Persuasion Works Better Than Regulation In India: Piyush Goyal
Post the transition of the country towards digital future, regulation, as a mode to bring down the usage of cash has been argued and recommended at various occasions. Speaking regarding the same, the Railway Minister, Piyush Goyal said that the government has no plans to bring regulations as much as persuasion.
“In my own sense, persuasion works better and faster as compared to regulation. We need to incentivise like we did for income tax for digital transactions, B2B. We are looking at more such mediums to encourage people more,” said the minister, urging people to insist for a bill every time they transact.
Speaking on the sidelines of World Economic Forum, Goyal mentioned that a few years back the country became used to cash and it is now transiting towards digitalisation with India having an opportunity to take a lead in the world.
“a few years back the country kept printing more and more currency and we were actually encouraging cash transaction rather than a digital transaction. There was a huge percentage of cash in the GDP which is not good for any economy”, said Goyal who added that traceability of money became a huge challenge.
Agreeing to the fact that cash does has an important role to play in an economy, Ajay Banga, CEO, MasterCard, said that it should not be at the level of 95% of the economy.
“Declining Cash to GDP is not an emerging market phenomenon. Most of the economies in the world are cash-driven to a level of 80-85% like Germany or Japan, due to various reasons like infrastructure, culture and others. The only countries in the world where cash is smaller is Korea and the Scandinavia due to their enlightening government policies, which India is taking the cue from”, said Banga.
Talking about the transition of the economy towards digitalisation and GST, Banga said that it would change the whole system for better but it is important to provide the right incentives for the merchants as well, especially in terms of Merchant Discount Rates (MDR).
“An excessive merchant discount rate is a very bad idea as it absolutely dis-incentivises the merchant and the right rate would depend on the country. If you discourage the players from providing the latest and more secure cashless system and ask them to provide those same solutions by looking at the data, it would create a problem to be solved 5 years later,”, said Banga.
Today’s debit card MDR is the country at the lowest level in the world i.e. 0.25% for the most transaction.
“I could prove it to you by any study that the cost of cash management is much higher than the merchant savings”, said Banga. He applauded the Watal committee on digital payments and urged the minister to use the same as an example for the world.
