GS-2/Essay

Steps taken by GOI to promote Digital Transaction:

The Government has decided to exempt services by an acquiring bank to any person in relation to
settlement of an amount up to Rs. 2,000 in a single transaction through credit, debit card or other
payment card service, sources said
The Government has been taking steps to promote cashless or digital transactions to take India
towards a less-cash economy.
Recently, the Government asked banks to install additional 10 lakh PoS terminals by March 31 in
different parts of the country.
The service tax notification of June 2012 will be amended to include exemption on credit and debit
cards, the sources added.
As of now, services provided by organisations such as United Nations and other international bodies
are exempt from tax.
A range of other services provided by arbitral tribunals, testing of newly developed drugs,
educational institutions, trade unions, general insurance business and sports bodies, among others,
too are exempt from the levy.
Cashless Economy/Digital Economy A discussion

Can India really survive as a

Cashless Economy?
With the increase in furor about going cashless, it is imperative that we
understand what entails going that route.
Migrating towards a cashless economy will bring about many tangible benefits
to both emerging as well as developed countries. However, as in any other case,
its also best to exercise caution.

How will an increase in electronic payments

affect the economy?
1. Increase in GDP growth: According to the study conducted by
Moodys on 70 countries between the years 2011 to 1015, a percent
increase in card usage in every country produced:

About $104 billion, or 0.06% increase in consumption between 2011

and 2015

This comes up to 0.04% increase in GDP between 2011 and 2015.

Electronic payments have added $296 billion in real (U.S.) dollars to

GDP in the 70 countries studied in the period. That is equivalent to 2.6
million jobs on average per year over the 5 year period.

It was found that countries with the largest increases in card usage
experienced the biggest contributions to growth.

On plotting, it can be seen that there is strong correlation between card usage

and GDP growth.

Countries with the largest increases in card usage experienced the

biggest contributions to growth. Example, Hungary saw a 0.25%
increase in growth, Chile 0.23%, Poland 0.19%. In most cases,
save Finland, Greece and Tunisia, card usage increased regardless of
economic performance.

The study also found that a rise in electronic payment methods such as
credit, debit and prepaid cards in the UAE added US$3.7 billion to the
GDP, and created an average of 14,750 jobs per year in the economy
during the years 2011-2015. UAE also saw a six-percentage point
increase in card usage with the economy placed 6th in terms of
economic impact on GDP amongst the 70 countries studied.

2. Convenience: It is more convenient for both merchants and

consumers. Consumers are saved from the trouble of visiting an ATM
to obtain cash or from having to count the cash at the time of
payment.

Even merchants are benefited as it lowers labor costs for them. For
example: In self-service gas stations where consumers can use their
own cards.

Even startups are benefited. Especially the ones that are into delivery
of goods. About 70% of the consumers choose Cash on Delivery for
payment. And Cash on Delivery cost the company about 5 times more.
This way going cashless drive down costs for companies.

3. Increase in Transparency: Electronic payments bring down the cost

incurred by the central bank in providing currency.

While cash transactions are costly for businesses, they are costlier for
banks. Cash requires elaborate security for its transportation and
disbursement. It also a task tracking it bill by bill. Thus, financial
institutions can make more money from card transactions and account
maintenance while cash for all its importance, has questionable returns
and a growing air of obsolescence.

They also reduce the gray economy by a substantial amount. They

create an audit trail that brings down unreported transactions, thus
raising tax revenues.

4. Electronic payments provide consumers with a safe and secure access

to funds, reduce cash and check handling for merchants, and expand
the pool of customers who are guaranteed to pay.
5. More importantly, as a side effect they also promote more financial
inclusion, giving those without access to the formal banking system an
introduction to formal financial services.
This way, electronic transactions reduce friction in the economy, which results in
an increase in spending on goods and services. This in turn creates a virtuous
economic cycle where increase in consumption translates into increase in

production, more jobs, higher income, and greater economic prosperity.

How is Sweden doing after going cashless?

Sweden, which is hailed for being the first

cashless society, has nearly 80% of all transactions made electronically. Digital
payments through cards or apps are so widely accepted that most Swedes dont
carry cash anymore. Even the children are supposedly let to pay through debit
cards.
In 2013, Sweden eliminated its largest denomination bill, and demand for its
second largest bill, the five hundred krona note too fell off soon after. By 2014,
only a fifth of Swedish retail transactions were being conducted in cash. Ticket
machines for trains and buses in Sweden accept only cards; and cafes and
restaurants are increasingly moving away from accepting cash too.
Sweden underwent this transformation after three overriding causes that
pushed it in this direction. Several high-profile bank robberies made the public
distrust the security of paper money. The Swedish financial industry also
realized that fee-inclusive transaction technologies would be more profitable
than cash transactions. And lastly, being a small country, Sweden has been a
leader in developing transaction apps and tools to aid this transformation.

Therefore, especially for the young and technologically adventurous, cash

serves as an inhibition to the freedom of exchange. This line of thinking has
driven the success and popularity of cashless-ness in Sweden. Swish, the most
popular mobile cash-transfer app in Sweden runs on this notion. It was not
developed by a visionary tech entrepreneur, but by Swedish banks which
conceived the idea and funded its development. This peer to peer service moves
money instantly requiring only the telephone number of the concerned person.
Within four years of its launch, this popular app is used by nearly half of the
Swedes and over 90% of the Swedish population under the age of 30. In fact,
as of today, some Swedish banks have more Swish transactions than ATM
withdrawals. Interestingly, Sweden even experienced its first Swish mugging
last summer. Two thugs beat up a man and forced him to swish them. However,
the criminals were soon identified by their account.
Street salesmen, from hotdog vendors to homeless magazine sellers have
adopted another app called iZettle, a cheap and easy Swedish system that
allows sole traders and small businesses to take card payments via an app and
mini card-reader plugged into their phones. Many of them have since reported a
30% increase in sales.

Cards are now the main form of payment amongst Swedes with a study by Visa stating that an
average Swede uses a card three times as often as an average European.
While Sweden seems to have made the most head way in stamping out paper
currency, there are many more inching closer such as Denmark and Norway.
93% of consumer transactions in Belgium are now cashless. Many European
countries have even capped the amount that can be legally paid in cash.
Australia has also seen its cash use fall by a third. Even sub-Saharan Africa is
seeing a jump in online payments.
However, there a lot of concerns yet to be addressed regarding a cashless
economy.
Cases of electronic fraud have more than doubled in the past decade.

Privacy is another concern. For electronic transactions to take place, one must
submit his account details online, thereby compromising privacy. Every
transaction one makes is traceable. The jury is out on whether it is okay for
governments (which are not always benevolent), banks or payment processors
to have potential access to this information.
Major sections of rural populations, poor and the elderly are left behind. Rural
population with scant access to banking institutions are worst hit because they
would be heavily dependent on cash for doing everyday business. Elderly people
are usually reluctant to change and end up fumbling with smartphones and
often forgetting their pin numbers. Going completely cashless only adds to their
misery.
That said, a lot of economists vouch for a cashless economy to drive growth and
bring down the inelasticity caused by hard cash. However, the right
implementation and gradual but steady transformation is required to ensure the
disruption by the transformation doesnt do more harm than good.
-- There had to be a high level of secrecy surrounding this decision and the fact is that such a large
country was indeed taken by surprise when the decision was announced.
The Reserve Bank and the Central Government were conscious of certain immediate difficulties that
the public at large could face and all efforts were made to minimise them and mitigate them

The problems of the common persons, according to Gandhi, were at the top of the policy makers
radar and all dispensations were calibrated to address them without at the same time jeopardising
the achievement of the larger policy objectives.
The Deputy Governor reiterated that there is adequate supply of notes and hoarding of notes helps
nobodys cause.
"We also strongly advocate the public to switch to digital payment modes given that there are several
options, there are adequate safeguards and there is an increasing acceptability of this mode of
payment by a large number of recipients," he said.

Digital Economyand Policy Issssues:

Indias strategy of going cashless has its own set of complexities but the country has a six-month
window to roll out digital wallets for 750 million people.
Addressing delegates, which included CEOs of start-ups and large companies, gathered at the
Carnegie India Global Technology Summit, Infosys co-founder Nandan Nilekani pointed out the
challenges that lay in front of regulators and technology providers.
Pointing out the fact that the Indian economy which has been a cash-driven one was a state function
government printed notes, coupled with public sector banks dominate banking transactions. So
far the government played a dual role of owner and policy maker, he said.
Digital economy
However, in the digital economy the old rules are getting upended as companies charge no
transaction fees and make money through data, thereby making efforts to make payments accessible
to everybody a model followed by companies like Google or Facebook.
Bulk of Indias transactions are kirana-like merchant payments and that has to go cashless, which
could get economy on the right track, said Nilekani, adding that currently this cannot be done as the
card system is designed for top-end users.
This development comes at a time when the the central bank lowered GDP growth rate to 7.1 per cent
and short-term disruption in economic activities due to demonetisation. Traditionally, the Indian
banking system has been high value, low volume but high transaction fees, which restricted the use
of cashless payments to rural India.
The former chairman of the Unique Identification Authority of India urged companies in this space
to roll out solutions quickly. In a complex scenario things have come together and we can do things
in six months what would have taken six years, he said.
While India has around 1 billion people registered in Aadhaar, around 250 million people have
access to digital wallets currently. There are 350 million people in my estimate with feature phones
and the only way to reach out to them is through USSD technology, he said. However, there are
regulatory hurdles that prevent these new age wallets to introduce products to markets. USSD is a
protocol used by GSM cellular telephones to communicate with the service providers computers that
can be used to make payments, similar to OTP pin.
Policy issues
Nilekani also stressed on the fact that the government needs to be look into certain policy-related
issues so that the newer payment systems leave out sections of society. If you see in China, payment
is dominated by WeChat and AliPay. This should not be the case here, he said.
Regulation is complicated and some of these issues need understanding, said Shivnath Thukral,
MD, Carnegie India.

Good Governance:

Cashless India

Demonetisation has led to a spurt in non-cash transactions. The challenge is to ensure

user convenience and security, and tax gains
While the anguish and anxiety caused by demonetisation will remain for some time, the spurt in the
use of plastic money and e-wallets is a welcome positive outcome, and signals that India can reduce
the use of cash for many transactions. Also of significance is the wave of disruptive innovations
unleashed by the move. Payment platforms such as Paytm have already built an in-app point of sale
(POS) machine so that those who do not have the Paytm app on their phones or do not have
smartphones can share their debit cards details to make payment. It is a different matter that the use
of the application is on hold for now the genie is out of the bottle, and such innovations will soon
become a reality. Equally significant is the rise in competition between various payment gateways
and platforms to become the preferred mode for completing transactions. Paytm, for instance, with
its aggressive marketing, has come from nowhere to become synonymous with e-wallets, much like
Xerox for photocopying. In doing so, it has challenged established players such as Visa and
MasterCard, especially with vendors who do not have a POS machine to accept payments.
An increase in cashless transactions was expected as the natural outcome of the demonetisation
move and a not-so-hidden motive of the Centre, which has been pushing Digital India plans. While
the Centre and the Reserve Bank of India have announced various measures such as waiver of
charges for use of cards over the past 18 days to encourage greater use of plastic money and ewallets, serious efforts are needed to boost the use of RuPay, the Indian payment gateway, and the
Unified Payments Interface, an indigenous low-cost platform to payments and money transfers. This
is both an economic and a strategic imperative. Ensuring multiple strong players for both payment
gateways and e-wallets is also important to ensure that no one player becomes dominant and has the
room to take decisions that may adversely impact users.
Becoming a cashless society painlessly is an ideal situation. Fewer cash transactions in an economy
can help bring down transactions costs, instances of economic offences and street crime. It needs
some disincentives for withdrawing cash beyond a certain limit as well as incentives to encourage
those who switched to digital payments systems to stay with that mode. Above all, governments
both State and Central need to ensure that digital trails exposed by this transition are assiduously
tracked to maximise revenue gains.

Paytm launches payment method for non-internet users

MUMBAI, DEC 7:
Digital payments platform Paytm today announced a toll-free number to enable consumers and
merchants without an internet connection to pay and receive money instantly and also recharge their
mobile phones.
Customers and merchants will need to register with Paytm their mobile number and set a four digit
paytm PIN, the company said in a statement here. They (users) can then enter the recipients mobile
number, amount and their Paytm PIN to successfully transfer the money from their Paytm wallet to
another Paytm wallet, it said.
We are committed to enabling more and more Indians to transact digitally. The launch of our new
toll free payment number (180018001234), is another significant step in that direction. This will

allow even non-smartphone users across India to go cashless, Nitin Misra, senior vice president,
Paytm said.
Currently, over a million offline merchants across India accept Paytm as their preferred payment
mode, the company claimed.
Paytm has a current user base of over 160 million. The companys investors include Ant Financials
(Alipay), Alibaba Group, SAIF Partners, Sapphire Venture, Mediatek and Silicon Valley Bank.

Creating a cashless utopia

Heres how an economy that swaps currency for byte money will work no bribes and
no deforestation
GORU (Government of the Democratic Republic of Utopia) has decided to abolish paper money and
instead print only byte money. Technologists came out with a unique non-counterfeitable
algorithm and configured byte money in various denominations of the Utopian rupee (UR) up to 1
million UR.
The Reserve Bank of Utopia (RBU) , in charge of printing the byte money, transferred huge
amounts of it to various banks through computers, in exchange for paper currency surrendered by
the banks. This new currency was named the Utopian byte rupee (UBR)
Byte Rupee Cards
All the citizens of Utopia were asked to collect their byte rupee cards (BRC) from the banks. These
plastic-electronic cards were loaded with UBR equivalent to the paper money surrendered by them.
Each BRC could hold up to UBR 1 million.
Those who were already holding bank accounts, were also given these cards loaded with the balance
amount in their account.
These BRCs were bearer cards, which, like money, could be stolen or lost. Hence, at the request of
the BRC holder, a unique number was embedded. Alternately, he could incorporate his own
password for paying more than UBR500 at a time.
GORU also introduced a small gadget byte money storer (BMS), which is of the size of a cigarette
packet (20s). This was a subsidised gadget for UR50 and sold only through the banks. Each gadget
was given a unique number. Every kirana and individual was in possession of BMS.
The system worked as follows:
Mr A goes to a kirana to buy a shampoo or tea bag or bun for UR 2. He inserts his BRC into
the kiranas BMS and punches the amount. The amount is deducted from his BRC and transferred to
the BMS of the kirana.
At the end of the day, the kirana owner inserts his own BRC into his BMS and gets credited with the
balance in the BMS. Now the BMS has nil balance.

If the kirana owner wants to pay his supplier, he can do so by inserting his BRC into the BMS of the
supplier, or the supplier can insert his BRC into the BMS of the kirana and get credited.
Even daily bus tickets, auto/taxis, cinema tickets, etc. were dealt through the BRCs. In fact paying
tolls on highways, buying vegetables, enjoying a cup of coffee could be through BRCs.
In other words, the BRC was the purse holding the money, from which one paid to anothers BRC
through BMS.
The impact
The wide usage of the BRC and BMS resulted in the following:
1. The banks earlier used to restrict withdrawal of money from ATMs to not less than UR 100, due to
the transaction costs involved. Now this ceased to be a problem as no one wanted to draw money
from ATMs and even UR 1 could be paid through the BRC to any BMS and this transaction was not
through the ATM.
This was equivalent to paying paper money from the purse. Simply put, money was transferred from
BRC to another BRC through BMS held by individuals.
2. At intervals of time, when the BRC holder wanted to deposit money in his Bank account, he took
his BRC to the Bank or to ATM and inserted the same in the BMS of the Bank and his account got
credited in the Bank and deducted from his BRC.
3. Within one year all the paper money got out of the system and into the vaults of RBU for pulping
and recycling for other purposes.
4. Since there was no more printing of paper money, millions of tonnes of wood got saved, resulting
in stoppage of destruction of forests and trees.
5. The various hazardous chemicals used in the manufacture of the paper money got eliminated.
6. The new byte money (UBR-Utopian Byte Rupee) was printed by the RBU according to the
normal monetary policy of GORU.
7. Everyone paid everyone else in Byte Money and the Government also collected its taxes in the
form of Byte Money.
In other words, paper money ceased to exist.
Greater common good
Just like the fight between any Federal Reserve Bank and the counterfeiters of paper money, the fight
continued with Byte Money also. GORU is geared up on this to combat this.
The problem of BMS being stolen, getting destroyed, drowned, etc. were also addressed. Since BMC
as well as BMS were sold by the banks, the banks give a unique number and just like the deactivation of a mobile phone lost or stolen, the same de-activation was done and new BMS could be
issued.

The BMS holders were encouraged to transfer to their bank accounts substantial balances in the BMS
frequently and keep only minimum balance in the BMS so that when stolen or damaged, the amount
lost would be minimal (Just like the risk of carrying wads of paper money in the purse).
The facilities were available in all the ATMs and bank branches to draw byte money from the bank
balances either into BMS or BRC and vice-versa. This eliminated the requirement of BRC or BMS to
carry heavy balance.
One important side-effect was the demonetisation of the paper money resulting in elimination of
black money, bribes and corruption. It is true that for a few months, the paper money used to be in
circulation, meaning that some people still used the paper money as consideration for payments.
It died out eventually, for the simple reason that RBU was not printing any more paper money to
replace soiled or damaged notes. Hence, after some time, people refused to accept old paper money.
In this process of elimination of paper money and restoration of forests, the Republic of Utopia
earned considerable revenue from carbon credits.
However, they were aware that they were enjoying the first mover advantage and it was a matter of
time before other countries also followed suit.
It was a win-win situation for all.

The transactions trail they leave will help detect tax evasion
December 4, 2016:
Demonetisation has forced consumers and small businesses to use their debit and credit cards more
often, try mobile banking and adopt e-wallets. As a change in habit, that is a welcome development
it reduces the need to carry enough cash on shopping trips and saves vendors and shopkeepers the
bother of keeping track of cash collections and keeping the money safe till it is deposited in the bank.
If this new habit is not abandoned when the currency crunch eases, India will firmly move towards a
less cash economy, although getting there is a long haul.
Every transaction completed with the swipe of a card, or using internet or mobile banking or ewallets, leaves a digital trail. This trail would become a rich source of information that the tax
department can use to identify tax evasion. For honest taxpayers, that should be of no concern.
However, for merchants, vendors and shopkeepers, the convenience of accepting digital payments
could be replaced with nightmares of tax compliance, particularly if they do not maintain proper
books of accounts.
There is no doubt that the Government will mine the data on transactions in its efforts to widen the
tax net. Just about 40 million individuals, businesses, firms and corporate entities file I-T returns
currently, and the actual number of those paying tax is lower. In the bid to curb re-emergence of
unaccounted cash as well as to collect more from income taxes, the Government could direct
payment gateways and e-wallet companies to share information on individuals and merchants
exceeding a certain threshold in payments and receipts. Credit card issuers are anyway required to
file annual information reports where payment on a card exceeds 2 lakh in a year.
Tina Edwin Senior Deputy Editor

This refers to Red tape, a big drag on our exports by Ajay Srivastava (December 2). The writer has
highlighted the causes for delay in documentation and at the level of movement of goods. At the
documentation level while there is a delay in getting the required exemption for payment of duty,
and at DGFT for processing export incentives, the delay which happens at the level of banks for
processing export and import documents needs to be highlighted. Both ,customers and banks are
responsible for the same.
Srinivasan Velamur
Chennai
An industry grounded
This refers to Bolt from the blue for logistics industry by Areef Patel (December 2). Indeed, truck
and transportation industry is one of the worst hit by the cash demonetisation scheme. Not only has
demand from various sectors come down drastically but truck rentals have also dropped
considerably. A driver is given around 30-40 per cent advance for the journey to reach the
destination. Due to severe cash crunch, transporters have been hit.
GST was expected to be rolled out by April 1, 2017, which would have given a huge boost to this
sector. But considering there are still glitches in the passage of this critical Bill and Parliament is
hardly functioning nowadays, it does not seem that this deadline will be met. So, the logistics
industry may remain in pain for some time.
Bal Govind
Noida
Intimidating Mamata
The stationing of army trucks on NHs and toll posts in West Bengal without the permission of the
State government was not an exercise that can be seen in isolation from Banerjees campaign against
the Modi governments demonetisation drive. But the West Bengal CM is made of better stuff to be
intimidated by threats of this kind. It was unfortunate that the Army was deployed in the vicinity of
the Secretariat to overwhelm the State administration. It certainly represented a setback to CenterState relations. The defence of the Modi government seems to come from their belief that the move is
good only for their interests as well as those of the social classes they represent and support.
G David Milton
Maruthancode, Kanyakumari
Wrong note
The SC order on playing the national anthem in cinema halls, which is totally unwarranted, is yet
another reflection of the rising tendency on the part of the apex court to stray into executive terrain.
Is there any valid reason for bringing back a practice which died down years ago? Is the artificial
patriotic fervour worked up by the Sangh Parivar getting rubbed into judiciary? Many are bound to
walk around while national anthem is played in cinema halls. Can the Supreme Court do anything to

avoid such insults to the anthem? The Supreme Court should not be wasting its time on such
matters.
Manohar Alembath
Kannur, Kerala
The SC directive on national anthem is a crude way of promoting nationalism. It is hard to
understand why such a sweeping invocation is warranted in the first place. When governance and
framing policies are the prerogative of the ruling regime, such moves coming from the highest court
of the land do send the wrong message of the Supreme Court overreaching its constitutional role,
which is what its usually accused of by the executive.
R Prabhu Raj
Bengaluru
Cant bank on them
How faulty is our banking system? The biggest seizure of new currency of 4 crore from two
individuals in Bengaluru reveals chinks in the system. This would not have happened without the
knowledge of bank higher-ups.
The people have lost faith in the banking system. All are now withdrawing money. For example,
banks and treasuries in Kerala now see heavy rush and serpentine queues of people withdrawing
salary, pension and deposit. These people are not given the money they wanted. If this continues,
none will return to banks to deposit money. The net result is imminent ruin of the banking system.

Banks are bleeding enough

This refers to your edit, Easing the blow (November 30). The original purpose of CRR is to ensure
that banks do not run out of cash to meet the payment demands of their depositors. Liquidity in the
system is also addressed by keeping CRR as a monetary policy tool. CRR basically restricts banks
from lending. In the normal course, 4 per cent CRR is alright. But making banks maintain 100 per
cent incremental deposits in the form of cash or with the central bank amounts to zero earning on
these deposits for the banks.
At the same time, banks pay interest on the funds mobilised. Banks also incurred huge costs while
collecting the demonetised notes. When demonetisation is a government programme, banks cannot
be expected to bear the cost. NPAs are already making them bleed. The Centre and RBI must
compensate at least to the extent of interest being paid to banks on these incremental deposits.
S Kalyanasundaram
Email

RBIs move to impose incremental CRR of 100 per cent on increase in net demand and time
liabilities between September 16 and November 11 would lead to increase in the cost of funds of
banks. This has happened at a time when banks were thinking of how to manage the excess liquidity
arising from demonetisation.
On the positive side, this would help the depreciating rupee stabilise and keep the CAD under
control. This would also put a pause to domestic bond buying. The sudden spurt in bank deposits is a
temporary phenomenon. Banks have to live with these monetory measures.
Srinivasan Velamur
Chennai
Post demonetisation, banks are flush with deposits. The temptation to dilute the current unhealthy
levels of NPAs will be high. Not only will the process of their recovery tend to lose steam, fresh largescale loans could also lack the level of prudence that had been exercised following intensive auditing.
In either case, the common man will be denied compensation. This forced deluge of deposits has
enabled a sharp drop in the cost of funds, as also of borrowing by industry.
The CRR hike is timely. It would help contain profligacy in lending even as as loan rates are dropping
sharply. It would provide a cooling off period for a stymied financial system that finds itself bloated
with cash overnight. The next monetary review hopefully is not hurried into till the postdemonetisation economy truly settles down and hard data emerges. So should it be with the budget,
as the present mirage of a fund-flooded economy will skew our policy approach.
R Narayanan
Ghaziabad, Uttar Pradesh
Insulting survey
The survey on demonetisation is laughable because a mere 5 lakh or less than 0.05 per cent of the
10,340 lakh (as of July 2016) mobile subscribers responded. To claim, on such flimsy grounds, that
the overwhelming majority of the people of India supported the decision is an insult to our
intelligence.
The increasing weakness of Indian democracy lies in the emaciated opposition that keeps inflicting
self goals, as the latest tamasha of Akrosh Diwas again proved. This is compounded by a crawling
when only asked to bend attitude readily adopted by the bureaucracy and many leaders and
institutions such as the RBI. The instruction to BJP netas that they should file expenditure
statements camouflages the question of the possibility of information about demonetisation having
been leaked to them. The period to be accounted for should have been some months prior to the
demonetisation.
N Narasimhan
Bengaluru
Voluntary corps

This is the right time to create awareness among the rural and semi-urban masses about various
electronic modes of payments. This can be done only with the help of voluntary organisations of
youngsters who are more tech-savvy and enjoy the confidence of the local people. An example of this
kind of movement was the literacy mission in Kerala during the late 1980s.
PD Sankaranarayanan
Thiruvananthapuram

Demonetisartio and Case Study:

Sugar Industry:

But paying labourers in cash in the upcoming crushing season could be a challenge
On the face of it, the sugar industry seems to be better prepared than its peers to face the present
cash crunch in the economy. The industry has been among the first to use the banking channel to pay
its farmers and traders, even before the demonetisation shock.
Cooperative banks, which gave concessional loans to sugarcane farmers, have played an important
role in giving incentives to them to open bank accounts, explains N Ramanathan, Managing Director
of the Chennai-based Ponni Sugars.
Sugar companies, too, realised that going cashless helps in improving fiscal discipline and
governance. "But we couldnt have done it overnight. So at every stage we brought down the
eligibility for cash payment. Over the years we were able to drive entire cash payment out of our
system. Now all payments go by cheque," said Ramanathan. Banking has taken deep roots in the
sugar sector in the last ten years. Today there is absolutely no cash payment being made by sugar
companies in Tamil Nadu, he added.
While this has insulated the sector from the present cash crisis, demonetisation has created its own
set of problems. And that is because at the sub-traders level, cash transactions are still the norm,
despite millers selling to traders on payments against cheques.
This meant that demand for sugar from these sub-traders has taken a hit. Some in the industry are
also apprehensive of an impending payment crisis for casual farm labour hired for harvesting and
loading, as the crushing season picks up all over the country in the coming weeks. While there may
not be much of a problem paying cane growers and transport contractors, the actual trouble may
begin when it its time to pay the labour involved in harvest.
With the crushing season beginning in Tamil Nadu in December, millers are hoping against hope
that the cash supply in banks would improve. Until there are notes of 100 and 500
denomination in circulation, it wont help matters because harvest labourers get 500-600 in daily

wages and have to be paid in small currency. For that there has to be adequate cash supply in the
banking channel. Today it is not happening, Ramanathan added.
Demand problem
For Balram Chini Mills in Uttar Pradesh where several mills have already started their crushing
operations, cash payments to workers is not a major problem, pointed out Vivek Saraogi, Managing
Director of the company.
What is problematic, though, is a decline in demand for sugar. The major impact of demonetisation
that we are witnessing is the fall in demand for sugar. While millers sell on payments against cheque
and in our factories we dont have any cash payments at all, I am told that down the line there are
traders or sub-traders who buy from the main traders in cash. The chain gets broken somewhere,
and that is why people are not able to fully trade in the current situation. As of now, our volumes
seem to be a lot thinner, Saraogi said without putting a number to it.
Reports say other large sugar companies such as Karnataka-based Shree Renuka Sugars have also
reported lower purchase of sugar by wholesalers.
India is the worlds second largest sugar producer, after Brazil. The country had a carry over stock of
77 lakh tonne as on October 1, 2016 (from when the sugar season begins) and with an estimated
production of 234 lakh tonne, total sugar available in the country during the 2016-17 season would
be around 311 lakh tonnne, against the estimated consumption of 255 lakh tonne, according to
industry body Indian Sugar Mills Association (ISMA).
Transporting such huge stocks of sugarcane will be a problem as the truck network needs cash to buy
fuel.
The small and marginal farmers who harvest cane with family labour will not be impacted. A few
larger farmers who use contract labour will find it challenging. It will also be a little tough if they hire
trucks to transport their product," said Abinash Verma, DG, ISMA.
Cane farmers, although assured of payments flowing into their bank accounts, have other worries.
The cane farmers who get payments from the millers in their accounts, need the cash to buy
pesticides, fertilisers and other inputs. Half the farmers have their Kisan Credit Card accounts, but
the other half can operate only through cash. If the cash situation is not eased out, there will be
repercussions, said Ramanathan.
Rakesh Tikait, a cane grower from UP and spokesperson for the Bhartiya Kisan Union, is hopeful of
cane payments coming into bank accounts of farmers in the next few days, but has a simple plea.
The government should ensure that cane farmers dont have problems withdrawing money from
their accounts once payments are made. That is the only thing we want.

PM Schemes:

PM crop insurance scheme has covered 26% of farmers

PM crop insurance scheme has covered 26% of farmers

The Pradhan Mantri Fasal Bima Yojana, the comprehensive crop insurance scheme launched this
year by the government, has provided coverage to over 26 per cent farmers and is likely to cross the
target of 30 per cent coverage for both kharif and rabi seasons in 2016-17, the Agriculture Ministry
has said.
In terms of total area covered, the achievement has been significant amounting to a total area of
388.62 lakh hectare and sum insured of 1,41,339 crore. The performance this season has improved
by 18.50 per cent in terms of farmers coverage, 15 per cent in terms of area coverage and 104 per cent
in terms of sum insured. an official release circulated by the Agriculture Ministry on Wednesday
stated.
In comparison, in kharif 2015 the number of farmers covered was 309 lakh (22.33 per cent), total
area coverage was 339 lakh hectare and sum insured was 69,307 crore, the release added.
The performance in kharif 2016 (June-September) is better despite the fact that there were teething
issues such as a delay in notification of the scheme by many States. The cut-off date for availing
insurance was extended July 31, 2016, which was later extended to August 10, 2016.
Furthermore, there has been a quantum jump of more than 6 times in the coverage of non-loanee
farmers from 14.88 lakh in kharif 2015 to 102.6 lakh in kharif 2016, the release said.
The PMFBY, which replaced the older National Agricultural Insurance Scheme (NAIS) and the
modified NAIS, seeks to provide comprehensive insurance to farmers against the vagaries of nature
at very low premia of 2 per cent of the insured value for the kharif crop and 1.5 per cent for the rabi
season.
(This article was published on December 7, 2016)

State Issues;

No Valley for childhood

The third generation of Kashmirs youth since the outbreak of armed secessionist
campaign in 1989 looks set to be consumed by the conflict unless something drastic is
done to end the vicious cycle of protests and curfews, killings and maiming, and
disrupted schooling
Insha Lone sits quietly in a room at her uncles home in Dangerpora hamlet in South Kashmir. Its
hard to miss her with her thick, black glasses that are large enough to cover her cheekbones. The
contrast it makes with her beautiful face and fleshy nose only heightens the agony of the realisation
that she can no longer see.
The 14-year-old was blinded just three days into the current upsurge of violence in the Valley, when
she was hit by a barrage of pellets fired by the police to quell a protest outside her home in village

Seedow. The image of her disfigured, pellet-riddled face went viral, generating widespread horror
and anger, and forcing the State government to send her to AIIMS Delhi and, later, Aditya Jyot Eye
Hospital Mumbai. But after several surgeries, the doctors declared her blind.
Her plight has since become emblematic of the Kashmir situation and her face a symbol of the mass
blinding unleashed by indiscriminate use of the non-lethal pump action guns. Though the Centre
had, in between, formed a committee to review the guns use, it ultimately decided not to ban it.
Pellets continue to blind and maim protesters.
According to recent figures, 1,178 of the over 15,000 injured were hit in the eye and 300 have lost
sight in one or both eyes; 150 minors, aged below 15, have impaired vision. As many as 991 of the
injured have been admitted at SMHS, the Valleys main hospital, and 135 at the SKIMS Medical
College.
Sitting in her room, Lone is keenly conscious of her lost sight. She longs to see her mothers face. She
asks for her school bag, which her mother has hidden for now. Whats more, she wants to go to her
school and meet her classmates. The frustration borne out of having these simple wishes unfulfilled
pushed the child to leave home and move to her uncles house.
I dont want to live at my home. I got blinded there, she says. Besides, I cant even go to my school
now. What is left for me to do there now?
Lones dejection is heartbreaking and, whats worse, she isnt alone in this. Injured or not, thousands
of Kashmiri children are ensnared in the Valleys unremitting political conflict and stare at an
uncertain future.
Stalled education
Schools in Kashmir have remained closed since July 8, the day the popular Hizbul Mujahideen
commander Burhan Wani was killed in an encounter with security forces. The curfew over the
following two months, alongside an endless separatist protest roster, ensured that no schools could
reopen. This situation remains unchanged, even after the government successfully conducting board
examinations for Std X and XII from November 14.
The schools confront a unique dilemma: The government sees their reopening as a major step
towards normalcy, whereas the separatists are determined to prevent this for the same reason. The
State cannot provide security to all the 15,000 educational institutions in the Valley, and the schools
are anxious not to defy the separatist protest calendar, especially in the face of the widespread anger
against the ongoing killings and blindings.

The tug-of-war has hopelessly politicised the situation. The government and the separatists alike are
mouthing platitudes about their respective concern for education, but are, in practice, using the
children to score off against each other.
In October, the States education minister Naeem Akhtar had, in a local daily, penned an open letter
to the hawkish separatist patriarch Syed Ali Shah Geelani, seeking his intervention to re-open
schools. Sir, I am praying for education for we dont have it though we do well in most other fields.
Among 34 states of India we are at 33. Cant we have a modest but more achievable target as a
Muslim majority State to convert the wish of our Prophet to become number one by implementing
his command, Akhtar wrote. Can we with our present performance card face Him (God) on the day
of reckoning, you Jenab Geelani sahib as the David in the present equation and me as the Goliath,
you as the angel of Azadi and me as the devil of subjugation?
In response, Geelani in his address to the nation said the people who were collaborating with
India had no right to exhibit concern for education. It is a shame that those schooled in the art of
slavery and collaboration are teaching us the virtues of education. Education is not making ones self
available at the service of a foreign Hindu fascist aggressor against ones own people, he said.
Education is not mere literacy. It is the light by which we distinguish truth from falsehood. Our
children are now educated in this; they see without exception the hollow men that these
collaborators are.
And even as this contentious discourse was playing itself out, schools started burning across the
Valley. In a matter of six weeks, 36 schools 16 in the four south Kashmir districts of Kulgam,
Anantnag, Shopian and Pulwama, also the hub of the current turmoil were set afire.
Initially, both the separatists and the government watched the development from a distance, then
they dissociated from it, and later started blaming each other. It took the burning of 19 schools to
finally rouse the Hurriyat to tamely condemn it. The separatist grouping merely issued a statement
that those burning the schools were not its well-wishers.
The State government, which has so far arrested over 10,000 for alleged participation in protests and
stone-throwing, managed to round up just over 30 people for alleged involvement in school
burnings. Intriguingly, however, it stopped short of identifying them or revealing their motives and
links.
So, who burnt the schools? Nobody seems to know. Yet, everyone is aware that there is a troubled
political context to the development the tussle between the government and the students backed
by Hurriyat over the holding of the annual examination. Bizarrely enough, at some of the protests
against the exams, students carried placards that read No exams until Azadi. This led many to
surmise that the school burnings were an impulsive action by students seeking postponement of the

examinations. But the organised and coordinated nature of the incidents, in places far removed from
each other, put paid to such conjectures.
The State government, meanwhile, has gone ahead with the board examination as scheduled. And
the Central government was quick to claim victory.
Human resource development minister Prakash Javadekar termed the board exams a powerful
surgical strike on the separatists, and the latter were quick to retort that Javadekars statement was
a vindication of their position that the government was exploiting education for political ends.
The battle over school reopenings, on the other hand, is an ongoing one and the state government
can do little without the separatists consent. Nevertheless, a small number of government and
private schools, most of them in far-flung villages, tried to get around this bind by opening schools
for two hours in the morning.
One of these is the Government Middle School at village Haran in Ganderbal. Its headmaster,
Mushtaq Ahmad Hakeem, 51, leaves his home in nearby Bamloora at 7.30 in the morning, as do
some of his colleagues in the adjacent villages. They walk furtively some ride a cycle the three
km to the school and return home by 11 am.
I first talked to the villagers. It was only after they encouraged me to reopen the school that I went
ahead, says Hakeem. We did our best to provide education to our children. But there is not much
that can be done in two hours.
This exercise has proved costly for some. In Bamloora, teachers who attempted to hold morning
classes were attacked. On the whole, an estimated 90 per cent of schools have remained shut a
state of affairs that is tied to the predominantly rural character of the current revolt.
Drift towards militancy
The disruption in education aside, the fallout of the unrest on Kashmirs children has been profound
and sweeping. For one, the ferment has been, more or less, led by 15- to 20-year-olds. According to
police data, there were 2,249 incidents of stone-throwing in the first 100 days of the current turmoil;
and on the day after Wanis killing, there were 200 incidents, with nearly 2,000 stone-pelters
involved in each that is, 40,000 youth pelted stones on that single day.
Similarly, as many as 5-10 protest rallies, each with nearly 5,000 participants were taken out every
day in the first 45 days after Wanis death. The governments response has been ruthless: 96 dead,
several hundred blinded and over 15,000 injured.
In a Valleywide sweep, more than 7,000 have been arrested and over 500 slapped with Public Safety
Act a lawless law that sanctions six months of incarceration without trial, and can be extended

up to two years. A predominant majority of the killed, blinded and arrested are youth, many of them
minors.
Militancy has been in step with this groundswell of agitation: In the first 100 days, there were 68
militancy-related incidents shootings, gunfights, grenade attacks and fidayeen (suicide) strikes.
The dead included 35 security personnel Army and CRPF, six cops and six civilians.
Additionally, more than 50 Kashmiri youth have embraced militancy during this short period of
unrest, which is unprecedented over the past decade. This, coupled with the infiltration by 105
militants in the first nine months of this year, has given a marked boost to militancy in the Valley.
According to J&K DGP K Rajendra Kumar, nearly 300 militants are currently active in Kashmir,
which is a substantial jump from the annual average of 100-150 over the past decade. Kumar
described the situation as extremely fragile at a recent meeting of top civil and police officials of the
State, chaired by Chief Minister Mehbooba Mufti.
The signs are ominous for Kashmir. It is now the third generation of its youth since the outbreak
of the armed secessionist campaign in 1989 that looks set to be consumed by the conflict. That is,
unless the Centre embarks on a sustained ameliorative response that addresses the issues
underpinning the eruptions in the State.
We lost the 90s generation to militancy. At the turn of the millennium we witnessed a slow
transition to a less militant struggle, forced in part by geopolitical factors and a consequent
realisation that the gun no longer served the Kashmir cause, says Naseer Ahmad, a local columnist,
who adds that the separatist movement transitioned to street protests through three successive
summer revolts until 2010.
But the current agitation is different. The drift now is back in favour of militancy. There is a
renewed fancy for the gun, largely because it now commands the same public respect and awe that it
did in the early 90s, Ahmad says.
The unconscionable number of killings and mass blinding, on top of the massive humanitarian
fallout of three decades of violence, has only deepened the feelings of desolation and consequent
alienation from New Delhi. Along the way, the romanticised discourse on Azadi becomes enmeshed
with the discourse of violent means to achieve it, and, further ahead, touches base with ideologies
some of them transnational in their appeal that champion an endless armed resistance.
Politically troubled future
The four months of mass groundswell, attendant with the curfews and shutdowns, have brought
Kashmir to the brink of an economic collapse. Nearly everyone, with the exception of government
employees, is losing their livelihood. Shopkeepers have thrown out their salesmen, hoteliers their

cooks and waiters, and daily-wage earners have been forced to live on doles. Other small businesses,
including the local newspapers, have either sacked staff or drastically cut wages.
New Delhi appears impervious to these hardships. After initial feeble attempts at some engagement,
it gave up all pretence of a political outreach. Ever since the visit in August of the all-party
delegation, which found no takers among the separatist and civil society groups, the Centre has not
embarked on any initiative to defuse the volatile situation.
This has left Kashmir feeling embittered. The youth apprehend an economically unwelcoming and
politically troubled future, caught up in the parallel narratives of Islamabad and New Delhi, and their
respective play in the competing politics of the separatists and mainstream parties in the state.
According to the 2011 J&K Economic Survey, the number of unemployed youths registered at the
district employment and counselling centres was 6.01 lakh. Officials reckon the number would go up
to 10 lakh in 2017. But there are fewer job opportunities for them.
The Annual Employment and Unemployment Survey Report for 2012-13 says that at 10 per cent,
J&K has the highest unemployment rate in north India. The reason for this is the absence of a robust
private sector; the State government, which is currently the largest employer, is in no position to
provide jobs to all.
The prevailing situation in J&K is as follows: The uncertain and interrupted schooling deprives
Kashmiri youth of proper education and skills. The lack of employment opportunities denies them a
future. And the lingering conflict in the State frames their world view and determines their lives and
choices. It also exacts heavy costs in terms of loss of life and injury.
If anything, this renders the Kashmir of today structurally unfavourable to its children. And this
scenario can only be expected to continue unless there is a fundamental shift in the factors at play.
Riyaz Wani is a journalist based in Srinagar

Discretionary products bear the brunt of demonetisation,

witness steep fall in sales
Aerated drinks, skincare products, juices and chocolates, among segments hit
MUMBAI, DECEMBER 7:

Ramji Ganji & Co, a kirana store at Churchgate in South Mumbai, has witnessed the steepest fall in
sale of products like aerated drinks and face creams. Sales have slid by more than 30 per cent in both
these categories since demonetisation was announced last month.
Consumers are cancelling their parties as they do not want to buy Coke and Pepsi while women are
no longer asking for face creams, says the owner of the general provision store.
Industry sources indicate that aerated drinks category has dipped in consumption by more than 25
per cent and this is more pronounced in the mini-metro markets. Coca-Cola and Pepsico refused to
officially comment on the impact of demonetisation on sales but it has been a double whammy for
the MNCs already facing de-growth in the aerated drinks segment. Winter is a season when
production is generally curtailed in this segment.
However, necessities like packaged water have not suffered a similar fate as aerated drinks. Bisleris
Chairman, Ramesh Chauhan, said, Everyone will find a way out. Distributors can always be paid on
credit and this period can get extended in times like these. Water as a category has not been
impacted but it may not be necessarily the same case in the aerated drinks category.
Biscuits production
Parle, the makers of the countrys largest glucose brand of Parle G, is willing to admit that it had
reduced 30 per cent of its biscuits production in the month of November. It now fears that all highticket items, that are discretionary in its portfolio, including its new imported brand of chocolates,
may take a further hit.
Any FMCG product which is not a necessity and is discretionary in nature will get impacted this
season. Biscuits is almost like the staple category and its impact will be less than some of the big
ticket categories like skincare and hair care which have products like creams and shampoos
belonging to companies like HUL, Godrej, Emami, Dabur and Marico Distribution cycles have
slowed down as less orders are being placed with some of these FMCG categories. But staple brands
like ITCs Aashirvaad atta will have takers, observes B Krishna Rao, Deputy Marketing Manager,
Parle Products.
It is mostly the general trade and kirana outlets which stock majority of FMCG products that are still
reeling under the impact of demonetisation unlike their modern trade counterparts. Having dealt in
cash with wholesalers and distributors, FMCG companies are willing to double the credit time given
to distributors when they buy the goods from them and the distributors in turn are also willing to do
the same when they sell the goods to the retailers, to normalise operations.
Observes K Ramakrishnan, Country Head, IMRB Kantar Worldpanel, In FMCG, it is the wholesale
trade which has been affected and this has disrupted the entire distribution for smaller retailers and
the general trade for FMCG players. While the staples category has seen the least impact,
discretionary products like skin creams are likely to suffer the most. The north of the country, which
is the hub of wholesale trade, has been the most impacted while the southern markets have felt the
least impact and the rest of the markets have been somewhere between.
Tata Global Beverages, the market leader in tea, has faced marginal reduction in demand. Sushant
Dash, Regional President, India, Tata Global Beverages, said, It is de-stocking in the system by
distributors and wholesalers who dealt in cash, is what has impacted the general trade retailers. The
impulse and luxury segments, which are mainly discretionary in nature, have been impacted in the
FMCG segment. We have seen a marginal reduction between 5 and 10 per cent since tea is a necessity
and will wait to see how consumer demand pans out before taking any decision on production.

Tea and biscuits may have got some respite from the slowdown but indulgent categories like juices
and chocolates may not have a similar fate. BP Agarwal, President of the Biscuit Manufacturers
Association, said, Biscuit sales have dropped by 30 per cent but there is not much which can be
done as even promotions cost money and input costs have also been going up over the years.
However, we are better off than some of the other FMCG categories like chocolates and juices which
has seen a 70-80 per cent drop in demand.
Downtrading of brands
Meanwhile, downtrading of brands and products in the FMCG category is expected to get more
rampant. Dairy major Parag Milk Foods expects to feel the impact of demonetisation on high value
food products like ghee and cheese.
We fear there will be down trading to smaller packs in the case of high value products like ghee
which sells at 500 for a litre unlike in the case of staples which consumers cannot avoid buying. To
counter the pressure, we have to adopt new ways of selling, with sachets leading the way as there is
bound to be down trading. We have already extended the credit line to our distributors and are
willing to take post-dated cheques from them, said Devendra Shah, Chairman and Managing
Director, Parag Milk Foods.

SC n Technology:

Remote sensing satellite Resourcesat-2A launched

successfully
BENGALURU, DEC 7:
Indias latest remote sensing satellite, Resourcesat-2A, was today successfully launched by ISROs
workhorse Polar Satellite Launch Vehicle from the launch pad at Sriharikota in Andhra Pradesh.
Resourcesat-2A, intended for resource monitoring, is a follow on mission to Resourcesat-1 and
Resourcesat-2, launched in 2003 and 2011 respectively. It is intended to continue the remote sensing
data services to global users provided by Resourcesat-1 and 2.
PSLVC36 successfully launches Resourcesat-2A, ISRO said.
Describing it as a successful launch, ISRO Chairman A S Kiran Kumar said it is going to provide
continuity to our three-tier imaging data, which will be useful for various applications of land and
water.
He said it has been a perfect launch.

I wish to congratulate the entire ISRO team for the wonderful job they have done and for putting
one more operational satellite into orbit, Kumar said.
PSLVC36, the 38th flight of PSLV, blasted off at 10:25 hours from the first launch pad at Satish
Dhawan Space Centre in Sriharikota and injected Resourcesat-2A into orbit in a flawless flight
lasting about 18 minutes.
The 1,235-kg Resourcesat-2A was placed in an 817-km polar Sun Synchronous Orbit (SSO), ISRO
said.
In this flight, the XL version of PSLV with six solid strapon motors was used.
Resourcesat-2A carries three payloads which are similar to those of Resourcesat-1 and 2.
They include a high resolution Linear Imaging Self Scanner (LISS4) camera operating in three
spectral bands in the Visible and Near Infrared Region (VNIR), medium resolution LISS3 camera
operating in threespectral bands in VNIR and one in Short Wave Infrared (SWIR) band, and
coarse resolution Advanced Wide Field Sensor (AWiFS) camera operating in three spectral bands in
VNIR and one band in SWIR, with specified spatial resolutions, ISRO said.

GS-1
Social Welfare Schemes:
December 7, 2016:
You mean freebies.
Yes, Im talking of the freebie handouts of everything from TV sets to mixies to grinders to laptops
to bicycles. Many of these have been derided by conservative economists and commentators as nonproductive squandering of public resources. But they werent always wasteful.
But Im also talking of a broader policy-driven approach to social welfare based on what economists
Amartya Sen and Jean Dreze call the principles of universalism: that is, they were available to
everyone on a non-discriminatory basis.
In other words, it wasequal-opportunity populism.
The cynicism is easy to understand. But the intangible benefits from Tamil Nadus crafting of asocial
security net are hard to miss. To be honest, this wasnt just the result of Jayalalithaas compassionate
statecraft: it evolved under both her mentor MGR and her political rival M Karunanidhi. It was MGR
who introduced the midday meal scheme in government schools. Once criticised as extragavant
populism, it is today internationally acclaimed: it improved the health of underprivileged children,
and, as a trickle-down effect, even improved school enrolment. Jayalalithaa expanded the welfarism
to cover everything from cradle to grave. And her policies were driven by outcome-focussed
pragmatism, not a doctrinaire approach.
Tell me more.
This isnt discussed much these days, but to Jayalalithaa goes the credit for introducing the radical
cradle baby scheme as an antidote to the regressive social practice of female foeticide and
infanticide. Under it, unwanted girl babies could be abandoned outside primary health centres and
orphanages; the state would then raise the girl children. Now, it would have been easy to merely

criminalise foeticide and infanticide and they are criminal acts. But the cradle baby scheme
effectively gave life to countless girl children who would otherwise have been killed; and over time,
this has improved Tamil Nadus sex ratio relative to all of India.
But how does giving away mixies and grinders count as progressive policy?
There is merit in the feminist argument that giving away such labour-saving devices frees up women
from the chores of domesticity and enables them to become productive economic forces outside their
homes. More broadly, these freebies are a form of compensation from the state for womens unpaid
labour at home. The same is true of the Amma Unavagam outlets that Jayalalithaa opened up
How so?
These outlets, which serve hygienically prepared food at rock-bottom prices, have effectively
outsourced womens unpaid labour at home. It just goes to show that to truly liberate women,
you need context-specific pragmatic policies, and not fiery feminism. Even giving bicycles to schoolgoing girls has a social impact: it gives them mobility, which patriarchal forces tend to curb.
But doesnt welfarism take away resources from economic development?
On the contrary, data indicates that on traditional indices of economic development, Tamil Nadu
outperformed many other peer-set States over the past 25 years. Again, not all the credit for this
accrues to Jayalalithaa, but she was in power for 15 of those years. What this means is that
Jayalalithaa wasnt conflicted by the growth-or-equity discourse. She ensured growth with equity.
But surely youre not saying Jayalalithaa was flawless?
Not at all. She had big failings, including corruption and a megalomaniacal hold on absolute power.
But to give credit where its due: her much-criticised welfare-nomics yielded many intangible
benefits for the State.

GS-3/
Policy Issues:
RBI faulty directive on SMEs:

Out to cull sick small and micro units?

recent RBI directive unfortunately pushes banks to declare SMEs unviable, and recover
dues without exploring revival options
The bank is a friend, philosopher and guide of small enterprises was the guiding motto for all
banks during the past five decades. This seems to have been made into the derisive saying A banker
is one who lends an umbrella when the sun shines and takes it back when it starts raining, by the
RBI circular of March, 17, 2016, on small units in financial distress.
This circular, according to the written statement of Kalraj Mishra, the minister for micro, small and
medium enterprises (MSME) recently in Parliament, was issued on the basis of a notification issued
by the ministry. The latest instructions do not recognise ground realities and could do incalculable
harm to the growth of the MSME sector, especially to micro and small enterprises.

Draconian directive
The main directions of RBI to banks now are as follows: One month before a loan turns into a nonperforming asset (NPA), that is, in cases where principal or interest payment is overdue between 31
and 60 days, it should be taken up for Corrective Action Plan (CAP) by banks/creditors. This would
be done by the branch manager of the bank in respect of small loans with aggregate limits up to 10
lakh and by a committee for bigger advances. An elaborate procedure has been laid down for
composition of the committee.
The options under CAP would generally include (a) rectification: obtaining a commitment from the
borrower to regularise the account without any assistance from the lending bank; (b) restructuring:
consider the possibility of restructuring the account, if it is prima facie viable and the borrower is not
a wilful defaulter; and (c) recovery: once the first two options are seen as not feasible, due recovery
process should be initiated.
According to these instructions, the decision on viability of the unit should be taken at the earliest
but not later than within three months of the unit becoming sick under any circumstances. In respect
of micro (manufacturing) enterprises with an investment in plant and machinery up to 5 lakh, and
micro (service) enterprises with an investment in equipment up to 2 lakh, the branch manager
may take a decision on viability and record the same, along with the justification.
If these instructions were applicable prior to 2015, let us consider the impact. During the big deluge
in Chennai in December 2015, many micro and small enterprises engaged in photocopying service
and similar activities lost all their machinery and equipment. In such a scenario, if the unit had taken
a bank loan, branch managers, in their eagerness to reduce the level of NPAs, might have taken the
easy way out by declaring the unit unviable, and started the recovery process.
In the context of government rules governing banks, declaring the borrower viable and giving further
loan might warrant vigilance (penal) action, should the unit later prove to be unviable. Declaring
the unit unviable would not call for such enquiry. And, if the bankruptcy code were in existence, the
borrower would be made bankrupt and his/her entire life would be ruined.
What Chakrabarty recommends
Let us juxtapose these instructions with the earlier RBI circular issued in November 1, 2012, based
on the recommendations of the Chakrabarty Working Group on rehabilitation of potentially viable
sick units, on dealing with sick micro and small enterprises. Briefly, they ordained that a micro or
small enterprise would be considered sick if any of its borrowal accounts remained NPA for three
months or if there is erosion in the networth due to accumulated losses to the extent of 50 per cent of
its net worth during the previous accounting year.
This would, according to the working group, enable banks to take timely action in identifying sick
units for their revival. Once identified, the banks must examine the viability or otherwise of the unit.
If found viable, a rehabilitation package should be fully implemented within six months from the
date the unit is declared potentially viable or viable.
While identifying and implementing the rehabilitation package, banks are advised to do a holding
operation for a period of six months. This will allow small-scale units to draw funds from the cash
credit account at least to the extent of the deposit of sale proceeds during the period of such holding
operation.
The decision on viability of the unit should be taken at the earliest but not later than three months of
the unit becoming sick under any circumstances. The declaration of the unit as unviable, as
evidenced by the viability study, should have the approval of the next higher authority/present

sanctioning authority for both micro and small units. In case such a unit is declared unviable, an
opportunity should be given to the unit to present the case before the next higher authority.
Go back to earlier format
Comparing the two instructions, the March 2016 circular seems to place the burden on proving
viability or otherwise on the unit, whereas the earlier instructions required the bank to prove
unviability. Further, in the latest directive, action is triggered one month before the account turns
NPA, whereas the earlier instructions called for action to be taken three months after it would
become an NPA.
It will be observed from the RBI instructions prior to March 2016 that the objective was to assist the
NPA borrowers in micro and small enterprises to re-establish their productive capacity with as much
help as possible from the lending banks.
However, the later instructions appear to lay more emphasis on the banks and creditors safeguarding
their interests, than nursing micro and small enterprises back to health. In fact, the definition of sick
small units appears irrelevant now, as banks have to take action well before the account becomes
NPA.
It is a fact that micro and small enterprises are extremely vulnerable to acts of God or those of
bigger enterprises to whom they might be ancillary units.
Banks should, therefore, approach the problems of such units with greater sensitivity. It is absolutely
necessary that the instructions of March 2016 are not made applicable to micro and small
enterprises.
Would the RBI and the Centre urgently review the matter and reinstate the 2012 circular in this
regard?
The writer is Deputy Managing Director (Retired), SBI

Should RBI support growth or be hell bent on focusing on Inflation

The RBI-MPC team has been prudent but the price of prudence may prove high
The Monetary Policy Committee has missed an opportunity to give the economy laid low by the
drop in velocity of circulation of money a booster shot. The MPCs reasons for not cutting repo
rates are less than convincing. It cites the near certainty of monetary policy tightening in the US
and the firming up of crude prices after OPECs decision to cut output as the main factors. A rate cut,
the MPC implicitly fears, could drag the rupee down below 68 levels against the dollar, spurred by an
outflow of FII monies invested in debt towards US bonds. This, the MPC perhaps feels, would further
raise fuel costs. It notes that emerging economies are already being rocked by volatility, with India
too seeing portfolio outflows amounting to $7.3 billion in October-November. However, the impact
of an oil output cut is not expected to be serious. The drop in the annual rupee-dollar forward
premiums since July from about 6 per cent to 4 per cent at present suggests that the outlook on the
rupee is not a cause for worry. A forex chest of about $360 billion is meant to deal with such
contingencies; besides, a depreciation of the currency can help our labour-intensive exports, which

are just showing signs of revival. The 10-year G-secs yields too have been on the decline and, at 6.3
per cent, are barely above the overnight repo rate level of 6.25 per cent. A flat yield curve is not
desirable. But by reacting solely to the external situation, the MPC seems to have overlooked the
need to bring domestic business and consumer sentiment, ruffled by demonetisation, back on track.
This is despite the fact that it expects 2016-17 growth to fall by 0.5 percentage points, while also
conceding that the effects of demonetisation are unclear.
Sectors that led Q2 growth agriculture, construction, hotels, trade, transport and communications
have been worst-hit by the withdrawal of currency. Private consumption too has been impacted.
Given the distinctly deflationary environment retail inflation in November is likely to fall below 4
per cent, and presuming that the currency crisis is here to stay for a few months, this trend may
continue the MPCs concerns over core inflation (excluding food and fuel) seem exaggerated. It
seems to have made the age-old monetary policy error of targeting inflation when the lurking fear
now is of demand compression (notwithstanding the Seventh Pay Commission outgo, which is
restricted to the organised economy) dragging down the economy with it. A rate cut would have
boosted animal spirits, urging the banks to lend their excess liquidity to bonafide businesses.
The RBI should have also been more forthcoming in providing information on the currency
situation. We now know that 1,179 crore of new notes have been printed, but not their value. That
11.5-lakh crore of withdrawn currency has returned to the system was all that one could glean from
the RBI.

Issues:
Playing national Anthem At Cinema Halls:

The honourable Supreme Court on Wednesday ordered all cinema halls in India
to play the national anthem before the start of the feature film. As per the
order, everyone from the audience is obliged to stand up and show respect to
the national anthem. Also, the theatres are expected to have the image of the
national flag when the anthem is being played and all doors are to be closed to
prevent any disturbance while playing the national anthem. A period of ten days
has been given by the Supreme Court for compliance of this order. This move
has been taken by the Supreme Court to instil committed patriotism and
nationalism among the citizens.
The intentions of the Supreme Court are no doubt in the right direction. In my
opinion, being truly patriotic to the motherland and having unconditional love
and respect for the motherland is the best virtue that one can possibly have.
However, would one become patriotic by just standing up for the national
anthem (rather being forced to stand up for the national anthem)? Isnt there
more to patriotism than this gesture?

Let us closely analyse events when people in our country actually feel patriotic.
For a lot of people, the feeling of patriotism comes only during an India vs.
Pakistan cricket match. There are people who get this feeling during
Independence Day and Republic Day when the tricolour is hoisted in different
parts of the country. Whenever there are any terror attacks or ceasefire
violations in the border, the hate for Pakistan manifests in a feeling of
patriotism. Of late, we witnessed patriotism when some of our Bollywood stars
made unwarranted comments and their movies were boycotted. For some,
boycotting foreign brands and using Indian brands is a way to show patriotism.
Let us now look at some of the more serious issues where the common man in
India actually needs to show patriotism, but selfish motives bypass patriotism.
When buying or selling property, the common man more often than not indulges
in undervaluation to reduce the tax component, which is one of biggest causes
of the parallel economy. This evil practice has become almost a norm and the
common man does not even feel guilty after indulging in this act. Where is
patriotism when the common man receives a part of his house rent in cash,
thereby contributing to unaccounted wealth in the nation? Where is patriotism
when the common man pays a bribe to the traffic cop to avoid paying a larger
sum to the government or when he pays a bribe at the RTO office to avoid
hassles in obtaining a driving license? Where is patriotism when the common
man litters the streets and then blames the government for not doing enough to
maintain cleanliness? During Elections, there are a lot of places in India where
the voting percentage is less than 50%. Voting is our right and our duty. When
we have a negligent attitude towards this basic duty, what patriotism are we
talking about?

These are just a few instances when the average common man in India allows
greed to overtake national interests. The harsh truth is that we, the ordinary
citizens of our country are as responsible for India still being a developing
nation as our netas and bureaucrats. The oft heard argument to defend such
actions is that the government officials would anyway misuse the tax money
and hence there is no need to be completely honest. The other argument that

one hears is that everyone does it, why should I not do it? These are just
excuses given by the common man and none of it would justify not performing
basic duties towards the nation and society.
This move by the Supreme Court would not achieve the desired result of
instilling patriotism, but there is definitely scope for trouble and unwanted
violence. People who have some amount of love and respect for the country
would stand up for the national anthem without raising any hue and cry. But
there are people, especially the ones belonging to the extreme left of the
political spectrum, who find it rather fashionable to disrespect the national flag
and anthem. At the same time, there may be people who would not be able to
stand up due to health reasons. There are high chances that unruly elements
and self-styled patriots would resort to violence against the ones not standing
up for the national anthem and this could result in another intolerance debate.

Merely playing the national anthem and asking

people to stand up would do very little to instil a
sense of patriotism and nationalism. The
honourable Supreme Court must look at methods
to inculcate the sense of patriotism when it comes
to some of the larger issues mentioned above.
Children and youth must be taught that bribery and contribution to the parallel
economy are sins and anti-national deeds. Patriotism is a virtue that cannot be
forced and it must come from within. One must stand up for the national
anthem because of genuine love and respect for the country and not out of
force.

Sectoral Issues:

Boost handicrafts

This is with reference to India can rule world lifestyle market by Pritam Banerjee (November 29).
The Make in India initiative should encourage skilled workers throughout the country who are
slowly falling prey to cheap bulk foreign products being pumped into Indian markets. Small-scale
and cottage industries engaged in traditional handicrafts should be encouraged.
One way is to boost tourism. Also, when big organisations hold celebrations, they should purchase
these items in bulk. India is popular for its handicrafts and artisans, and they should be fully
encouraged not only by the Government but also the people.
Veena Shenoy
Thane, Maharashtra
Funding the elections
This is with reference to Its time to make poll funding transparent by NV Krishnakumar
(November 29). The crackdown on black money by means of demonetisation has to be backed by
further strikes on unaccounted properties and also on the root cause for corruption. Our political
system encourages corrupt practices by rewarding culprits. The enormous expenditure in elections
and their funding of through ill-gotten money is a curse on the country. There is also a deeply
entrenched system of crony capitalism.
Two things can be done to achieve transparency in poll funding: have government fund elections and
hold elections simultaneously for the Centre and the State legislatures. Political parties must
cooperate by accounting for all their transactions. Parties must come under RTI. With these reforms,
corruption will definitely decrease.
Rahul J Gautam
Bengaluru
Were so negative
Modis appeal to BJP MPs and MLAs to reveal their financial transactions after demonetisation is a
good move. Now, it is unfortunate that for every constructive effort, there are lots of negative
comments and protests. Also, such things get more of the limelight than the positive results that
emerge. It is painful to witness the deterioration of public ethics, with political elements going so far
as to pledge to remove a constructive leader. It is amazing that the media gives so much importance
to negative elements.
VS Ganeshan
Bengaluru

The torture continues

The Governments announcement that people should pay 50 per cent tax on unaccounted deposits,
and 85 per cent if they are caught with unaccounted money doesnt mean anything to 90 per cent of
the people who just about manage to make ends meet and do not have anything to save. The majority
of the people are in debt. The country is waging a war against black money least knowing the
quantum of black money to be unearthed, and in the process the Government is making honest and
gullible people suffer. There is no end to the torture.
S Ramakrishnasayee
Ranipet, Tamil Nadu
Truly media friendly
The death of RP Puri, owner of Central News Agency in Connaught Place, Delhi, has created a
vacuum for lovers of the print media. He left no stone unturned to make books, newspapers, and
magazines easily available at any time to readers. The shop made available practically every known
newspaper and magazine. And Puri allowed readers to read and/or scan any material, Indian or
foreign. This calls for a big heart. He will be remembered forever.
Mahesh Kapasi
New Delhi
Chequered legacy
Fidel Castro bravely stood up for many Third World countries but he failed to take a leaf out of the
progressive moves made by regimes of small countries such as Taiwan which too emerged from the
shadows of imperialist rule. It was only after 2010 that he advised his successor Raul Castro to
introduce some liberalisation in the Cuban economy, sensing belatedly the long-term failure of the
communist model. As much as his regime was characterised by his magnanimous outreach to the
Third World, it will also be infamous for his narrow-mindedness regarding economic liberalisation
and capitalism .
Aravind Sridhartor
Bengaluru
LETTERS TO THE EDITOR Send your letters by email to bleditor@thehindu.co.in or by post to
Letters to the Editor, The Hindu Business Line, Kasturi Buildings, 859-860, Anna Salai, Chennai
600002.

IT Sector Issues:

Deep thought

This refers to No future for jobs in the info-tech sector by Rajalakshmi Nirmal (November 28).The
picture of growth in the IT sector described in the report is dismal and should be taken serious note
of by the Government.
With the high cost of educationand students aspirations attached to the field, the prospects would
disappoint many. The Government should appoint a team of experts to examine the situation and
suggest strategies to deal with it. The parents of children going in for higher education should take
note of the situation and think of suitable alternative strategies.
TR Anandan
Coimbatore
Use funds judiciously
More than 6 lakh crore has come into the banking system after demonetisation. A major chunk
comprises the hard-earned money of the middle class, poor, and senior citizens. It is hoped the
Government will ease withdrawals after the December 30 deadline. The government and RBI should
chalk out methodologies to utilise these funds judiciously. This is imperative in the wake of a hunch
that banks may use the money to wipe off NPAs and cleanse their balance sheets. That would be a
great injustice to the common man.
Tharcius S Fernando
Chennai
Impractical idea
Prime Minister Narendra Modi batting for a cashless society by educating more people to carry out
cashless transactions using mobile payment technology is well intended but seems impractical. The
PM must remember that a large percentage of India's population lives in the villages and has no
access to android or smartphones. Even many living in towns and cities do not possess these phones.
Though technology has brought multiple benefits and convenience it has also made the lives of
senior citizens and the unlettered miserable. Cashless transactions are good but it is important that
android phones are made affordable to the poor and the deprived. Jumping to implement the idea at
this juncture appears premature and impractical.
NJ Ravi Chander
Bengaluru
Museum pieces
While some feel we dont have enough ATMs in India, the fact is in a cashless scenario, ATMs will
become redundant.

People will use e-payment options such as cards, e-wallets, UPI and so on. Hence, there is no need to
augment the ATM network.
PD Sankaranarayanan
Thiruvananthapuram
Pot and the kettle
Our former PM has called demonetisation organised loot and legalised plunder of the common
people. While he is partially right as peoples hard-earned money saved in banks is not all available
(temporarily) to them, what about the scams and mismanagement of the countrys affairs during his
regime? Why did he remain silent? Being at the helm of affairs all the powers were with him. Besides,
he was an economist.
By remaining silent and not acting on his duties as PM, he was responsible for the countrys slow
development and even for the Congress downfall. In allowing this he acted like a true politician. If he
was unable to act independently on the right track due to any reason, the right thing would have
been to resign as PM.
Mahesh Kumar
New Delhi
Everyones responsible
This refers to Caught off-guard (Below the Line, November 28). The Opposition vehemently
demanded the PMs presence in the House, but fell silent when he actually appeared in the Rs. It is
unfathomable why the Opposition demanded his presence when the minister concerned was capable
of answering questions. Both, the ruling and the opposition parties should work in tandem to run the
august House smoothly without pandemonium. They should keep the national interest in mind and
push away other factors.
HP Murali
Bengaluru
Erratum
In Deceived by multiple IDs (From the Viewsroom, November 28), one of the demonetised notes
was mentioned wrongly as 2,000 instead of 1,000. The error is regretted.