Currency Demonetisation and Future course of Indian Economy

[Bart S]

I don't know what the editor is thinking, but if the total currency of 500/1000 bills in circulation is 15 lakh crore, how can 14 lakh crore be black money. Even if it is, any thing less than that amount deposited is good as it is less liability for the govt and it is not the same as getting away.

I tend to agree with you ... there is a mismatch somewhere in the editor's calculation.

If I am not mistaken, that was from the Hindu or Businessline. We know where their sympathies lie, so it's expected that they would try and put some spin on it.

[Supratik]

I can't believe that some guys on a forum called "Bharat Rakshak" are actually in favor of continuation of the black economy. Cannot remember this type of degeneration in the last 20 years on this forum. If you have to tackle the problem you have to start somewhere and some people will be hurt.

PS: The same people who take bribes from the businessmen are also see their stack burn. So some have suggested that this should be done periodically till the overwhelming majority enter the white economy. So this may not be a one off thing. Currently 4% of the global economy is cash-based. In India it is 12%. I expect some people to now move to the cash-less economy and some going back to the black economy till the next surgical strike.

[rahulm]

Our jugaad skills are stuff of legend, as is our capacity to rationalise any illegal behaviour/action.

[SaraLax]

I tend to agree with you ... there is a mismatch somewhere in the editor's calculation.

If I am not mistaken, that was from the Hindu or Businessline. We know where their sympathies lie, so it's expected that they would try and put some spin on it.

Well -it is the Businessline, which IMHO is not a left leaning business newspaper even though the HINDU is one heck of a stubborn leftist news paper (the grating Guardian of India that even resorts to lying to tarnish the current government and shamelessly issues corrections one week later).

[Rishi Verma]

Just get a electricity connection with your honesty and white money in business premises. Of course, you will remain a harishchandra , premises wont have electricity and hence no black money! Simple!

JaggaJi, sorry to hear of the incident involving your family in the past. Does it mean nothing should be done? I have a consulting business and I deal with many small manufacturers in India. They are universally supporting this news. One guy said he had to pay his employees in cash, suddenly out of fear of surgical strike the employees next week will open bank accounts under jan-dhan and want to get paid in cheque but biz owner said he can just go electronic transfer!! Talk about collateral benefits!!!!!

[Chandragupta]

I can't believe that some guys on a forum called "Bharat Rakshak" are actually in favor of continuation of the black economy. Cannot remember this type of degeneration in the last 20 years on this forum. If you have to tackle the problem you have to start somewhere and some people will be hurt.

PS: The same people who take bribes from the businessmen are also see their stack burn. So some have suggested that this should be done periodically till the overwhelming majority enter the white economy. So this may not be a one off thing. Currently 4% of the global economy is cash-based. In India it is 4%. I expect some people to now move to the cash-less economy and some going back to the black economy till the next surgical strike.

Hold your horses. I don't think anyone is opposing this step, I personally am elated that someone finally had the balls to do something like this.

But damage to the SME sector is real and will happen as collateral damage. Some of us are just saying that a majority of these businesses were pushed to black by a system that extorts rather than supporting and managing. Thats all. And some here cannot accept it despite never having run a business in India and are spewing idealistic nonsense.

I wonder if these are the same folks who have babus in their family and their BM is in form of RE and gold and are thus comfortably placed.

Eitherway, nobody is opposing the surgical strike on BM. About damn time.

[jamwal]

Raids started in small towns too.

Income tax raid at jewellery shops in Jain bazaar, Jammu
As part of it’s drive against errant jewelers, income tax department has raided atleast three shops in Jain Bazar, as of now. The recoveries haven’t been reported, as the raid is is till in process. The IT officials are authenticating the bills lying with the shop owners. It has recently come to the notice of IT department that some jewelers have been selling gold without proper invoice.

Also read : Çlose watch being kept on Hawala money, DGP alerts against cash laundering

Also, owing to the new demonetisation policy of Rs 500 and Rs 1,000 notes, the Income Tax (I-T) department on Thursday conducted surveys on jewelers and suspected hawala operators across Jammu and Kashmir.

There have been reports of illegal profiteering by discounting of money, sale of gold at an up to 60 per cent premium, and sale of jewellery for over Rs 2 lakh without PAN details.

When IT officials reached Jain bazar, many a shop owners shut their shops, in fear that the IT officials will interrogate them, some of whom even went on to the extent of fleeing from the spot. Similar raid is also under process at Gandhi nagar jewelry shops.

http://u4uvoice.com/income-tax-raid-at- ... aar-jammu/ - Income tax raid at jewellery shops in Jain bazaar, Jammu

[Bart S]

I can't believe that some guys on a forum called "Bharat Rakshak" are actually in favor of continuation of the black economy. Cannot remember this type of degeneration in the last 20 years on this forum. If you have to tackle the problem you have to start somewhere and some people will be hurt.

PS: The same people who take bribes from the businessmen are also see their stack burn. So some have suggested that this should be done periodically till the overwhelming majority enter the white economy. So this may not be a one off thing. Currently 4% of the global economy is cash-based. In India it is 4%. I expect some people to now move to the cash-less economy and some going back to the black economy till the next surgical strike.

Precisely. And are in favor of continuing black money, citing the excuse of corruption. The foundation of corruption is black money, in a sense. How many corrupt officials will be ready to take a cheque or bank transfer for their bribe? Obviously there will still be corrupt people, but cutting black money will make it that much more hard for them to do that. Till now it was just too easy, in fact it was harder to be honest.

Along with GST, expect a lot of the corruption and parallel economy to drastically reduce. And I hope the government continues on the reform path and keeps attacking all forms of corruption and inefficiency.

Also, those who are talking about the anger of the BM-using classes, are ignoring the very real happiness amongst the masses. For too long they have been shafted by these folks, and if you talk to the average person on the street, they are absolutely delighted that for once the boot is on the other foot. These are the people who vote in numbers, and the net result will be good for the BJP next time the polls come around.

[pankajs]

As for the mop-up of old ₹500 and ₹1,000 notes, any sum less than ₹10 lakh crore flowing back into the banks would suggest that the hoarders have somehow got away. The amount is calculated on the assumption that black money, according to 2007 World Bank estimates, is 24 per cent of the GDP, or ₹34 lakh crore in 2015-16, of which the cash component is estimated at 40 per cent or ₹14 lakh crore. We may assume that 30 per cent of this money will not return to the system, fearing investigation by income-tax authorities, which would leave us with ₹10 lakh crore. It is also worth noting that black money cannot be unearthed merely through this step, as those at the apex of the pyramid have devised smarter ways of squirrelling their wealth away. In order to prevent a shift in concealment from cash to property, laws need to be tightened as well.

I don't know what the editor is thinking, but if the total currency of 500/1000 bills in circulation is 15 lakh crore, how can 14 lakh crore be black money. Even if it is, any thing less than that amount deposited is good as it is less liability for the govt and it is not the same as getting away.

I don't know how that fellow got to publish this logic. If the BMers hold back on Cash what are they going to do with?

Right from kabadi wala up to Jwellers and builders no one is going to touch it. It is dead money and whatever does not come back into the formal banking system by March 2017 is lost on the holders for ever. At the same time GOI/RBI can retire the an equivalent liability and get 100% free pass for that amount.

[putnanja]

If I am not mistaken, that was from the Hindu or Businessline. We know where their sympathies lie, so it's expected that they would try and put some spin on it.

Well -it is the Businessline, which IMHO is not a left leaning business newspaper even though the HINDU is one heck of a stubborn leftist news paper (the grating Guardian of India that even resorts to lying to tarnish the current government and shamelessly issues corrections one week later).

Actually, after Malini P, the editor of The Hindu was removed, the Mukund Padmanabhan, the editor of The Hindu Business Line became the editor of The Hindu, while Raghavan Srinivasan, the senior Associate Editor of The Hindu Business Line became its editor. The Hindu's editorial or its left&China leaning hasn't become any less due to that.

[madhu]

I feel next step will be direct deduction of all the tax with penalty for the account that are over 2.5L deposits and ask people to clame it by showing proof….
Till now Gov use to go behind people asking to pay tax and get rest from now on it will be people who have to run behind Gov to recover their money.

The feeling is there will be continuation of this 10,000/- cap after 1 jan also. This will ensure not much cash is in the had to get converted to black and people are forced to go cashless transitions
Interesting time ahead

[habal]

Cash economy will cease after this. People may deal in foreign exchange or Gold from hereon.

Much of this will result in economic contraction.

[hanumadu]

Most people with small amounts must have already deposited their amounts and it comes out to be 53k in sbi. Will we see a tapering down? Is the big money yet to come? How will all this end? The suspense is killing. . 49 more days to go.

[Supratik]

I still remember the angry looks and abuse that I got for asking bills for things I bought from stores. Overwhelming small businessmen don't give receipts for thins that they sell. So they are as much part of the problem as the corrupt govt officials. It is difficult to feel sympathy for them.

[habal]

Don't really blame them, it is really difficult to do honest business with IT and Sales tax folks in this country. This is a fact of trade in this country.

[kvraghav]

Why would traders keep govt babu's black money with them? The cash is withdrawn and distributed. The expenses are only cooked to show that amount as expense but it is never held as cash. What is held as unaccounted cash is actually the game we did for yourself.

[Akshay Kapoor]

On the real estate sector, please go easy on this crash bit.

In any market, there is a ratio of genuine end-users to investors. A speculative market has more of the latter while a more balanced market has more of the former. It is when the ratio gets tilted towards investors that you've the bull run in property prices.

And what fuels the investors and bull-run? Loads of black-money!

But the market have been flat for 2+ years now. While the developers might not have explicitly reduced the prices, the prices have seen implicit correction. If you index property prices to inflation, you'll see that most of the stock is actually selling at same price as was two years earlier. Or in some cases, the price post adjustment to inflation has actually gone down.

Similarly, in the secondary or resale market, the prices have remained stagnant or actually come down.

On an average, realty market has not even given 5% return per annum over last three years.

What this means is that investors and speculators have long exited the market. The impact of today's decision would've been felt strongly if it would've sucked out the money chasing real estate asset class. This would've led to some price correction. But that money is simply not there.

So, IMO, take a chill-pill; property prices are not going to fall through the roof! There is another very big reason for it - the stock in the market is not homogeneous. But explaining that will take a long time. Some time later.

BTW, I'm witnessing signs of slight uptick in the property purchase. Only purchase, mind you. Not prices.

Thing is, people have become very vary of construction or delivery risk. Developers have delayed projects and many buyers + investors are stuck. Genuine end-users end up with twin burden of EMI + monthly rental due to project delay. This made many first time buyers to put off their purchases.

But what is happening now is that many of these much delayed projects have reached completion/occupancy or will be doing so in H2-2016 or 2017. Genuine end-users are opting for such projects where there is minimal delivery risk. In fact, I've observed that ready-to-move properties have slight premium over under-construction properties.

Rohit, you work in real estate right ? How's the Jaypee greens Noida project (Kalypso Court) ? Will it ever be completed ? One tiny quibble with your post - sorry can't resist it - prices fall through the floor not the roof

Namo ji is great. Bande me hai dum. What a move.

[rahulm]

Just had a chat with a scheduled bank manager in Mapusa.

He said in 2 days they have received 2.5 cr deposits when on an average day they receive a few lakhs

[Rishi Verma]

So RaGa stands in line to return 500/1000. How can he explain when asked "kaha se laaya". Oh he can say "mummy ne diya". Idiot...

[Supratik]

I don't understand - if I can buy a cell phone with a receipt why can't I buy mithai with a receipt? The taxman will be on both. I think it is just an excuse for corruption.

[Sachin]

The media is now abuzz with reports of even Gujrat government asking for some grace time to totally nullify the Rs.500 & Rs.1000 notes. Mullah Mulayam's frantic appeal was also heard yesterday.

Looks like the panic that Rs.500 & Rs.1000 are going to be worthless papers which caused the mayhem. I like to believe that it was a deliberate move. And the fact that the ATMs did not have the capacity to accept the old notes and issue new ones caused further confusion. RBI is now saying that an individual can deposit the Rs.500 & Rs.1000 notes till Dec 31st, but it would take time for that to sink into people's head.

I read about a fish monger in KL, who was very happy to accept these Rs.500 notes and sell the fish. He was confident that he would be able to deposit the same in his bank, and also give proof that how he came across these many Rs.500 notes. It was just his sales collection. Looks like he understood the whole game, much better than the "intellectual" & "secular" crowd.

[Bart S]

Why would traders keep govt babu's black money with them? The cash is withdrawn and distributed. The expenses are only cooked to show that amount as expense but it is never held as cash. What is held as unaccounted cash is actually the game we did for yourself.

Absolutely spot on. Most of the excuses being made are not valid.

[habal]

Bart S, Supratik, have you done business in India with VAT number ?

[Supratik]

@habal,

I think you need to see that there are two sides to the corruption and one of that side is the businessman himself.

[habal]

Ok, answer me this rhetorical question.

Will share part of your honest profits, post taxes with an ugly jackass from the IT dept & sales tax dept as bribes ?

humor me.

[shiv]

A deal was to be made last week, it got pushed to this week.

Bank loan against land depends on the valuation by a valuer and capacity to repay. Its hard to raise enough of cash for my medium term plans, but enough for short term, but asset valuations are going to be iffy from now, and banks are going to be 'more' stricter on land backed loans.

I am just trying to understand how the Government intends to handle some negative's created by this event which is largely very positive

You are collateral damage. There must be hundreds like you - not that it is any consolation to you.

I am not suggesting that you have anything to do with it - but land as hedge for money is par for the course in India. I know people who grew up with my kids put into medical college on donations of 40-80 lakhs by selling land. Doctors are not going to come cheap anytime soon in India because a very large percentage have come up on paid seats. I know many of them and many of them are actually bright and dedicated, but the money they make will not catch up with the input in a hurry and so they will either be used or will make sure you will have an angioplasty when all you need is sugar control. But I digress.

Property and education - both of which require government sanctions and permissions and also large tracts of land are the classic black money route where there is real public-private partnership. These people will take a huge hit. It is difficult for anyone to feel sorry for your genuine plight when one cannot wipe a grin off one's face thinking what anyone is going to do with 100 crores in cash. I suspect a large amount of money will eventually become legal with people accepting 30 + 30% penalty and get 40% in white plus court cases.

All around me in government I see people who have made money this way starting from a small 5 crores to hundreds of crores.

I read somewhere that 1 crore in Rs 1000 notes is 12 Kg. In 100 Rupee notes it is 100 kg.

[Supratik]

@habal,

I will ask the same question again. If I can buy a cell phone with a receipt why can't I buy mithai with a receipt.

[Gus]

Govt asking stock details from jewellers. There goes that ...

[Supratik]

To answer your rhetorical question - when you are yourself not honest i.e. you do not honestly record your sales why should I care what happens to you.

[nash]

@habal,

I will ask the same question again. If I can buy a cell phone with a receipt why can't I buy mithai with a receipt.

It's not only mithai if you buy anything from the unorganized sector, it wil be without receipt.

[Karthik S]

I read somewhere that 1 crore in Rs 1000 notes is 12 Kg. In 100 Rupee notes it is 100 kg.

It's a good fun fact to know.

[Supratik]

I know I am just using it as an example. I can understand the panwala, biriwala, sabjiwala etc doing that but I think the traders themselves are not honest. Another target should be those involved in Exim. They generate a lot of BM and stash abroad.

[shiv]

@habal,

I will ask the same question again. If I can buy a cell phone with a receipt why can't I buy mithai with a receipt.

In Bengaluru there are hundreds of mithai shops that sell with receipts. Normal practice. of course street vendors don't do that

[nash]

I know I am just using it as an example. I can understand the panwala, biriwala, sabjiwala etc doing that but I think the traders themselves are not honest. Another target should be those involved in Exim. They generate a lot of BM and stash abroad.

Totally agree, but problem is not these xyz wala but the number of small businesses who never give proper receipt because they have to pay tax, simple case of tax evasion. Point is which you have already stated if you are not honest then there is no meaning of whining here

[nash]

@habal,

I will ask the same question again. If I can buy a cell phone with a receipt why can't I buy mithai with a receipt.

In Bengaluru there are hundreds of mithai shops that sell with receipts. Normal practice. of course street vendors don't do that

In bengaluru, even lot of chai vendors give proper receipt but lot of good small restaurant won't . Thing is if one set of people can do it why not others.

[hanumadu]

HIndustan Times Online

Jharkhand: Man arrested for attempting to deposit cash for Maoist rebel

A petrol bunk owner was arrested trying to deposits a maoist's 25 lakh.

[Sicanta]

Just visited 12 atm's nearby, both private as well as psb's. All closed down. One by syndicate was working but when the branch closed at 8, they must have shut down the server of the atm.

What happened to all the news about banks being opened till 9?

[Rishi Verma]

In India there are too many of these small time vendors, some even have 8-10 bananas to sell, some just a small bag of peanuts. One can't expect him / her to give a receipt. What gov can do is let them operate but charge them a fixed fee of some nominal amount. It's coming to a village near you whether one likes it or not.

[Rishi Verma]

Just visited 12 atm's nearby, both private as well as psb's. All closed down. One by syndicate was working but when the branch closed at 8, they must have shut down the server of the atm.

What happened to all the news about banks being opened till 9?

I talked to the bank manager of Corporation Bank. She said once they run out of currency they close shop. 50% who visited the bank got served. Tomorrow 75% will get served, then 95%, it will stabilize in a week according to my algorithm.

[hanumadu]

In India there are too many of these small time vendors, some even have 8-10 bananas to sell, some just a small bag of peanuts. One can't expect him / her to give a receipt. What gov can do is let them operate but charge them a fixed fee of some nominal amount. It's coming to a village near you whether one likes it or not.

I think there are already such provisions for such people. Below certain threshold revenue they don't have to pay a tax or pay a nominal fixed amount. But if indeed their revenues are below the limit, they have nothing to worry and can use banks to deposit their money. Only those who have higher revenue but not pay the taxes will be holding cash and caught in jam like this.