Demonetisation Debate, Points to Consider

Decision to demonetize Indian high value currency notes has kicked up huge debate. Many have highlighted serious implementation issues. Problems that has created a lot of inconvenience / hardship to common Indian people. There is no doubt common people have faced serious difficulties. 

Many well meaning individuals have written scathing articles against the government. Some had questioned the move on ideological ground. Others have personal distrust and disgust for anything that prime minister Modi does. I shall try to understand points raised by Ms. Amulya Gopalakrishnan and Mr. Amit Varma, in Times of India. Without going into individual articles, let us look at key points raised by both authors:

1. Government is promoting technology in its pursuit of digital India and cashless society. India has poor infrastructure of technology. Even most developed countries with much stronger digital infrastructure, hardly use 40% transactions in cashless form. The examples of Germany and USA were quoted.

Critics of government policy are loosely using cashless with low cash as a synonym. Government has said that it will try to induce population towards alternatives of cash. This may bring more money into banking system, there will be transparency in transaction and pressure on banks may ease. It must be noted that in most developed economies of the world, cashless transaction constitute nearly 70 – 90% of all transactionsIndia is hoping to reach a modest level of 30% to 50% cashless transaction.

Yes Indian digital infrastructure is creeky. Yes many people do not understand how banking system works. But a thousand mile journey starts with the first step. India has taken the first shaky step. A lot depends on how different state governments work with central government to strengthen the move and educate general population.

2. Many Indians in rural area do not have access to banks. Rural folks are not adept with banking system. Crooks in the form of government employees will cheat common villagers, who do not have any understanding of computers and digital mechanism.

In India, people in rural areas are routinely cheated of their due by rich and powerful. What to say about rural poor, even urbanites and semi urbanites are made to sign a wage amount and disbursed an amount lower than the signed amount. These victims can be  highly educated a college professors, they can be educated mill workers or uneducated / semi educated tea garden labourers. The practice of making payment by cheque or transferring money electronically into payees account may eliminate middle men, remove bribing and put a stop to paying less than agreed wage. Yes there can be corruption in this process also. False account can be created or money can be transferred to a different account. Insistence on adhaar based KYC may minimise creation of false account. Transfer of person A’s salary to person B’s account may be minimised if account number and name do not match. In India, corruption is all pervasive and corrupt are extremely innovative. For that matter, liquid cash is all the more vulnerable to robbery, pick pocket and theft.

3. Privacy of common Indians will be at stake. Government will keep track of all financial transactions. Paper trails will be everywhere. 

A vast majority of Indian people live below subsistence level.  We must discuss in a country where poor are routinely deprived of their due is transferring wage directly to a persons account really bad? We must discuss, after initial hardship of opening a bank account and transferring money to the account, is it so bad if a farmer or daily wage earner can move his money from point A to point B without having to commute many miles or kilo meters? What is the significance of privacy debate, when a vast majority of Indians do not have access to decent living conditions? Many Indians bathe in the open, many ease in the open and many defecate in the open. Our indicator of human development is very poor, be it education, be it healthcare, be it sanitation. We must ask, why seventy years post independence we are so illiterate, why lack so much in infrastructure? 

4. Many women who save money in nooks and cranies of her household will lose her independence. She will be forced to open a bank account.

Are we to understand women save money in 500 and 1000 rupee notes only? If it is true, such women are not poor. They can always open an account. If women save money in 10 to 100 rupee currencies, these notes have not been demonetised. 

Whatever, may be the scenario, government has not forced anyone to open a bank account and/or use digital transaction. Any individual, opposed to alternate methods of transaction can always use cash. If a large number of citizens adopt cash as preferred mode of transaction, then e-transaction promoted by government will fail. Similarly, if a house wife or for that matter any woman and/or man, opens a bank account and transacts electronically, she / he will still retain independent besides earning interest on savings.  

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