Notes for a cashless economy

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M. Venkaiah Naidu
The November 8 announcement was aimed at eliminating black money and corruption, apart from dealing with the counterfeit currency industry. It has also given a god-sent opportunity for the digital economy
India’s economic landscape, in terms of everyday transactions, has been transformed, so to say, in one fell swoop. The life of every Indian, from a corporate CEO to a cobbler, has changed like never before ever since Prime Minister Narendra Modi has announced the trailblazing decision to withdraw old Rs.500 and Rs.1,000 currency notes from circulation.
The biggest reform, with a purpose
Apart from turning out to be the biggest economic reform in independent India, this revolutionary measure is making it incumbent upon everyone to embrace and promote digital platforms for money transactions. Necessity is the mother of invention, to use a clichéd adage. Herein lies the importance of the crucial and game-changing role the youth and other digitally literate people can play in educating the unlettered and semi-literate men and women in the use of mobiles and digital platforms for money transactions.
The November 8 announcement was basically aimed at eliminating the twin menaces of black money and corruption, apart from dealing a death blow to Pakistan’s terror-funding machine and the Inter-Services Intelligence (ISI)-sponsored counterfeit currency industry. It has also given a god-sent opportunity for providing a huge thrust to the digital economy and reap a bouquet of benefits that would accrue from such an all-encompassing transformation the country is going to witness in the days and months to come. The positive cascading effect would give a major fillip to our formal economy and help improve the country’s GDP in the long run.
There comes a time in the history of a nation when a major shake-up has to be effected by taking a momentous decision to bring about a tectonic shift in the attitudes of people, especially those who have been exploiting and milking the loopholes in the system for begetting illegal and tainted wealth.
Despite having a deep understanding of the temporary difficulties it might cause to the common man, the Prime Minister, in a courageous move, decided to withdraw Rs.500 and Rs.1,000 denominations in view of the gigantic proportions black money was acquiring, leading to a virtual parallel economy. He was also aware of the growing menace of counterfeit currency being pumped into the country from across the border and the sinister manner in which it was being used by terrorists, smugglers, separatists, women and child traffickers and drug dealers. He took this timely and path-breaking decision to prevent the shadow economy from causing any further damage to the country.
Not a sudden decision
The decision was not sudden. Mr. Modi took all the necessary precautions and alerted the nation about the likely stringent measures the government would be taking to unearth black money. Who should fear the consequences of such a historic decision? The answer is simple. Only those in possession of ill-gotten, unaccounted money in our country and those with sinister motives and evil designs across the border.
Soon after the National Democratic Alliance came to power in 2014, the Union Cabinet at its very first meeting constituted an SIT (special investigation team) headed by the former Supreme Court judge, M.B. Shah, to go into the issue of black money.
Similarly, at the very first G20 Summit he had attended at Brisbane in November 2014, Mr. Modi stridently took up the issue of black money with other global leaders. “Increased mobility of capital and technology has created new opportunities for avoiding tax and profit sharing. I urge every jurisdiction, especially tax havens, to provide information for tax purposes in accordance with treaty obligations,” he told the world leaders. This forceful pitch by the Prime Minister led to the inclusion of a clause on combating tax evasion in the final communiqué.
Later, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 came into force on July 1, 2015 for disclosure of foreign black money within three months by paying 60 per cent tax.
Other measures include the constitution of a Multi-Agency Group (MAG) on the Panama Paper leaks and the passage of the Benami Transaction Bill, 2015, an anti-black money measure, in the Lok Sabha. India also inked agreements with many countries, including the U.S. to add new provisions for sharing banking information. Double Taxation Avoidance Agreements (DTAA) were also signed with countries which were considered safe tax havens such as Mauritius and Cyprus. India also joined the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (AEOI) to combat tax evasion and unearth black money. Later the Income Declaration Scheme was announced and, finally, the Prime Minister warned during his “Mann Ki Baat” address to the nation that the time is up for black money hoarders.
Support and the road map
As the country is passing through this momentous phase, marking a tectonic shift, it is our good fortune that most Indians – be they illiterate or literate, rich or poor, rural or urban dwellers – are lending their wholehearted support to the Prime Minister’s drive against black money and corruption. At this juncture, one should salute the common Indian for bearing this temporary inconvenience with fortitude and patience in the larger interest of the country. That people are in sync with the Prime Minister was also reflected in opinion polls carried out by various agencies.
Another testimony of this support was captured in the results of the recently held by-elections in Assam, Arunachal Pradesh and Madhya Pradesh. In the municipal elections held in Maharashtra and Gujarat, the Bharatiya Janata Party swept to power, clearly indicating that the people were willing to suffer temporary pain for long-term gain.
The Prime Minister’s agenda for moving towards digital transfer of money is the need of the hour wherein day-to-day transactions take place without cash. Yes, in a society as layered and complex as ours, the challenges that lie ahead are many, but the road map has been laid out in a statesman-like fashion by the Prime Minister. The government on its part has suggested various measures for people to move towards a less-cash economy. Transactions in physical currency would gradually come down as more and more people switch over to digital currency.
An important aspect that should be noted here is that India has the highest use of cash in the world, according to MasterCard report. It is apparent that such high use of cash would only strengthen the country’s informal economy, which is not in the larger interest of the nation. Reduced use of cash would choke the grey economy, curb money laundering and result in increased tax collections to the government’s coffers. All this would ultimately benefit the common man, as a less cash economy would plug loopholes in the public system.
Jan Dhan, Aadhar and Mobile
The Prime Minister has steered the country in the right direction for people to move towards digital transactions – right from the launch of the Jan Dhan Yojana to JAM (Jan Dhan-Aadhaar-Mobile) and other initiatives, including the Micro Units Development & Refinance Agency Ltd. (MUDRA) Bank, all of which are a demonstration of his commitment towards improving the living standards of every Indian.
With Aadhaar acting as an important link between the people and the government, the common citizen need no longer do the bidding of unscrupulous and corrupt officials to secure what is rightfully his.
A Moody’s report has pegged the impact of electronic transactions to 0.8 per cent increase in GDP in emerging markets as against 0.3 per cent increase in developed markets. People need to make full use of electronic payments as they are faster and easier to trace.
The various options towards a cashless or less-cash economy include Unified Payments Interface (UIP), Bank Card, prepaid cards, using various cards at any PoS (point of sale)/ ATM, Unstructured Supplementary Service Data (USSD) based mobile banking, Aadhaar-enabled payment system (AEPS) and e-wallet or digital wallet.
As part of the drive to promote digital transactions, the Prime Minister himself conducted a workshop for his personal staff. Various ministries too are undertaking similar workshops for their respective staff.
Eventually, it is planned to ensure that every transaction takes place through the mobile phone. With more than 1,033 million mobile phones in India, including about 250-300 million smartphones, an important requirement is change of mindset among all sections – I am sure every Indian would become part of this awe-inspiring initiative launched by the Prime Minister to take the Indian economy to majestic heights.
M. Venkaiah Naidu is Union Minister of Urban Development, Housing and Urban Poverty Alleviation, and Information and Broadcasting.

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