Currency Demonetisation and Future course of Indian Economy

TKiran · Post by **TKiran** » 02 Dec 2016 18:00

--deleted--

pankajs · Post by **pankajs** » 02 Dec 2016 18:22

^
I am happy for you that you are using all *legal* methods to make you taxes zero. Depreciation / accelerated depreciation, as specified in the tax provisions, are legal ways to minimize you taxes. Tax laws allow for carrying forward losses and consolidation of loss making subsidiary financial. All legal and above board.

Why bother then when GOI is going after those who make profit but do not pay taxes? GOI's action should not impact you but you posts seem to indicate that you are under tremendous pressure. Why? It makes no sense.

OTOH, If you are *under reporting* your revenue or *over reporting* your expense to *minimize* you profit down to zero and thus avoid tax then you anxiety makes sense.

If following GOIs DeMo more of your customer ask for correct tax invoice or switch to digital payment, thus not allowing you to under report you revenues, you fear/angst makes sense.

If you cash/assets cannot be explained by your salary you pay yourself (After all you business is zero profit), it makes sense for you to fear GOI.

vijayk · Post by **vijayk** » 02 Dec 2016 19:23

http://swarajyamag.com/politics/the-rs- ... -data-says

The Indian Express ran a story titled ‘Demonetisation’s rude shock: There may not be any black money’ recently. The report, attributed to IANS, was carried by many other news portals as well. Quoting from the Rajya Sabha reply of the Minister of State for Finance, Arjun Ram Meghwal, the report said the high-denomination currency circulating in the system on the day of Prime Minister Narendra Modi’s historic announcement was Rs 15.44 lakh crore.

Then, it dropped a bombshell, questioning the demonetisation drive in view of the total value of Rs 12.50 lakh crore already finding its way into the banking system.

However, the figures from the report are incorrect.

From the table, it can be seen that the total currency in circulation as on 18 November was Rs 14.27 lakh crore - a decline of Rs 3.70 lakh crore (20.61 per cent) over the figures from 4 November.

Another significant takeaway from the tabulated data is that bankers’ deposits with the RBI for CRR (as claimed in the IANS report) as the currency already in circulation is not counted as currency in circulation and is in fact a separate line item.

If one were to take into account the RBI figure of Rs 8.45 lakh crore as mopped up by banks till 28 November as the old notes tendered for cancellation, almost Rs 6.99 lakh crore (45.27 per cent of total) is yet to be deposited.

In view of this explanation, it is important to stress on the need to form opinions only on the basis of RBI bulletins and press releases. There are far too many people who would want to write the obituary of demonetisation. Believing motivated reports would be playing into their hands.

TKiran · Post by **TKiran** » 02 Dec 2016 19:25

--deleted--

Marten · Post by **Marten** » 02 Dec 2016 19:27

Great advice Sir.

Thakur_B wrote:
TKiran wrote:
End of my paradigm:
Here's my paradigm. Pay your bloody taxes. If you can't manage to stay in black after paying taxes, unlike the rest of us, then find a line of work where you will.

Karan M · Post by **Karan M** » 02 Dec 2016 19:46

Paradigm. What a word. Reminds one of Zero loss Sibal-ji statements.

Manish_Sharma · Post by **Manish_Sharma** » 02 Dec 2016 20:05

From Swarajya :

The Deposit Figure Of Over Rs 11 Lakh Crore Is Incorrect. Here’s What The RBI Data Says.
Alok Bhatt - December 02, 2016, 6:03 pm

The Indian Express ran a story titled ‘Demonetisation’s rude shock: There may not be any black money’ recently. The report, attributed to IANS, was carried by many other news portals as well. Quoting from the Rajya Sabha reply of the Minister of State for Finance, Arjun Ram Meghwal, the report said the high-denomination currency circulating in the system on the day of Prime Minister Narendra Modi’s historic announcement was Rs 15.44 lakh crore.

Quoting the Reserve Bank of India (RBI), the report said Rs 8.45 lakh crore (in old Rs 500 and Rs 1,000 currency notes) was already mopped up by the banks from its depositors.

The report also went on to claim that the total cash reserve ratio (amounting to Rs 4.06 lakh crore) as on 8 November was the amount already held by banks and, thus, part of the total currency in circulation.

Then, it dropped a bombshell, questioning the demonetisation drive in view of the total value of Rs 12.50 lakh crore already finding its way into the banking system.

However, the figures from the report are incorrect.

Every Friday, the RBI releases its Weekly Statistical Supplement (WSS) report, detailing its weekly operations under 14 tabulated reports. The most recent report available in the public domain is that from 25 November 2016, and the report for the current week is due today. These reports capture the data for the week prior to the release of the report.

Now, refer to Table 7 in the report. It captures the information on reserve money (M0), its components and sources. Reserve money (M0) is the ‘base money’ and the highly liquid component of money stock in the economy. It plays the most crucial role in the determination of other monetary aggregates of the economy.

At any given point in time, the reserve money (M0) equation (its components) is as follows:

Reserve money = Notes in circulation + Bankers’ deposits with the RBI + Other deposits with the RBI

Notes in circulation represent the currency in circulation in the form of notes and coins, while bankers’ deposits with the RBI represent balances maintained by banks in the current account with the RBI, mainly for maintaining the CRR and as working funds for clearing adjustments.

The final component of reserve money is other deposits with the RBI and this includes deposits from foreign central banks, multilateral institutions, financial institutions and sundry deposits net of IMF Account No 1.

A tabulated compilation of movement in reserve money (M0) per WSS bulletins of the RBI is as below:

http://swarajyamag.com/politics/the-rs- ... -data-says

Manish_Sharma · Post by **Manish_Sharma** » 02 Dec 2016 20:21

TKiran wrote:
Pankaj sir, very sensible post, In fact I don't have any worries about my business, but my worry is something else...

TKiran wrote:^Primus ji, you are missing the jungle for trees. In India, small business people provide the employment for almost 95% of the population...

"You have no worries about your business..."

then you write

Your worry is something else.

My question :

Are you worried about others?

ShauryaT · Post by **ShauryaT** » 02 Dec 2016 20:26

Model 3
Total amount of black money = Rs 10,000
Total population of India - 100 people

80 people hold Rs 0 each = Rs 0
4 people hold Rs 100 each = Rs 400
8 people hold Rs 300 each = Rs 2400
4 people hold 600 each = Rs 2400
2 people hold 900 each = Rs 1800
2 people (biggies) hold the remaining Rs 3000

Biggies hold only 30%. Small and medium held 70%

My take on above model originally by Shiv ji.

IOW: It is more spread out, and the layers are not as stark. About 80% have no money or means but mostly not enough money. The 20% an on all India basis is a huge population. If the GoI targets to top two layers with sticks and carrots for the others, it will work.

SaraLax · Post by **SaraLax** » 02 Dec 2016 20:28

Manish_Sharma wrote:From Swarajya :

The Deposit Figure Of Over Rs 11 Lakh Crore Is Incorrect. Here’s What The RBI Data Says.
Alok Bhatt - December 02, 2016, 6:03 pm

The Indian Express ran a story titled ‘Demonetisation’s rude shock: There may not be any black money’ recently. The report, attributed to IANS, was carried by many other news portals as well. Quoting from the Rajya Sabha reply of the Minister of State for Finance, Arjun Ram Meghwal, the report said the high-denomination currency circulating in the system on the day of Prime Minister Narendra Modi’s historic announcement was Rs 15.44 lakh crore.

Quoting the Reserve Bank of India (RBI), the report said Rs 8.45 lakh crore (in old Rs 500 and Rs 1,000 currency notes) was already mopped up by the banks from its depositors.

The report also went on to claim that the total cash reserve ratio (amounting to Rs 4.06 lakh crore) as on 8 November was the amount already held by banks and, thus, part of the total currency in circulation.

Then, it dropped a bombshell, questioning the demonetisation drive in view of the total value of Rs 12.50 lakh crore already finding its way into the banking system.

However, the figures from the report are incorrect.

Every Friday, the RBI releases its Weekly Statistical Supplement (WSS) report, detailing its weekly operations under 14 tabulated reports. The most recent report available in the public domain is that from 25 November 2016, and the report for the current week is due today. These reports capture the data for the week prior to the release of the report.

Now, refer to Table 7 in the report. It captures the information on reserve money (M0), its components and sources. Reserve money (M0) is the ‘base money’ and the highly liquid component of money stock in the economy. It plays the most crucial role in the determination of other monetary aggregates of the economy.

At any given point in time, the reserve money (M0) equation (its components) is as follows:

Reserve money = Notes in circulation + Bankers’ deposits with the RBI + Other deposits with the RBI

Notes in circulation represent the currency in circulation in the form of notes and coins, while bankers’ deposits with the RBI represent balances maintained by banks in the current account with the RBI, mainly for maintaining the CRR and as working funds for clearing adjustments.

The final component of reserve money is other deposits with the RBI and this includes deposits from foreign central banks, multilateral institutions, financial institutions and sundry deposits net of IMF Account No 1.

A tabulated compilation of movement in reserve money (M0) per WSS bulletins of the RBI is as below:

http://swarajyamag.com/politics/the-rs- ... -data-says

Sir !,

Thanks to you - this article is now available for reading by our forum members. But please post the most important portion of the above article (which you have left out). I have pasted & highlighted the key percentage information below.

.
.
.
From the (above) table, it can be seen that the total currency in circulation as on 18 November was Rs 14.27 lakh crore - a decline of Rs 3.70 lakh crore (20.61 per cent) over the figures from 4 November.

Another significant takeaway from the tabulated data is that bankers’ deposits with the RBI for CRR (as claimed in the IANS report) as the currency already in circulation is not counted as currency in circulation and is in fact a separate line item.

If one were to take into account the RBI figure of Rs 8.45 lakh crore as mopped up by banks till 28 November as the old notes tendered for cancellation, almost Rs 6.99 lakh crore (45.27 per cent of total) is yet to be deposited.

In view of this explanation, it is important to stress on the need to form opinions only on the basis of RBI bulletins and press releases. There are far too many people who would want to write the obituary of demonetisation. Believing motivated reports would be playing into their hands

Beware of media prostitutes who are willing to sell themselves and this nation - to the black money holders and thus provide lies to the common man and these are the same people who lie through their newspapers/news channels/websites in order to keep giving life to their rejected, morbid foreign imported ideologies !!

Manish_Sharma · Post by **Manish_Sharma** » 02 Dec 2016 20:46

^Thank you Sara ji for correcting the mistake.

_()_

Malayappan · Post by **Malayappan** » 02 Dec 2016 21:09

There's one more update. Apparently the "Opening Figure" used needs to be updated - by a whopping 1.26 lakh crores!

Link: http://swarajyamag.com/insta/rs-25-lakh ... sbi-report

Ref first point in that article -

The market estimates for the current currency calculations are based on the 16 March data of Rs 14,180 billion (excluding cash with banks). The most recent data is actually from 9 November, which pegs the value of high denomination currency notes at Rs 15,441 billion (excluding cash with banks).

That is a margin of Rs 1.26 lakh crore not being accounted in many calculations.

Please read it in full!

Sachin · Post by **Sachin** » 02 Dec 2016 21:17

From Kerala..
Undisclosed income worth Rs 1.64 crore deteced in Jan Dhan bank accounts......
Co-op crisis: Kerala Ministers hold talks with Jaitley...... (though nothing changes on the ground

).

Yagnasri · Post by **Yagnasri** » 02 Dec 2016 21:22

The culture of not paying tax I spoke is there, and no one can deny that. It is most of the time is not because the tax is high etc. But because people do not want to pay even when they can. Major problems faced due to non-availability of notes is because no business is ready to take payments in any manner which leaves records. As you may be knowing my mother was seriously ill and hospitalised on 8th November and the doctor was not ready to take cheque or card payment. This is the person who knows us very well for at least two decades. There are shop owners who do not want to take card payment even they have means to take. From what I hear people in hometown are demanding shops etc. to take payment by card. If the businesses and others are ready to take card payments etc. most of the problems in towns and cities will vanish.

GOI shall not accept cooperative banks to enter into this. No way.

TKiran · Post by **TKiran** » 02 Dec 2016 21:39

--deleted--

JohnTitor · Post by **JohnTitor** » 02 Dec 2016 22:00

TKiran wrote:You may say, well in Soviet Union, the Govt. Provides the employment for the masses, everyone pays taxes, all are govt. employees, then let us see if Modi can provide a job for me in his Govt., I would be more than willing to pay 75% of my salary as taxes. I will not take any bribes, I would not even ask for huge salary, in fact I would work with zero salary, if he can provide for the free education to my wards and free food for me and my wife, and free housing, and free transport to office/factory and back home.

Problem with a lot of Indians is they think that taxes are optional. Everyone pays taxes in the west. Do some of the big businesses and people try to evade taxes, sure, but only through legal means. Not declaring your earnings (which is what you are effectively doing if you deal in cash and don't account for it and use it to "manage" your business without it coming as an expense on your tax returns) is illegal. Try as you might, you are only making Indian businessmen look like thieves and not as you put it "trying to run a business and provide people with a livelihood".

TKiran · Post by **TKiran** » 02 Dec 2016 22:07

--deleted--

yensoy · Post by **yensoy** » 02 Dec 2016 22:08

Can we please take the discussion of Running a Small Business, Corruption and Taxation to a different thread? This is really derailing the main focus of the thread, which should be demonetization, printing, distribution and availability of currency, currency alternatives, black money statistics, news and investigations, political reactions & news coverage - domestic & international, RBI/PMO/FM/Parliament roles, and FICN. Anything else is distracting.

JohnTitor · Post by **JohnTitor** » 02 Dec 2016 22:09

TKiran wrote:You must be self loathing Indian, who doesn't know anything about West. India follows British laws still. Have you ever heard about Donald Trump, a business man who didn't pay taxes for years together. For your information he is the President elect of the United States of America

Seriously? Insults are the last refuge of the out-argued. As far as my nationality goes, let me just say that my only connection to India is through ancestry and distant relatives. So no, I'm not a "self-loathing Indian". Which part of "Do some of the big businesses and people try to evade taxes, sure, but only through legal means." does the bolded part not cover? Trump can get away with not paying taxes because he is doing it using loopholes and not outright lying to IRS/HMRC about how much money his business made.

yensoy wrote:Can we please take the discussion of Running a Small Business, Corruption and Taxation to a different thread? This is really derailing the main focus of the thread, which should be demonetization, printing, distribution and availability of currency, currency alternatives, black money statistics, news and investigations, political reactions & news coverage - domestic & international, RBI/PMO/FM/Parliament roles, and FICN. Anything else is distracting.

Agreed.

Let us please focus on demonetisation and the macro-economic effects.

vnms · Post by **vnms** » 02 Dec 2016 22:17

Here's the paradigm shift that you are looking for:

You are earning, and your employee is earning. He is paying tax, you are not. Are you saying that you opened the business to provide employment and thereby provide government tax? That would be a round-about way of paying government tax, not only being more expensive. Why don't you pay the government tax directly and be done with?

Bottom line is you opened a business to make money and not as a social service. If it were possible to make money without hiring anyone, you would do so.

Please understand this: You are not doing anyone a favor by hiring people. You are only doing it to enhance you profits. And no one expects you to justify your motive to make a profit. But you are attempting to justify it by claiming to do social service. You are wrong here.

Lilo · Post by **Lilo** » 02 Dec 2016 22:30

Yagnasri wrote:The culture of not paying tax I spoke is there, and no one can deny that. It is most of the time is not because the tax is high etc. But because people do not want to pay even when they can. Major problems faced due to non-availability of notes is because no business is ready to take payments in any manner which leaves records. As you may be knowing my mother was seriously ill and hospitalised on 8th November and the doctor was not ready to take cheque or card payment. This is the person who knows us very well for at least two decades. There are shop owners who do not want to take card payment even they have means to take. From what I hear people in hometown are demanding shops etc. to take payment by card. If the businesses and others are ready to take card payments etc. most of the problems in towns and cities will vanish.

GOI shall not accept cooperative banks to enter into this. No way.

GOI should simply reduce the face value of cash in circulation to less than one tenth of the preDeMo figure and that too with Rs 50 notes as the maximum denomination.
After the current DeMo shock - which will definitely reduce the cash component to <50% of the preDeMo cash levels by Dec 31st 2016, GOI must release a whitepaper detailing the step by step progression to the <10% cash level in the economy.

Let every unscrupulous individual proud of their capacity to maintain their business in cash economy whine & complain with increasingly rare yet frantic claims of bravado on "still" being able to avoid paying the govt even a paisa of Tax.
Let that cognitive dissonance resonate say the next 3 years in this thread - suarly the khujli displayed will be source of fulsome mirth in these peeareeff dhaghas .

vera_k · Post by **vera_k** » 02 Dec 2016 22:48

A business always has the option of investing back into the business to generate expenses and not pay tax. Amazon is probably the biggest practitioner of this tactic. But this does mean the money is accounted for and is put to productive use somewhere. Plus indirect taxes will have been collected on such revenue.

Akshay Kapoor · Post by **Akshay Kapoor** » 02 Dec 2016 22:54

JohnTitor wrote:
TKiran wrote:You must be self loathing Indian, who doesn't know anything about West. India follows British laws still. Have you ever heard about Donald Trump, a business man who didn't pay taxes for years together. For your information he is the President elect of the United States of America
Seriously? Insults are the last refuge of the out-argued. As far as my nationality goes, let me just say that my only connection to India is through ancestry and distant relatives. So no, I'm not a "self-loathing Indian". Which part of "Do some of the big businesses and people try to evade taxes, sure, but only through legal means." does the bolded part not cover? Trump can get away with not paying taxes because he is doing it using loopholes and not outright lying to IRS/HMRC about how much money his business made.

yensoy wrote:Can we please take the discussion of Running a Small Business, Corruption and Taxation to a different thread? This is really derailing the main focus of the thread, which should be demonetization, printing, distribution and availability of currency, currency alternatives, black money statistics, news and investigations, political reactions & news coverage - domestic & international, RBI/PMO/FM/Parliament roles, and FICN. Anything else is distracting.
Agreed.

Let us please focus on demonetisation and the macro-economic effects.

It's a shame that such criminals like Tkiran are allowed to post on BR. It's people like these who give India a bad name and have the temerity to call others names. It's people like him who are trying to destroy the very fabric of this country and he has ample support in Kejriwals and Mamtas. But I doubt it very much if this chap knows the b of business- creating a product and delivering it efficiently. Rent seeking and pimping is not business !

Bart S · Post by **Bart S** » 02 Dec 2016 22:56

yensoy wrote:Can we please take the discussion of Running a Small Business, Corruption and Taxation to a different thread? This is really derailing the main focus of the thread, which should be demonetization, printing, distribution and availability of currency, currency alternatives, black money statistics, news and investigations, political reactions & news coverage - domestic & international, RBI/PMO/FM/Parliament roles, and FICN. Anything else is distracting.

That is the intent behind such posts. It's basically trolling and spreading FUD.

disha · Post by **disha** » 02 Dec 2016 22:59

T'Kiran is now T'Kiraning this thread. So please do not feed the T'Kiran. Let him rant., currently he is smoking so many gold flake cigarettes which has its effects and rant is all he can do. Nothing more.

Anyway., with the NaMo going for the DeMo., T'Kiran is truly T'Kiraned.

shravanp · Post by **shravanp** » 02 Dec 2016 23:04

btw, Lok Sabha passed IT Amendment Bill and opposition is crying their lungs out. Is this a money bill or would it be subject to Rajya Sabha's atrocities?

Akshay Kapoor · Post by **Akshay Kapoor** » 02 Dec 2016 23:07

It's a money bill. Opp can't do anything

Suraj · Post by **Suraj** » 02 Dec 2016 23:13

shravanp wrote:btw, Lok Sabha passed IT Amendment Bill and opposition is crying their lungs out. Is this a money bill or would it be subject to Rajya Sabha's atrocities?

Money bill. It'll pass without a hitch.

yensoy · Post by **yensoy** » 02 Dec 2016 23:24

Lilo wrote:GOI should simply reduce the face value of cash in circulation to less than one tenth of the preDeMo figure and that too with Rs 50 notes as the maximum denomination.

...and if you ever need to lose weight, just tie your belt really, really tight. It will work just like your idea.

Apart from making everyone uncomfortable and pissed off, it will not do a thing.

Bart S · Post by **Bart S** » 02 Dec 2016 23:27

One thing that has become perfectly clear from the past weeks though is that for ordinary people making ordinary legit expenses that need cash, Rs 100 denominations are perfectly viable, and in fact preferred. Govt should seriously consider capping currency denominations at 100 Rs, or if really needed 200 Rs.

SRoy · Post by **SRoy** » 02 Dec 2016 23:46

Rs. 100 as the highest denomination is enough.

GoI, including the PM, however don't look like wishing to promote cashless / cash-free market place or are clueless on how to do it. Or maybe both.

After initial euphoria and wholehearted support, I don't think this exercise will have much effect on black money in the long run.
All that the demonetisation exercise has achieved till is to needlessly penalise honest tax payers like us that have relied on the banking system.

All I can say is that the banking system failed us. Normal banking has gone out of the window. Why people like us have to cede public space to all manners of thugs and lowlifes in ATM queues or bank queues is beyond me. By what logic every branch and every ATM has to free for all is also beyond any sane rationale. Some ATM's are permanently shuttered.

If this doesn't improve, and it looks like it won't improve, there will be political consequences.

Suraj · Post by **Suraj** » 03 Dec 2016 00:10

"Cashless economy" is a strawman here. Neither Modi nor GoI emphasized any such goal at all. The goal was always to get the entire black economy to present its cash into the formal banking system, with a limited amount of cash released back out to sustain the formal economy's cash component. Of course the reduction in the cash float within the economy implicitly leads to cashless transactions, as does the elimination of cash use in big deals, but the basic cash economy that operates on a day to day basis was never targeted.

Rishi Verma · Post by **Rishi Verma** » 03 Dec 2016 00:14

Nashik co-op bank under investigation for laundering 40Cr bm to white. I hope the shameless corrupt politician behind this is hung from the nearest tree

TKiran · Post by **TKiran** » 03 Dec 2016 00:17

Deleted

SRoy · Post by **SRoy** » 03 Dec 2016 00:27

"Cashless economy" could be a strawman in context of this thread, but in a cash restricted scenario at least "less cash" is natural consequence.

So, in lieu of my hardship I would want to see every dishonest mofo that still insists on cash to be put behind bars, their professional credentials revoked. Beginning with doctors, the most evil lot of our times, totally bereft of any shred of humanity or morality. Maximum number of ground level reports of inconveniences due to low cash availability has come from people caught in medical emergencies.

JohnTitor · Post by **JohnTitor** » 03 Dec 2016 00:45

One idea for reducing the use of cash in real estate transactions would be to fix the taxes, stamp duty etc based on the average price of the area. For instance, if properties in a certain part of Blr, KL cost 5000 /sqft then the tax could be collected as a % of this. This means that irrespective of the actual transaction cost, the "right" amount of tax would need to be paid. It would also mean that the larger the property, the higher the tax. But this would only work if a regular survey of the average transaction price is conducted - perhaps once a year or something like that.

SRoy · Post by **SRoy** » 03 Dec 2016 00:54

Repeat

SRoy · Post by **SRoy** » 03 Dec 2016 00:56

Taxation have to be simplified. No second opinion about it.
Never understood the concept of registration fee, stamp duty. Oh wait ! mutation fee. Of course the annual property tax.

When we buy a property why we can't just pay one reasonable amount, get all the paperwork from a single window and be done with it?

All of these British era laws, breeds contempt for civic authorities and encourage tax avoidance.

Many have said that real estate are a mess and needs to be cleaned up. Need to begin with property laws themselves.

Picklu · Post by **Picklu** » 03 Dec 2016 01:07

I agree with SRoy about the digitization on the merchant end.

There are still a large hold out (only cash or absurd demand like min Rs 700 purchase for card payment with 2% extra ) and if the push/hardship is not bringing them to the digitized side, things will be back to pre nov 8 state from 1st Jan.

Given the location of this dhaga, I won't discuss the political ramification of people's frustration if things go back to the same from 1st Jan after all the hardship but suffice to say that there would be a major loss of credibility (let's not be too comfortable with the TINA factor of Modi)

Suraj · Post by **Suraj** » 03 Dec 2016 01:14

Tax reform is a complex exercise, outside of the scope of this thread. We just finished indirect goods and sales tax reform through the GST . Stamp duty and registration is not part of GST. In any case, stamp duties present a significant one time cost. A regular property tax assessed against sale price with a small inflation-indexed increase each year would be better. Annual property tax in US ranges from about 0.5-3% but it is deductible on your income tax return in most cases.