Friday, 2 December 2016

Want to go cashless ?

#Demonetisation  The televised address by the Prime Minister  on the evening of the 8th November announcing the scrapping of  currency notes in the denomination of Rs 500 and 1000 has been  sudden and dramatic in its effect. The subsequent Gazette notification by the ministry of Finance mentioned the reasons for the step taken as: (1) Curb the menace of fake currency notes ;(2) wipe out unaccounted and tax evaded money; and (3) prevent terror financing and drug trafficking. 

In the wake of the widespread chaos and disruption that followed; the Prime Minister appealed to the citizen of the country to wait for 50 days for the system to normalize. Since then, for the last three weeks, the whole country is coping with the shortage of currency notes. The basic premise of the word demonetisation  being used to describe the scrapping of a set of currency notes and then replacing them gradually by another set  is now being altered to remonetisation as the realisation dawns over its inappropriateness. 

The events which have unfolded in these three weeks show that the basic objectives of the process, as mentioned above can't be said to have been fulfilled immediately and the evaluation on these points will take time. But meanwhile the sucking up of liquidity from the people and piling them into the Banking system has hit the whole financial infrastructure hard. The hardest hit sections of the society has been the unorganized, rural and small business segment. The prevalent confusion due to the change of rules of exchange, deposit and withdrawal of money from bank accounts almost on a daily basis has rendered the whole exercise into a form of undeclared financial emergency. 

Sensing the nature trouble ahead  which may stretch beyond the period of 50 days of patience as advocated by the PM, the whole narrative is now sought to be shifted towards  a related but hitherto unannounced dimension of "cashless" transactions. Theoretically  and conceptually this also looks good and most well meaning citizens, particularly the urban middle class and the upwardly moving class would endorse it wholeheartedly. Maybe as a tool to realize  their aspiration of entering a digital world at par with developed nations. And surely cashless financial transactions would usher in a great societal change. No doubts about that, even from a sceptic like me. 

But instead of getting swamped away in waves of irrational exuberance as previously done over Swatchh Bharat, Yoga Day ,  Surgical strike on Pakistan  or  the fervour of patriotism it is necessary to examine the matter in the light of our capabilities and plans . The recent episode has shown the logistical challenges that have to be encountered in a big country like ours with a even bigger population by comparison with the developed nations.  As the scarcity of currency notes and recalibration of ATMs have shown; there is a crying  need of meticulous planning with military precision instead of reaction through announcements. Nothing is impossible but everything has a cost. 

The advantages of going cashless are many. But we have to ask ourselves whether everything that is possible needs to be done. And that too in a hurry. Most of us are already moving toward a cashless society — not because we care about the accruing benefits overall , but because the stuff is so very convenient.There is no denying the fact that cashless transactions will bring more people under the tax net. It will eventually be the order of the day. But till then, it should not be forced on a population with low level of literacy and ignorance about laws and technology.

Banks and payment systems  industry will make a huge amount of money . There will be a major risk of cyber crime syndicates replacing the present organised crime gangs. All these may look like whining of a nitpicker but the most relevant aspect of the cashless society is the tremendous power that the government will hold on the individual citizen. What about it ? How do you limit the ability of the government to use the payments system as an instrument to control the behavior of its citizens. Do you we really want the banks and the state to know every single detail of what we are spending our money on and where. It is very easy to say yes just to press for the cashless world and score debating points. But remember once you surrender that freedom –  it will be very difficult to get it back.

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