Cashless transactions? Why not? Yes, it’s a big gamble, given the reach and awareness of banking in the country. Mobile connectivity is abysmal in many parts and a vast swathe of rural India remains under-penetrated when it comes to banking. For example, of 6,238 gram panchayats in Odisha, about 4,400 have no branches. About 47 percent of rural population in the state, according to a letter from Chief Minister Naveen Patnaik to Finance Minister Arun Jaitley, have no proper access to banking facilities. The recent experience with demonetisation revealed the limitations within the banking ecosystem.
But then, sometimes, shock therapy works well to revitalise a system trapped in lethargy. The demonetisation exercise would certainly help the banking system shift to the next level of efficiency. Similarly, the big emphasis on cashless transactions, disruptive in its potential as it might be, would definitely mark a big shift in how Indians transact. Sure, more than 230 million of them remain unbanked, the general confidence in the banking system remains low and there’s a massive unorganised sector in the economy that relies heavily on cash. But if Prime Minister Narendra Modi is serious about making India cashless, he has to step on the gas now.
It is difficult for countries to go entirely cashless, but the process has to begin somewhere. The idea coming close on the heels of demonetisation seems to have the timing right. If there was a fear of a public backlash to such bold moves, the results of civic body polls in Maharashtra and Gujarat settles it conclusively. If the overwhelming perception is that something good is in the air, people won’t mind small discomfitures. The prime minister has managed to convey to people at large that he means good. And the opposition’s argument against demonetisation has been less than convincing.
If the civic polls were projected as a referendum on Modi’s move to trash high value currency notes, then he has easily won the popular vote. In Gujarat, it was expected that the elections, coming on the heels of the massive Patel agitation and the OBC backlash to it, and the demonetisation now, would aggravate the BJP’s electoral woes. With 107 of 126 municipal and district panchayat seats in its kitty, the party remains as strong as ever. In Maharashtra, the party left all competitors far behind.
If the opposition expected frustrated people at ATMs and banks would teach Modi a lesson, that is not how it has turned out. So this should be a signal for Modi to press ahead with the cashless experiment. In the middle of his five-year term at this point, he can afford to take the risk. If it turns out to be a poor effort, he can still undo the damage in the rest of his tenure. Also, it helps that the opposition is unsure how to react to such moves. It has neither been able to capture the moral high ground nor has it been able to make a strong political statement.
Where Modi scores on is his clarity. Being a wonderful orator, he manages to break down otherwise complex economic concepts to simple messages for easy consumption of the masses. The opposition may have a valid point against demonetisation or cashless transactions, but none of its leaders has been able to transmit it in the language that the common people grasp easily. It’s possible none of these leaders understand in depth the actions of the government.
With all the advantages on his side, Modi should press with cashless transactions, which would save the country crores. So long as there’s no strong, coherent counter-narrative to his moves, he can keep on experimenting. The system needs a good, solid kick to rev up.