The Decision Pin-up controversy
By: Amit Bhushan Date: 11th Jan 2017
With the Central Bank’s refusal to take credit for the famed decision, the government will be hard pressed to come up with its rationale backed by hard facts and data. There is likely to put measures that would strengthen banking in the country, especially with drives for cash-less (for corporates and institutional segments and subsequently even for the masses), to restore the credibility and strengthen banking institutions. This is because the note change on its own has near zilch impact on corruption and the jury is yet to be out on black money (and this would take time to be apparent to masses). An incentive system to alter corporate and institutional behavior for payments via account transfer mode only (on back of tax related benefits for lower rates say slabs for payments via non-cash upto 75% -0.5, 90%-1% and 99.5% - 2%) would go a long way. The losses in corporate tax realization would be easily made up by rise in other tax as well as greater compliance and individual tax. Banks may come up with new instruments say like non-bearer cheques so that these become more preferred choice as against bearer cheques and there is systemic push for greater compliance. The government push for end-users non-cash payments is commendable and probably needs to be strengthened further to take roots in smaller towns and villages. If need be then banks can be advised to come up with cash-withdrawal charges (initially for corporate and institutional segments) for withdrawals over say INR 2000/- so that profligacy to settle transactions in cash is curbed and banks may use these to absorb costs for cash-less transactions.
The mechanisms would not only help improve banking as well as bankability for enterprises whose economic activity will come on record, it would also help to improve tax collections. With most money presently in banks, people should least disruption to comply. Such a mechanism would have least impact on small fries since such people would have the necessary cash (without any charges) to settle their transactions, while businesses wanting to do large transactions should plan for suitable payments/ settlement mechanisms and also become compliant. Since the banks and taxmen would be able to track the flow of funds via banking channels, that would ensure improve bankability and lower the cost of credit for such businesses. Since the masses are not inconvenienced, many netas as well as business leaders/bankers would want to become owners of the idea (provided they don’t have an axe to grind), rather than jostling the ball as in present case. While some netas might have their legitimate infra related grouse (some may have other grouse dis-guised as infra), however they may be better advised to then solve the infra problem in specific regions rather than ‘playing with the (emerging) payments system’.
With the tough question politics now taking elementary baby-steps, such basic hygiene factors are going to become increasingly unavoidable. There is likely to be an increasing focus on questions that would help shape businesses and industry become more competitive and offer greater choice to people especially in the food-processing sector as well as agriculture where focus on low-water crop and common irrigation facilities as well as village development has long been neglected. Improvement in education outcomes, distribution of government services may be some of the other areas, especially around urban building and facilities development, strongly afflicted by political interference. There is likely challenges for the people to explore the ‘talks’ by netas versus ‘delivery’, with the commercial news media, again continuing to spread half-truths, confusions, diversions and everything else but ‘Game questions’. These would be progressively measured as the ‘Game’ evolves…..
By: Amit Bhushan Date: 11th Jan 2017
With the Central Bank’s refusal to take credit for the famed decision, the government will be hard pressed to come up with its rationale backed by hard facts and data. There is likely to put measures that would strengthen banking in the country, especially with drives for cash-less (for corporates and institutional segments and subsequently even for the masses), to restore the credibility and strengthen banking institutions. This is because the note change on its own has near zilch impact on corruption and the jury is yet to be out on black money (and this would take time to be apparent to masses). An incentive system to alter corporate and institutional behavior for payments via account transfer mode only (on back of tax related benefits for lower rates say slabs for payments via non-cash upto 75% -0.5, 90%-1% and 99.5% - 2%) would go a long way. The losses in corporate tax realization would be easily made up by rise in other tax as well as greater compliance and individual tax. Banks may come up with new instruments say like non-bearer cheques so that these become more preferred choice as against bearer cheques and there is systemic push for greater compliance. The government push for end-users non-cash payments is commendable and probably needs to be strengthened further to take roots in smaller towns and villages. If need be then banks can be advised to come up with cash-withdrawal charges (initially for corporate and institutional segments) for withdrawals over say INR 2000/- so that profligacy to settle transactions in cash is curbed and banks may use these to absorb costs for cash-less transactions.
The mechanisms would not only help improve banking as well as bankability for enterprises whose economic activity will come on record, it would also help to improve tax collections. With most money presently in banks, people should least disruption to comply. Such a mechanism would have least impact on small fries since such people would have the necessary cash (without any charges) to settle their transactions, while businesses wanting to do large transactions should plan for suitable payments/ settlement mechanisms and also become compliant. Since the banks and taxmen would be able to track the flow of funds via banking channels, that would ensure improve bankability and lower the cost of credit for such businesses. Since the masses are not inconvenienced, many netas as well as business leaders/bankers would want to become owners of the idea (provided they don’t have an axe to grind), rather than jostling the ball as in present case. While some netas might have their legitimate infra related grouse (some may have other grouse dis-guised as infra), however they may be better advised to then solve the infra problem in specific regions rather than ‘playing with the (emerging) payments system’.
With the tough question politics now taking elementary baby-steps, such basic hygiene factors are going to become increasingly unavoidable. There is likely to be an increasing focus on questions that would help shape businesses and industry become more competitive and offer greater choice to people especially in the food-processing sector as well as agriculture where focus on low-water crop and common irrigation facilities as well as village development has long been neglected. Improvement in education outcomes, distribution of government services may be some of the other areas, especially around urban building and facilities development, strongly afflicted by political interference. There is likely challenges for the people to explore the ‘talks’ by netas versus ‘delivery’, with the commercial news media, again continuing to spread half-truths, confusions, diversions and everything else but ‘Game questions’. These would be progressively measured as the ‘Game’ evolves…..