What are the pros and cons of a cashless economy? What are the measures taken by the government towards realizing a cashless society?

A cashless economy is one in which payments are performed digitally rather than traditionally using coins or cash, such as through digital wallets, net banking, mobile banking, and credit and debit card transactions.

Merits:

• It would prevent black money from entering the system. Terrorism, human trafficking, drug trafficking, and other illegal activities benefit from a cash-based economy. 
• The circulation of counterfeit money notes can be minimized in a cashless economy. 
• It will boost the tax base since it is harder to evade correct payment in a cashless world. 
• The movement of money becomes simpler across the nation in a cashless economy. Money transfers are simple to complete. 
• The likelihood of money being stolen will decrease. 
• A cashless economy results in digital transactions, which improve transparency and accountability.

Demerits:

• Increased risk of cyber attacks.
• Lack of digital literacy.
• It may further widen the rural-urban divide.
• Lack of infrastructure and internet connectivity in remote areas.
• Dependency on smartphones.
• Privacy issues and digital frauds.

Way forward:

A cashless economy is undoubtedly better in various ways to the cash-based economy. However, digital literacy of the citizens along with improved cyber security and better infrastructure is imperative to make India a cashless economy.

Topics: GS-III: Indian Economy Issues Relating to Planning