Protestors take to the streets as Modi urges Indians to join digital world

With banks overwhelmed by desperate account holders and  crowds  of Indians taking to city streets to protest at his decision to give the country four  hours’ notice of a ban  on  500- and 1000-rupee notes, India’s Prime Minister Narendra Modi  used yesterday’s monthly radio broadcast to defend his actions and to call on the nation’s SMEs and casual work force to use digital payment channels as part of the fight against endemic corruption.
“I want to tell my small merchant brothers and sisters, this is the chance for you to enter the digital world,” Modi said.“It’s true that a 100% cashless society is not possible. But why don’t we make a beginning for a less-cash society in India?” He also urged the country’s young ‘digital natives’ to take the time to teach their older, less tech-savvy compatriots how to use digital platform payments.
It is going to be a long, hard  journey, but a potentially lucrative one for the banking sector despite the immediate turmoil. More than 90% of consumers purchases are transacted in cash, according to Credit Suisse, and the combination of a  boom  in smartphone sales and falling mobile data prices in recent years  as  led to a surge in digital payments it is starting from a very low base.
Although Modi’s ban on large-denomination notes has  ostensibly  been introduced to stamp out corruption in the form of the  cash back-handers to officials that area way of life at virtually every level of  government, the Prime Minister is also on a mission to stamp out tax evasion. The corollary of less than 10% of all commercial transactions being processed through the banking system is that only 2 – 3% of Indians pay any income tax at all. Last December, India’s finance minister, Palaniappan Chidambaram, said that  a mere 2.89% of the population (about 36 million people) had filed income tax returns for 2105. The state’s failure to generate tax revenues is seen as one reason why India has been lagging behind China in the race for economic growth.
In the short term, however, the ban is expected to slam the brakes on India’s GDP growth with  Goldman Sachs revising its 2016  forecast for India’s economic growth down from 7.6% to 6.8%.