1. How PM Narendra Modi’s boldest reform move can reboot India, power-up version 2.0

How PM Narendra Modi’s boldest reform move can reboot India, power-up version 2.0

BJP-ruled states must make EDC machines compulsory for transactions by commission agents in mandis

By: | Published: November 21, 2016 6:19 AM
modi_ap-l It is well-known that much of black income is generated through cash deals in the real estate sector, and an honest person wanting to buy a house or plot with full cheque payment was often ridiculed. (Source: AP)

With demonetisation, prime minister Narendra Modi has taken the boldest economic and political decision of his term so far. He has pressed the button to reboot India and come up with a version 2.0 which, hopefully, will weed out corruption to a great extent and sow the seeds of hope for a ‘clean’ India. In this endeavour, the ministry of finance and key personnel of RBI also deserve compliments for maintaining secrecy.

While there is no doubt that it has disrupted the smooth functioning of the economy in the immediate run, especially the informal one, there seems a majority view emerging that it is good for the country in the medium- to long-term. Perhaps for the first time, an honest person feels happy that the government has given him/her some dignity, a sort of premium to honesty, by targeting those who have hordes of cash stashed from their unaccounted transactions.

It is well-known that much of black income is generated through cash deals in the real estate sector, and an honest person wanting to buy a house or plot with full cheque payment was often ridiculed. Almost half the payments are accepted in cash, and it was almost impossible to buy a house in pure white money! This was sickening and cancerous. So, no wonder that honest people are very happy with this move of the prime minister.

But, if the inconvenience to the common man, standing in the long queues at ATMs and banks, lingers for long, it can turn the mood sour. Some opposition parties will surely take full advantage of that situation to ensure that this drastic step of the government fails and demonetisation is rolled back. If the Modi government buckles under their pressure, it will be political suicide. Thus, it must act on war footing to minimise the inconvenience to common man in remonetising the economy with new notes and promoting electronic transfers aggressively on a large scale. How can it be done?

Let us consider first the news that volumes of fresh produce in agri-mandis have dropped significantly, truckers have stopped plying, and farmers are in deep distress. No doubt that this has some truth, but the magnitude of it is being blown out of proportion. If supply-lines are so badly disrupted, how come consumers in urban areas are still getting their daily essentials at regular prices. Why have the prices of daily essentials not erupted? That is the litmus test. Have people stopped consuming fruits and vegetables or milk and bread? There are no long queues for daily needs. People are getting their food at regular prices, and they are adjusting. Behavioural change is in the air, with greater use of plastic cards in transactions that were being done earlier carried out almost entirely in cash. It needs to be expedited. How can this be done?

It is time that BJP-ruled states take the lead in announcing that commission agents in all agri-mandis must have EDC machines (Electronic Data Capture machines, used to swipe credit/debit cards) compulsorily and transactions should be only through these machines, else their licences will be cancelled. These machines are very cheap and convenient, and will immediately convert the massive cash transactions into electronic ones, signalling the rise of digital India. A massive campaign and demonstration of digi-wallet systems, e.g. Paytm, will give it a further boost. Small vendors, even paanwalas in street-corners, adopting this will transform the manner India transacts small business, running into millions of transactions every day. That would be an innovation to transform India, and it can be quickly ramped up, giving a major relief to the common man.

The Union and states’ ministries of agriculture and farmers welfare need to lead this transformation exercise. Nabard, with offices all over the country, and agro-companies like Amul, Hatsun Agro, Nestle, Iffco, etc, too need to demonstrate and promote e-payments to the millions of farmers. This is the first attack on black money, and honest people and companies with a stake in agriculture andthe farming community cannot keep sitting in their comfy offices. They must be out in the field, helping their stakeholders.

Further, at least BJP-ruled states should announce quickly reduction in stamp duty in real estate transactions, from the current levels of 6-7% in most states to, say, 3% or lesser still. That will not hit their revenue adversely as business will expand with honesty. But, it will surely boost the morale of honest people to brave the inconvenience that they are undergoing, as they can see quickly the potential gains from such a move.

Next, the banks and the Enforcement Directorate need to be on alert as many with unaccounted cash are using Jan-Dhan account-holders and even farmers to deposit cash in their accounts. The ongoing ‘reward’ is a commission of around 25%, and many in the queues at the banks are these potential ‘awardees’! It is easy to identify a few such cases and catch the big fish behind them and mete out exemplary punishment quickly. Else, the impact of this mission will get diluted.

Also, high-priority needs to be accorded to recalibration of ATMs for new notes, extending working hours of banks, even asking them to work in shifts 24×7, especially for withdrawal of money by people from their accounts. If need be, even opening special extension counters through mobile vans, in schools, colleges and other offices—with due police protection—especially on holidays, as is done while conducting elections, may provide some quick relief.

Prime minster Modi cannot afford to lose this ‘surgical strike’ on black money and all honest people who want to see India emerge as a clean nation need to support him at the moment. The challenge is gigantic, but it can be met!

The author is Infosys chair professor for agriculture, ICRIER.

Views are personal

  1. R
    Ram
    Nov 21, 2016 at 9:11 am
    Very good article by an intelligent person which are rare as there is surge in number of s. Thank you sharing knowledge
    Reply
    1. R
      Renu S
      Nov 22, 2016 at 2:53 am
      This is such a bold and good step for our Nation that we must make it successful -- now only another 40 days left --- hi ji used to live without food for that many days!Come on we can do it
      Reply
      1. R
        Renu S
        Nov 22, 2016 at 2:54 am
        We can make this a success so we will be strong in the near future! hi ji lived without food for 40 days that is all that is left now.
        Reply
        1. B
          Balasubramanya
          Nov 26, 2016 at 4:10 am
          Thumbs up to Modi's surgical strike against black money and we are not at all mind the inconvenience caused on banking transactions for next few days.
          Reply
          1. C
            Chandrashekar
            Nov 21, 2016 at 4:57 pm
            Please share this post with pmo@earliest
            Reply
            1. M
              m s
              Nov 26, 2016 at 2:00 am
              SIR MODI's , step is very good to make india syne and i congratulate for this revolution . i would like to add that people standing in atm queue are 90% are who were buy by the the people who are against modi jee & spread a message in the public for inconvience caused by stop of 500 & 1000 notes. this is a practical which my friend found in front of ATM & ask someone who replied that we were paid for standing in the ATM line uptl 10 o'clock .
              Reply
              1. G
                Ganesh Bangalore
                Nov 22, 2016 at 10:30 am
                Dear Sir, Sub: Sudden demonitification Rs 500 & 1000 Country is flooded with the currencies of Rs 500 & 1000 and there are fake currencies also. This has reached many terrorists also and safety of country and common citizens are at stake. Besides terrorists are also using for increasing terrorist activities harming our country. It is also reported that due to demonetising of the currencies Kashmir has become calm also Besides Rs 500 & 1000 are used by our political parties also for giving incentives to get votes. Though fake currencies and terrorism are growing since a long time no other Prime Minister got the idea for reformation. Due to all such habits not only prosperity of the country gets affected, gap between rich and poor is increasing harming common people and the prosperity of the country. Hence P M Narendra Modhi and R B I Governor who have studied in detail have taken sudden decision without any advance information for manition, in the interest of welfare of common citizens and country. I wish the idea of this letter may be published with any alteration. B S GANESH
                Reply
                1. G
                  Ganesh
                  Nov 26, 2016 at 2:07 am
                  Very good article with practicaly applicable suggestions. Plz share it with Hon. PM or PMO, he will surely consider it. I welcome this type of script s from out of media people. Also extend compulsory Electronic payment options to jewelry, private higher education insutions, grocery stores across india.
                  Reply
                  1. M
                    M.A HAMEED
                    Nov 26, 2016 at 2:08 am
                    I don't understand why RBI showing baises in sensing money to all over the nation's,The 500 notes available in north India and bjp ruling states only .. on second of notes bans Bhopal gets 500 note still Hyderabad didn't got 500 ripped bills what he'll this RBI ... it's will create a more division in states
                    Reply
                    1. M
                      M.A HAMEED
                      Nov 26, 2016 at 2:05 am
                      It's not possible banks will go dry if this happens. Bcz ofthe higher values loan'sCreates cash crunch in banking sector.
                      Reply
                      1. H
                        Himmatlal Joshi
                        Nov 22, 2016 at 1:19 am
                        The learned author has talked about BJP ruled states. In fact non-bjp ruled states must also give a thought to it in their own interest. The time is coming they have to do it. Disrupting the Parliament on this subject is an immature move.It is a misuse of the democratic rights.Everyone knows that the hardship to various sections of people is a temporary phase.No pain no gain.
                        Reply
                        1. J
                          Jitendra
                          Nov 22, 2016 at 5:43 am
                          Since this is a major economic reforms,opposition parties and MSM should support itstead routine hardships to the people are being blown up.Many like Kejriwal are spreading rumours that 55 people have died because of this demonetization.While political leadership of NDA may not be influenced by such vitriols,opposition parties should consider the efforts that bank employees and ATM service providers are putting in.
                          Reply
                          1. R
                            rahul gandhi
                            Nov 26, 2016 at 2:06 am
                            Demonetization has put a spanner in running economy. This is an impulsive decision without considering the ground realities of Indian economy, masked objectives ate dividing the nation. 75 people are dead already, few might have been unreported as well. Many cash deprived may convert to petty crimes, cash ders r not loosing its the common man standing in the que who is loosing, loosing his daily wage, loosing on health as suddenly he has to limit his food only with cooperative provided cheap rice, milk is luxury, he doesn't have cash neither bank balance, employer cannot pay in cash, all messed up
                            Reply
                            1. S
                              S. Gopalakrishnan
                              Nov 26, 2016 at 4:01 am
                              This demonitisation move will spur and awaken rural people deliberately kept in deep slumber by politicians and rich people by denying all facilities Hereafter digital economy and technology will be at their door steps and necessarily they have to keep abreast with latest to make a survival Educated people in rural and semi urban areas must voluntarily reach out poor and illiterate people to get to know of financial system viz ATM debit card e Wallet etc to them Govt should simultaneously educate the people in all possible ways one stroke economic prosperity and removal of illiteracy can be achieved
                              Reply
                              1. D
                                Desh bhakt.
                                Nov 21, 2016 at 10:22 am
                                Just dont understand the truth in India. So many articles for and against this move. Many economists are writing articles for & against this move.
                                Reply
                                1. Y
                                  YOGESH ENGINEER
                                  Nov 26, 2016 at 2:15 am
                                  NOTHING TO WORRY - MAJORITY PEOPLE OF INDIA ARE WITH MODIJI ....WHY ALL THIS HUNGAMA BY OPPOSITION IS THAT THEY HAVE DIRTY MONEY IN TONS.....OPPOSITION IS A CONFUSED BUNCH OF DIRTY POLITICIANS WITH DIRTY MINDSET ....NO ONE IN THIS WORLD ARE GOING TO CARRY ANY CURRENCY TO THE GRAVE... ROTI KAPADA AUR MAKAAN IS ENOUGH IN THE PRESENT SCENORIO?
                                  Reply
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