Currency Demonetisation and Future course of Indian Economy

[Suraj]

MohdKav: you're on notice. I'd rather not warn you , but I strongly suggest you edit the posting calling others fools.

[MohdKav]

If you go by the books, 99.9% of the times there will be no issue.
A section of the population wants to cut the edges. Then they are raided. They got off with bribes earlier.
They are complaining about babus being mafia now.

Coal India Ltd. is notorious for delaying money to retiring officers.
My dad was textbook honest. He retired and got all his money in less than a month.

Honesty is still a very strong currency. If you are in the wrong dont go around pointing fingers at others.

This is delusional stuff. Yes ban BM, tax everyone - which is the way it should be, but saying that if you go by the book, there will be no issue is absolutely bullshit.

I started a company last year and the Sales Tax folks would not give approve my filing, ran pillar to post nothing happened. In the end had to grease their palms or suffer losses. You can do everything by the book and the babus will sit tight on your file and not move an inch unless you oblige them.

Do you know what it takes to get an industrial electrical connection in Noida? Water connection? NOC from Fire department?

This is a great decision which shall hopefully end such corruption but to say that business owners are reaponsible for all this BM is absolutey horse dung.

You have put it far more eloquently than I ever could.
Black money was an enabler for me to run my business legitimately. if that makes any sense.
Getting a building permit, I have been running pillar to post. Even though all my documents are in order, its easy for them to come up with something.
I have unauthorized people occupying some part of my land, its been 7 years, the court have done jackshit.

[MohdKav]

MohdKav: you're on notice. I'd rather not warn you , but I strongly suggest you edit the posting calling others fools.

I am sorry that I am getting on your nerve, and not sticking to the script here. But it is tad bit rich for me to keep quiet when a person threatens to silence myself and then calls me a troll.
I am sorry , I am not in the Black money burned, Everything is hunky dory and corruption is gone bandwagon.
Most people who dont run a business, dont understand how hard it is run something, raise funds, pay salaries, get paperwork in order.

[Gus]

So rahulm - how are the security features ? Is it easily verifiable? The shorter notes should fit the massa wallets better though. Had trouble with notes sticking out with some wallets.

[Chandragupta]

I used to work for a top IT-vity firm of India before I set up my own business and I can tell you somedays I sulk and regret ever leaving my job. It was the best time of my life. Many people here have no clue what it takes to run a business in India.

[MohdKav]

I used to work for a top IT-vity firm of India before I set up my own business and I can tell you somedays I sulk and regret ever leaving my job. It was the best time of my life. Many people here have no clue what it takes to run a business in India.

I was abroad working for a bank. the most idiotic decision i took, was come back and run a business here. My business is all white unfortunately and forcibly my expenses are not white.
I was already out of money, and now I am nearly out of sources to raise money.

[Gus]

If you dont understand how black money is made, and how it will be made in the near future. Please dont respond.
Black money burned. Awesome. But if you think there ends the matter. You are a fool.

Nobody in this thread and not even modi is claiming this is the end. This is part of a series of steps and happens to be a big important step.

Along with transparency in business regulations and interactions with govt machinery and many other steps - ultimately corruption can be significantly reduced. Has this not already happened at the top most level in central govt ?

[rahulm]

After trying 5 times to start a business in India, I have given up. For all,practical purposes, the entire sarkari machinery is a professional extortion racket run by a ruthless rogues gallery.

I have decided the best strategy is to wait for others to start buisnessss, get smart at equities and other instruments and VC and ride the India boom.

As for me, I will continue to have a nice job in a low,inflation, resource rich, strong exchange rate beer guzzling country

[kmkraoind]

I was abroad working for a bank. the most idiotic decision i took, was come back and run a business here. My business is all white unfortunately and forcibly my expenses are not white.
I was already out of money, and now I am nearly out of sources to raise money.

Do not worry, you are just passing a tough phase, once that is over, you will enjoy Amruth. "The darkest hour of the night comes just before the dawn."
From now onwards, your income-expenses both will be white and you can be proud of it.

[ShauryaT]

if government is convince it's not a disproportionate asset.

Further, there won't be anywhere near the same volume of cash printed, to replace what's out there. Not even a percent of what's out there . There's no longer any scope to 'take the new cash and do what was being done before', not on anywhere near that scale.

Suraj: You are looking at it from a governmental and macro economic perspective. Look at it from an Indian person, who has BM - which is mostly hard earned money earned through honest means and saving that money from an utterly corrupt government (local, state and central) and kept for one's own benefit. I am not condoning this but just stating a fact of life here.

In India, the very fact that you have money, even NRI money sitting in NRE accounts with ZERO other activity except for investments in public markets, the tax department flags operations and the harassment ensues for no good reason. Can you imagine what happens to the small manufacturers, traders, retailers. The happiest business people are those who have NO bank accounts and doing business worth crores - all in cash. They never have to deal with the government and are happy for that. My point is, the level of mistrust in handing over money to the government and making it visible to them is to be understood.

Only if enough thought had been put into utilization and channeling of this money into private investments instead of government coffers. I would not be surprised if many people choose to burn a part of this money that they cannot get converted to new tender or deposited through suckers and choose NOT to be visible to the government. If the choice is to say loose 50% of the cash to taxes or burn 50%, then the latter choice would prevail.

[ShauryaT]

From now onwards, your income-expenses both will be white and you can be proud of it.

Most small business people with BM are not ashamed. They are just scared of a corrupt scheming government out to harass anyone with any funds. There is a massive trust deficit and these moves do not do much to heal the divides.

[habal]

all peoples are now complaining that the rs.2000 note is very low quality. The printed paper looks like a photo copy of the note.

Again shopkeepers are unwilling to accept new 2k notes because they are afraid these notes are original or fake.

[MohdKav]

if government is convince it's not a disproportionate asset.

Further, there won't be anywhere near the same volume of cash printed, to replace what's out there. Not even a percent of what's out there . There's no longer any scope to 'take the new cash and do what was being done before', not on anywhere near that scale.

Suraj: You are looking at it from a governmental and macro economic perspective. Look at it from an Indian person, who has BM - which is mostly hard earned money earned through honest means and saving that money from an utterly corrupt government (local, state and central) and kept for one's own benefit. I am not condoning this but just stating a fact of life here.

In India, the very fact that you have money, even NRI money sitting in NRE accounts with ZERO other activity except for investments in public markets, the tax department flags operations and the harassment ensues for no good reason. Can you imagine what happens to the small manufacturers, traders, retailers. The happiest business people are those who have NO bank accounts and doing business worth crores - all in cash. They never have to deal with the government and are happy for that. My point is, the level of mistrust in handing over money to the government and making it visible to them is to be understood.

Only if enough thought had been put into utilization and channeling of this money into private investments instead of government coffers. I would not be surprised if many people choose to burn a part of this money that they cannot get converted to new tender or deposited through suckers and choose NOT to be visible to the government. If the choice is to say loose 50% of the cash to taxes or burn 50%, then the latter choice would prevail.

Black money has been part of the Indian economy, and most honest businessmen and even people who have been pushed by the government, taxes and society.
last week, even if I wanted a person to buy my land in complete white money, I wouldnt find takers, even if I was ready to sell it 20% discount.
Unless and until the government makes, ease of business a reality and ease of finance a reality, businesses will start closing down, jobs will be lost and tax revenue will go down.

Government set fire to black money. Good. But it has collateral damage, unacceptable damage as far as I am concerned.

[habal]

Only property dealers, sarkari bribe pullers, politicians in wait for elections & oddjobs who see heavy cash once or twice a year and then do not see anything at all, do not know how to convert black into white.

Every politician and khandaani industrialist/businessman knows how to turn black into white.

And the way to turn black into white is through exports, nuff said.

[MohdKav]

I was abroad working for a bank. the most idiotic decision i took, was come back and run a business here. My business is all white unfortunately and forcibly my expenses are not white.
I was already out of money, and now I am nearly out of sources to raise money.

Do not worry, you are just passing a tough phase, once that is over, you will enjoy Amruth. "The darkest hour of the night comes just before the dawn."
From now onwards, your income-expenses both will be white and you can be proud of it.

Honestly, at the present moment I rather pay salaries to my staff and make my business stay afloat. Somehow.
What is the government going to do about ease of lending, now that it has burned a parallel economy which used to finance 'legitimate' business to stay afloat. What is it going to do about ease of business and corrupt file pushers. What about extreme complex and over regulations? What about NRI's ?

Non taxed NRI money is competing with my extremely taxed money in India, and the Indian resident is loosing out.
Its easier to be NRI to do business in India than a resident Indian.
These are all serious issues faced by businessmen in India.
Without funds, business will fold, without real estate, raising cash will be difficult.

[Suraj]

Suraj: You are looking at it from a governmental and macro economic perspective. Look at it from an Indian person, who has BM - which is mostly hard earned money earned through honest means and saving that money from an utterly corrupt government (local, state and central) and kept for one's own benefit. I am not condoning this but just stating a fact of life here.

I was not making a qualitative judgement in my response earlier. I'm stating that you're mistakenly calling it money. It's not money anymore. It can't be used as money. It can be utilized to a limited extent for a limited period of time, but must be tendered to a bank somehow, by someone, for it to be exchanged for actual money - the new currency. Further, the rules are stacked up such that you won't get as much cash as you deposit.

It does not matter if intentions are good etc. The stuff in hand is just waste paper that needs to be exchanged. And it will not be possible to exchange it in whole - GoI will require the vast majority of it to be cashless white transactions. There's physically no way to avoid it because they just don't intend to print as much replacement currency notes at all, nor is it possible to print that much in any reasonable time. In other words, it can't be business as usual because you literally don't have physical cash on hand anymore to do what could be done before.

[JohnTitor]

Building regulations for example - some rules can be interpreted in multiple ways, its been made to be confusing on purpose. These were these people make money by exhorting from builders, small time or big time. That hasnt changed. They will still ask for money, heck I was asked a bribe yesterday in GOLD, I am sure as cash comes back into circulation properly, they will take money again.

While I agree with the problems with doing business/bvuilding regulations and what not.. who is to blame ultimately?

You can blame the govt or someone else all you want. But at the end of the day, people themselves are to blame. Take littering and pissing on roads for instance. The same people who do this in India will not dare do it in a western country.

This is a democracy, people get the government they vote for. For 65 years, people voted for looters, theives and anti-nationals who's sole job was to enrich themselves at the expense of the people. They deserve the $hit they are in. NM is trying to clean it - it will take at least 10-15 years before progress can be seen. If as you say you are an honest businessman, then yes you will feel a bit of the pain as the transition happens. Bear with it - your children will have a better country.

[Lisa]

Hopefully GoI takes back Rs2000 note in the same manner in a year or two to make it pretty clear that this is not a once every 40 years thing.

Absolutely correct.

[kapilrdave]

Madhu Kishwar is rumor mongering . There hasn't even enough new cash printed to replace even a fraction of a percent of the BM out there .

In order to succeed you have to park the old cash, get back new cash of same face value and have absolutely no trace of your identity known . It's physically impossible to accomplish because there's not enough new cash in circulation . Even having cash in hand doesn't guarantee you won't be caught when they analyze the deposit data .

She is talking about people who have already converted it to real estate, pushed it into other means, illegal financing and gold. She wants them to be caught

That lady is not trustworthy and I've said this before also.

When PM threatened to do surgical strike on BM holders some days ago, she was ranting that the real looters are politicians and not the businessmen whom are being threatened, and how govt is doing nothing to catch politico's money.

Now that this step is specifically targeted towards hoarders upward to 10 crs - the range from where smallest politics starts - she is whining about the successful settlers who are definitely less than 10 cr walas. Either she doesn't understand the jacksh*t about BM or she has some covert intent. In both cases, she should be ignored.

[Chandragupta]

Yes, the Children will inherit a better country, no doubt. I support Modi's decision completely but at the same time, it would have been better if small businessmen, traders and manufacturers were given a way out on a case by case basis. A lot of businesses will close down. These are small and medium industries who had some part of their business in cash mainly to avoid extortion and harassment by authorities, these are not hawala operators and politicians. They will close down for atleast the next 3-6 months. Many people were financing their businesses from sale of property, a person I know just sold his land in Bhopal to set up a plastic plant, he is gone and in tears. He will have to do something else now.

There is too much collateral damage.

[Patni]

I can understand plight and confusion of small business owners as they will all have to adjust to new condition where there is no cash in hand to pay to corrupt officer and so yes maybe some will have to halt any business if they cant work without permission etc. But i am hoping that it will be Visible when a business stops. As long as a business is viable someone else with enough clout and white money will step in as am sure due to natural demand and supply in huge market it will not happen that everything grinds to stand still! One positive in mid term for SME will be cheaper credit from banks as inflation and landing rates both got to come down least a 100 basis points by end 2017 is my expectation. Most businesses in SME today pays least 11% or more so if anything businesses will see more profitability and growth going forward.

[kapilrdave]

MohdKav, would the easier and cheaper loans available by banks bring the smile back on your face?

[GeorgeM]

Do not worry, you are just passing a tough phase, once that is over, you will enjoy Amruth. "The darkest hour of the night comes just before the dawn."
From now onwards, your income-expenses both will be white and you can be proud of it.

I think we are being overly optimistic here. With extremely high taxes, black money is here to stay. it is like the battle between computer virus maker vs anti virus maker. The edge is thin and constantly moving. Give fake currency makers 6-12 months, playing field will be level again. Few points to note
1. Watch for demonetisation of Rs 100 as well, pretty soon. May be in another 3-6 months. High value notes will be fully overhauled, Because Pakis are busy minting fake 100 notes now.
2. Ultra rich black money owners lost peanuts.
3. Expect more taxes. Already announced today is the airfare surcharge upto Rs8500. PF tax will comeback as it has too much money to be left alone.
4. Remember, corruption and black money cannot be minimized, unless taxes come down. New GST has taxes and cess. Cess keeps the door open for tax over tax for any item in future. For now it is hiding under cigars and pan-masala.
5. Best option - work outside India, send money home as needed. Work in India and pay tax in India is becoming suicidal. Worse in doing business in India and having it all white. I am just flummoxed, flabbergasted, discombobulated etc at this all black will become white, no more black money etc. bandwagon. Must be some strong Idukki gold.

[JohnTitor]

^^ Agreed.

Taxes need to come down substantially and people should pay for what they use. Vehicle owners need to pay road tax + emissions tax. These funds should be used specifically for building/maintaining roads/highways & the environment respectively. Pay for health at point of use or through insurance. Each thing that the government provides needs to be paid for at POU instead of paying through taxes. Problem in India is that there a million taxes and cesses and what not.

Income/corporation tax should be halved or dropped further. The laffer curve is a useful thing to go by here.

Lower taxes will ensure people are not disincentivised from paying their fair share.

[Murugan]

Exchange of old Rs 500, Rs 1,000 notes worth Rs 4,000 allowed only once till RBI review

Read more at:
http://economictimes.indiatimes.com/art ... aign=cppst
http://economictimes.indiatimes.com/wea ... 369778.cms

[pankajs]

I think we are being overly optimistic here. With extremely high taxes, black money is here to stay. it is like the battle between computer virus maker vs anti virus maker. The edge is thin and constantly moving. Give fake currency makers 6-12 months, playing field will be level again. Few points to note
1. Watch for demonetisation of Rs 100 as well, pretty soon. May be in another 3-6 months. High value notes will be fully overhauled, Because Pakis are busy minting fake 100 notes now.
2. Ultra rich black money owners lost peanuts.
3. Expect more taxes. Already announced today is the airfare surcharge upto Rs8500. PF tax will comeback as it has too much money to be left alone.
4. Remember, corruption and black money cannot be minimized, unless taxes come down. New GST has taxes and cess. Cess keeps the door open for tax over tax for any item in future. For now it is hiding under cigars and pan-masala.
5. Best option - work outside India, send money home as needed. Work in India and pay tax in India is becoming suicidal. Worse in doing business in India and having it all white. I am just flummoxed, flabbergasted, discombobulated etc at this all black will become white, no more black money etc. bandwagon. Must be some strong Idukki gold.

Who claimed that ALL black money will become white suddenly? ALL black money held in CASH/currency became white(part of formal system) After midnight of 8th Nov. Does NOT matter if it gets deposited in the bank or not. Lets start with that.

[MohdKav]

Building regulations for example - some rules can be interpreted in multiple ways, its been made to be confusing on purpose. These were these people make money by exhorting from builders, small time or big time. That hasnt changed. They will still ask for money, heck I was asked a bribe yesterday in GOLD, I am sure as cash comes back into circulation properly, they will take money again.

While I agree with the problems with doing business/bvuilding regulations and what not.. who is to blame ultimately?

You can blame the govt or someone else all you want. But at the end of the day, people themselves are to blame. Take littering and pissing on roads for instance. The same people who do this in India will not dare do it in a western country.

This is a democracy, people get the government they vote for. For 65 years, people voted for looters, theives and anti-nationals who's sole job was to enrich themselves at the expense of the people. They deserve the $hit they are in. NM is trying to clean it - it will take at least 10-15 years before progress can be seen. If as you say you are an honest businessman, then yes you will feel a bit of the pain as the transition happens. Bear with it - your children will have a better country.

What do you do John?

[Murugan]

Despite (hostile) govts, people are doing brisk business without following govt rules/regulation or paying excist/tax

[MohdKav]

She is talking about people who have already converted it to real estate, pushed it into other means, illegal financing and gold. She wants them to be caught

That lady is not trustworthy and I've said this before also.

When PM threatened to do surgical strike on BM holders some days ago, she was ranting that the real looters are politicians and not the businessmen whom are being threatened, and how govt is doing nothing to catch politico's money.

Now that this step is specifically targeted towards hoarders upward to 10 crs - the range from where smallest politics starts - she is whining about the successful settlers who are definitely less than 10 cr walas. Either she doesn't understand the jacksh*t about BM or she has some covert intent. In both cases, she should be ignored.

You really think salaried class dont have black money ? You think anybody who bought land or sold land inherited or otherwise dont have black money ?
You think Doctors, lawyers dont have black money.
Hoarders have useful and important play in the Indian economy, they used the money for easy lending and business to stay afloat. Ofcourse they were not doing it for a service, rather because there was a demand. Legitimate sources of money are cumbersome and harder to come by.
So you took away this easy source of finance for business, how are you going to fill that void ? It was already a tough market, businesses will start closing down in months to come, jobs will be lost and businesses will close down. So how does the government stop from such an eventuality ? They just it be? Or do they make very fast structural reforms and easy money available ?

If what Modi to the aviation ticket surcharge is any indication, it doesnt look good. The idea should be less taxes and ease of business; not the other way around.
It was government's own policies which created black money, if he goes for higher taxes and harder regulations, it will keep on creating black money. 10 years from now; this reset would look futile .

[MohdKav]

Despite (hostile) govts, people are doing brisk business without following govt rules/regulation or paying excist/tax

I suppose you dont run a business either. Also if you think all businesses are the same, then there is no point.

[rahulm]

Security features as they struck me:


Front side:
See through register where the numeral 2,000 can be seen when note is held against light. Ok.

Latent image of 2,000 can be seen when the note is tilted. Can't tell with naked eye

Micro letters 'RBI' and '2,000'. Can't see.

Colour shift security thread with 'RBI' and '2,000'. Cant read text on thread.

Watermarks of Mahatma Gandhi and electrotype 2,000 numeral. Yes.

Denominational numeral with Rupee symbol, 2,000 in colour changing ink. Yes


For visually impaired:

Rectangle with Rs.2,000 in raised print on right. Letters don't seem raised enough. Should ask visually impaired to certify.

And finally the entire note is a conformal nano passive transmitter the size is cut perfectly to resonate at a secret frequency and the colour thread is a end fed open wire

[GeorgeM]

ALL black money held in CASH/currency became white(part of formal system) After midnight of 8th Nov. Does NOT matter if it gets deposited in the bank or not. Lets start with that.

Yes, that is the correct thinking. But the same thinking is not what the 'euphoria' folks have. They think all black money.
Also the rider is, this is a temporary win. In a few months, again black money in cash will start to build. There has to be a continuous process, while encouraging e-money. When I can pay the local vegetable cart vendor with m-pay or pytm, mobile to mobile, that will be a giant step. But so long as taxes are high, the vendor will be very reluctant to accept e-money. So he will start building the black money cash reserve again. Probably already started.

[Murugan]

No all businesses are not same, and I know the pain, especially if you have to do lot of VAT/ST/IT jamela. What I say is things are not just that bad and despite all these problems business community has prospered.

[kapilrdave]

You really think salaried class dont have black money ? You think anybody who bought land or sold land inherited or otherwise dont have black money ?
You think Doctors, lawyers dont have black money.
Hoarders have useful and important play in the Indian economy, they used the money for easy lending and business to stay afloat. Ofcourse they were not doing it for a service, rather because there was a demand. Legitimate sources of money are cumbersome and harder to come by.
So you took away this easy source of finance for business, how are you going to fill that void ? It was already a tough market, businesses will start closing down in months to come, jobs will be lost and businesses will close down. So how does the government stop from such an eventuality ? They just it be? Or do they make very fast structural reforms and easy money available ?

If what Modi to the aviation ticket surcharge is any indication, it doesnt look good. The idea should be less taxes and ease of business; not the other way around.
It was government's own policies which created black money, if he goes for higher taxes and harder regulations, it will keep on creating black money. 10 years from now; this reset would look futile .

My post was about Madhu Kishwar's duplicitous tweets which has nothing to do with what I feel about the utility of the BM hoarders in economy.

But now that you asked me, let me try to say the same thing which is already said by other but in bit different words. And I promise this is my first and last.

Those who hoarded money in RE also have lost a big chunk already. First in form of reduced prices which is inevitable and second, whenever in future they want to sell it is going to be very hard for them to sell in black, at least that's what the plan seems to be. So they have to pay that much extra tax on income. So while they have not lost the entire amount, they still stand to lose significantly, and the direct beneficiary will be the one who has everything white.

Those who converted into gold, well too bad that got lucky but they are probably not that big offenders either. So okayish.

In a nutshell, the system is being changed from an economy excessively financed by BM, to most of the economy financed by WM. Rest of the things remain same more or less, minus the criminals.

Your whine about excessive taxes is red-harring only. What did you thought, govt announcing the demonetization and reduction in taxes simultaneously? The taxes will be reduced when the tax base increases. Simple.

Actually you should be happy about this step by govt for the situation you have described for yourself. You will get cheaper loans and reduced taxes for your business by legit lenders. Your momentary pain is understandable, but I wish you realize that it's momentary.

[Patni]

Well i think a good start is made and if more people/businesses are pulled into tax net and start paying taxes, with current GoI investing in infra and security, as it is already doing, this can and will provide a good leg up to economy. I believe BJP core think is pro-business and always will remain so as it did started out as "Bania party".

[yensoy]

3. Expect more taxes. Already announced today is the airfare surcharge upto Rs8500.

I did a double take when I saw that news item, then realized it's per FLIGHT not per passenger. Airline will pass it down to passengers but it will be like Rs100/head. Piss poor reporting.

Taxes wise, boss I file income taxes in 3 large countries and let me assure you that Indian tax rates are the lowest. If you are complaining about Indian IT rates, you have no idea about the world (and please don't compare with islands of prosperity like Dubai or Singapore).

I think the level of corruption in state and local level is much higher than at the central level. But this discussion is not about corruption; that will need other means to fix and from the past actions I believe Modi very much has that as a target.

[Murugan]

Rs 53000 crore received by SBI as deposit in last two days (CNBC Tweet)

CNBC-TV18 ‏@CNBCTV18Live 2h2 hours ago
. @TheOfficialSBI Says Received Total Deposits Worth Rs 31,000 Cr On Thursday, Received Rs 22,000 Cr Today

[Chandragupta]

The hope is that loans will come easy now with low interest. Thats the only way to refinance businesses else thousands will close down and thousands more will lose jobs.

[kvraghav]

if SBI got 53K crores, then all banks together would have got more than 2 lakh crores in just 2 days. All money will either be deposited or exchanged. People are just ingenious.

[jagga]

I doubt most people here even know how difficult is to run the business in India. They all are going gaga about this step, of course, they get their wages in white. Who cares, about small business and traders who are day and night hounded by IT officials. Some are saying if you do everything by book you have nothing to worry! My advice to them start a business in India, go 100% by book and be a satyavadi Harishchandara and see if you and your family can survive. It's a professional extortion racket run by devils! I am hearing so many families are in deep trouble. All the cash lying in these homes is not profit, it was the necessity to run the business. People who worked hard all their lives are all of sudden seeing destruction of their efforts. For some its matter of life and death!