It is an old story, first mentioned by Rajiv Gandhi, the late Indian prime minister, that the rupee, meant to suggest government funds, goes through ‘wear and tear’.

When it sets out from Delhi, Gandhi is said to have suggested that only 15 paise or 15% of every rupee spent by the government actually reaches the beneficiary. India is a large country, he is said to have said with bemused irony, and there is wear and tear as the rupee sets out from Delhi to reach different corners of the country.

The rupee behaves rather differently these days. It travels through a different, digital, mode. The use of digital technology for Direct Benefit Transfer (DBT) where government welfare funds are straight credited to the bank account of the beneficiary as opposed to being delivered by an intermediary institution has saved the Indian government around 1.8 trillion rupees since it was introduced about half a decade ago. In 2020, India led the world in digital financial transactions.

But two other, arguably even more exciting, developments have taken place. The introduction of eRUPI has attempted to fix the very last mile in the leakage pipeline. The eRUPI is a one-time payment mechanism, a sort of voucher, which helps people make a payment, using this electronic voucher, for specific purposes. The voucher is pre-paid and can be used only for specific purposes, to pay for only specific services or items. There is little chance for this voucher to be ‘misused’, a euphemism for leakage or graft, because it cannot be used for any other purpose than the one for which it was created.

One of the problems of Indian public policy analysis is that it is usually studied piecemeal and therefore, like the proverbial blind men feeling up an elephant to describe it, the analysis conjures up rather inept, if sometimes technically accurate conclusions.

India’s digital financial structure is not a framework, it is a flow, in the sense that the only way to understand it properly is not by placing it in a structure but by following how money flows through it, or what money behaves in or through this system. It is designed – one link after the other from DBT to UPI (United Payments Interface), and now eRUPI – for two fundamental things, to make the transfer of money easier and faster, and to prevent leakage. Well, why use this word ‘leakage’ anymore, I mean, of course, theft, graft, call it what you will.

When we look back at the history of money in India, this system will be remembered as one of the biggest inter-linked ecosystems that cleaned up a very large part of the everyday harassment and theft that ordinary Indians have tolerated for a long time. The petty harassment of every day transactions is designed to be eliminated using this system.

It is the answer to the simple question – why can’t an ordinary Indian, without any extra-constitutional influence, receive, simply, the money that the government spends for their welfare?

Why is that too much to ask? It isn’t. It is the very basic that is to be expected in a democracy. This is the expectation that is being fulfilled through the application of this system.

In 2017, at Davos, a speaker from China described astounding levels of digital transactions done on Singles Day, the biggest shopping day in that country. At that time, I wondered when payments via phones would become ubiquitous in India. Last year, India beat China in digital transactions volumes. Things have changed in India even faster than many of us, who track these things regularly, had imagined.

The rupee now moves smoothly, in near instantaneous transactions, it reaches many more people for whom it is intended than it ever did, and it is far less misused.

Now, it can also be shifted across countries, in a manner easier and more efficient than before. The Reserve Bank of India and the Monetary Authority of Singapore have announced that India’s UPI and a similar system in Singapore, PayNow, would partner in facilitating real-time financial transactions between users in the two countries.

When rolled out, users would be able to make instantaneous money transfers using mobile phones between the two countries – international payments with the ease of shifting money between domestic phones.

All of this not only brings down the cost of international monetary transfers significantly, but it also adds yet another dimension to the concept of easier flow of money.

The wear and tear have been reduced very substantially.

Views are personal. The writer is a historian, a multiple award-winning author, and a World Economic Forum Young Global Leader.

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