✌✌✌✌ THE HINDU ✌✌✌✌
✌✌ Cash need not be King ✌✌
The government has declared an incentive package to encourage non-cash payments for fuel, new insurance policies from public sector firms, train tickets and highway toll, among other things. For credit and debit card transactions up to Rs.2,000, the Reserve Bank of India has relaxed its stringent two-factor authentication requirement, and service tax stands waived. Taken together, these moves to encourage cashless payments are significant not just because they can alleviate the cash crunch following the demonetisation of high-value notes. They could spur a change in spending habits in an economy where cash has served as the basis of around 95 per cent of all transactions. From those between traders and farmers to settling a restaurant bill, the use of cash creates a window to escape the tax net. Shopkeepers routinely ask buyers if they would like a bill or not, and those who opt for the latter to save some rupees are often left with little recourse if the goods prove to be substandard. By contrast, cashless payments can be captured electronically through the settlement mechanisms, bringing more revenue to the government and ensuring consumer rights. Given India’s abysmal tax base, this nudge to cashless payments could be a game-changer, with the introduction of the Goods and Services Tax.
A nudge to move people away from cash, especially in the rural economy, first came in Yashwant Sinha’s 1998-99 Budget, with the issue of Kisan credit cards to farmers. Around 15 years later, RuPay cards were introduced with an eye on lowering payments to service providers such as Visa or Mastercard. By November this year, 29 crore such cards had been issued, 19 crore of them linked to Jan Dhan accounts. The Narendra Modi Cabinet approveda two-year action plan to encourage digital and card payments this February. If some of the proposed measures, such as rationalising the merchant discount rate on card transactions, had been implemented before the demonetisation announcement, perhaps the current pain due to a tight supply of cash could have been ameliorated somewhat. With new payments banks coming up, along with mobile wallets and banking applications, India’s transaction ecosystem could see a paradigm shift provided the government puts in place effective monitoring systems and ensures interoperability between these alternatives. An estimated Rs.18,000 crore is spent to maintain ATMs, and if even a quarter of ATM withdrawals are cut by the switch to cashless payments, banks could use the savings to reach the unbanked millions and still lower digital transaction costs.
✌✌ South Korea at a Cross roads ✌✌
When Park Geun-hye assumed office as South Korea’s first woman President in early 2013 on a wave of popularity, not many could have foreseen her impeachment on corruption charges less than four years later. Such has been the impact of the scandal that several lawmakers from her own Saenuri Party voted in favour of the impeachment resolution brought in by the opposition in Parliament. The crisis was sparked by revelations two months ago that Ms. Park had abused her powers to help a confidante, Choi Soon-sil, extort money from companies for her foundations. Since then, the Korean media have carried stories of Ms. Choi’s access to the President’s office and her influence in decision-making. The crisis was handled ineptly by Ms. Park and her aides. She never bothered to explain her position directly to the public, and did not take her party into confidence. She stayed away from the press and the opposition, perhaps hoping the crisis would blow over. But with a 4 per cent approval rating, she soon became the most unpopular leader South Korea has had since its transition to a democracy in the late-1980s. And an impeachment appeared certain in the wake of opposition protests that attracted over a million people to Seoul.
South Korean Presidents are no strangers to corruption scandals. But in Ms. Park’s case, the allegation that the President was being controlled by a puppeteer seemed to have aggravated the public anger. Moreover, Ms. Park’s record in office was far from exemplary. The economy continued to sputter under her rule with growth rate falling to 2.6 per cent in 2015, the slowest since 2012. Her decision to reach an agreement with the United States to deploy an advanced missile system to counter threats from North Korea was not popular domestically, and also increased tensions in the Korean Peninsula. Relations with China too steadily deteriorated under Ms. Park. South Korea needs a clear-headed leadership both to reboot the economy and to take strategic decisions with a long-term perspective. And given the bitterness and administrative paralysis of the past couple of months, it needs someone at the helm who is free of scandal and has popular support. Unfortunately, the impeachment has pushed South Korea into a protracted interregnum — the Constitutional Court can take up to six months to decide if Ms. Park has to go or whether her powers can be restored. Ms. Park could have avoided pushing the country into this period of uncertainty had she resigned before the parliamentary vote. But she chose to cling on, leaving lawmakers with no option but to trigger the impeachment process.
✌✌✌✌ THE ECONOMIC TIMES ✌✌✌✌
✌✌ Demonetisation could push up food prices ✌✌\
The demonetisation drive is likely to push up food prices, particularly the non-grain part. Here is why. In terms of value, vegetables, fruit, fish, milk and its by-products like cheese and paneer are 65 per cent of farming. Even prior to demonetisation, a goodly share of this valuable produce used to rot, before reaching any market. Today, as vegetable and fruit growers grumble, there is no cash to pay people who will harvest the vegetables and fruit on your plate. A drop in supply and rise in vegetable, and food, prices are highly probable.
Now, the harvesting of grain — rice and wheat — which will begin soon, has been mechanised. Harvesters will do the job that needed many person-hours at the rate of Rs 400 per day before demonetisation. But how will people pay for harvesting machines in a time of acute cash scarcity? From Bengal to Punjab, we hear tales of acute farm distress.
But these states also grow much of vegetables, fruit and other edibles that we cannot do without. Unlike grain, whose harvesting can be mechanised, the plucking of vegetables, fruit, fish farming, dairying and poultry rearing is highly labour-intensive. Some estimates say 90 per cent of the total cost of horticulture and other non-grain produce is the cost of wages that need to be paid to mainly migrant or seasonal workers. With cash drying up, there are reports of a large outmigration of jobless workers from Uttar Pradesh, Bihar, Bengal and Odisha from the plush farms of Punjab, Haryana and western Uttar Pradesh.
Deprived of money, the main dairy, pisciculture and vegetable and fruit cultivating areas of India will also be deprived of workers. It is anybody’s guess how this cash to worker to output shortage will contribute to food price inflation. It will be tragic for the poor. It might also affect you, dear reader.
✌✌ Cash need not be King ✌✌
The government has declared an incentive package to encourage non-cash payments for fuel, new insurance policies from public sector firms, train tickets and highway toll, among other things. For credit and debit card transactions up to Rs.2,000, the Reserve Bank of India has relaxed its stringent two-factor authentication requirement, and service tax stands waived. Taken together, these moves to encourage cashless payments are significant not just because they can alleviate the cash crunch following the demonetisation of high-value notes. They could spur a change in spending habits in an economy where cash has served as the basis of around 95 per cent of all transactions. From those between traders and farmers to settling a restaurant bill, the use of cash creates a window to escape the tax net. Shopkeepers routinely ask buyers if they would like a bill or not, and those who opt for the latter to save some rupees are often left with little recourse if the goods prove to be substandard. By contrast, cashless payments can be captured electronically through the settlement mechanisms, bringing more revenue to the government and ensuring consumer rights. Given India’s abysmal tax base, this nudge to cashless payments could be a game-changer, with the introduction of the Goods and Services Tax.
A nudge to move people away from cash, especially in the rural economy, first came in Yashwant Sinha’s 1998-99 Budget, with the issue of Kisan credit cards to farmers. Around 15 years later, RuPay cards were introduced with an eye on lowering payments to service providers such as Visa or Mastercard. By November this year, 29 crore such cards had been issued, 19 crore of them linked to Jan Dhan accounts. The Narendra Modi Cabinet approveda two-year action plan to encourage digital and card payments this February. If some of the proposed measures, such as rationalising the merchant discount rate on card transactions, had been implemented before the demonetisation announcement, perhaps the current pain due to a tight supply of cash could have been ameliorated somewhat. With new payments banks coming up, along with mobile wallets and banking applications, India’s transaction ecosystem could see a paradigm shift provided the government puts in place effective monitoring systems and ensures interoperability between these alternatives. An estimated Rs.18,000 crore is spent to maintain ATMs, and if even a quarter of ATM withdrawals are cut by the switch to cashless payments, banks could use the savings to reach the unbanked millions and still lower digital transaction costs.
✌✌ South Korea at a Cross roads ✌✌
When Park Geun-hye assumed office as South Korea’s first woman President in early 2013 on a wave of popularity, not many could have foreseen her impeachment on corruption charges less than four years later. Such has been the impact of the scandal that several lawmakers from her own Saenuri Party voted in favour of the impeachment resolution brought in by the opposition in Parliament. The crisis was sparked by revelations two months ago that Ms. Park had abused her powers to help a confidante, Choi Soon-sil, extort money from companies for her foundations. Since then, the Korean media have carried stories of Ms. Choi’s access to the President’s office and her influence in decision-making. The crisis was handled ineptly by Ms. Park and her aides. She never bothered to explain her position directly to the public, and did not take her party into confidence. She stayed away from the press and the opposition, perhaps hoping the crisis would blow over. But with a 4 per cent approval rating, she soon became the most unpopular leader South Korea has had since its transition to a democracy in the late-1980s. And an impeachment appeared certain in the wake of opposition protests that attracted over a million people to Seoul.
South Korean Presidents are no strangers to corruption scandals. But in Ms. Park’s case, the allegation that the President was being controlled by a puppeteer seemed to have aggravated the public anger. Moreover, Ms. Park’s record in office was far from exemplary. The economy continued to sputter under her rule with growth rate falling to 2.6 per cent in 2015, the slowest since 2012. Her decision to reach an agreement with the United States to deploy an advanced missile system to counter threats from North Korea was not popular domestically, and also increased tensions in the Korean Peninsula. Relations with China too steadily deteriorated under Ms. Park. South Korea needs a clear-headed leadership both to reboot the economy and to take strategic decisions with a long-term perspective. And given the bitterness and administrative paralysis of the past couple of months, it needs someone at the helm who is free of scandal and has popular support. Unfortunately, the impeachment has pushed South Korea into a protracted interregnum — the Constitutional Court can take up to six months to decide if Ms. Park has to go or whether her powers can be restored. Ms. Park could have avoided pushing the country into this period of uncertainty had she resigned before the parliamentary vote. But she chose to cling on, leaving lawmakers with no option but to trigger the impeachment process.
✌✌✌✌ THE ECONOMIC TIMES ✌✌✌✌
✌✌ Demonetisation could push up food prices ✌✌\
The demonetisation drive is likely to push up food prices, particularly the non-grain part. Here is why. In terms of value, vegetables, fruit, fish, milk and its by-products like cheese and paneer are 65 per cent of farming. Even prior to demonetisation, a goodly share of this valuable produce used to rot, before reaching any market. Today, as vegetable and fruit growers grumble, there is no cash to pay people who will harvest the vegetables and fruit on your plate. A drop in supply and rise in vegetable, and food, prices are highly probable.
Now, the harvesting of grain — rice and wheat — which will begin soon, has been mechanised. Harvesters will do the job that needed many person-hours at the rate of Rs 400 per day before demonetisation. But how will people pay for harvesting machines in a time of acute cash scarcity? From Bengal to Punjab, we hear tales of acute farm distress.
But these states also grow much of vegetables, fruit and other edibles that we cannot do without. Unlike grain, whose harvesting can be mechanised, the plucking of vegetables, fruit, fish farming, dairying and poultry rearing is highly labour-intensive. Some estimates say 90 per cent of the total cost of horticulture and other non-grain produce is the cost of wages that need to be paid to mainly migrant or seasonal workers. With cash drying up, there are reports of a large outmigration of jobless workers from Uttar Pradesh, Bihar, Bengal and Odisha from the plush farms of Punjab, Haryana and western Uttar Pradesh.
Deprived of money, the main dairy, pisciculture and vegetable and fruit cultivating areas of India will also be deprived of workers. It is anybody’s guess how this cash to worker to output shortage will contribute to food price inflation. It will be tragic for the poor. It might also affect you, dear reader.
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