endyashainin
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http://www.wired.co.uk/article/demonetisation-india
More than 600 million Indians don't have cards. So how can the country ban cash?
The Indian Government wants to make the country entirely cashless. But it needs to close its gaping digital divide first
Itkannan4u
India has become a leader in IT services and its skilled workers now occupy offices across every continent. Yet the digital divide is stark; around a billion people have no access to the web, which is the largest offline population of any country according to the World Bank.
So the fact the country is pushing so fervently towards a cashless society is a significant pain point.
The political rhetoric is simple: demonetisation is about crushing the 'black economy.' But 600 million Indians don't have bank accounts, and a disproportionate number of these individuals live in villages, earning daily wages in cash. Only 4.4 per cent of the population has access to a credit or debit card. Following the global financial crisis, banks and credit card companies in India became overcautious and the excesses of the previous years were controlled, pushing millions of credit cards out of the system.
Elitist India argues 'mobile wallet' companies, such as Paytm and Freecharge.in, should fill the gap, but most citizens are unfamiliar with the available options; the third-generation mobile spectrum and broadband are limited, and out of India's population of 1.3 billion, less than 300 million use the web.
Of the total number of Indians who own mobile phones, only around 26 per cent have smartphones, which are essential to use payment apps, plus the cost of a smartphone is prohibitively high in a country with the lowest living standards among major emerging markets.
India's road to demonetisation
November 8
India's Government declared the Rs500 ($7.40; £6) and Rs1,000 (US$15; £12) notes invalid from midnight. The initial aim was to curb corruption and counterfeit currency.
November 8
The Government also announced the issuance of new Rs500 and Rs 2,000 banknotes.
November 9
Banks are closed.
November 10
Banks reopen and customers queue to deposit and exchange old currencies.
November 18
Chief Justice of India asserted: “People are suffering, it is a serious problem” and asked the Government to justify, under law, its notifications for demonetisation along with various steps it had taken since November 8 to make sure inconvenience to people was mitigated.
November 23
Goldman Sachs revised its forecast for India’s economic growth for this fiscal to 6.8 per cent from the earlier estimate of 7.6 per cent.
November 24
Government announces that demonetised currencies can only be deposited at banks and no longer can be exchanged.
November 27
The Government’s narrative was adjusted, and the aim became a move to ‘cashless’ economy.
The World Development Report 2016: Digital Dividends suggests the adoption of any technology is a matter of education, affluence and skill; in particular it stresses the differences in the ability to access to technology in India. The government’s ‘Digital India’ seeks to expand India’s digital infrastructure so every citizen has access to the web but what will the universal spread of internet do for the majority of the population who are poor in India?
And what will this spread do to the poor? We should not conflate ‘access to technology’ with ‘use of technology,’ which does not always equate to ‘meaningful use of technology.’ The argument there will be ‘natural’ diffusion (or ‘trickle down’) of a digital cashless economy does not hold true for a country like India where lack of education, particularly in rural India, remains as the principle hurdle. This inequality is not merely a passing phase.
Demonetisation has occurred in Zimbabwe, Zaire, Myanmar, Ghana, Nigeria, and, partially, in Australia. While the Soviet Union's attempt led to a coup, Zaire saw the end of the dictatorial regime that started the transition.
A real-life David and Goliath: the Indian 'web warrior' who took on Facebook and won
A real-life David and Goliath: the Indian 'web warrior' who took on Facebook and won
India's move is similar to “sucking out from the system all US dollar bills except about half of the $1 notes.” In a country where cash dominates day-to-day life, and as much as 94 per cent of the workforce is employed in unincorporated and unorganised sectors, the Indian Government’s approach has more in common with the failed experiments of dictatorships that led to inflation, currency collapse, and mass protests.
In The Curse of Cash, author Kenneth Rogoff makes a case for partly phasing out paper money. However, Rogoff’s plan isn’t aimed at developing countries such as India where a massive proportion of people do not have access to the formal banking system.
He also does not suggest phasing out notes overnight, which has been India’s approach. Most importantly, Rogoff proposes completely eliminating large notes, but India is instead exchanging them for new ones, and introducing a larger, 2,000-rupee note. This raises questions of equity and efficacy as 96 per cent of India’s ‘black economy’ is not held in cash but in real estate or gold, or it is laundered through foreign currencies.
Very few steps have been taken to stop these approaches. The finance ministry recently declared it will now be possible, beginning in September 2019, for India to acquire the financial information of Swiss accounts held by Indian residents as of 2018, but ironically not for the preceding years. However, the elephant in the room is that government data shows only 1 per cent of Indians pay any income tax.
Scandinavian countries have proven that an efficient tax system is far more effective in controlling corruption than anything else. Unfortunately, the current, media-savvy government well understands that sensible, incremental reforms do not make headlines.
Looking at the Government’s implementation plan, the policymakers seemingly underestimate how much time and effort are needed to calibrate an “ATM machine,” otherwise they would not have increased the physical size of the new notes. Recalibration of ATMs is a time-consuming technological process.
The idea of implementing a generic plan, while politically intriguing, clashed with reality. India has its own peculiarities in its legal and political framework. But is the pain worth the gain? It ultimately depends on the government’s true objective, and in this regard, the Indian Government has not been transparent. The ‘vote bank’ politics ensured it only highlighted the headline-grabbing ‘attack on corruption’ as the principle objective. In reality, this is far from the truth and over-simplified.
Is this move pro-poor? Despite unprecedented increase in overall opulence, the contemporary India denies elementary freedoms to vast numbers — perhaps even the majority — of its citizens. India ranks 134th out of 180 countries on the Human Development Index and one-third of the total population lives below the poverty line.
The digital divide and lack of access to a bank account or a debit or credit card are proving to be disempowering, discriminating, and fosters dependency. A government’s action should not put the poor in a disadvantaged position that they do not have the tools or means to circumvent.
Will this move impact people’s perceptions or ‘mind-set’ toward a ‘black economy’? Lawrence Summers, the former US Treasury Secretary, has been critical and said recently, “without new measures to combat corruption, we doubt that this currency reform will have lasting benefits. Corruption will continue albeit with slightly different arrangements.”
The move to demonetisation has again laid bare the well-established ethical thinking that good intentions are nothing, if they are not backed by common sense.
More than 600 million Indians don't have cards. So how can the country ban cash?
The Indian Government wants to make the country entirely cashless. But it needs to close its gaping digital divide first
Itkannan4u
India has become a leader in IT services and its skilled workers now occupy offices across every continent. Yet the digital divide is stark; around a billion people have no access to the web, which is the largest offline population of any country according to the World Bank.
So the fact the country is pushing so fervently towards a cashless society is a significant pain point.
The political rhetoric is simple: demonetisation is about crushing the 'black economy.' But 600 million Indians don't have bank accounts, and a disproportionate number of these individuals live in villages, earning daily wages in cash. Only 4.4 per cent of the population has access to a credit or debit card. Following the global financial crisis, banks and credit card companies in India became overcautious and the excesses of the previous years were controlled, pushing millions of credit cards out of the system.
Elitist India argues 'mobile wallet' companies, such as Paytm and Freecharge.in, should fill the gap, but most citizens are unfamiliar with the available options; the third-generation mobile spectrum and broadband are limited, and out of India's population of 1.3 billion, less than 300 million use the web.
Of the total number of Indians who own mobile phones, only around 26 per cent have smartphones, which are essential to use payment apps, plus the cost of a smartphone is prohibitively high in a country with the lowest living standards among major emerging markets.
India's road to demonetisation
November 8
India's Government declared the Rs500 ($7.40; £6) and Rs1,000 (US$15; £12) notes invalid from midnight. The initial aim was to curb corruption and counterfeit currency.
November 8
The Government also announced the issuance of new Rs500 and Rs 2,000 banknotes.
November 9
Banks are closed.
November 10
Banks reopen and customers queue to deposit and exchange old currencies.
November 18
Chief Justice of India asserted: “People are suffering, it is a serious problem” and asked the Government to justify, under law, its notifications for demonetisation along with various steps it had taken since November 8 to make sure inconvenience to people was mitigated.
November 23
Goldman Sachs revised its forecast for India’s economic growth for this fiscal to 6.8 per cent from the earlier estimate of 7.6 per cent.
November 24
Government announces that demonetised currencies can only be deposited at banks and no longer can be exchanged.
November 27
The Government’s narrative was adjusted, and the aim became a move to ‘cashless’ economy.
The World Development Report 2016: Digital Dividends suggests the adoption of any technology is a matter of education, affluence and skill; in particular it stresses the differences in the ability to access to technology in India. The government’s ‘Digital India’ seeks to expand India’s digital infrastructure so every citizen has access to the web but what will the universal spread of internet do for the majority of the population who are poor in India?
And what will this spread do to the poor? We should not conflate ‘access to technology’ with ‘use of technology,’ which does not always equate to ‘meaningful use of technology.’ The argument there will be ‘natural’ diffusion (or ‘trickle down’) of a digital cashless economy does not hold true for a country like India where lack of education, particularly in rural India, remains as the principle hurdle. This inequality is not merely a passing phase.
Demonetisation has occurred in Zimbabwe, Zaire, Myanmar, Ghana, Nigeria, and, partially, in Australia. While the Soviet Union's attempt led to a coup, Zaire saw the end of the dictatorial regime that started the transition.
A real-life David and Goliath: the Indian 'web warrior' who took on Facebook and won
A real-life David and Goliath: the Indian 'web warrior' who took on Facebook and won
India's move is similar to “sucking out from the system all US dollar bills except about half of the $1 notes.” In a country where cash dominates day-to-day life, and as much as 94 per cent of the workforce is employed in unincorporated and unorganised sectors, the Indian Government’s approach has more in common with the failed experiments of dictatorships that led to inflation, currency collapse, and mass protests.
In The Curse of Cash, author Kenneth Rogoff makes a case for partly phasing out paper money. However, Rogoff’s plan isn’t aimed at developing countries such as India where a massive proportion of people do not have access to the formal banking system.
He also does not suggest phasing out notes overnight, which has been India’s approach. Most importantly, Rogoff proposes completely eliminating large notes, but India is instead exchanging them for new ones, and introducing a larger, 2,000-rupee note. This raises questions of equity and efficacy as 96 per cent of India’s ‘black economy’ is not held in cash but in real estate or gold, or it is laundered through foreign currencies.
Very few steps have been taken to stop these approaches. The finance ministry recently declared it will now be possible, beginning in September 2019, for India to acquire the financial information of Swiss accounts held by Indian residents as of 2018, but ironically not for the preceding years. However, the elephant in the room is that government data shows only 1 per cent of Indians pay any income tax.
Scandinavian countries have proven that an efficient tax system is far more effective in controlling corruption than anything else. Unfortunately, the current, media-savvy government well understands that sensible, incremental reforms do not make headlines.
Looking at the Government’s implementation plan, the policymakers seemingly underestimate how much time and effort are needed to calibrate an “ATM machine,” otherwise they would not have increased the physical size of the new notes. Recalibration of ATMs is a time-consuming technological process.
The idea of implementing a generic plan, while politically intriguing, clashed with reality. India has its own peculiarities in its legal and political framework. But is the pain worth the gain? It ultimately depends on the government’s true objective, and in this regard, the Indian Government has not been transparent. The ‘vote bank’ politics ensured it only highlighted the headline-grabbing ‘attack on corruption’ as the principle objective. In reality, this is far from the truth and over-simplified.
Is this move pro-poor? Despite unprecedented increase in overall opulence, the contemporary India denies elementary freedoms to vast numbers — perhaps even the majority — of its citizens. India ranks 134th out of 180 countries on the Human Development Index and one-third of the total population lives below the poverty line.
The digital divide and lack of access to a bank account or a debit or credit card are proving to be disempowering, discriminating, and fosters dependency. A government’s action should not put the poor in a disadvantaged position that they do not have the tools or means to circumvent.
Will this move impact people’s perceptions or ‘mind-set’ toward a ‘black economy’? Lawrence Summers, the former US Treasury Secretary, has been critical and said recently, “without new measures to combat corruption, we doubt that this currency reform will have lasting benefits. Corruption will continue albeit with slightly different arrangements.”
The move to demonetisation has again laid bare the well-established ethical thinking that good intentions are nothing, if they are not backed by common sense.
Must be the vegan diet preventing them from revolting. 
