Article Image
IPFS News Link • Currencies

Cashless Biometrics and India's Demonetization Experiment

•, by James Corbett

In the wake of India's demonetization of the 500 and 1,000 rupee notes last November, I wrote an editorial ("Crisitunity in India's Cash Crunch") where I noted that one significant reason for the drastic move was the chance to rein in India's sizable informal economy:

"In India, they call cash gleaned from counter-economic activities 'black money.' It's not known to the government, it's not stored in the banks, and it's not taxed. In other words, it's the would-be technocratic overlords' worst nightmare. It's impossible to know the size of this 'black money' pool (can we call it something cooler, like 'freedom funds' or something?) but it has been estimated to be as much as 20% the size of the total Indian economy. Now with the vast bulk of those freely-gotten gains being brought back into the banking system (or exchanged with a valid form of government identification), it will come back under the purview of Big Brother and his friend, Uncle Taxman.

As if on cue, earlier this month the Indian income tax department began asking banks for data on their customers' bank deposits between April and November of last year so they could better analyze the cash that was being turned in for signs of "suspicious" activity.