PayTM and Freecharge are rejoicing 2 days ahead of the budget. Here’s why

If there’s anybody who is having a ball right now, it’s a couple of startups operating in the digital payment space in India.

It’s because the government is discouraging cash payments. It has recently removed the surcharge on card/ electronic payments, which means it should not cost more when you are paying digitally. Also, it will soon become a must for people to make online payments in transactions above a certain threshold.

India is amongst the most cash intensive cash economies, and the government realizes there needs to be policy changes which can encourage people to make electronic payments.

The Industry is brimming with happiness after the good news. “This is a masterstroke by the government following last year’s RBI decision to roll put payment banks,” says digital payment portal Paytm’s founder Vijay Shekhar Sharma.

“The current regime in which companies levied charges on digital payments was lopsided – and in favour of cash,” he adds.

Govind Rajan, the COO of Freecharge, seems equally excited. He says, “this decision to bring digital payments at par with cash is a watershed moment in the creation of a truly digital India.”

“In combination with Aadhaar and Jan Dhan Yojana, this move constitutes the most wide ranging and ambitious program for the digital transformation of the country,” he says.

Presently, India's cash to GDP ratio is 12%, which is 3-4 times that of comparable economies like Brazil and South Africa. The cost of managing this high cash dependence is over Rs 20,000 crore in the formal banking system and even more in the entire economy.

“With this strong signal, we are on our way to wean the country off its expensive and inefficient addiction to cash. Going digital will not only save the country crores of rupees, it will also provide consumers and merchants a more secure and frictionless way of transacting,” says Rajan.

“We are confident that the government’s continued support for the digitization of payments will further fuel growth and innovation in the sector, with significant long term socio-economic benefits to the Indian economy,” he adds.