Soon after Finance Minister Arun Jaitley announced a raft of discounts and freebies to promote digital transactions last week, one of the twitter feeds read: ‘the finance ministry is sounding more like an e-commerce salesman.’ The promotional offer, which is less attractive than the ones thrown by e-commerce firms, is like a coin with two sides depending on which side you look at – either the government is desperately shifting the narrative to digitisation from black money, or this is the game plan to ensure that future black money growth is arrested. “Goal post is shifting, it is no longer about black money, now they have found a new one called cashless economy ,” says former finance minister P Chidambaram But given the government actions, it appears unlikely that it is going to even rewind its moves partly though it may amend, or fine tune measures to ensure that people use less of cash and depend more on electronic payments. Can a country where even top bank chief executives use wads of cash to pay for their expenses, make a shift towards digital given high illiteracy, poor internet penetration, absence of banking services and a penchant for tax evasion by traders and purchasers alike?While the focus has been on the amount of Rs 500 and Rs 1,000 currency notes that would not be deposited in banks, the broader picture stays that of squeezing cash supply in the system and ensuring that merchants and businesses keep an electronic record of all transactions making tax evasion next to impossible. “How again another cycle of unaccounted wealth will not be created? It has to be to get greater digital money, greater online, digital tracking using all the tools of big data — you have to try to prevent accumulation in unwanted places,” says KV Kamath, ex-CEO of ICICI Bank. “It is not difficult to do that. Digital money gives you the ability to track that.”Till now one of the biggest obstacles to digitisation has been the government itself which encouraged a lot of cash payments and the heavy charges that prevented people from using it, and not necessarily to evade taxes. Merchant discount rate, or the price that merchants are supposed to pay to banks for card payments, is often passed on to the consumers who end up paying 2% extra for card payments.Minister Jaitley on November 24 soon after appealing to bank CEOs to be on mission mode to expand digital banking said, “Contrary to perception that adoption of digital mode will be a far cry, this is a change that is already happening in the country. They (banks) need to use this opportunity to further capitalise on this change. They (banks) should see this as a business opportunity.”The government included even some private establishments to encourage its idea of digital economy. Banks were asked to waive off MDR on debit cards and also do away with charges on withdrawing cash from ATMs of other banks. Moving to electronic transaction will bring transparency and weed out corruption. “This will also help future transactions to be substantially digital and once they are substantially digital they get caught in the tax net,” Jaitley said on Tuesday.The government should put its money where its mouth is. Majority of online transactions with the government attract a convenience fee which is the reverse of what the government is talking about regarding digital payments. Even as the finance minister announced that the railways would be giving discounts for electronic payments, Central Railways continued to levy a surcharge on every card transaction. It is only recently that the Railways under pressure from the government has ordered for around 15,000 terminals for card transactions at its booking counters from ICICI Bank and State Bank of India.Prime Minister Modi’s shock treatment has invited criticism that citizens are put to enormous hardship to push his pet project. But a peek into the history shows that governments across the world are forced to take harsh steps to achieve a particular objective, including India’s own devaluation of the currency in 1991, by the then Finance Minister Manmohan Singh, by more than a quarter to overcome the currency crisis.Recent developments may show countries like Greece forcing its citizens to stand in queues to get their own money, there are instances where even the US had to resort to ban withdrawals from banks and order its citizens to deposit their gold to restore normalcy. President Franklin Roosevelt in 1933 ordered a ‘bank holiday’ for a few days and extended it for an indefinite period.Furthermore, he prohibited gold ownership beyond a limit and ordered they be surrendered at treasury by citizens or they face a jail term. While Modi may be seeking 50 days to showcase the impact of his demonetisation drive, what is quite visible is the pain and agony of people which the Chief Minister of Bengal Mamata Banerjee and her Delhi counterpart Arvind Kejriwal point out. “That’s typical of our country,” says Romesh Sobti, chief executive at IndusInd Bank. “If you didn’t do anything, you will be perpetually blamed for not doing anything, and if you do anything, you could have done better.”Any shopper faces this question: Do you want a bill? If so, pay 10% more. Then the instant answer is, no, thank you. That not only helps buyer avoid tax, but also the seller. The amount of tax evasion is so high that nearly 40% of medical stores are not even registered. “The biggest impediment to cashless is that people don’t want to show higher sales in their books,” said Dipak Gupta, joint managing director, Kotak Mahindra Bank.“The problem of the merchant is if you were showing a sale of Rs 100 last year, you don’t want to show your entire Rs 250 sale in white this year. So while digital or plastic can happen very fast, there is a mental impediment towards its impact.” There is a whole chain of tax avoidance that will be broken if payments are captured in the formal system. The only way to bring these tax avoiders to the digital platform is through a combination of incentives for electronic, disincentives for cash and stronger tax administration.Industry estimates suggest there are three crore merchant outlets in the country and as of the latest data, there are not more than 15 lakh ter minals in the country, of which the major chunk is with the massive retail chains of Big Bazaar, D-Mart and Shoppers Stop.What banks have completely left out are the street corner shops, which the mobile wallets are now targeting, thanks to the Reserve Bank of India regulations like caps on transfer, and banks’ greed for high profit margins. These discounts that government threw may be just one small step in moving towards a digital world.South Korea set an example where it announced tax incentives for those transacting through electronic modes. The government’s push can make the PoS machines reach these remote corners, but bankers are saying that is at the expense of their profits and they are not in for social service. But seasoned bankers like Kamath disagree and say that the four-fold jump in transactions will more than offset halving of fees.“South Korea, to encourage credit card use, said that any transaction done through credit cards will have a deductibility in tax,” says Kamath. Whether India manages to move to the league of South Korea and New Zealand or not, Modi has taken a great leap….. will it be forward?