Suggestions for Moving towards Cashless Economy

According to RBI, 60% of the Rupees 500 and 1000 notes have already been deposited in the banks. So the Government's calculation of blackmoney holders being caught is not going to be fruitful. Realising this, Modi Government has called for people to move into a cashless or e-payment mode. However, there is precious little that the Government has done till date to move more people into the e-payment/e-wallet mode.

So what should the Government do now?

PayTM has already launched massive advertisements featuring the Prime Minister. This is the second company after Reliance Jio to feature the PM in its advertisement. No company can do it without the permission of the Prime Minister. So I am sure the PM has given his blessings. Now the question is why the Prime Minister who always talks about swadeshi is promoting a company where the Chinese hold 40% shares? Unfortunately, that is likely to remain mystery.

Nevertheless, apart from PayTM ie promoting a private company the Prime Minister or his Government hasn't done much.

UPI:
The pilot for UPI or Unified Payments Interface was launched in April 2016 by the then Governor of RBI Dr. Raghuram Rajan, which powers multiple bank accounts into a single mobile app. Since August 2016 it is available for use. However, not much publicity has been done for popularising UPI. Details about UPI can be found here: http://www.npci.org.in/UPI_Background.aspx

The Modi Government should immediately recruit atleast 1 crore people for atleast one year to move from door to door and popularise UPI app among people. This will also result in sudden spurt in job creation as well as adoption of the UPI app among people. The amount of money required for recruitment as well as conducting this year long promotion can be budgeted.

Politically it will help the Government as the youth will be very happy to get a job as well as act as a change agent.

Bank Accounts for all:
The other important thing that the Government can do is that Government should make it mandatory for people to open a bank account for each child. The moment a child is born, a bank account should be opened and this process should be linked with the birth certificate registration and make it seamless. With Birth certificate and bank account an Aadhar number should be also created. So this will lead to complete documentation of all citizens and any benefits transfer can happen through the bank accounts. This will go a long way towards making our economy cashless and transparent.

Hope someone can whisper these suggestions in Mr. Narendra Modi's ears.

BlackMoney Penalty: Official method to recapitalise banks

Govt. has proposed to hold on to some of the money deposited in the banks if people can't satisfactorily explain the source of those money.

In the latest twist to the unfolding #Demonetisation drama, the Modi Government has proposed that people holding blackmoney can declare their blackmoney and pay 49.9 percent as tax and penalty. The breakup is as follows. Govt. will charge 30% as tax on the undisclosed income, plus there will be a 33% surcharge on it. And a 10% of the declared amount will be charged as penalty.

Apart from this, 25% of the declared income will have to be mandatorily locked-up in an interest free bonds for four years. Though the Modi Government doesn't officially say so, it expects this 25% to help in recapitalising the banks which have seen massive NPAs. For the record the Gross Non Performing Assets (NPAs) of Banks in March 2016 was 7.6%. And this figure was expected to increase to 8.5% by March 2017 and if the macro-economic situation deteriorated then it could increase to 9.3%. (Source: RBI Projections) http://arjunaubacha.blogspot.in/2016/11/compensating-citizens-for.html

For example, if it can get say 1 lakh crore voluntarily disclosed as previously undeclared and hence untaxed amount which we refer to as blackmoney, then 25% of it would be 25000 crores. So this 25000 crores would be locked up for 4 years and help in recapitalising the public sector banks.

The Government was expected to inject some 40,000 crores of rupees into the banks which would have been too little. So the Government is trying to get the funds from public to recapitalise the banks.

The Government has also said that if people don't declare their undisclosed income and then get caught, then they will face penalty of 85%.

Since 9th November, a lot of people have been illegally helping change unaccounted for cash of people by taking commissions of 30 to 35%. Some people who have more than 5 or 10 crores of rupees have also given some 50% as commission to some bank employees and Income Tax people to get new notes. So the Government's proposed 49.9% combined tax, surcharge and penalty may find some takers.

Since a lot of people out of fear of persecution by Income Tax department won't declare their previously undisclosed income, the Government is trying to threaten with the higher figure of 85% if they get caught. It is a common knowledge, that the Income TAx department is grossly unprepared to handle such massive volume of cases. So it would be a big help for the Government if more people come forward and declare their previous undeclared incomes.

Till date some 8 lakh crores of rupees have been deposited in the banks. The Government was expecting that this number will be much lower. If this rate of deposits go on, then most of the 1570 crore 500 rupee notes and 630 crore 1000 rupee notes will get deposited in the banks. That would be a nightmare scenario for the Government. They had thought that if some of the notes don't come back, then RBI will knock off that amount from their books as liability and then give back the same amount to Government as dividend. The creative ways many people have adopted to deposit their blackmoney in the banks has raised the tension of the Government. If the Government can't get back money in dividend from the RBI, then it can't have a lower fiscal deficit and also it won't be able to recapitalise the banks.

So the Government now has come out with this idea of a voluntary disclosure. However, the Government is not using the word voluntary disclosure because its Voluntary disclosure scheme has just ended on 30th September.

There are some people who have 8-10 crores of cash. Some of them who were previously despondent, may go and declare it to the Government. Since they were anyway giving 35% as commission to agents, so giving a bit more and buying peace of mind may be preferable to some. However, knowing the fear of the income tax department, not everybody will agree to declare. So the Income Tax team may need to do a lot of work. Recapitalising banks won't be such an easy job.

Nevertheless, already the banks are flush with cash deposited by people. All these money is locked up in banks, as people can't draw more than 2000 rupees per day. This is expected to last for six months. So the banks have got some respite for six months from the NPA problem. The last word on this is not yet heard. However, the cover of the Modi Government that this is a people centric move is slowly getting blown and the main aim to recapitalise the banks and give a positive spin to the PM's image is now becoming clear to many people.

Surgical Srikes: Another take

With the DGMO press conference announcing Indian soldiers to have crossed the Line of Control (LoC) and inflicted large casualties on militants preparing for infiltrating to India, all hell have broken loose.

It has been proclaimed as the ruling party's answer to Pakistan and even the Modi Government's 56 inch chest bravado. In many circles it has been said that for the this has happened for the first.

Unfortunately, the situation is such that everybody in India has to agree and praise the Government of its "guts" and "attacking" Pakistan. Else, one will be immediately branded as anti-national.

It has been said that Indian soldiers have crossed the LoC and moved upto 500meters and in some cases upto 2 kilometers and attacked the terrorists and successfully come back.

After the initial brouhaha about these "surgical strikes", voices have been raised about the authenticity or the extent of these operations and have asked for the video proofs, which the army is supposed to have documented during the surgical strikes. No one would have demanded for publishing the videos, if it would not have been announced that there are video recordings of the operation. By the way, no name has been given to this operation. All operations ie significant actions have a code name.

Military observers will vouch that these kinds of actions have happened in the past. Earlier it used to be frequent. However, after the setting up of barbed wire fences and more patrolling, these situations have reduced. In one earlier instance, Pakistan troops had entered India and cut off the head of one soldier. So our troops are boiling and are capable of cross-border incursion and striking down targets if and when they are given orders.

India has field guns, like the Bofors, which can fire and strike some 28kms into the enemy territory with precision. These field guns were not used. Our soldiers have shoulder fired missile launchers which can strike down enemy posts across the border. Snipers can even take down militants some 7kms away. These snipers check the wind velocity, terrain and fire accurately from a distance of 7kms and instantly neutralise the target.

Recently, the former home mininster Mr. Chidambaram said that in January 2013, Indian soldiers had crossed the LoC and carried out operations. This was done without fanfare as the army chooses not to publicise such events. The then ruling party, the congress led UPA Government didn't choose to announce it. Now the BJP-led NDA has made it a policy and is reaping the political benefits.

The Indian army is normally not partisan and doesn't favour any political party. However, if the Government of the day orders to disclose any information, then it has to.

It appears that some activity has taken place. Pakistan has announced that 2 of their soldiers have died in some local firing. We are not sure of the exact nature of the action unless the Government chooses to disclose. If the hype is more and substance is less, then we will obviously not see the videos.

In the absence of any photo or videos released by the Government, there are lot of fake photos circulated by interested parties. One of the photos shows some militants lying near a broken building. However, this photo was lifted from internet. Interestingly that photo was of militants killed by Pakistan army in 2012 after they massacred school children.

In this intensive propaganda war, truth becomes diffused and difficult to detect. So people either keep quiet or believe whatever they want to believe. This is not the last of such incidents. Many more of such incidents are likely to happen.

It is said that with the BJP on the back foot in the UP elections, they are going to create more such situations in early 2017 to influence the UP electorate.