(Photo: Lijumol Joseph/The Quint)
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Did USAID Influence Indian Govt’s Drive for a Cashless Economy?

Based on readers’ feedback, we would like to clarify as follows:

1. Project Catalyst, which was initiated jointly by USAID and GOI, was commissioned on 15 November, 2015. A link between this and demonetisation is impossible to infer.

2. Further, the following report does not deal with the demonetisation exercise initiated by GOI on 8 November, 2016. It is about India’s move towards a cashless economy, which is an evolutionary step independent from demonetisation.

3. The RAW enquiry of 2004 being referred to in the report is a matter of public record, although it has been disputed by several people and agencies.

American aid agency, USAID, which was used at least once by the US Central Intelligence Agency (CIA) to launch a covert intelligence operation in India, has partnered with the Narendra Modi government to “create a network of more than 40 organisations to increase the usage of digital payment systems, particularly among low-income consumers”.

According to documents in The Quint’s possession, the USAID-Indian government partnership, which was inked last year, “supports the goals of (the) Pradhan Mantri Jan Dhan Yojana launched by Prime Minister Narendra Modi to mainstream financial services to all Indian households.”

The most stunning use of USAID by the CIA was in facilitating the flight and subsequent defection of a Research and Analysis Wing (RAW) Joint Secretary, Ravinder Singh, to the United States in May 2004. An internal enquiry by the RAW into Singh’s defection revealed that two of his sisters working for USAID were “used” to “approach” him. Singh was found to have clandestinely supplied top secret documents and information about RAW’s operations to the CIA. Singh had fled via Nepal and then Germany to the US.

Also Read: Goof-Up: Security Threads for Rs 1K Notes Used in Paper for Rs 2K

Was NSA Consulted?

It could not be confirmed whether the Prime Minister consulted his National Security Adviser (NSA) Ajit Doval, a former Intelligence Bureau director, before the deal with USAID was closed.

In November last year, USAID and the Modi government established an “independent entity” called “Catalyst – Inclusive Cashless Payment Partnership” to “facilitate the rapid adoption of digital payment in India as a step toward building an inclusive digital economy.” The aims of “inclusive electronic payments, such as mobile money and digital wallets,” are to not only to “lift millions out of poverty by providing them access to formal financial system(s), but […] also to improve governance by reducing costs and increasing transparency.”

Also Read: Check Your Wallets: Chances Are Your New Rs 500 Note is Defective

(Infographic: Rahul Gupta/ The Quint)
(Infographic: Rahul Gupta/ The Quint)

Cashless Transactions

At a time when 97 percent of retail transactions in India are conducted by cash or cheque, and only six percent of merchants accept digital payments, the USAID-led initiative will be like manna from heaven for American credit card companies. A policy paper prepared by Visa, one of the leading credit card companies, reads:

In many markets, the biggest obstacle to accelerating the shift toward electronic payments is the absence of an appropriate acceptance infrastructure, such as point-of-sale terminals. Developing a network of merchants equipped to accept electronic payments requires enormous effort, and traditionally, three types of barriers stand in the way: inadequate physical infrastructure and data resources, lack of appropriate incentives or sub-par investment returns; and government policies and regulations.

(Infographic: Rahul Gupta/ The Quint)
(Infographic: Rahul Gupta/ The Quint)

Opening Up the Market

By demonetising two high-value currency notes (86.4 percent of the total cash in the system), Modi has virtually opened it up for companies in the credit and debit card business to swamp the Indian market.

It is said that Catalyst combines new technology and innovative business models to “increase the reach of cashless payments tenfold over the next two years in select geographic locations.” A cross-section of national security bureaucrats and practitioners of espionage tradecraft The Quint spoke to, however, admitted that it is not unknown that foreign intelligence agencies on many occasions use other agencies to promote the commercial interests of their respective countries’ companies.

USAID, on its part, claims that it piloted business models to:

  • Promote e-commerce by connecting low-income customers in urban slums with online retailers linked to microfinance institutions. These online retailers will also offer specific discounts to consumers who make purchases via this portal.
  • Develop alternative lending models by arranging for customer data from a service provider that does not offer loans, and sharing this data with lending institutions. The lending institutions offer loans based on customers’ transaction details with the non-lending institutions.
  • Research challenges of a leading FMCG (Fast Moving Consumer Goods) company to digitise payments throughout its distribution chain (from retailer to distributor to the company).
  • Support the India Stack project (an initiative by iSpirit, a group of technology volunteers) that seeks to make financial transactions paperless and cashless.

Also Read: Note Ban: Weak Imported Security Threads In Rs 2,000 & 500 Notes

‘Greater Adoption of Digital Payments’

According to a note by Catalyst CEO Badal Malick, the objective of the “exciting partnership” between the USAID and the Indian government was to “expand merchant acceptance and build consumer confidence towards greater adoption and use of digital payments.” Besides, pilot projects revealed that “customers were willing to give consent and did not seem concerned about data security and privacy issues.”

It is revealed that Catalyst has “engaged with a cross-section of strategically selected organisations, including policymakers, FMCG companies, mobile network operators, payment networks, financial institutions, payment technology companies and e-commerce providers.”

These include: Accion, Airtel Money, Axis Bank, Bill & Melinda Gates Foundation, Better Than Cash Alliance, CGAP, CIBIL, Citibank, Coca Cola, FICCI, FIS Global, HDFC Bank, Hindustan Lever Ltd, HSBC, ICICI Bank, IFC, Intellecap, ITC, Janalakshmi, Michael & Susan Dell Foundation, Mastercard, Novopay, P&G, Snapdeal, Vodafone, Yes Bank, Telenor, TCS, Paytm and a few others.