BY the end of 2016, a steady stream of data corroborating the lived experience of the suffering millions hit by Note Ban presented a dismal picture of economic slowdown across agriculture, manufacture, services, infrastructure, real estate, trade and export. To take just one example, the All India Manufacturers’ Organisation (AIMO) sent the government as many as three survey reports stating that micro-small scale industries suffered 35 per cent jobs losses and a 50 per cent dip in revenue in the first 34 days since Demonetisation. Banks were flush with funds, but credit uptake by business had dipped to the lowest level since 1960s.
Adding to the embarrassment of the government, India's former and incumbent Official Statisticians, the RBI, practically all Indian (and many foreign) economists, the World Bank and International rating agencies – all revised downwards the estimated growth rate of our GDP, putting the blame squarely on Demonetisation. Shortly after Modi’s 8 November announcement, Kenneth Rogoff, author of the highly influential book The Curse of Cash (see below) wrote an article titled “India’s Currency Exchange Gamble and the Curse of Cash”, pointing out where he differed from the Indian approach:
“I argue for a very gradual phase-out, in which citizens would have up to seven years to exchange their currency, but with the exchange made less convenient over time. This is the standard approach in currency exchanges. … India has given people 50 days…
Second, my approach eliminates large notes entirely. Instead of eliminating the large notes, India is exchanging them for new ones, and also introducing a larger, 2000-rupee note, which are also being given in exchange for the old notes. …” (The Wire 21.11.2016)
A more hard-hitting denouncement came from Steve Forbes. The Editor-in-Chief of Forbes magazine (of Forbes 500 fame) wrote:
"…What India has done is commit a massive theft of people's property without even the pretence of due process -- a shocking move for a democratically elected government.
“…Not since India's short-lived forced-sterilization programme in the 1970s -- this bout of Nazi-like eugenics was instituted to deal with the country's 'overpopulation' -- has the government engaged in something so immoral.
"India is the most extreme and destructive example of the anti-cash fad currently sweeping governments and the economics profession.
"Countries are moving to ban high-denomination bills, citing the rationales trotted out by New Delhi. But there's no misunderstanding what this is truly about: attacking your privacy and inflicting more government control over your life.
"By stealing property, further impoverishing the least fortunate among its population and undermining social trust, thereby poisoning politics and hurting future investment, India has immorally and unnecessarily harmed its people, while setting a dreadful example for the rest of the world. … As for the digitisation of money, it will happen in its own good time if free markets are permitted."
As opposed to what the Prime Minister promised, it is now evident that the 'pain' is not short-term. But how about the promised 'long-term gain' in terms of getting rid of black money?
Black money is essentially a flow, a process that generates unaccounted (not necessarily illegal) income hidden from the taxman, but we can also conceive of and try to measure its volume or stock at a particular point of time. Whichever way you may look at black money, Note Ban has produced only negligible and momentary (and in some ways counter-productive) results.
In the first burst of officially orchestrated euphoria about the 'bold move', Modi's drum-beaters in the government and in the media proclaimed that the best part of cancelled notes would go out of circulation. This would (a) destroy most of the black money (b) impose a huge loss, i.e., a punitive cost on hoarders of black money and economically annihilate them and (c) reduce the liabilities of the RBI and thus the national exchequer would earn a hefty dividend to be used for public welfare.
Now that solid data has been made available, let us examine these claims, starting with the first. A news analysis published in The Economic Times ("Demonetisation: RBI's own figures indicate return of 15 lakh crore of banned notes", 14 January 2017) points out that, at the very least, 96.5 per cent – and most probably much more – of banned notes had re-entered the banking system by the end of the last year. In other words, only about 3 percent (if not less) of these notes have been 'destroyed' in the economic sense. The calculations are based on figures available from the RBI; several other analysts too have independently arrived at the same conclusion.
The first claim thus falls to pieces. Moreover, one must not forget that black money in the form of cash constitutes only 3 percent (as estimated by former JNU Professor Arun Kumar) to 6 per cent (as estimated by the IT department) of the total amount of black money (including cash, gold, securities, real estate etc.). That means, Demonetisation had as its target only 3 to 6 percent of estimated black money stock. And what did it actually neutralise? At most three percent – only of that meagre cash component, while 97% was laundered white.
And how was this made possible? Obviously, both small tax evaders and big players proved smarter than the government and bypassed all the strict regulations, audits, etc. to unload their black money into the 'white' economy. Some of them might have suffered some losses and inconveniences, but they are far from finished. Barring a few (for example, the Pradhan Mantri Garib Kalyan Yojana, which was a shameless compromise with big black money holders and the advance tax payment scheme) most other methods used for the purpose were illegal. These included depositing money in benami accounts, accounts of friends and family members and Jan Dhan accounts, laundering black money through brokers for a commission, and so on. Such activities meant an expansion or proliferation of black business and the new black money generated in this process (e.g., the discounts earned by the broker who changed Rs 1000 notes for maybe Rs.800) actually pushed the old black money, across the extremely porous and largely arbitrary border, into the ‘white’ region. All this puts paid to the second claim.
The third claim was actually rendered meaningless because nearly all the cancelled currency quickly got back to the RBI's chests. What if most of it did not? Would that mean a windfall to the government to be passed onto the aamadmi? No, even in that case there would be no question of any special dividend to be paid by the RBI to the Government. This was clarified by the RBI Governor himself on 7 December last year. So the third claim also stands exposed as a deliberate lie at par with Modi's false promise of gifting Rs.15 lakh to every Indian out of the huge bounty he vowed to bring home, once elected Prime Minister, from the Swiss banking system.
Meanwhile, the real fight against black money was absolutely forgotten. Thus, just three days before Note Ban, the Treaty on Mauritius Route (notorious for “round tripping”, i.e., black money of Indians travelling overseas and coming back, legalized, as FDI) was extended.
The "drive against black money" thus turned out to be a deceptive slogan designed to exploit the people's earnest desire for an effective fight against corruption, to mobilise mass support for the project and most crucially, to market the 'chaiwala’s son' as a crusader against corruption, as a trustworthy leader of the honest poor in their struggle against the corrupt rich. With the falsehood getting exposed pretty soon, it was unceremoniously abandoned for a set of more high-sounding slogans: Cashless Society and Financial Inclusion.
Reduction of poverty, equitable growth, financial inclusion, access to formal credit networks – many are the sparkling packages in which digitalization is marketed around the world (we shall return to this in the next chapter). The specific content and thrust, of course, vary from country to country.
In our country, the high-decibel state-corporate propaganda machine seeks to divert the people's attention from basic problems like unemployment, aggravating agrarian and industrial crises, steadily declining real wages, rising inequality, landlessness and eviction and so on, and waxes eloquent about the supposed advantages of digital money over cash. It is conveniently forgotten that for the overwhelming majority of Indians who have little money to spend in the first place, the debate over form of money – digital or cash – is absolutely irrelevant and disgusting.
The government claims that digital transactions will lead to formalisation of the economy, and therefore, to transparency and an end to black money. This is sheer sophistry. Are the advanced, predominantly formal economies free from corruption and black money? UK tops the list of countries which stack money in the Swiss banking system, followed by the US. Has pre-eminence of digital transactions prevented this? Is not Nigeria, a poor country with an extremely low cash-to-GDP ratio, one of the most corrupt countries in the world?
In fact, there are cash-intensive countries with lower perceived corruption and less cash-intensive countries with higher perceived corruption. The “corruption perception index” of Transparency International represents the perceived level of public sector corruption on a scale of 0 (highly corrupt) to 100 (very clean). In 2015, the index was higher for many economies with higher currency-GDP ratios (75 for Japan and Hong Kong; 86 for Switzerland; 81 for Germany; 76 for Austria) and lower for many economies with lower currency-GDP ratios (44 for South Africa; 38 for Brazil; 35 for Mexico; 36 for Indonesia).
The problem with the official thesis on the panacean properties of digital money – that it automatically leads to formalisation of the economy and financial inclusion of the poor – is that it is impossibly simplistic and unrealistic. For the growth of a formal economy, formalisation of exchange alone is far from sufficient; what is more important are adequate development of productive forces (including technology and labour skills) as well as commensurate changes in production relations. Our tremendous backwardness in these areas cannot be overcome by, say, plastic money or BHIM or PayTm. So, even assuming a considerable progress of digitalization in spite of the hundred constraints, that would not by itself usher in a broad-based formal economy of mature capitalism.
Similarly, financial inclusion does not occur merely by large-scale opening of bank accounts or issuing debit/credit cards. Timely and easy credit must be made available to the needy people and they must be considered creditworthy by the lending institutions. If such conditions are not met and the practical problems of employment/production/regular income are not addressed properly, mere provisioning of banking facilities remains ineffectual. That was the experience even in the pre-reform years in the case of what was called priority sector lending from nationalised banks to farmers, small entrepreneurs etc. Today the situation is no better. According to the FII survey (Financial Inclusion Insights survey) conducted last year, 23% of the accounts under PMJDY remained as zero balance accounts (of course, some of these did serve one ‘important’ purpose – as conduits for laundering black money in the aftermath of Demonetisation). This shows that mere opening of accounts does not ensure the use of accounts to receive salaries/wages or undergo any form of transaction.
In the middle of a hectic poll campaign in UP, BJP president Amit Shah was asked in a televised interview in a national channel: what did the common man gain from Note Ban? He replied that it injected sufficient liquidity into the system (meaning the cancelled notes which were deposited in the banks) and that has enabled the government to take up various pro-poor schemes in the budget. The interviewer, for reasons best known to him, did not call Shah's bluff. He did not point out that Modi's lieutenant was just telling a lie and deliberately misleading the nation. The money in the system are perfect legal tender belonging to the depositors – not revenue to the government to be used for the budgeted schemes.
Previously the BJP had claimed that the banks and therefore the government would be gifted with a windfall equal to the huge amount of the legalised currency that would not return to the system. And now that almost all those notes – including the alleged black money – have been lawfully deposited into the banks, the shameless second-in-command in the ruling party just shifts the goalposts to the opposite end and declares that the government can spend more precisely because the demonetized currency is back in the system!
Well, one might take this as yet another chunaavi jumla (empty election rhetoric) the BJP leaders, including the Prime Minister, have made themselves famous for. But even in their official statements, responsible ministers and government agencies are frequently coming up with doctored statistics and their own ‘alternative facts’. Thus in early January the Finance Minister, rather than acknowledging and acting upon the disturbing feedbacks pouring in from all corners of the country in the immediate aftermath of Demonetisation, chose to try and paint a rosy picture of the economy by citing selectively from stray figures of an apparent hike in the government's revenue collection. However, knowledgeable analysts were quick to demonstrate that he was suppressing the real causes behind the rise (e.g., a hike in payment of advance income tax as a method of using up cancelled notes) and other relevant data, thereby misleading the nation by half-truths.
To top it all, the Central Statistics Office (CSO) in its 28 February press release declared that in the third quarter (Q3) of the financial year, gross domestic product (GDP) in real terms grew at 7% along with an 11.2% rise in private final consumption expenditure over corresponding estimates in the previous year. In short, the Q3 growth rate was reportedly marginally lower than that in Q2, but consumption expenditure reportedly witnessed a robust growth. The Prime Minister freely used the growth ‘guesstimate’ in election speeches to claim that the adverse consequences of Demonetisation were unfounded. But acclaimed experts, including the incumbent Chief Statistician of India, expressed their doubts and explained the technical details of how this biased finding was arrived at.
Even this, perhaps, could be taken as something passé. After all, where is the government that does not lie to the electorate? Better take a look, then, at the most authentic documents indicating how the government actually proposes to handle the economy post Demonetisation.
Between them, these two documents lay bare the tensions inherent in the government's economic thinking. The former, prepared as usual by the Finance Ministry with some of the contributions coming from pro-government but at least nominally independent economists, recognised in part the 'temporary' damage done by Demonetisation and suggests few countervailing measures including a half-baked scheme of Universal Basic Income (UBI). The Budget Proposals, reportedly prepared this year mainly under the supervision of the Prime Minister's Office, blatantly rejected these concerns.
After loudly projecting Demonetisation as an anti-rich, pro-poor measure for nearly three months, the government eventually refused to tax the rich and expand welfare-oriented and employment-generating public expenditure that would (a) provide succour to the battered aamadmi and (b) rejuvenate the trounced economy. The much hyped UBI remained conspicuous by its absence. Even in these difficult times, the government stuck to the conservative tradition of consistently cutting down the Centre's expenditure as a share of GDP: from 14.9% at market prices in 2011-12 it had already fallen to 13.4% in 2016-17 and yet in the current year the share is budgeted to shrink further to 12.7%. Obviously the overriding concern remains fiscal discipline, because that is what the watchdogs of finance capital – the international rating agencies -- demand. Modi’s pro-poor pretensions thus stand fully exposed.
THE less-cash thing is by no means Modi's brainchild. The campaign for cashless society originated in the developed economies – the Scandinavian countries in particular – in the late 1990s as a spontaneous, gradual progress towards digitalization of money. It was spurred by development of productive forces (advances in technology and management techniques) and was more or less welcomed. It also started spreading to developing countries without opposition.
The push for a rapid and forced transition to cashless economy arose in the 2010s as yet another product of the growing convergence of the economic interests of capital in crisis and the political concerns of an increasingly malicious intrusive state in the neoliberal era. As always, the task of aggressively marketing the strategy in the name of people's interests was taken up by the state, with capital keeping a low profile. In early 2012 Michael Snyder reported that, for various reasons (e.g., cash is expensive to print, inspect, move, store and guard; most important, a cashless society would give governments more control) “most governments around the world are eager to transition to a cashless society. They are increasingly viewing cash in a negative light. In fact, according to the U.S. government paying with cash in some circumstances is now considered to be “suspicious activity” that needs to be reported to the authorities.” (A Cashless Society May Be Closer Than Most People Would Ever Dare To Imagine, The Economic Collapse, 29 March 2012).
The coercive element was further intensified with the rise of the idea of negative interest rates on bank deposits. When lowering of interest rates down to or even less than 1% failed to induce people consume more and save less (which was necessary to pull the developed economies out of the stagnation/recession lingering since 2008) bankers started thinking of crossing the “zero lower bound”, i.e., charging negative deposit rates. Denmark’s central bank was a pioneer when it first cut its deposit rate below zero in 2012. The process was accelerated when in June 2014 the European Central Bank (ECB) reduced its deposit facility rate to -0.1% to address stagnation and deflation in the region. By now the trend has spread to the Eurozone and Japan. At present only in a few countries banks are charging negative interest rates (often in the name of sundry bank charges) but others also are prepared to go that way if need be. However, the problem is, few people are willing to keep money in banks at a cost. The only way to force them is to abolish cash and make digital payments the only available option. This course would benefit both the banks (augment their scale of operation and earnings) and the state (helping it keep watch on the details – such as amount, time and place, purpose, persons/entities involved, etc. – of each transaction and use the data thus collected for taxation, terror watch, and various other commercial/political/policing purposes).
The political groundwork for ushering in the absolute rule of digital money is now going on in full swing in many developed countries, with economists and the media being roped in. A relatively more convincing and moderate route map toward cashless society has been presented by Kenneth Rogoff, a former chief economist of the IMF and author of the influential 2016 work The Curse of Cash, who proposes slow phasing out of all cash starting with what they call big bills (high denomination notes) even as other experts suggest more radical measures.
The whole idea of depriving citizens of the right to hold cash has come up against vigorous opposition from concerned citizens. Writing in The American Thinker, Mike Konrad tells us how he thinks governments will handle the situation arising out of the people's preference for keeping cash at home rather than paying a negative interest:
"Don't worry. Governments will rise to the occasion and soon will be making cash illegal. People will be forced to put their money in banks or the market, thus rescuing the central governments and the central banks that are incestuously intertwined with them. …
“Beyond that, cash is probably the last arena of personal autonomy left. … It has power that the government cannot control; and that is why it has to go.
“Of course, governments will not tell us the real reasons. Might provoke a reaction. We will be told it is for our own "good," however one defines that. It will be sold to us as a benefit. …
“Side stories will inform us that mugging is down. Crime is finally being defeated. What won't be reported will be that hacking will shoot up. Bank fraud will skyrocket. … Poor people … will be told that the rich can no longer hide their money and will be forced to pay their fair share.
“…… we will be told that criminal enterprises will have been hurt badly. Their mountains of cash are irredeemable. Don't you believe it. Rather, there will be a spike in the price of Bitcoins during the conversion. Bitcoin's anonymity has already spawned major illicit franchises on the darknet. These will grow.
“The real purpose of a cashless society will be total control: Absolute Total Control….
“However, it will be sold to us as expedient simplicity itself, freeing us from crime: Fascism with a friendly face.” (Here Comes the ‘Cashless Society’, February 8, 2016)
Similar apprehensions have been voiced by many others. Thomas DiLorenzo, economist and Mises Institute Senior Fellow, observed in course of an interview:
“The state will make more and more use of “threats of terrorism” to seize financial assets. It is already talking about expanding the definition of “terrorist threat” to include critics of government like myself. The American state already confiscates financial assets under the protection of various guises such as the PATRIOT Act. I first realized this years ago when I paid for a new car with a personal check that bounced. The car dealer informed me that the IRS had, without my knowledge, taken 20 percent of the funds that I had transferred from a mutual fund to my bank account in order to buy the car. The IRS [The Internal Revenue Service – Ed.] told me that it was doing this to deter terrorism, and that I could count it toward next year’s tax bill.”
Interestingly, even in the official circles in the richest countries one sometimes hears voices of dissent. In Germany, where nearly 80% of transactions as per Bundesbank Survey 2014 were conducted in cash despite the country being one of the world’s most advanced nation, the Bundesbank (German Central Bank) CEO Carl Ludwig Thiele in a talk on 14th April 2016 strongly opposed the trend of blocking the use of cash and argued for keeping cash as a mode of payment. “‘Cash is Coined Freedom’ – this modified Dostoevsky quote has not lost its validity”, he asserted.
We in India certainly do not face such a situation at this moment, but the portents are clear. Already banks have reduced the numbers of free withdrawals in a month, forcing you and me to either move over to online banking and plastic money or bear the cost of cash withdrawals. Such indirect pressures, which are bound to increase in the days to come, must be resisted and reversed now if we are to avert an Indian version of the digital dictatorship currently haunting Europe and America.
The ‘cashless’ idea was given a solid shape and powerful propulsion in 2012 at the instance of the lone surviving superpower. President Obama issued an executive order installing the “President’s Global Development Council” (GDC) at USAID, which he tasked with advising him on how to increase American power by means of development policy. The document is quite frank in its statement of purpose:
“To help protect national security and further American economic … and strategic interests in the world, it is the policy of the Federal Government to promote and elevate development as a core pillar of American power and chart a course for development, diplomacy, and defense to reinforce and complement one another. As stated in the 2010 National Security Strategy and the Presidential Policy Directive on Global Development, the successful pursuit of development is essential to advancing our national security objectives.” (Emphasis added)
And what course did the GDC chart out? It came up with a push for “financial inclusion”. The President was advised to make this a top priority for the US development work, and that he should reallocate aid-money in favor of the financial inclusion effort, to be conducted in partnership with and mostly by the private sector. It also recommended that the US government use its significant influence on the World Bank and on the G20 to get them to issue and pursue ambitious financial inclusion agendas.
The other major initiative taken in the same year was the formation of the “Better Than Cash Alliance” (BTCA) for pushing back the use of cash globally. Based at the UN, it is “a partnership of governments, companies, and international organizations that accelerates the transition from cash to digital payments in order to reduce poverty and drive inclusive growth.” Its founding members include the Bill and Melinda Gates Foundation, Visa, Mastercard, Citigroup, Omidyar Network, the Ford Foundation and the US government’s development agency USAID. It is easy to see that most of these are ‘world leaders’ (read ruling monarchs) having a direct stake in the digital payments sector, or to use a more fashionable term covering both emerging technologies and firms driving change in this sector, the fintech ecosystem.
India joined the organization on September 1, 2015, a year after the launch of Modi’s flagship financial inclusion program Pradhan Mantri Jan Dhan Yojana, which saw 175 million new bank accounts created. According to the BTCA, its new partnership with India is an “extension of the Indian Government’s commitment to reduce cash in its economy.”
In 2014, as part of the Spring Meetings of the World Bank Group including the Consultative Group to Assist the Poor (CGAP) and IMF, a session on digital finance was held on 14 April. The forum was inaugurated by the CEO of International Finance Corporation and other participants included big names like Walt Macnee, president of the MasterCard Center for Inclusive Growth. Speaking on the occasion, Sandhya Rani, postmaster general of Andhra Pradesh, emphasized the huge potential of digital finance on rural development and the role the India Post can play with over 155,000 post offices, most of which are in rural areas. It is to be noted that such involvement on India’s part in global initiatives on financialization predated the installation of the Modi Government.
The US-inspired push for digitalization of exchange and finance soon came to be concentrated on the third world, especially the bigger economies like India, with the state and the private business interests in US taking the lead role. In 2015 USAID announced a formal partnership with the Indian finance ministry to advance digital transactions in India. In January next year, USAID presented a report titled “Beyond Cash”.
In December 2015, the US Treasury Department and USAID organized a Financial Inclusion Forum in Washington. The world’s richest person -- a miracle-maker whose wealth grows and grows the more he spends for the poor –said on behalf of the Bill and Melinda Gates Foundation:
“Full digitalization of the economy may happen in developing countries faster than anywhere else. It is certainly our goal to make it happen in the next three years in the large developing countries. ……We worked directly with the central bank there [India]
Gates was really excited that Aadhaar was “becoming pervasive throughout the country” because that ensured everybody would be “well tracked and served.” Indeed, that’s the point – every citizen will be tracked 24x7 -- wherever she goes, whatever she does with her own money! Forget the profits made by the fintech firms, is this not absolutely essential for the holy war against terror, in which every citizen is suspect and needs to be tracked?
In his speech Gates also stressed that a government’s assistance to the poor and needy should not be delivered by the “incredibly inefficient” method of providing cash or grain to the recipient. “Digitalization helps targeting”, he said, if payments are done via mobile banking. The idea endorsed by Gates and the financial inclusion “community” at the forum was to steer poor people into participating in the digital payment system by making it a condition for receiving state support.
He made another interesting point. One of the major reasons why countries like India can go over to full digitalization faster than the USA, is that there are much less restrictions from legal mandates to protect people’s privacy and data. He was right. The Indian government has always been adamant in ignoring these concerns. At a hearing in July 2015 pertaining to various petitions challenging the validity of the Aadhaar project, Attorney General Mukul Rohatgi told the Supreme Court that the Indian Constitution does not guarantee a right to privacy and this view has indeed been endorsed by the Court.
Like the World Bank, USAID and other agencies/forums of finance capital, the World Economic Forum also is actively involved in the promotion of digitalization. It runs a project called “Promoting Global Financial Inclusion” aimed at “accelerating financial inclusion through public-private collaboration at national, regional, and global levels”. Here also the India connection is very strong, with Natarajan Chandrasekaran -- CEO and MD of Tata Consultancy Services (TCS) who is also on the board of the RBI – serving as Chairperson of the IT Industry at the World Economic Forum, Davos.
The Forum’s “Strategic Partners” (leading TNCs) operating in the IT/telecommunications sector are very aggressive in the international campaign for digitalization of transactions and finance. Their position was very clearly spelt out, at the 2015 financial inclusion summit, by Dan Schulmann, CEO of PayPal: “Until it [the world] goes fully digital, there will be a need to have a way to transfer money from the digital form into a cash form.” Since in his view this is a costly nuisance, he added: “The major competitor we have is cash. Right now, 85 percent of the world’s transactions are done in cash. That is really what we are trying to attack right now.” Expressing the same hostility, Strive Masiyiwa, Chairman and Founder of Econet, a large African Mobile Phone company with a payment platform, said “Cash is what we seek to eliminate.”
In July 2016, the RBI, still under Governor Raghuram Rajan, came up with a document titled “Payment and Settlement Systems in India: Vision 2018”. It charted the road map towards a less cash economy to be achieved in two years by promoting digital modes of payment. While recommending much more extensive use of POS, ATM etc., the report specifically recommended UPI (Unified Payment Interface) and Aadhaar Enabled Payment System (AEPS). In fact, almost all that is being done now for the promotion of digitalization under Modi-Jaitley-Patel, were conceived or started under Manmohan-Chidambaram-Rajan (of course, there is now a much greater urgency as expressed in the carrot-and-stick approach for promoting non-cash transactions). A perfect consensus was actually built up over the years under the aegis of global – mostly American – finance capital, only to be temporarily punctured by Demonetisation, which was a rash partisan decision with hardly any economic rationale (except for slightly accelerating the transition to the digital world).
The same month, a report titled “Digital Payments 2020” (one of many such reports from various US institutions) was prepared by the Boston Consulting Group and Google with “guidance” from Visa and the National Payments Corporation of India among others. It was remarkable for leaving out all the usual niceties about financial inclusion etc. and instead talking of India’s digital payments opportunity as a “$500 billion pot of gold” and of what was to be done to “grab” it.
Then in September 2016, McKinsey Global Institute issued a report titled “Digital finance for all: Powering inclusive growth in emerging economies”. It estimated that widespread adoption of digital finance can boost the GDP of all emerging economies by as much as $3.7 trillion by 2025, a 6 per cent increase compared to a business-as-usual scenario. “India could see a boost of $700 billion, an 11.8 per cent increase by 2025. This additional GDP could create up to 95 million new jobs across all sectors, 21 million of them in India,” it said.
On October 14, 2016, the partnership between USAID and the finance ministry to advance digital payments was "taken to a new level" by the creation of the “Catalyst” at a conference in Delhi. It was decided that the project would be implemented in a single city as a pilot to increase digital payments before it is taken to other cities. “India is at the forefront of global efforts to digitize economies”, USAID Mission Director to India Jonathan Addleton said on the occasion.
After three weeks, Narendra Modi gatecrashed into the digital arena in his characteristic style with the 8 November announcement.
Thus the process of digitalization (including Aadhaar, a vital link in the chain of the proposed mass digitalization program) was initiated during the UPA regime. There was a broad consensus in the ruling elite, the bureaucracy and the major parties, so the BJP found it easy to carry ahead with the work started by the Congress. Come November 2016 and Modi broke the unity and cracked the long whip of Note Ban to shove the entire population and the whole economy of India into the willing arms of big banks, payment gateways, internet and mobile service providers and other stakeholders in digital finance. In the process the so-called 'informal' sector, actually the mainstream social and economic lifeline of "we the people of India", was subjected to yet another cruel bout of what Marx called the primitive accumulation of capital, as it has always been in the past.
WHO are the gainers from Narendra Modi’s signature project?
First and foremost, those stakeholders whom we saw in the previous chapter aggressively batting for the total elimination of cash on a global plane: the various “financial inclusion” enthusiasts, card networks like Visa and MasterCard and so on.
Then you have their kith and kin in India: the recently launched "payment banks", telecom operators (some of which, like Vodafone and Reliance Industries, have also branched into the payments bank sector) internet service providers and electronic wallet firms -- all of which earn profits as intermediaries between buyers and sellers of products and services.
Also there are the commercial banks, which benefited from massive inflow of cash following Demonetisation, because that helped partially refill their coffers looted by cronies like Adani and Mallya, thereby temporarily arresting the drift towards a US style banking crisis. Of course, this is no solution to the non-performing assets(NPA) problem and the banks will be allowed to be looted again so long as the current lending policy prevails.
Big enterprises in other fields also expect to gain from the decimation of their tiny competitors in the informal sector, but whether such gains will be offset or more than offset by the losses arising from the overall slowdown in the economy remains to be seen.
And who are at the losing end? Obviously the self-employed, the casually employed, those running micro and small enterprises, workers -- especially temporary/casual workers including agrarian labourers who did not find work -- peasants who failed to cultivate and/or took loans at exorbitant rates of interest, small traders and street vendors whose customers migrated to bigger shops with facilities for digital payments, and so on. They are suffering, and will continue to suffer in future: for many, job losses are permanent; peasants, unable to repay the huge loans and interests especially due to fall in prices of agricultural produce, stand on the verge of economic ruin and even suicide; traders who acquire POS machines to stay in business have to bear the additional cost of merchant discount rate (MDR, to be paid to the banks, which proves prohibitive for them though not for the big retailers) and also the burden of handling various technical and accounting issues such as self-declaration and KYC norms … in the informal/unorganised sector it is a story of endless sufferings all around.
Not that the formal/organised sector, which is predominantly the corporate sector, was not hurt. It was, both by disrupted supply chains of raw materials (mostly provided by the informal sector) and reduced demand (caused by not only the cash crunch but also depressed or vanished incomes). Manufacturing, infrastructure and real estate experienced a slowdown that is yet to be over. But while the big enterprises as a rule have the wherewithal to tide over the losses in a period of time, those in the unorganised sector lacks this resilience and often get permanently crippled.
Did not the government and its economic advisers actually have any idea about the enormous barriers which make thorough digitalization an impossible proposition in our country? It is hard to believe that. For in the "Concept Paper on Card Acceptance Infrastructure" published in 2016, the RBI itself provided us with a very good account of such bottlenecks and also showed that given the ground situation digitalization tends to bypass the small businesspersons and caters to the big ones. So there were absolutely no grounds for them to believe that forced digitalization would bring about rapid and inclusive growth. The real economic objective could only be to promote the expansion of the formal sector (especially of its corporate core, and the cronies within that core) at the expense of the so-called 'informal' sector, which is actually the mainstream social and economic lifeline of "we the people of India". And that’s what is being accomplished now: another ghoulish spectacle of what Marx called the primitive accumulation of capital.
In Marx, primitive accumulation refers to both (a) the historical phase which created the preconditions for the rise of capitalism through "a process that transforms, on the one hand, the social means of subsistence and of production into capital, on the other, the immediate producers into wage labourers" and (b) a process that is occasionally resorted to throughout the history of capitalism for purposes of maintaining and reproducing this separation "on a continually extending scale" and transcending the multiple barriers to normal market-mediated capital accumulation in periods of crisis/stagnation.
We Indians have had to suffer the pains of waves after waves of primitive accumulation in the not too distant past: piracy and pillage by Dutch, Portuguese, Spanish and British East India Companies; the colonial drain during British rule; de-industrialisation of the great Indian handicrafts in unequal wars with the rising British industries; the evictions associated with modern industrialisation and 'development' (building big dams for example) in late British India and then in independent India; and more recently in the era of neoliberalism, the spate of land grab in Dadri, Raigad, Singur, etc. which represented one of those historic moments, as Marx puts it in Capital, "when great masses of men are suddenly and forcibly torn from their means of subsistence, and hurled as free and "unattached" proletarians on the labour market...". The latest – and very unique -- addition to the long list is the Demonetisation-Digitalization onslaught.
Exactly 100 years ago, Lenin in Imperialism the Highest Stage of Capitalism talked about "the separation of money capital… from industrial or productive capital", which "reaches vast proportions" under "imperialism, or the domination of finance capital". And he added: "The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the finance oligarchy…"
Since the advent of neoliberalism in the last quarter of the past century, finance capital has further bolstered its dominant position, achieving for itself still greater freedom from state regulations. Under popular pressure some restrictions were put in place in advanced capitalist countries in the aftermath of the crisis that started in 2007; but many of these are in the process of being rolled back. For example, Donald Trump has pledged to drastically water down – if not abolish altogether – the Dodd-Frank Wall Street Reform and Consumer Protection Act. With rapid advances in information technology, fintech firms – such as Microsoft, Visa, Mastercard -- and their associates have taken upon themselves the task of aggressively expanding the frontiers of finance both within and across national economies. The concerted efforts for promoting digitalization, briefly noted in the previous chapter, is a part of this ongoing international initiative.
But the commonality ends here, with the shared vested interests of finance capital and big corporates in pushing for cashless economy as in many other countries. As for the specific form and content of Demonetisation-digitalization in India, it is marked by certain peculiar features.
These salient features are best captured by way of summing up, in three points, what we have talked about so far.
First, unlike the empty talk of Achchhe Din, the vacuous "Make in India" slogan, the bullet train rhetoric or the empty claim of surgical strike on Pakistan, the Note Ban-Less Cash continuum has proved to be a serious, sustained and efficacious measure. The crux of the matter and long term objective (being pursued for quite some time now) is digitalization, which is designed to (a) extend the ongoing process of neoliberal restructuring to the sphere of currency, exchange and finance and (b) permanently tilt the economic balance in favour of the predominantly corporate organised sector vis-a-vis the non-corporate unorganised sector. Demonetisation on the other hand was primarily a political gamble (which partly paid off in the short run) that sought to give a facelift to Modi’s sagging popularity and reflected the frantic urge of a fascist personality to project himself as a ruthless leader capable of doing things others do not dare to dream of; it was also an attempt to forcibly speed up digitalization. The first ‘D’, conforming to a global trend of the times, enjoys full support of establishment economists; the second one, something unprecedented
Second, Note Ban definitely bears the unmistakable marks of Modi: the theatrics and demagoguery of the 8 November announcement and his subsequent sermons; the way the Prime Minister took such a high impact decision all by himself ignoring elementary norms of responsible governance; the obstinacy and arrogance with which he rubbished all criticism and suggestions on this question; the way all opponents were branded as corrupt anti-nationals; and finally, the cruel refusal to use the budget route for offering a healing touch to the honest, hard-working Indians brutalised by Note Ban. In intent and content, impact and implications, it is definitely a key element in the evolving economic programme of Indian fascism, authored by a worthy disciple of Golwalkar and the first Sanghi to have occupied the top post in the country with a free hand to rule, unhindered by any balls and chains imposed by partners in a coalition government.
Third, given the stark pro-corporate bias of digitalization, it represents a quantum jump in the ruling BJP's inevitable metamorphosis, which had started years ago, from a traditional bania-based party to a party of big corporates. The programme purports not only to curb tax evasion but, more important, also to enormously strengthen full-spectrum state surveillance and control over individual citizens, firms and other non-state actors. In this way it works for a powerful intrusive state armed with latest techniques of electronic (and, with Aadhaar chipped in, biometric) policing. And surely a strong police state remains – as in the past – a basic prerequisite of fascism.
However, the aggression on the life and livelihood of those who comprise the non-corporate informal sector – the forcible separation of many of them from their "means of subsistence" – is being carried out not in one stroke with brute physical force (as in the cases of land grab for example) but slowly by economic means. Moreover, the whole project is meticulously marketed as the first serious, effective, national attack on black money and corruption. All this prevented an immediate outburst of popular anger and resistance. However, as the hard facts of life start revealing themselves through the fog of confusion created by the RSS-aided government propaganda, as Demonetisation-induced depression takes a toll of the income and livelihood of the millions working in the informal economy and the Modi government dismantles whatever welfare framework had been developed over the years, replacing subsidies with cash transfers and subjecting the people to the intrusive surveillance of the biometric Aadhaar card and the vagaries of the market, the poor will definitely fight back and the megalomaniac despot will be duly punished for his economic war on India.
IN the middle of November 2016, when Modi’s Demonetisation was drawing flak from all quarters and when the people of India were still in a state of shock and awe, Bill Gates --the world’s richest person who considers himself the best friend of the global poor -- was in Delhi, all praise for the ‘bold move’.
On November 16, Gates was at Niti Aayog, lecturing India’s PM, FM, HM and others on “Transforming India” through technology -- including gene editing, artificial intelligence, and of course, digitalization. Demonetisation will speed up digitalization and, given the scale of the operation in such a big country, it will have a great impact on the rest of the world, he asserted, visibly glad.
In a meeting with the Minister of Information Technology, Law and Justice Ravi Shankar Prasad, the world’s most well-connected and powerful philanthropist was requested to be part of the digitizing process. The latter readily agreed, and quipped, “It’s a very exciting time in India and some of these digital platform opportunities are really quite amazing”.
Flash back to December 2015. As the most eminent speaker at the Financial Inclusion Forum organized by the US Treasury Department and USAID in Washington, Bill Gates had said: “Full digitalization of the economy may happen in developing countries faster than anywhere else”, largely because there are much less restrictions from legal mandates to protect people’s privacy and data. “It is certainly our goal”, he added, “to make it happen in the next three years in the large developing countries. …We worked directly with the central bank there [India] over the last three years [since 2012, that is] and they created a new type of authorization called the payments bank …”
In his speech Gates had stressed that a government’s assistance to the poor and needy should not be delivered by the “incredibly inefficient” method of providing cash or grain to the recipient. “Digitalization helps targeting”, he said, if payments are done via mobile banking. In this connection he went euphoric about Aadhaar:
“It is a wonderful thing to go in and create a broad identification system. Again India is an interesting example of this. There, the
Aadhaar system …is becoming pervasive throughout the country. This will be the foundation for how we bring that switch to every mobile phone in India.”
So was it not natural for Gates to be so excited during his latest trip to India? His India Office (in operation since 2002) had been persuading the RBI for three years, i.e., since UPA days, for speeding up digitalization and now the unexpected big push – the massive Demonetisation -- was at hand!
IN the name of ‘nationalism’, the Modi government and the Sangh Parivar have declared a veritable war on premier educational institutions like JNU and the Hyderabad Central University. They accuse these and every other institution that values debate, dissent and democracy of being ‘anti-national dens’. They have begun to charge citizens who refuse to sing the Sanghi tune with ‘sedition’, turning the whole country into an open jail. In the name of nationalism, we are thus being pushed back to the unfreedom and injustice of the colonial era.
What could be a bigger irony of history? Nationalism in India took shape in the course of the great national awakening and assertion for freedom from the British colonial rule. The RSS considered it a waste of energy – leaders of Hindu Mahasabha and RSS spent their time praising the British and, if ever put in jail, begging for mercy and serving as police informers. The anti-imerialist anti-colonial nationalism of Bhagat Singh and freedom-fighters of other ideological shades advocated communal harmony and secularism, cherished diversity and pluralism, celebrated the mosaic that is India. In stark contrast, the RSS and Hindu Mahasabha advocated ‘cultural nationalism’ – which was nothing but ‘majority communalism’ or ‘communal majoritarianism’ – which viewed Indian Muslims, not British colonialists, as the enemy, degrading minorities as second-class citizens who could live in India either by embracing Hindu culture or as ‘guests’ without rights accruing to the Indian citizenry!
The freedom movement unfurled the banner of democracy in India. In the preamble to the Constitution, the Indian people proclaimed India as a sovereign democratic republic (the words secular and socialist were admittedly inserted later, but were very much rooted in the spirit of the Constitution before any of the amendments came in) and firmly upheld the notions of ‘JUSTICE, social, economic and political’, ‘LIBERTY of thought, expression, belief, faith and worship’ and ‘EQUALITY of status and of opportunity’ as pillars of this democracy. The RSS, at the other end of the spectrum, wanted the Manusmriti, the charter of slavery inflicted on shudras, dalits and women in the Brahminical order, to be adopted as India’s constitution and when that did not happen, they began describing Ambedkar as the modern Manu of India!
Bhagat Singh and his comrades who shone as ever glowing stars on the firmament of every freedom fighter’s dream of a free India wanted India to march on towards a state of freedom where exploitation of man by man and nation by nation – the defining features of imperialism – will become a thing of the past. The Savarkars and Golwalkars stood diametrically opposed to this vision; they drew their inspiration from Mussolini and Hitler, their models were fascist Italy and Nazi Germany. Today in power, their inheritors are bartering away India’s natural resources and hard won sovereignty to global capital and the military might of US imperialism. The quest for self-reliance and independent foreign policy has been sacrificed at the altar of FDI worship in the guise of ‘Make in India’ and the role of junior partner in a US-led global military alliance.
It is to divert people’s attention away from this naked collaboration with British colonialism then and US imperialism and other advanced capitalist countries now, that the RSS-BJP-ABVP whip up the bogey of ‘cultural nationalism’ so that the minorities and every dissenting voice are portraryed as ‘the enemy of the nation’ and US imperialism is presented as the best friend and biggest benefactor of India.
The fight for economic rights and constitutional liberties for common Indian citizens today therefore has grown into the real patriotic battle for saving India from the corporate-communal clutches of the Modi government, from the fascist project and ideological-political tyranny of the RSS and its communal cohorts and siblings. And in this battle, it is utmost important to resurrect the dreams and ideas of Bhagat Singh and Bhimrao Ambedkar, two of the greatest twentieth century fighters and visionaries of equality and democracy who had risen from the Indian soil. We must hold high the banner of Bhagat Singh’s patriotism that calls for an end to imperialism, the banner of Ambedkar’s democracy that calls for annihilation of castes. The saffron rulers are desperate to distort and appropriate Bhagat Singh and Ambedkar as their icons; and all over the country, students and teachers and enlightened citizens who are spreading the ideas of Bhagat Singh and Ambedkar are being attacked by the state and the goon squads of the RSS.
We must therefore spread the messages of Bhagat Singh and Ambedkar with renewed vigour and intensify the battle for democracy braving every repression and defying every assault of the Sangh brigade. Comrades of All India Students’ Association and Ryvolutionary Youth Association have decided to launch a countrywide “Utho Mere Desh” (Arise, My Country) campaign to carry the messages and spread the ideas of Bhagat Singh and Dr. Ambedkar to every nook and corner of India. Comrades Arindam Sen and Kavita Krishnan have compiled some key ideas of Bhagat Singh and Ambedkar in this booklet which we hope will serve as a useful handbook to combat the disinformation campaign of the Sangh brigade and encourage us to fight and win this crucial battle with all our courage and strength, energy and determination.
Dipankar Bhattacharya
General Secretary, CPI(ML)
Charu Bhawan, Delhi
23 March 2016
What are we having this liberty for? We are having this liberty in order to reform our social system, which is full of inequality, discrimination and other things, which conflict with our fundamental rights.
- BR Ambedkar, during a Constituent Assembly debates
towards the formulation of the Constitution
(Constituent Assembly Debates,
Vol. VII, 2nd December 1948, pp. 779- 83)
‘A radical change, therefore, is necessary and it is the duty of those who realize this to reorganize society on a socialistic basis. Unless this thing is done and exploitation of man by man and nation by nation is brought to an end, sufferings and carnage with which humanity is threatened cannot be prevented…’
- Statement of Bhagat Singh and B.K. Dutt in the Court
on June 6, 1929 in the Assembly Bomb Case
The temple of Mother India is full, Landlord, usurer, capitalist, rich trader, All are crowded inside with the cruel butcher, Only the poor patriot in khaddar is outside.
- Baba Nagarjun, ‘Sach Na Bolna’
(Don’t Speak The Truth)
Bhagat Singh this time don’t be born an Indian Patriots are still punished with hanging today If you speak for people, you’ll be called a traitor, Let alone strikes - you’ll be jailed even if you give a speech! ---- Shailendra
POETS like Baba Nagarjun or Shailendra warned of a scenario in independent India where every manner of plunder, oppression, bullying and massacre will call itself ‘nationalism’, while the real patriots will be branded as anti-national and clapped in jail.
This phenomenon is at its peak in today’s India, with Narendra Modi in power.
The RSS (parent organization of the BJP and ABVP) had no role in the freedom struggle, and instead served the ‘divide and rule’ policy of the British while Bhagat Singh and his comrades were bravely embracing the gallows. If the RSS served the British, the BJP Government today serves the interests of imperialism. It helps Indian and multi-national corporations to plunder India’s land and resources, and unleashes repression on the struggles of Indian people against this plunder. Its policies are made, not in the interests of Indian people, but in the interests of imperialist powers and global capitalists. And it tries to redefine ‘nationalism’ in terms of communal hatred rather than in terms of the rights of India’s people.
Any citizens who point out the RSS’s and BJP’s betrayal of India’s interests, its shameful collaboration with the British Raj in the past and the imperialists today, and its propagation of communal hatred and violence, are branded as ‘anti-national’ by the BJP.
When Babasaheb Ambedkar was drafting the Constitution, the RSS had nothing but contempt for the Constitution and the tricolor flag. But the RSS and the BJP are the ones today who are branding the followers of Bhagat Singh and Ambedkar - who defend the rights of workers, peasants, Dalits, adivasis, and women; who seek to transform society, end oppression and bring in social and economic equality and democracy; as anti-national.
Hyderabad Central University (HCU) and Jawaharlal Nehru University (JNU) are at the frontlines of a battle for the soul of India. The students and teachers of these campuses are facing arrest, physical assault, and severe repression precisely because they have refused to surrender the dreams of Bhagat Singh and Ambedkar.
It is urgent today for the citizens of the country to rise up to defend the campuses, defend the country, defend the Constitution, and to strengthen the struggle for an India of Bhagat Singh’s and Ambedkar’s dreams.
The RSS worked to help the British Raj in Bhagat Singh’s time. Today the RSS and BJP are working to hand over India’s precious land, resources, education and labour over to multinational and Indian corporate looters. And they are attacking the very basis of India’s Constitution, and the idea of equality and rights for Dalits, women and minorities for which both Ambedkar and Bhagat Singh struggled.
What is the idea of ‘nation’ that the RSS (and its organizations like BJP and ABVP) advocates? What right do they have to hand out certificates of nationalism? Let us find out, through the writings of their own leaders and heroes.
