Cashless will be king as digitisation makes inroads

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Dollarphotoclub_65788684Prime Minister Narendra Modi is pushing an unsuspecting and a ‘reluctant’ India through monetary asceticism which could lead the country to becoming a ‘cashless paradise’ long spoken of in our spiritual and even fiscal scriptures. When the Prime Minister delivered his banking bomb last month, few would have thought that this was actually a harkback to India’s ancient spiritual and economic traditions in which money is referred to as maya and its character is described as extremely fickle and treacherous.

Under the new dispensation, even Dharamraj will have to learn computers to digitise our hell-worthiness. Our religions always complained that the nature of maya is fickle. The Modi masterstroke has tried to make it less fickle, more reliable and verifiable. Cyber will replace the spiritual — and both are equally intangible if not unreal.

However, Modi was inspired more perhaps by hardcore fiscal ground realities than by the philosophical unrealities of religion. Cashless society is seemingly a modern and Western fetish. Terms such as “plastic money’ — or, at a more advanced stage — “digital money” are just sophisticated covers to hide another driving force which is central to the cashless fetish: centralised control through the use of invisible technologies. So technology, which was supposed to democratise power through universalisation of information will actually create new dictators sitting on top of all information even on our private lives.

It is true of course that under practically every political system, governments have their hands thrust firmly into the citizen’s pockets. But up to now, governments had just so many hands. Pockets always and easily outnumbered government hands, no matter how many. Paper currency is a symbol of governmental control not only over the citizen’s money but even on his spending and “other” habits.

But to exercise this control, the government needs an elaborate system of fiscal monitoring, and this is not an easy task. Once ‘paper cash’ leaves the government mint, it develops a mind of its own and chooses its destinations and picks its own routes to reach those destinations. Governments practically lose control over something to which they gave birth — cash currency. Maintaining the character profile of every note that leaves the mint becomes an impossible task.

It is because of this “free will” of every currency note to chart its own course that governments need an elaborate taxation regime and massive armies of governmental officials at various levels to put this regime in place and keep it functional. As cash currency leaves the mint or even a banking hub, it declares its independence of the system. Cash currency hates any interference in its sovereignty. Every paper note wants to live its life on its own terms. The last place a coin or a note wishes to lodge itself in is a government treasury, and worse, a banking strong room. It is the nature of currency to remain ‘current’ — constantly renewing its contract with life.

A finance minister who can dole out freebies from empty pockets is known as a financial wizard. The other kind is called silly

Ideally, this should mean that cash currency is happier in capitalistic economies as it is in these economies that “spending” is preferred to “saving”. But this is not true. The fact is that capitalistic economies do not allow their currency the kind of freedom which communist, socialist or controlled economies provide it. This is because, theoretically at least, socialistic economies keep every ‘penny’ of their currency on the move in the interest of social welfare while capitalist economies have invented an artificial dungeon for their “legal tender” — the illegal basements of money hoarders. These basements are darker, more sinister and utterly stifling for currency because once a coin falls in these dungeons, there is very little chance of its coming out of it to breathe in fresh air of actual market economy.

Don’t forget the new czars of communist economies whose individual worth far outweighs cash in the pockets of the entire proletariat. These czars also love dark basements for their harems of curvy currency! The tinpot “proletariat dictatorships” are known to possess and hide even darker and deeper cells in which they keep their unaccounted beauties.

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In democracies like India, one would presume that there would be no such thing as ‘economics of fiscal dictatorship’, as most policies and every penny on which governments put their signatures have to be approved by the people through their elected representatives. This is the theory. The ground reality is somewhat different. Parliamentary sessions are not and should not be economic seminars in which experts discuss not only the details of the policies under which governments propose to collect and spend money that comes to it in the form of taxes — people’s money. The fact is that in most democratic countries, Parliaments are just “mute and non-responsive” mirror images of the people, more like location pictures frozen for five years, stirred only occasionally to create the illusion of life and activity.

The fact also is that members of parliaments (in any democratic country) are seldom elected on the basis of a detailed economic agenda, and therefore they know very little of what the people who have elected them truly expect of them on economic policies. As for people, they know even less — and couldn’t care less. By and large, what goes for “economic policy” is nothing more than a set of slogans invented generally by people who have earned their places more because of their distaste for economics than their understanding of it. The more someone understands economics, the less qualified he becomes to be a popular leader. At best, he can be a mere face or voice of a political party whose members understand what would confuse their electorate the best, and get elected on the basis of this confusion.

In this scenario, to expect our political leaders to place economics above politics is, to say the least, utterly fantastic. Our leaders are an entertaining lot: the more they understand money, the less they understand economics. This is an entertaining luxury allowed only to people in democracies. What we have is a secret, unwritten but clearly understood deal between the people and the politicians: neither would make economics a recondition for the fulfillment of their greed for money. Governments are neither formed nor dismissed because of the impact their decisions create on economy. People elect those who do not make economics an excuse for not pleasing the people. “No money in the treasury” is no excuse for “no salaries”. Such reasoning belongs to the world of academics. In the real world, which is the world of the people and the politicians, governments must share with people the money which the government does not have.

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Governments generally know that spending more money than you have is no magic. It is a routine government practice all over the world. A finance minister who can dole out freebies from empty pockets is known as a “financial wizard”, whereas someone who tells the people the truth and asks them to accept it as a sacrifice for the long-term interest of the nation is “silly, pessimistic and a failure.” A finance minister’s success is directly proportionate to the money that he invents.

How is this ‘wizardry’ achieved? Easy. What most people do not know is that macro and micro economies are not only two different things but even drastically opposite to each other. A family budget and a state budget differ in that the first must have money before it can spend it while the second must spend money in order to have it.

Several countries have dumped cash in favour of barter because currency carries a promise that cannot be fulfilled

Secondly, savings are a virtue in a family budget and a disaster in state economy. A finance minister who has money left in the treasury at the end of a financial year has clearly not been doing his job. A government must spend all it has on building infrastructure, creating assets that create employment, meeting people’s welfare schemes and a million other things — especially a million other things! For a government, a penny saved is a penny not well spent. Besides, why must a government save? Does it have daughters to marry off? Does it need money to pay the doctor if it falls ill? Does it have to save for its children when they grow up? No. A good government must spend more money on helping people to earn more money for the government. A government’s true saving is the skills that it has added to the “talent bank” of the nation.

So, why does any government need ‘cash’? Government budgets are not about ‘cash’ but about ‘calculations’ — it’s all about making the right ‘entries’ in the right books. If government budgets were about cash, then the entire Parliament building and all South and North Block plus all the adjoining areas may have to be vacated to lodge money before the start of every Budget speech .Theoretically, it is possible for any government to conduct itself royally without ever holding a thousand-rupee note between its fingers — or even without ever seeing the money it has itself minted. Government finances are not about cash but about books. A good finance minister is a cashier minus cash.

Then, why have currency at all? Actually, that is as good a question as it is an answer. Why do you need currency at all? If we divide the history of human economic activity into three parts — the past, the present and the future — then a thing called hard cash or hard currency belongs only to one of the three segments: the present. People in ancient times survived without ready cash. The entire economic life of an individual, a village, a society or a nation was carried out through a wonderful and natural arrangement known in economics as “barter system.” You have milk, I have wheat, she has clothes, he has medicines. Now, I need milk and you need wheat; he needs clothes and she needs medicines. You give me milk, I give you wheat; she gives him clothes and he gives her medicines. The system worked even in a complex demand-supply networking.

I need clothes, and I know you. But you have only milk. So what will we do? We will go out, hunting for someone who might need what I have and another who might need what you have, but the order might juggled, and the system will still work.

But if it gets more complex, then we can probably depend on someone who has the space and capacity to ‘store’ more than one item for a longer period. And he can act as “equitable exchange and networking centre”. This is what gave birth to our bania and later a shopkeeper, and then a mall. The modern mall can easily function as a structure for networking cashless exchange — with minor processing technologies being applied to goods.

This is how things were in the past. Everything operated through equitable exchange or barter system – till the system was replaced by a more convenient cash currency which put elephants, horses, cars, aeroplanes, buildings, water and wheat — all in one single pocket by compressing them magically into paper, or paper money.

That is our present.

But several countries have already gone back to the future. They have already dumped cash in favour of barter. But they have done so by inventing a modern-day version of Aladin’s lamp — debit and credit cards and phone banking systems. But they have done so by grasping one very simple truth: That currency is nothing but a promissory note and its relevance is proportionate directly to the credibility of the signatory. A hundred-rupee note is nothing except a written promise to you personally and directly from a gentleman called Urjit Patel, the Governor of the Reserve Bank of India. I don’t know why should I trust his word and, more importantly, why should he make so many promises to so many people — if he didn’t have the money in his basement to meet all the promises he has made to all the people in the country or abroad.

Suppose, one fine day, just as he is about to sit with his wife and children around the dining table for a well-earned supper, all of us turn up at his door — all at once — and demand that he return the money which he owes us because of the promissory notes he has given to us under his personal signatures? Would he have that much money in his basement to be able to fulfill the wild commitments he has made to everyone in the country, foolish man!

But the crux of the matter and the crux of the debate on demonetisation is that Urjit Patel is not a foolish man. He is a smart guy. In fact, he is cunning. He has made all these false promises knowing them to false, because he knows all of us will never turn up at his door all at once on a single day. He uses the same trick by giving us more loans than the money he has in his bank.

And Urjit Patel is backed by an even more cunning Gujarati, named Narendra Modi. One evening, while I was shopping for my son’s wedding, Modi turned up at Patel’s house and winked at him with an evil idea. He told Patel, “Tell people that you are going to back out on your promise, unless they deposit all the notes you have signed for them. Tell them to return all of these notes today or in the next six weeks, and tell them that you will give them a new signed promise which will have a far smaller value. For every promise worth 2.5 lakh returned by them, you will promise to return only 2,400 per week! Later, you can appear magnanimous by raising the promise of 2,400 to 4,000 per week.

How really mean! Isn’t it?

As things stand now, we will have to pass every personal or social monetary dealing through these two, and another — that Supreme Court lawyer Arun Jaitley. They couldn’t have chosen a smoother talker to dazzle us on what has actually been done to us. We are charmed by his words and persona but in the process, we keep forgetting that there is no money in our pocket to pay him for the performance. Thankfully, he doesn’t charge. But this hides a cruel fact: everything we do will have to go either through him: either through a cheque or through a credit or debit card or through a phone bank like PayTM. Earlier, Modi, Jaitley and Patel just wouldn’t and couldn’t find out when you and I exchanged currency notes. So, we could even indulge in huge stacks running from my house to yours or vice versa. But no longer. Stacks will still do the exchange — with a difference. There will always be a fear that Modi, Jaitley and Patel can find out what we are doing through this exchange.

This might affect a lot of our normal activity. One such is our very act of deciding on whether Modi should continue to hold his job for the next five years or not — the elections.

O by the way, Punjab goes to polls sometime early next year. Also, UP, Goa etc. If you are contesting or voting in any of these, and have in the past been in the habit of cash doing the electoral talking for you, then please, it is time for you to think of some new means of performing this sacred democratic ritual!

The old order has changed, and the new has not yet taken over. So, think up new tools for new rules.

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Encryption is a chink in our armour

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To face the brave new world of cashless transactions, we need a strong encryption policy at once, says Sanjib Sinha

The great debate between the Centre and the Opposition on demonetisation has brought the subject of encryption straight to our dinner table. Certain technical words are flying around – encryption, bits, bytes, key sizes, cyber security and, of course, algorithm.

What they are? They have not appeared out of the blue. We will have to understand them if we want to participate in the effort to make India digital and cashless, at minimum cost and without delay.

One truth has to be swallowed right away: India doesn’t have proper encryption technologies in place at this moment. Yet we want to move forward towards a cashless society where online transactions are mandated. As we know, any online transaction depends very heavily on secured, strong end-to-end encryption technology; this is a major flaw that should be corrected — at any cost and immediately.

The decision had been taken already and we have to stop thinking wistfully about the old days. We have to move forward. We really have no time to ponder over why this government is trying to implement a policy that was not in the visionary radar of the previous government, only two years back.

The UPA government had liberated the economy but didn’t adopt the idea of digital government with a strong command. The end-result is we still don’t have a dedicated law on encryption in proper place. Furthermore, the terms and conditions of the licence agreement between Department of Telecommunication (DoT) and Internet Service Providers (ISPs) have made the situation highly
insecure. This agreement permits usage of encryption technology only up to 40 bits and that is also with RSA algorithm which is considered to be extremely weak and backdated as far as hacking methods like ‘brute force methods’ are concerned.

Common people don’t understand these words — ‘bit’, RSA and algorithm. Before coming to that point we should know that Securities and Exchange Board of India (Sebi), Data Security Council of India (DSCI) and Nasscom with other industries strongly recommend a much higher encryption standard of 256-bit with Advanced Encryption Standard (AES) algorithm. This is a clear exodus from the ‘Jurassic age’ 40- bit standard adopted by the DoT licence to the ISPs.

Now we again have a strange encounter with a new word — AES algorithm and the measurement of bit is also high this time — 256.

Let us clarify these terms first. The word ‘bit’ has come from ‘binary digit.’ For the time being we should be content with this information — a computer only understands binary digits 0 and 1. For that reason, when the number of bit increases, the vulnerability of a computer network reduces significantly and it becomes stronger. That is why Reserve Bank of India (RBI) has mandated that Internet banking or online transaction should be conducted using 128-bit encryption with AES algorithm.

Let us remember the DoT licence agreement issued to ISPs again — it said 40-bit with RSA algorithm. It is sheer suicidal madness to adopt such prehistoric encryption technology. It’s because the security available with a 1024-bit key using RSA algorithm is considered approximately equal in respect to the security to only 80-bit key with AES algorithm. Now the recommendation from everybody concerned with online security was 256-bit with AES algorithm. That translates to approximately more than 3000-bit encryption with old RSA algorithm. Just imagine, where everybody shouts for around 3000-bit, the government licence agreement has been sticking to around 40-bit! And for that reason recently, a petition seeking ban on WhatsApp and other similar applications that use strong end-to-end encryption technologies with 256-bit AES algorithm was dismissed by the Supreme Court.

This is the irony of our encryption policy, which loosely hangs around a dark corner where any time it might slip and fall fatally or could be killed by John the Ripper.

Who is John the Ripper?

You have probably heard about infamous Jack the Ripper who terrorised the Whitechapel district in London’s East End from 7 August to 10 September in 1888, killing at least five women and it came out from the investigation that he had knowledge about human anatomy. John the Ripper has only a slight resemblance with the infamous Jack. Hackers created a “Brute Force Method” and named it ‘John the Ripper’. This John has a fair amount of knowledge about the computer and internet networking and can viciously mutilate any security system just like the infamous Jack. Brute Force is a single-character-at-a-time password attack on a system. John the Ripper is an open source Brute Force software so anybody who knows a little bit of computer hacking can download it and there are plenty of free tutorials available around the web world — and in that context think about the ‘Pre-Historic’ 40-bit standard adopted by the DoT licence to the ISPs.

A computer network is a collection of devices that are connected through various media like hardware and software and runs through many layers. Widely used Open Systems Interconnection (OSI) reference model and Transmission Control Protocol/Internet Protocol (TCP/IP) model have their own layers; the first one has seven layers and the second one has come up with four layers. Using the internet, cyber attackers can sneak through any layer and adopt a variety of tactics to steal valuable data. As time passes by, these methods evolve and come out much stronger. Replacing ‘Brute Force’ method, there have been attacks like ‘Dictionary Attack’, ‘Biclique Attack’ which are much faster and stronger.

Remember, we take pride in exporting software to America. What happens there? The National Security Agency (NSA) took over responsibility for all U.S. Government encryption systems when it was formed in the year 1952. Keeping aside all the allegations of mass surveillance against NSA, do we still have any such system which will formulate a policy which will protect our data? We’re building software for other countries while struggling with our own encryption policy!

At the present moment we’re worried about the old 40-bit backdated RSA algorithm. It opens up a Pandora’s Box inviting millions of computer-illiterate, common people to a brave new world to adopt a system where they might become victims of more and more digitally fraudulent activities keeping in mind that frightening fact — the number of disclosed data breach, all over the world, rose by more than 50 percent last year.

Because of that, with a strong encryption policy in place there comes up the vital issue of digital literacy also. Hopefully the government will think about it quickly and take steps before it’s too late.

Sanjib Sinha is a data-journalist, author and ethical hacker

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