Small businesses, which contribute 45 per cent to India’s GDP, transact primarily in cash despite the Centre’s push towards digital transactions, according to a study.
A study by MasterCard and the Confederation of All India Traders (CAIT) estimates that there are 10 crore micro-merchants — defined as primarily business-to-consumer (B2C) enterprises, with an employee strength of 2-20 workers each and who deal only in cash — constituting about 95 per cent of the MSME (micro, small and medium enterprises) sector.
The government’s push towards digital transactions has barely made a dent in this category because providing access in itself is not enough, according to Ravinder S Aurora, Senior Vice-President, Global Policy Affairs, MasterCard.
Access without adoption“Access without adoption and usage is of no value. What is the use of access to a (debit) card if the person has nowhere to use it, if the merchants do not accept it?” Mr. Aurora asked. Currently, even the government’s Jan Dhan Yojana and RuPay debit cards are focussed on rural India bypassing most of the small merchants who reside in towns.“Not more than 1.5 per cent of the 10 crore traders even have cards, let alone use them,” Praveen Khandelwal, Secretary General, CAIT, said.
Where people have cards, they do not use them for transactions.
There are three main deterrents in going for digital transactions, according to Mr. Aurora and Mr. Khandelwal. The first is the rule that transactions of more than Rs.2 lakh will draw the attention of the Income Tax Department since they require a PAN card to be provided. The second hindrance is that banks charge an additional fee for card transactions, which the merchants, who already survive on small margins, have to pass on to the customer. This, in effect, makes cash a cheaper option for the consumer.
The third deterrent is there is lack of awareness about the benefits of using cards for payments and higher costs in conducting cash transactions.
