It has been three years since the Rs500 and Rs1,000 currency notes were demonetised to curb black money and fresh notes of Rs500 and Rs2,000 were released. After that, the Government has taken several measures to promote digital transactions but according to feedback from people via LocalCircles survey, though digital transactions are increasing year over year, a large number of people still prefer cash transactions over digital transactions.
LocalCircles conducted a pan India survey to check how consumers are conducting transactions and if they feel that demonetisation had brought any positive changes for the country, which received over 50,000 responses from across India. The first question asked citizens how many of their monthly purchases on an average over the last 12 months have been without a receipt. About 39% said 5-25%, 29% said 25-50% and 27% said 50-100%.
The Rs2,000-rupee note has made it easier for people to keep cash in stock. The next question asked people when they purchased a property in the last 12 months, how did they pay for the transaction. Around 33% said they paid the full amount by e-payment or cheque while 10% said they paid under 25% in cash and rest via e-payment or cheque. Almost 57% said they paid 25-50% in cash and rest via e-payment or cheque.
An important goal of demonetisation was to reduce the use of cash in transactions and encourage people to pay using non-cash modes, but the use of cash in the Indian economy does not seem to be reducing. When asked for which category of purchases have they paid the most amount in cash (without receipt) in the last 12 months, 31% said salaries of domestic staff, 36% said groceries, 5% said discretionary purchases and eating out and 7% said property, rent & home repairs. About 1% each said jewellery and used vehicles while 7% said they used cash to pay bribes and 12% said they did not make any purchases in cash.
People were asked that three years after demonetisation, what do they think was its top benefit. Around 21% said it reduced black money in the economy and 12% said it increased direct tax collections. About 42% said it brought a large number of evaders in the tax net while 25% felt demonetisation had no benefits at all.
When asked about the negative impacts of demonetisation, 32% said it was loss of earnings for many unorganised sector workers and 2% said it was sizable migration of labour to villages & lower rural income. Around 33% said the biggest negative impact of demonetisation is economic slowdown while 28% feel it had no negative impact. It has also been reported that the amount of fake currency seized in the last 3 years has considerable shot up when compared to the pre-demonetisation times.
The final question asked what should be the one move that the Government should implement immediately to further reduce black money in India. About 29% said linking of all property ownership to Aadhaar should be made mandatory and 11% said Rs2,000 note should immediately be demonetised. Around 5% said a 2% transaction tax should be levied on all cash transactions above Rs10,000 while 6% said detailed scrutiny should be done of all individuals with a Swiss Bank account.
Nearly 42% said disclosure of all assets of all ministers and government employees and their families should be made mandatory.
Comparison of key data points 2018 to 2019
LocalCircles says it was also able to draw a comparison between the responses received on the demonetisation survey in 2019 as well as 2018. The comparison shows that the percentage of citizens using cash as the primary mode of transaction reduces over 30% from 2018 to 2019.
Citizens also admitted to using cash as the primary component in property buying, rose from 2018 to 2019. This may be an indication that the use of black money is now increasing in property transactions.
The comparison of the two years also shows that the highest number of citizens continue to believe that expansion of the tax net has been the top benefit of demonetisation.
It was widely speculated that demonetisation resulted in a reduction in the economic growth rate of the country, with many reports calling these speculations baseless. On the other hand, India’s fight against black money received a major boost with Switzerland’s Federal Tax Authority proving information on financial accounts held by Indians under the framework of global standards on AEOI (Automatic Exchange of Information), with the next exchange scheduled to happen in September 2020. It remains to be seen if the use of cash in India reduces in the next few years as newer modes of digital transactions continue to become popular with the Indians.