There is a problem with cash.
In a very Hollywood style robbery touted to be the biggest in India some robbers stole 8 crs in cash from a car. It seems now that their is a bookie and hawala angle to it. Once the police will start questioning about where the money came from many skeletons will come out of the cupboard. The people who were looted claims that the money came from property deal. So who keeps that kind of money in cash ?
The problem with cash are plenty. To start with cash in the Indian economy is probably the source of all the corruption that we see in our society. Consider this. There are only 3.5 crore assesses, a mere 2.9 per cent of national population, and only 42,800 show annual income over Rs one crore. Audi, BMW and Mercedes together sell more than 30,000 cars in their premium category. So you get the picture right.
The local Bania never pays a dime in tax because he deals mostly in cash.
The property market drives out genuine buyers because there is too much of cash of cash in the system.
A lot of cash is transacted when people buy gold and diamonds and we know where this money comes from.
If removing corruption is on our agenda then removing cash from the Indian economy should be our priority number one. It can be done, very easily and very fast provided we have the political will for it. Some of the things that can be done are like making PAN mandatory for all jewellery and property sales and having a cash transaction tax at source. And no exceptions.
The government can also ban 500 and 1000 Rupees note to root out all the black money from the system. Don’t worry the poor will not suffer as they don’t have 500 and 100o rupees stashed in pillows. While you can never root out cash from the system you can certainly make it hard for anyone to transact in cash.
Most developed countries transact very little in cash. Most of the transactions happen through the banks. In India it is said that the cash economy is twice the size of the real economy. Imagine if even half of that were to come to the mainstream we can have unprecedented growth.
My worry is that cash is central to corruption but no one in the political circle including Kejriwal and Rahul Gandhi are making any noise about it. While legislation can definitely help in reducing corruption, the real culprit is cash. I suspect that politicians are the ones who will be hit the hardest if cash were to disappear. So they are very hush hush about it.
Cash is king but like kings let it be only at a few places. Can someone make it extinct please.