Here's How US Played A 'Silent' Role In India's Demonetisation And Push For Digital Transactions

A number of people starting from Prime Minister Narendra Modi, to a Pune-based activist Anil Bokil, have been credited by people at several occasion for coming up with the idea of demonetisation. But little credit has been given to the role United States has played in the entire development.

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According to a research paper in Global Research, United States Agency for International Development (USAID), the US government¡¯s development agency had in October announced the establishment of Catalyst: Inclusive Cashless Payment Partnership¡°, with the goal of effecting a quantum leap in cashless payment in India, calling it, "The next phase of partnership between USAID and Ministry of Finance to facilitate universal financial inclusion."

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Catalyst¡¯s Director of Project Incubation is Alok Gupta, who used to be Chief Operating Officer of the World Resources Institute in Washington, which has USAID as one of its main sponsors. He was also an original member of the team that developed Aadhaar bio-metric identification system.

Also read: Did You Know That The Original Idea To Discontinue Rupee 500 & 1000 Notes Came From The People Of India

The article also points out the likely role "IMF-Chicago Boy" Raghuram Rajan - who was the RBI governor till some months ago - might have played in the policy.

If Rajan was involved in the preparation of this assault to declare most of Indians¡¯ banknotes illegal ¨C and there should be little doubt about that, given his personal and institutional links and the importance of Reserve Bank of India in the provision of cash ¨C he had ample reason to stay in the background.

After all, it cannot have surprised anyone closely involved in the matter, that this would result in chaos and extreme hardship, especially for the majority of poor and rural Indians, who were flagged as the supposed beneficiaries of the badly misnamed ¡°financial-inclusion¡±- drive, the report adds.

It says that the partnership of USAID and the Indian ministry of finance, from which catalyst originated, are little more than fronts which were used to be able to prepare the assault on all Indians using cash without arousing undue suspicion.

According to a report of The Economic Times, USAID has committed to finance Catalyst for three years.

The Catalyst team, which includes about 10 members, will be housed at the Institute for Financial Management and Research (IFMR) and will be supported through USAID¡¯s Mobile Solutions Technical Assistance and Research (mSTAR) program.

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The Beyond Cash report by the USAID which goes into the intricate details on the probabilities of a cashless economy in India cites the following reasons for "why a complete digital environment remains a distant dream."

Cash transactions as matter of habit

97 per cent of retail transactions in India are conducted in cash or cheque.

Not many consumers use digital payments

Only 11 per cent used debit cards for payments last year.

Very less merchants accept digital payments

Only 6 per cent of Indian merchants accept digital payments.

The report describes the partnership between the MoF and USAID as "To support digital financial inclusion in India."

Based on their extensive research, USAID came with up the following conclusions:

Current users of digital payments are highly satisfied with their experience.

Awareness of and interest in digital payments among current non-users is low.

Low interest in digital payments is often driven by the lack of a digital store of value.

Low penetration of merchant acceptance is a key barrier to adoption.

Consumers recognize the problems associated with cash.

What will it take for merchants to accept digital payments?

Merchants who accept digital payments are highly satisfied with the experience.

Among merchants who do not accept digital payments, awareness and interest is low.

Merchants, like consumers, are trapped in cash ecosystems, which inhibits their interest.

It is expensive for merchants to adopt digital payments, which affects their interest.

Merchants experience cash pain-points, which offer an opportunity for digital payments.

Vast unmet demand for credit can be used as a ¡°hook¡± for digital payments acceptance.

It also lists methods to "Bringing Merchants Onboard"

Enable merchants to try digital payments acceptance at low or no cost.

Digitize retailer-to-supplier payments.

Use transaction-based credit as a ¡°hook¡± for acceptance.

Incentivise existing merchants to further use digital payments and recommend them to others.

Communicate benefits of digital payments that could offset cost liabilities.

As you can see these were exactly the same measures that were rolled out in India after the demonetisation was announced.