Is this India’s Marie Antoinette Moment (don’t have bread eat cake)?

Anand Teltumbde (a civil rights activist) compares the govt switch to digital cash to Marie Antoinette Moment:

Narendra Modi’s promotion of a “cashless society” shows the government’s disconnect from ground realities, and harks back to Marie Antoinette’s famous “let them eat cake” response to learning that peasants had no bread to eat. Clearly, a cashless or less-cash economy will not be achievable in the near future, and may also not be desirable.

There are apparent advantages of digital money over paper currency but to assume that everything is fine with it will be grossly erroneous. Paper currency runs a risk of being counterfeited, but then digital money is not free either. Taking current commissions being charged by the payment platforms, the cost of digital transactions could run into thousands of crores of rupees. A currency note costs money to produce and there are logistical expenses in its circulation, but it copes with 1,00,000 transactions on an average. If its cost is spread over these transactions, the per-transaction cost is almost zero. Contrast it with the cost of digital transaction either by credit/debit cards or e-wallets. They charge anywhere between 1% and 4% of transaction value. As the user base widens these unit costs are expected to come down but not completely vanish because their issuers’ business model is premised on that revenue stream. The use of digital money, moreover, is vulnerable to various security risks. In course of time, like costs, the risk associated with digital money may also come down but it can never be risk-free. Eventually, these risks and costs shall be borne only by common people.

Basically, digital or physical, it is a question of money which majority of people simply do not have. Digital money may suit Modi to score political mileage, hyping it as development, but it should be understood that there is no essential difference between physical and digital money, insofar as they both constitute a liability for the issuer and operates as a transferable claim in transaction mode. Digital currency tends to increase velocity of money and become virtual. Virtual money is just a digital representation of value, which is issued and usually controlled by its developers. If digital money is transacted person-to-person (P2P) and used in the real world for physical goods and services, it remains digital but if it is used only for virtual world purchases in closed loop systems, then it turns virtual. The intrinsic tendency of digital money to become virtual is hugely speculative.

Then why is Modi after a cashless economy? Cashless economy makes it difficult for many in informal economy to escape the tax net and significantly adds to the indirect taxes when the goods and services tax is implemented. The government will now have complete control over people because they can now be profiled with their transaction data and targeted for effective surveillance. It directly benefits digital wallet companies like Paytm and others. The space has already attracted many players, but in the long run, the winners would be those platform-gateway companies which also sell data. Reliance can surely be named because its Jio strategy catapults it to be the lord of the digital world. The vast majority however will be forced to buy data over aata (ration).

Marie Antoinette’s impudence led to the French Revolution, to the overthrow of the monarchy, and to her being guillotined.

Hmm..though one could have avoided the last few words as they are just too polemic.

But yes the comparisons to bread/cake are interesting: don’t have cash…use digital cash!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: