Cashless economy in India: there might be riots, the Supreme court warns

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Picture credit: Indian Express

By Lakshan Redkar

Indians could take on the streets for a reason that may affect every nation in the coming years: transitioning towards a cashless society. In India, the transition was pushed by the Prime Minister but ended up being a major fiasco that could lead to riots in Mumbai. Indians want to keep their banknotes, finally.

The signs of anger started November 8th 2016, after the announcement was made that Rs. 500 and Rs. 1,000 will cease to be legal tender in India. At the time, the Prime Minister’s narrative was to involve ‘every citizen to take part in the fight against black money and corruption’. (1)

But Modi was soon exposed as having personal interest in India’s demonetization, having close ties with shareholders in the mobile banking and e-banking sectors. On November 25th, PM Modi yet urged Indians to use their phones as their new wallets: “Your mobile phone can be turned into your bank and wallet. Today’s tech can help you use it for purchasing things, making payments,” said Modi. A few days later he kept pushing for a cashless society by saying that “Scrapping these notes has opened other avenues to make payments. Download apps of banks and e-payment options. Shopkeepers can keep card swiping facilities and everyone can ensure they pay safe using their credit and debit cards. If not a 100% cashless society, I request you to make India ‘less-cash society.”

Modi’s decision to scrap the notes and to start de facto a cashless transition for India was made without a public consultation nor the Government’s consensus. The reactions were strong as it had devastating consequences on the most vulnerable parts of the population. Former Prime Minister Manmohan Singh reacted by questioning Modi’s hidden reasons to take that authoritarian decision: “I wonder whether he was giving his own report card by admitting the dismal situation’’ he said in an interview.

The decision has left people in the lurch and created a situation of confusion in distress across the country. For weeks, people have been desperately queuing up outside ATMs and banks with the hope to exchange the old notes for new ones which was rapidly out of stock. Paradoxically, by trying to root for a cashless society, PM Modi exacerbated the Indians’ attachment to their currency and their want to hoard more cash. The banks are suffering a distrust and mobile banking isn’t picking up as fast as Modi expected.

So rapidly the cash became scarce and the people’s anger is today beginning to bring them to the streets. The Supreme Court is now asking to take urgent measures to end their ordeal and to avoid ‘imminent riots’. “It is a serious issue. This affects the entire population. You (the government) cannot deny there is a serious problem. There could be riots,” a bench of Chief Justice TS Thakur and Justice AR Dave said.

The Court also criticized the government for reducing the daily cash exchange limit to Rs 2,000, after the court had asked if the limit could be raised from Rs 4,500.

The war on cash has been started at all levels and now voices from all sides are asking the Government to come back on its decisions.

Kapil Sibal, Senior Advocate stood for the petitioners who have questioned the legality of demonetization “The government just did not have the capacity to print new currency notes. They should have taken this into account and taken steps to avoid putting people into untold harassment,” he said (2).

He described a dramatic situation started by PM Modi’s announcement that started the protest “Daily laborers are not getting paid, tea garden workers are not getting their salaries, people in rural areas have to walk long distances to reach banks and ATMs only to be told that these have run out of cash. It is a serious situation. Transporters are suffering. Trucks are standing idle without cash. India is a cash-based economy and the government has hurt it badly by freezing cash circulation’’ he said.

The Attorney General even stood up to question the incoherent decision made “During the hearing on Tuesday, we had requested you to examine whether daily cash exchange limit could be raised from Rs 4,500. But the government has reduced it to Rs 2,000 a day now. Why? Is there short supply of currency notes, even Rs 100 notes? We do not understand this. The government promised in court to give relief to people but reduced the cash exchange limit’’ he said.

To this day, the Government hasn’t backed up from his decisions on demonetization. The streets aren’t pacified and cash is still scarce in many rural areas of India which could lead to the riots the Supreme Court has been fearing. A decision is to be made in the coming month. India is one of the world’s first examples we have of what demonetization could look like. The people of India don’t want a cashless society, we will now see what the Government chooses to respond to the angry streets.
(1) From eradicating black money to cashless economy: PM Modi’s changing narrative since demonetization, The Indian Express, December 22nd 2016

(2) People in distress, act fast or there might be riots, SC warns Centre, The Time of India, Dhananjay Mahapatral, November 19th 2016

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