Demonetization: A Logical Step towards Digitizing the Economyby Opinion Express May 31, 2018 0 comments
From abruptly announcing demonetization to following an active foreign policy, the Narendra Modi government has been a progressive administration. The lesson of demonetization is now getting clear now. However, India can’t afford to see complete slip of control from the state to a financial association which makes the common man helpless.
A reflection: One-and-a-half years after Prime Minister Narendra Modi announced the demonetisation of high-value Rs 500 and Rs 1,000 currency notes, needs attention. Politicians, economists and media, in the thick of the phenomenon, presented it either as a divine initiative or a satanic act, a bipolar discourse that inadequately represented the bold decision which is normally avoided by a party in power for the fear of becoming unpopular.
A chain of events in demonetisation and remonetisation arose from one currency management decision to implement the macro-economic policy. Its impact was judged from the prism of Indian economic policy vis-à-vis global financial practices and at the interface of both. Its immediate impact on the people, especially the poor and the filthy rich, was criticised and celebrated. None of such works applied the simple-yet-approximate 80:20 rule to understand the phenomenon vis-à-vis the countrymen.
80:20 is a management rule. In any project or household, 80 per cent of the total material and man/material/man is of 20 percent value while 20 percent of the material and man/material/man is of 80 per cent value. In family purchases over a month, the rule comes as true as in the case of any project or action of longer duration or that of a country.
Approximately 80 percent of the population has 20 percent of its wealth while 80 percent of the wealth would be in the hands of 20 percent of the countrymen. The attitude, access and exposure to the system of this 20 per cent transform any situation in their favour quickly after the initial tremor. Their information and knowledge-seeking, analytical and innovative approach made them early adapters during the initial phase of demonetisation. So was the first benefit: Their lethargy to switch over from habits of keeping more cash went away. During the switchover, transaction security issues, hidden costs and customer helplessness in digital banking made them campaign in the social media-driven democratic space. The Government amended rules of cyber transactions and invested more into security firewalling in response.
Demonetisation was expected to bring down the volume of black money and fake currency. Its concomitant processes towards cyber economic activities would bring down cases of money theft, dacoity and snatching. However, the chance of cyber loot from within and across the border looms large. It’s a war of every moment for financial institutions and the Government. Cashless, the latest evolutionary step in currency development, is able to solve the problem of passive money accumulation. Every cashless transaction leads to a change of account, enabling digital liquidity to invest money in some productive activity. It generates taxes for the Government and is supposed to create jobs for the people. It curbs black money and inflationary trend. However, this is not the cure for all ills in the economy. Further, its spread and impact on the lower 80 per cent, which owns wealth very thinly, is a matter of concern. With low level of wealth accumulation and cash, they are not hoarders of black money.
Why did the common man bear the hardship of demonetisation? Pro-reformists took it as sign of policy support and anti-reformists considered it as sheer helplessness of common man who has to fend day in and day out for making both ends meet. These hypotheses have not been questioned by media though they could have tested such questions empirically.
Common man welcomed the decision with two beliefs: It would bleed black money hoarders whom they saw growing by dint of proximity to power and becoming middleman, and they sensed well being of country they belong to. This was despite the systematic intrusion of cash through governmental schemes and displacement of stand-alone local markets by market networks putting inconvenience to their life styles. Yet they did not erupt with much provocation since they have already experienced long queues in ration and kerosene shops, post offices and where not for the last 70 years. Now they had a good cause added for their calm.
Does market-driven economy framework or the rural economic reality explain the calm? In several pockets of rural India, currency is not the only exchange medium. Barter is still in vogue. And in many rural families, they don’t enter into buying or selling for food or some other major items. This less dependence on market network is based on their approach to living. It cannot be considered as underdevelopment.
Putting simply, how far our villagers could self-sustain without money supply so that they won’t feel the move disturbing their simple living? Many may see a plan to eulogize poverty in raising this question. Yet, these votaries of poverty elimination must accept that plans of poverty alleviation over last seven decades failed to raise most of the poor to affluence, and could not prevent the affluent usurping funds for the poor.
A study on this question would help government understand people’s own inertia of being and becoming, and how this can help them in strategy making for development without much disruption in people’s life. This may also help Government decide how far it should allow market-driven economy to impinge upon people’s life. The Government also needs to chalk out plan a based on indigenous way of sustainable living beyond commercialism to see that market does not aggrandise the common man too far.
In short, ways and means of common man to sustain through hard times without surrendering to market should be there as part of governmental strategy so that the country actually steers through cycle of inflation-deflation of world economy with ease. This remained an aspect of strength for us even without governmental effort. But increasing “statism” and acceptance of market as master won’t keep it so for long. The more we introduce the global neoliberal techno-financial system lock, stock and barrel, further we become helpless during periods of depression and cyber-coups.
Demonetisation is seen as a logical step towards digitising economy; digitisation is viewed as the fifth generation antibiotic against all economic corruptions which corrode growth of the economy and national character, and aggravate inequality apace. However, India can’t afford seeing control slip away from state to the financial cartel which makes common man helpless in front of juggernaut of financial institutions. Information-Communication technology, like money, is an instrument which should be used cautiously. Hoarded or counterfeited paper currency causes great harm to the economy; digital money, at the stroke of a finger tip, may wipe out an entire economy. How does the country get prepared to avert such crisis is a far bigger question.
Demonetisation 2016 exposed two truths in common man’s manifest response over the last one-and-half-years. First truth: Increasing inequality is making common man expectant of a great overhaul which is able to punish the economic offender. Whosoever takes the responsibility would get support of them. Only the good intention and follow up action should be visible enough to be trusted by them. Second truth: When a party is given comfortable majority, it is for them to utilise it towards greater equity in society. If it tries to do so, it would swell their support base invariably because common man would consider it as people-centric approach of the Government.
The lowliest among them with zero-balance Jan Dhan accounts should be taken care of as they won’t be able to transact cashless easily for two reasons: Cashless is costly, and the accounting is beyond their cognition.
(The writer is Professor of Communication, Visva-Bharati, Santiniketan and Country Director (India), Asian Congress for Media and Communication)
Writer: Biplab Loho Choudhury
Courtesy: The Pioneer