Demonetization: A Paradigm Transformation in Cashless Payment System

Objective: To see the impact of demonetization on cashless payment system through comparing the significant differences between cashless payment transactions of three time buckets before demonetization, demonetization and after demonetization.

Method/Statistical Analysis: The study was done for the three time buckets before demonetization (March 2016-October 2016), demonetization (November 2016-June 2017) and after demonetization (July 2017-February 2018), using the secondary data of cashless payment system from the RBI bulletin. The Welch’s mean equality test was used to look at the significant differences of cashless payment transactions of three time buckets.

Findings: Looking at the significant differences of different cashless modes of payment system during the specified three time buckets, we found that during demonetization almost every cashless mode picked a sudden increase in value and volume of the transactions due to the currency deficiency and after the demonetization period due to the currency back in June 2017 the increment in use of almost every cashless mode had been stopped or decreased. From the results, we found that the demonetization move had significantly transformed the use of the cashless payment system, during the period of November 2016-June 2017.

Application/Improvements: Policy implications arising from the study is to achieve the objectives of demonetization move and to promote the Indian economy as a cashless economy, a well-equipped digital network, sound digital knowledge in people, digital security for the transactions and less availability of cash currency in economy are required.