Currency Demonetisation and Future course of Indian Economy

[shiv]

Stop gloating. When we start seeing pictures of villagers bodies being picked clean by vultures because of lack of high denomination notes our smiles will be wiped out. Bad Modi. Black Money is bad but not so bad that everyone needed to suffer. No?

[abhischekcc]

Supratik,

In some industries, the only choice people have is to participate in BM transactions or not do business. Although my work is not like this, I know enough people like this. They are hardworking people, giving 14-18 hours a day, 6-7 days a week. And now they see their work blown up like this. It is a fallacy to think that the government will not ask them questions. Payments to them have stopped, and they cannot pay their workers. Anybody who works with labour know that if you don't pay them on one day, the next day they don't turn up. Which means the business stops.

[Gus]

Now live from belgaum. Mostly the same stuff. But more attack on opposition for rumors

[Sabyasachi]

https://www.youtube.com/watch?v=95H7VEQIwyY

Lion of India Roaring.

Jai Hind.

[Suraj]

abhischekcc, some questions for you:
a) did you support Modi's plan to take on black money ?
b) did you understand what taking on the black economy entails ?
c) if you did understand, did you make contingency plans to move to all white transactions ?

[Supratik]

@abcc

Imagine a drug addict. He cannot pass anyday without the drug. His body and mind cannot function if he doesn't get that sniff or injection. If you don't stop he is going to have an ugly death eventually. Rehab is extremely painful but if you don't do it he is going to die anyway. Some will not make it. Similarly some people used to doing things the old way will disappear. Those who adapt will survive. If you know the theory of evolution you will understand that is how nature functions.

[abhijitm]

This move is pretty draconian(hate to agree with Mamata didi on this) , affecting 80% of the cash transactions in villages and b-towns, as one poster mildly put "you are collateral damage" to just normal honest people who live out side the banking channels.

Oh wait for the more bad news from villages and other towns be reported once the shit hit the fans.

One correction. Affecting transactions until 30th Dec. Not forever. But going forward even village economy should be careful. Cash transactions cannot go on forever. Government is gradually stepping up to provide necessary infrastructure for financial inclusion. Many NGOs, banks, tech start ups are working in that directions.

Tax is exempted for farmers. More reasons to bring them in cashless economy rapidly. But I do agree that it is the whole ecosystem that should undergo the change. We must move away from the status quo.

[JohnTitor]

GoI should ensure that convenience fee is eliminated on card transactions. Never understood how these fees are absent (or may be just hidden from consumers view) in Massa and in India, consumers have to bear the burden. Also encourage cashless transactions. Even cr@ptel centers don't accept cards for currency recharge. At least in my part of BLR, there are 3 Airtel centers and one of them is like a semi-HQ and onlee they accept card payments for all kinds. Also, certain superstores like Heritage etc., only accept cards on transactions above 100 bucks.

Sorry - you are mistaken. I'm not sure what you mean by "convinience fee", but in the UK/UK, it is called merchant fee (I'm assuming you mean the fee charged by the terminals used in shops). I have worked in this industry and can tell you this is charged across the globe. The reason for this fee is multifold - it is the cost required to ensure that the network is running 24/7/365. It pays for the staff, cost of acquisition etc as well as covers the risk of default in the case of a merchant bankruptcy. Many merchants charge an extra fee on top of the cost if the cost of goods is below a certain value. This isn't a fee the merchant banks force them to make, but it is the cost of doing business.

The only difference I can see between india and "massaland" is that in the latter, it is added to the cost of goods and not charged separately (unless your purchase is below a certain value)

[abhijitm]

Supratik,

In some industries, the only choice people have is to participate in BM transactions or not do business. Although my work is not like this, I know enough people like this. They are hardworking people, giving 14-18 hours a day, 6-7 days a week. And now they see their work blown up like this. It is a fallacy to think that the government will not ask them questions. Payments to them have stopped, and they cannot pay their workers. Anybody who works with labour know that if you don't pay them on one day, the next day they don't turn up. Which means the business stops.

If more transactions become cashless it would give more reason for government to increase base IT limit. That would lower the burden on small tranders. It is a chicken and egg. I prefer become digital first and then followed by incentives, rather than other way round.

[abhijitm]

Sorry - you are mistaken. I'm not sure what you mean by "convinience fee", but in the UK/UK, it is called merchant fee (I'm assuming you mean the fee charged by the terminals used in shops). I have worked in this industry and can tell you this is charged across the globe. The reason for this fee is multifold - it is the cost required to ensure that the network is running 24/7/365. It pays for the staff, cost of acquisition etc as well as covers the risk of default in the case of a merchant bankruptcy. Many merchants charge an extra fee on top of the cost if the cost of goods is below a certain value. This isn't a fee the merchant banks force them to make, but it is the cost of doing business.

The only difference I can see between india and "massaland" is that in the latter, it is added to the cost of goods and not charged separately (unless your purchase is below a certain value)

Indian banks do charge MDR to merchant for electronic transactions. Portion of which will indirectly pay tax to the government by banks. Hence if more transactions are digital, more incentives can be given to small traders. Biggest challenge is bringing the whole chain of transaction in cashless. Just one node will not help.

[kit]

http://satyavijayi.com/open-letter-arvi ... tead-1000/

Excellent reason as to why 500 and 2000 notes are issued to replace 500 and 1000 .

[Sridhar K]

Part of the problem with his employees are that they have average education and lower middle class quite a gullible category. The guy is well connected and very deeply influential.

Report him to PMO annonymously. If you cannot give me his name and I will and I will ensure that your name never comes. High time we do our Karma as well. My email is akshaykapoor108@gmail.com.

Bhavani, this goes for you too. Give me the name and I will report it anonymously. No one will connect it to you. Soldiers honour.

Let's help Modi please. We cannot expect him to keep batting for us and not do our bit.

Thank you. From what I infer, he is already in the radar.

The Visa and the other card gateways are getting jammed. Faced the issue a few times and ended up paying cash. Heard from many others on this issue. Big queues in most banks and ATMs affecting traffic but most people seem to be happy with the decision on the ground.

[manjgu]

a) got Rs 10000 without fuss ..in 100 rupee... b) things are improving as per bank officials ..they have been working till 1 am lately... c) what is the 2.5L rule about max limit of cash deposits.. is this without relation to the income or the cash deposited will be seen if its intune with income profile?

[manjgu]

a) got Rs 10000 without fuss ..in 100 rupee... b) things are improving as per bank officials ..they have been working till 1 am lately... c) what is the 2.5L rule about max limit of cash deposits.. is this without relation to the income or the cash deposited will be seen if its intune with income profile?

[manjgu]

the only business i know of where only cash works is prostitution... cant think of another one.

[abhischekcc]

If more transactions become cashless it would give more reason for government to increase base IT limit. That would lower the burden on small tranders. It is a chicken and egg. I prefer become digital first and then followed by incentives, rather than other way round.

The idea that making India a cashless economy will curb money is baseless idea. Most BM does not happen in small value transactions, it happens in large value transactions. That will happen in gold now, instead of currency notes.

[abhischekcc]

the only business i know of where only cash works is prostitution... cant think of another one.

Politics

[Yagnasri]

Private sector employees are being asked to give forms depositing cash in the bank without any details - just their pan card etc details and name signature. If they do not they are threatened with job dismissal. It is happening in AP and TS.

[pankajs]

a) got Rs 10000 without fuss ..in 100 rupee... b) things are improving as per bank officials ..they have been working till 1 am lately... c) what is the 2.5L rule about max limit of cash deposits.. is this without relation to the income or the cash deposited will be seen if its intune with income profile?

There is no limit on deposit. Below 2.5 Lakhs there will be no questions asked (or so the GOI says but when it finds half of the accounts stuck between 2.4L to 2.5 L they will investigate Every one is adopting the same tactics so that is going to be the end result.). Above that it will be assumed to be black and will have to provide proof of income, etc.

[manjgu]

true politics( we all know that one) and prostitution...but u were alluding to others to...which industry? where only BM works?

[JohnTitor]

The idea that making India a cashless economy will curb money is baseless idea. Most BM does not happen in small value transactions, it happens in large value transactions. That will happen in gold now, instead of currency notes.

You realise you contradict yourself, right?

Cashless has to start somewhere. In any case, purchase of high value items such as vehicles, gold (above a certain amount), property all need to be forced to go cashless. This is how it works in the developed economies. No one will pay $1m in cash to buy a house - even if you have it in cash, you will generally be asked to deposit it and create an electronic transfer otherwise It will raise too many red flags.

[Mollick.R]

I think because of this "Nuclear Strike" GOI coffers are gonna fill up directly or other way.

So if govt. can think about following two points for short term (1-month+) to mid term (6-months+) to help public go cashless way

1. Invite a global competitive tender for supplying (& after sales service too) of POS machines @ cheapest price.
We already have seen success in same kinda model for LED distribution. GOI can distribute POS machine through some nodal agency or some chosen PSU bank(s). e.g PAN card task is performed quite flawless by UTI, we need same models.
Even if this requires some initial subsidy for POS Machines Initially for business owners below some certain threshold limit it will still be beneficial.

2. Make transaction through our home grown RuPay cards free (means no additional charge) for next year or more.

Just my 2 WHITE_Taka
What say Gurus ????

[abhischekcc]

abhischekcc, some questions for you:
a) did you support Modi's plan to take on black money ?
b) did you understand what taking on the black economy entails ?
c) if you did understand, did you make contingency plans to move to all white transactions ?

a) Only to the extent it destroys FICN and old black money. But the introduction of 2000, 1000, and 500 notes means that corruption will resurface in future. There is no long term plan for fighting corruption, as Modi thinks Congress/others are beaten and only BJP will rule from now on. Hence, BJP can do corruption without restraint.

b) Sure, it means going after each and every suspect, analysing their expenditure and seeing if it is above known sources of income, and then filing cases against them. This involves going after crores of Indians. I also understand that Modi has tried to sidestep fighting corruption with this hair brained and improperly planned stunt, which he obviously thinks is a 'cunning' plan. His assumption is (assuming he is sincere) - denude people with BM and corruption will end. Haha, corruption will only end if the avenues of corruption are removed. And the biggest avenue of corruption is government discretion. Let me give you a simple example - whistle blower act does not provide adequate protection to whistleblowers. Why? Do they not fight corruption in corporate India. RTI application rejection is the highest under him.

c) All my transactions are white

The only thing that has happened is North Indian imperialism (old BM) has been replaced with West Indian imperialism (new BM). That is why more than half of the new currency has been allocated to Maharashtra and Gujarat (heard it in some news report) - so that power networks of BJP and friends (which now includes Sharad Pawar) could benefit the most.

[pankajs]

Private sector employees are being asked to give forms depositing cash in the bank without any details - just their pan card etc details and name signature. If they do not they are threatened with job dismissal. It is happening in AP and TS.

No worries! When half the accounts in India climb up to between 2.4 L and 2.5 L with the bulk of the money pouring in the deposit period, GOI will be forced to investigate. Every one is adopting the same tactics so that IS going to be the end result.

My best wishes are with these smart alecs all running in the same direction thereby leaving a WIDE trail behind for the GOI to follow.

[partha]

There is a video of an arms dealer standing next to Amar Singh outside a 5 star hotel and bad mouthing (BC, MC) Modi regarding demonetization. It's obvious people like him have lost lot of money kept in black. Considering he is seen with Amar Singh one can draw conclusions about how black money from arms dealers flows into politics. I am sure he is part of the network funding Samajwadi Party in UP elections. Also explains why Mulayam Singh Yadav is ready to part ways with his son but not Amar Singh. Such a rotten system. Kudos to Modi for such a bold move. I believe there will be a net positive effect on the economy with short term inconvenience to people.

In the Goa speech - did Modi say that powerful forces who are against demonetization could take his life? It's definitely possible. I hope his security is beefed up.

[abhischekcc]

true politics( we all know that one) and prostitution...but u were alluding to others to...which industry? where only BM works?

No, not BM exclusively, but BM and WM mixed.

One example is agriculture. At the farmer level, there is no distinction between WM and BM, because there is no requirement for tax. But at the wholesale level, there is an enormous amount of BM floating around.

Another is auto parts. Again mostly in the trade, not in manufacturing.

Service sector can be notoriously BM friendly.

[Supratik]

Now you are making things up. Just go white. Will curb your BP.

[abhischekcc]

The idea that making India a cashless economy will curb money is baseless idea. Most BM does not happen in small value transactions, it happens in large value transactions. That will happen in gold now, instead of currency notes.

You realise you contradict yourself, right?

Cashless has to start somewhere. In any case, purchase of high value items such as vehicles, gold (above a certain amount), property all need to be forced to go cashless. This is how it works in the developed economies. No one will pay $1m in cash to buy a house - even if you have it in cash, you will generally be asked to deposit it and create an electronic transfer otherwise It will raise too many red flags.

I think you are misinterpreting my words.

In my post, small transactions means shopping related - grocery, petrol, white goods, etc. Large transaction means RE or business related.

Certainly, autos need all WM to purchase for middle class, but not so for second hand autos.

And when I said gold will be used in high value transactions, I meant as a medium of exchange. Not as the end purchase product.

[abhischekcc]

Now you are making things up. Just go white. Will curb your BP.

??

[Supratik]

Reread my post. You are making things up in your posts in support of BM without any evidence.

[pankajs]

Modi has promised more steps to consolidate the gains from this latest initiative. Expect those initiatives to close further loopholes.

If he is able to force most of the high valued transaction (>Rs 50,000) away from cash then it will limit the pool of cash in the system as well as the source of black money. It might not happen in a day the more folks start using money transfers the less the opportunity to generate and feed the black economy. Any transaction needs to sides. Attack it from both sides and see it shrink.

As someone commented it is a chicken and egg problem so Modi had to start somewhere. Now if the Non-Agricultural part is fully transparent (Some day) then it will not be possible to mix it with agricultural income and claim exemption. With increasing transparency by the day the scope for black economy and mixing will slowly but steadily shrink too.

E.g If he is able to track ALL gold transaction (Some day) the gold as a store of black money and as a medium of transfer of black will cease.

[abhijitm]

If more transactions become cashless it would give more reason for government to increase base IT limit. That would lower the burden on small tranders. It is a chicken and egg. I prefer become digital first and then followed by incentives, rather than other way round.

The idea that making India a cashless economy will curb money is baseless idea. Most BM does not happen in small value transactions, it happens in large value transactions. That will happen in gold now, instead of currency notes.

Cashless will not curb the money entirely but will put much better control on it than anything else. This isn't the end game. It is like perpetual cat and mouse chase.

It would not be easy to use gold as a medium of exchange. Not impossible but only a few could do that which can be again controlled.

[pankajs]

E.g If he is able to track ALL gold transaction (Some day) the gold as a store of black money and as a medium of transfer of black will cease.

infact, this might be the very next field of action.

[abhijitm]

If gold was so easy to use then in black market it would have been the first preference over cash.

[Lilo]

There is a video of an arms dealer standing next to Amar Singh outside a 5 star hotel and bad mouthing (BC, MC) Modi regarding demonetization. It's obvious people like him have lost lot of money kept in black. Considering he is seen with Amar Singh one can draw conclusions about how black money from arms dealers flows into politics. I am sure he is part of the network funding Samajwadi Party in UP elections. Also explains why Mulayam Singh Yadav is ready to part ways with his son but not Amar Singh. Such a rotten system. Kudos to Modi for such a bold move. I believe there will be a net positive effect on the economy with short term inconvenience to people.

In the Goa speech - did Modi say that powerful forces who are against demonetization could take his life? It's definitely possible. I hope his security is beefed up.

This is the vedio.
https://twitter.com/rishibagree/status/ ... 6441953284

In press statement Amar Singh is now forced to praise the Modi .


https://www.youtube.com/watch?v=7uCwuJmIh5U

[vnms]

the only business i know of where only cash works is prostitution... cant think of another one.

Politics

Is there a difference, other than the fact that one is more older and honorable than the other? Hi

[M_Joshi]

Mohd - I am unsure what your grief is. You seem to be moving the goal posts all the time.

First you say, noone has black money and there will be no demand, then you say there is no liquidity..

Can you succinctly - in one line (not sentence) state what it is that has changed on a fundamental level? I genuinely want to understand and respond through discussion

John bhai,

Try running a business in India, then no one will need to explain what the problem is.

I run a Capital Goods Manufacturing Business in India (North India) which I started straight out of my MBA 4 years ago. I go through the struggles of doing business in India every day & that too without any formal job experience on my resume or any family background in manufacturing business. So I understand what you & some other posters have been trying to say, but to be honest I think it's a bloated one side argument. I'll explain all the points from 1st hand experience & you cannot lament me that I live outside India or I'm from IT desk job.
1) Cash Salary to employees: I used to disburse >4 lakh Rs. of cash salary each month (all white cash taken out from Businesss' Current A/c) to my 35+ employees including contract labor & workers. Only my admin staff used to get cheque salaries. After the announcement I was worried how will I pay salaries to the staff, as the announcement was just 2 days before I was to disburse the salaries. Thankfully I had not taken cash for that out of my Current A/c. I talked to my employees on 9th & was pleasantly surprised how they understood the decision. Many already had JDY accounts. I gave cheques to all the formal workers + the contractors for labour. No fuss, no issues. I'll say it's lesser hassle than disbursing cash salaries.
2) Liquidity : I clearly do not understand this liquidity aspect. As many posters including Suraj have pointed out that only the *black* liquidity is going out. Also it's a lesser hassle when you get payments in white (like in my business 98% payment is) or you declare 100% of your cash turnover. If you do not declare your 100% cash turnover then obviously you are the problem, not Modi.
3) Bribes : Govt. Inspectors for my product were sitting in my plant on 11-12th. That day they'd brown shawlars & did not take a single rupee of their regular commission saying, "let's take care of what we have first". I was sympathising with them on the outside, but on the inside?! I had to convert my hard earned money to bribes to pay these leeches. Before starting this business I never imagined I had to pay even after making the product 100% as required. Good step even if these bribe sacamsters have a few sleepless nights.
4) Loss of Business : From Capital Goods POV, no work is stopping here except for maybe delay in 10-20% of the projects due to this decision. From Consumer Goods standpoint obviously there is going to be some trouble due to the cash crunch for some time, but when pros outweigh cons then the decision is worth bearing. E.g. I went to buy some hardware for home yesterday & was given an invoice without asking for it (never before) even when I paid in notes of 100s. That is declared income now by the shopkeeper which earlier in most probability used to become black. So in medium term & long term no loss of business for businessmen, even those who used to deal in cash earlier.
5) Loss in RE Investment : Bad news for people across the spectrum even those who paid 100% white. The prices in RE are going to fall after a plateau graph for the past 3-4 years. I understand that it has hit many people adversely including many on BRF but there was no other way the prices were coming down in RE at affordable rates for the masses. Even in the last 2 years the builders artificially kept prices at the same level as earlier even when the demand dropped. It hits some commoners hard, but it hits the black money holders the hardest, so it was required. Hope fully the homes will become affordable & all these rowdy land wheeler dealers will get to know their real aukaat.
6)Argument about surviving at all costs : This is basically a euphemism for "Taxes are too high, I don't want to pay them." Do anybody like paying Taxes? No! But it's a gamble you take. If you get caught then you cannot whine that the system is rigged. You were cheating the system, rigged or not. I have traders in my relation who used to deal in cash & cheque both. The cash part was seldom declared. The chain started from the end consumer paying in cash to the dealer, then dealer to distributor then to manufacturer, all cash with rigged invoices & what not. Why? Only to save on tax. Now they're scrambling running in markets with bags full of cash trying to get hold of somebody to dump it on or by frantically buying jewellers, electronic goods, etc.. Even in my business I have a competitor whose side business in RE helped in making payments in cash & avoidance of paying taxes like ED & CST thus giving him more margin then me. Should I cry for him to follow those practices & that he is screwed now? Hell no!

To the posters who are being given an argument that do business in India then talk to us should see that these people are frustrated today as much of the BM lying with them is of no use. Just like one of my big shot relatives got an offer from some other big shot to take Rs. 25 cr. & convert it & keep 40% as commission. Question is how? The answer is it's simply not possible. These people have gone bonkers, nothing else. Doing business in India is going to become easier, not tougher.

[bharotshontan]

Any first hand accounts on how ultra peaceful Malda district is holding up in all this? Bong news outlets obviously only showing Kolkata middle class logistics. Malda is center of counterfeiting and cocaine trade.

[Primus]

Some humour might lighten up folks :

Sir , how far away is the bank ?

Man : Its 2 km away

Can I get an auto to get there ?

No need , just stand behind me in the line

An old one from IG days:

"Rashan ki line mein ek sajjan ne apne aage waale sajjan se poochha

Aap yahaan kab se khade hue hain?

Sajjan bola, aji hum to yahin paida aur bade hue hain"

Translation:

A man standing in a ration line asks the guy in front of him:
Sir, how long have you been here?
Reply: Sir, I was born and grew up here.

[habal]

Depressing news after trawling facebook, twitter. The entire lot opposing Modi's move is 90% peaceloving or just loving. Hindus, across spectrum and across class, most of them are supporting of this move and are willing to undergo a reasonable amount of pain and hardship to support Modi's BM initiatives. Looks like we are a divided country and peaceloving are suspiscious of Modi's every move as something to cut them down to size.