Post-Demonetization Steps - My Thoughts

It has been 50 days now since demonetization was announced by Indian Prime Minister Mr. Modi. And we all have experienced wide set of emotions through these 50 days. We have been happy, ecstatic, overjoyed, sad, pained, frustrated, hopeful and what not. And every time we have felt our emotions are justified. I have been through many of these emotions except for pain and frustration. I haven't had to stand in a queue for more than 15 mins and have been able to use digital payments at most of the places, conserving my cash that I had exchanged in mid-November.

After initial surge in usage of digital wallets, the downward trend is very evident now. I have seen people giving out reasons such as wallet is full, swipe machine not available to avoid accepting digital payments. To the extent that one of my regular lunch outlets allowed me to pay the bill after I "get" the cash. 

On one of the occasions, swipe machine of my vegetable vendor wasn't really working. I encouraged him to use UPI and accept money directly in his bank account. I also told him that he could save on the transaction fees. He got very excited, downloaded his bank's app. The app asked for the card details for registration and he didn't have it on him. I offered him to come back next day and complete the process. I was feeling very happy to onboard at least one person on UPI. When I went to him after couple of days, there was complete U turn in his attitude. "छोडो साबजी, नहीं करना है". I probed him further only to get to know that he was worried about cash accumulating in his bank account!!

It is becoming clear to me that people around us have their vested interest in having loads of cash around that they will be opposing this cashless economy in various ways - one of them simply being denying to provide alternate mechanism of payment other than cash. Probably they are already smart enough or have realised that if they hold on to lower income for few days, people WILL start paying in cash and they can continue to avoid paying taxes. 

With the hope that government is really serious about the cashless or less-cash economy, I think following steps are required on urgent basis:

1. Focus on people who are not paying taxes but are very much eligible to pay taxes. Government could come up some scheme that will remove the inhibition from people's mind in disclosing their real income and prompt them to start paying taxes. Lower tax for first time payers for next 2 years could be one of the ways. Or something similar.
2. Some of the folks that I have talked to have expressed interest in going digital but feel cornered as their raw material vendors insist on cash payment. May be banks could launch schemes like accept payment digitally and receive cash as your working capital at home next day - Banks could leverage pygmy agents to deliver the cash. This will bring in a huge percentage of small businessmen or street side vendors into digital orbit, thereby making their income legitimate and building their credit history etc.
3. Use BJP members to spread awareness about digital payments in the masses - including wholesellers, retailers, farmers etc. Understand their apprehensions - some of those apprehensions could be genuine and could be addressed at a large scale. Also educate the masses about having a good credit history with the banks which supposedly eases the loan approvals in your need. This will also give BJP a political advantage to get connected with people and address their other concerns as well, which could be a huge win in subsequent elections.
4. Increase the wallet capacity. Most of the vendors who started with accepting payments through wallets are feeling strapped as the wallets have a limit of 20K per month without KYC and many of them exhausted that in just couple of weeks. I also heard that the KYC process has been tremendously slow, which could increase the limit to 1L per month. Some relaxation is required on that front.
5. Make it compulsory to use digital methods to do 90% of the transactions of your reported business. That will bring in another layer of businesses and individuals under digital orbit thereby making it easier for customers to pay digitally. Since businesses wouldn't have control over how much would be 90%, they might tend to accept as much as possible digitally. This may also result in businesses creating incentives for their customers to use digital methods for payments!

All in all, there needs to be a dedicated team from Government working towards making the economy cashless or less-cash whatever you may want to call it.