Weeks before the famous midnight drama in parliament to roll out the Goods and Services Tax (GST) on 30 June 2017, a video recording of a Supreme Court advocate was going viral; it warned about the many dangers of a hasty rollout. The prime minister’s office called him for suggestions. His response was simple: “Don’t go for a nationwide rollout. Start with a pilot project and a small list of items under GST; iron out the glitches, stabilise the software and gradually expand the list.” What could be more obvious and sensible? He was told that the launch date and the nationwide rollout were non-negotiable; any other advice was welcome.
The government claims GST is a great success, though confusion over many issues continues; the invoice matching has been suspended; several aspects of filing have been postponed and it remains a huge work-in-progress. Nobody knows why a wonderful new initiative was forced on people without adequate preparation. As we have written elsewhere in this issue, MCA21, the mandatory online corporate filing database, remains another source of continued harassment with regular users resorting to multiple strategies to get work done.
The grandest of them all, the Aadhaar programme of the UIDAI (Unique Identity Development Authority of India), is the worst of the lot, because it affects our everyday life and our savings. UIDAI has expanded far beyond its original remit and is fast looking like a tool of control and surveillance. The government and UIDAI have refused to engage with citizens on issues of violation of privacy or misuse of information or the manner in which the data will be used and verified. When the formal legislation was finally passed to give UIDAI’s actions some legal sanctity, it was pushed through parliament as a money bill.
The Supreme Court is, at last, hearing a few dozen petitions against Aadhaar. But, even here, the government shamelessly uses its extensive financial muscle and influence to ensure that every newspaper, website and television channel is bombarded with full-page advertisements or interviews and signed articles of UIDAI’s founder or CEO, especially when the Supreme Court hearings are on. Such a brazen attempt to influence the public and the judiciary has been done only by the notorious Sahara group (ultimately, with disastrous results).
Cash Crunch
Now let’s look at the many facets of the cash crunch, which caused tremors of panic on 17th April. Moneylife has been reporting how ATMs have been regularly running dry ever since early 2017. Our sources at the Reserve Bank of India (RBI) clearly told us that RBI was refusing to pump more cash into the system. They believed that this was being done as part of the government agenda to nudge, or force, people into digital transactions.
No amount of writing to RBI or social media posts about closed ATMs made any difference, until television channels appeared to be whipping up an unstoppable panic that could have caused a run on the banks. It is only then that the government went into an overdrive of denials, assurances and a promise to crank up currency printing and ensure adequate supply in the coming weeks. Its spokespersons trotted out innumerable statistics which failed to answer one basic question: Why was RBI sleeping on its job of monitoring currency needs, cash management and anticipating ‘increased demand’, if any?
None of the events of April indicates any reason for ‘unusually large withdrawals’ either. The demand for cash during Akshaya Tritiya happens every year (in fact, jewellers say demand was lower this year), so does the sowing season and the wedding season; multiple state elections are as per plan and the central bank has responded to these over the decades without cash shortages. What was different this year? Why is the central bank clueless about the reason for ‘unusually large withdrawals’ when it has access to all the currency supply numbers?
Some experts, using RBI’s own statistics, have already disproved the theory of ‘unusually large withdrawals’. Moneylife Foundation has also been alerting RBI about acute currency shortage across India, at least since March 2017. While the theory ‘unusual cash withdrawals’ seems doubtful, the panic among people is real and the government is solely responsible for it. People are feeling harassed about several issues; deliberate cash shortage is only one of them.
Many Indians supported demonetisation, despite the hardship involved, in the expectation that it would eliminate black money. But people’s faith has been shaken by the rash of banking scams which showed that large industrialists were looting banks with impunity, each for a few thousand crore rupees, while government misguidedly hunted for cash stashes. Blaming the Opposition for fomenting panic and unleashing tax raids again, instead of re-examining its own policies and actions, is not enhancing the government’s credibility. Here are some issues that need consideration.
1. A growing number of educated people are seriously asking if their bank deposits are safe or could be appropriated to pay bad debts under the bail-in clause of the ill-conceived FRDI (Financial Resolution and Deposit Insurance) Bill. Not everybody is convinced about our assurance that there is no immediate danger; they believe the government is capable of initiating any coercive action overnight. Most people have begun to store more cash for contingencies, despite the risks.
2. The threat of forced Aadhaar linkage of everything from bank accounts to telephones is another cause of stress, especially among senior citizens. Many are finding that their biometrics fail to be read by UIDAI’s scanners and are being forced to repeatedly update their Aadhaar card with fresh biometrics. Their big fear is about bank accounts being blocked or telephone services being cut off. The bombardment of text messages has triggered anxiety among people; especially since banks have, indeed, blocked accounts for want of Aadhaar. This harassment has tacit support of the government. Only those who aggressively point to the Supreme Court stay orders or submit them in writing are left alone.
3. The government deliberately curtailed cash circulation to force digital payments, leading to a currency shortage, say our sources in the central bank. RBI’s press release of 17th April, however, says, “There is sufficient cash in the RBI vaults and currency chests”; but it does not explain the inadequate supply to banks and ATMs. If enough currency is available, what is the need to ramp up printing ‘at all the four note presses’? Or ensure a five-fold increase in printing of Rs500 notes? Has RBI forgotten its job of cash-management or was it doing the government’s bidding in squeezing cash supply to help digital payment companies?
4. Forcing people into digital transactions as part of a controversial global exercise led by large payment giants is a disastrous idea. Many older Indians are simply not comfortable with digital transactions. Grievance redress of such transactions remains poor and regulators have no accountability or interest in building public confidence. It is hard for most people to figure out new scams where fraudsters posing as bank or telecom officials con people to part with their password and security details by threatening to freeze accounts. The stress of dealing with this is only understood by those in the affected income or demographic group.
5. Finally, there is the Rs2,000-denomination currency which is not a transactional currency at all and tends to be saved by individuals and hoarders. This was a lesson learnt during demonetisation itself and printing was stopped to crank up the supply of Rs500 notes. The newly introduced Rs200-denomination note also remains scarce; the result is that ATMs dispense Rs2,000 notes, which are stashed, or smaller denominations that empty out machines rather rapidly.
The bigger lesson here is that forcing people to do things against their will and deal with faulty systems is a disastrous strategy that cannot always be blamed on the Opposition or on critics. With just a year to go for the general elections, it is time the government started listening to people and delivering on some of its promises of ‘achche din’, instead of causing stress and harassment. And making a mockery of ‘being responsive’ when forced into multiple course corrections arising from poorly thought-out policies and implementation.
made available so as to reduce the pressure on ATM with limits not exceeding 5000/per transction.
Spot on
mistake of govt ok, but with bad intention?
i dont think so.
Taleb has written about the dangers of centralization in his book "Anti Fragile".