The top recommendation of a high-powered panel of chief ministers and bureaucrats to tax cash transactions above Rs 50,000 in order to encourage digital payments appears puzzling, and inadequate.
Having already caused considerable damage to the world’s fastest growing economy via demonetisation — that hasn’t yielded any great clues on black money stashes — such micro plans to limit cash supply won’t help the economy much. While digital payments may be the way to go in a cashless economy, what we see here is overzealousness in propping up digital modes. It should surprise no one if most cash withdrawals are kept to Rs 49,000 in yet another clever way Indians manage to skirt the letter of the law.
A series of measures have already been taken to promote digital payments for fuel, at toll plazas and for rail tickets. The banking system has huge data of transactions and it’s only its own inefficiency in scrutiny that led to not only excessive cash in the system but also banking black sheep freely helping people exchange old notes.
What is needed is an expert panel of financial consultants to help devise ways to curb generation of excessive cash in the system while not further inhibiting the economy, which is badly in need of stimulus after the demonetisation.
Measures like handing out subsidies for people to own smartphones and go digital smacks too much of pandering to votebanks. To catch black money hoarders in future, a lot more finesse is needed than all the recommendations made by this panel.
