In an open letter to Prime Minister Narendra Modi, global brokerage firm Bernstein on Thursday called for a more coordinated push to formalize India’s economy, restrict cash-driven informal activity and boost . The firm also suggested ways to broaden the country’s tax base, saying that India has become more of a user than a driver of technological advancement.
Bernstein said informal transactions and heavy cash use persist despite rapid growth in digital payments, limiting transparency. “Informal transactions and cash usage persist despite progress in digital payments. Addressing this requires more than incremental measures,” the letter said, which was seen by LiveMint.
The brokerage firm argued that addressing these issues would require more than incremental policy changes, calling for a “decisive push toward formalization” to curb cash-intensive activity and improve compliance. It added that stronger measures would be needed to accelerate the shift toward traceable, digital transactions, according to the letter.
As part of this, Bernstein suggested a phased reduction in high-value currency denominations over the next five years. “How about only keeping a Rs10 note and phasing out of all other denominations in another 5 years,” the firm said. It added that the proposal could discourage large cash transactions and help drive greater transparency across the economy.
India has already withdrawn ₹2,000 denomination note earlier
On 29 May 2023, the Reserve Bank of India () announced the withdrawal of the ₹2,000 denomination banknotes. The highest-value note previously in circulation was introduced in November 2016, primarily to meet the currency requirement of the economy after the withdrawal of ₹500 and ₹1,000 banknotes then in circulation.
The objective of introducing was met once banknotes in other denominations became available in adequate quantities. Therefore, printing of ₹2,000 banknotes was stopped in 2018-19. About 89% of the ₹2,000 denomination banknotes were issued prior to March 2017 and are at the end of their estimated lifespan of 4-5 years.
India’s efforts to boost the usage of digital payment
Meanwhile, India is strengthening the security backbone of its QR code-based payments as it seeks to expand the global reach of its United Payments Interface (UPI), LiveMint reported in early March.
As part of the effort, the Bureau of Indian Standards (BIS) has unveiled new norms covering biometric authentication, QR-code payments and digital currency security, the report said, citing two officials aware of the matter. The aim of this initiative is to curb fraud, set common standards for banks and fintechs, and build trust in markets where such systems are still developing.
India processed over 218 billion digital payment transactions worth ₹284.7 trillion through QR scans and biometric authentication between April and February of FY26, according to finance ministry data.
Additionally, India’s QR code-based payment system is already operational in other nations, including Singapore, the UAE, France, Nepal, Bhutan, Sri Lanka and Mauritius. It is expected to be launched in Japan shortly.