IT Industry gives a Thumbs Up to the Demonetization Move
Founder, Director of Avaali Solutions Pvt Ltd, Ms. Srividya Kannan’s views on the demonetization move published in VAR India. The article was also carried in the online version.
The demonetizing move by PM Narendra Modi of discontinuing Rs 500 and 1000 notes has not only took every Indian by surprise, but it has been lauded and welcomed by the IT industry by hailing it as a ‘Masterstroke’ and a bold move –
8th November 2016 will go down in history as a day that Indians will keep it in mind for a lifetime. It is on this day that a major step taken by the present government and RBI is believed to improve the lifeline of the crumbling economy for better. The discontinuing of Rs 500 & 1000 notes will not only help in the long run for the country to prosper but also have greater implications like faster GDP growth, bringing down inflation and products becoming more affordable which will fuel the demand and further growth of the industries.
Applauding the move Kunal Bahl, Co-founder & CEO – Snapdeal says, “We welcome the Government’s bold and courageous move to weed out black money, which will have significant long term benefits for the economy. With this, the quantum of India’s economy moving through the digital pipes will witness massive growth. Both Snapdeal and FreeCharge are committed to supporting all such initiatives.”
“This is an extremely bold and first of its kind crack down initiative against corruption, black money and counterfeit currency. It is indeed commendable the way that this initiative has been executed with such perfection (including timing of the announcement, keeping such a wide initiative under wraps until announcement etc.). There is no doubt that in the mid to long run, this will indeed have a big impact to remove the termite of corruption,” says Srividya Kannan, Founder, Director – Avaali Solutions Pvt Ltd.
Even though this is not the first time such a move has been made by a sitting government, what is significant this time is that it is built on the JAM trinity – Jandhan, Aadhar and Mobile – making it hard for the country to regress. The gradual transition starting with Aadhaar/ PAN/ Bank account linking, penetration of digital wallets and online services, multiple instances to declare black money followed by back end preparation of new currency, which will definitely bring evident changes in the governance.
“A full-blown war, not just a surgical strike, has been declared by the Indian Government against black money. Out of the current Indian population estimated at 123 crore, only a minimal fraction of 2.87 crore individuals filed their income tax return and even lower, one percent or 1.25 crore, paid taxes in FY 2014-15. This is certainly an alarming figure to quote, especially considering that we are a progressive nation. With the PMs announcement, the honest tax payers will get their fair play. The nations biggest crackdown will certainly check black money and cross-border monetary transactions of counterfeit currency. This will curb corruption to a large extent and also ease the life of common citizens,” suggests Rajeev Jain, Chief Financial Officer, Intex Technologies (India) Ltd.
Impact on the IT Industry –
The increasingly growing dependence on ICT right after this scheme gets into action seems to be getting clearer. Says Anwar Shirpurwala, Executive Director – MAIT, “The move taken by the govt. clearly indicates that we will be depending more and more on the ICT. This move has been possible because of the availability of technology and multiple means of financial transaction. This also calls for the Govt to further look for means of increasing IT penetration, thus enabling every citizen to use technology tools and services for cashless transactions. Govt. should continue to give more emphasis on technology led schemes and programs for the betterment of the economy growth.”
Opines Satish Kumar V, Country Head – DMX India, “This is a welcome opportunity for the IT industry as the dependency on the banking & online transactions and communications is set to grow exponentially. This development would help hardware/software/services players to perform smart business, maintaining a transparent track record. It is also a boost to the start-up segment that can now take the cashless transactions and related shopping /purchase related experience to new levels of comfort with their innovative platform & service idea.”
Rohit Agarwal, CEO – Astrum Electronics India Pvt Ltd comments, “For the IT industry, there is not going to be a major impact as our industry works mostly (around 90%) in bill and there is only less component of it which is in real cash, if we talk about branded materials. But those who are not selling brand and are importing material from China, it will be big challenge for them as there 90% business in cash. The main issue will be at the consumer level as most of the people are buying in cash and people are not habituated to use debit and credit card so sales will suffer in short term. This move will help brands to grow and help in curbing the fake, grey market, and Chinese import cash sales.”
Agrees Biswas Nair, Founder & Managing Director – Inspirria Cloudtech, “This decision will hardly be impacting businesses in the IT industry as most of the transactions are done digitally. But, certainly the largest employee base in the IT industry may feel the inconvenience in near future because of the pull out of the 500 and 1000 currency notes. We need to understand that these young employees are one of the most avid spenders too, albeit some of them have moved to debit and wallet money.”
S Sriram, CEO – iValue infosolutions too echoes a similar sentiment, “There wont be much of an impact on the IT industry as they prefer purchase and sales through banking system only. Once cleaned up, further generation of black money will be dramatically cut down and more transactions will happen electronically instead of cash and hence the counterfeit will reduce.”
According to Sudip De, Director – DOEL International Pvt Ltd, IT and mobility are pretty settled business through national distribution. “All cash businesses would be hit for sure. Legal distribution through NDs & RDs would thrive to topple the grey market; trade would be hit in the short term but in the long term people would learn to do their business through cheques or net banking. I just hope the daily wage earners are not hit. Most of them have not been able to decipher the entire process clearly and they should be educated. I prefer sudden jerks and so am happy the way it has been done.”
With GST likely to be rolled out from 1st April 2017, this demonetisation of old currency notes will complement the governments move to ensure higher tax compliance. “Strict tax compliance will help SMEs running legitimate businesses, who generally find it difficult to compete with smugglers and those dealing in contraband goods. While there may be hardship for a week or two, thereafter things are expected to settle down, and people in general, including businesses, would be able to get cash when needed through authorised banking channels,” observes Viren Bavishi, Director – TAIT.
Reaction from the Industry –
The ICT industry too has reacted positively to the move and the reactions started coming out right after the PM made his announcement –
Naveen Surya – Chairman, Payment Council of India and Managing Director – ItzCash
“We welcome this extremely bold and much needed step by Prime Minister Modi and the government to cure us from disease of cash in our society. I along with Payment Council and India and ItzCash greatly admire this move and provide our full support.”
Sanjay Sethi, Co-founder and CEO – Shopclues
“This is a master stroke by the BJP government and a very bold move indeed. The country’s infrastructure is much more prepared to make this a watershed moment for war against terrorism and black money. This will play a significant role in putting India on track to becoming the economic force it is intended to be.”
Upasana Taku, Co-founder – MobiKwik
“The announcement of discontinuation of Rs 500 & Rs 1000 notes is a mind blowing initiative taken by Prime Minister Narendra Modi to curb black money in India. This is the biggest surgical strike on the menace of cash ever heard of anywhere in the world. This is a historic policy change and will go down in democratic Indias history as more impactful than the economic reforms of 1990s. Our kids will read about this in their history and economics books. Within a 50 day period a billion Indians will change their payments behaviour – we will move from cash only to a cash-free economy.”
Sathvik Vishwanath, CEO and Co-Founder, Unocoin
“The intentions are good but very difficult to achieve. If going cashless is the only way forward, certainly the bitcoin which is borderless trustless and transparent currency makes more sense”.
Manavjeet Singh, CEO & Founder, Rubique
“This is a promising move made by the government towards cashless economy. This will boost innovation in the nascent electronic payment industry. Without doubt, this will bring down frauds and thefts and costs of printing cash. It is a great blow to black money. If executed well, the costs of doing transactions between buyers and sellers will lower significantly by 2019.”
Ranjit Punja, CEO &Co-founder, Creditmantri
“A Sweeping step taken by the PM, but this should have a positive impact in curtailing black money and reducing corruption. Likely to cause some temporary hardship, and with the introduction of the Rs. 2,000 note, along with the security and tracking features, currency will be used as intended.”
Rishi Gupta, MD & CEO – FINO PayTech Limited
“It is a very good decision by the Government to demonetize high value currency notes and restrict the usage of new notes. We believe this development will definitely encourage the large segments who are unbanked and under-banked to join the formal banking ecosystem.”
Suresh Pansari, Director – Rashi Peripherals
The announcement made by Narendra Modi to cancel legal tendering of Indian Currency Note of Rs 500 and Rs 1000 with effect from 9th November is a very bold decision for the Indian Economy after Banking nationalization in 1969.
Discontinuation of currency note of denomination of 500 and 1000, with a view to keep in mind:
To differentiate the legal Notes and old fake note which are in circulation.To stop money supply to terrorist and drug mafia.To improve better Tax compliance and additional Tax collected to be used for building Infrastructure in India such as Road, Air Ports, Sea Ports, Power Plant etcTo reduce corruption in Indian Politics and Government.To bring Cash money in circulation for better productivity.
Impact of above, may be –
Transaction in Cash will reduce drastically.Payment through Cheque, RTGS, NIFTY, Credit Card, Debit Card will increase a lotIndian Retails that used to accept Cash needs to change their way of operation from Cash to Banking Money.Much awaited Tax compliance will be in place for: Income Tax, Service Tax, VAT, Stamp Duty, Local Levy etc.Corruption should reduce drastically.Level playing field, honesty and efficiency to reward, will pay a major roll.In few months/short term period, Rural Population will face difficulty for this decision of cancellation of old Notes but the same will get habituated and would create more benefits to them, in medium/long term.IT and Mobility business, again short term we might slow down for a while but soon will have much better/higher opportunities way forward, after implementation of GST in 2017.
Abey Zachariah, CEO – Goodbox “This will change the way business happens. This is the death knell of the parallel economy. We are thankful to Prime Minister Modi for taking this step. We were predicting that money will be digital to a large extent in the 3-5 years. The move by PM Modi will accelerate the process. This move will help the country fight the menace of fake currency. Black money will be out and this will give a big fillip to businesses like Goodbox. We expect transaction charges to go to a small fraction of what it is today due to increased digital currency transactions. This will result in businesses adopting digital and platforms like Goodbox for the future. Black money will not be a competitive advantage.”
M A Mannan, Country Manager, India – Corsair
“This is a great initiative by the government and a bold step towards future. Though it came as a surprise but everyone should appreciate and support the initiative to flush out fake currency, black money from our country. Biggest plus is at least this government is initiating some kind of actions against black money which is good for the economy. Minus from this development is to wait and watch, as money demonetization has happened before in history but with no effects on black money. Suggestions could be many but when it is done its done. It should have been done in a phased manner to start with 1000Rs and then to 500Rs.”
Sanjay Patodia, CEO – Galaxy Office Automation Pvt. Ltd.
“The ban on big currency notes will definitely going to give a positive boost, but only in the short term. The government is allowing people to deposit money into the system, but also reserve the right to audit it. There is still not much clarity on some points like the penalty for not depositing money in a given time frame and the rates of the penalty for late deposit.
The other thing to look forward is how the government can sustain this impact. With the arrival of new big currency the government should make efficient plans to curtail on cash money.
Rajan Chellappan, Managing Director – Optiserv Solutions Pvt Ltd.
“We will call it a calculated step by Government of India towards the economic growth of the country. This step will help in making cashless transactions a mainstream. However, this will not going to affect IT sphere, particularly the organized IT industry, where all the transactions are done through banking systems only.”
Suresh Sethi, Business Head, M-Pesa, Vodafone India
“Vodafone India welcomes the Government’s bold step to accelerate India’s progress into a less cash economy. We reiterate our commitment to actualize the government’s vision through Vodafone M-Pesa that leverages the reach of mobile technology to enable financial inclusion and offers the convenience of a digital wallet for easy transactions. The unique cash out feature of Vodafone M-Pesa makes it the ideal digital wallet for masses, enabling users to digitise cash, remit it to family and friends, pay bills and/or withdraw it at their convenience from over 120,000 touch points across the country.”
Prashant Mehta, VP & Global Service Line Lead- Systems Integration & Data, SapientNitro
“This is a bold and game-changing move by our PM. It will have a significant impact on black money (or so called parallel economy) and corruption and will help pivot the worlds largest democracy into a digital economy. With the implementation of Aadhaar based direct subsidy payments, a large part of the country was encouraged to open bank accounts. This move will further increase the user base and help drive higher financial inclusion across a broader section of the society including the lower income segment.”
Bhavin Turakhia, CEO & Co-founder – Zeta
This is an extremely bold and revolutionary move from the Modi government. In the short term, it may impact liquidity issues across the country given that approx 20% of GDP is in black money. But in the long term this move will encourage more industries to go digital. Many more merchants will start accepting payments digitally driving the growth between person to merchant payments. This move opens up the potential for the digital card industry which is still at a very nascent stage as far as awareness is concerned. The opportunities that lie ahead are immense, but its execution will depend upon the adoption of the best technology for financial systems so that the entire nation can reap the benefits of this move.
Ankur Joshi Co-Founder and COO of Pretr
“This is a truly transformational moment for the country and the economy.Major leap towards digital economy and surely very exciting times for wallets and all those operating in the digital payments and transactions space.We hope that while the new generation consumers had already adapted to digital transactions the older generation will also now adopt the same.As a direct impact on e-commerce companies there will be a shift from high value COD transactions to high value Digital transactions.The game has just begun.”
Bijesh Amin – Co-Founder, Indus Valley Partners
“The Modi government has heralded a new era in overt action against the “black” economy with the recent bank note demonetization. An unheralded positive from this action is that the global alternative asset management industry may see this as an additional indicator of Indias attractiveness as an investment destination.
Combined with the obvious geo-political upheaval from Brexit and Trump-entry, this makes an even stronger case for India as an attractive place to invest surplus cash piles or “dry powder” that have been accumulated by various private equity firms over the years.
The recent announcement by Oaktree Capital management to enter the Indian real estate market is a sign of (good) things to come. Oaktree joins global distressed debt managers including J.C. Flowers & Co, Apollo Global and Brookfield Asset Management investing into the country. And the scope for further investment is vast.
India has an estimated $120 billion of bad and troubled loans that are creating a blockage to further domestic capital investment and these global private equity firms have built up decades worth of expertise in dealing with such asset classes and helping to recapitalize balance sheets. A win-win could be a very welcome outcome for both the Indian economy as well as these these financial institutions.”
Sanjay Joshi, Country Manager at Edimax Technology
“This is a path breaking step taken by our PM NarendraModi to eradicate black money and accelerating India towards a cashless economy. It will expand the access to electronic payments and use of ICT across India providing a safe, convenient, and flexible alternative to cash. This bold move is just another instance of the Modi government’s vision of corruption free India.”
Anirban Blah, CEO – Gigstart
“While the move to eradicate black money will make an impact in the long run, it may be tough for those who are organising weddings to get back on their feet after the sudden change. In times like these, it is services like Gigstart that function on a non-cash basis that can overcome the challenges faced by people who are organising any kind of event to make the payment procedure seamless and transparent. Gigstart facilitates a direct NEFT payment process and ensure the artist receives the money from the client directly.”
Anurag Mohta,Co-Founder – RealBooks
“While the announcement of the demonetization was sudden, it was something that had been on the cards for a while and I had heard from multiple sources about this in the last few months.
If we were to ignore the immediate pain that each one of us facing, in the long run it’s surely better – it adds more people to the tax net who were so far evading taxes and therefore better for the overall development of the country.
From a global perspective also, a clean and transparent India will attract investors with more confidence.
From our own perspective, I am looking at super normal growth thanks to this initiative – our accounting platform RealBooks promotes transparency and accountability – where you can scan and attach each supporting document to the accounting entry. Given the kind of Digital India and “Swachh Bhaarat” that Our PM is trying to promote, RealBooks has already taken steps in that direction”.