Currency Demonetisation and Future course of Indian Economy

[Marten]

Who says they will be investigating AND prosecuting? IRS officers are the same as the other IPS or IAS officers. ALL of them are in the top 10% of BM owners. This rat hunt includes the hunters too. Appreciate the irony.

The tracking is not being done by IT Dept. Please remember CPC is run by Infy. hehe.
Adding two teams overnight to do BIG DATA anal-e-sys is not a big deal at all. At this point, all the buzzwords that we chinnaITyVity folks like to throw around are going to be witnessed in real world implementations.

[kmkraoind]

My main takleef is that the IT Department has played a huge role in the creation and spread of black money over the years. And now that very same group of people are in charge of investigating the incoming deposits?

Yatha Raja, tatha praja.

When people/workers think their higher up is crook, they too will resort to corrupt practices. If the higher ups are honest, the behavior reflects down upon. In our case, honesty will not creep overnight, but slowly babus and people will become honest and question other's corrupt practices. Had same demonitisation was brought in during Sonia regime, people will be sniggering and questioning intent of it, but see how Mango man is okay to bear some short term pain and are wholeheartedly supporting Modi.

India pulls 500, 1,000 rupee notes to fight graft - Dawn.com

Just go to the comments sections, and see comments made by Pakistanis.

[pankajs]

There was this waPo fart where one fellow is going around Delhi depositing 49,000 per Bank account for his employer. The FOOL is painting a BIG target on his backside and will ultimately lead GOI to his employer. Such a simple doge will surely be first to be tested by Income tax dept.

Folks still don't get it!

[Suraj]

All GoI needs to do is announce that 'carriers' will be prosecuted and that they will be lenient or even give a reward if the carrier squeal . Put the BM oozing fatkats against the mango man whom they're trying to con . Watch the fun .

[Rishi Verma]

I think gov can get 100% old notes back. Suppose 100cr was burned by someone. After deadline that 100cr is known not to have returned, gov can print that money pay itself right?

[Suraj]

They don't need the money to be printed again and circulated . There's no real purpose to doing so . It's just inflationary . The deflationary effect of money being burned benefits everyone . Well except the guy burning it and the environment . The rest of us see a rise in the real value of our money because some of the black money that competes with it just went up in smoke .

[Karthik S]

IMO, liability amount will come down from RBI balance sheet.

[pankajs]

Whatever happens 100% of the currency portion of the BM will be pulled back into the formal system in one shot. The RE/Gold/etc part of it will start moving back into the formal system as and when they are liquidated.

Of course nothing can be 100% especially hard assets. Some of it will flee the country.

[Suraj]

Can't flee the country either. Rupee is not fully convertible on the capital account. On the current account GoI's happy to keep an eye on trade invoicing. To exchange for foreign currency they have to identify themselves. Hawala channels ? Nope. They're kabadiwala channels now, dealing in waste paper. And the money sitting abroad ? You can't bring that back except through official channels either. The kabadiwala can't help you anymore.

Fundamentally nothing can be done on a great scale. All kinds of things can be done on small cottage industry level, and that's ok. Too small potatoes to give a big deal about.

That's the beauty of the whole thing. GoI didn't bother with chasing down every last criminal and activity. They simply invalidated the medium of exchange. Modi just said 'arrey, see that money in your hands ? Poof! It's useless now. Hand it over and identify yourself and we'll give useful money back to you slowly after confirming it's honest money'.

[saip]

This is the Reserve Bank of India Act, 1934. It gives the procedure for declaring notes as not legal tender.

26. Legal tender character of notes.
(1) Subject to the provisions of sub-section (2), every bank note shall be
legal tender at any place in 4[India] in payment or on account for the amount
expressed therein, and shall be guaranteed by the 5[Central Government].
(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].

In 1978 they went the way of Ordinance which was replaced by an Act even though all they needed was a Gazette notification. At that time it looks like the time given was like 5 days! Now it is ten times that much. But today the currency to be exchanged is more than ten times.

[disha]

I remember my father in 80s spent some 100Rs. to get a single 1000Rs. crisp note - a single note that he later gifted to his sister. Just for the fun of it.

[SBajwa]

I wish they would make plastic currency like that of UK and Canada.That would be very hard to forge!

I think that is what it is. Polymer money

https://en.wikipedia.org/wiki/Polymer_banknote

[disha]

Okay math questions for all the BM hoarders on this forum

How many 2.5 lakhs are there in 2.5 crore?

Somebody has to make 101 transactions under different ids and then ask them to pay back. If you are gali-ka-goonda type., then maybe you will muster some 25 very trustworthy non-squealers people with Jan Dhan account and unique id and ask them to deposit it and then retrieve it later. Maybe you can give them 50k Rs. cut for their efforts. Still you loose some 75% of your BM hoard!!

If you are bigger - say colony-la-liquor-baron type., then you may have 25 crores. So how many transactions? 1010 transactions under different ids. Now you have to find some 250 very trustworthy non-squealers people with Jan Dhan account and unique id. Your problem went 10x. And still loose some 75% of your BM hoard!

Now think if you have 250 crores (I have heard figures in 1000s of crores!), so your problem is 100x - that is to retrieve 25% of your hoard without a single leak and retrieval., you have to find 2500 highly committed, very trustworthy non-squealers people with JDAM.

Now imagine if are Maya/Mamata and have 2500 crores. You are toast. Get 25000 people first. And still loose some 2000 crore. When 25000 from a single city/town/district deposit some 500 crore over a week - it sure will trigger an alarm. Further, you have to move that much amount of cash securely among 25000 people. Let us say each of them is 6 mins drive away from the nearest "BM Source" and the "BM Source" has to accompany the "BM conduit" to the bank which is 4 mins away., a "BM Source" can manage say 6 people in an hour. Let us say 10 hours are open for banks - so a single "BM Source" can manage 60 transactions in a day. Or 600 in 10 days. You will need 40 BM Sources to move 500 crore in 10 days. Note that this is single use ids., since if you use the same id twice - tax man will come and ask the BM Conduit on how did the conduit get 5 lakhs in say 2 days.

---

On August 2016., NaMo said that he will give a strong injection to remove Black money termites. Here it is not an injection., a complete pest treatment.

---

If Indian Economy is 2T$ and another half of it is unaccounted - that is 1T circulating around or parts of it lying in lockers or under bed., my estimate is that with this destruction of black money wealth - government capital account inflow will improve by some $ 250 Billion. Basically., GOI does not have to borrow that much from RBI - in effect., it has already borrowed that much from RBI.

What has happened with this Modi's surgical strike is that GOI suddenly discovered it has some $250 Billion under its pillow which can now be used. If it is used for infrastructure - may be give a billion dollar to each smart city project or build more coaches/rails/roads or hospitals or schools - it will add 2% point to its GDP. Who said Indian economy will not be in 10% GDP by 2018? My bet is at the dawn of 2019 - Indian economy will be growing at 10% GDP with 3% retail inflation.

So hang on to your dhotis and prepare for a launch into 4T $ economy by 2020. Leapfrogging, France, UK and Germany and knocking at the doors of Japan. By 2020.

[MohdKav]

There is going to be a real estate crash, 50% ?
Is the Indian Government ready to crash the real estate industry which provides so much jobs and taxes ?
What will banks do with so much recapitalization ? Its not only black money which is coming back into the system, but also people who never was in the banking system.

[salaam]

There is going to be a real estate crash, 50% ?
Is the Indian Government ready to crash the real estate industry which provides so much jobs and taxes ?
What will banks do with so much recapitalization ? Its not only black money which is coming back into the system, but also people who never was in the banking system.

What is your point? Above is another example of your jumbled up analysis and contradictions.

[Rishi Verma]

Arun Jaitley was on cnn-18 today, he mentioned that depositors up to Rs2L won't be asked any questions. Why?? Even 20,000 should be asked "bhaiyya kisne diya, bua ne ya chacha ne"

PS bua is Maya, Chacha is Shivpal

[MohdKav]

There is going to be a real estate crash, 50% ?
Is the Indian Government ready to crash the real estate industry which provides so much jobs and taxes ?
What will banks do with so much recapitalization ? Its not only black money which is coming back into the system, but also people who never was in the banking system.

What is your point? Above is another example of your jumbled up analysis and contradictions.

Job loss and tax loss from real estate industry isnt a big loss?
Is there going to be a real estate package? Such as better loan scheme's for real estate companies or housing loans?
What about that is so difficult for you to understand ?

[salaam]

What is your point? Above is another example of your jumbled up analysis and contradictions.

Job loss and tax loss from real estate industry isnt a big loss?
Is there going to be a real estate package? Such as better loan scheme's for real estate companies or housing loans?
What about that is so difficult for you to understand ?

You don't want a discussion. You are just hurt and venting your frustration.

All your questions are hypothetical.

Let the dust settle before crying about imaginary tax and job losses.

[Suraj]

There is going to be a real estate crash, 50% ?
Is the Indian Government ready to crash the real estate industry which provides so much jobs and taxes ?
What will banks do with so much recapitalization ? Its not only black money which is coming back into the system, but also people who never was in the banking system.

Of course they're ready to accept the consequences of their actions. They already performed the action. Why would you ask such a question after the fact ? If you don't like the action, just vote for someone else .

A drop in house prices helps millions of people who have been priced out of the market.

[Atmavik]

There is going to be a real estate crash, 50% ?

So be it. my family invests in real estate but i still support this move.

This will make housing more affordable for Teachers, soldiers, bank employees and scientists. these people are the real nation builders i am happy for them.

[MohdKav]

There is going to be a real estate crash, 50% ?
Is the Indian Government ready to crash the real estate industry which provides so much jobs and taxes ?
What will banks do with so much recapitalization ? Its not only black money which is coming back into the system, but also people who never was in the banking system.

Of course they're ready to accept the consequences of their actions. They already performed the action. Why would you ask such a question after the fact ? If you don't like the action, just vote for someone else .

A drop in house prices helps millions of people who have been priced out of the market.

You didnt get what I was trying to ask and understand.
They have performed it, but are they ready to annhiliate the real estate industry (will it crash 50% )
Do you foresee governmental schemes/incentives for the real estate industry ( revival package) especially when there is capital in the banks as well as to promote infrastructure and white money based industry ?

[MohdKav]

Job loss and tax loss from real estate industry isnt a big loss?
Is there going to be a real estate package? Such as better loan scheme's for real estate companies or housing loans?
What about that is so difficult for you to understand ?

You don't want a discussion. You are just hurt and venting your frustration.

All your questions are hypothetical.

Let the dust settle before crying about imaginary tax and job losses.

I am not in the real estate business.
Though I do own land. I would like it to hold value, I am human, I am selfish. I didnt buy it in black money either, didnt need to, since I bought atleast 15 years ago.

[Suraj]

You didnt get what I was trying to ask and understand.
They have performed it, but are they ready to annhiliate the real estate industry (will it crash 50% )
Do you foresee governmental schemes/incentives for the real estate industry ( revival package) especially when there is capital in the banks as well as to promote infrastructure and white money based industry ?

No, with all due respect, you don't understand what you're asking. One asks 'am I ready for this' before doing something, not after it. The action itself implicitly answers the question.

GoI needs no relief package measures here. When prices of a much sought after asset falls, it creates its own demand. Demand has never been an issue in real estate when the price is right. With your claimed '50% drop' there will be bidding wars and perhaps even fistfights over multiple buyers of houses.

[Prem]

http://www.timesnow.tv/the-newshour/deb ... ence/51682

Is this the single biggest reform since independence?
Lord Desai says it should be done periodically.

[MohdKav]

You didnt get what I was trying to ask and understand.
They have performed it, but are they ready to annhiliate the real estate industry (will it crash 50% )
Do you foresee governmental schemes/incentives for the real estate industry ( revival package) especially when there is capital in the banks as well as to promote infrastructure and white money based industry ?

No, with all due respect, you don't understand what you're asking. One asks 'am I ready for this' before doing something, not after it. The action itself implicitly answers the question.

GoI needs no relief package measures here. When prices of a much sought after asset falls, it creates its own demand. Demand has never been an issue in real estate when the price is right. With your claimed '50% drop' there will be bidding wars and perhaps even fistfights over multiple buyers of houses.

So you expect a 50% drop in real estate values ? In kerala mostly 60 : 40 White : Black .

[Suraj]

Dude, 50% is YOUR claim.

[MohdKav]

Dude, 50% is YOUR claim.

I am asking for your opinion or your analysis, I am trying to find an informed opinion.
This maybe because of textual nature of a forum such as this but I am here trying to fill the holes in my understanding of this situation.

[Suraj]

My informed opinion is to wait and see, like everyone else says. If you're looking for a magic formula that tells you how much your property changes in value, there isn't one.

[ashbhee]

I wish they would make plastic currency like that of UK and Canada.That would be very hard to forge!

I think that is what it is. Polymer money

https://en.wikipedia.org/wiki/Polymer_banknote

Thanks for the clarification SBajwa Ji, that is a relief! Have you gotten hold of any yet?

[sohamn]

No, with all due respect, you don't understand what you're asking. One asks 'am I ready for this' before doing something, not after it. The action itself implicitly answers the question.

GoI needs no relief package measures here. When prices of a much sought after asset falls, it creates its own demand. Demand has never been an issue in real estate when the price is right. With your claimed '50% drop' there will be bidding wars and perhaps even fistfights over multiple buyers of houses.

So you expect a 50% drop in real estate values ? In kerala mostly 60 : 40 White : Black .

You are totally convoluting your questions. Why do you think if real estate price crashes then people will be out of jobs? Instead I think it will be a real estate boom, every tom dick and harry will line up to buy apartments from the huge unsold property market. Furthermore, you are saying just because there could be some problem in some sector I will not try to resolve the single biggest problem plaguing our country.

Remember this is not a crash because the demand has dwindled, this is rather a price lowering mechanism. So, instead this will stir up demand in the sluggish market. Hence, it will create more jobs.

Unless of course you have more than 2.5 lacs in high denominations and you don't know what to do. Then your grudge is legitimate but your money is not.

[MohdKav]

So you expect a 50% drop in real estate values ? In kerala mostly 60 : 40 White : Black .

You are totally convoluting your questions. Why do you think if real estate price crashes then people will be out of jobs? Instead I think it will be a real estate boom, every tom dick and harry will line up to buy apartments from the huge unsold property market. Furthermore, you are saying just because there could be some problem in some sector I will not try to resolve the single biggest problem plaguing our country.

Unless of course you have more than 2.5 lacs in high denominations and you don't know what to do. Then your grudge is legitimate but your money is not.

Grudge ?

I need to raise cash for my business, my option of selling my land moreover gone and getting loans look bleak. Ofcourse, as any person who is in position, would be worried; its quiet natural especially when you are a small businessman with no black money with salaries to pay and with govermant servants who want to harass you because they lost money in this event.

[JohnTitor]

Dude, 50% is YOUR claim.

I am asking for your opinion or your analysis, I am trying to find an informed opinion.
This maybe because of textual nature of a forum such as this but I am here trying to fill the holes in my understanding of this situation.

There won't be a 50% drop - I wish there would be but my estimate is that it will be 25-30%

The reason I say this is that there is plenty of demand. India, has a huge population and about 300m are now middle class. Falling asset prices will create demand and ensure that the drop will not be significant. Even in 2009, the drop was no more than 30%.

As far as job losses go, that is not the case. My friend works with a major developer in blr. Most developers are sitting on huge inventories but still the prices haven't fallen. His estimate is that there are over 15-20k flats on the books in the top 5 developers. Even then, there is a labour shortage in this sector. So you need not fear job losses. A 25% drop will be a welcome for new home buyers.

[sohamn]

I still don't understand -
1) Why selling your land looks bleak? - the demand doesn't go down in the medium term ( > 6 months )
2) Why is getting loan looks bleak? - the bank would still take your property at market value as a reverse mortgage
3) Why is it difficult to pay salaries ? - you can wire the money to each employees bank, instead of paying cash.

Look man, if you don't have black money and can account for all income source then you shouldn't be worried. You can get all your money back. Yes, you will have difficulty for 3 months especially if you are transacting via cash ( which you should have avoided for multiple reasons ) - but in the medium to long run - your money is safe and it helps the economy tremendously.

[Suraj]

Why would getting loans be bleak ?

Lets have some perspective here. There are a lot of people like you who are impacted short term. On the other hand there are a lot of big fishes who accumulated thousands of crores in benami cash who are currently sitting on piles of what's worth less than toilet paper. Those lakhs of crores of money can no longer push up the price of every daily essential from dal to milk to bananas, all the way to the prices of houses and other immovable property.

You assert that your concerns are selfish. Fine. None of us are obligated to take further time to address that, though. There are a large number of people who are impacted and seek some clarity. It's only been two days. No one can help you right now, except yourself.

[nachiket]

I don't understand why selling your land is not an option anymore. Has your land value already dropped significantly? Were you planning on a cash transaction? Your arguments don't make sense.

[shyamal]

My maid went to bank this morning to exchange cash. Queued for four hours and got Rs 2000 - all in 100s and 10s. She is very happy about the whole thing.
Also - I have spoken to lots of people today - poor and middle class. About 90% are happy about it though many had to face small inconveniences.

CPM leaders who have posted on FB ridiculing this step are getting some "love" - even from their own supporters.

[nachiket]

While I'm by and large extremely happy with this nuclear strike on black money by Modi, I do have one thing to critique. I don't think they should have publicized that cash deposits of 2.4 lakh will come under I-T dept. scrutiny or that deposits of 10 lakh or more will invite a 200% penalty.
I-T dept. does not need to publicize what they are going to do. They could have waited till after Dec 30 and then dropped another bombshell on those who thought they could get away with depositing the cash and suddenly found that their account was "frozen pending investigation" or something. This would have ensured that more black money would enter the banking system and higher windfall to the govt. in terms of penalties. Now a higher percentage of the money is going to get burnt or discarded.

[saip]

Banks are open this Saturday and Sunday, it appears.

[LokeshC]

While I'm by and large extremely happy with this nuclear strike on black money by Modi, I do have one thing to critique. I don't think they should have publicized that cash deposits of 2.4 lakh will come under I-T dept. scrutiny or that deposits of 10 lakh or more will invite a 200% penalty.
I-T dept. does not need to publicize what they are going to do. They could have waited till after Dec 30 and then dropped another bombshell on those who thought they could get away with depositing the cash and suddenly found that their account was "frozen pending investigation" or something. This would have ensured that more black money would enter the banking system and higher windfall to the govt. in terms of penalties. Now a higher percentage of the money is going to get burnt or discarded.

Which btw will lower inflation.

[sum]

^^ You may be right but honestly, we dont know what other bigger bombshells are already about to be unleashed yet.

This is just reminding me of how a cat plays with a mouse it catches to teach its kids where it keeps allowing it to run( the kittens try to softly paw at it since they are still learning to hunt) and then mom cat keeps flicking it back with a paw into the hit zone once its the mouse gets a bit far away from the kittens.

After a while of false hope, the mouse just gives up and lietrally rolls over to end the misery faster