Currency Demonetisation and Future course of Indian Economy

[Rishi Verma]

You cannot just walk into a bank and ask for a loan for 200K without any kind of collateral or guarantee, even with a high credit score and great financial status. The reason why you need the loan is a major determinant and if you are using that amount as a means of investment it is particularly difficult.

In fact it's easier to get a $200M collateral free loan after a round at a golf course than to walk in a bank and ask $200K because u have a perfect credit score., it's how big you are and who you know.

[Sachin]

By the way here is a humble contribution from Kerala, to the DeMo initiative.
Rs 8.78L fake currency deposited with SBT{State Bank of Travancore} after note ban......

[Rishi Verma]

Builder Supertech Fails to Deposit Money as per SC order. Reason: DeMo

NEW DELHI: Real estate giant Supertech Ltd failed to comply with a Supreme Court order to deposit Rs 10 crore and told the apex court on Friday that it could not raise the amount as it was hit by demonetisation.

The court had directed the company, which is fighting a legal battle to protect its twin towers — facing the threat of demolition — at Emerald Court in Noida, to deposit the amount before its registry by January 3 to ensure that flat buyers who wanted their money back did not remain in "illusion".

[rahulm]

Admission that's super tech had BM. Well, it's a real estate company so that's stating the obvious.

Don't they have a bank account to xfer funds ?

Arrest the promoters/owners, attach all their assets, freeze their bank accounts and throw them in jail. Make sure every news channel carries videos of the moment they area arrested and thrown in jail. Make an example of this company.

It's seems to be be getting normal to disregard courts.

[shiv]

^^ A sad day for the building industry when a builder cannot cough up a measly 10 crore

[rahulm]

The builders are smarter than that. Probabky, all stashed away in wife's gold, benami properties, land holdings in companies seperated by 5 orders from parent thrice removed.

Make the pain personal for the company Directors.Since, BM holders have no qualms parading their trappings of wealth publicly, parade their shame publicly. We are a status conscious country, reduce their status and H&D in front of the country.

I would like the government to maintain and publish, online, a public register of convicted BM holders. Since, we have no issues in publishing our caste, gotra etc in marriage advertisements, the BM holders should have no issues in their caste,gottra, state and mother language being published. (What ok when you are a goose is also ok when you become a kabootar) Then, we can do some analytics and profiling and tar and smear based on solid data.

In line with our traditions and with NaMos wishes to digitise everything, such a register should have a button to throw e-eggs and e-chappals at the BM holder. The public can then sort the list in ascending or descending chappal/egg order.

[shiv]

Yeah - the have sold 600 out ot 800 flats in those twin towers and have probably pocketed a gross of over 1000 crores in the process

[SriKumar]

Admission that's super tech had BM. Well, it's a real estate company so that's stating the obvious.

Don't they have a bank account to xfer funds ?

Arrest the promoters/owners, attach all their assets, freeze their bank accounts and throw them in jail. Make sure every news channel carries videos of the moment they area arrested and thrown in jail. Make an example of this company. It's seems to be be getting normal to disregard courts.

Yes, clearly the court did not require them to deposit in cash, the BM walas can use a cheque if they want. This is not even an excuse. No points for creativity here. Some public examples have to be made. But yes, courts are getting dis-regarded, with the Supreme court leading the charge and showing the world how to go about this.

Someone in a previous post mentioned that black money will not remain cash (within the context of a govt officials accepting bribes) and it will be converted to gold and benami property. The price of gold in India has come down after Nov. 9 and has generally stayed down (Nov 8th, there was a spike). So it seems like gold demand has fallen after DeMo started, and rupee is not converting to gold. http://mumbai.indiagoldrate.com/gold-ra ... 0-days.htm

In terms of property purchases, again, as I understand it, rates have fallen (or stayed unchanged at best). So the demand has not increased and so BM rupees are probably not being converted to property so far. One possibility is they want to hold on to their stash and make a purchase many months from now- which means they have to hold on to liquid cash for the near future and hide the rupees somewhere. I heard black rate for USD has gone up (no way to google for this, is there ), so may be that is being used a storehouse for rupees. And whoever is trying to store rupees in any manner (cash, gold, property) is probably going to have to plan for the next NaMo move- demonetize Rs. 2000, IT raids on homes hoarding cash or benami property. The noose will gradually get tighter and tighter-hopefully. Some public shaming of top offenders is needed for smaller fish and aam bribe-demanding janata to take heed. This is all in the right direction. However, as things go from black to white, at some point, GOI will have to address the issue of taxes, stamp duty etc. in quick order.

[Subdas]

Any business that claims loss of business due to denom is basically proving that they are corrupt business. This whole denom exercise is basically targeted at unscrupulous business, starting from farmers to doctors, who conceal income and loot the public of tax. Didi is claiming that the leather industry in Bengal has collapsed which means it was 100% corrupt business. So any business that is down big time post denom is dirty business and should wind up.

[rahulm]

Pre DEMON, BM holders seldom thought about yield. They were focussed on asset price increases which could be converted into more BM by liquidating the asset.

I suspect, at this point, owners of property bought with BM may be more concerned with arresting asset price deflation (protecting their ill gotten investments ) than with yields and asset price increases.

At some point either the holders of stock will reduce prices to realistic values or the buyers will say what the heck and jump in. It's probabky a sort of Mexican stand off right now.

I am hoping there are significant asset valuation write downs in the near future in proportion to the cash component being sucked out by DEMON. Property in India is grossly over valued in comparison to what you get.

On the flip side.the softening in lending rates by almost 100 bps will or at least, in theory, kick start demand.

[shiv]

So any business that is down big time post denom is dirty business and should wind up.

Actually no. A lot of businesses like sweetmeat shops and restaurants of the idly-vada or dhaba types had a loss of business and I know a few who are chains and have always provided receipts and accepted digital. Autorickshaws saw reduced business, and even my hospital where everything is receipted and all digital means are accepted saw a drop in footfall. The only thing is that those who did not have much to hide did not complain much knowing that those who were hiding cash were being hit. And complaining as if only they know what business in cash meant.

Even now many of the businesses I have named who have not hoarded wealth in black despite dealing every day in cash will be the first to embrace digital transfers if they were not already doing so - and condemning all of them will not affect them - it just sounds stupid.

Another thing to recall is that "digital payments" are very new to India - barely a decade old. Before that it was all cash. Any business that has existed for 20 years, 30 years of longer - or even a doctor who has had a practice for 30 years will have dealt with cash alone for most of his life and until demonetization would never have been under pressure to go digital especially if his consultation was Rs 100 or 200. But I see demonetization as a good thing for doctors - I predict a uniform increase in consultation fees from people who were charging less than a plumber or electrician or a mobile service technician to levels that suit their place in society when they see people waving mobile wallets and credit cards at them

[rahulm]

Cards, ATMs, POS will be redundant by 2020 in India: Niti Aayog

It's a laudable moon shot and a win if even half of the target is achieved.

[pankajs]

UPI is the future .. Phone and connectivity. Will replace Card, ATM, POS and wallet. Yesterday there was an update and the list of supported bank is up to ~35.

[shiv]

UPI is the future .. Phone and connectivity. Will replace Card, ATM, POS and wallet. Yesterday there was an update and the list of supported bank is up to ~35.

I bet my left testimonial that Canara bank is still buggering about with apps that are less then semi-functional with links to outlets that no one has heard of like "Achal Cashew centre"

[shiv]

Incidentally - speaking of "cashless" and healthcare - I must mention that humongous amounts of money are spent on advertising "cashless hospitalization". Unfortunately this is a scam that hits many patients and a lot of hospitals. I know of no insurance company in India that is actually interested in paying out money. They want people to pay money every year but will put in every possible condition to avoid paying out money, or pay out very little very late or pay out money of the insurance agent is bribed by the hospital.

So much for a "cashless" economy. Everybody goes with less cash except the insurance company..

[pankajs]

IIRC, Canara bank is on the list of banks enabled via UPI i.e. to say is an option for transacting via BHIM app, though I cannot comment on the usability.

[kiranA]

Shiv,

I fully empathize your loss in business and also the suffering of your customers (patients). If I were you I would blame it fully on poorly conceived, poorly executed policy surprise that was sprang on to your unsuspecting business and your customers.

But of course you see it differently - you fully embraced your losses and your patients suffering (disease/postponement of some treatment) in the expectation that somewhere some blackmoney hoarder is being or will be fully punished. Personally, in general, I have great respect to those who can sacrifice immediate gains for a greater cause. While (as far as embracing your losses) you are being a gentleman about it I think you have been badly informed about your cause.

Even greater tragedy is Yagnasri's. A man sacrifices his immediate pleasures and saves some amount in hope that it rescues him in future eventualities - like a wedding of his child or arranging last rites for their parents death. When that is taken away from him by his own govt its a great crime. But he too seems to see nothing wrong with the policy but chose to blame the merchants for not changing their decades old behaviour of accepting cash with a firman from Modi.

[kiranA]

Pre DEMON, BM holders seldom thought about yield. They were focussed on asset price increases which could be converted into more BM by liquidating the asset.

I suspect, at this point, owners of property bought with BM may be more concerned with arresting asset price deflation (protecting their ill gotten investments ) than with yields and asset price increases.

At some point either the holders of stock will reduce prices to realistic values or the buyers will say what the heck and jump in. It's probabky a sort of Mexican stand off right now.

I am hoping there are significant asset valuation write downs in the near future in proportion to the cash component being sucked out by DEMON. Property in India is grossly over valued in comparison to what you get.

On the flip side.the softening in lending rates by almost 100 bps will or at least, in theory, kick start demand.

They do think about yield - thats precisely why less than 6% of black money is held in cash which is negative yield (inflation). Owners of BM can fully wait until the economy is fully monetized again. The people who cant wait and will take losses due to demon are farmers, laborers etc.

[Suraj]

They do think about yield - thats precisely why less than 6% of black money is held in cash which is negative yield (inflation). Owners of BM can fully wait until the economy is fully monetized again. The people who cant wait and will take losses due to demon are farmers, laborers etc.

Anyone with significant RE holdings with a substantial BM component cannot avoid significant taxation in future. The reason is that they cannot transact without reporting an official transaction, which requires them to submit a purchase record. A very low 'official' figure becomes a large capital gains tax event. If they have no record at all, i.e. benami, they're in even more trouble.

In other words, those holding BM property are better off selling into a weak market to curtail their losses. They cannot 'wait for economy to be fully monetized again', which assumes they can wait out for prior conditions to return. Those conditions are gone. They cannot collectively sell back into a cash BM market. Sure some states could deliberately be lax about enforcing RE transaction records and taxation, but that is to their own detriment, cutting their own noses off to spite their faces.

[KL Dubey]

I am not sure that is entirely true.

It is not that easy to get a collateral-free loan in the US, not been the case for several years, and definitely not in the range of 'hundreds of thousands'.

.....

You cannot just walk into a bank and ask for a loan for 200K without any kind of collateral or guarantee, even with a high credit score and great financial status. The reason why you need the loan is a major determinant and if you are using that amount as a means of investment it is particularly difficult.

I don't know how easy it is, but I had no difficulty getting a 150K+ loan a year ago. These are not from traditional banks but from 'finance companies' (the one I used is located in CA) that apparently specialize in personal loans. I didn't have to walk anywhere, the whole thing was done in 3 days with a 5 min phone call and online document uploads, and the funds were in my account within 1 week. No questions asked about what I am going to do with it, but the contract specifies certain things you can't do (such as stock market speculation). For smaller personal loans (50K or lower, often used for debt consolidation) even credit card companies will help.

Anyway, the point is that such a segment of the market doesn't exist in India AFAIK. This could be especially useful for students and young professionals with good income flow/earning potential. Goremint could help create this market by having a guarantee scheme similar to what is provided for SMEs. Somewhat similar to what goremint did to seed the venture capital sector in India back in the 1980s.

[disha]

Looking at the future - here is my wishlist for the 2017 budget
1. There should be a cashless digital portal for paying bribes to government officials
2. ATMs should normally be restricted in withdrawal amount but there should also be a "Bribe" option in which Rs 50,000 withdrawal is allowed per week per bank

^^ It is like legalizing prostitution. The pseudo-liberals now will declare a Jihad on you!

[Rishi Verma]

For the first time I am noticing how often the "small traders" take my cash and don't bother to give me a receipt after selling me the goods. Happened 5-6 times last week alone. There should be an app where I just take the pic of the place and upload it to income-tax guy.

It should become mandatory to provide a receipt with TIN number, price, and product description no matter how small the transaction.

One large store in a Delhi mall gave me a receipt where the product description was a handwritten 24-digit number! A month later I forgot what that receipt was for.

Indian traders (small and large) are coming up with new ideas everyday to not pay tax.

In China the gov encourages giving receipt practice by a few tricks. Each receipt has a scratchable area where people may win some big price. This makes the buyer demand the receipt and often fights break out on the issue.

[Dasari]

They do think about yield - thats precisely why less than 6% of black money is held in cash which is negative yield (inflation). Owners of BM can fully wait until the economy is fully monetized again. The people who cant wait and will take losses due to demon are farmers, laborers etc.

Are you a farmer or laborer? How do you know their losses? Can you provide data? The farmers and laborers have been hurt for long time, even before demonetization. As far as I know ( in vizag district), most of the demonetization impacts are gone.Everybody got impacted by Demo, especially for farmers this is nothing new. The suffering they go through natural calamities every few years is lot bigger than this demo. Nothing is being done to alleviate that. They got hit with hudhud cyclone 2 years ago where 1,000,000 trees fell and almost all electric polls were down. Entire dist came to stand still for 2 months. Hardly any long term support came their way. But next 10 months things came back to normal for them. So don't come up with fake cries about farmers. Most of the sufferings are temporary and almost over. It is worth going through this as long as the sufferings of BM hoarders is permanent. That is what our diucussion should be. Let the hoarders use all excuses but this should be beginning of their end.

[rahulm]

GST should fix the cash and receipt issue for Goods - if the trader does not collect GST at the retail point of sale, (s)he cannot claim tax credits for the same goods from the wholesaler/up the chain.

At a hardware retailer in Pune I over heard a retailer telling a customer who did not a receipt for his purchase that once the GST is implemented it does not matter whether you want a receipt or not. It's the same.

I predict, though, services which are selling their time only with no goods (maids, cooks, plumbers, electricians, trades people of all sorts ) will be largely unimpacted and the status quo will continue.

[NRao]

I predict, though, services which are selling their time only with no goods (maids, cooks, plumbers, electricians, trades people of all sorts ) will be largely unimpacted and the status quo will continue

Who knows?

IF they are paid via a non-cash means, then they are part of teh cashless society.

IF they get paid in cash and deposit it in an account, they come into the fold.

IF they get paid in cash and Modi deMos again - which is likely to happen - in another 5 years or so, then they get caught.

I would think they all make so little their income will not be taxed, so why not just disclose it? Make a special postcard sized IT form for them.

[shiv]

I think a number of supporters of demonetization have been scoring own goals in their rants against cash - without a clue about how the cash economy became what it was before demonetization. At least a few people have made posts that suggest that the economy was a cash economy because businesses did not want to deal with anything other than cash forcing poor 'ickle innocent customers to pay in cash alone.

This is ignorant bullshit of the highest order and this mistaken impression needs to be corrected because I see it as a self goal by some supporters of demonetization.

Just 10-15 years ago there was no such thing as digital economy or digital payments. Even ATMs were non existent over most of India and the few that were there belonged to foreign banks like Citibank and private banks like ICICI. A huge percentage of people did not have bank accounts. Cash was the norm. Either one had cash to buy stuff or there was no cash. What did people without cash do? All suffered, some probably starved. Others took credit - not with credit card but by simply promising to pay later. Others took loans given be money-lenders - traditionally the much maligned Bania or Shetty - of the Vysya community, or pawned jewellery. Others simply became bonded labour.

Perhaps many people do not realize this - but I "grew out of it" about 15-20 years ago. In my grandparents time and in my parents time (my "parents time" ended about 1995 or so when one departed and the other had no income) we had servants living in an outhouse. I don't think those servants were paid anything more than Rs 100 or 200 a month, Not that my parents could afford more but the "servants" got free accommodation, free water and electricity. In exchange - one family lived in our ancestral property from 1925 till 1990. From 1990 to about 2000 we had 2-3 other families who worked under the same conditions until refused to continue the system. The family would get milk in the morning, wash the dishes, wash the clothes (or load the washing machine) do the beds, clean the yard etc. Some family members would do odd jobs outside and earn more. There were no "luxuries to buy". We the relatively wealthy had car, fridge, mixie/blender and eventually landline phone. The maximum the "servant" could aspire for was a radio set. TVs came only in the 90 after the cable revolution.

From the 1990s India saw a huge change. Literacy, personal incomes, human rights, minimum working hours, minimum salary, no underage labour. This means that until 1990 my own family (including me) were doing things that are now illegal. It is another matter that my extended family grew out of this habit and the children of all those servants have been educated - one is a lawyer, another a plumber, a couple are in ITvity and have migrated abroad taking their "servant" father with them. But this form of "bonded labour" that our family had still continues in India. Is your family doing it? If so you had better move out of the habit soon. Minimum wages, maximum hours, minimum working age, right to education, Aadhar and PAN numbers will all come along with the digital economy. I have learned to do my own ironing when needed. I washed dishes this morning because the maid called in to say she was not coming. Will wash my cars next. My NRI Amreeki relatives are surprised that they can't get "servants" or cooks any more.

But the economy could not expand without cash. Banks and bank accounts were never encouraged (Why do the poor need them?) So cash has been pumped into the system. And like reservation for communities - Income Tax was imposed only on those who could show salaries. And most of the population was exempted. And as computers& networking infra was built up ATMs were used to pump thousands of crores into peoples hands. Mobile phones came into existence only in the late 1990s and smartphones are barely a decade old. the automobile market exploded post 1996-98 - just 20 years. All paid for by cash, cash cash. If you are a young working person in your 20s today - you father was in the thick of the cash economy. Was he a crook?

So it is both ignorant and illiterate to claim that people taking cash are all hoarders and all tax avoiders. Few people know how the governments have excluded the wealthiest from tax and have taxed the vulnerable. In the 1990s in Bangalore every single doctor was hit and went through a tax enquiry. A soft target in which many docs legitimately complained of being targeted for no reason even when they had diligently filed tax returns. Of course many were caught - but only after targeting the softies in the 1990s did the tax people grow the balls to catch biggies starting with actors and later even politicians, Has anyone noticed that no actor has complained about demonetization? No cricketing star has complained. No ITvity biggie has complained. Only politicians and some businessmen and the complaint is not about themselves it is about someone else - "the poor"

[rahulm]

The interesting services would be independent consultants -lawyers , Doctors, Valuers, engineers whose charges are non trivial and annual incomes might breach the highest tax brackets.

[shiv]

The interesting services would be independent consultants -lawyers , Doctors, Valuers, engineers whose charges are non trivial and annual incomes might breach the highest tax brackets.

A very large number do breach the highest tax brackets. I cannot speak for lawyers but I can speak for doctors. Doctors are generally not poor or starving. They are important enough in the community for people to gratefully pay for their services. Mostly they have cars But if you know dozens of doctors in India and recognize their cars in the hospital parking lot you will find that very few have cars that cost above 10 lakhs. Most docs who own cars like Audis, Mercs, BMWs and Volvos either are from wealthy families or own (or have inherited) hospitals of their own. Most other doctors have sub-10 lakh cars. So yes many are in the highest income category but they don't pull in as much as people imagine. Any CA will know how much doctors pull in. But generally they are not poor and even doctors in their 70s have people coming to them because they have been trusted by generations in some families.

[rahulm]

Cash and BM have nothing to do with each other. BM is generated when taxes are evaded. It's very nature (liquidity, anonymity - ie it leaves no trace ) make cash transactions the easiest way to create and hoard BM making. cash got associated with BM and became a dirty word in this day and age.

Suppose, I get paid in cash and make just enough in the year so that I don't breach the tax free threshold do I have BM even though it's all cash if I

A. don't file my tax return and so my income is undeclared and below the ITO radar
B. file my tax return and no tax is payable ?

If there were no taxes at all would there be any BM?

E-transactions, due to their nature are traceable, visible and hence make it hard to evade taxes and therefore to create BM. digital transactions, therefore are associated with white or no BM.

BTW! Being a kaluram, I have an issue with this white=good and black=bad. I would prefer it being labelled as patriotic and unpatriotic money.

[Primus]

You cannot just walk into a bank and ask for a loan for 200K without any kind of collateral or guarantee, even with a high credit score and great financial status. The reason why you need the loan is a major determinant and if you are using that amount as a means of investment it is particularly difficult.

In fact it's easier to get a $200M collateral free loan after a round at a golf course than to walk in a bank and ask $200K because u have a perfect credit score., it's how big you are and who you know.

That's probably true everywhere in the world

[Primus]

I am not sure that is entirely true.

It is not that easy to get a collateral-free loan in the US, not been the case for several years, and definitely not in the range of 'hundreds of thousands'.

.....

You cannot just walk into a bank and ask for a loan for 200K without any kind of collateral or guarantee, even with a high credit score and great financial status. The reason why you need the loan is a major determinant and if you are using that amount as a means of investment it is particularly difficult.

I don't know how easy it is, but I had no difficulty getting a 150K+ loan a year ago. These are not from traditional banks but from 'finance companies' (the one I used is located in CA) that apparently specialize in personal loans. I didn't have to walk anywhere, the whole thing was done in 3 days with a 5 min phone call and online document uploads, and the funds were in my account within 1 week..................

There has to be a catch somewhere. Typically such 'finance companies' would charge an interest rate that is way higher than a bank or credit union. I mean, I could start company tomorrow lending without collateral to a person of 'good standing' if I was sure my loss could be hedged with a higher interest rate.

OTOH, you can also get loans at a rate substantially lower than a typical bank provided you have collateral. Thus, I got a car loan last yr for 0.75% APR from a credit union, this being an unheard of rate.

Anyway, this is possibly OT for this thread.

[shiv]

Suppose, I get paid in cash and make just enough in the year so that I don't breach the tax free threshold do I have BM even though it's all cash if I

A. don't file my tax return and so my income is undeclared and below the ITO radar
B. file my tax return and no tax is payable ?

A is black (or "upatriotic"), technically. That is why every adult Indian should have a PAN number even if tax returns are not filed. There are "trigger purchases" that require a PAN number to be shown. I think automobiles are one such category

[shiv]

There has to be a catch somewhere.

In India the "catch" are the goons who come and grab your property and rough you up should you fail to pay. Citibank have that reputation in India.

[geeth]

Deleted

[geeth]

Suppose, I get paid in cash and make just enough in the year so that I don't breach the tax free threshold do I have BM even though it's all cash if I

A. don't file my tax return and so my income is undeclared and below the ITO radar
B. file my tax return and no tax is payable ?

A is black (or "upatriotic"), technically. That is why every adult Indian should have a PAN number even if tax returns are not filed. There are "trigger purchases" that require a PAN number to be shown. I think automobiles are one such category

"A" is not black money because, if there is no taxable income, filing of IT return is not mandatory till you generate taxable income in a financial year. But once you start filing, it is better to continue even if your taxable income is zero. It will become handy in certain cases.
For firms, they dont have to register under salestax/service tax till a threshold limit of 10 lakhs. Also, they can pay a lumpsum 2% salestax upto 50 lakhs turnover per annum. Upto 2 crore turnover, they can declare a a standard 8% (0r 6% if all turnover by cheque/online) profit and pay IT on that profit after applicable deductions.

[pankajs]

http://www.financialexpress.com/india-n ... 28/500605/
Govt asks banks to obtain PAN or Form 60 of account holders by February 28

[shyamal]

petrol pumps refuse to accept debit or credit cards from tomorrow.
http://indiatoday.intoday.in/story/petr ... 52549.html

[shyamal]

Petrol pump situation resolved for now. All cards to be accepted till further decision is taken on 13th Jan.
http://www.ndtv.com/india-news/petrol-d ... ht-1646498

[nishu]

Guys, I've a doubt if some one deposits black money in some others account and the bank is unable to identify who deposited it.
Can the account holder withdraw that amount or the money will be confiscated ?

[Rishi Verma]

850Cr deposited in Rajkot co-op bank during 50-day demon period. iT guys looking at it. One mobile number was used for many accounts, fake deposit slips etc etc coming out