Is India moving from cash dependent to cash-less economy?

Dr Manmohan Singh and P Chidambaram had taken the centre stage to attack the government on one of the boldest move ever taken in the history of independent India – ‘Demonetization’. While former PM called it a monumental mismanagement adding that the step will have a massive effect on our economy and the GDP of the country will shrink by a minimum of 2 per cent. P Chidambaram, former finance minister, was not far behind to create a sense of fear among the general public. He estimated that it will take at least 7 months for the situation in banks to normalize and by then it would have adversely hit our economy taking a toll especially on the rural economy.

Probably Chidambaram thought things will move slowly just like it did in UPA era and got his estimate, but what he did not know was PM Narendra Modi is not the one to make commitments and once he does commit to something he will not rest until the task in hand is completed. Probably Chidambaram was of the view that his impeccable English is a certificate of his wisdom. But his prediction has gone terribly wrong just like his Hindi speaking skills. Yes Chidambaram has been proved absolutely wrong on his ‘seven month’ prophecy. The speed with which re-monetization is taking place bankers estimate that thing would normalize by end of the first month of 2017. Now that’s only two and a half month period from the day demonetization was announced, a far cry from Chidambaram’s imaginary prediction.

Now let us ponder over what our former PM Mr. Manmohan Singh had said in his much debated Rajya Sabha speech. Mr. Singh had predicted the economy to shrink by 2 per cent at the least. But all the international agencies who are monitoring our economy closely such as Morgan Stanley, Asian Development Bank, Citi, and many more have estimated our GDP would grow at 6.5-7% which more or less falls in line with the prediction made by the government agency. There’s an argument that after taking into consideration post demonetization period and the slowdown in small, medium and unorganized sector the GDP figures would be around 6.5 per cent, which is still way higher than world renowned economist’s (Mr Manmohan Singh) prediction. Hence it really makes us think whether our former PM had estimated the fall in GDP by himself or it was a written statement passed on to him which he duly by hearted and put it forward in the upper house. Whether by hearted or not Dr. Singh’s projection clearly seems to be a political one and a one which has nothing to do with economic calculation.

The government on January 9th announced that collection of indirect tax revenue has risen by 25 per cent for April-December 2016. The revenue collection in the month of December 2016 alone has increased by 14 per cent when compared with the collection during December 2015. It should be noted that there has been an unprecedented increase in indirect tax revenue collection at a time when the country bore the brunt of economy slowdown. Also the tax revenue from direct tax is also set to increase as there has been huge accumulation of black money in Jan Dhan Accounts and also accounts in Co-operative Banks.

The shock given to the system by announcement of demonetization has provided the much needed platform for the country to transform itself from cash dependent economy to less cash economy. This transformation which was a distinct possibility only a few months back now seems to happen within a year from now. The transformation which would have taken more than a decade would be taking place within a year. This in itself is great news for Indians, as it is evident that government at the centre is not only making policy decisions but also working day and night to implement the decision swiftly for the welfare of the nation.

The transformation into digital world would bring a heap of benefits along with it. It would make our economy much more transparent and also would provide very less chances for the businessmen and politicians to hide money acquired through illegal means. It would also benefit the common man at large as when the revenue through indirect tax increases the government at centre will get that extra room to pass on the benefit to the larger public by announcing public friendly direct tax slabs.

Thus now all eyes are now on Mr. Arun Jaitley who will be presenting budget on February 1. This is an once in a lifetime opportunity for Mr. Jaitley to bring forward a path breaking budget and truly make the demonetization move a grand success. Finance Minister has to raise the income tax slabs and also has to up the ante in public spending by increasing the investment in infrastructure, healthcare and education at large. Jaitley also has to have a big allocation towards the rural economy as it is the right time to uplift the rural economy and change the fortunes of the country.

Ramachandra Bhat K