Shri Vaishnav Academy

Topic:-Digital Economy

Presented by:

Vivek Jain

CertificateThis is to certify that Vivek Jain , student of Shri Vaishnav Academy, Indore have completed there project on “Digital cashless economy” of Senior Bal Vigyan in the year 2015-16.This project is their original bonafide work carried out by them under our guidance. They worked sincerely and have given a satisfactory work in the project.

Mr. H.C.Tiwari

(Principal)

Date:- 10-07-16

Place:- INDORE

acknowledgementsI Vivek Jain, student of Shri Vaishnav Academy, Indore thank Bal Vigyan And Ryan International School for giving us this opportunity to present ourselves on this platform.

Presented by:-Vivek Jain

Contents

Introduction• Problems with Current Indian Economy• A Digital Economy

A Cashless Economy: How Does it Work?

• Mode of Depositing• Way of Payment

A New Taxation System

Working of The New System

Advantages

Contents

Limits And Disadvantages

Solutions Always Exist

Practical Examples• Kenya • Sweden• Somaliland• South Korea• Some Other Examples

Conclusion

Bibliography

introductionProblems with Current Indian Economy:• The modern Indian Economy is quiet fragile and

unstable.• A lot of Black Money exist in our Economy. The

amount is greater than what are pending loans on India.

• So much taxes exist that it is tough to even name them all.

• The country of 100 crores is run by the taxes of just 3 crores. This means that the taxation is improper.

introductionA Digital Economy:-• A Digital Economy is one where purchases and

transactions are done mainly by electronic means and cash is seldom used.

• As Cash is seldom used, it can also be called as a “Cashless Economy”.

• This idea is new coming and only exists in a few countries.

A cashless economy:How does it work?

A Cashless Economy! How does it work???Mode of Depositing:

Users are issued with a card calledElectronic purse . The electronic purseis topped up Using revaluation terminals. A range of terminals are Now Available including coin & note, Credit Card or payroll deduction terminal.

Simply by inserting the card into a revaluation terminal and following the instructions given, money is added onto the electronic purse on the card.

Way of Paying Money: The card then replaces your wallet or purse

when paying for goods at both vending and catering facilities.

.

Card readers are installedat all Points of Sale (e.g. vending machines, Restaurant tills, coffee bar till, staff shops). Instead of juggling with cash at the Point of Sale, the cardis inserted into the reader and the total sum ofthe purchase is quickly and accurately deductedfrom the card.

New Taxation SystemIf this economic system exists, govt. Can chargetax on every transaction.Even a tax of 1-5% of thetax would provide the govt. a revenue which is more than what it gets now. A Single Tax Scheme thus would be generated. And no Tax can be stolen.

Working of new system Every individual is required to have bank

accounts. These accounts would operate on Internet Banking and other digital forms. Since almost no cash would exist, people will use digital cash for their everyday transaction. Once a transaction is made, government can charge tax on the transaction. And the successful transaction would occur.

Receiver

Taxes To The Government

Payer Electronic Transfer

Deduction of 1-5%

Working Of The New System

Advantages • As the economy is cashless, a lot of paper will

be saved that would have been used for making currency. This would be a great step to sustainable development.

• Many crimes like corruption, kidnapping and extortion require cash. In a cashless economy, no such crimes would have their existence.

• Just by charging a small percent of transaction as tax, govt. would be earning a lot of revenues.

As a computer would be looking at transactions and charging the tax, A lot of government revenue will be saved as there would be no need of departments like Income Tax, Excise Duty etc. In short, there will be no need of Indian Revenue Services.

• As the entire money is digital, no terms like Black Money, Green Money would exist. No tax would be stolen as tax would be directly charged at the time of transaction itself.

• Many problems of people would be solved as their would be one tax scheme. People will no more have to worry for different kinds of taxes.

• Now everybody would be charged tax. There would not be anyone left who could say that he doesn’t pay tax.

LIMITS & DISADVANTAGES

Limitations and Disadvantages• For this system to work, there should be

registered bank accounts of every person. India is lagging a lot in this aspect.

• A Digital System means a lot of power (electricity) is required for this system. India still faces a lot of power shortages. After this system, power requirements would be increased to almost twice of what it is now.

• For this system to work, one of the foundation requirements is that every citizen is literate. In India Kerela is the only such state.

• It is required that every shopkeeper, vendor, taxi driver should have machines and gadgets to accept the transaction.

• The greatest harm to this economy is hackers. If somehow the economic system is hacked, hackers can do every possible thing. Any one can become rich from rag or rag from rich in just a few seconds.

Solutions always exist• Even if people are not literate, they can learn

to operate the electronic purse.

• Hacking problem can be solved by ideas like one time passwords(OTPs) and security can be made more difficult to cross.

• All the locales would install the required machines to accept transaction as the necessary change generates itself.

• If solar power plants are installed, a lot of clean and cheap energy will be generated which means in effect that the problem of power would be solved.

• Once the economic system comes into existence, more and more people would join this system, given its advantages. Awareness would compel them to open up with bank accounts.

SOME PRACTICALEXAMPLES

Practical examples Following countries have practically applied this

new economic system:

Kenya• The biggest African user of mobile money is

Kenya, where there are 15 million subscribers to M-Pesa. Though originally a method to send money home from cities to families in rural areas, M-Pesa is widely used for many things from receiving salaries, to paying bills and school fees, slowly making cash obsolete.

Sweden• The number of bank robberies in Sweden plunged from

110 in 2008 to 16 in 2011—not because security has vastly improved, but because most Swedish banks simply don't handle cash anymore.

• Cash transactions are down to just three per cent of the national economy (compared to nine per cent in the Eurozone and seven per cent in the US); public buses don't accept cash; and three out of four of Sweden's largest banks are phasing out the manual handling of cash in bank branches. Need to donate money at church? There's a card reader for that.

Canada• As of January 1, 2013, no more new Canadian currency is

being printed. Why? Firstly, there has been a decrease in demand for new bills.

• Secondly, the plastic bills have a longer life expectancy. The biggest reason: a push toward driving a cashless future. According to a poll by PayPal Canada, 56% of Canadians already would prefer to use a digital wallet than cash. Also, Canada is a world leader in plastic payment, where payment by credit, debit and bank cards is almost 70 per cent compared to a world average of 40 per cent.

Somaliland• Though one of Africa's poorest countries, a mobile

revolution has created an informal electronic banking system with more efficiency and convenience than many far more developed countries in the world.

• Cash is disappearing and there is no need for credit cards because even street vendors accept payments by mobile phones. A survey in 2012 found that the average customer made 34 transactions per month on their mobile phone higher than almost anywhere in the world.

South Korea• Starting out as a very cash dependent society, the

Korean government has successfully put into place policies to encourage cashless behaviour which many other Asian countries can learn from. For example, South Korea introduced a preferential VAT treatment for consumers who pay with cards, moving the share of cash from 40 per cent to 25 per cent within four years from 2002 to 2006. South Korea was touted as the leading Asian nation in the Economist Intelligence Unit's E-Payments Adoption Ranking.

Australia

Singapore

Hong KongUS

Nigeria Some Other

Examples

The Problems That exist in modern economy would no doubt won’t exist in the new cashless economy. But as it is clear, the proposed economic system will also come with some of its own small problems. As it is said: “Change is the only Constant thing in the world”, its looking like that the time has come for us to shift from modern economic system to the new economic system. This change is required now and will soon become a necessity

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