Some people are difficult to please. And when they belong to the tribe of left-leaning issue-hunting chatterati of our country, woe betide those that seek to propitiate them. So ran my thoughts on getting a buzz from the same Economics Einstein friend of mine who had played catalyst to my last. He was incensed my conciliatory gesture of a post – and at the suggestion of using a credit/ debit card driven payment system as an antidote to the cash impelled parallel economy. He called it many names – but the tags principal to his argument were three: it was effete, elitist (Long Live Comrade Dasgupta!) and uni-dimensional.
To the last of these, let me plead guilty immediately – the idea of a carded economy was admittedly made as an appetizer any ways. Some of the thoughts that came to me at various times this week:
And now, the other two charges. At the core of my premise of effectiveness in advocating an electronic payment system was its ability to capture information in a digital form, coincident with the actual transaction. Equally, the effort in its transmission, storage or retrieval would be marginal save for the investment in scaling up transaction infrastructure in a country as vast as ours (but which, in my defence, shibboleths of Financial Inclusion and Productivity would any ways force on the banking system). The data thus recorded could be mined to model smarter risk-based pricing solutions to help customers and banks, while sharpening the I-T department’s claws.
Almost in anticipation of this, my friend had pointed me to the PAN/ AIR project and its relative failure in achieving similar results – at least at the government end. He had sent me an article from HT on 24 Aug too, with analogous lamentations. The sum and substance of this report went thus:
But perhaps we write the epitaph of this effort too soon. We can equally note that high-value transactions capture was up 2X between 2007-08 and its preceding year – clearly denoting detection successes than economic boom. Equally, the march of technology in the banking industry is relentless, making the switch to electronic financial administration easier by the day. Or, for that matter, let us not ignore the large-scale adoption of computers by Indians at large. Mind you, this is not the super-bright precocious pre-teens of the current day, the trend is equally discernible across age and economic strata. (My father, loath to the PC most of his life – or perhaps never having needed to take to one, courtesy a sarkari lifestyle – is now not merely a ‘Friend’ on my social networking account, but was actually preaching the virtues of Skype to me the other day!)
The fun times, however, are yet to roll. To my mind, far more than banking industry paradigms or designs of Fin Min mandarins – or even technology’s constant down-spiral of prices and advances in user-friendliness – the real clincher is, literally, in our hands. The convergence of mobile-phone and computing will be where my oracular protestations be put to test. As more and more of India takes to using the ubiquitous phone for functionalities beyond voice, they will buy in to its convenience for financial transactions too. If this adoption gets sweetened by promises of greater speed, increased transparency and lower transaction cost (why ever not, one would think), the inclusion revolution shall fly bottom upwards. Empowered handhelds will then achieve what its voice cousins have already done – bridge divides that most thought an impossibility in the Indian context. Not will this spread make the ‘card’ all pervasive, it will put pressure on high value transactions to conform, given an enormously shrunk cash economy in the future.
Hence, card, we dream… Goodbye elitism, farewell effete :D
To the last of these, let me plead guilty immediately – the idea of a carded economy was admittedly made as an appetizer any ways. Some of the thoughts that came to me at various times this week:
- Speedy adoption of VAT and GST system, something that has been argued for in these pages earlier, underscored here since they track the production process through the value chain and hence enable significant MIS
- Comprehensive implementation of UID (linked with PAN) – with all registrars computerized across asset classes as well as company registration, customs and excise, tax, passport, licences etc – and cross-tabbed (if needed) with HNI indicators like asset ownership and lifestyle spends
- Better enforcement of annual personal tax returns – and perhaps early bird incentives than merely penalty for delay or default. (No doubt my friend would be happier to hear words like greater powers to enforcement agencies but very rarely have our national issues been about legislation instead of execution, and we perennially run the risk of bad intention.) My only exception would be for relatively high visibility downstream impact like on personal rights of holding elected office, driving license etc
- Clarity and continuity in wording rules and regulations – limiting the need for judicial interpretation that may be time-taking and (occasionally) contradictory. One can extend this to talk of faster determination of tax disputes but the need for specialized courts and higher judge-population ratio is a more widely-felt and urgently-needed action
And now, the other two charges. At the core of my premise of effectiveness in advocating an electronic payment system was its ability to capture information in a digital form, coincident with the actual transaction. Equally, the effort in its transmission, storage or retrieval would be marginal save for the investment in scaling up transaction infrastructure in a country as vast as ours (but which, in my defence, shibboleths of Financial Inclusion and Productivity would any ways force on the banking system). The data thus recorded could be mined to model smarter risk-based pricing solutions to help customers and banks, while sharpening the I-T department’s claws.
Almost in anticipation of this, my friend had pointed me to the PAN/ AIR project and its relative failure in achieving similar results – at least at the government end. He had sent me an article from HT on 24 Aug too, with analogous lamentations. The sum and substance of this report went thus:
- Compulsory PAN citation for all high-value transactions has not worked – of the INR 55.7 Lakh Cr total value reported in 2007-08, 30% were missing PAN. For instance, in realty deals (a known home of Black Economy) of declared value over INR 30 Lakh, capture was around 25%; saving bank deposits of INR 10 Lakh plus it was one-third etc (Folks with dark humour will savour the fact of ~10% of 3100 RBI bond sales of over INR 5 Lakh gettinh away without a PAN!)
- Moreover, cases of fake/ multiple cards abound, limiting the department’s ability to trace any transaction back to the beneficiary. It is any ways over its head in water on the high-value AIRs for investigation/ matching with I-T returns (Rumour has it that the department has been trying to build 360 degree profiles of HNI’s (politicians, bureaucrats, corporate honchos, high-growth businessmen – even people with flashy lifestyle not commensurate with known income sources) using AIR data for over three years
But perhaps we write the epitaph of this effort too soon. We can equally note that high-value transactions capture was up 2X between 2007-08 and its preceding year – clearly denoting detection successes than economic boom. Equally, the march of technology in the banking industry is relentless, making the switch to electronic financial administration easier by the day. Or, for that matter, let us not ignore the large-scale adoption of computers by Indians at large. Mind you, this is not the super-bright precocious pre-teens of the current day, the trend is equally discernible across age and economic strata. (My father, loath to the PC most of his life – or perhaps never having needed to take to one, courtesy a sarkari lifestyle – is now not merely a ‘Friend’ on my social networking account, but was actually preaching the virtues of Skype to me the other day!)
The fun times, however, are yet to roll. To my mind, far more than banking industry paradigms or designs of Fin Min mandarins – or even technology’s constant down-spiral of prices and advances in user-friendliness – the real clincher is, literally, in our hands. The convergence of mobile-phone and computing will be where my oracular protestations be put to test. As more and more of India takes to using the ubiquitous phone for functionalities beyond voice, they will buy in to its convenience for financial transactions too. If this adoption gets sweetened by promises of greater speed, increased transparency and lower transaction cost (why ever not, one would think), the inclusion revolution shall fly bottom upwards. Empowered handhelds will then achieve what its voice cousins have already done – bridge divides that most thought an impossibility in the Indian context. Not will this spread make the ‘card’ all pervasive, it will put pressure on high value transactions to conform, given an enormously shrunk cash economy in the future.
Hence, card, we dream… Goodbye elitism, farewell effete :D
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