Love of cash hinders India’s move to digital economy

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Satara (Reuters) – India’s dependency on cash may slow the country’s transition to digital payments despite large numbers of internet and mobile phone users.

For many citizens living in rural areas, cash is still the bedrock of daily existence because of a lack of facilities.

Sudhir Shinde, a farmer from Satara district in India’s western state of Maharashtra says he withdraws more money from his bank than required as the money vending machine in his village has not been operational for months.

“If I need money urgently, I must make a 32 kilometre (20 mile) trip to Satara town, which is not always possible,” said the 37-year-old sugarcane farmer Shinde, while buying fertilisers for his winter-sown crops.

“I always keep money in hand assuming family emergencies like hospitalization or any other such urgent requirements”.

Indian Prime Minister Narendra Modi backed a shock ruling in November 2016 to outlaw 86% of cash in circulation to target undeclared “black money” and fight corruption.

The demonetization got rid of old 500 and 1,000 rupee banknotes and Modi said that would boost the country’s digital economy, unearth unaccounted wealth and reduce the use of cash.

But 99.3% of the junked currency is back in the banking system, suggesting that only a miniscule portion was unaccounted illicit money or fake currency notes, and India’s addiction to cash is now, perhaps stronger than ever.