Chachu's Column #44: Of Cash, Less-cash and Cash-

less Society
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Few years back, I had purchased a Godrej Lock. When I requested for a bill for purchase, my request was
shrugged off and I was handed a small piece of paper with list of items purchased and the prices. When I
enquired about the guarantee of the lock, the request was shrugged off again. In a few months, the lock
went kaput and I promptly went to the shop with the kaput lock and the piece of paper. At first, the owner
completely refused to take ownership of the problem. After some pestering, the shop keeper asked me for
the bill that he had never ever given nor had ever agreed to give one. After some more pestering, the issue
was escalated to the manufacturer who promptly agreed to change the lock gratis.
The episode made me wiser and I pledged to buy all things with a BILL irrespective of the tax
implications. Few months later, I brought some Jaguar fittings and again the bill was not given. When the
fittings stopped working I went to the shop for the bill and was refused again. Then, when the service man
was called, I was informed that the faulty fittings could be changed free provided I could show him the bill.
Since I did not have the bill, I again went to the shop. Finally I got the bill and got 4 faulty pieces worth
4000Rs changed free of cost.
Few months later, I again went to the market hunting for some door locks. For all the material
purchased, two sets were created – one was tax paid items for which I got a bill and Card payment was
accepted at a 2% markup - and the rest of items for which neither tax was paid, nor I got a bill nor for which
Credit Card was accepted.

So this was India – where the tax paid economy or the formal economy worked in parallel with black
economy or the informal economy. The formal economy paid income tax, service tax, excise duty and the
likes. And informal economy paid what they wanted to pay. As a salary earner, I always lamented the fact
that all our expenses were done through post tax income – while for most of the informal sectors, the
expenses were part of the cost and what was left over was offered for tax – if at all these sectors offered
their income for tax. So the salary earners had to continue bearing the burden of the 7 th pay commission for
higher salary of Government Servants, higher Minimum Support Prices for farm produce, higher defense
budget and all other social welfare expense. And the informal economy could keep buying bigger cars, or
splurge on other material desires of life.

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This would have continued the way it continued till a man of humble origins by the name of Narendra Modi
decided to wield the axe – an axe that was to change the very fabric of the nation. The night the bomb was
dropped, we were preparing for our travel to Vaishno Devi the next morning. And while I was busy packing,
my brother came running and telling that all 500 and 1000Rs notes were banned. I thought “what a joke? It
JUST CANNOT HAPPEN. ”

We opened all websites and all news channels and found the news to be true. Immediately I called
the taxi driver at Jammu who was to pick us from airport – whether he would pick us from airport and accept
old currency. He told that he knew nothing about demonetization. To make things simpler, my brother ran to
nearest ATM and punched multiple requests of 400Rs till he drained the ATM of 100Rs notes. While others
in family promptly broke the piggy banks of the kids to pull out all loose change and 100Rs stuff. My mother
who hoards 10, 20, 50 and 100Rs notes gave all of us loose change worth few thousand. This ensured our
trip was secure. In the next few days in Jammu and Vaishno Devi, the old currencies were accepted without
much fuss. Only sore area was the toll plaza where the ensuing ruckus due to lack of change meant that
tolls were discontinued till date.

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Meanwhile, that very night when demonetization was announced, we kept on getting messages from Big
Bazaar that all their shops were open till mid-night. I was quite amused but the import of the step was
understood by me very soon. It seemed that all those with cash hoardings had raided Jewelry shops,
Consumer durable shops, Apple Stores and the likes to convert all their cash into valuables and something
useful.
The news the next day revealed it all. Of how the jewelry shops were open till 4am busy accepting
all kinds of notes and making back dated bills – how these shops were stripped of any piece of gold. How
the iphones were being sold at a premium. How people were flooding all the places where old notes were
accepted.
That they were falling sick and asking doctors for any possible surgery as government hospitals
were accepting old bills. That they were buying medicine stock for months as pharmacy were accepting old
bills. That they were filling their cars and bikes as the petrol pumps were accepting old bills. That they were
paying all their municipality dues pending since years with their newly found reserves. And suddenly the
municipality coffers were overflowing with money they had never seen.

Meanwhile, all those who were providing services found a new way to mint money. An Uber driver told
me that a person who had to travel in emergency and who only had 1000rs notes, paid full 1000Rs for a trip
of 600Rs. It was totally immaterial that the 100Rs notes were neither banned nor had disappeared – just that
no one was willing to give it in exchange.

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In times of panic, I have made a simple rule “JUST DO NOTHING”- Just think and wait for the situation to
improve. With hordes of credit card at my disposal, I recharged all my e-wallet accounts like PAYTM, created
one for my wife and charged it too. Going to ATM was just out of question – I hated queues like hell. In any
case, I was a digital person ever since one of my cheques bounced due to signature mismatch.
The acceptance of cards at Superstores, Uber, local canteen and the likes did not allow me to miss
my cash too much. All daily vendors for milk & newspapers, were promptly asked to accept old cash or
digital money. Tremendous support to e-wallet like Paytm meant that digital currency had trickled down to
the lowest level including the street hawkers.

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But dire situations create dire responses. There was one person whose wife was pregnant and quite ill. He
had borrowed large sums of cash from his friends and relatives – which now appeared to be dead money.
Many visits to ATM and banks to withdraw new currency failed. Then there was that feeling that who shall
look after his ailing wife while he went around hunting for money – and what shall happen to borrowed
money. So he solved the problem by simply killing himself – as if after this step, there was more money and
someone to look after her even sicker wife.
Then there was this story where a government clerk with negligible salary who had amassed crores
of money from bribes and corruption and who was completely confused about what to do next.
Then there were reports of panic attacks in people who had tons of such money – and there were
queues of people at psychiatry departments seeking such treatment.
Then there were reports of people dying out of exhaustion by standing in long queues. And there
were reports of Samaritan doctors looking after such people while they were standing in queue – or some
NGO offering tea and biscuits to these people. And if this was not enough charity, overnight startups were
formed like bookmychotu.com who could offer you people (or chotu) at hourly rates who could stand in ATM
queue for you.
Then there were reports of how people owning 6 shops in a wholesale market like Chawri Bazaar
had most of his shops closed due to lack of business and currency. And how some other shops were closed
as the sales tax officials were after their lives to declare the sales book status before the demonetization
kicked in.

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The effects of demonetization are still being speculated. Some feel that out of 15 Lakh Crore in these high
currency notes, about 3-4 Lakh Crores shall never come back to RBI. And the government shall be richer by
that amount. Before becoming PM, Modi had promised to bring lakhs of crores of black money stashed
abroad and distribute among the poor. While no significant sums have come from abroad, this windfall gain
may imply that about 5000-25000Rs may get into over 25crore Jan Dhan bank accounts opened for the
poor. Others feel that interest rates shall fall, economic activity shall rise & considerable part of informal
economy shall go into formal economy thereby further boosting tax collections. Overall, this shall lead to
lower tax rates that in turn may trigger higher compliances.

Some others feel that GDP shall take a big hit and country may go into recession.

What eventually happens remains to be seen but personally I am quite happy with this step. The
salaried class had carried the burden of the government for too long – it was time the other economy or the
informal economy shared this burden.

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While the effects of demonetization was trickling in, I went to a jewelry store to buy some small stuff only two
days back. And I was promptly given a formal bill without even asking. When I asked the reason, I was told
that there was complete tallying of cash in hand vis-à-vis actual sales that happen and the sales receipts.

Someone from Sweden said few months back, “I don’t use cash any more, for anything. “You just
don’t need it. Shops don’t want it; lots of banks don’t even have it. Even for a candy bar or a paper, you use
a card or phone. Swedish buses have not taken cash for years, it is impossible to buy a ticket on the
Stockholm metro with cash, retailers are legally entitled to refuse coins and notes, and street vendors – and
even churches – increasingly prefer card or phone payments.”

India is not Sweden, but India is surely changing – or at least has leap frogged in the cashless
journey by a step or two. Modiji ki Jai!

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Chachu,
29th Nov, 2016
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Edited Comments on Chachu's Column Chachu's Column #43: Chachu in Poland

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1. After a looong time. Like it. (Courtesy Manju Banka)

2. I liked the Poland history you covered in the article; it was quite informative; I also liked the small details
you mentioned about snow and other things. Overall the article is quite informative and written in a good
manner; it engaged me to the end. Thanks Chachu for writing your experiences. (Courtesy Rajesh)

Web Resources
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[1] https://www.theguardian.com/business/2016/jun/04/sweden-cashless-society-cards-phone-apps-leading-
europe

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