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Analysis

Digital transactions recede, threaten ‘Digital India’

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Digital Transaction

The value of digital transactions nationwide declined marginally (1.5 per cent) to Rs 92.6 lakh crore ($1.4 trillion) in February 2017 from Rs 94 lakh crore in November 2016 ($1.42 trillion), according to representative data (provisional) on electronic payments released by the Reserve Bank of India (RBI).

The data do not cover all transactions across all banks. But, card payments data for four major banks, mobile banking figures for five banks and prepaid payment instruments (PPI, meaning mobile payment gateways such as PayTM and FreeCharge) data for eight non-bank issuers have been considered as representative for analysing trends in payments.

 

 

Source: Reserve Bank of India

Digital transactions (volume) had increased 42 per cent from 672 million in November 2016 to 958 million in December 2016 but have since declined 20 per cent over two months to 763 million in February 2017.

This puts in peril the government’s target to achieve 25 billion digital transactions in 2017-18, which translates to at least two billion transactions per month. The February 2017 figure of 763 million transactions falls 60 per cent short of the monthly requirement.

“The continuance of that high growth with a further pick-up in some components (of digital payments) (sic) from November to January 2017 was a positive fallout of demonetisation. However, the pace of growth moderated somewhat in February 2017,” the RBI noted in its first assessment of demonetisation, titled “Macroeconomic Impact of Demonetisation — A Preliminary Assessment”.

Prime Minister Narendra Modi — whose narrative of development earned Bharatiya Janata Party (BJP) a landslide mandate in the recent Uttar Pradesh assembly polls — changed tack on demonetisation from black money and fake currency initially to digital/cashless economy later.

Only two payment platforms, Unified Payments Interface (UPI) and Aadhaar Enabled Payments System (AEPS), show a consistent rise in value (in Rupees) and volume (number) of transactions post-demonetisation. All other forms have shown a decline — either consistently or in one or two months in the four-month period.

While UPI links mobile applications to a person’s bank account directly, AEPS is an Aadhaar-linked biometric identification system used for direct cash transfers under government schemes.

“Digital cannot substitute cash. The share of digital among transactions might increase in the long run but cash is affordable,” Rajeswari Sengupta, economics professor, Indira Gandhi Institute of Development Research, told IndiaSpend.

“Digital transactions demand a person to buy a smartphone and spend on data, which incur higher cost per transaction. People naturally prefer cash, where the cost is borne by the government.”

Use of online banking using the National Electronic Funds Transfer (NEFT) platform reduced consecutively in January and February 2017, while that of Immediate Payment System (IMPS) increased in December 2016 and January 2017 but declined in February.

“The catalytic push from demonetisation hastened migration towards digital payments in November and December 2016. However, ease in availability of cash by progressive remonetisation impacted the pace of growth of digitalisation in February 2017,” the RBI assessment said.

Debit and credit card transactions for four major banks show little difference between November 2016 and February 2017 — 205 million swipes transacting Rs 35,200 crore in November 2016 to 212 million swipes transacting Rs 39,200 crore in February 2017.

“As the cash in circulation will settle to a lower normal than the pre-demonetisation levels, digital payments will settle at a higher normal and continue its upward trend as before,” Sangram Singh, head of cards and payments, Axis Bank, told IndiaSpend.

Card transactions improved to 311 million swipes transacting Rs 52,000 crore in December 2016, showing a 50 per cent rise in transactions and 48 per cent rise in value transacted over a month.

But the pace of addition in debit and credit cards has not been matched by an equal focus on point of sale (PoS) terminals.

“..in comparison to the 800 million cards that have been issued as of now, the number of PoS terminals has not been really adequate,” RBI Deputy Governor R. Gandhi said in a speech last month.

High capital and operational expenses have deterred the expansion of PoS infrastructure, Gandhi added.

Cash available with people, which reduced from Rs 17 lakh crore just before demonetisation to the lowest post-demonetisation level of Rs 7.81 lakh crore ($118 billion) on December 9, 2016, increased to Rs 11.74 lakh crore ($178 billion) on March 3, 2017, according to RBI data.

Modi had announced the world’s biggest currency swap programme that scrapped 86 per cent of high denomination Indian currency on November 8, 2016.

 

Source: Weekly Statistical Supplements, Reserve Bank of India; figures in Rs lakh crore

 

The current level of currency with people matches the November 2013 level of Rs 12 lakh crore ($200 billion at the then prevailing exchange rate of Rs 60 per US$).

(In arrangement with IndiaSpend.org, a data-driven, non-profit, public interest journalism platform, with whom Abhishek Waghmare is an analyst. The views expressed are those of IndiaSpend. Feedback at [email protected])

Analysis

Modi’s momentum under attack as opposition gears up for offensive

Congress President Rahul Gandhi is also now a more formidable opponent of Modi than he was in 2014 and his attacks are sharper and unrelenting.

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Vishwashghaat

New Delhi, May 26 (IANS) With his party ‘stopped’ in Karnataka and bracing to face crucial Assembly elections in three major states in the north this year end, Prime Minister Narendra Modi takes his government into the last year in office with the political momentum slightly shaken against the mounting burden of fulfilling expectations on numerous election promises.

Political analysts say that many of the promises of the Modi government have been rhetoric and it needs course correction by being more accommodative over the next year if BJP’s prospects are to improve.

They said the outcome of 2019 elections will largely depend on opposition parties coming together to pose a common challenge to the BJP.

Kumaraswamy's swearing-in ceremony

The BJP’s inability to form the government in Karnataka, despite being the single largest party, has come as a damper to the party. It had suffered jolts earlier this year in defeats in prestigious parliamentary by-elections in Gorakhpur and Phulpur as also Ajmer and Alwar.

“Intolerance has been a major drawback in the last four years,” says political analyst and senior journalist H.K. Dua adding that the idea of India as a plural polity had suffered due to incidents like ‘love jihad’ and lynchings.

“Every incident fouls the atmosphere. India is a composite society and Prime Minister himself said ‘Sabka saath, sabka vikas’ which did not happen. That’s why Dalits have been very angry, tribals have been very angry, farmers have been very angry. Caste divisions are sharper than before. That does not speak well,” he said.

Dua said constitutional institutions “have not been shown the respect they deserve.” He said consensus between the ruling and opposition parties for running parliamentary democracy has been ignored. “The initiative had to come from Prime Minister but that has not come,” he said, adding there is doubt how deep is the faith of government in democratic practices.

“I don’t think in 2019 there will be Modi wave. Opposition will be able to present a formidable challenge if they unite. So the unity is very, very important.

Kumaraswamy swearing-in ceremony

But even as efforts to forge understanding among opposition parties continue at various levels, Modi continues to have a cross-country appeal as the prime vote-catcher of the BJP.

As Prime Minister, he has sought to bring speed to decision-making by cutting red tape, set ambitious targets, launched some imaginative schemes, focused on delivery, simplified norms and shaken off lethargy in the official machinery.

The BJP-led National Democratic Alliance government is seen to be more focused and target-oriented but there is little visible impact of some of its initiatives such as the Swachh Bharat Campaign.

Subrata Mukherjee, a political analyst who taught at Delhi University, said there have been more promises than delivery in the past four years and projects like Start Up India and Make in India have not progressed the way they were made out to.

“The economic record of the government is not very good and they are now postponing everything to 2022. That is beyond their mandate. So it is politics of postponement,” he said.

He said most of the schemes are a rehash of Congress schemes.

Mukherjee said Modi government needs to practice a more “accommodative politics.”

“They will have to work out accommodative politics, bring new segments. The scheduled castes, Muslims are angry. If they want to retain power, they will have to go for drastic course correction,” he said.

He said opposition unity was important for good politics and the proposed federal front cannot do without congress. “BJP will also have to understand that 2019 will be coalition government whether led by it or the Congress,” he said.

Unlike the 2014 elections, when he was the challenger, Modi will be the incumbent in 2019 and the opposition has a plethora of issues to queer the pitch including jobs, price rise, problems of farmers, multi-crore banking frauds, non-performing assets of banks, “write-offs” of corporate houses, and “atrocities” against weaker sections including Dalits.

Congress President Rahul Gandhi is also now a more formidable opponent of Modi than he was in 2014 and his attacks are sharper and unrelenting.

Congress General Secretary Ashok Gehlot said people had trusted Modi but he “betrayed” them. As a member of the opposition, he sees an all-round failure in the government.

“Farmers, youth, traders, women, everyone now feels betrayed. There is sense of fear and mistrust among people. Fuel prices are sky-rocketing. This is a loot. The situation in the country is such and all sections of society are so unhappy that the people will force every party in the country to come together to defeat Modi and the BJP,” he said.

BJP Spokesperson G.V.L. Narsimha Rao, however, as expected, termed the last four years as “epoch-making.”

“These will be best remembered for ushering in a New India Era with corruption-free governance, inclusive economic growth with special focus on farmers, women and marginalised sections,” Rao told IANS.

He said that Prime Minister Narendra Modi’s government has fulfilled long neglected basic needs of the common citizens with innovative schemes like Ujjwala.

The Ayushman Bharat scheme, announced in this year’s budget which aims to provide health insurance cover of Rs 5 lakh to around 10 crore families is an ambitious move to connect with the poor and, if successful, can help BJP earn goodwill in run up to 2019 Lok Sabha polls.

The elections in Madhya Pradesh, Rajasthan and Chhattisgarh later this year are expected to set the tempo for the Lok Sabha polls and the BJP is the incumbent in all three states facing tough contests.

(Prashant Sood can be contacted at [email protected])

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Analysis

Four years of Modi failed to deliver crore of jobs: Swaraj India

Prime Minister Modi had promised to deliver one crore jobs every year but the number of jobs have decreased in reality.

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Yogendra Yadav

New Delhi, May 26 (IANS) As the Narendra Modi-led NDA government completed four years on Saturday, Swaraj India alleged although it has provided some evocative slogans like ‘Make in India’, ‘Skill India’, ‘Beti Bachao, Beti Padhao’, but scored a near zero score in performance, especially in its promise to deliver one crore jobs every year.

“The Modi government only made an onslaught on the Constitution and democracy, and saw jobless growth, increasing communal tension, rural distress and overarching insecurity among Dalits, minorities and women in country. All the key promises of the BJP government have turned out to be hollow.

“Prime Minister Modi had promised to deliver one crore jobs every year but the number of jobs have decreased in reality,” said Swaraj India national spokesperson Anupam.

Swaraj India chief Yogendra Yadav said that the violence against religious minorities, especially Muslims, is spreading openly.

“The country is unsafe because despite the claims of surgical strike, incidents of encroachment and terror attack from Pakistan have increased. Relations with neighbouring countries and even old friends are seeing a challenging phase and China’s movements have become more aggressive,” he said.

Senior party leader Prashant Bhushan meanwhile decried the rise of corruption, eroding authority of anti-corruption bodies, shielding of corrupt officers are being shielded, the “disaster” of demonetization, no change in the black money situation and putting of the Lokpal issue in cold storage.

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Analysis

After 1,460 days of Modi rule, ‘achhe din’ yet to come

I do not blame this government for not being able to deliver ‘achhe din’. Which government since Independence has?

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Narendra-Modi

New Delhi: There’s only one year more to go for the BJP-led regime before another test at the hustings. But is the country any nearer to Prime Minister Narendra Modi’s promised ‘acche din‘ (good days)? Four years ago, the country had voted the present regime to power on hopes of better days in all socio-economic-political spheres. But despite some strong structural reforms like GST, and gut-wrenching changes like demonetisation, the jury may still be out on how good it has been, according to economists and others experts.

Despite India’s GDP growth of 7.2 per cent in the third quarter (October-December) of 2017-18, some economists feel that the demonetisation drive, avowedly taken to “cleanse the system” of black money, had ended up damaging the country’s economy instead.

“Demonetisation was a terrible mistake by the government, for which the common people paid the price. It has reduced people’s trust in the banking system, as they were denied their own money during the period of cash crunch. It takes so much time and work to build institutions and policies — it is so much easier and faster to break things,” Jayati Ghosh, Economics Professor at Jawaharlal Nehru University (JNU), told IANS.

The government decided to ban 1,000 rupee and 500-rupee notes on November 8, 2016, taking away 86 per cent of the total currency in circulation. “May be this move had served the government’s purpose politically, but economically it was a bad one,” Ghosh added.

Echoing similar views, Arun Kumar, former professor of economics at the JNU, told IANS that when the NDA government came in, the Indian economy was already on an upward trajectory. The quarter, in which the government took over, the growth climbed to eight per cent. In October 2016, India was the fastest growing economy in the world when China slowed down a bit.

“But then the government administered a shock to the system with demonetisation. It had a negative impact on the unorganised sector that comprise 45 per cent of production and 93 per cent of employment in the country. According to some estimation, 50-80 per cent of that got damaged,” he said.

Kumar, who is now Chair-Professor with the Institute of Social Sciences, added: “Government did no survey at that time and hence no data is available. Even data from International Monetary Fund and World Bank, which rely on government data, do not show any estimates (on impact).”

After demonetisation, credit off-take in the country declined sharply. “Between November-December 2016, it was at historic low of 60 years. Investment into the country also took a big hit,” he said. However, Ranen Banerjee, Partner & Leader, Public Finance and Economics, at PricewaterhouseCoopers (PwC) has a different take on some of the benefits flowing from the action.

“Demonetisation had positive impact as far as digital payments were concerned. It shot up sharply during that period but came down subsequently. The level is still higher earlier. But demonetisation as a measure did not deliver all the results that it was supposed to deliver,” Banerjee said.

The government’s other major thrust, though, on Goods and Services Tax (GST) — rolled out on July 1 last year, got better billing. Economists are hopeful that it will bring in beneficial changes once the hiccups are over. Banerjee says GST would change the entire landscape of tax compliance in the country by creating a multiplier effect. “GST was a bold move which is showing positive results,” he added.

Ghosh, though, thinks GST goes against the grain of federalism. “A unified system is not so necessary in a federal structure — for example, the US does not have it and still has a very modern economy. In a federal structure you have to allow states to have some money raising power. Further, GST implementation has been really bad.”

Kumar said: “Introduction of GST has hit the unorganised sector badly. Even in Malaysia where GST was introduced in 2015-16 at 26 per cent, government decided to scrap it. The organised sector is rising at the expense of unorganised sector. Disparity is rising.”

Industry chambers have by and large welcomed government initiatives, especially the decision on GST. “The overall economy is strong with GST having settled down and reforms firmly on the right path,” Chandrajit Banerjee, Director-General of Confederation of Indian Industries (CII), told IANS.

Over the last four years, according to him, the government had systematically addressed major “pain points” for the economy such as ease of doing business, non-performing assets of banks, foreign direct investment rules, infrastructure construction and exit of failing enterprises.

“The government’s mission-mode development campaigns have delivered notable results, adding to overall growth multipliers. The firm level and sectoral level numbers look promising for the next year in terms of orders booked and capacity utilisation,” said CII’s Banerjee.

Former economics professor at Indian Statistical Institute, Dipankar Dasgupta, who holds that the economy was yet to recover from the hit it took because of demonetisation, says that on GST he was hopeful that with time it will stabilise. “In the other countries where it was introduced there were teething problems too,” he said.

The government also took up the job to cleanse bad loans of banks. It is pumping in Rs 2.11 lakh crore as capitalisation, spread over two years. But a number of banking scandals and rising non-performing assets (NPA) may have reduced the faith of people in the bank system, after the shock of demonetisation. “We have declining deposits in the banking system due to people’s rising mistrust,” says Ghosh. Dasgupta says recapitalisation should be followed with caution so that it does not widen the fiscal deficit.

The government, though, has got support in its effort to tackle the issue of NPAs. The bankruptcy law has put everyone on notice. “People are taking the issue of NPAs seriously trying to resolve it. Companies are opting for out of court settlement. Propensity to comply has increased as borrowers know that there will be consequences on not servicing a loan,” Banerjee of PriceWaterhouseCoopers said.

Yet, overall the promise of the golden pot at the end of the five-year rainbow, as promised by Modi in his of speeches — where he had painted the BJP rule in attractive hues — has not materialised in four years. BJP’s best salesman may have oversold the hope. “I do not blame this government for not being able to deliver ‘achhe din’. Which government since Independence has?” asks Dasgupta rhetorically.

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