Cashless India in a Single Day

8th November ended like any other day. I’d just gotten home from work. My father called me. Excitedly he told me that our PM, Narendra Modi had recalled 500 and 1,000 denomination notes. I responded that it’s probably a hoax and switched to youtube to check just in case. It was true. A number of my colleagues who I discussed this with echoed my initial disbelief on having first heard of demonetisation. Living through a full day after demonetisation has been that much more unreal.

I can’t imagine that an extreme step such as this would ever be taken. As my Dad explained, the last time this was done was in 1978 under similar circumstances. India needed this. Edelweiss Securities predicts that the crackdown will unearth 3 trillion rupees ($45 billion). Perhaps I believed our politicians didn’t have it in them. But Modi ji’s turned out to be a politician like no other. He’s allowed his determination to lead him into the unknown. If this move fails to deliver impact, it’ll hound him. If it works, at least temporarily black money will entirely cease to exist in India. Fake money will be invalidated. Indeed, the nexus between terrorism, corruption and tax-avoidance will receive a blow.

And that’s significant.

As the dust of today’s discussions, evaluations, analysis and experiences settle, it’s becoming clear that although this was a much-needed reset of our entire system, it just might be that the entire potential of what is possible was missed.

First, a little background. A little before tax-season the government announced an amnesty scheme under which tax defaulters could come clean for a penalty and avoid criminal prosecution. Although the scheme was widely availed, it came nowhere near the goals our PM had set. Perhaps he have felt that some thing more would have to be done. I’d resigned myself to “yet another unfulfilled campaign promise”. It would continue to be business as usual.

India (and Bharat) is a clear, desperate large-scale use-case to go-digital. In our cash-led economy, an INR 10 denomination note has an average lifespan of less than 10 months.

Our PM himself appreciates technology for the transparency and accountability that technology brings with itself. He’s also cited the parallel economy being a key driver of forces that are destroying us from within.

Since the early years of 2000 – 2012, digital entrepreneurs have been tracking the Internet in India. We’ve achieved big changes at a snail’s pace. First came broadband, then smartphones, mobile internet, finally e-commerce. This is over a 12+ year time period. If we think forward, will it take us another decade for us to go cashless?

And therefore skepticism. We need to be there desperately, but the inertia won’t allow. Just the other day I was asked by a potential hire, “Do you really believe you’ll sell digital payments to a group that believes in dealing in cash”? I’ve always had a ready answer, but it’s a tough argument to fight. Even now, my son’s private school conveyance hesitated to share his bank account details. We simply didn’t have the cash on hand to pay him.

If one sets out to change India to stop having to rely on cash, until last night this felt a little like an impossible task. I only know now that I felt like this. I’m simultaneously embarrassed and impressed on the boldness and on how our PM’s decision has turned out.

So just maybe, I need not have to wait a decade for this change. Let’s take a fresh look at what was possible.

We’ve just spent an entire day where 500 and 1,000 notes are not legal tender. Throughout the nation Banks and ATM’s were shut. There was some chaos as people scrambled, but systems haven’t entirely failed or stopped. If you’re a daily wage earner and if you were paid in 500’s on Tuesday, you’d have a difficult time. In the coming days there will be more pressure on the system to change those 500’s into new 500’s or 100 denomination notes. On Thursday 11th, ATM’s will be back online, but if you don’t have a bank account, you won’t have access to more than INR 4,000 in the new currency right away. For sure that won’t cover the month’s rent and groceries.

Over the last 2 years, we’ve introduced Aadhaar – a biometric based system capable of identifying citizens, we’ve linked the Aadhaar system to bank accounts, and have recently introduced Unified Payment Interface, a simple account-to-account cash transaction system suitable for smartphones. If we’d made it possible to pay with UPI almost everywhere, there wouldn’t be as much pressure on the system for availability of 100’s and smaller denomination notes. Even in a hybrid system those who need cash to bridge expenses could have had them on priority while the others must pay digitally. Universal acceptance is key.

Let’s look at some of the counter-arguments I’ve got. Not everyone has a bank account, but they may have instances where they’d have to pay large sums (school fees comes to mind).

On the acceptance front, skepticism has prevented retailers and common utility providers from adopting digital. That could have been eliminated.

But just this one day, I believe that we could have prepared ourselves to digitise and made a leap. Even if it is only my limited view-point, on this one day we all accepted to be inconvenienced for the greater good. A nation that can be organised to give up their money and recognise the larger picture, they’re certainly ready to let go of their other fears. This opportunity, this reset might not arise again.

We’re getting quicker at transforming our ageing private / public systems and protocols. Reliance Jio’s doing it in telecom (they’re India’s only 100% VoLTE operator), railway tickets, our cooking gas subsidy system and many other examples come to mind. This pace of change is exciting.

There’s no doubt in my mind that 8 November is historic and a big leap forward. It has strengthened my faith in our version of democracy and in our leader. It’ll strengthen the common man by merging the parallel economy and forcing cash out into the open. It has encouraged me to think about what’s possible, what our future ought to look like and what we’ll need to do in order to get there. Thank you Honourable Prime Minister Narendra Modi for growing our picture by that much. Thank you for surprising me.

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