Currency Demonetisation and Future course of Indian Economy

Gus · Post by **Gus** » 23 Nov 2016 01:02

Just in the past 10 days, I've spend time in chennai, on the krishnagiri road, in Erode urban and rural areas. I did not see closed shutters. Only some footpath markets were on and off. They are also back to regular life.

Just like life will find a way, business will also find a way to adapt. The carpenter guy today charged 2000 and happily took online payment. Is he going to get into tax bracket and will probably need to file returns? We talked and he might end up doing that and he was fine with that after asking me about the slabs and possible taxes and exemptions and filing charges etc.

TKiran · Post by **TKiran** » 23 Nov 2016 01:06

The business was (I wound it up now, as I had to move to closer to my home town) Automotive, as it was too expensive for me to rent in the hub, I purchased a bit of land in a locality that is not visible from the main road, but fairly close to the hub, I spent a lot of money for publicity, but still was not able to get the customers, I hired some workers, who knew some RE guys personally, I left no stone unturned to make them my regular customers, they took the advantage of my desperation and screwed me royally, but luckily as my products and services were consistently good, and I arranged for their meetings at my business locations while they were waiting, slowly my network started expanding, my capacity as 100% utilized, almost after 2 years, I started demanding premium, in 4 years, I could depreciate everything, and I started paying more and more rent to myself, made good money and wound it up, the problem with IT professionals was that, they don't have time, they want everything instantly, it doesn't happen, they should be patient. So I didn't bother much about them. That's the brief story, can't tell more.

Suraj · Post by **Suraj** » 23 Nov 2016 01:10

Hi, please stop with further salaried vs businessmen 'do you know how hard it is for me ??' comparisons. It's not helpful, and is largely emotional .

It's much more useful to describe the facts of what costs and procedures each side deals with.

SwamyG · Post by **SwamyG** » 23 Nov 2016 01:19

Sorry if this was already posted. A good overview as the dust settles. DD guy asks good questions, covers important areas helps discover the picture better.

SG says about 50,000 crores is the cash economy that supports naxals.

rsingh · Post by **rsingh** » 23 Nov 2016 02:38

Manish_Sharma wrote:

photocopies and very bad quality.

Karthik S · Post by **Karthik S** » 23 Nov 2016 06:53

http://m.thehindubusinessline.com/econo ... 374694.ece

21 lakh tea, jute workers set to join banking system

Demonetisation has come as a blessing in disguise for nearly 21 lakh tea and jute mill workers in Assam, West Bengal and Andhra Pradesh. Their wages will now be credited to their bank instead of being paid in cash.

Following the demonetisation, 80-odd jute mills in India started using the banking channel to transfer fortnightly salaries of the nearly 3.7 lakh workers.

An earlier account said only five of the 62 mills near Kolkata were paying via banks. West Bengal accounts for 75 per cent of India’s jute goods production.

“It’s a transformational change,” Raghavendra Gupta, Chairman of the Indian Jute Mills Association, told BusinessLine.

“We have already cleared 50-60 per cent salaries. The rest will be cleared this week,” he said. Earlier, the industry blamed workers for not giving bank details.

Statutory dues
Asked if transparency in payments would help mitigate issues related to non-payment of statutory dues, Rao said there have been no fresh cases over the last five-seven years.

The organised tea industry has been citing the remoteness and inadequacy of the banking network for making cash payments to 12 lakh workers in Assam and five lakh in Bengal.

However, a joint initiative of the Assam Government and the Centre is set to put an end to the practice.

ATMs in tea estates
The Assam government has ordered over 800 tea estates to open accounts for all tea workers by December 5 and asked banks to establish ATMs/micro-ATMs in tea-growing regions by December 15.

Though the West Bengal government didn’t take such an initiative, banks held meetings with nearly 300 organised tea producers in the State with a similar mandate.

“We had a meeting with tea producers in North Bengal last week. We will use the banking correspondent network to open accounts and micro-ATMs. A mobile ATM will also be deployed,” said Pawan Bajaj, Managing Director and CEO of United Bank of India.

UBI accounts for nearly 30 per cent of the banking services in West Bengal and the North-East.

Welcoming the move, Azam Monem, Chairman of the Indian Tea Association (ITA), said the tea industry was ready for bank transfer, but felt banks might not find it easy to extend the services in remote areas by the December 15 deadline.

“A majority of tea workers don’t have accounts due to the poor banking network,” he said

Rishi Verma · Post by **Rishi Verma** » 23 Nov 2016 07:45

Went to a friends home who is inaugurating his store. He needed cash to pay for bunch of small items (mithai, invitation cards, electrician, carpenter). He gave a cheque of 50,000 to his friend at the Indane gas agency and got instant cash. (all white transaction)

Another way people manage without ATMs, not everyone but those who must, can solve cash issue with juggad way.

habal · Post by **habal** » 23 Nov 2016 07:56

Businesses do pay tax. Let's say an automobile ancillary manufacturer/OEM vendor will obtain raw materials for his manufacturing process and pay VAT on it. He will proceed to manufacture end product using this raw material and pay VAT on that too when he forwards parts to manufacturer.

Now on top of this, if he makes profits after all this taxation, he has to pay tax on that too. Isn't that double taxation.

Hitesh · Post by **Hitesh** » 23 Nov 2016 08:01

csubash wrote:
TKiran,
Could understand your angst in running a business. Belittling the salaried class for paying tax is a bit rich. Nobody gives salary to a poorly performing employee including you. By the way why should a salaried class pay tax, when business class doesn't want to pay tax. If mom & pop shops can't run a decent tax abiding business then they need to perish. Being a salaried class myself - why should i pay for the roads in front of your shop, police your street, provide colleges to your kids? Why should a salaried class understand you when you dont understand them?

Go try running a business yourself and worry about making enough money to pay your employees salaries first and the business costs. Your salary would be the last.

As a salaried employee, you never have to worry about where your paycheck is gonna come from. It is guaranteed. You just have to show up at 9 and leave at 5 or 6 and collect your paycheck and leave your worries at work and enjoy the benefits of home. As an owner, you don't get to enjoy these breaks. You have to constantly worry 24 hours nonstop to make sure that you make enough money to meet your payroll expenses, taxes, costs, etc. and then you have to worry whether you would have enough to cover your mortgage and bills. THen you have to plead with your employees to step up their productivity so you can make enough money.

You have never been in a small business owner's shoes and small businesses make a huge majority of the Indian economy. They practically live month to month and constantly worry about making enough money to meet the next month's expenses.

They have to go out and get the business which is a lot of work in itself and when they finally get the work, they have to do the work and make sure it is good quality in order to get repeat business.

shiv · Post by **shiv** » 23 Nov 2016 08:06

TKiran wrote:The business was (I wound it up now, as I had to move to closer to my home town) Automotive, as it was too expensive for me to rent in the hub, I purchased a bit of land in a locality that is not visible from the main road, but fairly close to the hub, I spent a lot of money for publicity, but still was not able to get the customers, I hired some workers, who knew some RE guys personally, I left no stone unturned to make them my regular customers, they took the advantage of my desperation and screwed me royally, but luckily as my products and services were consistently good, and I arranged for their meetings at my business locations while they were waiting, slowly my network started expanding, my capacity as 100% utilized, almost after 2 years, I started demanding premium, in 4 years, I could depreciate everything, and I started paying more and more rent to myself, made good money and wound it up, the problem with IT professionals was that, they don't have time, they want everything instantly, it doesn't happen, they should be patient. So I didn't bother much about them. That's the brief story, can't tell more.

Well since you have been so up front let me also be up front.

You stated that you do not like the tax man
You said that regular employees are a burden and you depend on contractors
Your employees tend to get better salaries after they leave your employ
You do not trust your own CA
You like certain customers and don't like IT professionals
You paid bribes for 5 years to ESI/PF officials and eventually got your file after a dance bar treat to one of the guys

Clearly you are a person whom it would be a mistake to trust. There is nothing unique in that. I meet dozens of small businessmen in shops who are obviously untrustworthy - sometimes revealed by absolutely cheap attempts at instant short term gain - like a juice shop owner looking at my clothes and saying Rs 25 for something that costs Rs 20 and then downhill skiing when questioned.. Also - you are ready to part with your money to pay people who play by your morals - like contractors and officials who are willing to take bribes. But you dislike government tax and employment laws and IT professionals who are generally the straightest of straight salaried people who only evoke jealousy when they get paid well.

Let me also say that certain communities in India are typically expected to show this sort of behaviour - it is actually a common joke. And no I am not talking about the usual community that gets mentioned on BRF. The minute a dealer or customer recognizes a man from this community he expects untrustworthy behaviour and knows that this may be his first and last dealing with this person. When this class of people deal with other business persons they show exactly the same behaviour. They will ask for concession from doctor's consultation and want free follow-up consults, and in schools demand a reduction when everyone else is paying up front. They tend to think that everyone else is trying for cheap short term profit just like oneself and will bend under pressure. I am not accusing you of being like this but I would not be surprised if this is the way you work with other businesses.

habal · Post by **habal** » 23 Nov 2016 08:07

Usually in sarkaari organizations like IT, Central Excise or VAT (state level only), Customs etc there is an organizational ethos wherein only the corrupt and corrupted can survive. If say you are an honest fresh recruit into these organizations, then you have 2 choices.

Either you join the corrupt clique/crowd in that dept and save yourself a lot of trouble. Or if one insists on being moral and truthful, the rest of your colleagues will consider you a royal pain and conspire against you 24X7 such that going gets impossible and sooner than later one is framed on some false charges which your colleagues will trap you in. So either you join the crowd, or else you get shafted. Most people in survival instinct mode, choose for survival. Very less people survive with integrity intact in these organizations.

Only solution is to make these organizations totally transparent, computerize records and take away as much discretionary powers as possible from the employees who work there.

nandakumar · Post by **nandakumar** » 23 Nov 2016 08:08

TKiran wrote:Singha ji, Tata consultancy services, never made profit till three years before listing, as it is mandatory to show profits for 3 consecutive years in order that they become public Ltd company and the profits should be good enough so that you can demand premium over the nominal value of the shares.

Tata sons is still the major share holder

TCS was a division of Tata Sons prior to being hived off as a stand alone company. The division was making more money than Infosys. Although standalone operational performance was not available there is circumstantial evidence to suggest that the software operations of Tata Sons was making money. The parent company (Tata Sons) was able to hike its stake in the post-91 era in all the group companies where it was vulnerable to a takeover threat only by reinvesting profits from the software business.

shiv · Post by **shiv** » 23 Nov 2016 08:12

Hitesh wrote:
You have never been in a small business owner's shoes and small businesses make a huge majority of the Indian economy. They practically live month to month and constantly worry about making enough money to meet the next month's expenses.

They have to go out and get the business which is a lot of work in itself and when they finally get the work, they have to do the work and make sure it is good quality in order to get repeat business.

Try being a doctor. You have to depend on someone to fall sick and come howling to you and then be told that you must empathize with your customer and do your ethical level best for him and also not demand money because "you are like God"

Medicine is the only goddam business in the entire world in which you cannot advertise (by law) and you have to do your best to ensure that your customer never comes back to you again to be called a success.

Easy to think that every other guy is having a nice time, but please stop. If you chose business. Live with it. Make your child a salaried employee

shiv · Post by **shiv** » 23 Nov 2016 08:18

Over 80 percent don’t mind inconvenience of demonetisation, says C-Voter poll

Kakkaji · Post by **Kakkaji** » 23 Nov 2016 08:21

Cash rush: Government sends teams for ear-to-ground reports

WITH THE demonetisation debate dominating proceedings in Parliament, 27 teams led by officials of the rank of additional or joint secretaries from various ministries have been sent to various states to conduct a ground-level assessment of the situation.

The Department of Personnel and Training has constituted three-member teams of officials to visit every state for at least two days each and report back to the government on the status of implementation of the demonetisation decision. These teams, which will focus on rural areas, have been asked to submit their reports by November 25.

According to an order issued by the Department of Economic Affairs, the teams will assess the availability of currency in bank branches, ATMs and post offices; facilities at bank branches and post offices for deposit, withdrawal and exchange of currency; and, status of calibration of ATMs to dispense the new Rs 2,000 and Rs 500 notes.

The teams will also assess the ground-level impact of the government’s decision on various sectors, such as agriculture, industry, transportation, traders, small businesses, informal sectors, etc.

TKiran · Post by **TKiran** » 23 Nov 2016 08:25

Shiv sir, praNamamulu, every word you said about me is true. I don't feel bad about it. As Singha sir said, I too use the money generated from other businesses to seed the new business, once I got all depreciated, I sell my business and make money, like for example today there was a news that TCS was about to be sold to IBM, if I were TCS, I too would have done the same.

TKiran · Post by **TKiran** » 23 Nov 2016 08:57

shiv wrote: They will ask for concession from doctor's consultation and want free follow-up consults,

Now a days, I don't do that, as my wife felt bad, when I did that in front of her.

kvraghav · Post by **kvraghav** » 23 Nov 2016 09:07

habal wrote:Businesses do pay tax. Let's say an automobile ancillary manufacturer/OEM vendor will obtain raw materials for his manufacturing process and pay VAT on it. He will proceed to manufacture end product using this raw material and pay VAT on that too when he forwards parts to manufacturer.

Now on top of this, if he makes profits after all this taxation, he has to pay tax on that too. Isn't that double taxation.

The tax like VAT is dumped on the customers. If I go yhr restaurant, it is an extra item in the bill. All indirect taxes Re borne by the end customer.

Manish_Sharma · Post by **Manish_Sharma** » 23 Nov 2016 09:12

There should be a victory day parade on December 31st, take that you corrupt mamta, kejri, congis, mediapimps there should be carpets made of your faces over which NaMo walks followed by FM staff, banking staffs and other arms of govt. helping :

http://timesofindia.indiatimes.com/indi ... 66700.cms?

Over 80 percent don’t mind inconvenience of demonetisation, says C-Voter poll

TNN | Updated: Nov 23, 2016, 12.10 AM IST

NEW DELHI: The demonetisation of Rs 500 and Rs 1000 notes is being seen positively by a large part of the population cutting across the lines of age, income levels and area of residence, a nationwide survey conducted by C-Voter has suggested. A whopping 80-86 percent of those surveyed said the inconvenience caused by the demonetisation is worth the effort of combating black money.

C-Voter, an international polling agency headquartered in India, conducted its survey in close to half the total parliamentary constituencies on Monday.

The wide-ranging support for the demonetisation cut across the barriers of categorisation. The numbers remained consistently high when broken down on the basis of area of residence, income levels or by age groups.

A landslide 86 percent of the respondents living in urban and rural areas said the inconvenience was worth it. This was 80.6 percent in semi-urban areas. The highest level of support however seems to come from those from the higher income group, 90.6 percent of whom said the move is worth it. Also tellingly, the lowest level of support in the 'below 25', 25-45, 45-60 and 60+ was 83.3 percent.

A picture of broad support also emerged for those who thought the demonetisation was a 'good move and equally well implemented'. This sentiment was reflected in 71 percent of those surveyed in urban areas, 65.1 percent in semi-rural zones and 59.4 percent of rural respondents.

First 14 days were the most difficult and they have passed with such high percentage....

Rest will be fine I think now with ATMs calibrated, Banks filled with cash, the tax dept and ED should start preparation for nuremberg trials !!! All these pawars, lalus presstitutes should be paraded in front of people with tattoos on their foreheads "Hum Choron ke bhi baap hain".

chetak · Post by **chetak** » 23 Nov 2016 09:13

A number of people have died during the recent elections in a few states. This cannot be the exception but it seems quite normal that during every election, the aged, the sick and some unfortunates die in some election related accidents.

This was never highlighted before by political parties and their pet, paid, presstitutes (or highlighted even now!!) on the same scale as the fraudulent discussions of death in the demonetization que, of people waiting to get their money.

I eagerly await the obituary reference in parliament of some long over due commies who have infested the world long enough.

Rammpal · Post by **Rammpal** » 23 Nov 2016 09:19

chetak wrote:
I eagerly await the obituary reference in parliament of some long over due commies who have infested the world long enough.

Mamata isn't really that old, is she ?

Yagnasri · Post by **Yagnasri** » 23 Nov 2016 09:21

GOI on its own as through legislation take steps to force non-cash transactions. The following among others may be helpful.

1. The Banks which lend to businesses shall stop taking cash transactions into consideration for the calculation of turnover or allow say up to only 25% of the non-cash transactions as accepted entries for calculation of turnover. In fact, lending banks shall insist that their card swiping machines shall be installed in the shops, etc funded by them.
2. The Payment of Wages Act needed to be amended to force the establishment to pay salaries by way of transfer to the employee's account.
3. Companies, cooperatives, associations, Trusts, etc. shall be prohibited to deal with cash. Only non-cash transactions are to be allowed there.
4. Mobile banking, use of cards shall be encouraged by reducing taxes and charges. At present, banks charge 2% to the establishments for the payments made by card. There is no need for such payment. A lump sum yearly charge of say 5k will be sufficient.

sanjayc · Post by **sanjayc** » 23 Nov 2016 09:25

One benefit of demonitization has been that every small shop in my locality - grocery, chemist, phone recharge -- now has a card swipe machine installed. This happened in the last one week. Earlier, they were all-cash people.

Yagnasri · Post by **Yagnasri** » 23 Nov 2016 09:28

Even those who have them and not using them are now using them regularly.

One thing i missed. Railways now charge 25/- for online booking and most of the stations only have one or two counters wherein swiping machines are used. This has to stop. More card using counters and no additional charges for the card and online bookings.

shiv · Post by **shiv** » 23 Nov 2016 09:31

TKiran wrote:
shiv wrote: They will ask for concession from doctor's consultation and want free follow-up consults,
Now a days, I don't do that, as my wife felt bad, when I did that in front of her.

LOL

Actually there are at least two communities of people I can name whose members behave exactly like this. It is a cultural tradition. Some are very wealthy. Many are small business people. Even some doctors from those communities are leaders in taking kickbacks from laboratories/scan centers that pay kickbacks. And nursing home owners will admit and "put a drip" so the patient cannot walk away soon. They tend to work very hard and follow long hours as long as it is business. Some suffer from stress related disorders due to that, but will avoid medical help because it costs money. Some will stand in queues for free blood sugar and BP check ups because it is free and rely as much as possible on home remedies. They seek multiple medical opinions to find the least expensive alternative.

Demonetization would have hit some of these people hard. I hope many of them come into the regular banking system.

shiv · Post by **shiv** » 23 Nov 2016 09:36

sanjayc wrote:One benefit of demonitization has been that every small shop in my locality - grocery, chemist, phone recharge -- now has a card swipe machine installed. This happened in the last one week. Earlier, they were all-cash people.

The other side effect is that online sales confirmation has slowed down because servers and lines are overloaded. I had to use my card twice yesterday and both times it took very long..

chetak · Post by **chetak** » 23 Nov 2016 09:39

Rammpal wrote:
chetak wrote:
I eagerly await the obituary reference in parliament of some long over due commies who have infested the world long enough.
Mamata isn't really that old, is she ?

I wasn't talking about mamata per se but all the commie cockroaches in parliament. But no harm in including the whole demented lot of those who masquerade as "farmer's friends".

rahulm · Post by **rahulm** » 23 Nov 2016 10:23

Yesterday tomatoes were selling for Rs 10 per kilo in Richmond BLR . Did hoarding by BM traders have such a significant impact on prices ?

Shaktimaan · Post by **Shaktimaan** » 23 Nov 2016 10:26

The Indian government as we know it has elements of corruption at all levels. Is it not counterproductive to confiscate more and more capital from small businessmen and feed it to this entity, which will allocate it inefficiently or otherwise squander it on renting treadmills for Rs.32,000 per day?

I am not feeling so gleeful about this. After all, there is no guarantee that governments after this one will be of the caliber of NaMo's current setup.

Unless NaMo does something serious to combat corruption and graft in the government at all levels, this move to collect more tax will ultimately backfire. This will simply move capital from private businessmen who would presumably use it responsibly (because they own it and their future depends on it) to babooz and netas who will use it inefficiently (because they didn't earn it and they have no stake in how it is used).

GShankar · Post by **GShankar** » 23 Nov 2016 10:26

Strange thing - someone i know got 10k from bank (NOT from ATM). This is first hand information and very true. It was a case of ask and you shall be given. No misuse of power or some such thing.

Not sure if protocols can be easily overlooked. Very strange. 6k in 100s and 4k in 2000 notes.

yensoy · Post by **yensoy** » 23 Nov 2016 10:30

rahulm wrote:Yesterday tomatoes were selling for Rs 10 per kilo in Richmond BLR . Did hoarding by BM traders have such a significant impact on prices ?

All this news of vegetables selling for cut rate prices is actually sad. Vegetables are perishable, so if cash isn't flowing they will unfortunately bear the brunt of price cuts. I don't want to price drops here. I want to see price drops in non-perishables which are being hoarded, like dal.

yensoy · Post by **yensoy** » 23 Nov 2016 10:32

GShankar wrote:Strange thing - someone i know got 10k from bank (NOT from ATM). This is first hand information and very true. It was a case of ask and you shall be given. No misuse of power or some such thing.

Not sure if protocols can be easily overlooked. Very strange. 6k in 100s and 4k in 2000 notes.

Was it a cheque withdrawal? If so, what's the problem if the bank has adequate stock of currency? It's only old notes to new notes conversion without ID which is regulated.

habal · Post by **habal** » 23 Nov 2016 10:34

Pvt banks engage in all kinds of hanky panky, they are still sending me SMS to deposit old notes whenever I feel like till Dec 31. They all have plenty of fictitious a/c's which they can manipulate as they want to satisfy their premium 'valued' customers.

You have to see how 'inspections' and 'auditing' are carried out in pvt banks by external auditors. It is mostly khaana-peena and naach-gaana.

rahulm · Post by **rahulm** » 23 Nov 2016 10:38

About a week ago, arhar (Tur) dal was selling for Rs 80/kg in Varanasi

This impacts of such a large demonetisation exercise cannot be planned or gamed to the last detail. It's a MVP model, with agile responses by the centre to market feedback.

I look forward to the next steps. There should, now, be no excuse for the government to not have EFT options for payments for all its services, trains, hospitals, property regos, RTO, at least in BJP governed states

GShankar · Post by **GShankar** » 23 Nov 2016 10:49

yensoy wrote:
GShankar wrote:Strange thing - someone i know got 10k from bank (NOT from ATM). This is first hand information and very true. It was a case of ask and you shall be given. No misuse of power or some such thing.

Not sure if protocols can be easily overlooked. Very strange. 6k in 100s and 4k in 2000 notes.
Was it a cheque withdrawal? If so, what's the problem if the bank has adequate stock of currency? It's only old notes to new notes conversion without ID which is regulated.

Removing from own account - most possibly from teller through withdrawal slip or self cheque. May be I was a under wrong impression that one can only withdraw 4k per day, be it ATM or teller.

And it was from City union bank from bengaluru, kerala.

Manish_Sharma · Post by **Manish_Sharma** » 23 Nov 2016 10:55

Gshankar ji, by cheque you can withdraw upto 24,000/- Rs. there is no problem in that.

Sachin · Post by **Sachin** » 23 Nov 2016 11:00

SHQ was in all praise for the demonetization exercise yesterday evening

. One of her reasons was that now on wards every body's money would have value (and not just the money of the black money holders). She was never a NaMo fan (and had commie leanings to boot), but now perhaps conversation with her bank colleagues may have changed her mind. And yes, the bank people are all getting Rs.2000/day as over time for all the holidays in which they worked

.

praksam · Post by **praksam** » 23 Nov 2016 11:01

My relative had to get his khata transferred for one of the properties a few days back. He had to pay the bribe in new currency.

vijayk · Post by **vijayk** » 23 Nov 2016 11:04

1.5 lakh post offices will distribute 500/2000 notes

habal · Post by **habal** » 23 Nov 2016 11:12

Manish_Sharma wrote:Gshankar ji, by cheque you can withdraw upto 24,000/- Rs. there is no problem in that.

provided the branch has enough cash.