What a year it has been as, I begun to write down the last editorial for the year 2016. Just when everything seemed to be heading in the right direction and growth was seeming coming in naturally for the steps the government had taken to bring in foreign funds and streamline the various sectors and reign in retail and construction sectors, we received the bombshell on 8th November and everybody started running helter-shelter. It has never been the same again.
The India before 8th November and after 8th November it is like BC & AD. When historian and economist will write the history and the economic development of this country they will have to reconcile these two yardsticks by which they could measure the Modification of our Economy. No single decision by any yardstick by any other PM in our history has had such telling effect for economically and socially on us. It is with a single stroke he wrote and rewrote the destiny of millions of Indians. There would be several individuals who are morose and glum for having lost a substantial part of their so called wealth and on the other side some neglected and usually unsung folks of our society being gleamed for attention which they otherwise couldn’t dream of. Now they find their bank accounts fattened by largesse extended by their masters. If not this, then what has been an economic leveller of sorts? And a vast redistribution of wealth which has changed hands so frequently in the past few days which couldn’t have left the coffers or the dungeons where they were lying so quietly all these years.
It has been a disruption to a large extent and the ending of a status quo and for the fact that taking such decision by future PM could now be the norm, then, a flash in the dark. So pilfers of unaccounted wealth are now vary where to stash. As options are fast running out for them. That is why the push towards digital India takes a natural corollary for the government to take. India is 87%cash economy and quite the reverse of some of the other developing economies like China, Brazil, Russia where the digital economy is in the range of 25 to 45%. So the first target for India is to get themselves in this club if they have to compete with BRIC economy leave alone established economies like US & UK.
For this the steps the FM has announced are the steps in the right direction. Govt. should encourage/make mandatory for all Govt. run intuitions to accept 90% payment in digital currency, be it Post Offices, Banks, Railways, Govt. Offices, Municipal Bodies, Taxations, Insurance, even payment of electricity, water and now get petrol and diesel under this. Within a year the rate of digital economy will easily grow from 13% to over 20%. Other norms should follow with a relaxation of levies on POS and other digital transactions completely and give tax incentives/cash rebates on digital payment to ensure its usage over cash. Make it mandatory for all establishment doing sale/purchase of over Rs. 10,000/- p.m. to be digitally enabled and offering at least 3 modes of digital payment to his customers.
Bank can also levy a transactional tax on the cash deposit made by merchants in their current accounts to discourage cash handling. These steps will go a long way is making a strong case for digital India.
Since the last month of so the business has definitely taken a back seat as there is no doubt the biggest issue before all Indians is demonetisation and how to deal with it. As we are coming to the far end of the scheme, certain experts are claiming that this is the beginning of the troubles, and since the cash has been sucked out of the system and the new cash is being infused quite slowly it will kill demand in the short term and the economy will suffer on this account. Well there is always two sides to a coin and as they say the glass is half full, my reckoning is since this exercise is too large for any economist to fathom and India has surprised many experts in the past and the resilience of the people to cope with difficult situations is too well known. Even during the 52 odd days that the government has given to change our monies we are amazed at the length the people have gone to get the conversion done.
This only proves in face of adversity the true face comes to fore and as Indian we have proved once again, Govt or no Govt we will beat every system to get ahead of others. So I am not surprised that we Indians will derive a system of doing business in these cash-less days or go digital and provide payments to our suppliers, workers and the small traders in their account through RTGS or NEFT.
Whatever said and done, the long and short of this argument is bigger the pool of taxpayers, bigger the pool of indirect taxes will go in strengthening our economy and the country as a whole and give better future to our children.