Demonetisation in India has become the vortex of a debilitating financial mess. On Thursday, Finance Minister Arun Jaitley announced that the central government refused to roll back its decision to demonetise Rs 500 and Rs 1,000 notes. While the “eradication” of black money may be presented as one of the principal reasons for demonetisation, in a wider context, the decision is portrayed to be multi-pronged, stating that the move will not only falter the functioning of terrorists, but it will help expedite the process of transforming the country into a modern cashless society.
To highlight the benefits of being a digitally dependent country, the government has pushed the small village of Akodara in Gujarat as its posterboy example into the spotlight. The CCTV-monitored and wifi-enabled village apparently inhabits mobile-savvy locals who can make purchases at kirana stores by making payments via their mobile phones. This village, the media conveys, has been least struck by the tumultuous aftermath of demonetisation. However, this model of digital sophistication is yet to be replicated in thousands of other villages across the country. But more importantly, cities that are also digitally savvy are experiencing financial paralysis.
The government’s plan to sell the idea of nation-wide demonetisation as an attempt to make the country “cashless”, therefore, seems a bit over-ambitious and somewhat callous. Of course, the depletion in cash has pushed digital and e-transactions to the forefront. E-banking, e-wallets and other transactions through apps using plastic cards are becoming popular. As of March 2016, the Reserve Bank of India declared that the number of debit cards floating in the economy was 661.8 million, while 24.5 million credit cards had been given to bank account holders.
However, of late the transfer of dependency from cash transactions to plastic card transactions has caused the latter to crash under the rising burden. In certain parts of the country, including a metropolitan city like Mumbai, there have been reports of card-swiping systems crashing. In fact, there are many people who don’t know how to use the cards. The percentage of erroneous transactions via plastic cards has risen from 8 per cent to 23 per cent due to first-time users putting in the wrong pin number over and over again, particularly in semi-urban areas, who’ve never used plastic cards before.
While the government may be hell bent on making the country dependent on debit/credit cards and mobile-dependent online transactions instead of physical cash exchange, the process should have been done slowly and organically. The government, however, is insisting that this move will strengthen the banking sector, boost the e-commerce business and it will encourage more people, particularly in rural villages to open bank accounts. However, in an interview with NDTV last night, Arun Shourie, a veteran journalist who has also worked as an economist with the World Bank, spoke about how demonetisation will only put a stress on farmers, whose usual transactions are small. “You think in the agricultural sector, daily wages would be paid through debit cards? Or that poor fellow [a farmer] will use a credit card to buy vegetables? He only earns for that day,” he asked.
To suddenly impose such a demand through demonetisation in a country where only a small percentage of citizens have access to debit/credit cards, can only be attributed to uninformed thinking.