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E-Payment Systems Can Save $22 Billion

SI Team
Friday, December 3, 2010
SI Team
An electronic platform for government payments to and from individual households could save an estimated Rs 100,000 crores for India, says a McKinsey report.

Saving this much money an year could mean a reduction in the country’s fiscal deficit by more than 20 percent, or it can boost its welfare spending by over 25 percent, or fund the entire cost of the Food Security Act.
E-payment will ensure that around 80-100 million poor households in India will have unparallel access to secure and convenient benefits directly from the Government without the interference of intermediaries. According to the report titled ‘Inclusive growth and financial security’, the present cost for the implementation of national e-payment infrastructure stands at Rs 70,000 crores and so the system could theoretically pay for itself in just one year.

“A national e-payment system is a critical step in achieving India’s long standing and fundamental goals of inclusive growth and financial security for its poor. The benefits to all stakeholders of a modern, reliable and well functioning payment platform are numerous and substantial,” the report said. According to the report, a greater penetration of an e-payment set-up is likely to encourage greater participation from the rural poor citizens and bring the central government closer to its goal of reducing poverty and hunger through its welfare, food and housing subsidy schemes.

The McKinsey & Company report suggests that electronic payment systems improve the effectiveness of government services to the poor, provide improved efficiency in other government functions such as tax collection, maintain law and order and create new business opportunities by enabling the delivery of new products and services.
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