- Curb Black Money: It's easier to keep a trail of transactions when money is exchanged online. Also, hawala transfers can't be made without paper currency. This does two things:
- The govt will get the tax money that would have been evaded if black money was to exist
- Curbs illegal activities altogether. A large part of black money is generated in illegal trades (like selling drugs; Breaking Bad fans would know). Without a payment system, illegal trade might become difficult.
2) The government spends a lot of money in printing and reprinting (to replace soiled ones) notes. It might sound like a meagre expenditure, but considering there are billions of notes in circulation, this amount accumulates and can be significant.
3) Avoid the threat of counterfeit currency: Fake currency can harm the monetary policy of the country adversely, besides being illegal and almost equivalent to theft in my opinion. A cashless economy would be immune to this harm.
Of course this is to assume we have reached a time where cashless economy is the primary if not the only exchange system that is thriving. This would also require government initiative in terms of imposing a ban on transactions in cash of a certain size. Say, all transactions above Rs 5,000 will only be allowed through the cashless mode.
A cashless economy comes with its own harms and threats, most importantly that of cyber crime and illegal access to private data. And without doubt an era of cashless economy is certainly a bit far off for now. The Jan Dan Yojana is a big step towards that direction.
A cashless economy certainly presents benefits that will boost our economy a lot.
https://www.quora.com/How-can-cashless-transactions-help-an-economy
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