The recent demonetisation of Rs 500 and Rs 1000 notes have given rise to controversies and conflicts among people in general. First let us take stock on the immediate impact of the move on general citizenry. Countrywide we see panic rush and queques forming in front of banks and ATMs and common people being in a daze, almost in a shock. Why the government did not take care of adequate cash supply to cope with this highly critical situation that is hard to fathom.
After two weeks we still have poor cash situation in banks and ATMs and it is clear that the government took these measures without proper planning and adequate forethinking. Could this be accepted in the US or any of other European countries?
However, on a different note we can see the intention of the government to filter white from the black. Gradually the move will, like NASSCOM has indicated, realign the system with online transactions. The western press like New York Times, Washington Post praised this demonitization move.
The move should ideally be part of a campaign against corruption and black money. We do not have any clue about the possible follow up action by government as this move hit us all out of the blue. There was no pre build up, no awareness campaign. but that may be because the government tried to catch the hoarders of cash by surprise.
We, the people of information technology sector, would of course read a welcome message to this move because the cash transaction and currency issue will automatically head us towards digital banking and online transaction in the long run. However, it would be good to know that RBI and government takes adequate care of providing necessary liquid cash to common people who even today do not have alltime or high end access to online transaction. Corporate sector people are already deep into the digital and they will yet increase this trend in coming days and months.
I see the fast development of e-market across the country due to this measure. That will be accompanied with increased internet accessibility and infrastructure too. This will give boost to domestic IT sector to a marked extent. The move appears to be honed towards extensive digitalisation, however, considering the vast and still largely unaudited disorganised sector which is submerged below poverty line, and who constitute a significant section of inhabitants of India, would possibly by circumstances remain outside the ambit of digital mode. The revenue increase due to demonitisation is yet to be seen before fully grasped and comprehended.
Electronic payment, which thus far has shown little penetration in the country, will get a push following the demonetisation of `500 and `1000 currencies, according to Nasscom. Finance Ministry’s Committee on Digital Payments, chaired by Ratan P Watal of NITI Aayog, said cash accounted for 78 percent of all transactions as per Reserve Bank of India. As such, this move is seen as a masterstroke that would make a major dent on unaccounted or ‘black money’, rendering it valueless unless it is taken to a bank to be exchanged, potentially bringing it into the tax net.
“If most of the black money is brought into bank accounts or into the tax net, there will be far less reason to deal only in cash and far more reasons to transact through electronic payments,” he reasoned. Further, this complements the other moves toward digital payments.
According to Nasscom, this would benefit the e-commerce industry, where a large number of deliveries in India are “CODÂ” or cash on delivery, rising logistics costs and risks. While other reasons for use of cash, such as trust, may take longer to alleviate, the present announcement could mitigate a significant factor driving COD, availability of unaccounted cash.
But, the introduction of `2000 note and reintroduction of `1000 note is being viewed as a potential dampener to the bold and progressive step by the government, as high-value currency notes constitute the foundation of black money and the cash economy.
The parallel economy of black money is as per every assumption or estimate higher and deeper than the white one. We appreciate government’s plans to demolish it and are ready even keen to cooperate as and when necessary. However, the existing loopholes and gap areas in our body polity and economic infrastructure in general warns us to doubly cautious before we commit ourselves into a course of action. The good intentions and rules made and formed at the apex so often go waste, humiliated and betrayed by the traditional practices of ubiquitious corruption. Unless this is addressed by a combination of value campaigns and hard legal policing we cannot expect to go far in bringing transparency and digitalisation to the full extent.
Prime Minister Modi has been proactively searching for transparent and better options since his day one in the government. He is in a system and society which is still plagued with inequality, distrust and wrong thinking about money policy. Modi is braving against the odds and trying to realign the nation into a new more vibrant more egalitarian infrastructure and wants commitment from the nation to work with him towards common goal. Challenges remembered, we hope he succeeds and make the nation reach new heights of economy, equality and understanding.
The author is Founder & CEO, Interra Information Technologies Inc.