Currency Demonetisation and Future course of Indian Economy

IndraD · Post by **IndraD** » 19 Nov 2016 16:46

kit wrote:http://economictimes.indiatimes.com/new ... 493215.cms

The Reserve Bank of India has withdrawn the facility given to the cooperative banks the right to accept or exchange the spiked 500 and 1,000 rupee notes.

there are reports small coop banks in rural WB has amassed Rs 50 Cr in three days: so have they gotten away with loot?

pankajs · Post by **pankajs** » 19 Nov 2016 16:49

50 cr is small by political party standard. True, some BM has been converted but now that it has come to the notice of RBI/GOI it will invite scrutiny.

vijayk · Post by **vijayk** » 19 Nov 2016 17:16

vina wrote:In fact, give the ability of this demonitisation along with the GST to force the ENTIRE parallel economy to come clean and stop all sorts of abuses including labor abuse and tax evasion the champions of labour, the Commies and the Unions must be singing HOSANNAS and welcoming this with open arms and stand shoulder to shoulder with the Govt and make this happen.

But no. They will do dharna, go stand with Didi, hem and haw.. throw "Whaddabouts?" Sure. How about MAKING SURE ESI is contributed and paid ? How about making sure taxes are paid fairly and evasion becomes very very difficult. How about making sure that the worker has wage accounts with banks. How about making sure that there is a formal social security system and safety net that gets in place. How about making sure that the future generation of black money

If Modi manages to get just these things in place. It will be a massive long term accomplishment in addition to the windfall he will get from this demonistation.

The commies SHOULD welcome this whole heartedly and support him unconditionally.

That's what surprises me!

Shows how hypocritical they are.

RajeshG · Post by **RajeshG** » 19 Nov 2016 17:53

http://www.forbes.com/sites/timworstall ... 6f26c4a1ae

Thus we just don’t know what the macroeconomic effect of demonetisation is going to be. It’s something we’ve just got to wait and see about.

Kakkaji · Post by **Kakkaji** » 19 Nov 2016 18:50

bharotshontan wrote:I feel like each poor person being offered the 2.5 lakh should take it and run if they can. Why commission? It's their money to keep, all of it. Govt is not going to come after individual 2.5 lakh anyway.

+1

I think a lot of people who have accepted 50k in old notes to deposit in their Jan Chan a/c will not return it. Only the goonda type BM guys will be able to recover it.

In the cities like Delhi, the drivers, maids etc can simply withdraw the money from their accounts and scoot. They will easily find jobs in another part of the city. The previous owner will not be able to do anything to them.

Only the goonda types can pull it off, and they will charge a hefty commission.

Primus · Post by **Primus** » 19 Nov 2016 18:54

Rishirishi wrote:This must be one of the greatest political masterstrokes of the history. Modi killed black economy, made people suffer and not only got away with it, but is about to become a cult figure. People seem to take pride in the fact that they have to stand in the line. Bank emplyoees are working 13 to 14 hours every day, non stop with pride.

And Modi is in no mood to stop. Now he will go after the benami properties and finally he will turn towards oversease wealth.

And I do not think it Modi will stop with that. This is only the first step. He has made it clear and knows all to well, that it will all be in vain, unless we india goes truly cashless. Personally I think India should only have RS 50 as the largest denomination. That will make cash so cumbersome that all will shift over to cashless.

My personal belief is that this move by the Modi government is tantamount to another 'Independence' for India and in that sense as monumental as the historic event in 1947. I am sure there were those amongst the populace that must have been upset by India's independence from the Brishits too, nostalgic for the Raj where their personal lives were enriched and 'everything worked so smoothly'.

People will protest the coming of God in their midst if it hurts their own little temples of deceit. Such is the nature of the beast.

shyamal · Post by **shyamal** » 19 Nov 2016 20:02

Very small lines in banks today in my locality as exchange was not allowed today.
I visited an ATM in the evening and got a Rs2000 note. Immediately spent it in the local market and got change of Rs 400.
Tomorrow - the banks are closed. I hope all bank employees get a much deserved break and feel refreshed to face the onslaught on Monday.

Does anyone know if exchange will be allowed on Monday?

I just wish govt keeps just 1 day a week(for example Monday or tuesday) for exchange. All other days for withdrawal and deposits only.

Till now people seem to be fine and I do not see any desperation.

nandakumar · Post by **nandakumar** » 19 Nov 2016 20:54

Just came back from attending a meeting. An acquaintance who me there is associated with a company selling these PoS terminals. Says his company which was selling 5000 units a month is now doing 5000 units a day!

chandrasekaran · Post by **chandrasekaran** » 19 Nov 2016 21:41

Apologies for the double post here - I have posted the same to the judiciary thread as well.

A hypothetical question to the legal gurus.

What happens if the SC stays the de-monetization drive ?

From the courtroom dealings, as reported by the press, its very clear that the arguments are focussed mainly on "inconvenience to public" - a completely subjective line of argument, instead of any constitutional law issue. The unfortunate reality seems to be that the judges are themselves focussing on that line and asking all types of "strange" questions. So what if the the judges continue this line to issue a stay or an extension of deadline or an order terming it as "null and void" ?

Given the recent history, I don't think this is a implausible scenario ? What options would the Govt. have in such a case ?

OmkarC · Post by **OmkarC** » 19 Nov 2016 22:00

First time poster here sir - what is the benefit to the national exchequer in terms of accumulating gain ? If 1 lakh crores of black money are deposited in old notes, they are getting back the same amount.

shiv · Post by **shiv** » 19 Nov 2016 22:04

chandrasekaran wrote:
What happens if the SC stays the de-monetization drive ?

Constitutional crisis. The judgement will be disputed because it cannot be reversed at this stage. AFAIK There will be an appeal and a panel of judges will have to study the issue. While I see that the supreme court takes a lot of flak on BRF it is my opinion that some of the flak is unjustified and some just plain stupid/ignorant - but that is my view. The court cannot do the undoable

VKumar · Post by **VKumar** » 19 Nov 2016 22:06

Income Tax department has issued notices to depositors who have deposited higher amounts. Asked for their last two years ITR.

shiv · Post by **shiv** » 19 Nov 2016 22:09

There appears to be a HUUUUUUUUUUUUUGE disconnect between political party spokespersons on TV and what is happening on the ground.

rahulm · Post by **rahulm** » 19 Nov 2016 22:14

Went for an evening walk. SBI ATM in Richmond had about 12 people.

Twisted and sprained my ankle on the Brigade Rd footpath. Hobbled to the nearest pharmacy and bought a cold compress pack. Saw a swipe machine but Pharmacy refused my debit card. Owner said the machine has stopped working since yesterday evening. Apparently, all POS machines have stopped working in the vicinity. ( don't know if it's true but only the naive will underestimate the bloody mindedness and determination of our traders to sabotage anything that is against their interests. ) Didn't have the will to argue or investigate so paid in 100 notes. Change no problem.

saip · Post by **saip** » 19 Nov 2016 22:18

A doctor came here for his nephew's wedding around 6th. The wedding was yesterday. But he went back on 9th, wedding be damned! I also know two of my neighbors who went to India on 9th on an emergency basis. I wonder how many NRI's changed their travel plans because of this. All power to Modi.

saip · Post by **saip** » 19 Nov 2016 22:19

chandrasekaran · Post by **chandrasekaran** » 19 Nov 2016 22:27

shiv wrote:
chandrasekaran wrote:
What happens if the SC stays the de-monetization drive ?
Constitutional crisis. The judgement will be disputed because it cannot be reversed at this stage. AFAIK There will be an appeal and a panel of judges will have to study the issue. While I see that the supreme court takes a lot of flak on BRF it is my opinion that some of the flak is unjustified and some just plain stupid/ignorant - but that is my view. The court cannot do the undoable

What if the objective itself to precipitate a constitutional crisis (in another stream it has already happened - the SC has returned the same 43 list back to the govt! on HC judges appointment, while sitting on the MoP for more than a year now ) ? What happens to demonetization during the appeal process ? A week or so to hear the appeal will create enough chaos and provide everyone the breathing room they desperately need ?

pankajs · Post by **pankajs** » 19 Nov 2016 22:28

shiv wrote:
chandrasekaran wrote:
What happens if the SC stays the de-monetization drive ?
Constitutional crisis. The judgment will be disputed because it cannot be reversed at this stage. AFAIK There will be an appeal and a panel of judges will have to study the issue. While I see that the supreme court takes a lot of flak on BRF it is my opinion that some of the flak is unjustified and some just plain stupid/ignorant - but that is my view. The court cannot do the undoable

There is something very damaging the SC can do without creating an impasse. I am thinking from a logistics pov and not legal side. It can pass an order allowing for the old notes to come back a legal tender without scrapping the new ones. At this stage the new and old are complementary.

That will release the pressure on folks holding on to old notes while not inconveniencing the ones with the new notes. But that will be the end of this cleanup drive and ANY future attempt. I don't think this is within the SCs remit but SC has greatly expanded its domain this past decade.

Added later: The GOI will have to go nuclear if such a scenario comes to pass. Hope they are prepared. This is not a small policy change.

rahulm · Post by **rahulm** » 19 Nov 2016 22:35

The SC will have the gumption to set, alter or tinker with monetary policy ?they are on the way to becoming a parallel government.

pankajs · Post by **pankajs** » 19 Nov 2016 22:38

They did entertain the PIL and there by rule on that question. That is as explicit as they can be about this matter being within their remit. So what prevents them from passing an order. This is headlong collision with the executive and RBI.

chandrasekaran · Post by **chandrasekaran** » 19 Nov 2016 22:41

My reasoning is that they have clearly side stepped that aspect (deciding on monetary policy) and instead focussing on a straw man argument "inconvenience to public and possibility of riots". Hence my worry that an order may be passed. All recent pronouncements by the honorable ones on this and many other cases makes be think that a stay or a final order may well be within the realm of possibility

LokeshC · Post by **LokeshC** » 19 Nov 2016 22:45

That's precisely what i am worried about, since les honorables have also been choked with this act.

pankajs · Post by **pankajs** » 19 Nov 2016 22:49

^^
Actually after thinking a bit more, it seems that the me lordies will not pass an order on this at least not disrupt the implementation (Like pass the order but suspend it to give GOI time to appeal or some such stunt). The reason being that they could have spiked the GOI effort the day the PIL was admitted BUT they did not. They have done out-of-turn stays many many times before like is Teesta's case.

This is a fight about judicial appointment that is reflecting in other domains. The me lordies are trying to make the GOI come-to-its-sense, in their view, by holding out this threat of unspecified action. They will do some tongue lashing, like during the last hearing, and pass the buck to another bench or a committee. And after the judicial appointment debate is settled the matter will die.

This is my most likely scenario.

RajD · Post by **RajD** » 19 Nov 2016 22:54

pankajs wrote:
shiv wrote: Constitutional crisis. The judgment will be disputed because it cannot be reversed at this stage. AFAIK There will be an appeal and a panel of judges will have to study the issue. While I see that the supreme court takes a lot of flak on BRF it is my opinion that some of the flak is unjustified and some just plain stupid/ignorant - but that is my view. The court cannot do the undoable
There is something very damaging the SC can do without creating an impasse. I am thinking from a logistics pov and not legal side. It can pass an order allowing for the old notes to come back a legal tender without scrapping the new ones. At this stage the new and old are complementary.

That will release the pressure on folks holding on to old notes while not inconveniencing the ones with the new notes. But that will be the end of this cleanup drive and ANY future attempt. I don't think this is within the SCs remit but SC has greatly expanded its domain this past decade.

Added later: The GOI will have to go nuclear if such a scenario comes to pass. Hope they are prepared. This is not a small policy change.

I think SC will rattle sabres only. Looking at the negative reaction from common people to its remarks on possibility of riots they know that most of the common people across party lines have given whole hearted support to this decision. There have been not a slightest hint of riot anywhere even after instigatiotins by political parties and media up to an extent. People are saying that they would be OK with some hardship and it is the most important message coming out of this consistently. Lastly, the government has an absolute majority and they can come out with an ordinance in case of any detrimental decision from either any lower or the apex court. Just like they did in case of implementation of NEET exam.

prasannasimha · Post by **prasannasimha** » 19 Nov 2016 23:10

The ordinance route will be the easiest but may not be necessary. The notes meanwhile can be destroyed . Also it can be made mandatory to exchange the notes. The government has at no time told it will not honor the value but the old notes are now not legal tender and have to be returned for a new note. It has though every right to ask where one got tthe possession of the same.

sanjayc · Post by **sanjayc** » 19 Nov 2016 23:13

Dr Praveen Patil ‏@5Forty3 6h6 hours ago
1st round of reports from different parts of UP on demonetization suggest people have simply gone berserk in their adulation for Modi!

hanumadu · Post by **hanumadu** » 19 Nov 2016 23:26

I think the govt should have printed and dispensed 2, 5, 10, 20 and 50 bills also to those exchanging and withdrawing cash. The small traders wouldn't have had to lose business.

Marten · Post by **Marten** » 19 Nov 2016 23:52

SRoy wrote:IT notices have started arriving for people. For deposits as low as 4 Lakhs Rs.

I think the entire thieving business of sending cooks, drivers, gardeners to do deposit itself will stop.

What's really perplexing is that many segments of the erstwhile parallel economy still dealing with old notes.

Are they too stupid not to know the consequences, as they may probably be last in the chain and would need to dispose of the cash?

Or they have some tricks up their sleeves that we don't know yet? Collusion with some bankers, maybe? Not casting aspersions on bankers per se, but I cannot see any logical explanation of use of old notes outside hospitals, pharmacies, transportation (rail / air etc.) and utilities (LPG/ electricity etc.).

The largest cash handler in our system is transport (I do not mean buses) and petrol/diesel bunks. Imagine the entire bunch laundering cash on a daily basis!

Magi · Post by **Magi** » 20 Nov 2016 00:07

This is what was going on before the indelible ink system was introduced.
My mother lives in locality with middle class, upper middle class with poor areas nearby. She witnessesed daily gather of people for direct exchange of cash. The commission seems to be around 500 for exchanging 4500. So, the crowd witnessed earlier for exchange is surely by these kind of people.
It seems people were willing to deposit and withdraw as well for a commision.
These are organized by the goonda types with close political connections. These people have the muscle and political power. So, not many will try to runaway with the cash.
Another reliable source told me that a goonda in chennai living in slum clearance board colony with a population of nearly 2000 has atleast 10crores of BM to exchange through these routes.
Now the direct exchange route is plugged. Hope the govt takes strong action against these kind of deposits as well.

SRoy · Post by **SRoy** » 20 Nov 2016 00:07

^^
Petrol/diesel bunks used for laundering is very much a possibility and surely being underway as we speak.

SRoy · Post by **SRoy** » 20 Nov 2016 00:13

The entire "exchange your loot at the nearest bank" thing was poorly thought off.

It only brought misery upon honest tax paying, bank account holder folks.

Next in line are the co-operative banks. Why were they not made to put their houses in order before the announcement?

Also, one more thing struck me surprising. There was no word from GoI towards dysfunctional behaviour of hospitals of all hue. Refusal to accept cash payments at despite GoI guidelines.

Way this game is turning out, it seems on only extra-judicial ways can fight black money.

>>>

Just back from the Kolkata's electronic market. For a small purchase the shop keeper happily took my new 2000 Rs note and gave me back a wade of 100 Rs. note, with a remark that I may return if I need more 100 Rs conversion.

Absolutely no way these gents could have honest money in 100 Rs. ready to be given away. Adding 2 + 2, they have somehow gotten older stash exchanged for 100s and now would take new 2000 Rs from market to hoard in 2000s only. Space efficient.

Set me thinking whether we have been taken for a ride or what. 10 days on surviving on bare minimum. Everything rationed.

disha · Post by **disha** » 20 Nov 2016 00:33

Or maybe you are overthinking! Ask him if he will take 1000s? Of course he is happy., he does not have crores but few lacs unreported & he is circulating back his 100s. He just needed 20-30 exchanges at bank counter to get his 'hoard' going.

shyamal · Post by **shyamal** » 20 Nov 2016 00:39

I too think that things could have been a bit better managed - specially -
1. restrict exchange to only 1-2 days a week
2. ATMs - even just 10% - need to be refilled with 100 and 500 at regular intervals, maybe twice a day so that people are reassured

But I have definitely not been surviving on the bare minimum. Have purchased most things that I wanted(from supermarkets with CC). Once I got my first stash of ATM cash, I spent a good part of it in local shops. No hardship or rationing.
Oh - and today I shopped with my 2000(got from ATM today) at a local shop and got 400 back in 100s. The shopkeeper was happy to give change. Most of them have anticipated that they will have to deal with 2000 notes and have withdrawn 100s from the bank. Nothing sinister there.
Just to give a different perspective - from Kolkata

svinayak · Post by **svinayak** » 20 Nov 2016 00:42

A currency printing press that was seized

Secret Service makes massive counterfeit bust in Peru

Secret Service makes massive counterfeit bust in Peru
LIMA, Peru -- President Obama is on his way to Peru for a meeting of Asia-Pacific leaders. But not all of the Secret Service agents there are for his protection.

Overnight Tuesday, agents staged the largest raid of counterfeit currency in the agency’s history.

They seized an estimated $30 million in fake cash piled in houses and apartment buildings in Lima. The bills were hauled away in trucks to warehouses, where they are being inspected and cataloged.

Peruvian agents sorting through the counterfeit currency CBS NEWS
A large stack of the fake money came from just one house; A total of 54 were raided in all.

Police are still counting the cash and logging the evidence. Once suspects have been convicted, it will all be burned.

“Operation Sunset” was two years in the making. The Secret Service worked with 1,500 Peruvian national police officers in the raids.

Six counterfeit rings were targeted and more than 40 people have been arrested.

A currency printing press that was seized CBS NEWS
In addition to the counterfeit cash, agents seized printing presses, Euro notes and Japanese yen.

The lead U.S. agent on “Operation Sunset,” who CBS is only identifying as Jose, said they have “made a huge impact.”

He said Peruvian counterfeiters are among the best in the world.

Sheets of counterfeit money CBS NEWS
“The texture on the actual note which makes it feel like a genuine bill, they are very, very meticulous when it comes to the finishing of the bill which actually makes it passable in the states,” Jose said.

The counterfeiters in Peru are so good, an estimated 60 percent of the world’s fake U.S. bills come from there.

© 2016 CBS Interactive Inc. All Rights Reserved.

Indian currency could have been part of this operation

SRoy · Post by **SRoy** » 20 Nov 2016 00:47

^^

Here in Salt Lake private bank ATMs are sort of permanently shuttered.
All the markets seem to have run out of poultry and farm products.
Household helps absolutely not ready to accept 2000s.
This is where rationing is coming from. Have to conserve 100s.

shyamal · Post by **shyamal** » 20 Nov 2016 00:52

Come and shop outside saltlake

I leave in the rajarhaat area. Fish, poultry and produce abound in baguiati market as well as the smaller roadside markets in rajarhaat. No shortages here. Spencers has the usual stock quantities as well.

Payment to household help will come only in month end. By that time things will be much better. I have offered to buy then groceries any time they need any help. Till now only my driver has taken me up on that offer(that too after lots of prodding).

Seriously - if you have a car then come and shop in spencers or baguiati market(if you prefer traditional markets). No problems there.

shyamal · Post by **shyamal** » 20 Nov 2016 00:55

Just OT - I feel that salt lake has a lot of senior citizens(kids are almost all settled outside Kolkata/India) and upper middle class buro-buri(the old couple) left to fend for themselves. The other lot are outsiders(from out of city/state) who are staying there as PG or rent and have very little involvement or say in things.
Businesses and services tend to take advantage of that

Suraj · Post by **Suraj** » 20 Nov 2016 01:01

RajeshG wrote:
shiv wrote:one shade, jet black. There are no "shades".
Thats great. You have great conviction and maybe it will last forever. Would that be the case for the 80% of population forever ? What will happen two months down the road when the people who have certain amount of money they earn and not pay tax for have those avenues dried up ? Will they raise prices ? If 80% dont support it and say the support goes down to 70% what are the political implications ?

Moreover such unfettered convictions come from where ? Are these based in some more basic human emotions ? Are these based on our perceptions of morality ? practicality ? logic ? envy ? patriotism ? Does everyone make the support/not-support decision based on the exact same emotions in 125 crore population ?

I think a lot of these things determine the eventual fallout of this. Its not even a question of anybody's supporting or not-supporting this action anymore. The action has been taken. What BRF needs to do is recognise that this is either a huge opportunity and an equally huge risk. The risks need to be minimised and opportunities maximised.

Why are you wasting time convincing us of the color of money ? If you're so convinced that money can be light-grey-thats-almost-white, then you should have no trouble convincing the taxman either.

You are missing the point of this whole measure. You no longer have the choice to decide whether or not to declare based on your own value system. Since you're so convinced that the money's almost white, go ahead and prove it to the entity that matters - the tax man. In the end your money will be fully white anyway.

All that's in question is how much of the original money will be white, because the rest went as taxes and penalties. Whether or not you think taxes are evil is your own problem. That's the beauty of the current situation - the government simply turned the power equation around. If you think you are doing good, just prove it to them. There's no longer the option of deciding for yourself at your convenience.

Suraj · Post by **Suraj** » 20 Nov 2016 01:05

SRoy wrote:^^

Here in Salt Lake private bank ATMs are sort of permanently shuttered.
All the markets seem to have run out of poultry and farm products.
Household helps absolutely not ready to accept 2000s.
This is where rationing is coming from. Have to conserve 100s.

For goodness' sake, stop conserving small notes. The best way to guarantee you'll get small notes is to spend them. Every person spending a 100 is a person making it easier for you to get your hands on another 100. If everyone just keeps it in their wallets, no one's getting them, which means no ones going to take bigger notes like 500 and 2000 either. That small cash needs to circulate for the benefit of the economy in the middle of a cash liquidity crunch!

SRoy · Post by **SRoy** » 20 Nov 2016 01:08

Shaymal

Yeah did few rounds of Spencers at Mani Square. Got my supplies.

Fish, meat and poultry remains scarce.

But you are right about old people.

Most of them are pensioners. They are the biggest reason for crowds.
They drew their pensions till couple of days before the bombshell. After that they promptly returned to deposit the same.