Boggart Abroad: India's Cashless Society set to fail but slide to fascism goes on

Monday, July 03, 2017

India's Cashless Society set to fail but slide to fascism goes on

On 17th July 2017, India will elect a new President through a vote of the elected representatives. The contenders are Ram Nath Kovind and Meira Kumar. Few people outside his own family know who Kovind is and voters are only vaguely aware of Ms. Kumar.

India will get a complete nobody as its next President. Both candidates are from the Indian province of Bihar. If it were a country, Bihar with its 119 million inhabitants would be the 12th most populated in the world. With a GDP of USD 420 per capita, it would also be among the world’s ten poorest countries.

While the world has been focused on events in Syria, Yemen, the USA, Europe and its immigration crisis, the USA and the Democratic Party's idiotic attempts to overturn the 2016 election result, and in the South China Sea, there has been little coverage of some serious political trends in the world's second largest nation by population. Adults and juveniles have been arrested all over India for celebrating Pakistan’s victory over in a recently held cricket match between the two countries. They are being prosecuted for sedition, a charge that has serious legal ramifications and could lead to life improsonment. With the British gone for 70 years, India’s laws and institutions seem to have lost their rational anchors and is becoming as fragmented, tribalistic and chaotic as it was before British rule.

Scene from a slum in Patna, capital of Bihar province

In the presidential race Kovind is from the "lower caste" and is supported by the Indian Prime Minister, Narendra Modi, who would like to make up for recent atrocities against the lower classes. While he is a nobody with hardly any public credentials and a machine politician, Kovind is sympathetic to resurgent Hindu fanaticism and has the support of Hindue extremists.

The position of the Indian president is similar to that of The Queen in the British constitution. If the prime minister decides to impose martial law, he needs the president’s signature. With Kovind’s appointment, Modi will have installed the yes-man he needed at the top of India’s institutions.

Many Indian commentators living outside the coumntry hve said Modi India is very rapidly moving India towards becoming a police state, that will have a strong Hindu extremist faction as its core.

To a populace not anchored to reason, if one votes for Hinduism, one will go for Kovind; and if one is pseudo-secular and wants to look pro-women, one will vote for Kumar. Kovind will very likely win for no other reason than the fact that Modi and his party BJP have higher support than Kumar.

Many wealthy and so-called educated people who have never used a bank card. Many simply won’t trust a machine. Most are incapable of learning how to use the cards. With people tired of corrupt, untrustworthy and unpredictable banks and payment portals incapable of providing reliable services, cash is coming back with a vengeance.

The economy, however, continues to be stagnant. Businesses continue to fail. If not for economic reasons, businessmen have grown tired of corrupt and rapacious bureaucrats and an extremely uncertain regulatory regime. Look at an Indian businessman and you will see an unhealthy, tired, soulless person.

Even today, vegetables sell for half as much as they normally do. Are poor people going hungry? Do not expect news on this in the media, which must toe the line of the Indian government.

If food is so cheap, does it not indicate that poor people are unable to buy? Are they going hungry? Moreover, if farmers continue to suffer and cannot profit from their produce, what effect will that have on the future food supplies? [Ed. note: the collapse in food prices was originally triggered by the government’s overnight cash ban]

Money — even in fiat currency form — is the blood of the system. Once the blood flow was stopped, even if it is fully revived later, clots will have appeared and organs will have failed. That is happening in India today. Job growth was already stagnant, but the situation is much worse now, making India’s so-called demographic asset, which never was an asset, a massive liability.

Domino effects continue to work their way up the food chain. Formal and big businesses are beginning to show signs of stagnation. Members of the salaried middle class are losing their jobs, but they have so far failed to connect the dots and continue to support Modi.

On 8th November 2016, Modi declared 86% of the monetary value of India’s outstanding currency illegal. Even today, ATMs remain cashless. The banks are clogged with throngs of people. Small businesses — the backbone of India’s economy — keep failing, because people continue to avoid discretionary spending.

People have suffered economically as the smooth flow of the economy was disrupted, and transaction costs for businesses have increased. Food prices have recovered a bit recently, but are still at about half their previous levels. Unfortunately, this is not because production has increased, but because demand has collapsed, with many of the poorest people likely unable to buy food.

Over a billion people in India have no access to internet. When it is available, it is often very slow. Electricity is unreliable. Bank websites are extremely unwieldy. To make an online transaction, the login process is usually very complicated, often requiring several steps and verification codes sent as text messages.

More than a month ago, I paid online for a flight ticket from Delhi to London. The money left my account, but I never got the ticket. It was virtually impossible to get in touch with the Indian company I had bought the ticket from. When I did finally manage to contact them, they told me that they had refunded the money. The bank says it never got the refund. Of course, I have had to personally visit the bank every time and spend a long time waiting to talk to someone. In this electronic day and age, more than a month after the event, no-one knows where my money is.

It is hard to pinpoint who deserves the blame. Indians are extremely unskilled, uneducated (despite paper certificates aiming to prove otherwise), and lack work ethics. They almost never have passion for their jobs or an interest in providing good services to their clients. This is the main feature characterizing many Indian companies. Management and owners lack professionalism and are singularly focused on the bottom-line, by hook or by crook, eschewing true value-addition.

India’s attempt to go digital will fail. Digital cash will fail. E-commerce companies will fail. In India, the national ID-card system, Aadhaar, will fail. The GST system will likely fail, or it will at least create massive problems in implementation. All these programs will impose huge costs on the economy and the well-being of entrepreneurs, including the wretched poor in the large informal economy.

India is looking for totalitarian solutions to deal with problems created by totalitarianism and tribalism. India is trying to use the the facade of the technologically advanced West hoping that the packaging will automatically deal with the lack of inner substance. Fail even with respect to superficial issues seems preordained.

India’s government cannot provide basic services to its people. Ambulances are conspicuous by their absence. But Modi wants to move on to doing bigger things. In the last 70 years of independence, Indians have systemically destroyed the institutions of the rule of law that the British had bestowed on the country.

There is a lot of pain and no gain facing India. If they had any sense they should be begging the British to return and rule the country. That is the only option apart from chaos, disintegration, and eventual never-ending tribal infighting among the fragments.

Sources:

India: Why its Attempt to Go Digital Will Fail

India: Cash Is Back

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