For the remedies for demonetization, our policy makers must consider ironical fact check related to the subjects, writes Faiz Askari, Founder Editor, SMEStreet.
In the bid to find remedies for the demonetization, our policy makers must consider ironical fact check related to the subjects, writes Faiz Askari, Founder Editor, SMEStreet.
NEW DELHI: Can we make online payment transfer to the local Chaiwala, who is supplying tea to the factory workers? The answer is no. Can we pay local runners or office boys who travel locally for office related work using mobile payments? The answer is another no. Can we make cheque payment to our suppliers, vendors, fabricators etc who actively involved in our production? The answer is ‘maybe’ in next few months, because this month of time they needed to get their finances settled as banking system is sort of paralyzed due to huge lines outside the branches. These are some common questions going on in any factory or small business.
So, the immediate future is looking tough for business. The time duration of this ‘immediate future’ can explain the exact positive impact of ‘demonetization’ in the country. Ironically we don’t know time lines.
Setting PoS machines, linking banking to the business and enabling your smartphone with mobile payment gateways are all glossy demands of every households and business. The fact remains, even if we leave aside the teir 2 towns, there is a substantial amount of banking population who doesn’t believe in debit cards, mobile payment gateways, digital transaction etc. This is ironical fact of our society.
All of this is creating a situation where the cash flow in markets have absolutely went on a freeze. This is real crisis.
While demonetization’s high level strategic intentions are clear and aims to bring economic improvement on long term. But this ‘long term’ depends on the ‘immediate term’ crisis. Ironically, the exact timelines, of these immediate term crisis and long term benefits cannot be defined.
At this moment, the remedies such as digital payments, mobile payments can be questioned based on their existing connect or penetration with the society.
Forget about digital payments or mobile banking, according to experts, ATMs network in the country is incapable of resolving the cash crunch situation in next six months or so.
As an example, in United States with a population of around 320 million, has around 432,000 ATMs and on the contrary, India, with a population four times that has around 220,000 ATMs. The ironical fact of the matter remains that Indian villages have never experienced the services of ATMs.
Cashless economy is fine, but the roadmap has to be firm. Infact, dreaming about achieving cashless economy in India is something like asking a young common laborer of an garment export house in Delhi NCR to go to Moon. While it is technically possible, but a lot has to fall in place in order to make this a reality.
But we must keep the faith on the system.
According to banking experts, the current size of digital banking in India, including credit cards, debit card transactions through PoS terminals, transactions through prepaid payment instruments like m-Wallets, and mobile banking, is around Rs 1.2 Lakh Crore. And this portion of the economy holds future of our uprising.