Traders welcome govt move to encourage cashless economy

Traders outfits, including the ones affiliated to the Bharatiya Janata Party (BJP), have welcomed the government's draft proposals for promotion of usage of debit and credit cards.

Praveen Khandelwal, head of Confederation of All India Traders, called it a landmark initiative. Khandelwal, known to be close to BJP, said the traders community didn't link these tax breaks to credit card operations as a boost to e-commerce. "We are against foreign direct investment in e-commerce but not e-commerce per se. We need to embrace technology," Khandelwal said.

The confederation has launched a national campaign in association with MasterCard to motivate traders across the country to adopt e-transactions. The campaign was launched in Delhi, Mumbai and Pune on June 3 and will cover 25 more cities, Khandelwal said.

B C Bhartia, a member of the confederation, said the tax concessions shouldn't be restricted only to individuals but also passed on to business entities. "Charges by banks on card transactions should be removed, at least for next few years, in order to encourage more people to embrace e-transactions," he said.

Currently, banks charge two per cent credit card usage and one per cent transaction cost on debit cards. The rentals of card swipe machines are about Rs 1,000 per month or one-time cost of such machine ranges from Rs 6,000 to Rs 10,000, according to the confederation. It wants the government to subsidise the cost of swiping machines to encourage its usage. It also suggested a scheme of discounts in value added tax payments as another measure to encourage cashless transactions.

According to the confederation, only five per cent personal consumption expenditure (PCE) of an estimated Rs 70,000 crore is transacted electronically in India. There are over 500 million debit cards - 100 million added in 2014 as a direct result of the Prime Minister's Jan Dhan Yojana. But these are used almost entirely at ATMs rather than at the point of sale - a ratio of 10 cash transactions to 1 by card at the point of sale, Khandelwal said.

Considering just currency, the ratio of currency to Gross Domestic Product in India is 12.2 per cent, which is higher than countries such as Russia (11.9 per cent), Brazil (4.1 per cent) and Mexico (5.7 per cent).

Leaders associated with the BJP's erstwhile traders' cell - it has since been discontinued after party president Amit Shah revamped the party structure previous year - also welcomed the government's step. Ashok Goyal, the former secretary of the now scrapped traders' cell, said the traders saw the advantages of increased use of electronic transactions but this should not be a move to allow backdoor entry to FDI in e-commerce.

Khandelwal said the benefits of cashless transactions flow to the entire value chain - faster transactions and settlement, reduced handling costs, lesser risk of theft, loss and counterfeit for merchants. "It is a less-appreciated fact that cash is free. The Reserve Bank of India and other commercial banks face a huge charge of Rs 21,000 crore every year as cost of currency operations," Khandelwal said.

PROMOTING PLASTIC

• According to the Confederation of All India Traders, only five per cent personal consumption expenditure of an estimated Rs 70,000 crore is transacted electronically in India
   
• There are over 500 million debit cards - 100 million added in 2014 as a direct result of the Prime Minister's Jan Dhan Yojana
   
• The rentals of card swipe machines are about Rs 1,000 a month or one-time cost of such machine ranges from Rs 6,000 to Rs 10,000
   
• Confederation wants the government to subsidise the cost of swiping machines to encourage its usage