From plate to plough: Change is in the air

Demonetisation gives dignity to honest Indians. But for it to succeed, the ministry of agriculture must take the lead.

Written by Ashok Gulati | Published:November 21, 2016 12:10 am
demonetisation, modi, narendra modi, demonetisation modi, demonetisation narendra modi, black money, corrpution, demonetisation corrpution, demonetisation black money (Illustration by C R Sasikumar)

With demonetisation, Prime Minister Narendra Modi has taken the boldest economic and political decision of his term so far. He has pressed a button to upgrade India to version 2.0, which will hopefully weed out corruption to some extent, and sow the seeds of hope for a “clean” India. In this endeavour, the ministry of finance and key personnel of the RBI also deserve credit for maintaining secrecy and for the surprise with which the nation heard this news.

While there is no doubt that it has disrupted the smooth functioning of the economy — especially the informal economy — in the immediate-term, there seems a majority view emerging that it is good for the country in the medium to long-term. Perhaps for the first time, an honest person feels happy that the government has given him/her some dignity, a sort of premium to honesty, by targeting those who have hordes of cash stashed away from their unaccounted transactions.

It is well known that much of black income is generated through cash deals in the real estate sector, and an honest person wanting to buy a house or plot with a full cheque payment was often ridiculed. Almost half the payments were accepted in cash, and it was almost impossible to buy a house in just white money. This was sickening and cancerous. So, no wonder an honest person feels very happy about this move from the prime minister.

But the inconvenience caused to the common man in the long queues at ATMs and banks, if this lingers for too long, can turn the mood sour. Some opposition parties will surely take full advantage of that situation to ensure that this drastic step by the Modi government fails and demonetisation is rolled back. If the government buckles under their pressure, it will be political suicide. Thus, it must act on a war footing to minimise the inconvenience to the common man while re-monetising the economy with new notes and promoting electronic transfers aggressively on a large scale. How can this be done?

Let us consider first the news that volumes of fresh produce in agri-mandis have dropped significantly, trucks have stopped plying, and farmers are in deep distress. No doubt there is some truth to these reports, but the magnitude of the situation is being blown out of proportion. If supply lines are so badly disrupted, how come consumers in urban areas are still getting their daily essentials commodities at regular prices? Why haven’t the prices of these goods erupted? That is the litmus test. Have people stopped consuming fruits and vegetables or milk and bread? There are no long queues for daily needs. People are getting their food at regular prices, and they are adjusting. Behavioural change is in the air with a greater use of plastic cards in transactions which were being done earlier almost entirely through cash. It needs to be expedited. How?

It is time that BJP-ruled states take the lead in announcing that commission agents in all agri-mandis must have the electronic data capture (EDC) machines (also known as machines to swipe credit/debit cards) and transactions should be only through these machines, else their licenses will be cancelled. These machines are very cheap and convenient, and will immediately convert massive cash transactions into electronic ones, signalling the rise of a new era of digital India. Massive campaigns and demonstrations encouraging the use of mobile wallets will provide a further boost. Small vendors, even the paan wala on the street corner, adopting this system will transform the manner in which India transacts its small business, which runs into millions of transactions every day. That would be an innovation to transform India and it can be quickly ramped up, giving a major relief to the common man.

The ministry of agriculture and farmers welfare at the Centre and in the states need to lead this transformation exercise. NABARD, with its offices all over the country, and agro-companies like Amul, Hatsun Agro, Nestle and IFFCO too need to demonstrate and promote electronic systems of payment to millions of farmers. In this attack on black money, honest people and companies with a stake in agriculture and the farming community cannot keep sitting in their comfortable offices. They must be out in the field, helping their stakeholders.

Further, at least the BJP-ruled states should quickly announce the reduction in stamp duty in real estate transactions, from the current levels of six to seven per cent in most states to, say, three per cent or even less. That will not hit their revenue adversely as businesses will expand with honesty. But it will surely boost the morale of honest people to brave the inconvenience that they are undergoing as they will see the potential gains from such a move.

Next, the banks and the Enforcement Directorate need to be on alert as many with unaccounted cash are using Jan Dhan account holders, even farmers, to deposit cash in their accounts. The current rate for their “reward” is around 25 per cent, and many in the queues at the banks are those potential “awardees”. It is easy to catch a few cases, and the big fish behind them, and give an exemplary punishment quickly. Else, the impact of this mission will get diluted.

Also, high priority needs to be accorded to the re-calibration of ATMs for new notes, extending working hours of banks, even asking them to work in shifts 24×7 especially for the withdrawal of money by people from their accounts. If needed, special extension counters should be opened through mobile vans — in schools, colleges and other offices — with due police protection, especially on holidays, as is done while conducting elections. This may provide some immediate relief to the general public. PM Modi cannot afford to lose this “surgical strike” on black money, and all honest people who want to see India emerge as a clean nation need to support him at this moment. The challenge is gigantic, but it can be met.

The writer is Infosys Chair professor for agriculture at ICRIER.

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  1. P
    Prashant
    Nov 21, 2016 at 6:55 am
    Who say,,prices have not distorted,,, yesterday I purchased Banana at 10 rupees dozen,,lowest in 6-7 years,,,,poor farmers are left with no option than to sell flowers ,banana,nd other perishable goods at throwaway cost,,,,,,(chapra ,bihar),,,,,,,,,,,Now if govt wants to placate Angry farmers,,,it shd reduce Urea nd diesel prices by Half,,for atleast 1 year,,,,it will sav govt from "backfiring of well intentioned plan",,,,
    Reply
  2. O
    Onkar Singh
    Nov 21, 2016 at 1:05 pm
    Professor are you looking for some sinecure job under Modi's govt?Or planning to make it to some cushy job? Surprisingly,no body among the think tanks and the economists,is addressing the issue,how can a Prime Minister,who got elected on thousands of crores of rupees of black money,remove black money?He is acting clever by half by converting the higher denominational notes of his party and his crony capitalist friends' money ,trying to project that he is after black money.Money laundering is a crime.How come his friend Adani who is involved in a money laundering case roaming around free? Now some news is doing the rounds he(Modi) received bribe from the house of Sahara and Aditya Burma's?So Professor take all the facts and news and see whether demonetization benefits all or BJP is trying to derive some kind of Election advantage,by being cash rich at the expense of the other political parties,who may not have as much currency to distribute during the UP and Punjab elections as the BJP?But Professor how can you ignore the difficulty that the poor have to go through? Or you Professors are also thick-skinned like the politicians? you don't not mind if some millions of people remain below subsistence levels,because their living with give the likes of you to do research,and a 1 percent rise in their level of income,can fetch the likes of you a prize as big as a Nobel!!A new breed of Professors!!!! Achhe Din wallahs Professor!!!
    Reply
    1. K
      Krishna Bhagawan
      Nov 21, 2016 at 9:53 am
      Agriculture is the biggest (bigger than switzerland) money laundering sector in India. That needs to go.
      Reply
      1. A
        ashok s
        Nov 21, 2016 at 2:27 am
        Nicely written sir , but practically its need govt action and will power to do so concurrently with sincerity . but this action was greatly missing in so termed surgical strike. Many builders or big shark paid cash for agro land banks . now poor farmers are the one left with black money
        Reply
        1. D
          Dash
          Nov 21, 2016 at 6:31 pm
          Most media outlets are showing only negative news. The realiy is that a new India has been born.
          Reply
          1. R
            Rajib Adhikary
            Nov 21, 2016 at 5:02 am
            "Perhaps for the first time, an honest person feels happy that the government has given him/her some dignity, a sort of premium to honesty, by targeting those who have hordes of cash stashed away from their unaccounted transactions"
            Reply
          2. X
            xyz
            Nov 21, 2016 at 5:35 pm
            The Prof is looking for some govt job. Maybe the present chair is getting over.
            Reply
            1. S
              SP
              Nov 21, 2016 at 3:04 pm
              I feel we need more dynamic Ministers for important Ministries such as urban development, agriculture and financial reforms who have a strong interest in the Ministry. The Government should also do away with socialist mind-set which only perpetuates poverty and rather choose the middle path and wide taxation using low rates. Raliways is a case in point where probably new set of people needed to manage it than present system of Railway board. The fares should be raised as long as they are cheaper than alternative modes such as Road transport and fares should be higher in more prosperous geographies.
              Reply
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