Currency Demonetisation and Future course of Indian Economy

Neela · Post by **Neela** » 25 Nov 2016 22:01

https://twitter.com/CMOMaharashtra/stat ... 1944461312

Im convinced now and no more discussions needed.
PLease close the thread

Sachin · Post by **Sachin** » 25 Nov 2016 22:03

Bart S wrote:FWIW, when I renewed mine, there was no verification. The address was different but city was the same.

OT (and hence last post on this topic). My parents had their passports renewed three months back. Both got it the new passports in 2 days flat. But two friendly policemen did came to visit our home a week later. Again no money taken.

rsingh · Post by **rsingh** » 25 Nov 2016 22:10

habal wrote:the going rate for passport verification 'house visits' are Rs. 500. You are just supposed to shut up and pay.

If you don't pay that money, then the cop will ask all manner of silly questions and in the end make out a report terming that applicant as Osama's cousin.

Applied for passport by mail in 1987. Was not at home during verification. Went to the police in late evening . Told them that I am sorry as whole day I was in University library preparing for exam. Everything was done on the spot without any this that+ they offered me tea (bechara thak gaya hei).So there are nice people as well. By the way never paid bribe. Well I left desh at very early stage.

arshyam · Post by **arshyam** » 25 Nov 2016 22:14

Rishi Verma wrote:
arshyam wrote:
I fully second this. I don't agree with his points either
OT of you to pontificate. There have been cases for someone being banned for being commie or kanhaiya-kumar types. Chinese can post away in related threads. If he is an expert, fine, he just brings communist views on NaMo's surgical strikes... /OT

Yeah yeah, whatever. I suppose you will call for my ban on this thread too, considering I am already 'pontificating', whatever that means. Some people like to hear only their voice, I suppose.

P.S. That roll you have so kindly added to my post - pliss to keep it to yourself. TIA.

disha · Post by **disha** » 25 Nov 2016 22:16

yensoy wrote: You ignore the other person's point at your own peril. I think David has been very respectful of forum rules (from the few posts I read), so please keep your xenophobia to yourself. People can have their opinion even if it doesn't agree with yours; even some hard core BRFites are ambivalent about demonetization.

I know that you are standing up for somebody's 'rights' since the line that "I will disagree with you but will defend your right to free speech" is nice warm and fuzzy feeling of global citizen., just like a baby peeing in a diaper finds it initially nice and warm till it gets cold and irritating.

The said poster you defend has come with a preconceived notion and his (or her) actions are very suspicious., so nothing wrong in showing one's own pre-conceived notions of cheen to the said poster. Like my pre-conceived notion of cheen is that the skyscrapers are taller than the mountains and the credit flowing from their banks is sweeter than honey.

Funny thing is that the cheeni economy bled several billion dollars recently, propping up US real-estate market. All this bleeding was in cheeni black money while their holier-than-thou leader was cavorting with Hafeez suar saeed playing eleven ping ping.

sudeepj · Post by **sudeepj** » 25 Nov 2016 22:32

DavidD wrote:Rudradev,

It's not a rebuttal, it's in fact an affirmation for the vast majority of his points except with a flippant attitude. It doesn't even address the most important point of Summers' argument, which is that while he supports demonetization, he thinks the way the GOI did, which is a sudden withdrawal of currently circulating currency, causes more harm than good. The only thing this "rebuttal" actually disagrees with Summers on is whether there's still "chaos" or not. There may not be riots on the streets, but I'd say a drop of GDP growth from around 7% to 0.5% is gonna bite, and that it'd be entirely avoidable had demonetization been executed differently (i.e., no sudden withdrawal of currently circulating currency).

No one has talked about a GDP drop of 7% to 0.5%! Some economists have talked about a drop of 0.5% over two quarters, which shall be made up in subsequent quarters in the shape of pent up demand.

d_berwal · Post by **d_berwal** » 25 Nov 2016 22:34

DavidD wrote: But that's the thing, isn't it? What do BRFites know about the villages? Every story I've seen posted here is about someone's experience from cities that even a foreigner like me has heard of. What about the villages? Given that most there don't have bank accounts, smart phones, or even internet access, chances are they're not experiencing demonetization the same way posters here are.

Dear DavidD., how much you know about Indian villages ? Have you ever visited or stayed a season in one.

How does Village economy work? (it works around crops not money!!)

- most of money heavy transactions are on credit.
- -- paid as barter(part of crop) or money realized after crop sale.

Who told you villagers dont have bank accounts or mobile phone?

Chances are your view point is only theory!!! and figment of your superior foreign thinking. Nothing to do with real Indian situation.

chetak · Post by **chetak** » 25 Nov 2016 22:44

sudeepj · Post by **sudeepj** » 25 Nov 2016 22:47

DavidD wrote:http://www.bloomberg.com/news/articles/ ... ote-revamp

How India's Cash Chaos Is Shaking Everyone From Families to Banks
Jeanette Rodrigues
In terms of the share of currency in circulation, Modi’s move was akin to sucking out from the system all U.S. dollar bills except about half of the $1 notes.

Do these people not check anything at all before publishing garbage? US currency circulation is given here:
https://www.federalreserve.gov/payments ... cvalue.txt
Value of currency in circulation, in billions of dollars as of December 31 of each year
-----------$1 $2 ---$5 ---$10 ----$20 ---$50 ----$100 $500 to $10,000 TOTAL
2015 $11.4 $2.3 $13.7 $19.0 $171.3 $79.8 $1,082.2 $0.3 $1,380.0

Modi govt. move is to demonetize about 86% of the currency, which in percentage value terms is similar to demonetizing $50 and $100 bills. US $100 and $50 bills amount to about 84% of currency in circulation. I suspect much of these $100 and $50 bills are held overseas by Chinese leaders. The ratio of these bills has grown out of all proportion to the US GDP while no one uses these bills in daily transaction at all. I must have spent several hundred thousand dollars in making purchases and I have *never* dealt in these bills.

And here's Larry blog entry:

Most sweeping change in currency policy in the world in decades
11/21/2016 By Natasha Sarin and Lawrence H. Summers

One of us (Larry) has long advocated the abolition of the $100 note in the US context and the 500 euro note (aka the Bin Laden) in the European context. We assumed the next step after the ECB’s announcement that the 500 euro note would be phased out would be discussion of the $100 bill and of the particularly pernicious 1000 Swiss franc note.

...
On balance, nothing in the Indian experience gives us pause in recommending that no more large notes be created in the United States, Europe, and around the world. We were not enthusiastic previously about the idea of withdrawing existing notes from circulation because we judged the costs to exceed the benefits. The ongoing chaos in India and the resulting loss of trust in government fortify us in this judgement.

Larry's article is written for a US audience. He is merely protecting his idea baby of demonetizing $100 bills from any bad publicity that may arise from the Indian experience. If the Indian experience works, he can say "Look, my idea works!!", if it doesnt, he can say "..But I criticized *that* move from day 1!! This is not what MY idea is at all!..". In the Indian context, this article is not even worth rebutting. It is not even wrong! It is fluff and nonsense.

Rishi Verma · Post by **Rishi Verma** » 25 Nov 2016 22:54

For all the naysayers and for outright enemies of NaMo such as kejri, pappu, Maya, Didi, softie aka Mulayam, If NaMo gets a Nobel Prize in economics (not that it means anything) would be a sweet - bitter revenge.

BTW most Nobel "laudiets" in economics are from the US are those who have royally screwed their economy. Or at least they don't have any solution for the screwed up US economy.

Rishi Verma · Post by **Rishi Verma** » 25 Nov 2016 23:00

Field report: went to two ATMs in rural UP this evening. (Axis, Canara). Both working and both deserted (nobody).

ManuJ · Post by **ManuJ** » 25 Nov 2016 23:26

Sorry to be asking a dumb question, but how is one supposed to use UPI?
Is there an app?

Sicanta · Post by **Sicanta** » 25 Nov 2016 23:35

ManuJ wrote:Sorry to be asking a dumb question, but how is one supposed to use UPI?
Is there an app?

Yes, search for it on playstore. All the major banks have one. Choose the one you like and you can connect multiple bank accounts through single app alone. Sbi too has launched one yesterday.

http://www.financialexpress.com/industr ... pp/362954/

rsingh · Post by **rsingh** » 25 Nov 2016 23:36

Neela wrote:https://twitter.com/CMOMaharashtra/stat ... 1944461312

Im convinced now and no more discussions needed.
PLease close the thread

Who is that phuvansundri?

Nitesh · Post by **Nitesh** » 25 Nov 2016 23:39

Government has to ask banks to sell Ru Pay machines in discount, this should be done at war footing, now that banks are relieved of cash exchange

pankajs · Post by **pankajs** » 25 Nov 2016 23:44

ManuJ wrote:Sorry to be asking a dumb question, but how is one supposed to use UPI?
Is there an app?

Pockets from ICICI Bank

Gus · Post by **Gus** » 25 Nov 2016 23:51

http://www.dinamalar.com/news_detail.asp?id=1656615

tamil - JDY accounts cross 64000 crore.

UP no 1, with 10K plus. next WB and RJ.

Sicanta · Post by **Sicanta** » 25 Nov 2016 23:58

Gus wrote:http://www.dinamalar.com/news_detail.asp?id=1656615

tamil - JDY accounts cross 64000 crore.

UP no 1, with 10K plus. next WB and RJ.

Do these 'smart' people think they are pulling a fast one on the gov. and will eventually get their money back?

Gus · Post by **Gus** » 26 Nov 2016 00:14

21K from couple days ago sounded less, but 64K sounds more...

not sure how big it is ..all things considered...big picture etc.

govt has given out warnings ..not sure if they will actively pursue.

Bart S · Post by **Bart S** » 26 Nov 2016 00:27

ManuJ wrote:Sorry to be asking a dumb question, but how is one supposed to use UPI?
Is there an app?

http://www.npci.org.in/UPI_Background.aspx
http://www.firstpost.com/business/demon ... 20918.html

If your bank does not have a UPI app out, use a generic UPI app like Phone Pe (from Flipkart) or Pockets (from ICICI). The latter is really good (apart from a bit of nagging to load money into the wallet, which you don't need for UPI).

Marten · Post by **Marten** » 26 Nov 2016 01:11

I've been asking around for merchants who carry Rupay terminals (we were initially involved in some security trials for pos + atm). Would have loved it if they could make all withdrawals linked to the fingerprints/Iris + aadhaar of every individual. I mean, also add two more layers to avoid local goondas taking debit cards away from normal folks and then using the accounts as their own.

100% most babus and criminals are using this as their MO. Some major analysis will be required for the Govt to be able to pursue such folks. Chaiwalla info is that a lot of babus got their holdings transferred and will be happy to take a hit because they will recover the losses over the next few years.

So, unless we start by hunting down corrupt IT officials who prey on normal tax-paying folks, this cycle cannot be broken. This conflict of interest has ensured that no IRS employees will ever plan on chasing down the other corrupt IxS folks. That needs to change. The original idea of a lokpal was to have an unbiased uncorrupt watchdog hunting down the corrupt babus. That has obviously not worked. How can it be made into a functional model?
PS: Also, could someone clarify if Pockets requires an ICICI account - I have an icici ac and wasn't asked to link it...

Bart S · Post by **Bart S** » 26 Nov 2016 01:32

Marten wrote:
PS: Also, could someone clarify if Pockets requires an ICICI account - I have an icici ac and wasn't asked to link it...

Pockets is a wallet just like paytm, made by ICICI. It works really well with an ICICI account but doesn't need one. It is a standalone app backed by ICICI. You can create your VPA with an @pockets format, and link it to any bank account. If you have an ICICI account it works even better, you just need to link it, and you can also add @icici VPAs.

srin · Post by **srin** » 26 Nov 2016 01:43

Reading a few real estate blogs (like this one), it appears that there will be deflation in real estate prices.

Not just because of the absence of cash component in the transactions, but because people expect it to be so. And when people are expecting a drop in prices, they will wait till the price comes down to the expectation level. And they can afford to wait for a while - unlike groceries and medicines, nothing happens to me if I don't buy an apartment tomorrow. So, this waiting itself will bring down the demand and becomes a self-fulfilling prophecy.

The only barrier is the circle rates which sort of act as a low watermark.

DavidD · Post by **DavidD** » 26 Nov 2016 01:53

d_berwal wrote:
DavidD wrote: But that's the thing, isn't it? What do BRFites know about the villages? Every story I've seen posted here is about someone's experience from cities that even a foreigner like me has heard of. What about the villages? Given that most there don't have bank accounts, smart phones, or even internet access, chances are they're not experiencing demonetization the same way posters here are.
Dear DavidD., how much you know about Indian villages ? Have you ever visited or stayed a season in one.

How does Village economy work? (it works around crops not money!!)

- most of money heavy transactions are on credit.
- -- paid as barter(part of crop) or money realized after crop sale.

Who told you villagers dont have bank accounts or mobile phone?

Chances are your view point is only theory!!! and figment of your superior foreign thinking. Nothing to do with real Indian situation.

Indeed my view point is only in theory. It seems to me that with the relatively low internet and smartphone penetration rate in India, presumably particularly in the villages, that they'd have trouble with demonetization. I didn't see many accounts of how this is affecting the villages, hence my question. It's true that I have preconceived notions given the premise of my question, but I'm willing to keep an open mind.

I can't keep up with all the replies so here are just some random replies:

1) There is indeed talk of GDP growth of 0.5% for the next 2 quarters, in fact possibly even in the negatives. It was in that Ambit capital article.

2) Again, not very well addressed is the question of why to conduct demonetization this way? Why not a gradual phase-out? I've heard that it is to catch the corrupt black money hoarders, but it seems to me like the big fish is being let go since most of their assets is probably not in INR paper notes, while it's the petty merchants with minor tax evasion as well as the poorer folks who know only cash that would suffer the most.

ManuJ · Post by **ManuJ** » 26 Nov 2016 02:02

Thanks everyone.
I am out of India, and was asking for my parents who I've been trying to convince to switch to cashless.
They need a single easy-to-use app that works across all banks.
Seems like Pockets can do that.
Will ask them to check it out.
Instead of every bank creating their own app, would have been nice to have a single UPI app (aka PayTM) that supported all banks.
Also UPI should be made mandatory for all banks, including cooperatives.

srin · Post by **srin** » 26 Nov 2016 02:05

I've been using Pockets for a while now. They even give you a prepaid debit card for offline use, which I find tremendously useful. I use that for all small (<1000 rs) payments at restaurants/coffeeday and also online - because I don't want to risk exposing my very high credit limit credit cards.

kvraghav · Post by **kvraghav** » 26 Nov 2016 02:15

Was trying to buy a 1200 sq feet. The guidance value is 3.6 k per sq feet. The asking rate was 4.6 last month and the seller was one with many properties in same layout. He did not agree to my conditions on all white. Calls me today and tells he is OK but I have brought him down to 4.1k per sq. I think real estate is really contracting and people who need money are resorting to distress sale.

Suraj · Post by **Suraj** » 26 Nov 2016 03:26

DavidD wrote:Rudradev,

It's not a rebuttal, it's in fact an affirmation for the vast majority of his points except with a flippant attitude. It doesn't even address the most important point of Summers' argument, which is that while he supports demonetization, he thinks the way the GOI did, which is a sudden withdrawal of currently circulating currency, causes more harm than good. The only thing this "rebuttal" actually disagrees with Summers on is whether there's still "chaos" or not. There may not be riots on the streets, but I'd say a drop of GDP growth from around 7% to 0.5% is gonna bite, and that it'd be entirely avoidable had demonetization been executed differently (i.e., no sudden withdrawal of currently circulating currency).

Let's assume you are being serious for a moment, and not simply being a sophisticated troll. Either way I'm game.

Prof. Summers, to put it simply, lacks intellectual rigor in his argument, and by supporting him, so do you. He speaks of 'chaos', and you implicitly claim the same. Let me provide some data. The demonetization was announced at 8pm on Nov 8. It was announced that banks would be shut on the 9th. Formal deposit and exchange began on the 10th. Between the 10th and the 18th, RBI data shows that Rs.5.45 lakh crore had been deposited or exchanged, with the vast majority being deposits. The total value of the 500/1000 bills out there was approx Rs.13.6 lakh crore (about $240 billion). The latest RBI bulletin shows that deposits now exceed Rs.6 lakh crore, as of Nov 20. In 10 days since the process began, 45% of all outstanding cash (approx $110 billion) has been deposited back in the banking system. The banking system has consistently absorbed over $10 billion in deposits, every single day, working through even the first weekend.

'Chaos' by definition asserts is a lack of efficiency. This process is far ahead of schedule. The last day is Dec 30. The process was given 50 days. Two weeks in, we're almost at the halfway mark. Bank deposit efficiency has not fallen - they have sustained >$10 billion in daily deposits every day so far, while also coordinating the disbursal of approx $10 billion in new currency as exchange and withdrawal, as well as the monitoring of fake currency, collection and recording of KYC/Aadhaar IDs and other details.

Long lines are not evidence of chaos. They are evidence of long lines. Which is to be expected. We are talking about the greatest demonetization in the history of mankind, running well ahead of schedule. In a country with 1.2 billion people, of whom approx 460 million are working age population, almost all of whom have bank accounts; PMJDY covers 99.9% of all households. It's quite true that 600 million don't have bank accounts. A land of 2+2 households leads to the startling headline "only 50% of the population has a bank account!" No kidding. The young and the aged - especially in rural India, live in a joint household and the working members have access to banking.

Now onto you. Provide data to back your assertion of chaos. The "GDP will fall from 7% to 0.5%" is not data. It's a wild ass guess. If you consider it accurate, do provide the raw data underlining the calculation. Or provide other objective data. Subjective references to articles are not sufficient proof. You're quoting a conclusion by Prof Lawrence Summers, former president of Harvard, Chief Economist of World Bank and US Treasury Secretary. I expect objective data to back up such an assertion from such a source.

UlanBatori · Post by **UlanBatori** » 26 Nov 2016 04:21

In all this hoopla, I have a small pooch. Suppose I am a small-time aam Endry - Preneur onlee. I am setting up Ulan Bator Hundi Vyapaar Pvt. Ltd. I go from house to house every day delivering cowdung and collecting old newspapers, and I ask them to pay me in OLD notes (OK, 1000 rupees worth of BS is quite a lot, I agree). Every day I also go to 5 friendly neighborhood banks, and deposit 2000 rupees. Sometimes they actually have small change or new notes to give me.

When I get those, I also exchange them at houses for a small (10%?) Transaction/Convenience Fee (TCF). Agreed, I can only make Rs. 10,000 a day this way, but hey, that's 60,000 a week, 240,000 a month. Not bad, given that I have a total of 1.5 month still left (I am betting also with my 6th coujin thrice removed, that come Dec. 31 guvrmand will get so much screaming that they will extend deadline to March 31). That's another solid 3 months.

Do u c any flaw in my bijnej plan?**

**Added later: Except that I will have competition from 50 others like me? So the average home-based Cash Holder can launder a full 50*1000 rupees = 50,000 PER DAY, 6 days a week. Not big enough for the Babus, but maybe good enough for most people.

ShauryaT · Post by **ShauryaT** » 26 Nov 2016 04:40

SRoy wrote:Buddy let me call you out.

Let us see.

ShauryaT wrote:Will the consumer stop going to a cash only restaurant?

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

Good for you. In Mumbai, there are three classes of restaurants for the masses. Class I, II, III. How many class II and III accept cards? How many consumers who frequent these use cards? How about Tier II/III cities and its eateries for the masses accept cards? In Mumbai it is rumored that the humble wada pav arrests the hunger for the masses, let me check if my favorite stall accepts cards now? I was on the ground on Nov 8. Went to a restaurant, which has been cash only for 50+ years. It was Nov 12 afternoon, after withdrawing some cash from bank went to the place. It was packed. The place has no plans to accept cards. My point is this is not about what you are doing at a personal level, it is about a massive change in an entire eco-system. It will take time, do not have unrealistic expectations and be quick to judge.

ShauryaT wrote:A cash only retailer?

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

Good for you. My driver had just returned from his vacation. He needed money to buy vegetables. Folks share a slum and his land lord wants cash only! He buys his grocery in the slum he lives in. No cards there.

ShauryaT wrote:Will govt officers stop demanding cash bribes?

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

Good for you. The overwhelming majority of stories I heard after week of Nov 8, were the regular kind, a bribe paid to a cop, an IT case "settled" by someone and the officer is asking if the bribe money can be returned - it was settled pre-Nov 8!!. Yes, had a few flamboyant friends who did say things are improving but when put to that hot test, they all admit at the end of the day bribes are paid to get things done. Yes, many small things do not need a bribe anymore. Things are improving, but do not expect this step alone to change things in India.

ShauryaT wrote:Will the public refuse to pay?

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

There are many stories one hears on either side. One has to make calls based on what one hears and experiences on how things work. Over 90% of all business interactions with the government end up in a bribe, is my judgment. The masses may get by at a lower percentage.

ShauryaT wrote: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.

Right! I am sorry SRoy, It does not seem you have any experience here. Let me share a story. This was 1985. I was a young teenager. It was in the city of Coimbatore. There were two customers of note in that city. One was the largest retailer in that city with a roaring business and lines at his shop every evening. Almost all the business was in cash. His net income was about Rs 10 lacs a month at that time. Right opposite was the other customer, with no apparent location disadvantages. His place was almost always empty. He had a very decent sized place and capacity to hold sizable inventory. The man was honest to the core. Never transacted any business without a bill. Always charged tax. His net monthly income was about Rs 6,000 per month.

Note that difference. Same industry, city, location, size of establishment. But look at the difference. There could have been other factors at play, but there was no doubt on customers minds of all types that go to Coimbatore in a 50 KM radius, on where to go. At about the same time we heard the then PM say, only about 16 percent of subsidies actually reach the beneficiary. The lesson was clear for me. India is no place to be honest and make a decent living. Understand times have changed, things have evolved but still awaits what I call as radical reform.

Let me tell you another recent story. In a residential building, where there were quite a few officers of rank and in the same building some obviously corrupt politicians too - the building needed quite a few services from its local municipality. Mundane things like street lights, paving of the road, water, gas connections, etc. For two years the retired officers tried their way, structured and disciplined. Without bribes to little or no avail. The corrupt politicians stepped in to manage the affairs and in 6 months all the issues the building had were taken care of – their way. The officers have quietly taken a back seat, realizing in the civilian side of the world things do not go exactly as per service rules. The Nov 8 move is unlikely to change this on the ground dynamic.

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

First, Please stop making this personal. This is about policy and the efficacy of the policies not about personalities and politics. This is also not about my personal behavior, which you know nothing about and do not intend to go defensisve, I have no reason to.

I desire for GoI to increase the defense budget to 4% of GDP but the nation has to live with a measly 2% instead. Cannot say the PM is not a good enough Bharat Rakshak. So, do not be so quick to judge on what people do in their lives, when my post had NOTHING to do with my personal experiences. I have no doubt this govt means well, but where I think the policies are short, will call it out. If you think, your experiences are the experience of most in the country – great!!

ShauryaT · Post by **ShauryaT** » 26 Nov 2016 04:54

Suraj wrote: It goes on like this . When you remove the liquidity underlining a market, you make it extremely hard and costly to transact .

I guess, you are banking on the liquidity never coming back, I am not sure of it. It entails a government being able to control and limit draws on legal tender for legal uses. It entails a government being able to do so over the long term, without any legal challenges, let alone political. It entails the conversion of the cash economy to electronic and credit based in time frames and in the type of infrastructure India has. It will require a cultural change - rapidly on the part of consumers, retailers, intermediaries and producers. It entails a massive arrest on corruption and future under reporting of incomes and generation of BM.

In the short term ( 6 months) you are likely to be right. The lack of liquidity will force a massive reduction of the BM economy. I just hope net-net there is a conversion to a white economy and not a net loss. We will see.

Suraj · Post by **Suraj** » 26 Nov 2016 04:56

ShauryaT: you're confusing a temporary liquidity issue with a broader structural problem . 'The poor' are often used to explain the difficulties involved, yet the lower you go, the less the likelihood of 500/1000 being used . Further, the liquidity issue is exacerbated by human instinct to hoard, even though logically the most effective way to ensure access to cash is to spend cash . Take another critic here - habal - asserting the desire to hoard 100s 'due to the liquidity issue' . That's a superbly baffling argument - 'due to the problem I'm going to act in a manner that makes it worse' .

Suraj · Post by **Suraj** » 26 Nov 2016 05:06

ShauryaT wrote:
Suraj wrote: It goes on like this . When you remove the liquidity underlining a market, you make it extremely hard and costly to transact .
I guess, you are banking on the liquidity never coming back, I am not sure of it.

No, that's a strange claim with no relationship to what I said.

ShauryaT wrote:It entails a government being able to control and limit draws on legal tender for legal uses. It entails a government being able to do so over the long term, without any legal challenges, let alone political.

There is no constitutional basis for opposition to demonetization. Which is why even Supreme Court is fiddling with flimsy arguments like 'inconvenience'. As if the public is not inconvenienced by the huge backlog of court cases.

ShauryaT wrote:In the short term ( 6 months) you are likely to be right. The lack of liquidity will force a massive reduction of the BM economy. I just hope net-net there is a conversion to a white economy and not a net loss. We will see.

I don't need to 'hope' . It's already the case. In two weeks (out of 50 days total), 45% of the cash supporting the black market has been deposited in banks or exchanged. Assuming about 2/3rds of the cash out there backs the black economy, more than half the cash base of the black economy is already white.

If you think about it, whether or not black economic activity was destroyed, or turns white, is entirely the choice of those who have black money to do so. That applies even to the lowest kirana store owner who primarily transacts in Rs.100 or less. Every single minute a person with black money hems and haws about depositing it and paying his dues, he impacts everyone below and above him in the economic supply chain. This is *not* the government's fault. The minimization of the impact on the cash economy is the responsibility of the person holding black money. The government and the banking system has operated efficiently enough to ensure that they are far ahead of the 50 day schedule.

ragupta · Post by **ragupta** » 26 Nov 2016 05:08

There is going to be problem for people who do not want to change.
Change or perish, it has been happening and will keep on happening.
Complaining on every pinch is not the solution.

This change is for good and only one of the step, if some one is not ready to change, he is bound to have more pains and problem.
Some just like to complain and will not change, the change has to be forced on them,
For most it is not an issue.

Good Job Namo, god strength to you!

ragupta · Post by **ragupta** » 26 Nov 2016 05:25

Demonetisation: Unaccounted deposits to attract 50% tax, 4-year lock-in period
http://zeenews.india.com/personal-finan ... 53398.html

manjgu · Post by **manjgu** » 26 Nov 2016 05:45

actually in villages..the situation is not as bad ...i was at my dads village ( vill mundakhera) near Khurja ( bulandshahar UP) approx 80 km from Delhi to check on my mango orchards and some paper work. my chahchas son owns a shop selling pesticides. no doubt there is cash crunch ..but my nephew knows his customers...where they live...their families....where is their field...what do they grow..lot of stuff is happening on credit.."Bhai maal de do...2/3 hafte mein chukta kar denge jab paisa aa jayega". lot of work in villages, small town happens on trust and the fact they know each other. he is maintaining a ledger... people come off and on and make payments...

disha · Post by **disha** » 26 Nov 2016 06:05

UlanBatori wrote:In all this hoopla, I have a small pooch. Suppose I am a small-time aam Endry - Preneur onlee. I am setting up Ulan Bator Hundi Vyapaar Pvt. Ltd. I go from house to house every day delivering cowdung and collecting old newspapers, and I ask them to pay me in OLD notes (OK, 1000 rupees worth of BS is quite a lot, I agree). Every day I also go to 5 friendly neighborhood banks, and deposit 2000 rupees. Sometimes they actually have small change or new notes to give me.

When I get those, I also exchange them at houses for a small (10%?) Transaction/Convenience Fee (TCF). Agreed, I can only make Rs. 10,000 a day this way, but hey, that's 60,000 a week, 240,000 a month. Not bad, given that I have a total of 1.5 month still left (I am betting also with my 6th coujin thrice removed, that come Dec. 31 guvrmand will get so much screaming that they will extend deadline to March 31). That's another solid 3 months.

Do u c any flaw in my bijnej plan?**

**Added later: Except that I will have competition from 50 others like me? So the average home-based Cash Holder can launder a full 50*1000 rupees = 50,000 PER DAY, 6 days a week. Not big enough for the Babus, but maybe good enough for most people.

UlanBatori-bin-dung-patty., there is no fly in your dung plan., accept that if you have a Jan-dhan account., then let us say you go to 5 homes., you got your 10000 rupees in old notes which are deposited in your account. Next day you have to withdraw in small cash (in 100s) and keep it at home - and then go on your rounds and put in the newly collected old 1000 notes in your JD account. And again withdraw in small cash (in 100s) and keep it at home. Yes you can do this for 50 days and launder 50x10000 = 5 lakh rupees., and will have 490000 in your shiny 100 Rs notes in a hole in your wall of your dung home for termites to eat. Why ji? Because JD above 10k starts attracting attention., the bank will want you to upgrade to non-JD account.

But then things get complicated here., if you do keep on accumulating 100 Rs. notes., you have sucked the notes out of the system making it difficult for you to get 100 Rs. subsequently., unless of course you put back 100 Rs. notes into the system (by say depositing that 100 Rs. in your another JD account).

But wait! Initially you could withdraw only 4k at a time and then Gobermand changed it to 2k at a time with an upper limit of 21k per week. And of course you now want to upgrade to a premier account other than Jan Dhan and you have to now take your pan out! No not that pan., the PAN card out. In essence the Gobermand has put a gadfly on your hmmm - let us just say your cow.

So with any account., you can launder 21k max per week for say 8 weeks that will be @1.6 lakhs with a reasonable gadfly stuck to your cow. Of course if you are a trader saving up to buy a nano in black., you can now launder that much money into the bank with a reasonable chance of able to get away., but if you are JJ with say 160 crores in a warehouse - for this route you need some 10000 pucca accounts. Good luck!

shiv · Post by **shiv** » 26 Nov 2016 06:08

DavidD wrote:
2) Again, not very well addressed is the question of why to conduct demonetization this way? Why not a gradual phase-out? I've heard that it is to catch the corrupt black money hoarders, but it seems to me like the big fish is being let go since most of their assets is probably not in INR paper notes, while it's the petty merchants with minor tax evasion as well as the poorer folks who know only cash that would suffer the most.

It is one thing to quickly convert black money into real estate or gold, but this simply removes the transaction power that banknotes have

People who have property and gold may have become wealthy from black money, but without cash they have little power

Black money in cash provided power to move things. You pay cash to ease one more property deal in black; you pay cash to get your son a medical college seat when his academic record would not get him anywhere close; you use cash to buy voters so that you then have access to more taxpayer cash; you use cash to bribe and treat officials who will allow you to get off tax free or smuggle illegal stuff. So there is a huge cash economy in black which is simply being ignored by the hollow claim that black money gets quickly converted to something other than notes.

disha · Post by **disha** » 26 Nov 2016 06:10

And with cash you can do hawala transfer and buy up homes in US of A., but without the cash DavidD'ji - you will have to sell your asset obtained in BM and convert it to cash in white and then convert the white into US Dollars - again in white. In essence., you take a haircut on all your BM wealth or assets obtained via BM.

shiv · Post by **shiv** » 26 Nov 2016 06:18

Sociology to the rescue. A lot of people who transact in cash in small amounts do so at regular outlets where they are known and they know the shopkeeper. Credit is used routinely and payments made as and when possible. If fact this is not just the "poor". It is a good business decision. There is a local vegetable vendor near where I live who sell form a cart. In this area there is no one who is poor. Everyone is jeans, tank-top, iPhone/iPad wala with more than one car per house. All his customers are wealthy but when the cash crunch started he started giving on credit. He said - please let the bill build up and pay me once in a while.

Businessmen are not morons in general. Some may be crooks but not morons. This talk about small businessmen hoarding 100 Rupee notes makes sense only for a short while.

For example: Businessman A and B are both hoarding Rs 100 notes. After a while a customer comes for a purchase with only a Rs 2000 note. The person who gets that business will be the businessman who is willing to give change and take the 2000 note for a purchase. Hoarding works only as long as it flows, unless you are hoarding for elections. medical seat, real estate.