Friday, November 11, 2016

TS Sudhir - Rs 500, Rs 1,000 ban: It is the common man who is affected, and his anger is showing // Anumeha Yadav: Will demonetisation help the move to a cashless economy?

Interview 1
Question: Do you support Prime Minister Narendra Modi's move, nay, surgical strike to demonetise 500 and 1000 rupee currency notes?
Answer: Yes.
Response: Great. You are a true patriot committed to nation building and rooting out black money from India.

Interview 2
Question: Do you support Prime Minister Narendra Modi's surgical strike to demonetise 500 and 1000 rupee currency notes?
Answer: Yes. But banks should have been better prepared. All it has meant is worry and a lot of trouble.
Response: You black money hoarder. Anti-national. You must be unhappy because all your black money has gone waste. You should be in jail.

Welcome to life in black and white in India. Not that surgical strikes, Rohith Vemula, beef ban, Kashmir, Pakistan, etc, had not polarised India. But the demonetisation has taken the divide to a new level. You are simply not patriotic enough if you complain about having to stand in an ATM queue for two hours and more. Or sweat it out at a bank branch to withdraw Rs 4,000, waiting for up to four to six hours in some cases. Especially when bank employees - the new soldiers - are overstretching themselves.
This is not to say that the move to ban big ticket currency notes is devoid of any logic. A lot of real estate developers, politicians, businessmen, medical college capitation fee barons are known to sit on tonnes of black money. The common man was led to believe that the real target is them. But after the initial scare that they will come under the scanner, the more smart ones seem to have found a way around it.

A Maharashtra politician told a friend how he had Rs 70 lakh in cash at his home when Modi announced it was illegal tender. He claimed that he distributed the money among many of his supporters the next day, keeping it under Rs 2.5 lakh each. All that money will be returned to him, minus a commission, as white in December.

I also heard the amusing tale of a politician in another state who had kept cash ready to 'buy' a position within his party. Now, he has requested the high command for more time to arrange the money in denominations of Rs 2,000.

But do we see any such people sweating it out at a bank? No. It is the common man who is affected and his anger is showing. He is dismayed that Modi undertook this exercise with the banks simply not prepared to execute it on the ground. SBI is on record to say it will take 10 days for ATMs to work like earlier.

Less than 32 percent of Indians have access to banks and post offices, according to the finance ministry's banking division. RBI data reveals that there is one bank for 9,500 Indians. That is reflecting in the panic in India's cities, towns and villages since 10 November. A Hindustan Times report reveals that one-third of the 1.38 lakh bank branches are concentrated in 60 cities. 253 of the 677 districts in India have less than 100 bank branches.

Unfortunately, the media focus is only on the cities and does not adequately reflect the picture in non-metro India. Reports from Jammu & Kashmir, the north-east or remote towns and villages, indicate that the new currency of Rs 2,000 or even Rs 500 notes have not reached many banks in sufficient numbers. Much of rural and semi-rural India works with liquid cash and is therefore at its wits end on how to legalise cash whose expiry date was announced suddenly.

The worst hit are those who are not on plastic money and have to take care of urgent medical expenditure. Private hospitals and chemists are not accepting old notes nor extending credit. The Rs 4,000 limit that has been imposed on withdrawals from banks mean it is a hand-to-mouth existence for many who are already in trouble.

Senior citizens are put to grief, having to stand long hours in serpentine queues. A 73-year-old man, Vishwanath Vartak, collapsed while waiting in Mulund in Mumbai and died. The PM told us there will be inconvenience. He did not warn people could also die. Foreign tourists who have withdrawn money after landing in India are among the worst hit. Instead of enjoying the sights and sounds of India, they are scampering around in an alien land, trying to secure legal currency. Incredible India indeed.

The trader class, the support base of the BJP, is annoyed given that most wholesale shopkeepers choose to keep liquid cash to buy material every day. Very few of them deposit money in a bank. Many of them have incurred losses because of the liquidity drying up in the market. Their simmering anger should worry Modi.

With India in the grip of withdrawal symptoms, ab ki baar, Modi sarkaar has been replaced by ab ki baar, lambi qatar.

No one is arguing against the move to fight black money. But surely the system could have been better prepared for the strike. While the black money converted into white may come into the banking system, how much of the fake currency will get weeded out? If the fake currency is already in circulation, it only means that one or two of the notes that you or I deposit in the bank, will turn out fake. Who takes the hit in that case? The common man.

But even if we ignore all these problems that are likely to last for a few more days, it is the aggressive posturing by the BJP bhakts that is nauseating. To project every complaint or grouse as an act of treason is the new extreme right-wing.

On Friday, I had tweeted about 55-year-old Vinoda who committed suicide in Mahabubabad district of Telangana. She had sold 12 acres of land and almost Rs 50 lakh was reportedly kept in cash in the almirah at their home because there was a dispute between the son and daughters on how much each would get. Hearsay on demonetisation reportedly triggered panic in the mother that all the money may go waste. She killed herself.

"Why don't you also kill yourself?" was a tweet in reply to mine. Many others, as if working in tandem, bombarded me with tweets accusing me of being a Kejriwal and Congress agent, out to give the PM's scheme a bad name. It is this attempt to bulldoze any contrarian view, the urge to black out any news they don't see palatable to them, that is worrying. Many of us, me included, voted for Modi in 2014 and may still do so in 2019. But the PM should be wary of the damage that the troll sena masquerading as independent opinion, that his party has unleashed will do to his prospects. Life is never black and white. It is more often than not, several shades of grey.

Demonetisation move may fail to win the war against black money
Only 28%-32% of Indians have access to financial institutions, including post offices and banks. Further, 33% of the 138,626 bank branches are in 60 Tier-1 and Tier-2 cities, leaving rural India at a huge disadvantage.

Anumeha Yadav: Will demonetisation help the move to a cashless economy?
With its announcement that it was withdrawing Rs 500 and Rs 1,000 notes from Thursday midnight, the government rendered almost 86% of the current cash in circulation illegal tender. As people deal with the difficulty of transacting in cash in the next few days, there is expected to be an increase in electronic payments – through cards, micro-ATMs, pre-paid mobile wallets, payment banks and United Payment Interface. Finance Minister Arun Jaitley reiterated this when he said the demonetisation decision was aimed at making India “a cashless economy”, which may potentially expand the tax base and reduce the costs of printing currency.

Within hours of the announcement, some electronic financial service players such as Paytm recorded higher than usual transactions from existing users. But experts are divided on the switch to electronic payments among new users in the country’s semi-urban and rural areas.

Cash economy: India is almost entirely a cash economy. Over 92% of its workers belong to the unorganised sector and earn in cash. Cash powers the rural economy. Also, 97% of retail transactions are done in cash, with only 6% of retailers accepting digital payments. India has 10 lakh point-of-sale machines, or compterised cash registers, one-tenth the number in the United States and China.

But the number of cashless transactions could rise significantly given the rapid increase in the number of people owning mobile phones and using the internet. The World Bank estimates there are 33 crore internet usersin India, which makes it the second largest internet market. Mobile phone subscriptions went up from 23 crore to 96 crore between 2007 and 2015. Several of these mobile and internet users now have a bank account under the Pradhan Mantri Jan Dhan Yojana, a scheme to link every household to a bank account. Under the scheme, 25.4 crore accounts exist and 19.3 crore RuPay debit card have been issued.

In addition, over 127 crore Indians are enrolled in Aadhaar, a biometrics-based digital identity database that has become mandatory for anyone who wants to continue to be part of food or pension schemes. Therefore, as more people start using their RuPay debit cards and Aadhaar for digital payments, in the long term, this is expected to facilitate a switch to an economy that uses less cash.

Primed for a switch?: Development finance experts say we may see a trend towards this in the coming weeks, since the government has restricted cash withdrawals from banks as well as ATMs... read more: