The Big Story: Cash trapped

A month after demonetisation, it is no longer about fighting black money, it is about going cashless. On Thursday, the government announced discounts and incentives for cashless transactions – cheaper fuel and railway tickets for those who pay online, no service tax for digital payments of up to Rs 2,000. A cashless economy is not an original concept. Some of the most developed countries, such as the United States, the United Kingdom and other wealthy states in Northern Europe, function largely on digital transactions. Indeed, a cashless economy sits well with Prime Minister Narendra Modi’s chosen brand of aspirational politics, of a piece with smart cities and bullet trains.

There are, no doubt, efficiencies and transparencies to be gained from going cashless. But it seems almost entirely out of touch with Indian realities. To begin with, there are structural barriers. As of now, India is almost entirely a cash economy. About 92% of its workers belong to the unorganised sector and earn wages in cash and only 6% of retailers accept payment through digital transactions. No matter how rapidly people are inducted into the Pradhan Mantri Jan Dhan Yojana scheme, India’s unbanked population remains vast, enough to form the seventh largest country in the world, according to some estimates. Second, there is inadequate infrastructure. Not enough people have mobile or internet connections, while connectivity remains erratic in large swathes of the country. And India has just 10 lakh point of sale machines, about one tenth of the number in the US or China. Finally, there are the innumerable human factors that shape economic decisions – a traditional distrust of banking and online transactions; local, informal ways of doing business that depend on cash; illiteracy.

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Going cashless at this point is not just a behavioral change, a matter of kicking a pesky habit, as Union minister Venkaiah Naidu has tried to put it. It is a painful, expensive process, involving a fundamental overhaul in the way people think about money, forced on India overnight. Modi has tried to pitch to the young, enlisting their help in the project of going digital, projecting it as the hip and fresh thing to do, coating it with an aspirational sheen. But it does not have the moral appeal of a fight against black money, which seemed to tap into years of despair about the status quo and resonated with a cross-section of the public. Going cashless may be an idea that is harder to sell politically than taking on the powers of darkness.

The Big Scroll: Scroll.in on the day’s big story

1 Going cashless is not that simple, writes Anumeha Yadav: it will have to contend with illiteracy and lack of trust in digital payments.

2 Nikhil Pahwa of medianama.com points out it will also be expensive.

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3 Srikanth Lakshmanan breaks down the complexities of digital payments.

Political pickings

  1. President Pranab Mukherjee tells Opposition parties to do their job and stop disrupting the House.
  2. In Karnataka, a driver’s alleged suicide note says mining baron C Janardhan Reddy laundered Rs 25 crore was his daughter’s wedding.
  3. The Supreme Court cautions judges against “judicial valour” and passing sweeping judgments that encroach on the powers of the executive and the legislature.

Punditry

  1. In the Indian Express, Ila Patnaik recommends policy and regulation changes for a cashless economy.
  2. In the Hindu, Prakash Nelliyat on how biodiversity must be factored into developmental plans.
  3. In Live Mint, Laveesh Bhandari compares “individualist Gandhi” and “statist Nehru”.

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