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Economic Times had covered the expose of PayTM by Cobrapost in Operation 136, Part II. Subsequently the story was quietly deleted without any official retraction. AamJanata believes that stories silently vanished tell a story of their own, and therefore is republishing the story here.

A sting operation conducted by Cobrapost called attention to reports that the Prime Minister’s Office (PMO) may have approached Paytm to get user details of protestors in the Kashmir Valley.

As per the investigation titled 'Operation-136 II', Ajay Shekhar Sharma - who is incidentally senior VP and brother of Paytm founder Vijay Shekhar Sharma - is captured on camera claiming that someone from PMO had called to asked for data of users to identify stone-pelters.

The video, however, does not mention whether Paytm complied with the alleged requests or not.

"PayTM=PayToPM"

Following reports, Paytm has released a statement on Twitter rubbishing the claims made by Cobrapost.

"There is absolutely NO TRUTH in the sensational headlines of a video doing rounds on social media. Our users’ data is 100 percent secure and has never been shared with anyone except law enforcement agencies on request. Thank you for your continued support."

However, Congress president Rahul Gandhi calls it " proof that (we) were absolutely correct about demonetisation".

The sting operation

Cobrapost's reporter had posed as an employee for an NGO affiliated to the RSS and is heard telling another top Paytm official that he wanted to promote books like the Bhagavad Gita and the Ramayan on the company platform.

The reporter openly says that the campaign is driven by a Hindutva agenda, to which the official responds by admitting to having promoted PM Narendra Modi’s book 'Exam Warriors' by highlighting it on Paytm's homepage.

In the video, Ajay is also heard making his political affiliation to RSS very clear right at the onset of the conversation. He also claims that Union Minister for Rural Development Narendra Singh Tomar and MP CM Shivraj Singh Chouhan know him by name and face.

Originally published at: Economic Times

This post is republished in public interest from the Cobrapost website, which appears to be having trouble.

Cobrapost exposes more than two dozen media houses, including some prima donnas of India’s holy Fourth Estate, where they all show their underbelly in its most visceral form.

New Delhi: In the second part of Operation 136, Cobrapost has exposed owners and high-ranking personnel of more than two dozen media houses, both mainstream and regional, the biggest ones and the smaller ones, the oldest ones and the newer ones. ‘Operation 136: Part II,’ in fact, shows Indian media’s underbelly in its most visceral form, where even the “big daddies” do not mind agreeing to undertake a campaign that has the potential to not only cause communal disharmony among citizens but also tilt the electoral outcome in favour of a particular party. This they will do if they are paid the right price, and sometimes they have no compunctions to quote a price as high as Rs. 1000 crore, as did the Times Group owner Vineet Jain, while others showed a propensity to indulge in any kind of illegality bordering on criminality.

The media houses agreeing to run the campaign are Times of India, India Today, Hindustan Times, Zee News, Network 18, Star India, ABP News, Dainik Jagaran, Radio One, Red FM, Lokmat, ABN Andhra Jyothy, TV5, Dinamalar, Big FM, K News, India Voice, The New Indian Express, MVTV and Open magazine.

We have received an exparte stay order from the honourable Delhi High Court on the evening of 24th May, 2018, which debars us from including the Dainik Bhaskar Group in our investigation. The honourable High Court has passed the injunction in favour of Dainik Bhaskar without hearing our side of the case, and we shall consequently be challenging the court order in the interest of truth and justice.

Senior Investigative Journalist Pushp Sharma used the same cover and the same ruse! Wearing the garb of a seasoned Pracharak, Sharma adopted malleable identities which he used according to the situation at hand. He first used his association with an Ujjain-based ashram, claiming himself to have been schooled at Jhunjhunu, Rajasthan, to have studied in IIT Delhi and IIM Bangalore, settled in Australia and to have been running his e-gaming company out of Scotland. Sometimes, he claimed to be the head of the Madhya Pradesh unit of Om Prakash Rajbhar’s outfit, Suheldev Bharatiya Samaj Party, charged with party affairs in Karnataka, Maharashtra and the Northeast. At times, the journalist used all his assumed identities in a single meeting. As the investigation evolved to take on a pan-India character, he assumed the identity of a representative of a fictitious religious organization, Shrimad Bhagwad Gita Prachar Samiti, purportedly on a mission, a gupt vyavastha (secret arrangement), at the behest of the “Sangathan” to bolster the prospects of the party in power in coming elections.

The journalist approached these media houses with his hideous proposition. As he offered them a fortune in return, Cobrapost saw them all crumble under the weight of a “big business opportunity” that was knocking on their doors without asking. Almost all bent themselves backward to grab this opportunity. However, there were two notable exceptions, Bartaman Patrika and the Dainik Sambad, which refused to play ball. No amount of cajoling or inducements could bring them around.

While meeting the owners and senior-most personnel of these media houses, Sharma asked them to run a media campaign on his behalf. While offering them a big fortune in terms of ad spend, which ranged anything between few crore rupees and Rs. 500 crore, he spread wide before them these essential ingredients of his agenda:

In the initial phase, the first three months, promote Hindutva through customized religious programmes to create a congenial atmosphere.
Then, the campaign will be geared up to polarize the electorate on communal lines by promoting speeches of Hindutva hardliners, the likes of Vinay Katiyar, Uma Bharti and Mohan Bhagwat, among others.
As elections approach, the campaign will target opposition leaders, namely, Rahul Gandhi, Mayawati and Akhilesh Yadav, caricaturing them using less than dignified language like Pappu, Bua and Babua, respectively, for them, in order to show them in poor light before the electorate.
They will have to run this campaign on all platforms – print, electronic, radio or digital including, e-news portals, web sites and social media such as Facebook and Twitter.

Negotiating hard, in what you can say was a value-for-money deal, the journalist drove home all these points as they all spread a red carpet for him. The interactions that the senior journalist had with all these media houses during the course of Operation: Part II can be summed up as follows:

They agreed to promote Hindutva in the garb of spiritualism and religious discourse.
They agreed to publish content with potential to polarize the electorate along communal lines.
They concurred to besmirch or thrash political rivals of the party in power by posting or publishing defamatory content about them.
Many of them were ready to accept unaccounted cash, in other words, for the job to be assigned to them.
Some of them agreed to route cash through a third-party agency to turn it into white, even suggesting hawala routes such as Angadiyas.
Some of the owners or important functionaries admitted that they were either associated with the RSS or they were pro-Hindutva and would thus be happy to work on the campaign, forgetting the cardinal principle of journalism: neutrality.
Some of them agreed to plant stories in favour of the party in power in their publications, while others were ready to unleash their investigative teams to rake muck on opposition leaders.
Many of them agreed to develop and carry advertorials especially for this purpose.
Many of them agreed to develop content for this invidious campaign by employing their own creative team.
Almost all agreed to run this campaign on their platforms – print, electronic, FM radio or digital in its various avatars such as e-news portal, e-paper or social media such as Facebook and Twitter.
Some of them even agreed to run down Union ministers Arun Jaitley, Manoj Sinha, Maneka Gandhi and her son Varun Gandhi, among others.
Some of them also agreed to run stories against leaders of BJP alliance partners, like Anupriya Patel, Om Prakash Rajbhar and Upendra Kushwaha.
Some of them even agreed to paint agitating farmers as Maoists in their stories.
Many of them agreed to create and promote such content as would aim for the “character assassination” of leaders like Rahul Gandhi.
Many of them are ready to run the content in such manner as would not look like paid for.
Almost all FM radio stations agreed to allow their customer to monopolize their free air time.
Many FM radio stations also agreed to use RJ mentions to promote the agenda: Hindutva and character assassination of rivals.

Operation 136: Part II is unique in the sense that it not only has exposed all these media houses but has also brought to the fore the fact that in a technology-driven age an agenda can find a mobile app a very effective medium to reach out to millions of users. Our expose of Paytm does exactly that. It brings home the point that one does not need an elaborate arrangement of the conventional media such TV channels or newspapers. A simple mobile app can achieve what the conventional platforms cannot: it can deliver the message with a blink of an eye. In fact, our interaction with top Paytm honchos is quite revealing in many respects, for it not only shows the company’s affinity to both the BJP government and its ideological fountainhead RSS, but also shows that users’ data can be compromised.

As India has slipped two paces to 138 from its position of 136, as this investigation was underway, in World Press Freedom Index (https://rsf.org/en/ranking#), Operation 136 has found that most of the media houses are either owned by politicians themselves, particularly the regional ones, or patronized by politicians, and it is natural for them to become their masters’ voice. It was high time we coined a new phrase to define this journalism as crony journalism a la crony capitalism. For instance, ABN Andhra Jyothy, a prominent Telugu TV news channel is patronized by TDP supremo Chandrababu Naidu. It is no surprise if we hear its Chief Marketing Manager E.V. Seshidhar say: “We have very good connects with TDP … We have do [sic] lot of what do you call we have main official what do you call for AP government Andhra Pradesh government, we have official event telecaster rights for Andhra Pradesh government.” While this connect goes beyond the TDP, to include the BJP and other outfits, Seshidhar even goes to say that their newspaper Andhra Jyothy holds so much sway that they could influence the outcome of the Karnataka elections.

On the other hand, Lakshmipathy Adimoolam, the owner of the 70-year-old prominent Tamil daily published from Chennai, wears his family allegiance to the Sangh Brotherhood on his sleeve. We are, therefore, least surprised to hear him say that he has imported especially designed software which could help in the promotion of Brand Modi: “You have newsletters … sent to … brochures, leaflets sent to party workers … say there is Modiji’s picture is there, just move your camera over here … it gives audio of Modiji.”

It was not that Cobrapost has exposed only those high ranking-personnel whose business is to negotiate a deal and bring business to the organization they are working for. In the course of this investigation, Cobrapost found some senior journalists, who have now donned the mantle of owners or CEOs, genuflecting before their big-ticket client and happily agreeing to work for his agenda. One such senior journalist was Purushottam Vaishnav who is working for Zee Media as its CEO Regional News Channels. Agreeing to run down political rivals by unleashing their SIT on them, Purushottam said: “Content mein jo aapki taraf se input aayega wo absorb ho jayega … humare taraf se jo content generate hoga investigative journalism humlog karte hain karwa denge jitna hum logon ne kya hai utna kisi ne nahi kiya hoga wo humlog karenge (Whatever input you will send in the form of content that will be absorbed … the content we will generate … we have been doing investigative journalism, we will do it for you. [Compared to Zee] None of the channels has done so many … we will do that).”

In fact, our investigation establishes the fact that the RSS, and as a corollary, Hindutva, has made deep inroads into not only the newsrooms but also the boardrooms of Indian media houses where even owners either blatantly admit their allegiance to the party in power and its parent organization or are eager to have an association with them. For instance, Big FM Sr. Business Partner Amit Choudhary admits to the relationship between the company that owns Big FM and the party in power in no uncertain terms: “Waise bhi Reliance BJP ka supporter hee hai (Anyway, Reliance is always a supporter of the BJP).” Then we have Basab Ghosh, Regional Sales Head of Open magazine, which is owned by the RP-Sanjiv Goenka Group, who also confesses to their allegiance to the RSS: “Acharyaji shayad aap bhi busy rehte hain aap shayad Open dekhte nahi hain regular. Main aapko ek baat bataata hoon. Open jitna support karte hain sangathan ka shayad hee koi karta hoga. (Acharyaji, perhaps you are a busy man and maybe you don’t read Open regularly. Let me tell you one thing. Nobody supports the Sangathan [RSS] as much as does Open).”

While the journalist had a tough time in convincing Ajay Shekhar Sharma of Paytm that he was there to fulfill the assignment received directly from the Sangathan under a “gupt vyavastha” or secret arrangement, the senior vice president of the mobile-app utility payment company candidly admitted his association with the top brass of both the RSS and the BJP. Taking his prospective client as someone belonging to the Sangh Brotherhood, he made a very shocking revelation. Referring to the stone pelting in Kashmir last year, Ajay Shekhar said: “Jab JK mein band huye the na pathar … toh humari personally PMO se phone aya tha kaha gaya tha ki data de do ho sakta hai ki Paytm user hon (When the stone-pelting stopped there in J&K, I personally got a phone call from the PMO. They told us to give them data saying maybe some of the stone-pelters are Paytm users.)” Paytm users may now be wondering if the company has violated its policy of privacy and data safety!

Another interesting fact that has emerged during the course of ‘Operation 136: Part II’ is that although they might be swearing by their allegiance to the RSS or the BJP, they don’t give a damn to Modi’s public stance against black money for which the Prime Minister did not back away from subjecting the entire citizenry to untold miseries by enforcing demonetization in November 2016. Punching holes in what has been gloried as “surgical strike” against black money, we found Vineet Jain, Managing Director of the Times Group, and his aide Executive President Sanjeev Shah, naming some big corporate houses which could help make black money squeaky clean and even suggesting to employ the services of ‘Angadias’—a Gujarati name for hawaladars or hawala operators of illicit money—to get the job done. While Vineet Jain says, “Aur bhi businessmen honge jo humein cheque denge aap unhe cash de do (There are other businessmen who would give us cheque against the cash you may give them), his aide Shah informs us: “Who will take that from him in Delhi suppose if Goenka says I want it in Ahmedabad so that I Angadia will have contact in Ahmedabad where they will exchange in number on a note or whatever.” Hope our Prime Minister and other arms of his government are listening!

Of all interviews that the journalist had with the owners and personnel of all these media houses in the course of this investigation, Manda Mhatre’s stands out in its revelations. While criticizing her own party, and claiming that it was the RSS leadership which ensured she got a ticket to fight election after she switched loyalties from NCP to the BJP, what the BJP legislator from Belapur, Pune, told Cobrapost is quite revealing: “Mere ko Sangh wale bol rahe the ki Muslim masjid todo ye karo. Main boli sorry main ye nahi kar sakti. Masjid sthal sab kachre ke maafiq dekhte hain. Itna log ko hum haay nahi le sakte hain kyonki aadhe log apne se jud gaye hain (The Sangh people were telling me time and again to destroy the masjids of Muslims. I told them ‘Sorry I can’t do that.’ They all look at a masjid something like trash. I cannot afford to earn so much ill-will of all those people [by resorting to such hate] because many Muslims have joined the BJP).”

We know it well that such open confessions of their allegiance to the ideology of the RSS could be brushed aside as personal opinions, but given the position they hold in their respective organizations what they say cannot be taken lightly. The reason is that it is rather the business interests that have an overarching influence on the editorial policy of a media organization, and Operation 136 has once again shown it in ample measure. The first part of Operation 136 had exposed India TV, Dainik Jagaran, Hindi Khabar, SAB TV, DNA (Daily News and Analysis), Amar Ujala, UNI, 9X Tashan, Samachar Plus, HNN Live 24×7, Punjab Kesari, Swatantra Bharat, ScoopWhoop, Rediff.com, IndiaWatch, Aj and Sadhna Prime News.

All these on-camera confessions make it clear that the malaise of paid news has set in deep as it is no longer confined to a few individuals who would show no scruples while publishing paid content, camouflaging it as news stories or reports. Over the years, paid news has become institutionalized, as this investigation establishes, for no one in authority in news business would receive an agenda, which is overtly communal and defamatory, with enthusiasm, let alone committing to undertake it, particularly when there are clear-cut guidelines to follow and laws to abide by.

The Indian Penal Code (IPC) has well laid-down provisions, for instance, to deal with various unlawful acts that these media houses agreed to commit. Section 153(A) makes any attempt to “promote disharmony or feelings of enmity, hatred or ill-will between different groups” punishable with imprisonment for a term of three years or a fine or both. Section 295(A) of the IPC also provides for the same punishment to be meted out when an individual deliberately, and with malicious intent, hurts the religious feelings of a community. Then, Chapter IXA of the IPC deals comprehensively with offences related to elections. Section 171 of the IPC makes interference with the free exercise of electoral right, in any form, punishable with an imprisonment of one year or fine or both. These provisions of the IPC, thus, ensure that the offence of polarizing a group on the basis of religion, caste or community is punished. The provisions of Chapter IXA of the IPC with regard to free exercise of electoral rights are overarching in their ambit as they are also relevant paid news to influence voters to gain electoral benefits.

In addition, the provisions of Cable Television Networks (Regulation Act) 1995, along with Cables Rules, and Representation of People’s Act, along with Conduct of Election Rules, make paid news and communal polarization for electoral gains an offence. Both the Cable Act and the Cable Rules prohibit transmission or re-transmission of programmes that do not conform to the advertisement code. While Rule 6 of the Cable Rules prohibits programmes of communal nature or that promote anti-national attitudes, Rule 7 also lays down the advertisement code prohibits publication of advertisements of political or religious nature. Rule 7(10) of the Cable Rules further states that “all advertisements should be clearly distinguishable programmes, viz., use of lower part of screen to carry captions, static or moving alongside the programme”. Then, Section 125 of the RPA makes communal polarization an offence punishable with imprisonment for three years or fine or both, while various provisions of Section 123 declare an act aimed at polarization and the practice of paid news as “corrupt practices” making election of a candidate null and void.

Apart from these and other legal provisions, there are “Norms and Guidelines on Paid News” of the News Broadcasting Standards Authority and “Norms of Journalistic Conduct, 2010” of the Press Council of India, which all media establishments are expected to adhere to. But do they really care for such scrupulous adherence? Our investigation says no.

We would like to make it clear that Operation 136 should in no way be taken as an effort to undermine Indian media or question its sanctity as an institution. Our investigation does not intend to cast any aspersions or pass judgment, either, on the journalists who are working in these media platforms. They have done good journalism in the past and will do so in future. However, if the management indulges in paid news, in all its gray shades, it creates a very difficult atmosphere for the journalists to ply their trade in. This story aims to underline our earnestness to address the malaise that has been dogging Indian media for the past three decades or so and look within to make course correction, so that the faith of India’s citizenry in this vibrant pillar of democracy is not dented.

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Growing evidence shows that India is serving interests of foreign influencers at the cost of the well being of Indian citizens. Demonetisation is just one in a long list of moves that benefit big money.

Finance Minister, Arun Jaitley, said something interesting when he addressed the Digi-Dhan mela today. He said that Bill Gates told him that more than 100 Cr have mobile phones, 109 Cr have Aadhar cards, digital economy will boom in India.

This had many people puzzled. What does Bill Gates have to do with anything that he's been quoted out of the blue? Why would Bill Gates be the source of information on how many mobile phones or Aadhaar cards are in India for the Finance Minister with access to National statistics? For example the Assocham Deloitte study that says that internet connectivity is still out of reach for 950 million Indians? A few others, who had been paying attention to the news remembered Bill Gates endorsing the demonetisation last month and then denying much knowledge of it and limiting his endorsement to the digitisation of the Indian economy.

But what does Bill Gates have to do with India's demonetisation that he was even asked to comment or endorse it at all or that made headlines on the subject twice and a month later the Finance Minister used data allegedly provided by him to support the viability of this insane venture? 100 crores is 1 billion - in a country of 1.2 billion, with 22% of the population (264 million!) below an absurd poverty line. You'd need to hand phones to babies on birth to get that kind of penetration! That alone should tell you that the number is useless for anything more than propaganda. It is the total number of SIMs sold. Of them "active" - used once a month at a minimum - are 900 million. This number would also include dual SIM phones, SIMs used for non-phone devices (air pollution measuring devices, for example), multiple SIMs used for businesses and so on. This really tells you nothing about the kind of penetration that would allow cashless transactions. Far more accurate statistics with relevance to demonetisation are available for India that make it clear that India has 220 million (100 crore is 1 billion) smart phone users (not all of them have internet enabled).

For that, we must rewind a bit, to something I've mentioned briefly in previous articles and explore it in more details.

Worldwide, as banks fail to manage their money responsibly, we are seeing them flounder. Powerful companies and people writing and influencing monetary policies are encouraging cashless transactions - supposedly to improve the government's coverage for taxation, but in reality, in a country with 70% of its population only owning 10% of its wealth while the top 1% own almost 60%, the cost of digitizing the vast majority of citizens is not even going to be covered by anything that can possibly be recovered from their meagre income that is way below taxable limits. It doesn't take a hotshot economist to know that in a country where 1% of the population pays taxes, the "tax net" is unlikely to get any substantial benefits from being thrown over 100% to see who gets caught. The costs of such an exercise would outstrip any benefits.

What going cashless actually achieves is providing a lifeline to banks by:

  1. Getting most of the nation's money into them and shoring up their failing liquidity
  2. By generating an income for them from the routine transactions of every citizen's day to day living.
  3. Preventing withdrawal of cash from banks by people who want to make more economical choices instead of paying commissions for every use of money.

This happening in India is of a great deal of profit to the global banking elite as well, as credit card services, banks invested in India and other financial service providers generate an income for banks based outside India with their shares of the seemingly small transaction charges on day to day use of money in a country of 1.2 billion people.

There is a great deal of effort put into "encouraging" countries worldwide into adopting cashless transactions by the global financial elite and governments stumped by failing banks and the lure of improved tax collection are capitulating, though none fell as hard and recklessly as the Indian government.

The Quint had correctly reported that the USAID had launched the “Catalyst: Inclusive Cashless Payment Partnership”, designed to scale digital payments systems in India in partnership with India's Ministry of Finance on the 14th of October. This is the press release on the official USAID website. So it is unclear why The Quint updated its article to remove this information and instead add an update that it was initiated jointly by USAID and GOI, but commissioned on the 15th of November as though it didn't happen till it was commissioned. Regardless, this explains what Bill Gates was doing there at all to be commenting on the demonetisation - that should have been a domestic issue. Among the organizations partnering in the Catalyst is the Bill & Melinda Gates Foundation.

Also included in the list is the UN fronted Better Than Cash Alliance that India joined on the 1st of September 2015. To quote their website, "The Alliance is funded by the Bill & Melinda Gates Foundation, Citi Foundation, Ford Foundation, MasterCard, Omidyar Network, United States Agency for International Development, and Visa Inc. The United Nations Capital Development Fund serves as the secretariat."

So, Bill & Melinda Gates, Omidyar Network, Mastercard and Visa participate as themselves as well as as part of the Better than Cash Alliance. USAID participates through the BCA. World Economic Forum participates directly. Many Indian banks, and surprisingly PayTM as well as phone networks are included.

Way before anyone in India articulated a need for cashless payments beyond the normal use for convenience - and there was an existing natural rate of adoption, USAID and its allies seem to have got the bright idea that India needed to go cashless and moved to get India to participate. Not one, but two organizations created in their need to "save" India from itself. One wonders why. The economy was doing well, the government was already undertaking means to improve access and inclusion of more citizens in the banking system - for example, the Jan Dhan Yojana, the expansion of the DBTL scheme (both of which put citizen's money into banks, the second mandatorily) had both been launched before the government joining these groups for promoting a digital economy in India.

Given the catastrophic results of the demonetisation, and the complete absence of consulting with anyone in the country - the government's own economists, RBI directors or security agencies included, it becomes important to ask just who was consulted and the quality of information that was provided and whether it influenced decisions adversely for the country.

There are reasons to believe that there may have been influence against National interest:

  1. Jaitley's direct quote of incorrect statistics allegedly provided to him by Bill Gates, that he used in order to justify the demonetisation at the Digi Dhan mela, even as all statistics of any reputable source point to the opposite. The RBI's data even shows that while the number of card transactions at PoS has increased (out of necessity), the value of transactions has actually gone down, clearly indicating a reluctance to adopt cashless transactions more widely than what was going on naturally.
  2. While in opposition, the BJP itself has pointed out that the CIA works through the USAID programme acting through philanthropic foundations to destabilize countries. There is considerable evidence to support this that BJP were already aware of. USAID has been implicated in covert operations to support subversive activities in countries from Cuba to Pakistan and notably the backing of Al Qaeda affliated rebels in Syria recently.
  3. Ford Foundation grants have in the past preceded at least two major political upheavals in the country - the Janlokpal Andolan and the creation of the Vivekananda International Foundation (which backed it and later ran subversive slander campaigns undermining the newly emerging AAP) were both preceded by grants by the Ford Foundation to their founding members or organizations. The Jan Lokpal Andolan discredited the government then in power. The Vivekananda International Foundation masterminded the rise of the current government, discredited the Aam Aadmi Party that was on the rise and now has an extraordinary number of members appointed to government positions, including the National Security Advisor Ajit Doval, under whose "able guidance", India's regional foreign policy has collapsed. There are allegations that he influenced a controversial supercession in the appointment of the next Army Chief.
  4. Contributed by reader Prem A (in comments below): The conflict of interest doesn’t stop there, Dr Nachiket M. Mor is the country directory of Bill & Melinda Gates Foundation and he is also one of the directors of RBI.
  5. Usual sources of reliable advice and information to the government appear to have been bypassed in this apparently "well planned" demonetisation, indicating that other sources of information were likely used - the government may potentially have been misled to use information that was not in national interest. This needs investigation given the mounting damage being inflicted on the country.
  6. Strangely, neither the government's joining the Better than Cash Alliance, nor the Catalyst were reported in India at all. For a government that proudly publicizes its every sneeze and hiccup that is dutifully given maximum publicity by a subservient media, if this were indeed a move that would benefit India, it is unclear why the Prime Minister would not proudly declare it.

25

It isn't just in India, that people are being forced to put money into banks. Banks worldwide are in trouble. Banks worldwide are needing bailouts. Demonetisation of notes is being considered as well as put into action in country after country - Europe (plan to not make 500 Euros post 2018), Venezuela (got reversed after protests from people) and now Pakistan (plan to demonetise Rs.5000 notes) and Australia (may abolish $100 note), though none of them have been as extreme as the abrupt discontinuation of 86% of the cash in the country, as India did. Governments are in difficult positions. If banks collapse, chaos will result. If they bail out banks, it is not sustainable. And worldwide, government and banks seem to have hit on the bright idea of using the people to get money into banks. Or rather, use the money of customers to continue with their mismanaged methods that have got them to this point. It wouldn't work, normally. One whiff of banks using the customer's money would have people withdrawing their money from banks. Unless - they couldn't withdraw, because there was no real way to do it.

The idea is simple. Go cashless - or as close to cashless as possible. With people unable to withdraw money, their money will remain in the banking system, even while they transact and it moves from account to account. Banks would have most of the money of the whole country to tap into. And no matter what happened, no matter how mismanaged, no matter how close to collapse, there would be no way for people in the country to prevent banks from looting them. Eventually you progress to what is called negative interest rates, where you pay banks for keeping money in them.

What could possibly go wrong?

Please note, I am not an economist. But it doesn't take rocket science to figure out that mishandled anything can only be fixed by handling it right. If banks are in a crisis, demonetisation may fill them flush with cash, but it cannot fix the problem. It will only give banks the freedom to make even bigger, catastrophic mistakes with money that isn't even theirs. Of course the government gets the side effect of unprecedented surveillance and control over lives of citizens. Soon, being harrassed by tax officials or being framed in cases would be the least of worries for dissenters. With very little effort, the government would have the power to cut off your access to all life essentials - or at least make access very difficult as yourself - your own money in your banks, access to cooking gas, your phone numbers... and it goes downhill from there. Whatever you have attached to this monolith.

Here are some very possible scenarios the current debate on demonetisation does not cover adequately:

Shrinking of the economy

Economic migrants are returning to their places of origin by the hordes. Jobs are being lost in entire sectors. Tourism has as good as crashed without money to spend freely. Most tourism in India happens away from the city in small towns and remote places where internet connectivity can be iffy. No matter the propaganda on TV, very few will (or indeed are) risking travel without actual hard cash to back up any cashless plans. A friend in the adventure tourism industry reports of hotels running empty with Christmas coming up, even when they are giving rooms at off season rates. They actually made a tidy profit, because a large chunk of a trip's expense is hotel rooms, which they got for way less than what they budgeted for. So he should be thrilled, right? um... Nope. That one trip is the only business he has in sight at the moment. Usually, they don't have time to breathe in this season. Automobile manufacturers have stopped or cut down production drastically. Local markets everywhere are shrinking. Reduced number of sellers seeing some sales in essential goods creates an illusion of normalcy, but it is an illusion, because the number of sellers have reduced to the point where the few left can try to survive on half of what they used to earn.

Agriculture has been hit unevenly. Those who got their produce sold and new crops planted before demonetisation are relatively unaffected, but most farmers are facing severe crisis with an entire year's worth of profits wrecked. The season that was just over was good. Good rain leading to good harvests. Except demonetisation resulted in their crops selling at the rates of the dirt they grew in. Devastated farmers have dumped tomatoes on roads because the prices they get wouldn't even cover taking them anywhere to sell. As reports of farmers unable to buy seed created outrage, an oblivious government did the one thing it was doing rapidly - poked a few more holes in their grand demonetisation to temporarily allow farmers to buy seeds from government outlets using the old demonetised notes. The government still appears to be oblivious, because the biggest cost of sowing crops is not the seed, but the labour and related expenses that go into it. To add insult to injury, in several places (notably in Uttar Pradesh), the government shops didn't accept the old notes anyway, because the banks wouldn't accept the notes from them - under the directions of the government.

Small industries - garment manufacturers, beedi manufacturers, etc - are rapidly shutting down or drastically cutting down workers, leaving thousands out of work. The pundits of the "market" appear to think that once cash is back (and note, they aren't even talking cashless at this point), things will get to normal. I admit I don't have their knowledge of economics. But I have the experience of living in countless small towns, villages and remote places on shoestring budgets (or credit) and I can assure you, there is no such thing as a jobs bonanza. The jobs being lost as a tsunami had trickled into existence over decades. Banks may be ready and willing, indeed eager to give cheap loans, but other than big companies and their audacious attitudes, I cannot imagine people coming out of a money crisis even thinking of risking loans before their depleted savings are shored again and loans taken to survive are repaid. Because for these people, the consequences of not repaying loans are not write-offs.

To be blunt, even before demonetisation, we weren't really adding much jobs. If the loss of jobs can be reversed, it still isn't an impressive pace. And I don't think it will reverse with the ease it was broken. It will have to recover from this trauma. Less jobs and less incomes mean less taxes after this one time bonanza and more NPAs. So the government and banks may end up losing income while they gain access to use a lot more money of depositors. That way lies bad news, in my view.

Security risks

The overall situation of desperation puts India at risk of unrest and lawlessness. We already see increased violence at banks. That is the most obvious. People want money, banks don't have money, anger happens, bankers are overtired, something blows on occasion, more frequently as time passes and the pressure does not relent. The government appears to be oblivious to this, as the usual propaganda channels are recklessly blaming banks for black market trading of cash, telling people via television that there is plenty of money and so on. Bankers have died of stress at work. There has been a suicide as well. This is bad news waiting to happen unless the government wakes up fast. Which it does not seem inclined to do, given that it is still trying to prevent a "cut" of demonetised money from being deposited at all and their absurd rules and roll backs and new rules to try and make it happen are further stressing banks and depositors. But still, this is the most obvious.

Situations of mass desperation are ripe for creating hostility and generating violence with rumors and incitement. With elections coming up in several states, this is a very real risk. Given that the ruling party seems to consistently profit from elections held after riots, I don't know whether they see this as a bug or a feature.

Another kind of security risk that would be very high right now is internet banking crimes. With most of the country's money in banks, bankers overworked, and a lot of new people beginning to use cashless transactions, India right now is ripe for internet banking crimes. Furthermore, the government's reckless promotion of services like Paytm, with no liability to protect users from fraud and unknown security measures and unaccountable management, the risk is magnified drastically. Several serious issues leading to loss of money crop up daily on social media, including organized fraud and tax evasion. Our own Godavar found that Paytm has an absurd process for responding to the loss of a phone with a Paytm app on it. The Cyber Appellate Tribunal being non-functional for the last five years is the icing on this cake.

The banks are also vulnerable to threats from terrorists or other enemies of the country. Attacks on the banking system at this point have the potential of bringing the entire country to a complete standstill. And they don't even have to involve theft of funds. Even simple DoS attacks preventing cashless transactions from succeeding would create considerable disruption. It is unclear whether the government has even prepared for such an eventuality.

Money being funnelled out of citizens and into banks and foreign services

When you spend Rs.100 as cash, and the next person spends Rs. 100 as cash and so on, the Rs. 100 remains Rs. 100. If you swipe a card and incur a 2% charge, With every transaction, the Rs.100 bleeds money to service providers and there is a continuous loss of value that can be recovered from it. Rs. 100 becomes Rs. 98, which becomes Rs. 96 and so on (yes, I know I should be getting into decimals and more accurate percentages. Too lazy). This is a tremendous bonanza for banks and other service providers. It doesn't get any more free money than this. For them, not you. Keep servers running, completely automated transactions keep dumping money at you. Is it any surprise that there is a rash of providers applying to become payment banks? It is likely that rates would be lowered. And why not, if they are able to get a cut on literally every single time anyone transacts for any reason - doesn't even have to be business - say someone giving their child pocket money? But the money with people will keep shrinking like this.

Worse, we will be bleeding money out of the country with every use of payment systems owned fully or partially by foreign companies. The government may well promote fully Indian solutions (not in a hurry, Paytm is 40% Chinese and the government is promoting it the most right now). But even with Indian solutions promoted, there will be considerable use of companies like Visa and Mastercard by those who need compatibility outside India - online purchases, travel... I am no economic expert, but I cannot imagine this to be a good thing - for foreign companies to profit from massive amounts of routine transactions in India. Would probably have serious implications for the trade deficit or something.

Collapse of banks

Here I say with even more stress that I am not an economist. But I don't see how this would not happen. Even with withdrawal of cash prevented, the flow of funds from one bank to another cannot be prevented without completely ending all pretense at an economy. Sooner or later, banks with accounts of mostly spenders and small businesses will start collapsing, because money from those accounts will be used to pay those with accounts in bigger banks. Smaller businesses would be more vulnerable for collapse and NPAs given to them will disrupt matters further. Now here is the irony in this. The banking crisis is largely of banks lending to big corporations. They are the ones most likely to cannibalize smaller banks with far less NPAs. Saraswat Bank for example apparently has a pretty healthy 2.6% of NPAs. If this happens (and I hope it doesn't - as a result of failure to go cashless), it would be like punishing banks for not serving problem customers.

Where does this end?

What this whole circus achieves is cosmetic covering up of the problem. Preventing the money of citizens from being withdrawn to prevent collapse of banks cannot be a functional solution to anything. It is a violation of citizen rights. It is an exploitation of their money. It does nothing to prevent banks from taking their mismanagement further into a loss making zone, confident that the customers money cannot escape. What would a point be where anyone says "enough"? What comes next? Any other asset citizens can use to escape the banks? Gold? Silver? Diamonds? Real Estate? How many of our rightful and honestly earned possessions will be regimented for this forced rescue of banks? What point is enough? And why is it not "enough" right now instead of pulling this horrendous attack by a government on the country at the behest of businesses?

It is alarming that when some global opportunistic plan says "jump", our government doesn't even ask how high, it throws the country off the cliff.

4

The government began with focusing on fake currencies and black money as the reason for demonetisation. As deposits started rapidly piling in banks and it looked increasingly unlikely that there was a lot of black or fake money being caught, the goalposts started shifting.

Soon it became evident that the supply of legal notes was nowhere near adequate and worse, going by the capacity to print notes, it would take another 5 to 6 months to return the amount of money withdrawn from the country. Then came disclosures of problems with notes, inappropriate prioritization of the 2000 rupee note, which is available relatively abundantly, but without the intermediate 500 rupee notes, only serves to reduce the limited liquidity with the existing 14% of notes left to people.

Suddenly the talk seemed to turn to a cashless India. Government spokespersons on TV as well as Modi himself have given up all talk of black money and suddenly demonetisation is all about a cashless India (which got rapidly ridiculed with comparisons to the cash-less reality) and upgraded to a less-cash India. This is a terrible idea.

Necessity is not utility

If it were useful for India's sellers to accept cashless payments by paying a charge on the transactions, they would already be cashless. The government wouldn't have to recommend it at all. The fact is, cash transactions are highly efficient. They work instantaneously and reliably with no other infrastructure needed - bank accounts, devices, connectivity, electricity to run said devices.... and they are FAST. Taking a note or five from a wallet, handing it over, acceptig change back takes way less time than devices connecting, verifying, blah blah blah. Even swiping a card takes more time. AND unlike cash, you pay a fee every time it is used. Whether it is the buyer or seller charged, the cost will ensure the buyer pays for it. No seller is an idiot.

A few sellers may have adopted these methods in a bid to increase the business the government killed, but it is highly unlikely that they will prefer these methods to cash, if they hadn't found them useful before. A few businesses catering to buyers likely to own cards may continue, but that is an entirely different planet from cashless India.

To give a very crude example:

Bottom line is that cash works. Starving the country of cash will not work because hoarders will hoard and the government will have to issue adequate cash to keep country running. This kind of deprivation will in fact cause more people to hoard. A domestic example (I'm full of them) - before the demonetisation, I'd been a happy mostly cashless user for over a decade. I live in a small town and yet my maid and grocer are paid with online transfers by the month. I very rarely had any cash other than the notes in my wallet which usually ran out and I lived a day or two on simple credit if needed - since I had no daily expenses as such beyond vegetables. Today, I have over 10 thousand rupees in my drawer - because I know I need to pay the other maid (whom I hired merely because she was desperate) in cash in another week or so, but then people will be crowding to draw salaries. I have also kept enough cash at home, because unlike normal times, when I could hop over to an ATM and withdraw when I needed, there is no telling when I may find an ATM with a queue I'm willing to brave. This is happening everywhere. 20 days of banks giving out money the best they can, and our local market looks like this:

People aren't even thinking of spending. They will not spend on anything unnecessary, no matter how much cashless you scream, till they feel reassured that they have enough cash for contingencies. That is going to be a long, long way away.

Inadequate penetration of debit cards

India has 24.5 million debit cards, most of them saturated in urban areas, and people often owning several among those who do. My home for example has two adults and 8 debit cards between us. so 24.5 million being the number of cards is unlikely to be anywhere close to actual card users. Further, cash withdrawals at ATMs is most of the use these cards are put to with 88% of transactions and 94% of the total monetary value of all debit card use. Which brings us right back to cash.

Inadequate penetration and extreme difficulty obtaining credit cards

A few days after demonetisation was announced, I got a call from SBI offering me a credit card. The limit was to be from 30 thousand to a few lakh - I forget details. Interested, I agreed. Ignorant of the ways of credit card companies, I expected that they would estimate my limits by my salary or deposits, etc. Turned out that they blocked a fixed deposit and issued a credit card against it for less than the amount of the fixed deposit. Unclear why anyone would use a credit card at all instead of their debit card, in that case. I got several other offers. Curious about this phenomenon, I replied to the offers with varying information about my income. Unsurprisingly, I found that I had to be rich enough to be able to spend the money directly in order to be able to use it on credit at rates that would put a shady rural moneylender to shame. It makes no sense and I don't think I'll be using that card. I think this option of going cashless is irrelevant to most of India's population - other than the corporate salaried class - got more interest out of them if I said I worked in an MNC - which, let's face it, may be the loudest population of India, but hardly the top empoyment.

Online and mobile banking

Let me narrate here an incident in my home recently. My maid, who pays for her gas in cash and uses her debit card strictly to withdraw money from the ATM as needed, got an SMS from her gas provider saying that she could pay for the gas online. The conversation went something like this:

The fact of the matter is, online transactions are complex and to the internet illiterate are a financial catastrophe waiting to happen. It is far better for people to learn about internet security with Facebook accounts and verifications and email passwords and lost passwords and recovery and hacked Twitter accounts than to begin their internet experience with a high stakes gamble like the contents of their bank account because their government forced them to do it for survival.

Make no mistake, if people don't have cash and get taken in by this propaganda, very soon you are going to have operators of cyber cafes with passwords to a hell of a lot of accounts as aunties line up their with electricity bills and bank slips containing their login ID and passwords in hand to pay the bill so that their electricity is not disconnected or to charge their Paytm account so they can pay their grocer. And they would not have the knowledge of how to change their password either. They would learn eventually, likely with hard lessons that leave them with nothing to protect, and this is not the way to do it. Too much risk.

Literacy rate in India

India's literacy rate stands at 74.04% - but this is an illusion. A lot of "literate" people of poor economic status are barely able to read and rarely in English, which is currently required to transact efficiently online, understand bank statements, secure their accounts, change passwords and PINs and more. Some things like using cards or withdrawing cash from ATMs can be done in Hindi or other languages, but even examining transaction slips and more still happens in English. Internet banking is mostly in English.

Computer literacy is even lower. Smart phone usage may be slightly better, but it is still under 30% of the population.

Electrification and internet penetration in India

I am not even going to talk of percentages here. To go cashless, an absolutely uninterrupted electric supply and internet connectivity is non-negotiable. And, to put it very very mildly, we are nowhere near 100%

Business margins

Business margins over every single transaction are absurd replacement to freely exchanged cash. For high value and infrequent sales, it may make sense. To buy your vegetables, Paytm may earn more than the vegetable seller's profit at the end of the day. Tomatoes are selling at 10Rs a kilo. One kilo is a hell of a lot of tomatoes.

Business readiness

Twitter is currently awash with stories of cashless fails. I had one yesterday. I couldn't find my debit card, so rather than risk it being stolen and misused, I blocked it. Five minutes later I found it. But while I can block it online, I cannot unblock it using the same security available to my entire bank account with access to online banking. If a thief has access to online banking, they don't need to unblock cards, they can simply transfer all the funds out. The bank has my phone, my email AND my access to online banking secured with passwords and OTP, yet something as simple as unblocking a card can't be done within minutes of blocking it and I must go to my home branch 2 hours away. If the card got blocked by someone while trying to pay after two hours of filling a shopping cart, would be a really fantastic cashless experience! This is the country's biggest bank!

If I was in a city and living cashless as Modi recommends, what was I to do? Beg for money to get home in spite of having plenty? Banks like Bank of Baroda or Indian Overseas Bank don't allow online generation of PIN for ATM cards - you must go to the home branch. How is a cashless India even possible with the biggest jugglers of money being so primitive?

Other issues like Paytm account blocking in the event of a lost phone being completely abusrd, to inexperienced sellers charging over a lakh rupees instead of over a thousand rupees accidentally and not knowing how to reverse charges. There are plenty of nightmare stories.

Security issues

Internet banking is a lucrative area for hackers, and India is not extraordinary on security. Just weeks before the demonetisation was announced, an ATM hack had defrauded many people of their money. While banks blocked cards and issued new ones, there is no information on any investigation or arrests made. Or, for that matter, for most cyber crimes beyond "objectionable" content on social media, which is usually busted because of a lack of anonymity - a newbie mistake, no hacker into financial systems will make.

There are security issues with banking apps

I'm just going to paste this here.

 

Forget cashless India. Go pre-dawn to some ATM that gives out Rs 2000 notes - they have shorter queues. Do this a few days and you'll have some cash to use till this nightmare is done.