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Article in EPRA International Journal of Economic and Business Review · August 2017
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Research Paper
1
PG Student, Department of Commerce, Madras Christian College,
Gowtham Ramkumar1 Tambaram, Chennai,Tamil Nadu, India
ABSTRACT
KEYWORDS : Economic growth, parallel economy, financial inclusion and cashless economy
INTERPRETATION
From the above table it is clear that the major investment which in turn results in better productivity.
benefits of financial inclusion are increase in demand This better productivity will result in more demand for
for financial products, growth in GDP, capital formation the products and the cycle continues resulting in
and accessibility of banking finance to rural areas. This economic growth which is reflected by GDP. As a result
is true because the major objective of financial inclusion of financial inclusion, more rural people get access to
is to achieve inclusive economic growth. banking finance as it is also considered as one of the
When majority of the population come into ways of bringing various sections of the people under
financial inclusion process, they become more aware one roof named financial inclusion.
about the various financial products available to them. The second set of benefits of financial
The various benefits of variety of financial products inclusion is brings additional savings into the economy
will stimulate them to go those financial products that which was discussed above and also helps in channel
best suit them. Thus the demand for the financial management. Due to the increased banking transactions
products increases as a result of financial inclusion rather than physical cash transactions, retailers and
process. other business people will move from the physical
When more people become aware of financial distribution channels to electronic channels which helps
products and services, it is expected to increase the in better channel management for small business people
banking transactions. This will lead to opening of new and it will also help the government in tracking the
bank accounts by those who do not have such accounts transactions going on in the economy.
earlier. Thus the savings of the people is brought into The third sets of benefits are direct distribution
the economy. More savings results in more capital of subsidies which overcomes the leakages in the
www.eprawisdom.com Volume - 5, Issue- 8, August 2017 184
e-ISSN : 2347 - 9671, p- ISSN : 2349 - 0187 Gowtham Ramkumar
amount of subsidies happened when it is physically and results in increase in profitability of banks. Finally,
distributed. Increase in financial transactions means financial inclusion is expected to increase the markets
more customers for banks, more volume of business for smart cards in the country.
TABLE SHOWING KEY BENEFITS OF CASHLESS ECONOMY
Rotated Component Matrixa
Component
1 2 3
Exposure to financial .860
services
Avoidance of carrying cash .730
Tracking money laundering .654
and allied activities
Convenience in handling .652
Financial transactions
Fall in parallel economy .579
transactions
Increased security of funds .531
Increased Public Spending .760
Eliminate counterfeit .747
currencies from the
economy
Stop leakage of money .731
Decrease in illegal .699
transactions
Increased business for .822
banks
Encourages opening of bank .768
accounts
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 5 iterations.
INTERPRETATION
The above tables reveal the various benefits becomes cashless, government will be able to track
of being a cashless economy. The major advantages of various transactions happening in the economy as they
becoming cashless economy are exposure to financial take place online. This will help them in tracking various
services, avoidance of carrying cash, tracking money money laundering and allied illegal activities because
laundering activities, convenience in handling financial of the previously established mechanism by the
transactions, fall in parallel economy transactions and government to prevent them. Cashless transactions
increased security of funds. When the economy provide people with psychological satisfaction of
becomes cashless, people are exposed to digital security of their funds rather than if they keep it in the
transactions which expose them to various kinds of form of physical cash. The cashless economy helps in
financial services offered by banks and other better handling of financial transactions as all
institutions. Similarly the cashless economy reduces the transactions are recorded electronically and reduce
burden of carrying physical cash. This helps in avoiding parallel economy normally what is referred to as black
theft and also helps in avoiding longer queue in the money transactions in the economy. This fall in parallel
retail shops or other shopping malls. Money laundering economic transactions moves the country toward
and illegal activities are considered to be the burden for economic development rather than economic growth.
economic growth of any country. When a economy
www.eprawisdom.com Volume - 5, Issue- 8, August 2017 185
EPRA International Journal of Economic and Business Review| SJIF Impact Factor(2016) : 6.484
The next sets of benefits of cashless economy Cashless economy brings various benefits to
are eliminate counterfeit currencies and increased public consumers in the form of increased security of
spending. Counterfeit currencies circulated in the funds and helps to avoid carrying cash.
economy are also barrier for economic development. The benefits sort out by the study regarding
Thus when the economy becomes cashless these cashless economy will have direct impact on
currencies lose their significance and they cannot be the economy. It will move the economy in
introduced in the digital economy. Thus being cashless growth direction and in longer period towards
economy to a certain extent eliminates counterfeit development.
currencies in the economy. Increased public spending SUGGESTIONS
is discussed from the point of view of government. This study identifies the various benefits of
Cashless economy mobilizes savings of the people. This financial inclusion and being a cashless economy. The
mobilized savings increases the government spending Government of India has been taking various steps to
for public welfare activities. improve the growth rate of the economy. On the other
Finally as a result of becoming cashless hand, people must be given proper awareness about
economy, the banks will witness a increase in their the various digital payments modes and the benefits of
volume of business and many people start opening bank being a cashless economy and also about the various
accounts which will again lead to exposure of financial benefits of achieving inclusive economic growth. This
transactions to them. All these benefits can help in will lead to increased cooperation from the public for
achieving inclusive growth for the country. the various schemes, policy changes and other actions
FINDINGS taken by the government to achieve better economic
The findings of the study are growth.
From the study it is clear that the major
CONCLUSION
advantages of financial inclusion are increase
To conclude, financial inclusion and cashless
in demand for financial products, growth in
economy are considered to be tools for economic
GDP, capital formation and accessibility of
growth. It is true that there are various difficulties in
banking finance to rural areas. They seem to
achieving cashless economy and financial inclusion but
influence 95.4% which indicated by
one day the move has to be taken by the government.
transformation matrix.
There is also a change in the minds of consumers and
All the advantages falling under the 95.4%
the country witnessed a increase in the volume of digital
category have correlation of more than 0.75. transactions and if the steps taken by the government
Majority of the benefits of financial inclusion produces the benefits discussed by the study, it is sure
are validated by more than 80% of the that any underdeveloped economy can become
respondents. If they are analyzed carefully, all developed economy.
the benefits of financial inclusion in some way
contribute to the economic growth of the REFERENCES
1. Chattopadhyay SK (2011) Financial inclusion in India: a
country.
case of West Bengal, RBI working paper series
The major advantages of becoming cashless 2. Gupta A (2011) Towards financial inclusion in india.
economy are exposure to financial services, SAMVAD, SIBM Pune,68
avoidance of carrying cash, tracking money 3. Agba, D. (2010), Implications and Challenges of E-payment
laundering activities, convenience in handling System.
financial transactions, fall in parallel economy
transactions and increased security of funds.
These benefits have an influence of 74.7%
which is again indicated by transformation
matrix.