THE HINDU ARTICLE WITH VOCAB, 17 JULY 2017

Cash is not trash

(The all-out war on cash transactions is not wise economic policy)

A public sector bank is the latest to join hands in the war against cash. A report released by the State Bank of India last week states that thanks to demonetization, India has seen a huge increase in digital payments using cards. If not for demonetization, it says, the economy would have taken three more years to achieve the level of digitization that it has since November. The underlying (आधारभूत) logic is that citizens are somehow irrationally (बिना सोचे समझे) obsessed (दिमाग मे घर कर जाना, जुनून) with the use of cash, and, hence, the enlightened officials in government are duty-bound to wean (विषय विमुख करना/ छुड़ाना) them of it, even if it requires administering cruel (निर्दयी) shocks like demonetization. Note that it is unanimously (सर्वसम्मति से) agreed by experts that a cashless world offers many undeniable (निर्विवाद) benefits. In a world where all, or at least most, transactions are digital, the government would be able to track any transaction. This would help prevent (रोकना) tax evasion (कर चोरी), thus increasing tax revenue, and also help in dealing with criminal transactions. What is ignored is the fact that when the government cracks down (कढ़ी कार्यवाही करना) on a preferred method of transaction among citizens, the result is a net economic loss to society. After all, it is not some superstition (अंधविश्वास) that holds back citizens from using digital cash. Instead, there are often some good economic reasons for them to choose to deal in cash over other forms of money.

Low-value transactions

 For one, physical cash often offers the easiest and cheapest way to deal in many low-value transactions. It might, for instance (उदाहरण के लिए), make no economic sense for small businesses to build the infrastructure required for digital payments, or for poor households to pay the price for it. Many businesses and consumers might automatically adopt digital technology as its costs drop. Forcing them to prematurely (समय से पहले ही) adopt technology will only be harmful to their interests. Two, a broad brush has been used to paint all untaxed cashbased economic activity as a crime that needs to be punished, but it should be remembered that cash actually allows several beneficial economic transactions to thrive (फलना फूलना). In the absence of cash, a lot of these useful activities would be crushed under the weight of harmful government policy. It is no coincidence (संयोग) that many legitimate (वैध) economic activities get pushed into the underground economy only under draconian (कठोर) regimes. Lastly, it is worth noting that the preference for cash among citizens has traditionally worked against the plans of governments to pursue inflationary (मुद्रास्फीति) policies. In fact, American economist Kenneth Rogof, a prominent (प्रसिद्ध) advocate of the war against cash, has spelt out clearly that cash stands in the way of central banks pursuing a negative interest rate policy (NIRP). Simply stated, if citizens are allowed to encash their deposits to escape a situation like NIRP, it would threaten the stability of the banking system. Cash thus acts as a natural check on inflationary government policies. It is no wonder that cash has been turned into an evil zombie, which it is clearly not.