Silver Lining Vs Missing Perspective

Hindustan Times ( 26 July 2016 ) carries a report with headline :

" In 6 years, cash will no longer be king for most Indians "

It goes on to say :

Silver Lining :

#  Non-cash transactions will grow from current 22 % to 40 % by 2020 and to 59 % by 2025

#  Cash in Circulation in India is 18 % of GDP ( For USA / UK , this is about 3.5 % to 8 % )

#  Currently there are 80-85 million active mobile wallets in India

#  In 2015-16, number of wallets / pre-paid card transactions stood at 747 million

#  Total value of transactions was Rs 46,200 crores with average transaction being Rs 618

    ( For this amount , these days , one cannot even buy enough grocery or vegetables ! )

#  Number of merchants on various mobile wallet platforms :

    *  Mobikwik........... 1 lakh

    *  Paytm..............  4 lakh

Missing  Perspective :

#  India's GDP ( 2015 )...........$  2 Trillion ( approx Rs 134 lakh*crore )

    That means Cash in Circulation ( @ 18 % of GDP ) , is approx Rs 24 lakh*crore ; so Rs 46,200 crore worth of Non-Cash transactions in 2015 , amounted to , barely 1.9 % of Cash in Circulation ( where am I going wrong ? )

#  Altogether , there are over 50 million MSME ( including retail shops ) ; I suspect that all the mobile wallet platforms , may have , by now , covered only 1 million of these - just 2 % ! So a long way to go there as well !

# As per different estimates , India's Black Money Economy equals 23 % of its GDP ie: Rs 30 lakh*crore

  Believe me , all of these CASH transactions are for purchase of land / flats / gold / expensive clothes / electronics  etc and use only Rs 500 / 1000 currency notes

These transactions are NEVER going to be through mobile wallets / banking channels and never in Rs 100 notes !

#  Latest available figures for currency notes in India :

   *  Total number of notes ( Rs 1 onwards )........ 76.5 Billion pieces ( = Rs 12468 Billion in Value )

   *  Of the above , share of Rs 1000 notes...........39 % ( ie : Rs 4862 Billion , by Value )

   *  And the share of Rs 500 notes....................  45 % ( ie : Rs 5610 Billion , by Value )

   * Share of Rs 1/2/5/10/20/50 / 100 notes........ 16 % ( ie : Rs 1995 Billion , by Value )

   Therefore , it stands to reason that the predicted increase in those NON-CASH transactions ( going up to 59 % by 2025 ) , will mostly eliminate just 16 % of the TOTAL currency-value in circulation !

There does not seem to be any likelihood of Mobile Wallets , encroaching on the balance 84 % of the currency !

#  Then there is the matter of Indians having siphoned out some Rs 34.5 lakh*crore ( $ 500 Billion ) of BLACK MONEY , abroad , during 2005-15

There is just NO WAY , Indian mobile wallets will get used for spending / using this money !

Whereas I am all for the efforts of mobile wallet platforms ( private or even NDA government's proposed UPI - Universal Payment Interface : a truly revolutionary idea ) , to usher India towards a Non-Cash economy , I feel these steps , by themselves , are woefully " Inadequate " !

For India to permanently get rid of BLACK MONEY and its root cause CORRUPTION , I urge NDA government once again , to implement my following suggestion ( repeatedly sent to the Policy Makers , over past 2 years ) :

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 *  Discontinue paper-based currency notes of Rs 500 and Rs 1,000

 *  Introduce plastic currency notes of Rs 500 / 1,000 which are embedded with RFID sensors

 *  Assign to each such note, a IP V 6.0 address , linked to its unique note number

 *  Set up a IT-enabled Technology Platform which will constantly monitor any accumulation of Rs 500 / 1000

     RFID embedded notes in excess of Rs 15 Lakh within an area of ONE square meter

Not only this IT-enabled Technology Platform show up all cabinets / lockers having such accumulations ( on the

GPS maps of IT Department's mobile app - BLACK-MAIL ) but it will also provide irrefutable proof of violation of the

 proposed limit of Rs 15 lakh worth of currency which can be held by a person at any time

And , a frugal extension of this technology will even create a dynamic CURRENCY MAP of entire country by tracking

the movement of each and every currency note ( Rs 500 / 1000 ) , throughout its life !

And the CURRENCY DENSITY of any State / City / Street  !

No need for an army of inspectors , additional administrative machinery , search-warrants , " Panch-Nama "  !

No chance of frivolous litigations on part of the so-called " Aggrieved " !

I do hope , our policy makers will cease this opportunity of a life time ( especially in view of forthcoming elections )

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26  July  2016

www.hemenparekh.in / blogs