I read the article on Washington Post –
India just made a big mistake with its currency ban
Authored by Harvard Profs – Lawrence H Summers and Natasha Sarin.
Based in India which has been the worst victim of black money, and an earlier corrupt regime under Ivy-educated ex PM and ex FM, I find a fundamental flaw in their article.
Flawed comparison of hard cash spends between US and India.<
“While it might be argued that because India is much poorer than the United States, $15 in India is equivalent to $100 in the United States, the reality is that most Americans in the top 1 percent of the income distribution do not handle $100 bills on even a weekly basis, whereas 500 rupee notes are very widely used in India.”
A fundamental flaw in this point is that for amounts of $100 (even smaller) Americans may use credit cards or e-transactions. In India the penetration of debit cards to almost every household has surged only in the last one year when the Govt initiated free bank accounts for every home – The PM Jan Dhan Yojana . Almost all banks (some of them reluctantly) in India were pushed by the ministry of finance to go to every doorstep to open the account. This exercise was done more than a year ago. All users get a free debit card. The whole intention is to drive people away from paper currency. That is the way to go towards a completely accounted economy
People in India have been given enough time to exchange the old notes and deposit it into their accounts. Those stashing cash have been given an opportunity to deposit and pay tax. Most of the queues are dying down. They have been quite long in the first week due to panic, and yes, servants and staff of hoarders who were pushed to convert black to white.
The move to curb hard cash is making people adopt e-wallets, debit cards and other alternative means much faster. I recently did a travel from Mumbai to Kolhapur on road and for a 3 day journey i spent only Rs. 60 (less than $1) using hard cash. Even small restaurants on the roadside (A franchisee of Kamat’s Restaurant) accepted money using e-wallet.
We have had a Prime minister in the past from Ivy league under whose regime we saw maximum corruption in history. Even his Finance Minister belonged to the Ivy league. we have had “eminent” central bankers who only gave ball talk in airconditioned conferences about “Financial inclusion”.
It took a maverick “tea seller” Prime Minister who has a degree from none, to think different and bring a bank account to every home within 6 months and mobilize Rs. 25,000 crore from deposits of poor. Today the deposits of PMJDY accounts stand at $10.5 Billion. (INR 72000 crore).. and counting
While opinions are respected, we need a different maverick solution. The answer in all likelihood for corruption cannot come from a system which has failed to bring ethics in their alumnus. How they need to reform themselves is a different topic altogether. We need to open up to answers from the “tea seller” on the street who has been the worst victim of black suit banking and black money. Thanks to democracy, one of them has become the Prime Minister of India, free from the sometimes hard-chiseled theories of prime universities.
High time the Ivy steps out of the Ivory tower and join the party on the streets!