By Nilotpal Basu
Even before the dust had settled down over the bombastic and unbelievable claim by Modi that in the last quarter Indian economy has grown by 7.8 per cent, the charge that the government has capitulated before the US and the Trump administration over the imposition of 0.4 per cent charge in some categories of digital transactions through the Unified Payments Interface (UPI) has completely exposed the pusillanimity of our economic administrators. A host of issues do call the bluff that the Modi government indulged in. Rather than statistical jugglery, what is needed to understand the present trajectory is what is being experienced by millions of aam aadmi. Surely, the basic thrust of Indian economic policy making constitutes a sure recipe for self-destruction. The government had claimed that the charge on some categories of UPI transaction is a meagre 0.4 per cent. That too, not on the common consumers, but on the traders who received payments through the UPI App.
The counter narrative is compelling. While only 4 per cent will have to pay the charge, the actual chargeable transactions are in excess of Rs. 2,000. This is a fallacy. Of the total amount received by traders from consumers, 66 per cent belong to this chargeable category. Therefore, overwhelming bulk of chargeable transactions will be covered in the proposals. While the government claims that small traders or retail businesses will not have to pay this charge at all, the reality is that a monthly transaction of Rs. 1 lakh actually amounts to Rs. 3,300 in transaction. Even in small kirana or tailoring shops in the neighbourhood transact Rs. 5,000 to Rs. 10,000 on a daily basis. Therefore, in real terms, most of the small businesses also will be impacted through this so called ‘meagre’ charge.
The government has also claimed that a service like that of a UPI App exists only in India. As a result, there is a huge cost which has to be covered in terms of bank costs, server expenses and employees’ cost. The government is charging this small amount only to sustain this.
But the government’s own data shows that last year the cumulative profit of all the banks were more than Rs. 4 lakh crore. Even NCPI, the public sector entity which administers the UPI had surplus of Rs. 19,000 crore and has a reserve of Rs. 7,000 crores. RBI has paid the government Rs. 2.87 lakh crore from their surplus. Apart from this, the two main apps apart from UPI which facilitate digital transactions are owned by the two multi-national giants, Amazon and Google. They recover a large part of their transactional expenditure by selling commercial information of all the consumers. Therefore, it is apparent that the proposed charges on UPI transactions are to undercut the competition for Amazon and Google, to the detriment of small businesses and common consumers in India.
Who is the government trying to fool? This whole controversy cannot be discussed in isolation from its historical context. On that fateful evening on November 8, 2016, Modi in his public broadcast, announced the big-ticket demonetisation of currency notes of Rs. 500 and Rs. 1,000, in one lethal blow. Somebody who is completely clueless about the manner in which black money operates in the economy could presume that contrary to the ancient Hindi film style, black money is not kept in pillowcases and earthen pots buried under their beds!
Apparently, that is what Modi and his advisors thought. But RBI’s annual report of 2017-18 showed that out of Rs. 15.41 lakh crores in demonetised currency notes, Rs. 15.30 lakh crores or 99.30 per cent had returned to the banking system, underlining the stupidity of the initial presumption.
In the face of tremendous hardships faced by the common man and the consequent public anger, the government was forced to initiate the UPI app, despite the Prime Minister himself promoting private digital wallets. The contribution of UPI has been substantial in largely digitising daily small transactions. Now with these charges, once again, the threat of disruption in that digital trade environment is looming large.
Demonetisation was the beginning of the downhill journey of the Indian economy. The informal, cash driven, small sector economy comprising of cash based physical transactions and small businesses crashed. The micro and small enterprises sector was left totally devastated. It took a heavy toll on employment, especially in the informal sector. It is a different proposition that the loud-mouthed Prime Minister and his sycophants never found time to apologise to the common man for this deadly self-goal!
It is only such mindless policy makers who can brag about a 7.8 per cent GDP growth! The reality is stark. India according to World Inequality Report 2026 is one of the most economically unequal countries globally. Top 10 per cent of earners capture 58 per cent of the total income. Bottom 50 per cent of the population receive only 15 per cent. Most Indians remain in the bottom 50 per cent of global income distribution.
Similarly, in terms of wealth concentration, top one per cent holds approximately 40 per cent of the country’s wealth. Top 10 per cent owns roughly 65 per cent of all national wealth. The bottom possesses a mere 6.4 per cent of total wealth. The inequality landscape is further aggravated with data on gender and labour disparities. Female labour force participation is stagnant at just 15.7 per cent.
Gender pay gap is startling. Women earn 61 per cent of men’s wages for paid labour. The fact that 94 per cent of the total work force is employed in the unorganised and informal sectors implies the worst levels of social security deficit for the work force.
However, the government is happily indulging in the same vein with policies for the growth of their corporate cronies and protecting their income and wealth through tax reliefs and bank loan waivers. The drastic reduction in funding for the social sector – in health and education – is now resulting in the widest possible disquiet and agitation. So long as the government fails to reverse its policy thrust of promoting its corporates and cronies we are surely heading for an explosion. (IPA Service)
