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The Financialization of Finance? Demonetization and the Dubious Push to Cashlessness in India

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  • C.P. Chandrasekhar
  • Jayati Ghosh

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.

Suggested Citation

  • C.P. Chandrasekhar & Jayati Ghosh, 2018. "The Financialization of Finance? Demonetization and the Dubious Push to Cashlessness in India," Development and Change, International Institute of Social Studies, vol. 49(2), pages 420-436, March.
    • Handle: RePEc:bla:devchg:v:49:y:2018:i:2:p:420-436
    DOI: 10.1111/dech.12369
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    References listed on IDEAS

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    1. Demirguc-Kunt,Asli & Klapper,Leora & Singer,Dorothe & Van Oudheusden,Peter, 2015. "The Global Findex Database 2014 : measuring financial inclusion around the world," Policy Research Working Paper Series 7255, The World Bank.
    2. Kenneth S. Rogoff, 2016. "The Curse of Cash," Economics Books, Princeton University Press, edition 1, number 10798.
    3. Schmiedel, Heiko & Kostova, Gergana & Ruttenberg, Wiebe, 2012. "The social and private costs of retail payment instruments: a European perspective," Occasional Paper Series 137, European Central Bank.
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    Cited by:

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    2. Sedai, Ashish Kumar & Nepal, Rabindra & Jamasb, Tooraj, 2021. "Flickering lifelines: Electrification and household welfare in India," Energy Economics, Elsevier, vol. 94(C).
    3. Ashish Kumar Sedai, Rabindra Nepal, and Tooraj Jamasb, 2022. "Electrification and Socio-Economic Empowerment of Women in India," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    4. Sonia Kumari Selvarajan & V. G. R. Chandran, 2024. "Financial Inclusion Trajectories: Geographical Dispersion, Convergence, and Development Implications," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(4), pages 897-924, August.
    5. Ioannis Chatziantoniou & David Gabauer & Hardik A. Marfatia, 2022. "Dynamic connectedness and spillovers across sectors: Evidence from the Indian stock market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(3), pages 283-300, July.
    6. Thereza Balliester Reis, 2022. "Socio‐economic determinants of financial inclusion: An evaluation with a microdata multidimensional index," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 587-611, April.
    7. Xue, Qing & Liu, Xiangqin, 2024. "Can digital finance boost corporate green innovation," Finance Research Letters, Elsevier, vol. 62(PB).

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