Who Is The Biggest Benefactor Of Narendra Modi’s Demonetisation Plan? No, It’s Not Who Arvind Kejriwal Told You So!


If you are living in India, you for sure know how Prime Minister Narendra Modi’s late night speech of November 8th changed the daily life of every resident (okay, probably not all but most). That was the night when PM announced to the whole nation about demonetizing rupees 500 and 1000 notes. Government said its implications were huge.

Demonetisation, announced by Modi on November 8, that made currency denominations of Rs 500 and 1,000 — Rs 14.1 lakh crore, or USD 211 billion, in circulating cash — illegal tender overnight, is undeniably a good idea, if one believes that citizens and their transactions must incur tax, that is. Only one per cent of Indians pay tax. Black economy makes up as much as 20 per cent of India’s total GDP, amounting to USD 1.74 trillion in PPP terms.

Anand Ranganathan wrote in Newslaundry. He further wrote,

The denomination made illegal tender in 1978 by Morarji Desai made up just 0.6 per cent of India’s circulating cash. What Narendra Modi has made illegal, on the other hand, is 86 per cent of India’s circulating cash. Yes, it is a no contest — 0.6 per cent versus 86 per cent. Modi says this is his war on corruption. Well, if this is how we fight wars, god save this country.

That’s the economics and scale of topography this change will affect. The question everyone is asking —Will demonetization flush out proverbial black money from our country or is this move affecting so large a populace worth the risk at all. All this and more questions are all valid and should be asked, after all, the deaths due to absence of cash have only increased. Reports alone claim 50 plus deaths due to demonetization (we have no data how many deaths have occurred outside the purview of media lens). But there is one more question which we are not asking. One which is important as well, more important if you think it through.

Who is the real benefactor of this grand ‘surgical strike’ on black money?

Seriously. Who is it? Well, if you ask Arvind Kejriwal, he will probably tell you Ambanis and Adanis. This author can’t confirm nor deny his claims. Banks received Rs.5.44 trillion in deposits and old notes submitted for exchange from the time banks reopened after demonetization till 18 November. Who reaped those benefits? If you ask Mallyas and other lucky few who got their bad loans off banks’ balance sheets, they will probably smile and say sayonara. But again, Finance Minister Jaitley told us how there is difference between erasing from balance sheets and waiving off a loan completely. So forget that as well. Who is the biggest beneficiary then? The answer is quite simple.

It’s Paytm.


Three cheers if you guessed it right.

Paytm in a statement has said since demonetization, it has served over 45 million users and signed up over five million new users. Over seven million transactions worth Rs 120 crore on a particular day after the government withdrew Rs500 and Rs1,000 currency notes. Overall, the company has seen 25 million online transactions on Paytm in six days, amounting to Rs150 crore.

In short, Paytm registered a 700 per cent increase in overall traffic and 1,000 per cent growth in the amount of money added to the Paytm accounts.

Other mobile wallets like Mobikwik have registered growth too but Paytm’s scale is just too huge to talk about the rest. Also, it was the Paytm which came with full page ads like Reliance Jio with PM Narendra Modi’s photo to cash in on Modi’s big move towards cashless economy. The ad congratulated Modi for “taking the boldest decision in the financial history of independent India” and urged readers to “join the revolution” by using Paytm. Now people may tell you how Modi didn’t shoot for these ads and, Paytm or Reliance just ‘used’ him to drive their agenda. But what they don’t tell you is, it is illegal to use PM’s image for any trade.

The Emblems And Names (Prevention Of Improper Use) Act, 1950 restricts the use of “the name or pictorial representation of Mahatma Gandhi, Pandit Jawaharlal Nehru, Chhatrapati Shivaji Maharaj or the Prime Minister of India” for the “purpose of any trade, business, calling or profession”, unless given “previous permission of the Central Government or of such officer of Government as may be authorised in this behalf by the Central Government”.

So are we not to assume Paytm and Reliance had blessings of PM or PMO on this? Well, if you may wish, you can also assume not PM nor anyone from PMO read any newspaper (that had this full page ads) or are active on social media where most were talking about this. Feels good? Alright, here is another important thing. Not that this matters in business world but one would believe it matters to those armchair ban-everything-China activists.

Alibaba, a Chinese giant along with its affiliate Ant Financial, is the single largest shareholder of One97 Communications, the parent of Paytm, with a 40% stake in the company.

Okay-Okay. Forget it being Chinese. After all it primarily serves in India. But do you know Indian government has its own cashless solution which is far more efficient and simple than any other digital wallet currently in market if marketed well? Alright. It’s not your fault if you didn’t heard about this one. Because the government never put efforts for us to know anything as such exist at all. But it does.


Enter Unified Payment Interface (UPI).

What do mobile wallets like Paytm or Mobikwik do? They ask you to transfer money from your bank account to their wallet. And from this wallet you use your money for different purposes at different places where this wallets are accepted. But, and here is where UPI shines. You can’t reverse your amount from this wallets to your bank. RBI has barred them from doing bank-to-bank transfers which is made possible using National Electronic Funds Transfer (NEFT), the Immediate Payment Service (IMPS) and now the UPI. This small caveat is huge pro for UPI as the intermediate step of adding money into wallet and then transferring to receiver so as to make possible the transaction success is removed. Also remember how this wallets ask for sensitive information (like bank account number, debit/credit card number, IFSC code etc.) for making possible the transaction between payee and payer. On the other-hand with UPI, you only require a virtual ID which can be your mobile or Aadhaar number. UPI (or vendor/merchant using UPI) can also ‘request’ money from customer with no need for customer to go through the pain of entering details at each purchase. Another plus for UPI.

Not all is well with UPI either. According to National Payments Corporation of India (NPCI) data only around 27 banks in India offer UPI services. But imagine the numbers of banks this government could have taken on-board had it advertised and marketed UPI well like it did with Jan Dhan Yojana. So to sum it all,
If the aim of government is to make Indian economy cashless, why is it not spreading word about its own service which can help it achieve that goal?

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