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India's Failed Demonetization Program and Its Retreating Economic Defenders - Alt-M

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The accumulating evidence on economic growth, meanwhile, has become damning. Between July and September 2016, India’s GDP grew 7.53 percent. Between January and March 2017 it grew 5.72 percent. Former head of the Reserve Bank of India Raghuram Rajan, now returned to the University of Chicago, links the drop to demonetization: “Let us not mince words about it — GDP has suffered. The estimates I have seen range from 1 to 2 percentage points, and that's a lot of money — over Rs2 lakh crore [i.e. trillion] and maybe approaching Rs2.5 lakh crore." Kaul adds that GDP does not well capture the size of the informal cash sector, where the losses from demonetization were greatest.

From India's Failed Demonetization Program and Its Retreating Economic Defenders - Alt-M

So why does the Bank of England think that getting rid of paper cash will boost the economy when the figures from India clearly show it didn’t. The answer, of course, relates to the stage of development of the economy. In England, there are ready alternatives to cash that almost everyone already uses. Contactless cards and mobile phones mean that if all the ATMs in England gave up the ghost tomorrow, it wouldn’t really matter. Yes, there are some unbanked people and, as I have long argued, we should be providing digital financial services that are appropriate to them (not forcing them to use bank accounts) so that they can use electronic alternatives. Having been involved in projects to do just this (e.g., mobile money accounts for “universal credit” recipients and services delivered via digital TV to the housebound) I can honestly say that I do not find insurmountable problems.

While the India has taken great strides (the introduction of “payment banks”) 

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"‘There were a lot of people who came and clicked photos (of the sign) but apart from that no transactions,’"

Bitcoin accepted here: The tiny family restaurant in India that's embraced virtual currency — Quartz

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