Home / Opinion / Online-views /  The demons of demonetisation

As we go about our daily lives these days, it seems like we have turned a blind eye to the poor. While we crib about long queues at ATMs and our inability to pay cab fares in cash, we often forget about the poor person living in a distant village and how his life has changed because of demonetisation. While framing a policy or taking an implementation decision, how can the government be insensitive towards those who are not connected to the Internet and without mobile phones.

The government talks about black money hoarders and how demonetisation will impact them, but does not mention or talk at length about how the poor will deal with this. Let’s not forget that India’s richest 1% owns more than 50% of its wealth. Is it really then fair to cause inconvenience to 99% of Indians in the name of recovering black money? A majority of those who have black money stashed in the country have found some way or the other to turn their illegal funds into legal cash now.

The government must understand that not all cash transactions are bad; only a tiny part of black money is in cash. While India’s cash-to-GDP ratio stands at 12%, less than 10% of Indians have ever used any kind of non-cash payment instrument. The nation is talking about “Paytm karo", but do we understand that an e-wallet means nothing unless one has an Internet-enabled mobile phone, a functional bank account and a credit or debit card. Even at its highest capacity, Paytm reaches only 150 million users across India. According to a report by the Internet Society, 50% of Internet-enabled mobile phone users in South Asia don’t even access the Internet on their phones.

With a population of more than 1.2 billion, the country has only about 24.51 million credit card holders and 661.8 million debit card holders; and not all of them use their cards actively. Even the number of ATMs is restricted to a little more than 200,000 with only 75,000 located in semi-urban and rural areas. When the prime minister is asking India’s citizens to go cashless, he is actually speaking to those who hold credit or debit cards, the 400 million individuals who are connected to the Internet and 125 million individuals who are active on social media. This means, he is speaking to less than 50% of India’s population.

In rural areas, to promote cashless transactions, biometric-based (point-of-sale) PoS machines are being used, but there are only 1.5 million PoS machines in India; and their performance and accuracy are hardly satisfactory. Take, for example, the case of PoS machines in Rajasthan. Out of the 25,725 fair price shops in Rajasthan, 24,653 of them are PoS machine-enabled. However, according to a report in The Hindu only 10% of them are functional, even though 9.8 million people are dependent on the National Food Security Act in the state. Clearly, more than 90% of the eligible people with proper entitlements could not receive their ration just because a digital machine failed to recognize its own legitimate people. In a scenario like this, how can India be expected to become a cashless economy?

If the government really wants organizations and individuals to go cashless, it first needs to create an infrastructure to support cashless transactions. And for that to happen, the Digital India plan should work. When I say that Digital India should work, I mean that its success depends on how many panchayats are able to connect with the Internet.

Are we even aware of the challenges facing Digital India? The government has asked citizens to put in all its documents online. Do we realize that for people living in rural India, uploading documents is not something that is done free of cost at home from a printer-cum-scanner? Instead, it costs money to travel to the nearest digital services centre and pay for the scanning and uploading services. This only leads to further exclusion.

While we have distributed Aadhaar cards to the poorest of the poor and linked them to PoS and biometric machines at ration shops in an effort to create a cashless economy, we forget that often fingerprints of labourers don’t match because of the rigourous nature of their work. Heavy pressure on their hands and frequent cuts make their fingerprints unrecognizable.

How can we hope to create a cashless economy without understanding the lives of the poor who form a majority of the country’s population.

If the government is functioning efficiently, it should already have a record of who holds black money. If it already has this list, is demonetisation the right way to go about getting that money back? Did the government explore other options to target tax defaulters and illicit wealth holders? Right now, it seems like this self-inflicted disaster is actually making India more impoverished by targeting the poor.

And if demonetisation was the way to go, shouldn’t the government have made arrangements for local area facilitators to ensure that the poor have access to new cash in a timely manner?

When the prime minister says we have to become a cashless economy, he must also be made aware of the kind of system, infrastructure and trust building it requires to really benefit the poorest of the poor and how much work is needed before a majority of Indians can embrace plastic money or virtual banking.

Osama Manzar is founder-director of Digital Empowerment Foundation and chair of Manthan and mBillionth awards. He is member, advisory board, at Alliance for Affordable Internet and has co-authored NetCh@kra-15 Years of Internet in India and Internet Economy of India. His Twitter handle is @osamamanzar

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