Currency Demonetisation and Future course of Indian Economy

Schmidt · Post by **Schmidt** » 06 Dec 2016 11:19

ShauryaT wrote:
shiv wrote:
A trader with BM, visits a high end restaurant, restaurant also collects some BM. Salary of staff is paid from restaurant revenues. Revenues take a 30% dip. The high end trader income has taken a permanent hit, with him not going to the restaurant any more. This is trickle down effects to all the vendors to the restaurant.

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Sure , certain high end segments esp luxury items will get hit when the " easy money " dries up

This is most evident when China does its periodic crackdowns on corruption - the market most affected is Macau and its casinos. Also expensive banquets / 1000 $ wine bottles / luxury cars etc take a nosedive

But this is no excuse to tolerate BM accumulation and tax avoidance

rahulm · Post by **rahulm** » 06 Dec 2016 11:30

The problem is the refusal of people to transact cashlessly. Not the non-availability of cash. In Mandis etc. people know each other for decades, even for generations. They do not want to take cheques as payment or do not want to go for electronic transfer even then.

This is the issue with a relationship based economy. If it were transaction based, then the transaction would take precedence and traders would be substantially online/electronic. This relationship based stuff inevitably leads to feudalism/zamandari model where over a period of time it's nearly impossible for new comers to enter..

Yagnasri · Post by **Yagnasri** » 06 Dec 2016 12:55

http://www.firstpost.com/sports/demonet ... 41942.html

In what way these two things are related? What economic climate these idiots are saying? Is there any problem for stupid cricket matches which are having far more reach in mango people? None.

Bart S · Post by **Bart S** » 06 Dec 2016 14:18

vijayk wrote:With new pod/paytm/wallet to bank interfaces putting pressure on banks web services, many services are literally out of operation. My brother could not get his atms to recharge his paytm wallet. Some pos systems are slow.

Paytm itself gives many errors.

Looks like banking infrastructure is unable to scale up or Govt. is putting limits. How can we trust that cashless is going to work?

There is no major crisis or meltdown in digital infrastructure, just some problems here and there and not large-scale systemic failures.

In any case this is a black swan event and some minor hiccups were inevitable. Banks and other companies will just learn the lessons and scale up. It's like lifting weights in the gym, your muscles tear a bit and it hurts but then they recover and become stronger. There is a little inconvenience involved but this is how we grow and improve. And it's not like everything else works with clockwork precision in our country and online transactions are the exception.

And these problems are not India-specific either, virtually nobody in the world can afford to over-provision infrastructure beyond a certain point so it is how things are done everywhere, including in the most TFTA of places.

Marten · Post by **Marten** » 06 Dec 2016 14:32

Per reliable ad honcho: FMCG is at a slowdown. This is a horrifying quarter. Media is suffering as a result. There is an endemic disease that is affecting cashflow and transaction volume across the logistical chain.

RajeshG · Post by **RajeshG** » 06 Dec 2016 14:39

Austin wrote:Black money: Deposits belie expectations of large windfall

http://economictimes.indiatimes.com/art ... aign=cppst

In a local newspaper there are "unnamed sources" quoted that 12.6 lac cr has been deposited but these are all speculations.

RBI had only released the figures upto Nov 27 i think. So we are due for another official announcement.

Although I have seen various numbers of total currency in circulation the numbers have mostly hovered around 14.5-15.5 lac cr. In an interview Bibek Debroi had estimated BM numbers to be around 4 lac cr. He had indicated that 2.5 lac cr would be single black while 1.5 lac cr would be double-black ( criminal money ). Finance Ministry/WB had estimated 20-23% to be BM if i remember correctly.

Whatever the numbers I am guessing all of us are going to be in for a surprise come dec 30th. So far i have concluded that nobody seems to have any clue.

Sridhar K · Post by **Sridhar K** » 06 Dec 2016 15:07

The other sector that is hit is various religious and charitable trusts where money is hoarded both over the table and under the table (in containers).

Don't know how BR missed the latest

mamata-banerjee-has-credential-to-be-prime-minister-baba-ramdev

Bart S · Post by **Bart S** » 06 Dec 2016 15:16

^

“In politics, Mamataji is the symbol of honesty and simplicity. I love her simplicity. She wears chappals and ordinary saris. I believe she does not have black money,” he said.

Height of stupid logic that nobody buys in India anymore. Reminds me of the 'fumble harmer' from KA. Or the saintly communist Tripura CM who refused to have an AC in his office, so simple and down to earth was he. Would have been better if he had taken the damn AC and in exchange, not run his state's economy in to the ground.

shiv · Post by **shiv** » 06 Dec 2016 15:30

Austin wrote:Black money: Deposits belie expectations of large windfall

http://economictimes.indiatimes.com/art ... aign=cppst

That is a puzzling headline. The theory that 3-5 lakh crore out of 14 lakh crores not coming in would be a "windfall" and there is no windfall if that much does not come in is an odd conclusion to reach.

If we assume that every single Rupee of 14 lakh crores of high denomination currency value gets deposited in banks by the 31st of Dec - it still means that every paisa of black money hoarded by anyone is now in the banking system with a name attached to it. Why is that not a windfall?

The article linked below shows how many bank accounts there were in India in 2015
http://www.thehindu.com/opinion/blogs/b ... 130386.ece

There were 460 million accounts and 50% were zero balance

There will now be clear records of which accounts filled up and with how much. For those accounts that are going to be taxed - the money is already in there - the tax is taken. Only the balance will be allowed to be withdrawn. That is surely a windfall.

sum · Post by **sum** » 06 Dec 2016 16:18

Sridhar K wrote:The other sector that is hit is various religious and charitable trusts where money is hoarded both over the table and under the table (in containers).

Don't know how BR missed the latest

mamata-banerjee-has-credential-to-be-prime-minister-baba-ramdev

Ramdev baba also hit by the DeMo tsunami?

Why this abrupt googly? Or is he on some track-2 by the ruling power to get Mamata to tamp down and clean up her state instead of doing Kejri style drama?

Sridhar K · Post by **Sridhar K** » 06 Dec 2016 16:21

Sum ji - I am not surprised. just link the first part of my post to the link I posted. You will get the drift though I hope it is track 2.

chilarai · Post by **chilarai** » 06 Dec 2016 16:27

That's a hit job on ramdev http://www.opindia.com/2016/12/media-sp ... bannerjee/

Akshay Kapoor · Post by **Akshay Kapoor** » 06 Dec 2016 16:30

sum wrote:
Sridhar K wrote:The other sector that is hit is various religious and charitable trusts where money is hoarded both over the table and under the table (in containers).

Don't know how BR missed the latest

mamata-banerjee-has-credential-to-be-prime-minister-baba-ramdev
Ramdev baba also hit by the DeMo tsunami?

Why this abrupt googly? Or is he on some track-2 by the ruling power to get Mamata to tamp down and clean up her state instead of doing Kejri style drama?

Doesn't seem from his comments that he is against demonetisation. Probably trying to cool the crazy lady down to ensure she does not do more damage. But who knows , money does strange things to people - but would be surprised if a real yogi falls for its attachment as well - negating everything a yogi works for - freedom

hanumadu · Post by **hanumadu** » 06 Dec 2016 16:51

Sridhar K wrote: Don't know how BR missed the latest

mamata-banerjee-has-credential-to-be-prime-minister-baba-ramdev

He denied saying this.

hanumadu · Post by **hanumadu** » 06 Dec 2016 17:36

http://indianexpress.com/article/opinio ... p-4412283/

Surjit Bhalla on GDP decline due to DeMo

Gus · Post by **Gus** » 06 Dec 2016 17:46

Rule No. 1 - NEVER trust an MSM report on outrage quotes.

Rule No 2 - Pay attention to how the attribution is for the quotes. Is it direct, or inferred or what...etc.

Rule No 3 - Triangulate from other sources.

Rule No.4 - Wait to see clarifications from the quotee.

Gus · Post by **Gus** » 06 Dec 2016 17:59

govt again allows old notes for use at toll gates -

this cannot go on like this...they need to pour resources in fixing toll gates payment crunch issues and get it over with. if centers run out of change, they should be able to issue tokens that can be used in next booth. if drivers ran out of cash, they should be able to get a bill to be mailed in. or have camps to educate and install mobile wallets etc at booths.

Bart S · Post by **Bart S** » 06 Dec 2016 18:16

Gus wrote:govt again allows old notes for use at toll gates -

this cannot go on like this...they need to pour resources in fixing toll gates payment crunch issues and get it over with. if centers run out of change, they should be able to issue tokens that can be used in next booth. if drivers ran out of cash, they should be able to get a bill to be mailed in. or have camps to educate and install mobile wallets etc at booths.

They should just eliminate toll for 3 months. It looks like the 2 weeks when toll was free showed massive improvements in transport productivity and huge reduction in delays due to the simple fact that vehicles didn't have to queue up at toll booths.

There is a strong case for moving to a different system that eliminates toll booths altogether, at least the manual ones.

Subdas · Post by **Subdas** » 06 Dec 2016 19:19

NAMO took this call on a judgement that the number of honest citizens of this country far out numbers that of the corrupt ones. I think he has been put right and this reform of digital payment is going to be a success.

shiv · Post by **shiv** » 06 Dec 2016 19:20

Gus wrote:govt again allows old notes for use at toll gates -

this cannot go on like this...they need to pour resources in fixing toll gates payment crunch issues and get it over with. if centers run out of change, they should be able to issue tokens that can be used in next booth. if drivers ran out of cash, they should be able to get a bill to be mailed in. or have camps to educate and install mobile wallets etc at booths.

I thought this was really funny and a good idea because the people who were the most reluctant to pay toll were rich goons with political backing who would bash up toll booth operators - also coincidentally the sort of people who will have a lot of old notes. This is a great way of making them cough up the money. At least till 31 Dec

JohnTitor · Post by **JohnTitor** » 06 Dec 2016 19:29

Bart S wrote:Height of stupid logic that nobody buys in India anymore. Reminds me of the 'fumble harmer' from KA. Or the saintly communist Tripura CM who refused to have an AC in his office, so simple and down to earth was he. Would have been better if he had taken the damn AC and in exchange, not run his state's economy in to the ground.

+1! Absolultely.

But MSM has made it up.. look:

https://twitter.com/news24tvchannel/sta ... wsrc%5Etfw

Swami Ramdev ‏@yogrishiramdev Dec 4
@news24tvchannel I was asked Can @MamataOfficial be PM of India. I just replied anybody can dream to be a PM in a democracy. Don't misquote

Gus · Post by **Gus** » 06 Dec 2016 19:34

bart - tolls were a necessary evil, but govt should have a plan to ease them out. there's time delay, idling petrol waste and general public annoyance and road rash etc. but in the meantime, they should know how to deal with that and the DeMo

tandav · Post by **tandav** » 06 Dec 2016 20:22

FWIW My interrogation of my cab driver in Lucknow reveals that DEMO pain is real and no one in hinterlands is able to take money out of their bank account for day to day expenses. The public backlash is expected to make a massive impact on UP elections with SP the main gainer and BJP losing deposit. According to him salaries have not been paid and only very large value notes (Rs 2000) are being given by banks which cannot be used effectively and ties up capital with a few shops that accept them as credit cards. Rs 500 new notes in short supply. Bank atms are not having Rs 100 notes either.

SRoy · Post by **SRoy** » 06 Dec 2016 21:48

Is the cab driver of peaceful variety? Ground reports here in WB is different.

SRoy · Post by **SRoy** » 06 Dec 2016 21:58

I will repeat it again that I have posted several times.

Modiji has made three great mistake ...

1. Didn't push for digitisation before the demonetisation move. Demonetisation or not there is no excuse for paying salaries in cash. Cashless payment options at government regulated vegetable markets (subzi mandis), mother diary booths, electricity/water bill payments etc. etc. would have made cash transactions nearly unnecessary for day to day small spending.

2. No oversight on bank workings. Free for all run ins at banks have made genuine account holders returning dejected from long queues to teller counters and ATMs. Not only did this allow black money to be deposited as white money by proxy depositors, in the initial rush it edged out elderly and infirm from bank queues. It angers everyone when they queue up to ATM of own bank to find that random people have entered with 5-6 ATM cards and have emptied it out.

3. Related to #2, banks have been lax and in some respect downright criminal is dispensing cash. Preferred customers have been withdrawing cash at convenience during off hours and have been allowed to exchange black money.

These will invite negative vote.

raj-senthil · Post by **raj-senthil** » 06 Dec 2016 22:03

http://pib.nic.in/newsite/PrintRelease.aspx?relid=154960

Income Tax (IT) Department carries-out swift investigations in more than 400 cases since the de-monetization of old High Denomination (OHD) currency on 8th November, 2016; More than Rs. 130 crore in cash and jewellery seized and approximately Rs. 2,000 crore of Undisclosed Income admitted by the taxpayers; IT Department refers large number of cases with serious irregularities detected Post De-monetization to Enforcement Directorate (ED) & CBI.

The Income Tax Department has carried-out swift investigations in more than 400 cases since the de-monetization of Old High Denomination (OHD) currency announced by the Government on 8th November, 2016. More than Rs. 130 Crore in cash and jewellery has been seized and approximately Rs.2000 Crore of undisclosed income has been admitted by the taxpayers.

Detecting serious irregularities beyond the Income-tax Act, the CBDT decided to refer such cases to the ED and the CBI, enabling them to examine the criminal conduct for immediate necessary action. More than 30 such references have already been made to the ED, and are being sent to the CBI.

The Bengaluru Investigation Unit of the Income Tax Department has sent maximum references (18) to ED. These are cases where undisclosed cash in new high denomination notes was seized by the Department. The Mumbai unit has referred a case where Rs. 80 lakh in new high denomination currency notes were seized. Ludhiana Unit has referred 2 cases, where seizures of USD 14000 and Rs. 72 lakh in cash were made. Hyderabad, shared a case involving seizure of Rs. 95 lakhs cash from 5 persons travelling in a Tata Indica. Pune’s reference stems from a seizure of Rs. 20 lakhs cash, including 10 lakhs in new currency notes from an un-allotted locker of urban cooperative bank, the key of which was in the possession of the CEO of the bank. Two cases referred by the Bhopal unit are of jewelers against whom evidence of large scale pre-dating of bills and flouting of PAN reporting norms were detected during searches conducted. The cases referred from the Delhi unit include the Axis Bank, Kashmiri Gate in which complicity of officers of the bank in the malpractices was detected.

The concerted and coordinated enforcement action of the Income Tax Department, ED & CBI in detecting the malpractices and taking swift action is going to continue in the coming days.

Sicanta · Post by **Sicanta** » 06 Dec 2016 22:42

SRoy wrote:I will repeat it again that I have posted several times.

2. No oversight on bank workings. Free for all run ins at banks have made genuine account holders returning dejected from long queues to teller counters and ATMs. Not only did this allow black money to be deposited as white money by proxy depositors, in the initial rush it edged out elderly and infirm from bank queues. It angers everyone when they queue up to ATM of own bank to find that random people have entered with 5-6 ATM cards and have emptied it out.

These will invite negative vote.

Yeah, this habit of using 5-6 cards is very frustrating. And these are chaps who must know how to conduct digital transactions securely.

Rishirishi · Post by **Rishirishi** » 07 Dec 2016 03:14

Dirty Money
Imagine who all touch the currency. Imagine how many people do not use soap after going to toilet. would you put a hankie used by dozons of people in your pocket.

Be safe turn cashless.

http://www.livemint.com/Politics/F1GoEx ... notes.html

The scientists found 78 pathogens and 18 antibiotic resistant-genes in the samples they tested.

The results of their analysis, reported in the June issue of the scientific journal Plos One, showed that out of the discovered microbes, 70% were eukaryota (which include fungi and protozoa), 9% were bacteria, and less than 1% were archae (single-celled organism lacking nucleus in the cells) and viruses.

Pathogens and other micro-organisms can thrive in paper notes because of the rough surface which allows them to settle for long periods. The level of contamination depends on how long the note has been in circulation, its capacity to absorb moisture, and its texture.

Recently, several attempts have been made to investigate the microbial population in currency notes in various parts of the world.

ShauryaT · Post by **ShauryaT** » 07 Dec 2016 05:46

Is the Current Demonetisation Legal?

But neither the RBI Act, nor the Banking Regulation Act, 1949, empower the government to impose restrictions on cash withdrawals or deposits in the manner it has been done, and to discriminate between holders and non holders of bank accounts, as the present notification has done. Such actions require an authorising legislation, either an Act of Parliament or an Ordinance. Both in 1946, and in 1978, similar actions were authorised by an ordinance. The failure to issue an ordinance to provide the legal basis for the demonetisation notification this time renders the demonetisation exercise illegal. Even if the act of demonetisation is severed from the restrictions placed on people’s access to their cash and bank accounts, the latter stipulations are both illegal and unconstitutional on several counts.

For a full understanding, read the article. My thought is to separate the limits on withdrawals from the demonetization act. I think the lack of an ordinance/law is a technicality, important but still a technical violation only. The withdrawal limitations has no basis. The author maintains both are illegal. The courts will decide.

Suraj · Post by **Suraj** » 07 Dec 2016 06:45

The RBI Act lets them eliminate notes from circulation without ordinance merely by notification in the Gazette of India.
RBI Act of 1934

26. Legal tender character of notes.
(2) On recommendation of the Central Board the 6[Central Government] may,
by notification in the Gazette of India, declare that, with effect from such date
as may be specified in the notification, any series of bank notes of any
denomination shall cease to be legal tender 7[save at such office or agency of
the Bank and to such extent as may be specified in the notification].

Any legal move to strike down withdrawal limits will also fail. You know why ? Because there is *no* withdrawal limit. The RBI has policy autonomy to control M0. They decide how much notes get printed. Cash withdrawal is simply the conversion of monetary holdings into currency notes. They can argue that there are in fact no withdrawal limits at all, just *cash* withdrawal limits, which they are entirely within their legal mandate to set. They are the central bank - they get to control monetary policy including amount of cash circulating. You can withdraw 100% of your money by cheque or any other non-cash means, any time, from any bank. Every last person in India is authorized to do this, right now. You just are not entitled to get it in cash. Banks can and will tell you 'here's Rs.X in cash and the rest as a cheque' and you cannot complain, because you just withdrew without any limit. You can't sue them for it, because they'll just tell you to take the cheque elsewhere, deposit it and withdraw as cash. Every single bank can make this argument simultaneously to ensure everyone can't do this at once. And the courts will side with them because they've technically done nothing wrong here.

manjgu · Post by **manjgu** » 07 Dec 2016 08:01

a CA friend of mine tells that it is possible that the collection of old demo 500 and 1000 notes could exceed govt calculation of 14/15 L crores ?? !! this he says is on account of large cache of notes which are printed for election purposes during UPA times but never entered RBI / banking system. he says the collections are going to be very high and govt may not get the kind of windfall it expected. This Demo excercise has allowed much black money to be converted into white.

manjgu · Post by **manjgu** » 07 Dec 2016 08:06

on a side note..saw a 500 rupee note with color/size as old 500 note but with many features of the new 500 note !!!! the series no was written in increasing size ...there were 4 little strips on the edge... this note came as a wedding shagun.

vijayk · Post by **vijayk** » 07 Dec 2016 08:16

Cashless is a threat to many scums all over India.

Example of how money is fleeced:

Lets say municipality has 4000 workers on paper and 2000 real workers.
Municipal commission to Sanitation supervisor - each person in the chain get their own share of fake worker salaries all in cash.

It is the same case in every department. So you think think we can solve this problem?

Cashless will threaten everyone of these chains. No wonder all scums including media hide behind poor people suffering. Hope we solve this liquidity issue and force cashless. I keep wondering how we can move forward.

I heard from my sister in Karnataka, people are so much in awe of Modi that they are doing archanas in temple for ModiJi.

Who knows real situation? It is all anecdotal

Suraj · Post by **Suraj** » 07 Dec 2016 08:24

That is a fanciful tale. Anyone can make such tall claims, but in reality RBI is the sole authority capable of issuing bank notes. The only exception is the Re.1 note, which GoI has the authority to print. There aren't anywhere near enough Re 1 notes to add up to lakhs of crores worth of extra currency.

atamjeetsingh · Post by **atamjeetsingh** » 07 Dec 2016 08:45

Haryana gives rs1400/month as old age pension to seniors above the age of 60. Last year govt decided pension will be directly deposited in bank accounts instead of cash being distributed by sarpanchs. Govt was able to remove 2lakh fake beneficieres.Govt was able to save over 300crore per annum. The possibilities of plugging leakage by goin cashless are so huge that in next 5 to 10 yrs we may see social services offered by govt may match developed countries.

yensoy · Post by **yensoy** » 07 Dec 2016 09:07

manjgu wrote:a CA friend of mine tells that it is possible that the collection of old demo 500 and 1000 notes could exceed govt calculation of 14/15 L crores ?? !! this he says is on account of large cache of notes which are printed for election purposes during UPA times but never entered RBI / banking system. he says the collections are going to be very high and govt may not get the kind of windfall it expected.

This kind of conspiracy theory is starting to get tiresome. So your CA friend is actually accusing the RBI of printing fake notes? Printing notes, releasing them to public without noting the liabilities on the balance sheet is the same as printing fake currency.

shiv · Post by **shiv** » 07 Dec 2016 09:09

manjgu wrote:a CA friend of mine tells that it is possible that the collection of old demo 500 and 1000 notes could exceed govt calculation of 14/15 L crores ?? !! this he says is on account of large cache of notes which are printed for election purposes during UPA times but never entered RBI / banking system. he says the collections are going to be very high and govt may not get the kind of windfall it expected. This Demo excercise has allowed much black money to be converted into white.

Every man has become a financial expert since Nov 8 and I am leading the pack - so here's my Rs 2000:

1. This "windfall windfall" business of undeclared cash that RBI can write off is bullshit. It is simply being called "windfall" by people who imagine that the Govt was keeping its fingers crossed and hoping that 3-5 lakh crores did not come into the banking system and that would be called "windfall" and that would be the main gain of demonetization This is actually rubbish. Even if all 15 lakh crores comes in it is a windfall.

2. Just because all the money comes into the system does not mean that it is all white. It will become white only after tax is paid. The money that was sitting in closets at home or in rooms in medical colleges is now in the bank - inaccessible to the people who put it in until the government decides whether it is OK to withdraw it.

3. Out of 15 lakh crores worth of 500/1000 notes someone made a wild guess that 3-5 lakh crores would not come in and called it "windfall". Actually that is not how it works. First of all the RBI cannot claim that money as its own until parliament passes an ordinance. After that the RBI can, if it chooses, write that amount into its books. On the other hand the RBI can choose not to print that extra amount of money at all.

My guess is that 1-2 lakh crores will remain undeclared as that may be too unsafe for owners to claim. Already there have been massive seizures of old notes as well as discarding of note. People are still paying salaries in old notes. Just yesterday our domestic help's husband appeared with Rs 8000 salary in old notes. Also the RBI may keep a window open for declaring cash even after Dec 31st - so all calculation of windfall no windfall are rubbish

Suraj · Post by **Suraj** » 07 Dec 2016 09:34

yensoy wrote:This kind of conspiracy theory is starting to get tiresome. So your CA friend is actually accusing the RBI of printing fake notes? Printing notes, releasing them to public without noting the liabilities on the balance sheet is the same as printing fake currency.

Yep. Not the RBI, but the Government itself is allegedly printing fake notes in lakhs of crores and bypassing RBI. Who cares about fake fakes from TSP when you have REAL fakes like these

Murugan · Post by **Murugan** » 07 Dec 2016 09:38

deleted

Murugan · Post by **Murugan** » 07 Dec 2016 09:56

^ + 1 to doctor's post

Nobody is discussing how 86% of total currency was made into 500 and 1000 notes during UPA-dhi rules of 10 years.

12-15 Lack crore now be put to use. that is a big windfall for country and not for govt.