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Demonetisation & the Push to Digital Payments in India: Violation of Human Rights?


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This post hopes to explore the recent demonetisation drive in India through a human rights lens and place the drive as well subsequent push to digital payments systems as a violation of human and internet rights.

Introduction

Currency exhibits characteristics of a common-pool good, i.e. rivalrous in consumption but non-excludable1 . However, as opposed to traditional common-pool resources like timber, coal and fish stocks; currency is a cultural artefact, which depends on the theories and trust that individuals place on it2 . Governance of common-pool resources are left to collectives that represent and act on behalf of the people towards the benefit of those people. A democratically elected government is that representative of the people. It is responsible for effective administration of common pool resources. The action of the government for its people is part of the act of self-determination as guaranteed by the International Bill of Human Rights.

Self-Determination and International Human Rights Law

The Universal Declaration of Human Rights (UDHR), The International Covenant on Civil and Political Rights (ICCPR); it’s two Optional Protocols and The International Covenant on Economic, Social and Cultural Rights (ICESCR) together constitute the International Bill of Human Rights. The Third Committee of the General Assembly at the 68th meeting concluded that self-determination is an integral part of the three major human rights instruments and we postulate that it is the “meta”-human right.

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As per the focus areas of the UDHR, ICESCR & ICCPR, self-determination is directly linked to the civic, political, social, economic and cultural realms. We will focus on the economic aspect of self-determination. Economic self-determination is the ability of a person to freely choose their profession and dispose of their resources3 as they see fit. Currency forms part of the monetary system which comprise a set of institutions and mechanisms such as a central bank, commercial banks, regulatory bodies and monetary policies. The regulation of the monetary system must always be done to maximise benefit to the the peoples of a state.

Demonetisation and Governance of Common-Pool Resources

Demonetisation is the act of invalidating currency as legal tender. On November 9, 2016, the Government of India withdrew the status of all ₨ 500 and 1000 (high-value) notes as legal tender with immediate effect, citing the intention to curb tax evasion and counterfeit money. Overnight, about 86 percent of the liquidity within the Indian economy was rendered invalid. Most of the Indian economy is based entirely on cash, with an estimated 85 to 90 per cent of all transactions taking place in cash. The drive of currency demonetisation and its rule changes; which occurred as frequently as everyday, further led to the significant human cost of the move.

The very act of demonetisation takes away the individual’s right to economic-self determination and the freedom of choice to dispose currency resources as they see fit. It may be interpreted as a violation of international human rights law. This, however, is a matter that requires further thought from a legal perspective.

Elinor Ostrom, highlighted a set of key guidelines of adaptive governance that are required for effective governance of common pool resources4:

i. Achieving accurate and relevant information, by focusing on the creation and use of timely scientific knowledge on the part of both the managers and the users of the resource
ii. Dealing with conflict, acknowledging the fact that conflicts will occur, and having systems in place to discover and resolve them as quickly as possible
iii. Enhancing rule compliance, through creating responsibility for the users of a resource to monitor usage
iv. Providing infrastructure, that is flexible over time, both to aid internal operations and create links to other resources
v. Encouraging adaption and change to address errors and cope with new developments

While the act of demonetisation may be reviewed through the lenses of the points mentioned, the last two — provision of infrastructure & links to other resources and change & adoption to address errors — are of particular importance when examined through the rights-based lens.

Closing the Loop

Circling back to the International Bill of Human Rights, one of the duties of the State is the provision of safety nets in case of economic disruption. It is our contention that the Indian State failed citizens in this; aside from other; avenues. The government pushed the creation of the Unified Payments Interface (UPI) and the Bharat Interface for Money (BHIM) mobile application. The UPI was aimed at targeting small payment transactions and merchant payments in India. The BHIM app integrated multiple bank accounts into a single user interface; based in the Aadhaar platform5 is powered by the UPI. The pair were supposed to alleviate the difficulties faced in the demonetisation drive. The prime minister also appeared in advertisements put out by private financial technology companies apparently showing the singular push that the state was placing on digital payment system. The procedural difficulties for a public office bearer appearing on advertising for a private company are not under the purview of this post.

While it may be argued that the state-led push to digital payments is an initiative to extend a new safety net for citizens; the haphazard manner in which they went about it, demonstrates the detachment of State policy and realities. This post will not explore the vagaries of banking infrastructure and money supply; instead only focus on technological factors:

Conclusion

On an infrastructural level, India was grossly underprepared for the rollout of such wide-scale demonetisation, which is evidenced in the impacts of the drive on the average citizen. The push towards digital payments without a strong base of Internet access goes against Ostrom’s fourth principle of the provision of appropriate infrastructure. It shines light on the lack of proper policy design and sheer disconnection from ground realities. For the state to push demonetisation without providing adequate infrastructure to support effective alternative means to engage with the monetary system is grossly irresponsible and (pending appropriate legal analysis) may be against the rights of Indian citizens.

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References (Non-linked):

1: Non-rivalrous goods may be consumed by many at the same time at no additional cost. a good or service is non-excludable if non-paying consumers cannot be prevented from accessing it.
2: Reinhart, CM & Rogoff, KS 2009, This Time is Different, Princeton University Press
3: There exists a duality in the definition of resources in international human rights law; defined as both individual and collective resources.
4: Ostrom, Elinor. (2010). “The Challenge of common-pool resources”. In: Environment: Science and Policy for Sustainable Development, 50:4, 8-21.
5: BHIM will create Equality, 03 January 2017, Press Information Bureau, Government of India

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Rajat is a Senior Officer – Research & Advocacy at the Digital Empowerment Foundation. He works on sifting through the socio-economic, cultural, technological and ethical questions surrounding the application of ICT4D in an equitable and socially responsible manner. A tea aficionado and incorrigible nerd, he identifies himself as a child of the Internet and would probably have a panic attack if his devices failed him. Rajat’s passion is understanding real world social networks and interactions using the tools of social and data science.

His favourite quote is: “Do not take life too seriously. You will never get out of it alive” – Elbert Hubbar.

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  • The potential legal violation perspective is interesting but will any step-up with lawsuits to validate this theory of legal rights violation?

    Another troubling perspective of the digital economy is its morphing into a cashless society juggernaut. To many in the payments industry, digital transacting was viewed as complimentary to traditional physical transacting – not an eventual complete replacement. Further, from the vantage point of 2017 globally, the safety and integrity of digital money (and digital identities) is trending in the wrong direction as the breadth and depth of cybercrime increasingly outpaces cybersecurity.

    Future historians will be agape as they evaluate and explain why early 21st century policy makers pushed the public into a digital-currency-transaction system (cashless society) that has greater risks than the physical-cash-currency-transaction system. Casually insightful historians will then be quick to discern that the policy move to cashless is fundamentally about greater government oversight and control over transacting and thus greater taxation power (innovators in bartering are queuing up ideas for off-grid transacting).