Two
mind blowing articles were published in Indian Express. Bhaskar Chakravorti’s article ‘Demonetiser’s
dilemma’ dated December 5 dealt with wide spread digitization activism and
mobile banking vis a vis cash transaction.
When 86 per cent transaction is in cash how India defy looking
forward in the direction of cent per cent e-banking at a galloping speed? He opined that e-wallet companies will have a
roaring business; but what about infrastructural facilities prevail at customer’s
door. The author analyzed the data of 70
cash based countries and inferred that cost of cash score is the highest in
India. It indicates as and when dealings
betide using cash it requires some expenses.
He elaborate steps involved in cash transaction and cost demanded at
each step, such as cost to consumers, cost to business, cost to banks and other
institution, cost to government. Since independence
the country is enduring the cost due to gargantuan cash dealing. The author further warned the authority not
be so smart regarding abrupt transformation to cashless business model. ‘Telling people to go cashless is putting the
cart before the proverbial horse. The
horse in this case is the digital infrastructure’ he said. The smart phone holder number is one third of
the society with incredible internet access due to lack of infrastructure
facility. Ladies are looking after house
hold activities; hardly 17 per cent of them are utilizing internet. Better not to talk about rural and semi-urban
community. The author appropriately
pointed out that the percentage of notes and coins to GDP is 12.04 per cent in
India which is higher than many developing countries. The cashless dealing is not a full-proof
alternative. So, the best approach is to
go step-wise from cash to cashless. It
may take few years more.
Another
article written by Surjit Bhalla (Black cash in India) dated December 6 is
regarding control over generation of black cash and GDP growth. In the first instance the author pointed out
that the abrupt decision of demonetization was well intended but inappropriate
and costly. He has differentiated black
cash and black economy and stated that the black cash is six per cent of black
economy. The present policy is only
concerned with six per cent of the total black economy. He said ‘Black cash has low shelf life and smart
people do not keep black income in cash’. He opined that the service sector will only
get affected, the effect on GDP will be one per cent, and large number of
people will be in permanent tax net.
After lot of computation he concluded that ‘demonetization policy will
likely to be a huge success in view of further reforms’.
Revenue
Secretary of India, Hasmukh Adhia added fuel in conflagration. The government is anticipating cent per cent
return of old currency notes of Rs 500 and Rs 1,000 to banking system, he said. The assessment is against the presage of one
and all. Experts were anticipating part
of the total cash will not bounce back to banking system. Now, the liability of RBI has increased. Centre for Monitoring the Indian Economy has
calculated 1.28 lakh crore cost (November 8 to December 30) due to
implementation of the policy. The fulgent
side is, the IT department will scrutinize each and every account. If taxes and penalties exceeds more than the
cost incurred on the policy, then only the whole drama will be a face saving exercise. Tracing entire transaction is not a joke. Cahoots between bankers, black money hoarders
and their agents need to be ascertained.
RBI Governor, Mr Urjit Patel announced that Rs 12 lakh crore (till
December 7) of old currency notes has already been deposited with banks and
post offices, and GDP is likely to decline by 0.5 per cent. Ambassador of Russian Embassy, Delhi has
written a letter to Minister of external Affairs regarding cash crunch. They have no cash to pay salary and
operational expenditure to their subordinate staff. Other embassies are also facing same difficulties.
The
Income Tax department has so far seized Rs 130 crore cash and has investigated
400 cases detecting more than Rs 2,000 crore undisclosed income. About 30 cases have been referred to CBI and
ED by the department for further investigation and legal action.
Initially,
it was expected that at least Rs 2.5 lakh crore of cash will not be deposited
in banks. Scenario has changed. If the prediction of Revenue Secretary comes
true then it is going to affect prospects of Modi government. It will tarnish the image of party in general
and Mr Modi in particular. Censure to
Modi government may hamper the future prospects of the party. The opposition will exploit the prevailing
situation and corner the Modi government in the Parliament and on the streets. How the government defends needs to be seen.
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