Will Demonetisation and digital transactions stop
corruption in India ?

If digital transactions could curb corruption and black money , Kenya would have be the most transparent country in the world. About 75% of the adult population in Kenya uses mobile phones for payments and money transfer. The value of mobile money transactions and transfers per day is equal to 4.5% of annualized GDP of Kenya, as per a report published in an International Monetary Fund (IMF) journal.

The use of mobile money is so widespread that Kenyans can use mobile wallet to pay for goods at virtually any retail shop throughout the country .This is something that the Indian government aspires to achieve post demonetization.

However, Kenya was listed as one of the world’s most corrupt countries in Transparency International’s 2015 Corruption Perception Index, ranking 139 out of 168.Corruption is so prevalent in Kenya that its team participated in the opening ceremony of the 2016 Rio Olympics in mismatched uniform.Reason? The officials had allegedly sold a part of the kit that Nike provided to the National Olympic Committee of Kenya to distribute to all the athletes.

Later, Nike lodged an official complaint with the concerned authorities.Had it happened before 2010, the Indian Olympic Committee officials could have got a clue from their Kenyan counterparts while organising the 2010 Commonwealth Games.

The same is true for other African countries such as Tanzania and Zimbabwe where digital transactions are very high but the countries figure low on transparency index. The Kenyan example is important as the Indian government wants to create a perception that digital transactions would curb black money and corruption.

Interestingly , it was not part of the original speech of Prime Minister Narendra Modi on November 8. While announcing that Rs 1,000 and Rs 500 notes would cease to be legal currency , Modi had said, “This step will strengthen the hands of the common man in the fight against corruption, black money and fake currency… Enemies from across the border run their operations using fake currency notes.“Shifting Focus Nowhere did he talk about digital payments. Now, all the ministers, policymakers and government advertisements are focused on digital transactions. This change of narrative is clearly an afterthought.In the last few weeks, the government has announced various tax sops and rebates on the use of digital mode of payments. It has set up committees of chief ministers and secretaries to promote digital transactions.

If the government wants to promote digital transactions it should simply implement its Digital India programme ­which has not progressed much in the last two­and­a­half years.
The vision document of Digital India says that India would become a world leader in digital banking by 2019. It also lists digital empowerment of citizens as an aim of the programme. Let us do a reality check on Digital India. Good connectivity is a basic requirement for its success. That is why Digital India’s target is to set up a countrywide optical fibre cable network connecting 2.5 lakh village panchayats by March 2017.
The target for March 2016 was to connect 100,000 village panchayats. However, only 8,000 village panchay ats could be connected. By this October­end, only 15,000 village panchayats could be connected, thanks to poor project management and flip­flop in policy .
The delay in laying the optical fibre network is just one issue. If the government has to provide e­education, tele­medicine and e­-governance services, it has to do a lot of work that requires digitisation of data and coordination between various ministries.

Digital India

If the Digital India programme was going on as per schedule, by now 200,000 village panchayats would have been connected and services such as e­education, e­governance and banking would have been available in remote areas. In modern day banking one needs only a laptop and connectivity with core banking software to work as a bank branch.
Banking correspondents at village panchayats could have easily ac ted as mini­bank branches. It could have saved a lot of hardship in remote areas such as Uttarakhand where people travel up to 20­30km to reach their nearest bank branches. The banking correspondents could have easily promoted digital payments and mobile banking.
As per the Digital India vision document, it would create 10 crore jobs by 2019. A few crore jobs would have already been created. This should have brought in ` Achche Din’. This is in stark contrast to the current loss of millions of jobs in the unorganised sector due to demonetisation.

The government brought in demonetisation to stop corruption. However, some bank officials who are responsible for making it successful are themselves involved in changing black money to white through fraudulent means.
It is clear demonetisation can’t stop corruption. The government should strike at the mechanism that is responsible for corruption and generates black money . Similarly, digital transactions can’t stop corruption.And demonetisation is not a way to promote mobile payments.
The government should follow its own Digital India policy to promote a digital society that will include cashless payments