On the evening of Tuesday, November
08, 2016, the Indian Prime Minister declared a historic decision in the path of
India’s fight against corruption, black money and fake currency by demonetizing
the higher denominations of Indian currency viz. Rs 500 and Rs 1000 with
immediate effect. The move delivered an unexpected assault on all the black
money holders and hawala traders in
the country, who were holding the majority of their black money and fake
currency as denominations of Rs 500 and Rs 1000. Looking at the merit of the
move, one can safely say that the move will be successful in wiping out the
fake currencies in circulation almost completely, but the same cannot be said
about the black money. Though for a short run, the government has dealt a
severe blow to all the black money holders, but this decision alone is not
sufficient to completely eradicate the menace of parallel economy in India.
The true panacea lies in demonetizing all paper currencies of the country and
moving on to a cashless economy. Though at the outset this idea might sound
highly impractical, shambolic and insane, it is something not really IMPOSSIBLE.
It can be achieved if a well determined government move on a well thought out
and systematic policy path. To achieve this we need a gradualistic and
systematic approach. In this article I am attempting to share with the readers
the outline of one such policy path that propped up from my thoughts. The objective
of this article is to initiate a discussion on these policies and churn out a
robust policy that could help in achieving the goal of a total eradication of
the parallel economy not only in India, but around the world.
STEP ONE – FINANCIAL INCLUSION
The first step towards a cashless
economy will be a comprehensive financial inclusion. Government should
aggressively try to get each and every citizen of the country to be part of the
financial system. Policy such as PM Jan
Dhan Yojna is a welcome move in this direction. Each and every citizen of
the country should have a bank account, with net banking, debit/credit card and
mobile banking facility. Personal accounts, Salary accounts and student accounts
must be made compulsory and should be linked to PAN.
STEP TWO – ICT INCLUSION
The second step will be
information and communication technology inclusion. This includes popularizing
mobile phones and internet among all people in the rural and urban.
Slashing down internet usage tariff and tax of gadgets such as smart phones and
computers shall be right move in this direction of popularizing ICT.
STEP THREE – TRAINING ON NEW
GENERATION BANKING
Once the inclusion of all people
in urban and rural with ICT is achieved, then the next step should be to impart
training to the illiterate and less educated people in urban and rural, in
association with the various banks in the country, on various techniques of new
generation banking such as net banking, debit/credit cards, mobile banking,
cash wallets etc. Such training can also be made part of all schools in the
country. Such trained students can also be made volunteer trainers in their
locality.
STEP FOUR – CREATION OF ONLINE MONEY
WALLETS
All banks in the country should
start Online Money Wallets. It should be a separate account other than the
regular SB, Current, Recurring or Fixed Deposit account. Money held in this
wallet should be highly liquid and shall be given no interest. The account
holder can decide on what proportion of his SB money he wants to hold in his Online
Money Wallet. Transactions from the Online Money Wallets should not be charged
with transaction or service charge by the banks.
STEP FIVE – POPULARIZING QR CODE
BASED COMMERCE
Once financial and ICT inclusion
is achieved and online money wallets are opened, the banks should issue QR
codes to all account holders. Shop keepers, taxi drivers and all others who
cannot keep swiping machines for debit/credit cards, can use these QR codes of
their bank account for getting their payment online.
STEP SIX – GOVERNMENT RUN
E-COMMERCE WEBSITE/APP
The Union Government should start
an e-commerce website/app with all the scheduled, non scheduled and cooperative
banks as partners in it. Through this website/app similar to the Paytm, the
Online Money Wallets held with these banks should be interconnected. The mobile
app should be enabled with not only provisions for net banking but also QR code
scanners. The government should ensure the safety of these networks from
hackers by building impenetrable firewalls.
STEP SEVEN – POPULARIZING SMART
CARDS
Public transportation, Petrol
outlets, Shopping malls, Food joints etc should all issue smart cards that will
be having money wallets to which customers can transfer money from their bank
account through net banking or e-commerce website/app. Public transportation
should introduce smart card system similar to that used in Metro Rails. This will end
free rider issue in public services for ever.
CONCLUSION
The idea laid down here envisages
an economy that runs on plastic money and online money. QR codes for commerce
and e-commerce app can revolutionize the commerce sector and can play an
important role in achieving this dream of a cashless economy. There will be
zero chance of having fake currency, black money and corruption in this system
as each and every penny are accountable. Every single transaction is recorded. The financial inclusion will make the monetary policy more effective and direct money transfers will bring about a more efficient distribution of public fund. This can also end age old social issues such as bribery,
undervaluation of land, unaccounted binami assets etc. However I do acknowledge
that it is not something that can be achieved overnight, but definitely
something which we should be pursuing. As mentioned in the introduction, this
is only a rough road map. The purpose of it is to ignite the minds and initiate
discussions on this line to churn out a robust policy could help in achieving
the goal of a total eradication of the parallel economy not only in India, but
around the world. Now let the discussions begin.
