Transition to cashless society has to be a gradual process


By Sandeep Sahu

In the one month since Prime Minister Narendra dropped the bombshell called ‘demonetization’ on an unsuspecting people, the ‘official’ objective of the mammoth exercise that has affected the economic activity of every single Indian has changed from a ‘battle against black money’ to a ‘movement towards a cashless economy’ – something that was nowhere in the picture when the announcement was made.

Of course, the government is well within its right to make a course correction and there is anything fundamentally wrong with a move towards a cashless economy. But such a move must be preceded by a reality check on whether the nation, especially rural India, is ready for it. In an economy in which up to 70% of all monetary transactions are powered by cash, the transition to a cashless economy (‘less cash’ economy, to be more appropriate) has to be a gradual process rather than forced down the throat of a largely semi-literate population that is too busy in the mundane business of eking out a living to bother about the concept of Digital India sought to be fast tracked by the Modi government. Talking of cashless transactions in a country where nearly 60% of the areas are unbanked is hypocrisy of the highest order.

Many people in rural areas still use the mobile phone solely to talk and are innocent of its multifarious uses that we city dwellers and smart phone users take for granted. There are also a large number of people in the remote areas who are yet to use a mobile phone. Banking services are yet to reach more than half the villages while credit/debit cards are unheard of. The fact that an overwhelming majority of Jan Dhan accounts saw precious little transaction since being opened more than a year ago before witnessing a flurry of activity after the demonetization decision (no prizes for guessing why) suggests that inculcating the banking habit in rural areas has a long way to go. In most cases, people simply don’t earn enough to put their money in the bank and then withdraw it when needed.

As we have seen since November 8, there are some people in the country for whom every crisis is an opportunity. They are the middlemen and touts who offered to exchange the outlawed Rs 500 & 1000 currency notes for new currency – for a price, naturally – and roped in Jan Dhan account holders and daily wage labourers for the purpose, till the government put an abrupt end to the exchange of old notes. Where is the guarantee that these people will not make a killing out of the government’s push for a cashless economy, taking advantage of the illiterate, semiliterate people’s ignorance?

Besides, how can the government convince people that the fast tracking of a cashless society is not a move aimed at benefiting banks and companies offering digital/cashless ways of payment through use of what is known as plastic money? The surcharge on payments done through cards may have been waived for the time being to meet the exigencies of the situation after demonetization. But where is the guarantee that they won’t return once the situation becomes ‘normal’?

On Thursday, Finance minister Arun Jaitley announced a slew of measures, including small concessions on buying petrol/diesel or booking railway tickets online, to incentivize cashless transactions. Nothing wrong with that except that the poor, illiterate man in the remote village is put a disadvantage because of his unfamiliarity with digital gateways of payment.

On its part, the Odisha government has gone about the business of working out a system of cashless transactions with gusto, forming a high level committee to oversee the transition without realizing that rushing it through could upset the economic equilibrium and make life really difficult for the common man, especially in the hinterland.

The Modi government would do well to draw a lesson from the Emergency era move for birth control through mass sterilizations led by Sanjay Gandhi. While there was nothing objectionable in the idea of population control in a country as populous as India, forcing it down on people proved to be a disaster – so much so that no subsequent government has attempted to promote family planning in any significant way since. Instead, economists now talk of the ‘population dividend’. The lesson is this; in a country as vast, populous and diverse as India, even desirable change has to be a gradual process rather than a forced move in a hurry.