Why a 'cashless' economy would hurt the poor: A lesson from India

India and other governments have failed to see the impact on poor, who seldom use banks

India recently tried to reduce the use of cash in its economy by eliminating, overnight, two of its most widely used bills in what was called demonetization.

While the effort – initially explained as an attempt to curb “black money” – has been a failure in many respects, it was part of an ongoing and global push toward cashlessness.

What India and other governments have failed to contend with, however, is the adverse effect such severe policies have on the poor, who seldom use banks.| economy policy

India’s working poor rely almost exclusively on cash, with about 97 percent of all transactions involving an exchange of rupees. With 93 percent of the country working in informal off-the-books jobs, most transactions entail personalized relationships rather than standardized forms of legal contract or corporate institutions.

My own research on the persistence of Delhi’s informal recycling economy shows just how important cash is to low-income laborers.

How Delhi’s informal recycling economy works

For the past few years, my work has focused on informal garbage collectors in a northwest Delhi neighborhood who collect garbage for middle-class residents across the city.

Beyond collecting trash, these workers also constitute the city’s only recycling service by separating out and selling plastics, papers, metal and other valuable scrap – including human hair sold for wigs and stale bread used for cow feed. The money they earn from selling these materials is how they support their families.| read full story