E-payment option can help India save Rs 1 lakh cr: McKinsey

India could save Rs 1,00,000 crore per year -- enough to reduce its fiscal deficit by more than 20 per cent, or boost its welfare spending by over 25 per cent, or fund the entire cost of the Food Security Act -- just by adopting the electronical payment method, says a report.

According to a report by global consultancy firm McKinsey, an electronic platform for government payments to and from individual households could save an estimated Rs 1,00,000 crore.

E-payment will ensure that every poor household in India -- around 80-100 million -- will have unparalled access to secure and convenient benefits directly from the government and without the interference of intermediaries.

The report titled 'inclusive growth and financial security' further said that a nationwide e-payment system could theoretically pay for itself in just one year as the one time cost of setting up a national e-payment infrastructure is just around Rs 70,000 crore, while, the model saves about Rs 1,00,000 crore a 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.

A greater penetration of an e-payment setup is likely to encourage greater participation from the rural poor citizens and bringing the central government closer to its goal of reducing poverty and hunger through its welfare, food and housing subsidy schemes.

Electronic payment systems improve the efficacy of government services to the poor, provide improved efficiency in other government functions such as tax collection and maintaining law and order and create new business opportunities by enabling the delivery of new products and services.

Meanwhile, an e-payment system would also reduce instances of "laundering", because there will be substantial decline in cash transactions.

"Even a 10 per cent reduction in grey economy could potentially result in an Rs 50,000 to Rs 60,000 crore tax windfall for the nation," the report added.

A transparent payment trail and a robust know-your-customer process backed by biometric authentication will also significantly impact law and order institutions by reducing instances of financial corruption, potentially reducing stress on law enforcement agencies, the Home Ministry and the State governments, Mckinsey said.