Can digital public infrastructure insulate citizens from cash shortages? Discuss with lessons from India, Kenya and Nigeria.

Digital public infrastructure (DPI) means shared digital rails such as UPI, Aadhaar-linked accounts and mobile money. It offers a way to pay that does not depend on cash. India's 2016 demonetisation withdrew about 86% of currency by value with four hours' notice [1]. Kenya and Nigeria had similar episodes [1]. These cases show that DPI can cushion cash shocks but cannot fully insulate people from them.

How DPI cushions a cash shock

• Another way to pay: promoting digital payments was a stated aim of demonetisation [1]. Payments from bank accounts keep trade going when notes run short.
• Pushes money into formal channels: the World Bank expected demonetisation to shift domestic remittances into formal and digital channels over time [3].

Why DPI falls short: lessons

• India: the shift was uneven and partly temporary. The RBI found that the move away from cash was transient in nine States/UTs, with no clear change elsewhere [2].
• India: excluded groups were hit hardest. Informal flows suffered far more than formal ones. Undocumented migrants struggled to exchange their cash wages [3].
• India: buying essentials. Forthcoming research suggests that people buying medicines for sudden illness were most exposed, because they could not plan ahead or compare prices [1]. The old-note exemption covered only government hospital pharmacies [6].
• Kenya (2019): even a country known for mobile money faced cash shortages after withdrawing notes [1]. A well-developed digital system did not remove the informal economy's need for cash.
• Nigeria (2022–23): the transition window was too short. This caused a cash crunch, cut growth in manufacturing and services, and created a black market for new notes [4]. The IMF had warned about the harm to the unbanked [5].

Way forward

• Assess the unbanked first and allow longer switch-over periods before withdrawing notes [5][4].
• Exempt essentials for the whole shortage: let all licensed chemists accept old notes, not just government hospital pharmacies [6].
• Make DPI inclusive: offline and feature-phone payments, plus help from banking correspondents, so the last mile is not left out.

Experience in India, Kenya and Nigeria shows that DPI works as a shock absorber, not a substitute for careful cash management. It can protect citizens only if note withdrawals are phased, essentials are exempted and nobody is left without a way to pay. That approach supports the financial inclusion and health access goals of SDGs 1 and 3, and the constitutional promise of welfare under Article 38.