Few problematic questions:
Q1. Why did PM not get enough Rs.500 notes printed three to six months before November 8, 2016 Demonetization announcement and get all ATM's ready beforehand?
Q2. Why did he not order banks to become compliant with UPI and USSD or AEPS technologies three months earlier?
Q3. Why did he not (or does he not) launch a training campaign and mobilise all teachers (in schools and colleges) and even bank staff to learn and then teach others making digital transactions?
What was he aiming for, really?
It would appear that PM was driven by the urgency of dealing a coup de grace (surgical strike) to the opposition parties in U.P. elections and he couldn't care less for other consequences (like during 2002 riots). TOI's chief cartoonist captured the situation strikingly accurately (10-Dec-2016 Page 9 of TOI A'bad).
Demonetisation is estimated to have cost India Rs.1.25 to 1.5 lac crores. Additionally demonetization is costing lives. It has already cost many lives and the way things are panning out and the utter callousness of the government in not tweaking rules in favour of the helpless and the poor, many more will die in queues, hospitals or even homes without access to their own money!
Only a very powerful Prime Minister can commit such an expensive project without consulting experts or the cabinet. Apart from the human distress and hit on economy, the humongous monetary cost may well exceed the tax on "black money" expected to be recovered or extinguished until the amnesty scheme (PMJKY) runs out on 31st March 2017.
Modi and team have no understanding of how large scale transformative systems (like Aadhar) are rolled out. For making India go from 98% cash transactions to even 50% digital (mobile) transactions, it would take much more than exhortations by PM or enthusiasm of Niti Ayog's Amitabh Kant (he declared lucky prizes to promote digital transactions). Migration from cash to mobile money transactions could easily be justified to be scaled up and formulated as an all-time biggest project. Instead Modi is squandering this opportunity of transforming India on an important dimension. Due to a ham handed campaign, and no training resources deployed, the available technology and resources remain grossly underutilised; sadly people prefer to queue up for cash when most of them could have switched to mobile (digital money) in less time! The bank staff could have been deployed for opening bank accounts and teaching those in the queue to learn the use of UPI or USSD enabled mobile transactions - technology and infrastructure already exist to include both smart phone users (with Internet connectivity) and feature phone users (without Internet connectivity). Queues for cash would reduce dramatically. Constraints in going digital are not mobile coverage or transactions technology coverage. In India we have over 1 billion mobile users (may be 600 million unique subscribers - i.e. practically every household).
Constraints are
1) awareness ; training and
2) individual bank accounts (practically 99% of households have bank accounts) and linking them to Aadhar (particularly important for the less literate because biometrics security enabled transactions are desirable for them).
Modi and team have bungled on estimating the gains of demonetizing on the economic front. Almost all the demonetized currency is going to get back into banking system before expiry of the deadline. Modi and team are now expecting the tax base will expand. Millions of notices will be sent out to depositors to explain their income which the Income Tax officials will want to tax or confiscate! This will be the biggest opportunity for the I-T Department, one of the most corrupt departments of the government, of milking innocent (gullible) citizens who have been lured by the Modi team to deposit funds below Rs.2. lacs by telling them that no questions will be asked.
Many individuals and political parties can deposit cash they are holding in 500 and 1,000 rupee currency without inviting any questions - for e.g. all political donations - election funds collected by parties and agricultural income are tax exempt. No wonder folks declare agricultural income which is bogus or political parties collect fictitious donations below Rs. 20,000, where source need not be declared, to launder or hoard black money (hoarding black money also helps in making expenses below the table). Since cash withdrawals have been controlled by RBI (at the behest of Modi government), in the U.P. elections, the BJP is expected to have an advantage. Due to insider knowledge, ruling party and their friends, would have had enough time ahead of November 8, 2016 to park cash properly. Bank deposits in September and October 2016 had spiked like never before! Will these be investigated?
It would seem very unlikely that Congress would not have dug up evidence of insider machinations of the Demonetizing project engineers. After all this is not a small size project. If one party chooses not to expose another party, it can only be due to a quid pro quo.
What will Modi Government do with the surge in bank deposits? The politically smart idea of demonetization, of impairing the financial muscle of opponents, could boomerang soon with cash starved people getting restless in North India. Modi government needs to recapitalise banks due to mounting NPAs. Also the ruling party bosses may want to make good their promise to masses to recover back black money and gift the poor people some (or part of the Rs.15 lacs promised to each). BJP strategists may also favour meeting many other political demands prior to elections (Niti Ayog team talks of big data but the cash distribution to 1.25 bank branches, 1.5 lac ATMs and 1.6 lac Post-offices is hardly being informed and guided by a coherent policy). Meanwhile, Congress has preempted one populist gimmick of loan waiver to farmers. One needs to wait and see what BJP decides to do with (temporarily) bloated bank deposits.
India's freedom from black money and corruption will not come from demonetization. It may not even come from converting cash dominated economy to digital transactions dominated economy, although that is a great opportunity and it must not be foregone due to lack of energy or ham handed execution. Freedom from corruption will not come without reforms in political funding rules and utterly unrealistic caps on election expenses that force out honest and meritorious aspirants and reward candidates who are crooked or who give in to crooked practises :(
Q1. Why did PM not get enough Rs.500 notes printed three to six months before November 8, 2016 Demonetization announcement and get all ATM's ready beforehand?
Q2. Why did he not order banks to become compliant with UPI and USSD or AEPS technologies three months earlier?
Q3. Why did he not (or does he not) launch a training campaign and mobilise all teachers (in schools and colleges) and even bank staff to learn and then teach others making digital transactions?
What was he aiming for, really?
It would appear that PM was driven by the urgency of dealing a coup de grace (surgical strike) to the opposition parties in U.P. elections and he couldn't care less for other consequences (like during 2002 riots). TOI's chief cartoonist captured the situation strikingly accurately (10-Dec-2016 Page 9 of TOI A'bad).
Demonetisation is estimated to have cost India Rs.1.25 to 1.5 lac crores. Additionally demonetization is costing lives. It has already cost many lives and the way things are panning out and the utter callousness of the government in not tweaking rules in favour of the helpless and the poor, many more will die in queues, hospitals or even homes without access to their own money!
Only a very powerful Prime Minister can commit such an expensive project without consulting experts or the cabinet. Apart from the human distress and hit on economy, the humongous monetary cost may well exceed the tax on "black money" expected to be recovered or extinguished until the amnesty scheme (PMJKY) runs out on 31st March 2017.
Modi and team have no understanding of how large scale transformative systems (like Aadhar) are rolled out. For making India go from 98% cash transactions to even 50% digital (mobile) transactions, it would take much more than exhortations by PM or enthusiasm of Niti Ayog's Amitabh Kant (he declared lucky prizes to promote digital transactions). Migration from cash to mobile money transactions could easily be justified to be scaled up and formulated as an all-time biggest project. Instead Modi is squandering this opportunity of transforming India on an important dimension. Due to a ham handed campaign, and no training resources deployed, the available technology and resources remain grossly underutilised; sadly people prefer to queue up for cash when most of them could have switched to mobile (digital money) in less time! The bank staff could have been deployed for opening bank accounts and teaching those in the queue to learn the use of UPI or USSD enabled mobile transactions - technology and infrastructure already exist to include both smart phone users (with Internet connectivity) and feature phone users (without Internet connectivity). Queues for cash would reduce dramatically. Constraints in going digital are not mobile coverage or transactions technology coverage. In India we have over 1 billion mobile users (may be 600 million unique subscribers - i.e. practically every household).
Constraints are
1) awareness ; training and
2) individual bank accounts (practically 99% of households have bank accounts) and linking them to Aadhar (particularly important for the less literate because biometrics security enabled transactions are desirable for them).
Modi and team have bungled on estimating the gains of demonetizing on the economic front. Almost all the demonetized currency is going to get back into banking system before expiry of the deadline. Modi and team are now expecting the tax base will expand. Millions of notices will be sent out to depositors to explain their income which the Income Tax officials will want to tax or confiscate! This will be the biggest opportunity for the I-T Department, one of the most corrupt departments of the government, of milking innocent (gullible) citizens who have been lured by the Modi team to deposit funds below Rs.2. lacs by telling them that no questions will be asked.
Many individuals and political parties can deposit cash they are holding in 500 and 1,000 rupee currency without inviting any questions - for e.g. all political donations - election funds collected by parties and agricultural income are tax exempt. No wonder folks declare agricultural income which is bogus or political parties collect fictitious donations below Rs. 20,000, where source need not be declared, to launder or hoard black money (hoarding black money also helps in making expenses below the table). Since cash withdrawals have been controlled by RBI (at the behest of Modi government), in the U.P. elections, the BJP is expected to have an advantage. Due to insider knowledge, ruling party and their friends, would have had enough time ahead of November 8, 2016 to park cash properly. Bank deposits in September and October 2016 had spiked like never before! Will these be investigated?
It would seem very unlikely that Congress would not have dug up evidence of insider machinations of the Demonetizing project engineers. After all this is not a small size project. If one party chooses not to expose another party, it can only be due to a quid pro quo.
What will Modi Government do with the surge in bank deposits? The politically smart idea of demonetization, of impairing the financial muscle of opponents, could boomerang soon with cash starved people getting restless in North India. Modi government needs to recapitalise banks due to mounting NPAs. Also the ruling party bosses may want to make good their promise to masses to recover back black money and gift the poor people some (or part of the Rs.15 lacs promised to each). BJP strategists may also favour meeting many other political demands prior to elections (Niti Ayog team talks of big data but the cash distribution to 1.25 bank branches, 1.5 lac ATMs and 1.6 lac Post-offices is hardly being informed and guided by a coherent policy). Meanwhile, Congress has preempted one populist gimmick of loan waiver to farmers. One needs to wait and see what BJP decides to do with (temporarily) bloated bank deposits.
India's freedom from black money and corruption will not come from demonetization. It may not even come from converting cash dominated economy to digital transactions dominated economy, although that is a great opportunity and it must not be foregone due to lack of energy or ham handed execution. Freedom from corruption will not come without reforms in political funding rules and utterly unrealistic caps on election expenses that force out honest and meritorious aspirants and reward candidates who are crooked or who give in to crooked practises :(
