Now that demonetisation is underway (a long way before we call it done and dusted) what are the subsequent logical steps that the government should take? Well lets look at some of them and see if the same or some even better are in store for the much harrassed common man.
1. Fake currency: The logic should be that if it passes human test, then it is legal tender. If a currency has to he held under some scanner or other such implement then this scourge is never going to go away and the public will continue to be harasssed as fake currency notes are destroyed when you go to deposit in the bank. A major reason for people to keep cash as cash and not go to the bank.
2. RFID: This was a rumour on the launch of the new notes. It would have been useful if this tech or something similar had been incorporated which allows for individual tracking of currencies - this is the only way to stop the hoarding of black money.
3. Corruption: Make all application and disposal of application process online. In fact the person disposing off the application for say the state of TN would be sitting in delhi, and for delhi he would be sitting in jharkhand. This way physical contact can be eliminated and everything gets online and has to follow the queue. Also for the number of transactions that a person does will be the benchmark for the salary for every individual - this will ensure that everyone works. For eg if one person on the same job does 100 transactions in a month and another does only 75 transactions - the salary of the other person will be only 75% for that month and so on. The control transaction guy will be any unemployed youth who will be employed by turn in each month and the transactions that he does will be the minimum - I am sure if such a system is employed refinements on the same will keep the government employees busy!! (The BPO industry might implement this even before the govt!!)
4. Taxation: With GST and the FM's hint that he is looking at 25% as the peak rate of income tax, one shouldn't be surprised if the tax rate is reduced to 25% come the budget in feb'17. I feel an even bigger cut or substantial increase in the slab rates could be looked forward to.
5. Banking fees: It is one of the mysteries of the universe why the governments allow banks to charge a customer for NOT maintaining a minimum balance. Similarly the prepayment penalty is a joke when there are such high level of delinquencies. Also when you are looking at a cashless society one is charged for executing NEFT/ RTGS transactions. A complete review of the charges by banks and removal of the obvious silly ones and rationalisation of the others will go a long way in incentivising the people in adopting banking for most if not all of their transaction needs.
6. government revenue: The first law should be that all government revenue collection should be online. If it is not online it is not due - this is the first step to have been done even before demonetisation - we still have to carry DD's for many government activities!!
7. Land dematerialisation: the next BIG strike on corruption is dematerialisation of land records (not just digitalisation). With dematerialisation i estimate that 12-18% of land will have benamis and hence will fall in to the hand of the govt. 30-35% will end up in the courts. That will leave 47-58 percent which will be free from all problems/ issues and hence can be transacted online (compulsorily). The 12-18% of benami land once auctioned will also lead to the total pool of land records free from all encumberances and hence as the cost of compliance comes down the real estate sector will take off - this will add a permanent 2-3% to the GDP for the next 12-15years before we have the next collapse in the real estate market.
8. Subsidy: The government should stop all subsidies in urban centres - this is so as one of the stated objectives of the government is to keep people from leaving the villages and migrating to the cities. If the disincentive of zero subsidy stares the people in their faces they might think twice before they migrate. Also all subsidies are to be targetted with certain criteria - if the anticipated changes are not seen then the same is to be better targetted or to be closed.
9. government debt: A time table (very flexible table at that) is to be tabled each year with the budget which will lay out the roadmap for repayment of all outstanding government debt. All future debt issues to have a time bound repayment - the FRBM to be accordingly amended to include this clause.
10. Minimum Govt maximum Governance: ultimately the goal of the government should be to be present only in the defence, home security, taxation, RBI. The rest should be only policy / law mandates but they are to be financed and managed by a committee of ministers selected from the states - for example in education the govt can only set the minimum syllabus and the standards to be followed - the rest of the decision as to how to fund etc should be at the local corporation/ panchayat level - the devolution of funding will be on L1 basis.
11. WPI/ CPI - inflation targetting is a very important job of government and as such one measure of inflation is a misnomer - there should be one for subsidy free urban areas and one for subsidised non-urban areas. This way the real costs that matter will be in the respective baskets and better policy targetting can be done by the government - hence saving it budget monies.
leaving you all with another gem from the timeless series:
Bernard: But surely the citizens of a democracy have a right to know. Sir Humphrey Appleby: No. They have a right to be ignorant. Knowledge only means complicity in guilt; ignorance has a certain dignity.
I only hope that with full knowledge we also have our dignity at the end of the day because what is being witnessed today in front of the banks and ATM is anything but.
1. Fake currency: The logic should be that if it passes human test, then it is legal tender. If a currency has to he held under some scanner or other such implement then this scourge is never going to go away and the public will continue to be harasssed as fake currency notes are destroyed when you go to deposit in the bank. A major reason for people to keep cash as cash and not go to the bank.
2. RFID: This was a rumour on the launch of the new notes. It would have been useful if this tech or something similar had been incorporated which allows for individual tracking of currencies - this is the only way to stop the hoarding of black money.
3. Corruption: Make all application and disposal of application process online. In fact the person disposing off the application for say the state of TN would be sitting in delhi, and for delhi he would be sitting in jharkhand. This way physical contact can be eliminated and everything gets online and has to follow the queue. Also for the number of transactions that a person does will be the benchmark for the salary for every individual - this will ensure that everyone works. For eg if one person on the same job does 100 transactions in a month and another does only 75 transactions - the salary of the other person will be only 75% for that month and so on. The control transaction guy will be any unemployed youth who will be employed by turn in each month and the transactions that he does will be the minimum - I am sure if such a system is employed refinements on the same will keep the government employees busy!! (The BPO industry might implement this even before the govt!!)
4. Taxation: With GST and the FM's hint that he is looking at 25% as the peak rate of income tax, one shouldn't be surprised if the tax rate is reduced to 25% come the budget in feb'17. I feel an even bigger cut or substantial increase in the slab rates could be looked forward to.
5. Banking fees: It is one of the mysteries of the universe why the governments allow banks to charge a customer for NOT maintaining a minimum balance. Similarly the prepayment penalty is a joke when there are such high level of delinquencies. Also when you are looking at a cashless society one is charged for executing NEFT/ RTGS transactions. A complete review of the charges by banks and removal of the obvious silly ones and rationalisation of the others will go a long way in incentivising the people in adopting banking for most if not all of their transaction needs.
6. government revenue: The first law should be that all government revenue collection should be online. If it is not online it is not due - this is the first step to have been done even before demonetisation - we still have to carry DD's for many government activities!!
7. Land dematerialisation: the next BIG strike on corruption is dematerialisation of land records (not just digitalisation). With dematerialisation i estimate that 12-18% of land will have benamis and hence will fall in to the hand of the govt. 30-35% will end up in the courts. That will leave 47-58 percent which will be free from all problems/ issues and hence can be transacted online (compulsorily). The 12-18% of benami land once auctioned will also lead to the total pool of land records free from all encumberances and hence as the cost of compliance comes down the real estate sector will take off - this will add a permanent 2-3% to the GDP for the next 12-15years before we have the next collapse in the real estate market.
8. Subsidy: The government should stop all subsidies in urban centres - this is so as one of the stated objectives of the government is to keep people from leaving the villages and migrating to the cities. If the disincentive of zero subsidy stares the people in their faces they might think twice before they migrate. Also all subsidies are to be targetted with certain criteria - if the anticipated changes are not seen then the same is to be better targetted or to be closed.
9. government debt: A time table (very flexible table at that) is to be tabled each year with the budget which will lay out the roadmap for repayment of all outstanding government debt. All future debt issues to have a time bound repayment - the FRBM to be accordingly amended to include this clause.
10. Minimum Govt maximum Governance: ultimately the goal of the government should be to be present only in the defence, home security, taxation, RBI. The rest should be only policy / law mandates but they are to be financed and managed by a committee of ministers selected from the states - for example in education the govt can only set the minimum syllabus and the standards to be followed - the rest of the decision as to how to fund etc should be at the local corporation/ panchayat level - the devolution of funding will be on L1 basis.
11. WPI/ CPI - inflation targetting is a very important job of government and as such one measure of inflation is a misnomer - there should be one for subsidy free urban areas and one for subsidised non-urban areas. This way the real costs that matter will be in the respective baskets and better policy targetting can be done by the government - hence saving it budget monies.
leaving you all with another gem from the timeless series:
I only hope that with full knowledge we also have our dignity at the end of the day because what is being witnessed today in front of the banks and ATM is anything but.
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