Do you know diaspora send money to India is decreased by 9% during a pandemic? Two terms and their influence played a significant role in India’s path to become a cashless economy: “demonetization” and “COVID-19.” One laid the groundwork for digital payments, while the other became the primary source of funding for the ecosystem’s growth.
According to Accenture’s recent forecasting, about 66.6 billion money transfer worth USD 270.7 billion is expected to move from cash to cards and digital payments in India by 2023. This figure is expected to rise to USD 856.6 billion by 2030. According to the survey, the money transfer aggregator market in India is currently valued at Rs 9.5 trillion.
COVID-19 appears to be a similar-to-demonetization catalyst for the finance industry. In response to this situation, online money transfer service providers have been very hands-on, providing enhanced assistance on necessities such as sending money to India online from abroad, groceries, gloves, sanitizers, COVID-19 insurance, incorporation with donations to the PM CARES fund, and other vital goods and services.
What Is the Concept Of Demonetization?
When a country demonetizes a currency, it loses its legal tender value, which means it can no longer be used to satisfy financial commitments or settle debts. Old notes are typically retired and replaced with new ones. As demonetization is used to combat corruption, it usually only affects large-denomination banknotes. A government may demonetize by implementing a completely new or renamed currency if the goal is to remove zeros from existing price levels, enforce policies that dramatically reduce hyperinflation rates, and restore public trust in the monetary system.
What Was The Impact Of Demonetization On Remittance?
On November 8, 2016, India’s Government released orders terminating the authenticity of existing high-denomination paper currency (Rs. 500 and Rs. 1000). Following that, newer currency notes (Rs. 500 and Rs. 2000) were issued. The move was made to combat counterfeit money and those who hold untaxed or illegal funds.
The effect on formal foreign money transfer to India was negligible. In the short term, MTOs that pay out cash is hampered by the lack of significant denomination currency. Migrant families have reported difficulties withdrawing remittances from ATMs. Formal foreign outflows, which are generally made from bank accounts, were unaffected.
Prime Minister Narendra Modi has also claimed that demonetization is the first phase in combating corruption and tax evasion and that property records will be digitalized. These digital databases are used to track down people who have been registering assets in others’ names to avoid paying taxes. The real estate sector would be placed under even more strain due to the property digitalization project. Finally, online money transfer to India was the only service did not affect by demonetization because through online service, you can receive money in bank and mobile e-wallets without any hassle.