The Financialization of Finance? Demonetization and the Dubious Push to Cashlessness in India
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Abstract
This Debate contribution describes the promotion of digital rather than cash payments as a form of the financialization of finance, in its role as a payments system, with reference to recent Indian experience. The arguments in favour of reducing cash usage must be seen relative to the costs of digital payments, for both society and individuals. The drastic demonetization episode in India, which removed 86 per cent of the value of notes in circulation at one stroke in November 2016, was partly justified in terms of forcing a shift to cashless transactions. However, such a shift requires that adequate infrastructure be in place in terms of banking and connectivity, both of which are currently lacking in India. The article also identifies other concerns with digital transactions including higher costs and the possibilities of loss of privacy, fraud, identity theft and surveillance. The obsession with digital transactions as a marker of social and material progress is misplaced; it may become yet another means by which finance extracts rentier incomes out of relatively poor populations.