How Blockchain Can Be the Backbone of India’s Economy, Explained


India is currently the seventh-largest economy in the world.

It currently has an estimated population of about 1.34 bln people, or about 18 percent of the world’s population, according to the World Economic Forum. Despite its GDP dropping by roughly 5.7 percent in the quarter that ended June of this year, India remains the fastest growing large economy in the world — other than China.

If estimates are anything to go by, India will have overtaken China as the world’s most populous country by 2024, which would help solidify its position as the nation with the world’s largest youth population. The World Economic Forum also projects that India’s economy will be the second-largest economy in the world by 2050, with China occupying the first position.

In 2016, the Indian government, led by Prime Minister Narendra Singh Modi, announced that the nation’s two highest-denomination bank notes would cease to be legal tenders. At the time, the two denominations accounted for roughly 86 percent of cash in circulation in India. People who possessed the banknotes were to deposit them in the bank. With the move, the Indian government aimed to punish tax evaders in retrospect. The logic was that people with hoards of “black money” would have to answer questions if they attempted to deposit the demonetized banknotes.

While wealthy tax evaders were the target of the demonetization policy, it was the average Indian on the street that suffered the effects the most. At first, the policy led to an intense cash crunch, with Indians pictured queuing for hours at banks and automated teller machines, or ATMs. If you have a minute understanding of economics, you’d quickly realize that the slackened GDP growth in recent quarters found its root in the cash crunch that arose from the demonetization policy.

Poor as the policy might have been for average Indians, though, there were bright spots for proponents of a cashless economy. The World Economic Forum reported that the number of digital transactions in India increased following the demonetization policy — a plus for the government, who would now have increased ability to track the flow of money within the economy. The growth in digital transaction in India is, in turn, a big plus for Blockchain and cryptocurrency.