Currency Demonetisation and Future course of Indian Economy

[ShauryaT]

Suraj: A fine post above. Let us see if reality of the cash economy changes to this new dynamic of cashless transactions. The entire agricultural sector from the consumer to the producer and every intermediary in between including transport is cash based. The agricultural producer has no incentive to demand a check as his income is tax free. The intermediaries do have a massive incentive to under report their income and pay cash. The power dynamic between them is in favor of the purchaser. AFAIK, 90%+ of household food consumption is using cash. Will the consumer stop going to a cash only restaurant? A cash only retailer? Will govt officers stop demanding cash bribes? Will the public refuse to pay? Will the power of the officer to harass be under threat? Will these change?

IIRC: Less than 6% or so of the black economy is held in cash as per a government report. The rest is in real estate, gold, BM converted to white, stock market, foreign accounts, etc.

The limited goals to arrest the current BM cash economy through demonetization is laudable. Its pervasive effects due to this action alone are debatable.

[Suraj]

It's commonly argued that lots of the value of black economy is not in cash. True, and this is unrelated to my previous post . The cash provided the liquidity to exchange within the black economy . That case base became worth Rs.0 on Nov 9.

So the question is, how are you going to transact ? No one has that quantum of cash anymore . You as a blackmarketer (just as example) do not either . How do you transact the essential needs when your cash liquidity is gone ?

Sell your house ? No one has that much cash on hand. What do you report for buying price when capital gains tax is computed ? Heck, if it's entirely benami, how do you report purchase ?

Convert forex ? No hawala channels anymore since there's no cash to back it up and all existing value has been 0-ed. Bring it in and they'll ask for source of income . What do you say ?

Sell gold ? Purchase receipt please, so GoI can levy tax .

It goes on like this . When you remove the liquidity underlining a market, you make it extremely hard and costly to transact . They could resort to barter, but by tremendously discounting things, since they MUST pass on the burden of proof, or carry it themselves .

Things have value when they are transacted . It can be argued that something that's never on the market has no value because it does not exist within a market . E.g. Some ancestral home no one plans to sell . Likewise if you can't transact without penalty, the value you hold in the possession falls dramatically .

It can be argued that some people will find creative outlets . Sure, but it's mathematically impossible for everyone to do so. There is not enough cash anymore . Anytime anyone comes forward to declare concealed possessions government takes a huge cut of its value as penalty and tax.

So who has the power in this dynamic ? Not the black marketer anymore, regardless of what medium his wealth is in .

[SRoy]

Buddy let me call you out.

Will the consumer stop going to a cash only restaurant?

Yes. Never been to restaurant that doesn't accept debit/credit cards.

A cash only retailer?

Yes. Cash transaction were limited to sub-100 groceries till last month. Stopped altogether now.

Will govt officers stop demanding cash bribes?

Already refused the special branch cops for passport verifications. They couldn't stop it.

Will the public refuse to pay?

Passport. Property registration. Mutation. Electricity connection transfer. Vehicle registration. PAN. Aadhaar. EIC. Never paid a penny.

Will the power of the officer to harass be under threat? Will these change?

Threat to harass is only possible when you bribe once and your own paperwork is out of order.

And guess what a PF transfer was held up and bribe was implied. A RTI fixed it. In 3 working days.

And this coming from one of the most corrupt and backward state.

Atleast on BRF speak of what's possible. Some "Bharat Rakshak" you are.

[Suraj]

The intermediaries do have a massive incentive to under report their income and pay cash. The power dynamic between them is in favor of the purchaser. AFAIK, 90%+ of household food consumption is using cash. Will the consumer stop going to a cash only restaurant? A cash only retailer? Will govt officers stop demanding cash bribes? Will the public refuse to pay? Will the power of the officer to harass be under threat? Will these change?

"Will they ?" In pointing out that they should. The entire economic power dynamic has been reset . Those who previously maintained a relationship where they had to feed the black money system or pay bribes, no longer have to, and can compel change based on the new power they have once they declare their income .

If the short term pain of not doing so affects you too much, then you no longer have any business complaining about the problem because you are simply helping to restore the old dynamic despite not having any reason to.

Anyone can continue to ask bribes . You can tell them no, and ask them what are they going to do about it . Really, what does the bribe taker do about it ? Anything he does to reveal your past actions incriminates him. You've already paid your dues. In the case against him, you are an approver.

[disha]

I ran a small business., my father's business. For 6 years while managing studies. My father had to shut it down after I left. Some of the business was given over to my nephew., who is an engineer by training from a premier institute but wanted to stay back with family and not do the yen-are-eye route.

I know the vagaries of small business and we used to run it honestly., paying our share of taxes and all that. Of course there was a black money component to it., this was basically white being converted to black and the money was paid to "Sarkari Kutte" (or Government dogs). In fact I introduced a line item in the books called "dog biscuits" to track the expenses so that we can estimate how much 'loss' we were having due to this bleeding and also account for it in books.

20-30% of white money ended up in the black money., all the dog biscuits were given for octroi, entry tax, sales tax etc. Why the dog biscuits? For example if one has to obtain the 'C-Form' (let the folks check it out)., one will not get it from the sales-tax dept without the biscuits. The c-form had to be appropriately stamped etc (worse was the octroi commissioner who insisted that the stamp of the ST commissioner was off by a centimeter and cannot be accepted)., this shenanigans were doings of all dogs barking for their biscuits.

Most of the black money was generated due to the dogs barking for their biscuits in my case and within the larger trader community I noticed that a business/trader would start their business honestly but rapidly fall into the BM trap. Two kinds of people., the dogs as mentioned above and the customers who wanted to save on their VAT would generate the BM. Interestingly it was the educated-chi-chi folks who would insist on not paying their share of taxes arguing that the govt. itself is corrupt and hence what is the point in giving taxes to the govt. Several I-Ey-Ass afsaranis and armee-&-bolis-wives were the culprits. The cess-pool was so much that one of my school friend actually had judges & commissioners in his pockets! With all this cynicism: I got out of retail business all together and would deal only in wholesale.

I had become cynical of the dogs and within 1-2 years I knew the tricks of the trade., that is which dogs require how much of biscuits and how to generate more biscuits for the dogs. That is cook books to keep the entire transaction offline to not even pay a single rupee towards sales-tax. On the customer side., I still would insist that they take a receipt for return guarantee if the package is not opened within certain days. This would be beneficial for my customers from districts who had to transport the goods back and sometimes they will end up with unsold inventory. Of course if they do transaction without receipt., that will generate BM and that goes in feeding the dogs.

That is why I support GST in complete. All the eCONomists who are sitting in their A/C rooms on cushy chairs in lootyens delhi and in the orifices of the business weeklies do not have a clue on how big the GST change is for the small businessmen. In one stroke., all the dog biscuit business will be gone. I pay tax to my manufacturer., get the goods transported to my warehouse., sell it to my customer (wholesale or retail) - charge tax and pay tax to my manufacturer and at the end of the year., send up my true-up statement to the tax dept. If they start barking., send an anonymous complain on the twitter and the dogs will be put out in the manger.

The way I see it., economy grows based on the velocity of money and the size of the stream. The black money actually takes money out of the stream and slows down the velocity. GST will ease procedural roadblocks., the roadblocks create the BM. So instead of a "dip" in economy or "price rise" as predicted by eCONomists., we will see a plateau and an upward growth trajectory. There will not be a "price rise"., of course there will be a massive income shortfall for some sarkari kutte.

I bring in GST because swarajyamag proposed to delay it post demonetization. I disagree. In fact GOI must push forward implementation of GST as quickly as possible. If Demonetization is "yin" then GST is its "yang". Demonetization is basically a reset. In effect GOI is saying., lets account for all the rupees floating around and called in a reset of specific notes. Any unaccounted notes will be deemed as destroyed. By GST., no new unaccounted notes will be created. Demonetization has complete support in my family., we know that the dogs are at a big loss and there is a great sense of schaudenfraude! Of course., there is impatience for GST., several people I know have put hold to their plans till GST is in place.

Within 2 years., the only hold outs for black money in civil society will be RE and the police/Judgocrazies. Modi will need all our faith if he has to tackle this monster. For India., this is the real and the most difficult monster to behead.

Hence all the whiners on this thread stating that demonetization has affected them big time and they will go back to their old habits are just that whiners. Some are pernicious. Till GST comes in., insist on above board transaction. If the customer wants to pay for a high value item without receipt., ask that it be paid in 10 Rs., 20 Rs notes. spreading the fear that Rs. 2k is 1. being tracked and 2. can be demonetized and 3. you do not want to be caught with your already twisted chaddis down because of 1. and 2. As for the dog biscuits., you do not have to buy any now. Just point out that any dog biscuits will be laid to waste. On top of it., it may paint a big target on the dog itself. And if they insist on BM., pay them in coins (I used it once for a devastating affect) and see to it that they at least wriggle around like a worm.

[ragupta]

Disha,
Thanks for nice explaination, I agree fully.

[RajeshG]

Suraj

On your point of people not trusting 2k notess i think you are again not being practical. Currency notes for aam junta are nothing but a piece of paper plus trust. Trust is variable. Threat of discontinuation reduces trust and hence the value.

People dont do corruption because there are 2k notes available. Notes just happen to be a means not an rnd.

Go back to first pricipals truly and forget about morals for a second. I want to do business but i dont trust one piece of paper. What do you think i will do ? I wont stop business. I will use something else. $ perhaps. Its another piece of paper. But the printer of that piece is not threatening to go back on the promise.

Stop being emotional. Think practically. You are harming the cause you are trying to do raksha of by undermining the trust in rbi

[Suraj]

RajeshG: your 'think practically' is just code for 'yes I do black money but it's for me own good and I don't do it to harm others, so it's really only light grey money'. Suffice to say that no one trusts you when you're so self serving Trust works in both directions. You ask why the people should trust the government . Well, why should the salaried class trust the business folks who justify their black money ? Do you or not intend to stop bribery and black money accumulation ENTIRELY now ? Simple practical question onlee.

[ManuJ]

RajeshG, the govt. has not reneged on its pledge to pay the bearer of the 500 and 1000 notes.
It has simply asked the bearer to get the pledge renewed.
Where's the distrust coming from?
You are trying to create issues where there are none.

[Rammpal]

Suraj

On your point of people not trusting 2k notess i think you are again not being practical. Currency notes for aam junta are nothing but a piece of paper plus trust. Trust is variable. Threat of discontinuation reduces trust and hence the value.

People dont do corruption because there are 2k notes available. Notes just happen to be a means not an rnd.

Go back to first pricipals truly and forget about morals for a second. I want to do business but i dont trust one piece of paper. What do you think i will do ? I wont stop business. I will use something else. $ perhaps. Its another piece of paper. But the printer of that piece is not threatening to go back on the promise.

Stop being emotional. Think practically. You are harming the cause you are trying to do raksha of by undermining the trust in rbi

1. Wait a minute..., ".. the printer of INR..." is Neutral , and culling of those notes were conditional as well, otherwise, there would have been blood in the streets by now!
2. i.e.: is Everyone's INR worthless, or notes of a few respectable gentlemen ?
3. First principle of What kinda business, which does Not involve morals ?!!
Or is it that making profit in business in immoral ?

And, who's fault is it, to Not heed Modiji's warning shots?
Plenty of that too !
I guess, from now on, most amigos realize that when NaMo says he's gonna kick a.s;
He bloody Will !!

[shynee]

Close out the war on corruption

Demonetisation should go hand in hand with a merciless hounding of those who had either underpaid taxes or did not pay at all. Here, there are neither friends nor enemies. A majority of those affected by demonetisation are people outside government, either self-employed or in organised industry, who had prospered with the help of a conniving bureaucracy. This is why a well-coordinated post-demonetisation offensive has to tackle both the groups.

There needs to be evidence within government of an application of minds and a resolve to weed out corrupt elements swiftly without waiting for the wheels of the justice system which are notoriously slow to grind. There was a lot of criticism during the Emergency days in the mid-1970s of the misuse of the provision in the Conduct Rules for compulsory retirement of those civil servants who had either reached the age of 50 or had put in 25 years of service, and who had ceased to work effectively or whose integrity was suspect. Some complaints of arbitrariness and vindictiveness in those eminently forgettable times were unfortunately genuine. There is now an urgent need to resort to this rather draconian scheme to send down the message that neither sloth nor dishonesty would be permitted in the superior civil services.

We have fortunately more than a handful of senior officials at the Centre who can be expected to be objective in drawing up the list of those who should be shown the door. The margin of error in identifying those who deserve to be axed is minimal if this list is vetted by a committee of officers known for their integrity. This should be followed by vetting by another group, before being agreed to by the Prime Minister and one or two of his senior Cabinet colleagues (such as the Home and Finance Ministers in the present dispensation). In a modified form such a drill is currently in place to make sure that there is no arbitrariness in empanelling officers to the rank of Secretary in the Government of India. Interestingly, this is being implemented with the assistance of retired officers who had earned a name for honesty and effectiveness.

Even at the risk of being considered brash, I would strongly urge that the process of purge should begin with key organisations such as Income Tax, Customs and Central Excise, Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI). In the wrong hands, these become instruments of harassment and torture. There have been several recent instances of officials from one or more of these organisations being hauled up by the CBI for direct receipt of bribes or accumulation of assets disproportionate to their known sources of income. The most shocking of these is the reported communication from the ED giving adverse information against two former CBI chiefs. If this report is true, nothing can be more damning to the pursuit of integrity in the higher echelons of government.

[shynee]

India's Golden Moment

A major concern has been that all those in the informal sector who have legitimate business, though carried out in cash, will be undeservedly hurt. Some may be hurt mortally and result in their permanent closure resulting in job losses and the slowdown of GDP growth. Some wild estimates see GDP growth plummeting to zero in the next two quarters and not recovering in the foreseeable future.
This is surely scare-mongering. All medium, small and even micro production enterprises (production MSMEs as opposed to wholesale or retail traders) surely have some access to formal credit sources. This must be true of MSME export units that are reported to account for 45 per cent of India’s total merchandise exports. The majority of MSMEs deal only partially in cash. Anticipating the onset of GST, many had started to move away from cash transactions as these would not receive any tax credit. Therefore to argue that demonetisation spells doom and disaster for MSMEs is sheer exaggeration.

Farmers, it was asserted by Lalu Prasad, are in deep distress and dying. This is hyperbole. Farmers can sell their kharif harvest of sugarcane to mills with receivables being directly credited to their bank accounts as always. Any amount of paddy can be sold to the FCI at the government-declared minimum support price (MSP). Agro-inputs are normally available at 30-60 day credit to virtually all farmers.
Rabi sowing is, therefore, reportedly on track, opposition parties’ grandstanding notwithstanding. In his November 16 blog on Modi’s bold move, Kenneth Rogoff, the author of The Cashless Economy, wrote: “The short-run costs are unfolding, but the long-run effects on India may well prove more than worth them, but it is very hard to know for sure at this stage.”

It is, therefore, not surprising that the opposition parties find themselves terribly short of public support. Not surprisingly, they have been patently unsuccessful in taking their protests out of Parliament to the streets, where they will be exposed to the strong public support for the PM’s move.
The implementation certainly could have been better. Admittedly, the measure was humungous in scale, cloaked in necessary secrecy and complex. The RBI and ministry of finance should own up their responsibility. To their credit, they have been learning on the job, and have been open to suggestions.
Three practical questions must be answered for further course correction. First, was the relatively short window of 50 days necessary and could it not be extended? Second, could the domestic security printing press capacity constraint not be overcome by placing orders on foreign printers to produce Rs 100 and Rs 50 notes? Printing additional quantities of these denominations would not have breached secrecy and could have augmented the much needed currency supplies? Third, given the scale and time constraint, could government departments and treasuries not be used as points for dispensing and exchanging currency to overcome the shortage of ATMs that are still being re-calibrated.

It is, of course, necessary to take steps to restrict future flow of illegal earnings without which this huge exercise could come to a naught. Some measures are already in place: Greater transparency in governance and roll back of the “inspector raj”, strictures and action against the corrupt in the central government, compulsory linking of Aadhar card with deposits and withdrawals from bank accounts and large purchases of jewellery and real estate, the impending GST, greater surveillance by the CBDT and commercial banks of brokers, developers and jewellers and Jan Dhan accounts, which are the expected conduits for laundering black money. Modi has repeatedly announced that demonetisation is but the beginning and that other steps to curb black money are in the pipeline.

Modi has risked the support of the core constituency of the BJP and RSS — traders, middlemen and small entrepreneurs. He has taken this risk because he believes the measure can help India leave behind the culture of illegality, indiscipline and ill-gotten wealth. Every country needs its “golden moment” to transform itself and surge ahead. I suspect Modi feels it in his bones that this might be that moment for India.

[shynee]

Don’t join the debate -
Demonetisation is the prerogative of the executive. The Supreme Court should let it be

Every citizen, economist, institution and organisational body has an opinion on the demonetisation implemented recently by the centre. Suddenly, the “common man” has become the centre of attention of political parties; buckets of tears are daily shed bemoaning his travails. Analysis covering the entire spectrum of possibility and probability has occupied public space. While some of these analytical musings may be partially true, surely the entire spectrum cannot be valid. Indeed, the Congress, which had control of the economy for over 60 years, brought the country to its knees and was primarily responsible for the hardship of the populace. Yet, it has shed the most tears for the “common man”, who was treated with great disdain hitherto. The other loose cannon, Arvind Kejriwal, has gone to the extent of predicting “riots” in the streets. It is in this context that one wonders with trepidation whether the matter will be taken up for “consideration” by the apex court now, and if so, the further statements and announcements relating to the same that will follow.

The simple fact is, the apex court of India is held in the highest possible esteem by the thinking Indian. It is seen as the final temple of justice, the defender of the interests of the common person, the guardian of the Constitution, the protector of democracy. In a country which is slowly demolishing all its icons, it is a pantheon worthy of worship by the ordinary citizen. Time and again, the apex court has stood up to defend the citizen against the state. Of our governance triumvirate, the legislature has proven itself to be inconsequential, insignificant and effectively non-existent over the past seven decades — many will agree that it is a dummy organisation, manipulated by clever politicians, for their own ends. The executive has performed reasonably well. However, the failure to uplift the lives of million of people over seven decades, the miserable hand to mouth existence of a large majority of citizens, linked with completely unacceptable education and public health standards, and a totally corrupt economy, are all legacies created by the executive. The untrammelled predatory instincts of the political class has converted the democratic process to one deserving contempt. Public service is the last thing in the mind of the average politician, whose only aim is to win elections, make promises which he has no intention of keeping, amass wealth for the next 10 generations and return to contest elections again. It is in this depressing milieu that one looks at the standing of the apex court today — it is the last bastion housing the public’s hope.

It is not that the judiciary is unsullied, with a shining reputation. The judicial system is often unable to deliver justice to the common citizen; it is expensive, dilatory and highly corrupt in the lower levels. Many high courts don’t have a savoury reputation. Each civil and revenue case could take decades to reach a conclusion. A judicial arbitration process usually spans decades. No major reforms have been taken to deal with interminable adjournments; rampant, dilatory interlocutory orders; harnessing technology for recording evidence and speeding up the trial process; humane treatment of undertrials; and flagrant abuse of the system by rapacious lawyers. While the law is the same for all, the popular perception is that legal procedures are “elitist” — an expensive lawyer can do wonders for you. While part of the above is possibly exaggerated, one cannot deny basic facts. The system needs urgent and serious reforms — and one has not seen major steps towards this.

The Supreme Court is too sacred, too precious a resource that Indians have. It needs to be preserved with utmost reverence, attention and discipline. Irrespective of the merits of the demonetisation debate, whether one agrees with it or not, it is surely a subject in the executive’s province. One would hope that these political and economic processes will play out on their own in this regard, without the apex court sullying itself by entering the fray.

[shynee]

Govt. ends exchange of old notes

The exchange of the high-value notes of Rs. 500 and Rs. 1,000 over the counter at banks and post-offices has, however, been stopped with immediate effect. The Prime Minister, in his demonetisation announcement on November 8, had said the deadline for such exchange was December 30. This effectively means that those holding Rs 1,000 notes can only deposit them into bank accounts from Friday.

[prasannasimha]

Probably 1000's were being sent to north east! ?

[putnanja]

...

20-30% of white money ended up in the black money., all the dog biscuits were given for octroi, entry tax, sales tax etc. Why the dog biscuits? For example if one has to obtain the 'C-Form' (let the folks check it out)., one will not get it from the sales-tax dept without the biscuits. The c-form had to be appropriately stamped etc (worse was the octroi commissioner who insisted that the stamp of the ST commissioner was off by a centimeter and cannot be accepted)., this shenanigans were doings of all dogs barking for their biscuits.

Most of the black money was generated due to the dogs barking for their biscuits in my case and within the larger trader community I noticed that a business/trader would start their business honestly but rapidly fall into the BM trap. Two kinds of people., the dogs as mentioned above and the customers who wanted to save on their VAT would generate the BM. Interestingly it was the educated-chi-chi folks who would insist on not paying their share of taxes arguing that the govt. itself is corrupt and hence what is the point in giving taxes to the govt. Several I-Ey-Ass afsaranis and armee-&-bolis-wives were the culprits. The cess-pool was so much that one of my school friend actually had judges & commissioners in his pockets! With all this cynicism: I got out of retail business all together and would deal only in wholesale.
...

Thanks for the explanation. I had one question. Under GST, will all of tax payment be online? The problem with having officers control it is that they can block you till you pay them bribes. If that power is taken away and made fully computerized, what hold will they still have?

[manjgu]

printing defects in Rs 500 note reported !! http://timesofindia.indiatimes.com/indi ... 609841.cms

[shiv]

Go back to first pricipals truly and forget about morals for a second. I want to do business but i dont trust one piece of paper. What do you think i will do ? I wont stop business. I will use something else. $ perhaps. Its another piece of paper. But the printer of that piece is not threatening to go back on the promise.

Rajesh - what i am interested in is how far this can go.

Let me explain a theoretical scenario starting from November 9th when all old hi value cash was rendered useless. Now you say "If one piece of paper is useless "I will use something else. $ perhaps". Yes you can use $ or even gold, but you cannot use what has been collected and is freely available, that is 500 and 1000 notes. You have to use a more rare commodity for trading and by its being more rare it become more precious and more people are trying to get at it. The other problem is that the "more rare" exchange item is not accepted by everyone. After all if you have Rupee notes accepted in black with you, the only way you can convert them back into a trade-able commodity is to go via the banks or cheat and try and get "something else". That something else is available only in very small amounts. A small hoarder may get 5 or 10 lakhs exchanged to new 2000 Rupee notes or gold or $ by some illegal route, but what about someone sitting on 50 crores or 500 crores?

A clever person who has already converted his black money into real estate of gold can technically say " I can always sell this and reclaim cash at any time". This is correct in theory - but for some time - maybe 8th November 2016 to say March 2017 there will be no one with that much cash. There may be people with large bank accounts who can pay in white - but white is not what you want. You need cash and that cash is simply unavailable in very large quantities as cash

So it is true that small amounts of black transactions have already started - the black economy has probably already grown form zero on November 9th to maybe 1000 crores today because the government has released 33000 crores in new currency that is already fuelling a "new black" economy. But for it to grow to even 50,000 crores it will take some time. Now suppose the government does not replace all the old notes with notes of equal value, then the money is going to be in short supply initially. The short supply will be for genuine transactions and for black. Black traders will point to the genuine people's suffering and blame demonetization.

But suppose a large black transaction must happen now and a person has only white? What does he do? He must first convert it into notes, which are in short supply and then pay. The govt is giving plenty of Rs 2000 notes and making people suffer. The people who buy day to day stuff will quickly spend those notes. It is the early black money hoarders who will gratefully start hoarding the new 2000 notes. Since the notes are so new the govt has plenty of ways to play this game. They can say "All transactions above Rs 50,000 done in new 2000 notes must be accounted for. That means that there will be a disincentive for people to try and exchange bundles of 25 x 2000 notes unless they go to a BM hoarder. The hoarder who collects in 2000 has a sword of Damocles over his head. He does not know if 2000 will continue forever or whether it will get demonetized after a warning period.

500s are coming in late and we don't know how many will come in. If hoarding starts in 500s, it will start later and more slowly and that gives the government time to encourage small transaction (less than Rs 500) to be done electronically. Of course the action that the government takes now will be vital. After 6 months it will be too late.

[g.sarkar]

I ran a small business., my father's business. For 6 years while managing studies. My father had to shut it down after I left. Some of the business was given over to my nephew., who is an engineer by training from a premier institute but wanted to stay back with family and not do the yen-are-eye route.
..........

Dishaji,
That was very informative. As far as generating BM, each one of us is guilty in our own way. I may not have taken bribes, but I have certainly given money to TTEs on trains, or officials for mutation, or Post office officials and called it "speed money". However small, this has generated unreported black money and this is morally not correct. Is hammam mein sabhi nange. I have left India in 1977, and have never had to pay anyone bribe during my stay outside India. Why do I do it in India? Just because every one was doing it? For the removal of BM, our culture has to change.
Gautam

[g.sarkar]

http://www.huffingtonpost.in/2016/11/24 ... tter-gets/
Manmohan Singh Gave Major Burns To Modi On Demonetisation Today And Twitter Is Ecstatic
.....
Dismissing the government's defence that in the long run demonetisation would be good for the country, Singh said, "For those saying this is good in the long run, it reminds me of John Keynes' words, 'In the long run we are all dead'."

MMS is not dead, just a nonperson.
Gautam

[RajeshG]

Shiv

I am not following what you are asking. I am baiscally saying that 2 years from now a large xaction happens then what thinking will go thru the sellers mind.

On one hand there is 2k notes but rbi can deomnetize it any time. Then there is $ which will never be.

Pure business decision. What would you do ?

[Karthik S]

Shiv

I am not following what you are asking. I am baiscally saying that 2 years from now a large xaction happens then what thinking will go thru the sellers mind.

On one hand there is 2k notes but rbi can deomnetize it any time. Then there is $ which will never be.

Pure business decision. What would you do ?

Not Shiv, but still.. 2 years from now, hope people doing "large transaction" would have moved to electronic payments, or government would have made it mandatory for such transactions. Even if not, if government were to demonetize then, you can exchange your then old 2k notes for whatever denomination will remain legal tender at that time.

[shiv]

Shiv

I am not following what you are asking. I am baiscally saying that 2 years from now a large xaction happens then what thinking will go thru the sellers mind.

On one hand there is 2k notes but rbi can deomnetize it any time. Then there is $ which will never be.

Pure business decision. What would you do ?

RajeshG are you seriously trying to say that people will shift to dollar payment because that is a safe bet? Why did they not do it all these years? I will answer that. They did not do it because they thought that Rupees were a safe bet. Forget 2 years from now. What are they going to do in the next 6 months? What will they convert to dollars and how? How many people have access to dollars and how many people accept dollars in India instead of Rupees.

If you are talking about hawala trade you shifting the goalpost. Demonetization cannot stop hawala trade

[yensoy]

Thanks for the explanation. I had one question. Under GST, will all of tax payment be online? The problem with having officers control it is that they can block you till you pay them bribes. If that power is taken away and made fully computerized, what hold will they still have?

Mode of collection of payments is only one factor, and a minor one.

As long as officers have "discretion', there is going to be room for corruption. If the officer is given a power to make a subjective judgment call, right there is scope for bribery. Did you cross the white line? Hmm... depends on where you stand and what angle you see it. Is that house within the footprint of the plan? Maybe, but someone with a measuring tape will need to verify (and they may be off by 6" in your benefit if you buy them briyani). And it goes up from there as things get murkier...

Total elimination of corruption is going to be close to impossible, but as long as we can remove the scourge from our day-to-day lives as citizens I think that is a huge thing in itself. Now if your relationship with the government is more than just as a private citizen (e.g. if you are a supplier or vendor) then you will have challenges but you should also be in a better place to take care of yourself (e.g. hiring able CAs, lawyers etc).

[Hari Seldon]

This emphasis on [1] digitizing public services - from eSeva to passport applications,

[2] taking away discretionary powers from baboo(n) hands (think of allowing people to self-attest their documents rather than grease palms of gazetted offrs or elected local reps),

[3] taking away harassment powers from 'em agencies (think of randomizing business inspectionsand thereby dealing a mortal blow to inspector raj)

[4] focus on improving ease of doing business which in turn makes timebound several approvals and steps needed to smoothly open/run a business,

[5] cutting out middlemen everywhere - think of e-mandis circumventing APMC restrictions etc

are all a huge step towards reducing retail level corruption/ basic transactions friction == cost of doing biz in Des.

And I haven't even counted the renewed focus on JAM (jan dhan-aadhaar-mobile) for DBT (direct benefits transfer) to curb subsidy leakage, e-auctions of natural resources etc.

Couple all that now with this push to digitize even simple transactions and we're getting somewhere serious on curbing small-time bribe-taking, tax evasion, restoring rule of law etc.

Like him or hate him, Har har Modi. Only.

[Philip]

Snake-Oil Singh,the "dogfather" of the largest plundering ,ravaging and wholesale looting of the Indian exchequer since Independence, has like that bloodsucking vampire Count Dracula suddenly woken from the dead! His target this time is not the innocent folk of Mother India but the "godfather" of the demonitisation/demon scheme (you take your choice) PM Modi.

Snake-Oil's sudden blistering attack against Mr.Modi accusing him of plunder and loot of the wealth of commonfolk would have had great support had his own hands been clean.Tainted with coal dust and a litany of loot and scoot scams ,Snake-Oil and his party bit not only the
dust but gravel as well not too long ago.

While many may agree with his analysis,they will not blame Mr.Modi personally,but rather lay any blame for poor implementation on the banker babus responsible.

[rahulm]

Sign in restaurant advertising no credit or debit cards

A snack vendor in old Pune who has got the message and moving on with the times with payTM

[SaiK]

With 80 crore debit card, we need about 20-30% more to cover. Just get it rolling!

[RajeshG]

Shivji

Yes thats what i am wondering. In 6 mos what will happen i dont know. Actually nobody knows from what i can tell. There is hope, euphoria and sceptcism. But one barometer to watch would be price of dollar. If end of next year it starts to reach 75 then what i am saying is true. False otherwise.

[Shaktimaan]

Yesterday I went to my friendly neighbourhood chemist in Mumbai to buy some shampoo. This is an old-school guy who has been sitting behind the same dusty counter for decades now. I asked him when he was going to accept cards. He pointed to the PayTM sticker and said paytm karo. I already have a paytm wallet for Uber, so I happily paid the amount cashlessly in a few seconds. Times, they are a changin'.

[shiv]

Yes thats what i am wondering. In 6 mos what will happen i dont know. Actually nobody knows from what i can tell. There is hope, euphoria and sceptcism. But one barometer to watch would be price of dollar. If end of next year it starts to reach 75 then what i am saying is true. False otherwise.

The Dollar has gained against Euro and Yen as well so this is not just a Rupee issue.
http://www.marketwatch.com/story/dollar ... 2016-11-22

[yensoy]

Sign in restaurant advertising no credit or debit cards

A snack vendor in old Pune who has got the message and moving on with the times with payTM

For the roadside vendor to take PayTM is also security. Too much cash will make him the target of neighbourhood goondas or goondas in uniform. He can give them a golgappa instead.

[chetak]

Banks in quandary over burqa-clad women

Banks in quandary over burqa-clad women

Maria Akram NEW DELHI: NOVEMBER 25, 2016

Ever since the Rs.1,000 and Rs.500 currency notes were demonetised, bank staff have been dealing with huge crowds. Apart from dealing with public ire, banks employees, especially those working around Muslim residential pockets, have another issue to deal with.

The bank staff said they had faced unpleasant situations with women who walked in wearing burqas, while adding that asking them to lift their veils could trigger a backlash.

Peculiar case

An employee with Janata Co-operative Bank in Pataudi House, Daryaganj, said on condition of anonymity that they once had to call a woman employee from home to help.

“Women usually show their faces, but we faced a situation a day after the demonetisation was announced. One woman refused to lift her veil. When we told her that her old notes would not be exchanged, she abused and threatened us. We have women employees, but none of them were there during that shift,” he said, adding that the burqa-clad woman finally agreed to lift her veil before a woman employee in an empty cabin.

Resistance

Another employee at the ITO branch of Syndicate Bank said some women resisted when asked to show their faces. But, she added, they usually agree since the branch has three female employees. “We don’t give/exchange money without matching their IDs. Some women resist, in which case we ask them to step aside,” she said.

The Hindu spoke to some burqa-clad women, who said that it was a part of their culture.

“It is awkward to lift our veil before unknown men,” said Ruqsar, a resident of Jama Masjid.

Waiting outside the Oriental Bank of Commerce in Connaught Place, Ruqsar said she stood in queues for three days as she had to pay her daughter’s school fee. “Even at metro stations, airports and during elections, there are separate enclosures for women where security staff check IDs. Why can’t banks have something like this? I am not comfortable lifting my veil and banks should respect that.”

Banks doing their job

But Ruksana, another woman outside the same bank, said the bank officials can’t be blamed for doing their job.

“The burqa can be misused. Anyone can withdraw money using my ID if she wears a burqa. The employees are right in asking me to lift the veil.”

Misuse caught

Some bank employees, in fact, narrated instances when they caught girls below 18 years asking for money to be exchanged using someone else’s ID.

“Young girls come wearing a burqa. It is difficult to check every detail on every ID. But we are particular about the date of birth and photo,” said a female employee at Dena Bank, Daryaganj.

Not convinced

Also, with most women having common surnames like Begum or Khan, bank staffers say there have been occasions when they refused to exchange old currency. Hajra Begum, 49, said she had gone to IDBI Bank, where she was asked to lift her veil.

“Despite that, they were not convinced and began questioning me. Thankfully, my husband intervened. Later, the bank employees told us that nine women with the same name — Hajra — had exchanged money the same day.”

[rahulm]

online payments, particularly by street and petty vendors are a feel good story right now. There aren't enough numbers to signify a tipping point which is what is needed. Not yet anyway. Early days.

Yesterday, I hailed an auto,in old Pune. The driver asked "you have change?" to which i retorted " You have payTM" ? He went quiet for a while. I hectored him, as you you do Pune auto wallas-from being stuck in the old times. Being stubborn and resistant to change to you think the world should revolve around you etc etc.

At the end, he said, sir, if I knew how I would have it. So after my ride, I spent 10 minutes with him, downloaded the App on his phone and showed him how it works. He was happy. Hop fully, he takes it to its logical conclusion

payTM and Oxigen should have mobile kiosks which move around auto stands and pav wada and bhel wallas educating and enrolling to create a online payments movement.

[shiv]

online payments, particularly by street and petty vendors are a feel good story right now. There aren't enough numbers to signify a tipping point which is what is needed. Not yet anyway. Early days.

Yesterday, I hailed an auto,in old Pune. The driver asked "you have change?" to which i retorted " You have payTM" ? He went quiet for a while. I hectored him, as you you do Pune auto wallas-from being stuck in the old times. Being stubborn and resistant to change to you think the world should revolve around you etc etc.

At the end, he said, sir, if I knew how I would have it. So after my ride, I spent 10 minutes with him, downloaded the App on his phone and showed him how it works. He was happy. Hop fully, he takes it to its logical conclusion

payTM and Oxigen should have mobile kiosks which move around auto stands and pav wada and bhel wallas educating and enrolling to create a online payments movement.

Reliance can jump in here. Before demonetization the beg sensation was Reliance Jio and a whole lot of people got Jio SIM cards are are even now enjoying free 4G internet till 31 dec. A mobile wallet seems like a logical value addition

[chetak]

They are scamming us

Nepal bans new Indian Rs 500 and Rs 2,000 notes, waits for RBI notification

Nepal bans new Indian Rs 500 and Rs 2,000 notes, waits for RBI notification

HT Correspondent, Hindustan Times, Kathmandu | Updated: Nov 24, 2016

Indian currency is widely accepted in Nepal, where many people have been facing problems in exchanging the old Rs 500 and Rs 1,000 notes.

At a time when Nepalese citizens are facing problems in exchanging withdrawn Indian notes of Rs 500 and Rs 1,000 denomination, the country’s central bank on Thursday banned the exchange of India’s new Rs 500 and Rs 2,000 currency notes.

The Nepal Rastra Bank said the new Indian notes cannot be exchanged until the Reserve Bank of India (RBI) issues a new notification under the Foreign Exchange Management Act. Such a notification allows citizens of foreign countries to hold a certain amount in Indian currency, officials said.

Ramu Poudel, the Nepal Rastra Bank’s chief for the eastern region, told members of the business community in Biratnagar that the new Indian rupees are considered “ illegal” and cannot be exchanged until new arrangements are made by the Indian side.

“As of now, our understanding with the Reserve Bank of India is that a Nepali citizen can hold up to Indian Rs 25,000 (in the) old Rs 500 and Rs 1,000 notes. Even the fate of those old notes is uncertain, how can these new Indian notes coming into the market be considered as legal?" Poudel said.

Demonetisation affects Nepal, black marketing of currency rampant at border
Nepal’s central bank halts transactions with Rs 500, Rs 1000 Indian notes
Demonetisation hits businesses in India-Nepal border towns
Indian currency is widely accepted in Nepal, where many people have been facing problems in exchanging the old Rs 500 and Rs 1,000 notes. Due to the open border between the two countries, the new Indian notes too have entered areas along the border with India.

Nepal and India are yet to reach an agreement on modalities for the exchange of the withdrawn notes held by Nepalese citizens. Poudel said the two central banks are in close contacts to address this issue but no way out has been found as yet.

The Nepal Rastra Bank set up a task force to prepare guidelines for exchanging the withdrawn Indian currency notes. It handed over some guidelines to the Indian side through the Indian embassy of Kathmandu. Officials said the Nepalese side had suggested that authorities could collect the withdrawn Rs 500 and Rs 1,000 notes from Nepalese citizens and send them to the RBI for verification and exchange into Nepali currency.

Nepal’s central bank has also made it clear it will not provide over-the-counter exchange facilities to Nepalese citizens holding the withdrawn Indian currency because it lacks the expertise and technology to identify counterfeit currency.

Experts said India is cautious about providing exchange facilities to citizens of a foreign country as it fears it could be misused as “ a clearing house” to convert counterfeit currency.

The Nepali side also suggested that Nepalese citizens would have to open accounts at banks and financial institutions and deposit the demonetised Indian currency to receive the equivalent amount directly in their accounts.

Prime Minister Pushpa Kamal Dahal “Prachanda” and finance minister Krishna Bahadur Mahara have already urged their Indian counterparts to arrange exchange facilities for Nepalese citizens.

The Nepal Rastra Bank has said the country’s financial system holds Rs 500 and Rs 1,000 notes worth Indian Rs 33.6 million. This amount includes cash in bank vaults, financial institutions and the central bank. However, the actual amount is believed to be much higher

[shiv]

IIRC Even old 500s were unusable in Nepal. 100s onlee

[Singbhai]

I hope that means converting INR back to foreign currency. Someone with better English skills should have written that tweet.
Limiting someone to converting USD to INR to no more than Rs 5000/week is totally asinine - that's like $80/week. Yes there are tourists who live on that kind of money, but we don't want those kinds of tourists

Sirji - this is a critical option for NRIs and PIOs. Most of them do carry token amount of indian currency while traveling out of India. This currency comes of use on return - i.e. Paying for Taxi, Porter, chai, samosa etc. at the airport and while commuting to their destination in India. End result - a good number of NRIs are stuck with old currency and will face hardship during their initial leg of commute after landing to their destination. The option of being able to convert 5K is basically converting old currency to new. The $ or Pound conversion is not effected by this Rs. 5000 rule. Any money exchange at the airports should be able to help with that.

my 2 paise..

[Yagnasri]

As per the information from you know who there will be more easing of the situation next week as for as 500 and 100 are concerned. But I am not sure about this. People involved are saying it here. Arrangements are made to disburse 2000 notes this week.

Nepal and Bangladesh are two big gaps through which ISI used to pump fake notes into India. For Nepal GoN is asking then why Mamtha shouting for B'desh gap?

[Sachin]

Update from SHQ. Off-late even at her branch there is a mad rush for people to open Savings account. Many of the local rich are also now dumping what ever cash they have in these accounts. Now, this is the good part. The bad part is that, many of these very people were also loan payment defaulters. They just did not turn up at the bank to pay EMI, or ensure that their accounts had money. Now when such people start re-using their accounts, the bank seems to be straight away pulling out their loan dues from the SB Account. As per them, they have every right to pull money from the SB account of a person who is a loan defaulter; to the very last rupee in the account. No special notices, or instructions have to be given to the SB account holder.

As per the information from you know who there will be more easing of the situation next week as for as 500 and 100 are concerned. But I am not sure about this. People involved are saying it here. Arrangements are made to disburse 2000 notes this week.

Next week is also a bit crucial. Because that is when people get their salaries. There would be some good push to get liquid cash at that point of time. Many would have to have some cash to pay the creditors, news paper boys, Cable TV, home rent etc. etc.