The less cash budget

Proposals add up to a series of mutually reinforcing moves to build a digital payments ecosystem

AFTER THE DRAMA of demonetisation, the 2017-18 Union budget has been a decidedly sober affair. The budget speech, one of the longest in history, was short on game-changing ideas. The finance minister didn’t seem terribly perturbed by the gathering storm clouds worldwide: Populist surges in the US and Europe; a strengthening dollar and oil price uncertainties; prospects of trade or religious wars, maybe both. That the IMF has shaved off a full percentage point of India’s anticipated growth rate as the economic penalty for the November cash carnage did not seem to provoke much worry either.

With crucial elections looming, Arun Jaitley played it cool and he played it safe. There was the expected tilt towards expenditure on infrastructure, tax cuts for small enterprises and shots in the arm for rural households and the agricultural sector. To me, the most interesting question, however, was about what the FM had in store for jumpstarting digital payments; after all, with the re-branding of the demonetisation fiasco as an initiative to make India a “less cash” society, this issue seemed to be the most pertinent feature of this budget.

While the proposals for the “digital” theme were hardly revolutionary, they add up to a series of mutually reinforcing moves to build up a digital payments ecosystem — and the government picked a solution to champion as a focal point. For this, and for leaving the drama of 2016 behind him, the finance minister gets high marks.

At the heart of the budget’s digital strategy is a plan to put a thumb on the scale for the government’s own payment app, Bharat Interface for Money (BHIM), that facilitates electronic transfers between bank accounts. BHIM users can now enter their 12-digit Aadhaar number to make payments. The recently introduced payment system has been buggy, but it has attracted 12.5 million people to download the app. The budget aims to get many more signed up with incentive schemes to bring different market participants together: One is a referral bonus for users and the second, a cash back scheme for merchants who accept the payment system.

Moreover, a merchant version of the Aadhaar Pay system will be launched soon. To stimulate adoption in different situations, the government plans to mandate digital payments at petrol stations, hospitals and universities. Cash transactions over Rs 3 lakh have been banned altogether. Moreover, the Indian Railways will no longer levy a service charge on train tickets booked online