The Centre’s push to a cashless economy, welcome as it is, will be tough to implement given the low percentage of Indians with credit cards or even bank accounts, the Jan Dhan Yojana and the RuPay card notwithstanding. Of 720 million ATM cards issued, 450 million are used only to draw cash, and people still don’t use it for purchases. The demonetisation of Rs 500 and Rs 1,000 notes may speed up the process a bit, as many who have faced inconvenience in the past few weeks are thinking of changing the way they pay for goods and services. Banks and others are also trying to create awareness about the advantages of going cashless. The government’s objectives appear noble as it feels these steps would reduce the creation of black money and drive India to adopt common global practices.
The government tried to kill two birds with one stone with its move towards a cashless economy, the other one being the holders of black money. They tried to get their black hoard turned white by sending people, specially jobless youth, to stand in line to cash their notes at a commission. The government soon got wise and closed the window for changing notes when it realised most genuine holders of the demonetised currency had converted their notes and those standing in queues were so-called “mules” (people hired to change notes for a commission).
It is to the government’s credit that it is being pragmatic in allowing black money holders to put their money in banks by paying a stiff penalty. While not actually announcing an amnesty, it has permitted unaccounted money to be deposited in banks with a penalty payment of 50 per cent tax, 25 per cent of this frozen four years. If the holders of unaccounted money still don’t avail of this facility, they will have to pay 90 per cent tax if caught by income-tax sleuths. The government feels it’s better to get some of this money out by offering so many chances that it could be a win-win situation for all. Earlier this year, it started a income disclosure scheme, that ended on September 30. It has already collected a sizeable amount of money and the banks are flush with funds, raising hopes that interest rates on loans will come down soon. Bank depositors, however, have been losers so far, as the banks slashed deposit rates. The government is expected to use the Rs 600,000 crores that have reportedly come into the system to fund schemes for the poor. This, if genuinely implemented, will be a boon for the poor, particularly in rural India, as social welfare schemes and even funds allotted for the National Rural Employment Guarantee Scheme (NREGA) have been cut, though the government denies any reduction.
