The chaotic post–demonetisation period has been characterised by two significant realities. One, the central government’s motivation to weed out black money, seems to have dovetailed with a now thunderous sales-pitch for a cashless society. Two, in labelling all critics of demonetisation, particularly the political opposition as “corrupt” or “friends–of–the corrupt,” the government is reaffirming its intolerance of criticism as such. This, even as it singularly shoulders the responsibility of virtually overnight pushing the entire nation into a new and uncertain financial zone.
As evidence for my first argument, consider Prime Minister Narendra Modi’s Mann ki Baat address this Sunday. Describing the address as the “biggest push for a cashless economy”, a report in Times of India quoted the prime minister as saying: “Learn how this digital economy works. Learn the different ways you can use your bank accounts and internet banking. Learn how to effectively use the apps of various banks on your phones. Learn how to run your business without cash.”
While telecasting Modi’s address, the Doordarshan screen turned into an advertising canvas for various digital payment services routed through mobile phones. As news reports suggest, digital payment services have, in recent days, seen a steep hike in their business. The question that comes to mind is: Why is the Prime Minister delivering a national address in which he is so vocally and aggressively pitching for a cashless economy that is likely to benefit mushrooming private organisations? These companies have eagerly awaited a moment like this, especially in a country where the masses have not taken to electronic payment as easily as many would like.
The drive to eliminate black money has now become conflated with the drive for a cashless digital financial system. This is the system that exists in advanced economies in the West, particularly in the United States. In this context, it may be pertinent to remember that our social, cultural and economic structures have little in common with the American or European ecosystem. Equally importantly, the trajectory of Western economies in the recent past – including the fallout of near-complete electronic banking – should serve as a cautionary tale. Instead, the Indian government seems only too keen to replicate the fate of the West in this country.
The noted economist Kenneth Rogoff is one of the high-powered names associated with the desire for a cashless economy. In an article for The Wall Street Journal earlier this year, Rogoff blamed cash for all of the most sinister social evils in the US – illegal immigration, tax dodging, corruption, and terrorism. He recommended that the $100 note (along with high denominations like $50 and $20) should be phased out or withdrawn from circulation. “Will it ever happen?” Rogoff asked, answering that: “I believe the time has come. Finance ministries are desperate to collect more tax revenues without raising tax rates. Homeland security agencies are concerned about how cash facilitates terrorist financing. Justice departments are as worried as ever about the role of cash in crime. For immigration authorities, it sure beats building walls.”
If this rhetoric sounds eerily close to that being espoused by the Prime Minister today, then we should also note that some of the criticisms aimed at this hypothetical suggestion have also been borne out in India. In a response to Rogoff, titled “The Ludicrous Idea of Trying to Abolish Cash,” Tim Worstall wrote: “the real argument against this idea is that it just won’t work. … My point being that when we don’t have cash money then we’ll just use some other unit of account in the place of that cash money. And that, of course, poses a very serious problem for this idea that purely electronic money will enable the Fed to control the economy better.” All the reports we have of people improvising to survive the shortage of cash – including the return of barter systems – bears out this observation.
A deeper financial agenda seems to underlie the government’s demonetisation policy — the rapid evolution of a cashless society. Sans demonetisation, such an overhaul would have indeed been far more arduous and time-consuming than it is now. In the midst of all the hyperbole, we have forgotten the large numbers of people in India who continue to be outside the banking network, besides lacking the technological know-how enabling them to exercise financial vigilance in a digital economy.
Now, with reference to my second argument, consider the way the government has gone all out in painting the opposition and its leaders as “crooks.” There is no denying that the Congress party and Trinamool Congress do not have a clean financial record. But that underlying vice binds all political parties. The BJP is not an exception to this norm. If for instance, the ruling party submits to the financial auditing of its electoral expenses and the contributions it receives from various quarters, we might go a long way in cleansing the economy of black money. But that is unlikely to happen.
In an article for The Quint on 20 November, former Election Commissioner S Y Quraishi drew our attention the Election Commission’s two-decade long demand for political parties to submit to an annual audit by an independent auditor from an Election Commission-nominated panel. “Political parties, unfortunately, have not bothered to look at the Election Commission’s demands seriously. Governments have come and gone pushing the proposal under the carpet. And it is not political parties alone who refuse to disclose their sources of income; corporate houses also prefer anonymity,” Quraishi wrote.
Of course, it is easier to open the floodgates to votaries of electronic banking than it is to clean up one’s own house. And this is the script playing out before us today.