Meebting select people to gauge the impact of policy change or ground realities in general can get biased. Normally weeks before the budget, conversations are around what is likely to be announced with anyone of any reckoning walking around eagerly to flash out their wish-list. Some would brag about how they have recommended their brilliant ideas to the finance ministry. This time around, the pre-Budget expectation phase has been rather lukewarm. Many senior businessmen I encountered are guarded and a few opened up to confess they would rather pass their opinion this time around than hazard a guess.

Yet, one area of conversation that is still finding merit to debate is the impact of note ban or demonetisation. Black money thrives in politics, religion and real estate and is something that I have figured is well acknowledged. Real estate as a sector has been feeling the pinch of demonetisation the most, where hardly any transaction would go through without some element of black money.

The lack of black money in real estate is killing not just real estate but also allied industries like cement, home furnishing, paints, plumbing, and so on. It has also impacted jobs, which is most visible with unskilled and semi-skilled labour.

Every real estate project involves getting a sequence of permissions and registrations and that means under-the-table payoffs. The developer pays in black to get clearances and buy the land; the developer then takes money in black from buyers and the chain of illegal transactions continues. I was wondering why the government was doling out sops to home buyers and tax concessions when it donned that with a check on black money in real estate, the buyer is losing interest on two counts – they expect a sharp fall in real estate price and they are waiting for huge rate cuts in their home loans.

Religion and politics

An accountant with a dodgy god-man floated religious trust shared this very interesting insight – it’s easy to set up a religious trust and there are several tax breaks to claim. He went to share details of how balance sheets of such trusts are not just complicated, they are also difficult to understand for most to question source of funds. Many of these trusts have over the years become a well-oiled machinery of money laundering. In cases where the tax officials snoop in, chances are depending on the clout of the god-man or the religion propounding the trust, there will be an abrupt end to probe or a protest leading to closure of case.

In recent times, political donations have come up repeatedly for questioning. Even wily politicians accept that election funding is a taboo to discuss, which is why political parties rarely talk of their finances, let alone declare their source of funding. Those that share their data do not get into details or specifics. The demonetisation drive has been a boon for many political parties as unlike you and me, who will be scrutinised for any small aberration in our bank records when it comes to cash deposits, political parties won’t be questioned and that is the approach adopted for now.

The fast approaching state elections will test how political parties will address spending monies not just on visible campaign ingredients like posters, meetings and rallies. Already helicopter owners who are in demand during elections have reported there are few takers for their services. Several small hotels which would accommodate party workers are finding their rooms empty and the crowd renting agencies are on the verge of shut down. I spoke to a friend who has covered elections for several years on what were his observations on ground – he was disappointed that the election chutzpah is missing and the poll colour is missing.

Less cash

The usage of debit cards, e-wallets and UPI has gone up, which is a good sign of things to come as these instruments will reduce the dependency on cash. This will not mean that we will become fully cashless, but will reduce the high cash transaction dependency. The poor and uneducated are learning the tricks of using technology for cash transfers fast and it is heartening to note their enthusiasm. The upside of these electronic transfers is the trail it leaves and also the big data that can be used to analyse and frame policies accordingly.

A banker was quiet intrigued by the rising deposits and cash with them as the lending business was yet to kick off. My sense is that bank’s profits may be hit in the last quarter, which could be just the beginning of further reduction of interest rates in the savings account. I don’t think we will get to a situation as it is in Japan where banks charge you to maintain your money in the bank by way of negative interest rates. Many other countries have a zero interest rate on bank savings and deposits.

People will have to change their cash hoarding mindset or the high savings that we land up with. The upside is for businesses that are part of the stock-market ecosystem, as they will find more people gravitating towards them because of this lack of incentive to keep cash. It could also actually result in a situation where some people would rather keep cash under the mattress than pay a charge by way of negative interest to keep it in the bank. The future of banks is definitely interesting to watch out for.

nk@outlookindia.com