The recent demonetisation initiative was a bold move by the government of India towards abolishing a parallel economy in the country. However, the big question is this: is this a sustainable model? Will the government seek the help of technology to maintain and renew multiple business processes?
A few months ago, news reports quoted an RBI official saying that the central bank may soon set up a committee to study the use of "blockchain" technology in reducing the consumption of paper currency. Back then very few people might have understood what it really meant.
Blockchain exposes exactly what happened, when it took place and who was involved... it kicks out intermediaries that can easily manipulate records.
Here I will succinctly explain the concept of blockchain as well as the practical use cases of this innovative technology in the Indian context.
WHAT IS BLOCKCHAIN?
In a nutshell, blockchain is a new technology underlying Bitcoin and is popularly and rightly called the operating system for business transactions in many circles. Technically, it is a distributed, append-only, fault tolerant, time-stamped, secured, immutable, and when required, a transparent database.
Blockchain can either be public or private, just like the Internet. Transactions on a public blockchain are completely transparent and visible to anyone who wishes to explore. A private blockchain restricts access to a selected few, who have been given permissions. However, the biggest advantage of both these types lies in the elimination of an intermediary to complete the transactions, as well as the detailed audit trail that it creates. It exposes exactly what happened, when it took place and who was involved. In a sense, it kicks out intermediaries that can easily manipulate records for the benefit of additional fees.
HOW CAN IT BENEFIT THE INDIAN ECOSYSTEM?
The biggest question that arises from the demonetisation drive is whether it will actually benefit the average citizen of India. And the answer is yes, it can. Here is a list of initiatives that can add to the impact of demonetisation if the government embraces the new technology.
1. Blockchain can make all government contracts transparent and cashless
Often, intermediaries in the system try to take out an unaccounted portion of fund allocation whenever a contract is awarded, thereby robbing taxpayers of their hard-earned money. Blockchain can put an end to this by recording each and every transaction and making it transparent. It would enable public access to all the contracts awarded, transactions done by the government, businesses, contractors, public and everyone who is responsible for any decision-making and deals with money in such transactions. Funds allocation and cost incurred against it at each level can be fairly audited and accounted for. Every action will be recorded on a ledger and this ledger can be made public for scrutiny and transparency.
2. The entire voting process can be recorded on blockchain
Indian politics has been time and again accused of influencing the decisions of electors by giving out money in order to secure a vote bank. With blockchain, the entire process of elections—from awarding a ticket to a candidate to campaign spends to the final stage of voting—can be made public. This move will ensure a more fair and transparent electoral system in the country.
3. Make all government offices cashless
With new regulations in place, any payments made to and from the government must be mandated to be made cashless. Recording such transactions on blockchain and making it public will eradicate unfair practices in government offices. Blockchain will certainly help curb corruption. For instance, the government has already enabled a bank account with zero balance to its citizens. It means, practically every person in this country can get their wages deposited in their bank account. A contractor cannot underpay or overpay a labourer.
4. Make all transactions, penalties, fees etc. above ₹1000 cashless
With the emergence of new technologies, smartphones and robust networks, the digital banking era is already here. Sending and receiving a major part of payments digitally and recording it on blockchain can help our economy match income against cost and savings far more easily. Filtering out black money becomes simple.
5. Bring transparency to transactions and not people or companies
Instead of emphasising on proposals and names of non-meaningful political candidates on big hoardings, big contractor companies responsible to build infrastructure can have a QR code printed on public displays, as well as big government spends etc for a transparent audit at any time (like RTI). This is feasible if all the actions and transactions are recorded on blockchain.
6. Target major sources of black money
The major sources of black money—liquor houses, toll-tax, property registrations, medicines and drugs, city corporations etc.—should be on the blockchain platform with no intermediaries and cash Account for all liquor production and trade; bring every property registration recorded on blockchain and make it intermediary free; make all property transactions registrar-free by developing a system on blockchain; make all toll-tax contractor free by capturing the payments directly in the government accounts through cashless payments. These are just some of the examples by which transparency can be brought to transactions.
7. Mandate newer initiatives such as payment banks to build their entire infrastructure on blockchain
It would certainly take huge efforts to modify the existing infrastructure but we can start with the new establishments dealing with public money. Payment banks could lead by example by showing the path to becoming a cashless economy. Blockchain will help them lead this endeavour and in the process bring substantial reduction in their implementation and maintenance cost.
Demonetisation is possibly the biggest revolution since independence. We, as common people of the nation, want to build a better India for the coming generations. A future-proof technology can help us achieve that dream.