Demonetisation & The Big Digital Divide

India is a huge country with a massive 1.3 billion people. This massive population is not homogeneous. There is a big division among this people. Apart from language, castes, religions Indians are also divided by the wealth they possess ie. whether they are rich or poor, literate and illiterate etc. Now, there is another stark division between Indians, that of digital literacy.

Since November 8th 2016, it has been a difficult time for people in India as the Government of India in a sudden move banned the Rupees 500 and Rupees 1000 notes. Now the Government is pushing for digital payments as it believes blackmoney generation is mostly through cash. This push for payments through online or digital wallet mode has now has focused on the digital literacy or awareness about online and digital payments.

Despite smartphone penetration, there are many Indians who despite being well-to-do don't own smartphones. They are not comfortable with internet and mobile technology. They still do their banking via cheques, bank drafts etc and prefer to make payments in cash. They still struggle to draw their money through ATMs. There are many who forget their ATM pin numbers and write it down behind the ATM cards. This massive population, despite being literate in the conventional sense is not aware about e-banking and mobile technologies. It would be difficult for these people to learn to start using cashless mode for their payments.

These days this educated mass of retired, senior citizens and others are feeling as if they are illiterate. "I don't know this PayTM thing" is the general refrain. At the fag end of their careers, a sense of inadequacy is haunting many such individuals. India Today is changing too fast for such citizens. Ridiculed by the 20 somethings and other people as oldies and other choicest abuses, the older generation is slowly bowing their heads for something which they don't need but is thrust upon them. The respect for the older generation is all but vanished. Is this the price to pay?

If people hurtle into depressions, then no one will know as in India the society is not mature to handle depressions and mental health issues.

Demonetisation will also lead to more and more Government departments completely shifting to e-tender modes. Today, many small time businesses find the e-tenders cumbersome and a big technological challenge. The way e-tenders have been implemented till date is very cumbersome. It is not user friendly. So unless people master the various technologies, it will be difficult to compete as they are already disadvantaged.

If the Government can come out with well thoughtout applications and deploys a huge number of people to increase the awareness then slowly people may start understanding the intricacies. However, there are many big ifs involved here and the Government seems to be pushing through things without much of prior thought. Hope there is some light at the end of the tunnel, so that the common man and woman can learn and pick up the threads in their lives.

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.

Coercion to Go Cashless

The 9/11 moment of Modi Government banning Rs. 500 and Rs. 1000 notes from 9th November (mid night of 8th 00:00 hrs) not only paralysed the economy but also ensured social functions like marriages stopped due to lack of cash.

Since marriage is one of the most important social functions and Shri Narendra Modi was seen proudly claiming in Japan that even marriages have been stopped due to demonetisation, there was lot of brickbats and the Government then announced that any one person from a family having a marriage can withdraw Rs. 2.5 lakhs. However, that was not operational because banks had not got guidelines from the RBI to release funds for marriage. Currently people are only allowed 2000 rupees to draw from their savings accounts via ATM.

Now the RBI has sent its operational guidelines for dispensing RS. 2.5lakhs in cash and that has some shocking clauses.

being one an emotional The Modi Government with much fanfare announced that they are going to allow Rs. 2.5 lakhs withdrawal from your own bank accounts for marriage.

The person has to apply to the bank manager with proofs of advance payments already made towards the marriage for example booking of marriage hall along with the printed marriage invitation card etc. The marriage has to be on or before December 30th.

However, the most shocking clause is that the person has to mention whom the money will be paid and have to establish that those persons don't have bank accounts. So this cash expense can only be done to people who are out of the formal banking system.

If a person has a savings bank account, current account or Jan Dhan Yojana account, then money has to be paid by cheque or online transfer.

For example, if you are going to pay money for flower decoration, then you have to ask if the vendor has a bank account and then transfer money if he has. It is another matter that the vendor will have to pay cash for buying flowers from the women selling flowers on the street. Since the vendor have to pay cash to procure, he most likely won't accept the cheque from the person. Similarly there are many people who prefer to employ cooks to do the cooking themselves for the guests instead of giving the contract to caterers. So now visualise you buying paneer or cheese from the sweets stall who won't accept cheque. In some big cities, people the sweets stall owner may accept cheque but that is only in very few cases. You can create your own list and decide how difficult it will be for the person to do a marriage without cash.

The most important point here is that RBI is now clearly telling us that we are forced to use the banking system ie cheques, credit card, online transfer to make our payments and Cash is now pariah in this economy.

That is a very dangerous thing at this moment. US economy had credit cards since 1971. So people there use credit as second nature. In India, credit is seen as sin by many people and prefer to pay by cash. A minuscule portion of Indian economy is digital. Rest all is in cash. Insisting that we have to pay in cash is asking people to change their behaviour.

It would be easy for the educated people to do that. However, it would not be easy for others to do that.

Ethically it is not right to deny use of your own money. Government is the custodian of our money. So when you refuse to allow us to withdraw money from the banks, you are impinging on the rights of people. I can decide how to use my cash. The Government cannot just dictate that cash is bad. Unfortunately, that is precisely what the Government is doing.

Democracy doesn't run on coercion. Sanjay Gandhi realised it when he forcibly took people for vasectomy and tubectomy operations. That raised lot of hue and cry and India's family planning programme after that never made any progress. The Government should have understood that even good medicine cannot be forced down the throats of people, else they will rebel.

So what can Government do to increase use of e-wallet, online transactions?

1) The Government has to incentivise people to use online bank transfers, credit cards and cheques. When others see that there is an incentive in online transfers or cheque payments then they will prefer it.

2) Government has to do an e-wallet. Instead of allowing every bank to do one, it would be better if the Government comes out with an app. Instead of #PayTM which belongs to private companies with some 40% owned by Chinese (Alibaba is a chinese company), the Government has to encourage people to use a Government of India owned e-money app which can be named eRs . It would have all the security features and will also get the trust of people as it is Government owned. The Government can then tell people that they can get back say 1% as cash refunds if they use this app to buy and sell.

3) Ensure that first all property transactions have to be done through the above mentioned Government owned e-wallet say eRs. All highway toll booths to be only through the Government owned e-wallet. So the Government can immediately know the total income of each Toll vendor and hence the Toll vendor can't keep on charging forever. All railway travel bookings in AC classes to be started with e-wallets as well as all payments to Government to be done in the cashless mode. This will along with incentives for cashless mode will ensure adoption faster and help in smoothly moving to a cashless economy.

BlackMoney, Politics & Way Forward:

In the 2014 Lok sabha elections, you all would have seen the unprecedented money power. 20,000 crores was spent by BJP. Do you know how much is the official income of BJP in 2014-15? It is 1475.44 crores. So you guys think that the election was fought with “white” money?

According to grapevine, Mukesh Ambani is supposed to have given some 4000 crores. Do you think he gave all that in cheque?

Wake up guys!

Many years ago, Ratan Tata had proposed State funding of elections. It was rejected. Without adequate funding, good guys can never contest elections. Only the rich, corrupt can contest elections. Today they spend anywhere between 6 crore rupees to 10 crores for an assembly election and it varies according to the importance of the seat. That is way more than the stipulated amount that is shown to the election commission as election expenses. Majority of the money spent in elections is black money. During elections when the blackmoney comes out and is pumped into the economy, it becomes legitimate earnings for some and gives rise to a boost to the economy as it has a multiplier effect.

Nevertheless, funding of elections have to be streamlined, else politicians will continue to have a reason to generate blackmoney.

And don’t think the black money is generated only by rich.

Many of you would be paying house rent by cash. Any money that is not accounted for ie declared to the income tax is black. In Delhi, people pay part of the house rent as cash. This is because the owner insists on payment in lieu of pumping water to fill the overhead tank. Much of delhi is like that.

And if you every paid money to the traffic cop for a traffic violation, then that would have been without bill and it is a blackmoney. Did you request the TTE to allot you a berth in the train and given him some money. That is blackmoney. Next time run after the TTE and record video and see what he does. :)

A road side food vendor earns much more than many salaried employees. A TV report suggests a chaat wala in Bhubaneshwar earns 32000 profit per day. That is after paying the mandatory haafta to the police. How many common men and women earn that much money after tax? And all that is black. In Bombay, road side eateries have declared some Rs. 50 crores income. http://economictimes.indiatimes.com/news/economy/policy/roadside-eatery-owners-declare-rs-50-crore-under-black-money-scheme-in-mumbai/articleshow/54618396.cms

The generation of black money is relentless. Modi Govt. has done nothing to stop the generation. Neither it has done anything to hunt the super rich who have already converted their black money to white.

The gems and jewellery industry had grown by 97.1% in FY 2015-2016. Most of that is due to the cash getting converted to gems and jewellery. Govt. mandated the use of PAN card for high value transaction. However, people know how to bypass it by breaking the purchases into instalments as well as lot of those not being shown in the books and through fake id proofs.

The people who are hit by the Rs. 500 and 1000 notes ban are the poor and small time traders. In Delhi when a maid goes to convert her 1500 rupees which she had got as salary by giving it to the sabji wala, the sabjiwala thela guy gives 300 worth of sabji for each 500 note.

An industrialist has got 80 employees. He signed contract with all his employees and gave them 5L each to be deposited in their account as well as their wifes account (2.5L each). So he made some 4 crores white. This is one of the methods adopted. People are ingenious and can figure out a loophole to deposit their notes in the bank accounts.

The challenge is the significant loss in sales in the markets. The economy is hit. There is partial impact of this on some guys who had blackmoney. However for a large economy like India, this is way too less. We order food/groceries online paying through card to tide over the problem. The poor cannot afford to do that. In smaller towns the number of banks are too less and due to lack of media coverage we don't get to know the suffering of the people.

Note ban is More to do with Politics:

There is so much of data these days. The Government should have put people to analyse it. This kind of data analytics is called “big data”. However, the Government decided to create fear in the minds of people to benefit politically.

Else, there was no reason to say that any deposit over Rs. 2.5L in bank will be taxed. What was the point in making that announcement? Let people deposit all their money and then the Government could have just gone and caught the people who had deposited huge amounts and asked them to justify it.

What was the need to announce that the Government is tracking the Jan dhan yojana accounts where money is being deposited. It is simple politics my friend to tell you guys that the Government is actually hunting down the people with blackmoney. It wants you all to have vicarious pleasure in participating in that blackmoney hunt. Remember the Roman era where people used to applaud the bloody man vs animal sports? The psyche is the same. The Govt. makes the aam aadmi feel the same about hunting blackmoney guys. Unfortunately, due to the poor implementation, the poor people instead of applauding the Government have become collateral damage. The Supreme Court has rightly said that it is Carpet bombing.

Citizens can help unearth BlackMoney:

The Government can setup toll free numbers, email ids and fax numbers dedicated to unearthing black money where any person can send a message about instances of blackmoney generation.

Some bhakts say that banning Rs. 500 and Rs. 1000 will lead to more PayTM which is good. Tell me why going with a Chinese company is good?

Govt. App for e-money:

I would prefer that all buying and selling be done via an app linked with mobile and that app should be owned by the Government. It should have voice assisted features, so that even a layman can understand how to use it.

If there is any hacking then the Government should be responsible. When it comes with sovereign guarantee, people will definitely use it.

And the Government will then know all the users using the app to buy and sell even small things like samosa in the road side. Let the Government take the lead. It would be the biggest e-money payment mechanism in the world.

Why bow before chinese and use PayTM? If that can be done, then the entire India will stand up and applaud Modi. No amount of tears can move me. Only visionary work can. I still have hopes that Mr. Modi can do good things based on his mandate, without disrupting lives of common man and making him/her collateral damage in his politics.

Edit: Readers have emailed that there is a National Payments Corporation of India with its UPI (Unified Payments Interface) gateway, where some 30 banks are linked. So one can directly pay from your account. It was done during Raghuram Rajan's time and hasn't got much publicity. May be the Hon'ble Prime Minister can promote it instead of being shown in PayTM advts. However, we are not sure if this UPI will work in toll booths and other places.

Read the Next article: http://arjunaubacha.blogspot.in/2016/11/notes-ban-terrible-implementation-shows.html