Cash is King, but from time to time it does come under severe attack from the institution that prints the cash and is responsible for its distribution viz. the Reserve Bank of India (RBI). The RBI has learnt the art of making shock and awe decisions and thrust it upon its citizens, without really preparing the nation in advance.
Perhaps they feel, by unleashing their power on the public will make them look invincible, at least in their own eyes, even if it means breaking the promise once in a while to pay the bearer the sum mentioned on the note. Does not mean they do not honour the commitment, but not before scaring the hell out of the citizens and not without putting them under tremendous inconvenience. Unfortunately, little do they realize that keeping the public busy in unproductive works such as exchanging of notes or depositing them in the bank, the ultimate loser is the country’s productivity. RBI is supposed to know this, because it hires the best brains in the business to manage the country’s money, but no use if their decisions are not taken independently.
The recent withdrawal of the 2000 Rupee note although not as scary as the 2016 horror show, could have been handled from the citizen’s point of view. Agreed, the RBI had sucked out these notes from the system, as most ATMs and banks had stopped dispensing them out to the public long ago, but it still has 3.5 lakh crore worth of these notes in the system and hence decided they want them back and that too through a hasty announcement. Take them away by all means, but can Indians be treated with some respect and announcements such as these could be made in a time bound manner by giving advanced monthly reminder of at least a year. The suddenness of the announcement with no prior advanced warning, casts a doubt if the recalling of these notes has something to do with kick-starting economic growth so that the economic data points start looking pretty, in time for the elections next year.
What has economic activity got to do with withdrawing one particular denomination? Well, people panic when government institutions thrust decisions that are made unexpectedly and most start making hasty decisions of making unwanted purchases. But the RBI hardly cares for the citizens, for them the economic engine has to grow by hook or by crook.
Coming to the 2000 Rupee note withdrawal, fortunately the RBI governor did take into account the criticism and confusion that prevailed on social media during the weekend, to come out and clarify most issues that confused the best minds in the country. This brings us to the point, does RBI really have smart people drafting the rules. Remember rules should be drafted in simple language and understandable to the last denominator. You cannot draft rules using Shakespeare language and confuse the public by keeping so many loopholes open, and it is for this precise reason big decision should be made by institutions by taking the citizens into confidence. Running the country’s financial system cannot be treated like some suspense movie with so many twists and turns which only a handful of scriptwriters knowing the plot. India is democratic and all decisions should be made in a transparent and predictable manner.
Many might argue that the RBI wants to bring in a surprise element to catch the crooks off guard, let’s be real here, the crooks are miles ahead in money laundering. Probably they have put their monies in place in safe havens and just to catch a few crooks you cannot inconvenience the tax-paying citizens. Worse, just because there as some crooks in the system, you cannot treat everybody as crooks unless proved otherwise. Unfortunately this is the direct fallout of our hero worshipping.
Earning money is getting stressful, adding to that inflation is at an elevated level with the value of rupee not showing any signs of coming of age, then there is this wild card Artificial Intelligence almost at our doorsteps which has the potential of extinguishing careers. Such a pessimistic outlook and too much pressure to bear, you decide to take a break now, go on a vacation out of the country, not to worry the government has got you covered there too. Just before the 2000 rupee note withdrawal the government announced tax collected at source (TCS) a hefty 20% on all credit card purchases abroad. Probably they are going after crooks that travel abroad but never file returns, or the money launderers. The government justification is that you file returns you receive your money back as refund. This indirectly means the government gets free loan from the citizens and can use our TCS money between the date of TCS and date of refund.
Again thanks to social media which came to the rescue because many sane voices expressed a rare protest, the government was quick enough to put a limit of 7 lakhs before TCS comes into play. The Government has really mastered our slave psychology, hit them hard the first time and then give them some concessions and slaves that we are; we will readily applaud or not recall the hit. Adding insult to our intelligence, we will also applaud when tax refund figures show a sharp jump just in time for elections not realizing that these figures go up because government has decided to collect TCS and then refund it back.
Government policies especially in financial matters need to be predictable, mostly boring and trustworthy. If you want action and headlines all the time then please do it in other domains, not in financial matters. Taking away 2000 notes, introducing TCS is just adding to the burden to the already hassled citizen. By the way, after 2016 demonetization cash circulation in the economy increased by 83%. With 2000 notes under attack now, RBI should be prepared to print more notes notwithstanding the digital push. Cash will always be King, the more it’s under attack, it will bounce back stronger.
(The author is a business consultant)
