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What Have We Gained, Mr Modi?

Prime Minister Narendra Modi promised that the demonetisation troubles would end in 50 days. As the deadline draws near, ATMs remain dry and people  are asking whether their pains were worth the gains.

Vijaya Pushkarna

It is no coincidence that ‘notebandi’, the demonetisation of high-value notes by the Narendra Modi government, sounds a lot like ‘nasbandi’, the infamous sterilisation drive during the Emergency under Indira Gandhi. With long queues outside ATMs that seemed perpetually dry, the country has almost been cashless since Modi announced the demonetisation of 500- and 1,000-rupee notes on November 8. Curiously, that timed perfectly with his campaign for a cashless India or, as he twisted it, a less-cash India.

As cashless economy became the main focus, the talk of black money and counterfeit currency took a second place in the government’s scheme of things. The benefits to the economy and people of buying, borrowing, paying and selling without currency notes became the discourse from South Block, the Reserve Bank and the NITI Aayog. Indians, who had almost entirely been dependent on cash, were hurtled into a digital financial future, and most of them were caught unprepared.

Indians in cities have been using credit and debit cards, net banking, and even e-wallets to shop online, book train and flight tickets, make hotel reservations and pay the cabby, and even the maid and driver. It is those in Bharat, who are feeling let down, as in many cases their livelihood is threatened. “Modiji ne kaha ki amiron ko, paise walon ko line mein khada kar diya..lekin hum hi line mein khade hai,aur paisa hai hi nahi. (Modiji said he has made the rich stand in line, but it is we who are in the line, and there is no money.) One hears it very often in rural India.

Modi, indeed, said that. It was intended to get audience cheer him at a rally where he commended the way people were supporting him despite facing difficulties because of demonetisation. The villagers, however, seemed concerned more about reality rather than heroism—no money in their hands for any of their needs. And they started calling it ‘notebandi’.

In fact, the government has been headed towards a cashless economy for quite a while, with the Reserve Bank creating a technology-driven payment and settlement ecosystem. Staying the course with Aadhaar cards, then opening Jan Dhan accounts and initiating a series of steps around the mobile phone were aimed at moving from cash to less cash. Promoting mobile and digital banking to spur financial inclusion has been a vision of the government’s Digital India programme.

A study by the payment technologies company Visa, which was submitted to the NITI Aayog just before the demonetisation, said using cash was costly for the country. It cost 1.7 per cent of India’s real gross domestic product in 2014-15, said the study. Another study, done in 2014 by the Institute for Business in the Global Context, part of The Fletcher School at Tufts University in the US, pointed out that most Indians lacked the means to do non-cash payments even if they wanted to.

The study said people mostly used cards to withdraw cash from ATMs rather than making cashless payments. Though there is a fiercely competitive telecommunication sector in India, fewer than 2 per cent of mobile phone users had used a mobile phone to make a payment. Aadhaar, said the study, would reduce costs of serving India’s unbanked population. It made another interesting point—though people did not pay anything to transact with cash, as they did with cards, they spent time on fetching cash. “Delhi’s 11 million inhabitants collectively spend some 6 million hours per month fetching cash; Hyderabad’s 6.8 million spend 1.8 million hours,” it said.

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January 01, 2017