Indians like to pay cash; New Delhi likes them to use cards
PATODA, India: After India’s surprise decision to scrap highvalue currency last month triggered widespread cash shortages, people in the large village cluster of Patoda got by as best they could. They postponed family weddings, asked for credit and bartered services.
But as the money crunch extended into its second month, officials from the State Bank of India arrived with a rescue plan of sorts, which included new card swipe machines for small businesses.
At Raj Purohit’s sweet store one recent afternoon, curious onlookers gathered around one of the unfamiliar machines, which he had painted with a stripe of auspicious red vermilion powder.
“Don’t waste time standing in bank lines. Don’t carry cash everywhere like you used to,” Purohit told those around him.
One customer said he didn’t understand how swiping worked. Another said he wouldn’t trust it. Purohit tried five times to swipe a young customer’s debit card. By the time it went through, everybody knew the secret personal identification number.
But the government isn’t giving up. Even as banks scramble to replace bills for angry people in long lines, officials say the crisis is an opportunity to bring a grand cultural shift in Asia’s third-largest economy and move citizens toward cashless transactions involving cards, e-wallets and digital payment banks.
When Prime Minister Narendra Modi announced the removal of 80 per cent of the currency from circulation last month, he called it a decisive strike against corruption and counterfeiting. But he also has exhorted citizens to take advantage of the change. He asked India’s younger generation to teach their parents, neighbours and even the corner vegetable vendor how to go cashfree.
“You have a leadership role to play in taking India toward an increasingly digital economy,” he told them.
It will be a long road. Nearly 80 per cent of Indian transactions are conducted with cash. Taxevading Indians typically hide their undisclosed wealth in cash, real estate, jewellery or in tax havens abroad. Undisclosed wealth, called black money here, accounts for over a fifth of the national output, according to estimates.
But Modi’s ambitious decision to replace bills worth more than US$ 207 billion ( RM932 billion) was derailed by shoddy implementation and slow printing of replacement bills, leaving Indians of all income levels without cash overnight.
Amartya Sen, a Harvard University economist and Nobel laureate, called it a “despotic action.” Former prime minister Manmohan Singh, an economist, said the move can have “ripple effects” on economic growth and job creation in the coming months. As the chaos continued, Goldman Sachs downgraded its outlook for India’s growth in the coming year - twice. The estimate now stands at 6.3 per cent.
Officials say the switchover will make it easier for the government to track transactions and boost tax revenue. The government announced a series of incentives for people making online payments last week, and ordered banks to install one million new swipe machines across India by March - up from 1.4 million today.
“What I had expected would have taken three to six years will now take three to six months,” said Nandan Nilekani, the tech czar who created India’s biometric-based identity programme.
One billion people in the country now have unique biometric identification numbers, more than one billion have cellphones and at least half a billion have bank accounts, he noted, which will help the transition.
Don’t waste time standing in bank lines. Don’t carry cash everywhere like you used to. Raj Purohit’, sweet store owner