Currency Demonetisation and Future course of Indian Economy

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shyamal
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Re: Currency Demonetisation and Future course of Indian Economy

Post by shyamal »

The experience in my corner of Kolkata - changing 2000s is not a big deal if you are buying something worth more than 1000. Just bunch your purchases together.

I have been spending 100s as usual. magazine-wallah, flower-stall, roadside food stall, parking fees(10s and 50s), fish stall. I have not felt the urge to hoard them beyond the first 3-4 days.

ATMs are in bad shape but one or the other ATMs around baguiati, teghoria, raghunathpur is working at any given time. Not more than 7-8 people in queue if you go after 8pm.

SRoy - seriously I understand your worry but things are better in my corner(and its not very far from your corner so you can visit here).
shyamal
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Re: Currency Demonetisation and Future course of Indian Economy

Post by shyamal »

SRoy - I do understand. Salt lake is an anomaly I guess.
Paul
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Re: Currency Demonetisation and Future course of Indian Economy

Post by Paul »

This is also a good time to renew FDs for 2-3 year period. Rates will fall from next year onwards to 6%-7%max. SBI offers the lowest rates around anyways
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Re: Currency Demonetisation and Future course of Indian Economy

Post by rohitvats »

My first withdrawal since November 8th. Our society has ICICI Bank ATM. Money has been coming in regularly. Long ques earlier - mainly all the guards and maids and helps. But has gone down substantially. Earlier, the cash was getting used up in 2-3 hours. Today, the machine it seems had left-over cash from previous day. Staff said 6 Lakh was deposited in machine. All withdrawal since yesterday has been in Rs 100 notes.

Also went to local HDFC bank branch - many people had made their senior citizen parents stand in the que because of the rule. But the line for note exchange was smaller. 20-25 people max. Much longer line for deposit/withdrawal from own account. About 40 odd people. Surprisingly, more deposit than withdrawal at the time I was there. Bank exhausted cash by 2pm as most people withdrew the full quota of 24K in one go. It seems a much long line existed int he morning.

Drove past SBI branch. Very long line at about 2.30pm. But mostly ATM.
chetak
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Re: Currency Demonetisation and Future course of Indian Economy

Post by chetak »

Is it any wonder why the courts are perturbed??

Ashok Malik ‏@MalikAshok 10h10 hours ago

Very senior Maharashtra politician has spoken of being approached by 3 or 4 HC judges after Nov 8, for help with their cash reserves

2,014 retweets 1,087 likes
manjgu
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Re: Currency Demonetisation and Future course of Indian Economy

Post by manjgu »

i was in khajuraho for a days trip..situation not very good. very long lines of very poor looking people many without any footwear. sad to watch the impact... Delhi ..lines still very large in west delhi, uttam nagar, janak puri, vikas puri... not many ATM's working. A ATM outside NIT, Dwarka was working with about 30 people in line. ATM in Malcha marg were working.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by durairaaj »

1) I don't know why not many are thinking about using promisory note. Its is a valid legal document, that can be used in lieu of actual cash. Traders can use this without worrying about taxman in near term.

2) Keep hearing from relatives about friends asking to deposit 2.4 lakhs. There are more black (untaxed) money it seems.

3) Low denomination shortage is due to black money hoarders might have sucked it out from the market just when the news got released. When they double the low denomination circulation and digital pay options, the situation will come back to normal.

4) All minor and major temples should empty their hundis every week and not wait for their yearly counting day.

5) Bus transports should accept smart cards.

6) Major shock on big sharks is now trickling down. small fishes ae getting affected. Aid agencies should be ready to take care of daily wagers and poor people.

7) Governments should force banks to lower interest payments for existing loans instead of just lowering the FD rates ASAP. Waiting of next month end or even nov end is not right.Govt should signal the markets and let it work on assumptions.

8) Corrupt police and tax people in gateways collecting hafta has to be stopped ASAP.
Otherwise whatever gained will be lost forever.
vera_k
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Re: Currency Demonetisation and Future course of Indian Economy

Post by vera_k »

I posted earlier, but RBI can start selling cash on Amazon and Flipkart with free shipping and zero transaction charge to widen the distribution. The profit the mint earns from converting paper to money will be enough to cover the cost of doing so in most cases.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by shiv »

durairaaj wrote: 2) Keep hearing from relatives about friends asking to deposit 2.4 lakhs. There are more black (untaxed) money it seems.
I was thinking that the Rs 4500 per day exchange per person would allow 4500 x 50 = 2.25 lakhs black money to be converted. Obviously this was misused and now it is down to 2000 per day and inking for only 40 days - i.e 80,000 wonlee.

I know legitimate business people who are accepting old notes and who will declare the lot in their next IT returns, but I foresee a rush to the banks towards the end of December when hoarders have tried all other routes and failed and will want to retain just a little bit after penalties.

There will definitely be supporters of Mamata and Kejri hoping for a miracle rollback who are holding on to old notes..
shiv
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Re: Currency Demonetisation and Future course of Indian Economy

Post by shiv »

pankajs wrote: There is something very damaging the SC can do without creating an impasse. I am thinking from a logistics pov and not legal side. It can pass an order allowing for the old notes to come back a legal tender without scrapping the new ones. At this stage the new and old are complementary.

That will release the pressure on folks holding on to old notes while not inconveniencing the ones with the new notes. But that will be the end of this cleanup drive and ANY future attempt. I don't think this is within the SCs remit but SC has greatly expanded its domain this past decade.

Added later: The GOI will have to go nuclear if such a scenario comes to pass. Hope they are prepared. This is not a small policy change.
There are many ways of looking at the idea and mathematically if one idea has two possible outcomes, two ideas working together will have more than 2 outcomes.

Sorry about that obscure sentence. I will try and explain.

There are two sets of facts or ideas we need to look at:
1. The courts are not Maharajas whose will is our command. they have to justify any decision they make based on constitution, precedence, practicality and public good. They are not dictators and they cannot willy-nilly make unconstitutional or illegal judgements, or judgements that provoke public disorder because there are lakhs and lakhs of wise advocates who would call them out if they did.

2. The second idea that is being inserted here is that the supreme court is corrupt, vengeful, spiteful and/or jealous.

I would discard the second idea briefly for ease of analysis and ask if I know how the court reaches its decisions and whether I have all the facts on hand. Without that information resorting to things like "Vengeful, jealous and corrupt" is simply an "Easy explanation that suits ones own bias"

There are very close analogies in medicine that ensure that patients screw themselves. Patients come with problems that doctors must address based on a set of rules. For example if the person is bleeding from his backside the doctor has to rule out diseases that cause such bleeding and those diseases can be counted on one's fingers. However patients come with other ideas. They don't even know all the diseases that can cause that, but come with pre- conceived ideas. "I ate hot spicy food, hence I bled", "I ate hard food hence I bled" "I sat on a rexine seat for 6 hours on a journey, hence I bled" etc

Without deeper knowledge of how justices reach decisions and without reading them it is all too easy to reach wild conclusions. "The doctor said I need a proctoscopy to rule out piles. What a stupid doctor. He did not listen to me when I told him I had eaten chicken which causes me to bleed because of heat"
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Re: Currency Demonetisation and Future course of Indian Economy

Post by nandakumar »

Can Supreme Court overturn the notification on demonetising old Rs 500 and Rs 1,000 notes? The Court can do it in one of two ways. One, it can invoke the power conferred under Article 142 of the Constituion which talks about the power of the SC to
"pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may be prescribed by ..."
Now the notion of 'complete justice' is a nebulous one. Ideally, it should be applied in situations where an individual has been wrongly convicted of murder and there has been a miscarriage of justice at the lower court the SC can overlook the principle that in an appellate forum facts cannot be argued and that only interpretation of law can be appealed before it and reexamine the facts even, if necessary. But the SC has taken the view in the past that its powers to pass such orders under Article 142 is extensive in scope. So who is to say that SC will not take the view that 'complete justice' of putting an end to the sufferings of the common man requires that the notification of demonetisation is rendered inoperative?
Secondly the SC has taken the view that while Parliament can amend the Constituion it canot alter the 'basic structure' of the Constitution. The explanation for what constitutes 'basic structure' is rather vague and lends itself to all kinds of interpretation as to what executive action or legislative intent has violated the basic structure argument. So there you have it. One moremthing. We would do well to remember a dictum that a lawyer friend once told me. He said, "Remember that the Supreme Court is not the last word because it is right. Rather, it is right because it is the last word.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by manjgu »

i feel modi should have done demonitisation around 1st week of Feb..no marriage season, no sowing season... good weather to stand in Q's .. ??
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Re: Currency Demonetisation and Future course of Indian Economy

Post by Rahul M »

1st week Feb would have been too cold for much of north India and NE. also, the amount of cash holdings likely reach its peak just after festive season.

plz watch Debroy's interview, he mentioned that they had considered other windows but this was the best one.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by Manish_Sharma »

chandrasekaran wrote:The unfortunate reality seems to be that the judges are themselves focussing on that line and asking all types of "strange" questions. So what if the the judges continue this line to issue a stay or an extension of deadline or an order terming it as "null and void" ?

Given the recent history, I don't think this is a implausible scenario ? What options would the Govt. have in such a case ?
What govt. did in shah bano case? How sonia-mms overturned SC judgements on RTE...

The best lawyer in country Jaitley is now cabinet minister, NaMo will fight back. Anyway people don't have much good opinion of judiciary these days.

Only media-mamta-kejri will dance around with such a thing.

But govt. won't budge.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by shiv »

nandakumar wrote:Can Supreme Court overturn the notification on demonetising old Rs 500 and Rs 1,000 notes? The Court can do it in one of two ways. One, it can invoke the power conferred under Article 142 of the Constituion which talks about the power of the SC to
"pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may be prescribed by ..."
Now the notion of 'complete justice' is a nebulous one. Ideally, it should be applied in situations where an individual has been wrongly convicted of murder and there has been a miscarriage of justice at the lower court the SC can overlook the principle that in an appellate forum facts cannot be argued and that only interpretation of law can be appealed before it and reexamine the facts even, if necessary. But the SC has taken the view in the past that its powers to pass such orders under Article 142 is extensive in scope. So who is to say that SC will not take the view that 'complete justice' of putting an end to the sufferings of the common man requires that the notification of demonetisation is rendered inoperative?
Secondly the SC has taken the view that while Parliament can amend the Constituion it canot alter the 'basic structure' of the Constitution. The explanation for what constitutes 'basic structure' is rather vague and lends itself to all kinds of interpretation as to what executive action or legislative intent has violated the basic structure argument. So there you have it. One moremthing. We would do well to remember a dictum that a lawyer friend once told me. He said, "Remember that the Supreme Court is not the last word because it is right. Rather, it is right because it is the last word.
There are two different things here. One is the law and the other is justice. When the supreme Court passes an order that cannot be implemented (eg make sun rise from North) - it is shooting itself and the constitution in the foot. Time and again we have seen instances of Supreme court orders not being followed because they cannot be followed due to various reasons. The Ka-TN water dispute is a case in point and some violations after the Dahi Handi ban

So while the theory is that the supreme Court can say something and claim it is "right" the chances of such a thing happening are low unless we bring in a second set of assumptions to add to the Supreme court's motivations
1. They are dumb
2. They are malicious
3. They are corrupt
4. They take bribes

If we add these provisos to the Supreme Court's judgements - they can be applied to any ruling by the Supreme Court that has been passed in the past - why just a hypothetical anxiety causing scenario of reversing the irreversible?

Forget the Supreme Court for a minute and ask if the demonetization is now reversible, and then ask if the Supreme Court can call for its reversal. The court has to hear arguments from both sides. It is not a Maharaja who passes judgement based on whims.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by chetak »

Manish_Sharma wrote:
chandrasekaran wrote:The unfortunate reality seems to be that the judges are themselves focussing on that line and asking all types of "strange" questions. So what if the the judges continue this line to issue a stay or an extension of deadline or an order terming it as "null and void" ?

Given the recent history, I don't think this is a implausible scenario ? What options would the Govt. have in such a case ?
What govt. did in shah bano case? How sonia-mms overturned SC judgements on RTE...

The best lawyer in country Jaitley is now cabinet minister, NaMo will fight back. Anyway people don't have much good opinion of judiciary these days.

Only media-mamta-kejri will dance around with such a thing.

But govt. won't budge.
joint session of parliament and the ordinance route is not something that the SC, even with it's confrontational CJ, would be willing to risk because that opens up a lot of options for the govt.

Modi is not a person that anyone is willing to tangle with, as many have learned to their extreme detriment.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by arvin »

Withdrew 5000 using cheque yesterday. As expected got 100 * 10 and 2 mangalyaan. Person in front used full quota of 24000. Another person withdrawing 24k protested about too many mangalyaan and requested 100 and 50s. Teller politely replied about having to ration 100s for the entire day.
Since having a backup of debit+paytm+sodexo and few 10rs, hoping to do next withdrawl in december.
Yesterday say a vegetable vendor selling veg at rs 20 per kg for everything.
Bought 4 veg (including beans) with total at rs 40 sufficient for a week. Beans for 0.5kg sell at rs 20 in some shops. Hope this is sign of things to come.
Total withdrawl since nov-8 stands at 7000 (2000 atm + 5000 cheque).
chetak
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Re: Currency Demonetisation and Future course of Indian Economy

Post by chetak »

khujliwal raging at the BBC reporter for not linking deaths of people standing in que as directly attributable to demonetization.


https://www.youtube.com/watch?v=OroTzot75Gg

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Re: Currency Demonetisation and Future course of Indian Economy

Post by disha »

To arvin'jis post:

^^ If say 5000 lasts for 2 weeks., that means @Rs. 10k will last for a month. People can hoard cash only so much - like @24k will be hoarded for say 2 months. Spending will be on essentials and most of the utilities and whatever can be will be paid by cheque/card/e-transfers etc.

Basically., a new normal will be set where small purchases will be back in play and for big purchases., mangalyaan will be used. For everything else there is the cheque.
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prasannasimha

Post by prasannasimha »

The judges approaching politician for managing cash reserves statement must be a warning. Meddle anu further and the judiciary may be in a situation where the parliamentarian may be asked to name the judges.
chetak
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Re: Currency Demonetisation and Future course of Indian Economy

Post by chetak »

Dr Praveen Patil ‏@5Forty3

We did a simple bottom-up study in Punjab of why ATMs were running dry so quickly... we found bottlenecks that we have named as 5U.

Image
chetak
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Re: Currency Demonetisation and Future course of Indian Economy

Post by chetak »

War on Black Money: Freedom at Midnight

War on Black Money: Freedom at Midnight

PR Ramesh
18 November 2016

It was Prime Minister Narendra Modi’s best kept secret, and when revealed, his boldest mission for a clean political economy. PR Ramesh tells the inside story of the war on black money—and how it will change India

SOME OF THOSE gathered at the Union Cabinet meeting on the evening of November 8th were cracking their knuckles in anxiety; a few others were fidgety; others were hiding their apprehensions behind calm faces. Sports Minister Vijay Goel took a shot at levity by narrating funny incidents to the minister seated by his side, who was stealing glances at the clock on the wall. It was three minutes to 7 pm.

Members of the Cabinet had received a prior advisory not to get mobile phones to this extraordinary meeting, heightening the tension. None wanted to be the first to hazard a guess at the agenda, although some surmised that it had to do with terror attacks, border conflicts and ceasefire violations. At 7 pm sharp, Prime Minister Narendra Modi made an entry and gestured the gathering to silence. “I have an important announcement to make,” he declared. The Prime Minister told them that the lengthening shadow of black money and corruption had started to eclipse India’s growth story and damage the country’s image abroad. There was urgent need for decisive action. He spelt out some figures and then dropped the bombshell: all Rs 500 and Rs 1,000 notes would cease to be legal tender within a few hours, at midnight. The public would be allowed to change old notes to newly issued Rs 500 and Rs 2,000 currency notes up till December 30th at banks. A national address would be made on television. He told his colleagues that unlike in 1978, when the then Prime Minister Morarji Desai took the decision by himself, he had decided to take the Cabinet into confidence on the issue. The Prime Minister said that the gathered ministers could ask Finance Minister Arun Jaitley for any clarifications they needed. Minister of Mines Narendra Singh Tomar let out a laugh, high pitched and nervous. Some could be heard sucking their breaths in. Only one minister had questions. Apart from Jaitley, all of them were taken completely aback. From his chair, the Prime Minister studied the reaction on each face intently.

It was almost 8 pm and the Prime Minister was scheduled to make a nationwide address on the Cabinet decision on Doordarshan in Hindi as well as English. Women and Child Affairs Minister Maneka Gandhi asked if she could be excused after the first televised speech, in Hindi, but was asked to stay on until the entire exercise was over. Only Home Minister Rajnath Singh and National Security Adviser Ajit Doval were allowed to exit after the first address, having sought prior permission. At precisely 8 pm, the special broadcast was set up.

It was an hour after the Cabinet meeting that Modi went on air to announce the decision. Each and every one of the Rs 500 and Rs 1,000 currency notes that citizens held with them had been demonetised and would cease to be legal tender from midnight, he explained in his address. Exhorting the public not to panic since they would have time till December 30th to exchange their old notes for new, the Prime Minister sought their support for this all-out war against black money that he had declared to strengthen the economy and the country. There would be some pain, he said, but it would only be for the wider social good and a patriotic cause.

It was a short address. But its effect was electrifying.

JUST TWO DAYS prior to the Cabinet meeting, on November 6th, the Reserve Bank of India (RBI) had set off a series of coordinated actions that prepared the stage for the Prime Minister’s November 8th announcement. It had shot off a classified communication to the heads of currency divisions in banks across the country. They were to present themselves at the headquarters on the morning of November 8th. Once there, they were each charged with well-secured currency chests. Within lay wads of the newly printed Rs 2,000 currency notes to be released by banks to the public on November 10th. Within also lay the new Rs 500 currency. Sworn to secrecy, they were allowed to open the chests only after the RBI gave them a green signal that evening. That all-important okay came soon after Modi’s announcement to the nation.

Also summoned to an emergency meeting at the RBI headquarters that evening were bank chairpersons. When it started at 7 pm that evening, most of those present had no clue of the core agenda. For a while, they mooted other matters of concern with RBI officials. At the appointed moment, breaking into a discussion on such issues as the Scheme for Sustainable Structuring of Stressed Assets, the RBI officials in attendance switched on TV screens, gesturing to the chiefs to watch the Prime Minister’s address.

A nation struck numb would wake up to the brunt of this ‘inconvenience’ the next morning. Phones rang off their hooks non-stop at North Block. It was time for the Prime Minister and his team to enlist citizens for the war on illegitimately held cash. Two days later, Modi took his mission statement and message to Ghazipur in Uttar Pradesh.

In retrospect, the Cabinet ministers should have had a hint of the impending ‘surgical strike’ on high-value currency notes. After all, the Government had signalled its determination to push this through in many ways over the past several months. Despite the high level of secrecy, news of a fresh Rs 2,000 currency note to be issued had leaked to sections of the press from Hyderabad, where they were being printed. However, few figured out the larger plan.

Secrecy was crucial to the success of the idea to turn Rs 500 and Rs 1,000 currency notes invalid as legal tender. According to reports, the design of the new notes, including the depiction of Modi-era achievements such as the Mangalayaan satellite, was finalised and the process of printing started three months ago, though in as hush-hush a manner as possible.

An aggregate Rs 16.4 lakh crore worth of notes are estimated to be in the economy’s circulation, of which the banned denominations account for around 86 per cent by value. According to RBI data, that is a total of some Rs 14.2 lakh crore, of which Rs 500 notes account for nearly Rs 7.9 lakh crore and Rs 1,000 notes add up to a little more than Rs 6.3 lakh crore. Compared with this, Rs 100 currency and notes of lower denomination add up to only around Rs 2.2 lakh crore. This meant that the impact on the ordinary citizen would be palpable.


Secrecy was imperative for the move’s success. People in the know of Modi’s move included Arun Jaitley, senior officials in the PMO and Finance Ministry, then RBI Governor Raghuram Rajan, and other senior central bankers

What made the battle all the more grave was the alarming increase of the now-invalidated bank notes in recent years. According to the Finance Ministry, bank notes, the primary fuel of the economy, had increased 40 per cent in the period between 2011 and 2016. The quantum of Rs 500 notes increased 76 per cent and Rs 1,000 notes went up 109 per cent. India, among the world’s top cash-using economies, has grown increasingly dependent on high-value currency for two main reasons. One, inflation has necessitated higher value notes for buying the same quantity of goods one could buy for much less earlier. Two, the influx and stranglehold of black money in the economy has grown enormously, symbolised mainly by the demand for high denomination notes. Most economists are of the view that this increased cash circulation has led to greater inequity in society. And this was at the core of the Government’s pitch to people at large.

By December 30th, the deadline spelt out for exchange, the Government estimated that conservatively, around 80-85 per cent of the total high-value notes would be mopped up by banks. By day four, banks had collected close to Rs 3 lakh crore worth of these. By November 15th, that figure had zoomed up to an estimated Rs 5 lakh crore.

But the most telling indication of all that Modi was determined to set the pace for a low-cash economy came from his interest in the progress of the Pradhan Mantri Jan Dhan Yojana (PMJDY) . The PMJDY was designed to exponentially expand financial inclusion countrywide, especially for the marginalised, the below-poverty-line groups, the urban poor and the agricultural labour community. This flagship programme of the Modi Government, it now appears, was a significant foundation laid for demonetisation.

The PMJDY’s rapidly climbing numbers were proof of the urgency invested by the Government in the programme. By May 2016, it had as many as 219 million bank accounts. To inculcate the financial ethos of routinely engaging with bank processes among the target audience, the Government linked these accounts to substantive health insurance benefits. All subsidies to the eligible would be delivered through Aadhaar numbers registered for these accounts. This included payments under the MGNREGA scheme, SC/ST provisions, student scholarships and the NOAPS under which destitute senior citizens are given a monthly pension.

By November this year, the number of bank accounts had shot up to 254.5 million, of which 150 million are urban and another 100 million are rural bank accounts. The number of ‘zero balance’ accounts has dropped to 23.4 per cent of the total. Drafting the poor and marginalised into the banking system was also done through post offices and through 200,000 banking correspondents.

The Government had thus set the stage for the dramatic make over of the humble post office. At the end of 2014, the Modi Government amended the Post Office Savings Bank General Rules, 1981, to allow select branches—of the 150,000 post offices—to issue ATM cards to savings bank account holders. It also allowed the post offices to issue account statements (rather than passbooks).

Simultaneously, Modi pushed for the Unique Aadhaar number’s connectivity (orphaned by the UPA regime) to all bank accounts to plug leaks, increase transparency and allow the well-targeted transfer of government subsidies to those eligible. In mid-September, an official memo of the Finance Ministry reiterated that the deadline for the end of voluntary declaration of undisclosed income by citizens—the Income Declaration Scheme—was September 30th. In effect, there would be no more extensions of the deadline and any attempt by anyone to declare untaxed income after this date would face penalties under the law. It was in this context that the Prime Minister had on November 8th declared that any wealth from undeclared sources of income kept in the form of high-value notes would become “worthless pieces of paper” by midnight. Cash from legitimate earnings could, of course, be exchanged at banks until year-end.

Modi’s move on demonetisation comes on the eve of bypolls in states like Assam and West Bengal. Following later would be assembly elections in Uttar Pradesh, Punjab and other states

On its part, the central bank too had issued notices that could’ve been read as hints that a move of this kind may be in the offing. In the last week of October, it cautioned banks on its website against counterfeit notes, especially in Rs 100 currency. It asked banks to double-check the authenticity of these notes before re-circulating them. In the first week of November, it directed banks to offload more Rs 100 notes, something it had already done in May.

Thus far, only 3.5 billion pieces of the new Rs 2,000 note (around half the number of Rs 1,000 currency in circulation) and far fewer of the new Rs 500 notes have been printed, say reports. Given the short-term shortage of smaller value notes, the Government was aware that there was need to tread carefully and actively enlist the support of all classes of citizens for the drive. Among those who were fielded on this front were Jaitley and Rajnath Singh. But it was understood that the mission’s success would rest solely on the Prime Minister himself.

OF THE Rs 16.4 lakh crore in circulation, some experts estimate that a maximum of around 12-14 per cent could account for untaxed money and counterfeit notes, just a part of the huge shadow economy that dominates the country, the rest having been converted to real estate, gemstone and gold assets and stowed away in classified Swiss bank accounts. However, most economists agree that Modi’s decision would definitely draw in whatever black money is stored in the form of high-value currency, wipe out counterfeit notes, and make future black money operations extremely expensive. “A start had to be made on this front and there was need to take the public, especially the honest and the hardworking, fully on board. This was the best place to start,” said Jaitley. The second phase of the attack would follow later, on benami property, bullion and jewellery, the ‘usual suspect’ sectors for black money to be channelled into. Also, what would follow would be a big strike on political funding, particularly for elections.

Secrecy was imperative for the move’s success. Keeping the information classified from his own Cabinet, therefore, could not have been easy for Modi. People in the know included Jaitley, senior officials in the PMO, the Finance Ministry, then RBI Governor Raghuram Rajan, and other senior officers of that institution.

A CROWDED CLUSTER of bylanes with the overpowering aroma of chhole bhature outlets. They jostle with fruit juice stalls vending suspicious liquids with which to wash down heavy lunches on dizzy afternoons. The place, a veritable maze of alleys and old constructions, is choc-o-bloc with tiny offices of one kind or another. This is Daryaganj, home to all manner of eateries and printing presses to milliners to faux jewellery units and shoe shops. It’s the nerve centre of Old Delhi’s business district.

Somewhere on the main road is the 70-plus-years-old Golcha Cinema. At the stroke of the lunch hour on sweaty summer days in this neighbourhood, the staffers of these cramped cubicles prise themselves off their stools and struggle for the exits. Among them is a bespectacled data entry operator—let’s call him Bhushan—who spends his work day bent over a computer, crunching numbers, whose innocuous demeanour belies his importance to wealthy people who’ve stashed away bags of unlawfully earned money. Bhushan and others of his ilk are actually chartered accountants who secretly operate as middlemen for ‘clients’ looking to launder their money for a price. In return for a commission of around 1-2 per cent of the sum in need of a wash, they use multiple bank accounts and companies to park the untaxed funds of their clients for a required period. Turned ‘white’ or legal, the money is returned to clients through cheques. The entry operator raises bogus bills to cover his commission—which could be quite substantial, depending on the sum that has to be converted from black to white—and the relationship, always confidential, lasts for prolonged periods of mutual back-scratching.

Most economists are of the view that increased cash circulation has led to greater inequity in society. And this was at the core of the Government’s pitch to people at large

Bhushan would have remained incognito for longer, except for the IT Department raids launched by the Government as part of its countrywide drive to nab big-ticket black marketers, not just in metros but in tier-two and three towns where a good part of daily business is run on the ‘kuchcha’ or untaxed funds. Those raids were on overdrive through the first half of this year even as the officially offered voluntary income disclosure scheme for tax evaders was threatening to yield unsatisfactory results.

In determined swoops on establishments throughout the country to ferret out black money, the IT Department had increased its raids by mid 2016 to three times (145) the number of raids the previous year (55). Between April and July, the Department had seized Rs 245 crore in unaccounted-for money. The total undisclosed income admitted during the raids, as reported by the Times of India, was a huge Rs 3,375 crore, excluding cash and jewellery seizures. Officials acknowledged at the time that the raids had been ‘highly successful’ and led to ‘unprecedented’ cash seizures from builders in the real estate sector and educational institutions across Chennai, Mumbai and Delhi. These were two sectors commonly acknowledged as being hubs for money laundering.

Based on information gathered in Mumbai, Delhi, Chennai, Kanpur, Lucknow, Moradabad, Bhopal, Hyderabad and other towns, the IT Department began working on around 9 million transactions, including multiple deposits of over Rs 10 lakh in bank accounts and property purchases in excess of Rs 30 lakh.

Bhushan was among those interrogated by the IT officials on a raid overdrive. Among the names thrown up on the suspects list was an anchor at NDTV . The news anchor, who is currently being probed by IT officials on the source of his money, had apparently acquired an expensive home in New Delhi’s diplomatic area of Chanakyapuri. The matter is being probed and the anchor has already been summoned thrice for questioning by IT officials.

In the course of its raids, the Department identified close to 700,000 ‘high risk’ persons whose travel and business operations were put to scrutiny. The activities of these red-flagged names are likely to be monitored by officials for a while now, as part of the clampdown on black money.

The information gathered from Bhushan and others in his trade is now the basis of a comprehensive and fresh nationwide databank of black money suspects. Of particular interest to the IT Department are the names of those who have used the Old Delhi laundromat recurrently to legalise their money. Today, the list is in the hands of around 1,000 supervisory officers of the rank of commissioner and above who have been charged with ferreting out black money trails by grilling suspects.

The decision is also expected to nullify all the counterfeit currency in circulation, much of which is said to fund terror activities in sensitive states such as Kashmir, besides the drug economy in Punjab

The Department is also keeping close track of all Jan Dhan accounts. Several accounts have popped up in which the top limit of Rs 50,000 for cash deposits has already been reached, which has led to the conclusion that these are being used to launder black money.

That the dragnets being cast far and wide by the Government have sent shivers down the spines of habitual offenders is beyond doubt. The first few days after Modi’s November 8th announcement saw several establishments in key business areas pull down their shutters, perhaps in apprehension of IT raids.

Modi’s war on black money dovetails his party’s message of ‘India First’ with the commitment to uproot graft . It is a powerful political message. It offers a tangible stake to ordinary Indians in this national mission. The message is: ‘If you are an honest Indian who loves his country, you will support me in this all-out battle to cleanse the political and economic system.’ So says an image analyst who has worked on political campaigns.

For Modi, it is part of India’s ongoing battle against its enemies, both internal and external. It’s a battle that taps into the prevailing nationalist sentiment in the wake of the Pathankot and Uri attacks. “It’s the metaphorical version of the ‘Uncle Sam Wants You’ message. In this emblematic war, each and every honest and patriotic Indian is a soldier participating in the frontline directly,” says the image analyst.

The decision is also expected to nullify all the counterfeit currency in circulation, much of which is said to fund terror activities in sensitive states such as Kashmir, besides the drug economy in Punjab, a state due for Assembly polls. Also targeted are ‘extortion’ funds that grease the Maoist machinery in states such as Jharkhand and Chhattisgarh. The war is simultaneously being waged against money illegally ‘earned’ as commissions and kickbacks for ‘clinching’ deals in various sectors by entrenched lobbyists. A big chunk of the fake currency being stamped out has, according to the Home and Finance ministries, been printed in Pakistan and pushed into the Indian economy through porous borders with Nepal and Bangladesh.

There have been apprehensions even within Modi’s own Bharatiya Janata Party on whether this ‘big political risk’ he has taken could alienate the powerful trading community.

Many merchants have traditionally maintained ‘pucca’ account books in parallel with ledgers for ‘kuchcha’ deals that are kept out of the official tax grid’s lenses. This vote base has stuck steadfastly with the BJP through thick and thin since its Jan Sangh days.

Says a social scientist, “In a rapidly transforming economy, Modi is attempting to forge a longer term political bond for the party with the massive aspirational class of youth who are growing restive with widespread corruption hampering their opportunities. This would include the new retail trade classes that inhabit massive emerging spaces both physically and online. He is redefining the demographic [framework] by tapping the fast growing socio-economically aspirational classes. The old trading community vote base, too, many among the party leadership contend, would have little option but to fall in line even as it modernises, since the BJP continues to be the political outfit that best protects their interests.”

The move has made black money much harder now to generate, and to that extent the aspirational youth across classes are looking forward to fresh opportunities in the economy. The redeeming outcome would be to make the Indian economy significantly less cash-oriented. Economists have for long argued that a cashless economy is not only far safer, it is also fairer to various strata of society. In the longer term, that too, should make for a political statement that favours the Indian citizen of limited means—be it the vegetable vendor, the street hawker, the marginal farmer, the daily wager, or the landless farm worker.

Before going public, Modi told his colleagues that unlike in 1978 when Morarji Desai took the decision by himself, he had decided to take the Cabinet into confidence on the issue

“EVERY LEGISLATOR begins his career standing on the foundation of a certain falsehood: the fallacious statement on election expenses that he files,” former Prime Minister AB Vajpayee once said. In its efforts to check the rise of illegal money in polls, the Election Commission has been raising the expense limits allowed to candidates regularly. In 2014, the EC had set a limit of Rs 70 lakh in expenditure for each party representative contesting a Parliamentary seat. For assembly elections, the average limit for a candidate is currently Rs 27 lakh per constituency for big states; it ceiling is Rs 20 lakh for smaller states and Union Territories. In reality, no one follows this.

In 2015, the Association of Democratic Reforms (ADR) published a report that said that 75 per cent of the funding of key political parties originates from unknown sources. Of all the known sources, 87 per cent of donations came from corporates.

The biggest victim of rampant black money is democracy itself. Illegal money delegitimises so-called ‘popular choices’. Distributing liquor used to be a mainstay of some parties, but now, it has gone far beyond that with few blinking even as laptops, motorbikes, tablet computers, mixer-grinders and expenses borne for daughters’ weddings are used as tools to lure voters into backing a particular political party.

Although lobbying among Parliamentarians or elected representatives is not legal in India, as it is in the US, analysts say that surreptitious funding of political parties for future gains through favours has left the door wide open for corruption.

Modi’s move on demonetisation comes on the eve of bypolls in some states. Following later would be key assembly elections in UP, Punjab and other states. The move effectively puts paid to efforts by various political parties to use hoarded funds in Rs 1,000 and Rs 500 currency notes to influence voters. Most parties in the fray start accumulating slush funds well before election week in order to lay the ground for vote bank manipulation. “Given this, the move by Prime Minister Modi is a significant start to checking the flow of these funds,” says another analyst. According to him, electoral politics, Bollywood, real estate, gold and the jewellery sectors, apart from education, are the ones where black money mostly finds its way and thrives.

Electoral politics is an obvious target. One small way around the EC spending limits for assembly polls, for example, is the use of a few dummy candidates. Plus, there are expenses on canvassing by various wings of the particular party, such as its students and women’s organisations. Other expenditure includes vehicles for travel and helicopters for the real candidate, poll booth and canvassing offices, election day expenses, and, the biggest chunk of all, cash for ‘influencing voters’ and buying the loyalty of vote bank delivery agents. Some experts peg the sum needed at around Rs 10 crore, way over the official level permissible.

The EC rules require parties sponsoring candidates to maintain day-to-day accounts of all election campaign expenses and submit these to it within 90 days of a Lok Sabha election and 75 days of an assembly one. Also, it has set up an expansive Election Expenditure Monetary System mechanism to curb the influence of money power in polls. First implemented in 2010 in Bihar and subsequently in the 2014 General Election, this system’s rules require each contestant to keep a separate bank account for all poll-related expenditure and to pay for expenses incurred only through cheques or bank drafts. In addition, the system has a complaint-monitoring cell set up in every district, with quick response teams and other surveillance bodies available to act if need be. These teams are entrusted with the task of tracking illegal cash transactions or any distribution of liquor and other items for vote inducement.

“Just the rent for a chair at a public meeting costs Rs 10-15 daily, festoons cost Rs 300-500 apiece, helicopter rides cost upward or Rs 3 lakh an hour. How can any of these arrangements, all necessary to run a basic election campaign, ever succeed without exceeding the expense limit set by the Government?” argues an MLA of UP. Just halfway into the poll season of 2014, the EC seized Rs 219 crore in cash, enough to fund 500 primary schools in a state for a whole year, according to one news report. That gives some indication of the extent of slush funds being used for electoral politics in India, the extent of Modi’s challenge against black money here.

In an interview in 2014, former EC Commissioner SY Quraishi , talking about his book The Undocumented Wonder: The Making of the Great Indian Election, outlined 40 ways by which political parties circumvent strictures against use of unlawful funds in elections to influence voters. Paying utility bills for voters, forking out big-value currency notes for liquor, transporting money in ambulances to distant regions for distribution and tying up with local vendors for the provision of free booze were some of these. “There are at least 40 such ways [in which] political parties play cat and mouse games with the ECI,” Quraishi said at the time. Independent audits of the accounts of political parties and their poll spends, he held, should be made mandatory and the vetted figures should be put up on official party websites.

Meanwhile, the opposition, stirred up by the issue of demonetisation, is expected to stall Parliamentary proceedings in the ongoing Winter Session. Congress leader Rahul Gandhi, who queued up at an ATM in Mumbai, has sought to blame Modi. “None of the Prime Minister’s industrialist friends are seen toiling in long queues outside banks or ATMs for cash… Are you seeing any suit-boot person standing in line? These are just ordinary people,” said Rahul Gandhi.

Virginia University Professor John Echeverri-Gent, who has done a study on election funding in India, argues that the Nehru-Gandhi family maintained its supremacy within the Congress party thanks to its control over election funds. Amid attacks from opposition parties such as the Congress, the Prime Minister, though, has won the support of Nitish Kumar, chief minister of Bihar and JD-U leader, who lauded the move to get rid of “fake notes”.

According to a 2015 study, black money was both ‘systematic and systemic’ in electoral politics, propped up by corrupt businessmen, politicians and executives.

Modi has reimagined freedom at midnight.
Paul
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Re: Currency Demonetisation and Future course of Indian Economy

Post by Paul »

Pawan Kalyan‏ @PawanKalyan
It is evident from the current situation that government has not done enough exercise..
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Re: Currency Demonetisation and Future course of Indian Economy

Post by Paul »

He appears to be a Modi fan....
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Re: Currency Demonetisation and Future course of Indian Economy

Post by IndraD »

Yesterday a bank in Delhi handed over 16 kg of coin to a man who came to draw Rs 20 000 as they ran out of notes.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by IndraD »

IT turns heat on NGOs depositing large sum all of a sudden http://timesofindia.indiatimes.com/indi ... 519480.cms
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Re: Currency Demonetisation and Future course of Indian Economy

Post by JohnTitor »

https://www.youtube.com/watch?v=f8zK-h6jcX4

Ranya - kannada actor/INC politician gets trolled after she tries to instigate a crowd with "difficulties to the poor"
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Re: Currency Demonetisation and Future course of Indian Economy

Post by Chandragupta »

JohnTitor wrote:https://www.youtube.com/watch?v=f8zK-h6jcX4

Ranya - kannada actor/INC politician gets trolled after she tries to instigate a crowd with "difficulties to the poor"
What are the slogans that the people are raising? And what was the lady saying at the start? Some help with translation pls.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by kvraghav »

I hope people show this pompous idiot Ramya her place again in the next elections.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by Paul »

^^Pawan Kalyan's tweet shows Chiranjeevi's family must have lost a warehouse full of money. I think of Tier 2 politicians like Chiru, D K Shivakumar (energy min in KA), Jagan, Arjun Singh's son in MP, Ajit Pawar, Thackeray, Son of night soil and his litter...these people are in not in power or will lose like in KA, and they must be feeding their retinue of hangers on with the black money stash in various ware houses made over the past 2 decades. If they do not come to power in the short term, they will be out of business forever.

At least Didi, AK420, Yadav clan in UP/BH are in power and still have a shot at making up the losses but the others will lose their followers if they do not show a plan to capture the electorate's imagination in the future.
Last edited by Paul on 20 Nov 2016 17:31, edited 1 time in total.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by IndraD »

Chandragupta wrote:What are the slogans that the people are raising? And what was the lady saying at the start? Some help with translation pls.
People typically chant 'Modi Modi ' as if they had all the faith of the world in this man, several attempts of Khujli to instigate crowd have back fired as well, last heard he was screaming & furious when BBC patrakar refused to link deaths with cash crisis.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by JohnTitor »

Chandragupta wrote:
JohnTitor wrote:https://www.youtube.com/watch?v=f8zK-h6jcX4

Ranya - kannada actor/INC politician gets trolled after she tries to instigate a crowd with "difficulties to the poor"
What are the slogans that the people are raising? And what was the lady saying at the start? Some help with translation pls.
In summary, she says "look at the difficulty he is facing, ask him ask him, he's not getting any sales" (pointing to the seller.. regarding demonetisation).. to which the guy replies no one is facing any difficulty - after which the crowd starts chanting NM's name
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Re: Currency Demonetisation and Future course of Indian Economy

Post by RajeshG »

Suraj wrote:Why are you wasting time convincing us of the color of money ? If you're so convinced that money can be light-grey-thats-almost-white, then you should have no trouble convincing the taxman either.
Thanks Suraj. I will stop beating my wife now.

--------

anyway news from gujarat from various gujarati news channels.

- people are still largely in favor of decision, people who can manage to pay with CC/DC/paytm are using that
- still facing lots of trouble
- in one of the interviews a sabjiwala claimed about 40-50% reduction in sales
- big temple boxes have been sealed but small temple pujaris say about 40-50% reduction in revenue
- multiplexes are seeing very low attendances ( added )
- a debate hosted in kandivali, mumbai amongst gujarati community was highly in favor. there were people from BJP ( gopal reddy ? ) and congress netas in attendance. most people were in good mood and support the decision. there was also a sub-discussion where some important person sitting on podium was suggesting that govt should make an announcement that 50-55% penalty for declaring money can solve all problems in a month which could take several months.
- couple of individuals have been held with 16.3 lacs . some higher ups in banks are suspected per news report ( edited )
- also 3 individuals with 1 cr+ currency caught in rajkot
- APMC mkts are still closed. i am still not sure where vendors are buying the produce they are saving.
- there was a big rally in surat yesterday held by farmers regarding sealing of cooperative banks and low availability of cash. ( edited )
- hardik patel is going to hold a rally in rajkot today to address patels
- gujarat elections are going to be held next year
- i have heard from people that some weddings have been cancelled
Last edited by RajeshG on 20 Nov 2016 19:24, edited 3 times in total.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by Kanson »

This thread unlike full of sob stories, which I expected, is unexpectedly both educative and informative. Thanks to all participants to keep it this way.
I have my own stories to share, but I share pointers that vibes with last few pages of this thread which I came across while mingling with people in public places, and I found out some of them could be BJP party functionaries later to my amusement.

Pointers that I gathered:
PM NM is very methodical not only in the Drive against BM but in every aspect of National Security & Interest. There was a discussion on how NM taking every step to negate Chinese influence in and around our Area of Interest.

IT dept knows where BM is getting generated, who is holding and how much. They have a rough figure. They anticipate that in this drive against BM, there will be some percentage of BM getting converted to WM. All actions that is going to follow from now on is to mitigate that conversion.

Initially, the purpose and the focus of this whole exercise of demonetization and BM negation is against Break-India forces that includes Political parties. But given the nature of the way things are there is no way one can separate Business from Break-India forces and to some extent common man from BM generation. So the demonetization has to happen in the way that is happening.

Because of the prevailing law where Judges and senior adv cannot be touched, they are holding benami properties for several hi-fi politicians (in delhi) & their party members.

My Opinion: It seems, the whole exercise as it appears is akin to catching rat. To do that you have to close every door/window where it might escape. Given the circumstances, the above exercise seems to be just that.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by JohnTitor »

Jizz doing its usual negative campaign against the demonetisation campaign.


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Re: Currency Demonetisation and Future course of Indian Economy

Post by abhijitm »

Found this circulating on social media.

PSU banks deposit rises in Q2 ahead of demonitisation: Why so?

Gurus, any clarification will help to fight the battle.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by RajeshG »

According to Jaitley, that is because of pay commission payouts in month of sept
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Re: Currency Demonetisation and Future course of Indian Economy

Post by durairaaj »

The tamil news reports that PM Modi might have suggested reviewing (actual translation from tamil is relook) the demonetisation process. It says the reasons are: President is opposed to this step and the numerous cases filed against the govt in High courts and supreme courts might lead to unfavorable judgements.
News Link
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Re: Currency Demonetisation and Future course of Indian Economy

Post by abhijitm »

durairaaj wrote:The tamil news reports that PM Modi might have suggested reviewing (actual translation from tamil is relook) the demonetisation process. It says the reasons are: President is opposed to this step and the numerous cases filed against the govt in High courts and supreme courts might lead to unfavorable judgements.
News Link
Not possible to go back now. Situation is stabilizing and huge investment already in demonetization.
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Re: Currency Demonetisation and Future course of Indian Economy

Post by pankajs »

The headlines following his recent speech in Agra has no mention of a relook. It would be a headline worthy news. Just scanned the headlines but did not go into the reports.
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