Where were you when Prime Minister Narendra Modi announced, on national television, that a majority of the country’s currency (in value) would be rendered useless by midnight?
Perhaps a friend called you, or you saw it on Twitter, or maybe you watched the telecast. It may not have seemed as cataclysmic as it did to some, but it’s the kind of thing that you’re likely to remember. It’s also likely that in my case, and that of those who were present in the room on the evening of 8 November, the bearer of the message will be recalled just as vividly as the message itself. That’s because the audience at the corporate awards show at a South Mumbai hotel that evening didn’t hear about demonetisation from the Prime Minister, they heard it from Vijay Shekhar Sharma.
Smartphone in hand, the Paytm founder stood up and posed a question to former SEBI chief M Damodaran, who was on stage. It was prefaced by the fact that he had just been told that currency notes with denominations of Rs 500 and Rs 1000 would cease to be legal tender by midnight. 'It could be difficult to implement,' came the reply from the stage, as soft murmurs rippled through the hall. The answer made no discernible difference to a beaming Sharma. He was smiling even as he took his seat.
The Aligarh-born Sharma has long been among the most prominent and vocal evangelists of digital payments. He is given to bluster, to making ambitious pronouncements about digital proliferation and the growth of his mobile payments behemoth, Paytm. (At an industry event last month, for instance, he announced that by 2020, Paytm’s forthcoming payments bank would dwarf India’s largest banking institution.) But he does it all with an endearing earnestness. It’s the latter that he’s going to need more of, considering the good fortune he’s had in the past couple of months.
The government, amid a decidedly shoddy demonetisation drive roll-out, has sought to adopt the sort of digital evangelism that Sharma and his ilk have been practicing for years. Digital payments are already being incentivised, the Niti Aayog has even announced ‘lucky draws’ to promote digital payments, and ‘disincentives’ for cash payment may soon be introduced. Importantly, in the past two months, the immediate dearth of cash has made digital payments a necessity.
This in turn has driven an unprecedented increase in Paytm’s traffic. In just the month of November, the company claimed a 700 percent increase in overall traffic. The stars seem aligned for Sharma, and he’s moving to make the most of this windfall, with an army of salespeople and massive marketing spends. Paytm reportedly has close to 164 million users and a merchant base of about 1.5 million, which it hopes to ramp up to 15 million. By Sharma’s own estimates, the company was spending Rs 50 crore a month on marketing the brand. But the post-demonetisation push has taken things to a whole new level. In November, Sharma revealed the company spent Rs 250 crore on marketing. To top it all off, the launch of Paytm’s payments bank is expected in early 2017.
But it’s in this ostensibly fortuitous period for the company that the fault lines are most evident. With the increase in traffic, Paytm has faced technical glitches and outages. It also faces a copyright infringement suit that was recently filed by American payments major, PayPal. And you don’t need an expert to tell you that Rs 250 crore in marketing spend (in just November) is excessive for a company that in the past financial year had annual revenues worth Rs 830 crore, with a loss of Rs 1548 crore. At least some of that Rs 250 crore was allocated to full-page ads on national dailies with Prime Minister Narendra Modi’s photograph, congratulating him for the move to demonetise high-value currency. The trouble with this was simple: optics. With serpentine ques at banks and the opposition up in arms, using the Prime Minister as a proxy to promote your brand just doesn’t look good.
Sharma’s pronouncements over the past two months (“A few days of pain, and then massive gain” is an oft repeated line), coupled with the awareness that a marketing war chest and an admittedly well-established brand can get you, have also given him the appearance of the de facto face of demonetisation. Of course, this is not an altogether negative development for him, especially as the lines at banks shorten and things begin to look up for the government. The danger of bad optics though, persists.
A fundamental advantage that both the proponents of the demonetisation drive as well as Sharma have in this regard is that while success, throughout this whole exercise, is difficult to quantify, so is failure. What, for instance, are the parameters of the success of demonetisation? Will a windfall of Rs 1 lakh crore count as a success, or will seizures of a certain amount of illegitimate wealth adding up to a similar sum? Similarly, Paytm’s user and merchant growth numbers in the short run sound impressive. But can they be sustained once cash returns to normal levels? The answers are not clear. The more, the merrier, seems to be general rule of thumb.
And the similarities don't end there. Both Paytm and the demonetisation drive are products of grand ambitions, they’ve both suffered from shaky execution, and they will, undoubtedly, play an outsized role in shaping the future of the Indian economy in the time to come. If they succeed in this period, the rewards will be significant. And if failure strikes, we may struggle to even identify it. Whatever the result, one thing’s for certain: for better or worse, Vijay Shekhar Sharma, and his firm, will help script the course of a post-demonetisation India.
Updated Date: Jan 01, 2017 08:26 AM