Plastic Money in Indian Economy: An Overview

Abstract

Plastic money refers to payment instruments made of plastic, such as credit cards, debit cards, prepaid cards, and smart cards, used as alternatives to cash. In India, the use of plastic money has expanded significantly over the last two decades, transforming the country's financial landscape and supporting its transition toward a digital economy. Plastic money like debit cards, credit cards, prepaid cards emerged as a significant payment instrument in India after liberalization of the financial sector in the 1990s.
According to Parthsarathi Goyal (2024), the implementation of electronic payment systems has far-reaching consequences for the Indian economy. One of the most major effects has been the proliferation of e-commerce and online transactions. With the proliferation of digital payment methods, online shopping has grown in popularity, propelling the e-commerce sector and increasing overall consumption. Furthermore, reduced cash usage has had a positive impact on the economy, including enhanced transparency, efficiency, and tax compliance. Electronic payment systems have contributed to the reduction of the informal economy, the elimination of black money, and the promotion of a more organized financial system. Furthermore, the use of digital payment systems has helped to increase financial inclusion by giving previously underserved people access to formal banking services. Electronic payment systems have helped bridge the divide between the banked and unbanked populations by promoting mobile-based payment solutions such as UPI and PMJDY, allowing millions of people to engage in the formal economy.
The government's "Digital India" project is a great step toward expanding e- payments in India. This study aims to understand the benefits and issues relate to plastic money. This paper reviews literature, regulatory reports and data to summarize major benefits, issues, recommendations to make the paper money smooth, secure, convenient and popular among the customers.