Plastic Money

Why many economists advocate increasing the use of plastic money in India? Examine its advantages and disadvantages. (200 Words)

Technology has changed the way we deal with money giving us more convenience and easy access to funds from anywhere. Economists have been advocating the use of plastic money (credit cards, debit cards, ATM/cash cards etc.) due to their feasibility and multiplicity of advantages
Advantages of Plastic Money
  • Eliminates the need for carrying huge cash
  • Risk of Loss or Theft minimized
  • Anytime/Anywhere Access Using cards
  • Credit Facility for emergencies
  • Online Payments can be done easily
However, in the Indian case, we have more than these reasons for promoting plastic money
  1. Can allow the poor direct access to their money transferred via DBT/subsidy transfers
  2. Will help in checking black money by establishing identity of the customer and data of transactions
  3. Avoiding tax evasion
  4. Will save cost of printing and environmental cost of deforestation
Some of the drawbacks or risk related to cards are
  • Non-Acceptance at Small Retail Outlet hence cannot be used for all daily needs
  • Loss & Misuse
  • Low Value Transactions not always feasible
  • Service Charges are applicable in many cases
  • Impulsive Purchases and promotion to consumerism
Though they cannot completely replace cash in the current scenario, they can be used as complementary to cash. Moreover with their faster penetration, many linked advantages can be extended with plastic money



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