Across the aisle | Cashless economy: A distracting mirage

Why should the government or its numerous agencies have access to our lives through access to Big Data?

Written by P Chidambaram | Updated: December 25, 2016 9:01 am
demonetisation, cashless economy, e payments, paytm, india news, cash crunch, demonetisation crisis, The unravelling of demonetisation caused panic in the government.

Every now and then a new word or phrase is introduced into the conversation. On November 8, 2016, it was demonetisation. It was portrayed as the white knight on a steed who will slay the demons of black money, corruption and fake currency.

Six weeks later, the demon of black money continues to flourish. The tax evaders do not seem fazed by demonetisation, they are accumulating black money in the new currency! They have traded their old notes for new notes. According to the Income-Tax Department, since demonetisation, it has seized Rs 500 crore in cash of which Rs 92 crore was in new Rs 2,000 notes.

The other demon of corruption is still alive. Officials of the Kandla Port Trust, engineers of the Military Engineering Service, RBI officials, bank and post office officials, and many others have been caught red-handed taking bribes in the new Rs 2,000 notes.

The third demon is fake currency. Just wait for a few months and it will be proved that printing technology is indifferent between the crooks and the RBI. The counterfeiters will soon acquire the technology and challenge the Reserve Bank of India to stay one step ahead.

Panic attack

The unravelling of demonetisation caused panic in the government. The first sign was when the government and RBI began to renege on their promises and changed the rules repeatedly (at last count 62 times!). The value of notes that could be exchanged was raised, then lowered, and it was stopped altogether on November 24. Indelible ink was used to mark the finger, then discarded. The withdrawal limit of Rs 24,000 per week remained only on paper and most people got paltry sums. Permissible use of old notes was abruptly stopped on December 15. The ultimate panic reaction was when the RBI ordered that one could deposit old notes only once and up to Rs 5,000 (without being asked questions) after December 19 and before December 30, putting paid to the promises of the Prime Minister and the Finance Minister. The Finance Minister offered lame clarifications. Two days later, the RBI was shamed into reversing its directive.

The Prime Minister realised soon that he had been convinced or conned to buy a lemon. He had no choice but to change the narrative. He propounded the idea of a ‘cashless economy’. In his speech on November 8, the Prime Minister did not once use the word ‘cashless’. It was all about ‘black money’ (18 times) and fake currency (5 times). By November 27, the Prime Minister shifted gears and in two speeches that day he mentioned ‘cashless’ 24 times and ‘black money’ only 9 times!

‘Cashless’ economy is not an innocent or harmless goal. It conveys a compete lack of empathy for the poor and those who have minimal or no access to the digital world.

Not a cashless world

No economy has become ‘cashless’, not even the most developed economies (see table):

cashless

(Source: Bloomberg)

The value of dollars and euros in circulation has doubled since 2005 to $1.48 trillion and € 1.1 trillion respectively. The US and Europe are using more cash, not less cash!

World over, the necessary and desirable rule is that people must have cash in their hands and be able to carry out routine transactions using cash. It is perfectly legitimate for a government to make a law that high-value transactions shall be by cheque or any mode of digital payment — examples are real-estate transactions, high-value jewellery, large contractual payments, debt repayments, payment of certain taxes etc.

On the other hand, to insist that a farmer shall pay hired labour in digital mode or a homemaker shall buy vegetables by swiping a card is an unwarranted intrusion and puts an oppressive burden upon the payer and the payee. Remember, there is a cost to digital payment that will be borne by the consumer. Subject to a reasonable law concerning high-value transactions, we must have the freedom to choose the mode of payment. That is our right and no government should be allowed to interfere with that right.

A distracting mirage

Consumers may be divided into three categories based upon the degree of access to the digital world: real access, minimal access and no access. 71 crore debit cards have been issued so far; in August 2016, these cards were used to withdraw from ATMs Rs 2,19,657 crore but were used to make payments of only Rs 18,370 crore. To put a card or a smartphone in everyone’s hand, to provide real access to everyone, and to make everyone adopt the digital mode will require advocacy, education and persuasion, not coercion — and without restricting the person’s fundamental right to use cash.

There is also another important issue — privacy. Why should a young adult be forced to disclose that she bought lingerie or shoes or he bought liquor or tobacco? Why should a couple be forced to leave a trail of a private holiday? Why should an elderly person leave a record that he bought adult diapers or medicines for his ailments? Why should the government or its numerous agencies have access to our lives through access to Big Data? I think these questions need to be debated before the country is pushed into embracing the digital mode for all monetary transactions.

Cashless India is an illusion. It is a distracting mirage. It may not even be a desirable goal.

Website: pchidambaram.in @Pchidambaram_IN

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First Published on: December 25, 2016 12:00 am
  1. R
    RAGHVENDRA
    Dec 25, 2016 at 1:16 pm
    If it is just as PC told,then why didn't they try it first with this type of eagerness.
    Reply
    1. P
      Prashant
      Dec 25, 2016 at 6:06 am
      Cashless is not an illusion ,,,Chiddu chor,,,,soon it will b reality,,,
      Reply
      1. P
        Prashant
        Dec 25, 2016 at 6:10 am
        Vajpayee gave 8% growth Rate as a Legacy to ,so called,,,great great Economist Manmohan,,,,,,soon he brought it down to 4%,,,,,,Now again,,this "Chai wala" PM has accelerated the growth to 7%,,,,,,,,,,,,,,😊😊😊
        Reply
        1. H
          Hemant
          Dec 25, 2016 at 3:28 am
          Mr. Modi has taken major initiatives like demonetisation, cashless transactions etc which are for the good of the country and nobody on earth can deny it. However Mr. Chidambaram in his time could not do anything and therefore finds fault with Mr. Modi to raise his own stature. He is playing with words like how many times cashless and corruption were used. It is like Kapil Sharma's comedy show.
          Reply
          1. I
            India
            Dec 25, 2016 at 10:19 am
            Even though demonetization is a very bold and good decision and people support that , privacy of consumers is a valid point of concern. Now as far as buying stuffs considered private many people are already doing that using credit card from home internet . We need to ensure that all transaction data of consumers is treated as private and in not exposed to public, media etc . Only police of CBI should get them if there is a serious crime and such data is necessary . Also all transaction data should be properly anonymised and ideny obfuscated before analysing them in Big Data Companies . The banks and online third party banking companies should look into it .
            Reply
            1. D
              Dungal
              Dec 24, 2016 at 11:51 pm
              Lies repeated 100 times to look like truth.lt;br/gt;lt;br/gt;If your economic decisions are strong to help rural poor, why not answer modis accusation of not making bank access easier in rural areas.lt;br/gt;lt;br/gt;Why are you avoiding elections? Is it old age or loss of credibility with the meslt;br/gt;lt;br/gt;First earn that credibility that you have lost, that your first interest is nation building and not the hi family
              Reply
              1. D
                Dungal
                Dec 25, 2016 at 2:36 am
                Uneducated rural cl can't handle credit, only free cash thru MNRega.lt;br/gt;lt;br/gt;Access to easy credit will make the mes responsible and country poor free. That means no votes for my first family and no money to my pockets and my sons pocket.lt;br/gt;lt;br/gt;Credit is only for mallays under great economist MMS.lt;br/gt;lt;br/gt;MMS. Is clean and so am ilt;br/gt;lt;br/gt;-Chiddu
                Reply
                1. H
                  Haradhan Mandal
                  Dec 25, 2016 at 3:49 am
                  BJP falls bawk on Congress and its "misdeeds or corruptions" as its support and argument, Whenever BJP is on defensive. And it ALSO usurps all the ground-work of Congress/UPA govt without giving any credit.lt;br/gt;lt;br/gt;TODAY BJP' s THUNDEROUS leader ji says "Your Mobile phone is Your bank". lt;br/gt;lt;br/gt;It does not realize that INDIARA ji gave poor men access to bank by Nationalizing the banks and spreading it in the rural hinterland. WITHOUT the PSU Banks - there is no "your BANK". lt;br/gt;Same with mobile phone. A decade back the mobile companies used to charge 12 RS or 15 rs per minute for a CALL.. IF 2G licenses were AUCTIONED , as per CAG, GOVT would have got 75,000 crore - BUT it would have led to double the amount as DEBT burden on mobile companies. AND in that scenario - only FEW (less than 0.1%) Indian would have access to "your mobile PHONE". lt;br/gt; "your phone is your bank". We need well qualified VISIONARY leaders - not slogans.
                  Reply
                  1. H
                    Haradhan Mandal
                    Dec 25, 2016 at 3:36 pm
                    How does a poor man, lower middle cl man do? Even a middle cl (not the "IT middle" cl) man do - pay ONLY digitally using computer and mobile phone? Buying a computer (I can use free software) Paying for internet connection at home (who don't get it free at work-place) , buying a smart phone (for everyone in the house) and paying for internet connection (for use of e-wallet like PayTM etc ) from their mobile operators for everyone in the house? Forget -if he is educated enough etc to do that.
                    Reply
                    1. H
                      Haradhan Mandal
                      Dec 25, 2016 at 4:26 am
                      It should be an eye opener to ALL the data from the developed countries - specially Germany (and Austria - incidentally the examples of 'our ARYAN' Countries.) . lt;br/gt;lt;br/gt;They run the country and economy and TAX system with 80% with CASH based transactions. AND that does make/did not their country CORRUPT, does NOT make their business hiding s and profit and thus avoiding taxes. lt;br/gt;Where is the PROOF that CASH based economy has to be corrupt and LESS TAX compliant? Not necessarily as it is so obvious here.(Thanks Chidamabarm ji who always talks with facts and figures - and logic) lt;br/gt;They have addressed the issues of CORRUPT machinery FIRST - obviously.
                      Reply
                      1. H
                        Haradhan Mandal
                        Dec 25, 2016 at 8:01 am
                        Rajeev hi wanted to computerize GOVT and Bureaucracy not only in Central GOV but also for state govt in each state. He set up NIC - he set up Software Export Centers across India to bring and build capabilities in India. The same leaders used to mock Rajeev hi THEN, the same way they mock Rahul hi TODAY. Who are the real "Pappus"?
                        Reply
                        1. H
                          Haradhan Mandal
                          Dec 25, 2016 at 8:39 am
                          We know form our LOKPAAL BILL and ANSAN days that people have repeatedly USED "EARTHQUAKES" in India - but nothing happened there ALSO. NDA-1 was there for 6 years - but what happened to BOFORS earthquake???? lt;br/gt;Why in the last 2.5 years - there was no effort to implement LOKPAAL ACT which was ped in UPA-2 rule. Why no independent CBI and CVC? who will investigate the land purchases before 8th NOV?? Again - Who are the real PAPPUS??
                          Reply
                          1. H
                            Hindustan Hamara
                            Dec 25, 2016 at 4:04 am
                            Bhaiya Haridh: thoda complex hai ye bhakton ke liye. Simple baat ye hai ki jab hum paytm se transaction karte hain to commission Visa aur MasterCard ko kiyun jata hai. Ye kiya khicdi pak rahe. Kaun kis ko control aur promote kar raha? Aam admi is main kiyun pis raha.
                            Reply
                            1. H
                              Hindustan Hamara
                              Dec 25, 2016 at 7:48 am
                              Bhaiya Prashant: Vajpayee mat bol. Have some courtesy say Vajpayee Ji. He is Bharat ratna.
                              Reply
                              1. H
                                Hindustan Hamara
                                Dec 25, 2016 at 2:32 am
                                Mr. Chidambram is absolutely right. Privacy is very important aspect we need to know from e-companies. Another important point is why we need to pay tax on our already taxed income. Why govt wants to make these companies bigger and bigger? Will these companies will be under govt controlled or they will control the govt.? One more thing why we pay to paytm and commission go to Visa and MasterCard?
                                Reply
                                1. H
                                  Hindustan Hamara
                                  Dec 25, 2016 at 7:20 am
                                  Zee and Kaltak will suit you. If you want more pleasure watch DD.
                                  Reply
                                  1. S
                                    SURESH
                                    Dec 25, 2016 at 12:52 pm
                                    Chidambaram has exposed himself when he had said that in India we do not have electricity in more than 50% villages.Whose report card not of his own party Congress ruled the country for more than 50 years.
                                    Reply
                                    1. S
                                      SURESH
                                      Dec 25, 2016 at 12:45 pm
                                      WHENEVER ANY POSITIVE STEP IS UNDERTAKEN HARVARD EDUCATED WILL BE CRITICAL AND FIND FAULT INSTEAD IT IS THE DUTY OF A PERSON TO GIVE POSITIVE SUGGESTION HOW TO CURB BLACK MONEY AND CORRUPTION .EVERYBODY AGREES TO A POINT THAT IN INDIA WE HAVE BOTH BLACK MONEY AND CORRUPTION FOR THE LAST SIX DECADES.
                                      Reply
                                      1. K
                                        Kalidas
                                        Dec 25, 2016 at 6:50 am
                                        Very sensible article. I agree with his message lt;br/gt;lt;br/gt;"To put a card or a smartphone in everyone’s hand,.....to make everyone adopt the digital mode will require advocacy, education and persuasion, not coercion — and without restricting the person’s fundamental right to use cash...." is very smart, rational and legal thinking.lt;br/gt;lt;br/gt;Cash is ideny of a country. Its use, efficacy and ability to meet debt for which it is a legal tender. Cashless or digital money has lot of infirmities, including as instrument of being "no legal tender" to meet any legal debt. Digital entries are not final and may be reversed by concerned bank for any reason as result of which it's not mode of final payment. Cash can not. lt;br/gt;lt;br/gt;I live in United States, and still do not use debit card or credit card for payment to unknown suppliers for reason of ideny theft. Cash is most secure in that it does not bear our ideny details. Ideny Fraud is the most prevalent crime in US.lt;br/gt;lt;br/gt;In fact, our government exhort us not to mention our Social Security Number or give a copy to any unknown source and in Hong Kong no one can take copy of HKID to avoid fraud.
                                        Reply
                                        1. M
                                          Mahesh
                                          Dec 24, 2016 at 8:49 pm
                                          I was in a bank this morning in Chicago area (dec 24). I went there to get bank statements attested. My ICICI acct is locked because of KYC...icici said, get them attested. I was talking with official about indian govt demon policy, how it is affecting people etc. He said, in rural parts of Illinios, people mostly use cash. They don't like e-transactions. He said, it is very common in rural areas in USA, people don't want electronic for everything. They prefer cash transactions.
                                          Reply
                                          1. M
                                            MyTake
                                            Dec 25, 2016 at 9:08 pm
                                            Mr. "Whining" what positive things you have FOR THE PEOPLE (not for your clan) during your tenure?
                                            Reply
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