Currency Demonetisation and Future course of Indian Economy

ShauryaT · Post by **ShauryaT** » 28 Nov 2016 21:44

KJo wrote:I talked to my dad, he advises against converting money for other people. Some friends asked me if I could take their 500s and 1000s to India and convert and bring back. K&N wanted me to take their stash (Rs 14k) and give to someone in India, so that should be okay.

Know the law when carrying cash for international travel. I think the limit is Rs. 5000. Thanks.

yensoy · Post by **yensoy** » 28 Nov 2016 21:46

ShauryaT wrote:Most co-op banks are in rural areas, clientele are dominantly agricultural. The income for them is tax free. A "farmer" deposits Rs. 10 lacs, says never trusted banks earlier but here is my accumulated farm income. What is IT officer going to do? Squat.

IT guys aren't rookies in this business. Masking income as agricultural has been tried since time immemorial. Here is what they will do:
1. Assess the yield of the farm, and allow say 5 years profits as being legitimate; and make a demand on the tax for the balance
2. Check if said farmer has taken loans in the past - as long as the last of the installments haven't been paid disallow any savings from prior periods - so if farmer took a loan in 2004 and made payments till 2014, allow only the estimated profits between 2014-2016 as savings
3. And if IT officer is a crook, harass the farmer, get a payoff in mangalyaan and allow the entire proceeds

This is a civil matter, not a criminal matter. Burden of proof rests on the assessee in this case the "farmer".

shiv · Post by **shiv** » 28 Nov 2016 21:47

Uttam wrote:I have read each and every post on this thread. I have also talked many many people in India from 8 different states and from different economic class. And I am still not able to gauge how this demonetization is being received by majority of Indians. I think I have finally found a data point that may point towards its success.

Uttam

I am now fully converted to being Indian. I think like an Indian - which is a boast. Burning a bank, attacking staff and breaking bank windows and computers is a normal and well accepted method of registering true protest. Standing in queues is not. No one need to pretend that this does not happen in India or that people need to get paid for that.

NONE of that has happened. Why? Figure that out for yourself folks. It's not that difficult

Najunamar · Post by **Najunamar** » 28 Nov 2016 21:47

I thought it was $10k or equivalent. Of course assumes it is for US nationals.

ShauryaT · Post by **ShauryaT** » 28 Nov 2016 21:52

manjgu wrote:one thing i have not understood..people are saying BM is not kept as cash but as gold, property. But say i have BM and buy gold , the recepient of cash still has cash..same with property..i pay say 40L as BM for a property..the seller still keeps the 40L as cash? what am i missing here..?

The fact that the recipient of cash eventually distributes it to multiple parties through broken purchases or converts it into white, and/or a recipient of BM who is hoarding for some special purpose (elections/buy property) or is just plain stupid to hoard and sit on excess cash.

However the largest such hoard is with people, who do not have an out easily but do generate consistent BM. The most popular outs are, convert to USD, gold, launder or buy property. Most to non-productive assets.

ShauryaT · Post by **ShauryaT** » 28 Nov 2016 21:53

Najunamar wrote:I thought it was $10k or equivalent. Of course assumes it is for US nationals.

Check INR limit.

habal · Post by **habal** » 28 Nov 2016 21:55

I have brahmastra for fish which has not been used yet, which is I will park myself in pickup on a sea shore and get the fish directly from the sea going boats. But this has a few problems.

1. problem of plenty. (I have no choice in this matter, & have to accept whatever they sell).
2. have to present myself @ beach by 5-7 AM.

KJo · Post by **KJo** » 28 Nov 2016 21:58

Najunamar wrote:I thought it was $10k or equivalent. Of course assumes it is for US nationals.

Yes, I thought it was $10k or equivalent. So that is about INR 6.5 lakhs.

http://www.compareremit.com/money-trans ... ndia-3628/

Import: Currency Regulations in India
Local Currency (INR) -
Any person resident in India, who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs. 25,000 (Rupees Twenty Five Thousand only) per person.

Any person residing outside India and visiting India may bring into India currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.25,000 (Rupees Twenty Five Thousand only) per person

I see that the 25k INR is per person.

Foreign Currency-

There is no limit to bring foreign exchange in India from the US. However, the aggregate value of foreign currency notes in excess of USD 5000 or equivalent and the aggregate value of foreign exchange in the form of currency notes, bank notes or traveller's cheques in excess of USD 10,000 or its equivalent must be declared to the customs.

The limit for foreign currency notes is USD 3,000 and must be declare by filing CDF (Currency Declaration Form) if it exceeds the limit.

I don't understand the above. Is it USD 5k or USD 3k above which you have to declare?

nandakumar · Post by **nandakumar** » 28 Nov 2016 22:01

yensoy wrote:
ShauryaT wrote:Most co-op banks are in rural areas, clientele are dominantly agricultural. The income for them is tax free. A "farmer" deposits Rs. 10 lacs, says never trusted banks earlier but here is my accumulated farm income. What is IT officer going to do? Squat.
IT guys aren't rookies in this business. Masking income as agricultural has been tried since time immemorial. Here is what they will do:
1. Assess the yield of the farm, and allow say 5 years profits as being legitimate; and make a demand on the tax for the balance
2. Check if said farmer has taken loans in the past - as long as the last of the installments haven't been paid disallow any savings from prior periods - so if farmer took a loan in 2004 and made payments till 2014, allow only the estimated profits between 2014-2016 as savings
3. And if IT officer is a crook, harass the farmer, get a payoff in mangalyaan and allow the entire proceeds

This is a civil matter, not a criminal matter. Burden of proof rests on the assessee in this case the "farmer".

ShauryaT · Post by **ShauryaT** » 28 Nov 2016 22:03

yensoy wrote:
ShauryaT wrote:Most co-op banks are in rural areas, clientele are dominantly agricultural. The income for them is tax free. A "farmer" deposits Rs. 10 lacs, says never trusted banks earlier but here is my accumulated farm income. What is IT officer going to do? Squat.
IT guys aren't rookies in this business. Masking income as agricultural has been tried since time immemorial. Here is what they will do:
1. Assess the yield of the farm, and allow say 5 years profits as being legitimate; and make a demand on the tax for the balance
2. Check if said farmer has taken loans in the past - as long as the last of the installments haven't been paid disallow any savings from prior periods - so if farmer took a loan in 2004 and made payments till 2014, allow only the estimated profits between 2014-2016 as savings
3. And if IT officer is a crook, harass the farmer, get a payoff in mangalyaan and allow the entire proceeds

This is a civil matter, not a criminal matter. Burden of proof rests on the assessee in this case the "farmer".

Nice in theory - Is that your assessment of what happens or is likely to happen in practice in India for the most part?

habal · Post by **habal** » 28 Nov 2016 22:05

btw I forgot to mention it here.

for those who have current a/c's can withdraw 1L/2L etc each week.

this is the reason why logistics and road transportation are not particularly affected.

Picklu · Post by **Picklu** » 28 Nov 2016 22:16

Among all the high faluting theories, this is from chhi chhi ass backward didi territory...... jai ho!

Karthik S · Post by **Karthik S** » 28 Nov 2016 22:23

DeshGujarat ‏@DeshGujarat
Post demonetization move,upto November 27, Rs 33,948 crore exchanged, Rs 8,11,033 crore deposited, Rs 2,16,617 crore withdrawn at banks: RBI

Almost $90b with banks now, still a month to go! Hope banks immediately pass on the benefits to the people in terms of low interest rates.

saip · Post by **saip** » 28 Nov 2016 22:31

Somewhat OT

I went to Universal Studios in LA. Went to a cafe bought some snacks and a coke. They game me glass which looked very much like the one you get in fast food restaurants. Just the Universal logo on it. After I filled the glass at the machine and finished my snacks and went for a refill. But the machine said no refills. How did it know? Any wild guesses? (BTW there were no barcodes etc on the cup which i could see)

nandakumar · Post by **nandakumar** » 28 Nov 2016 22:34

shiv wrote:In the last 20 days since demonetization I have managed to exchange 3 x Rs 2000 notes (Rs 6000) for purchases - getting Rs 4200 in change as Rs 100 and 50 notes.

I don't find UPI/PayTM very useful yet. All my utility bills and a lot of other stuff was already e payments. My need for small notes is bus, auto, lady who irons clothes, street vegetable vendor

Someone has linked a great article/video above of how a mobile with SMS facility onlee (not a smartphone) can be used to send/receive payments - starting by dialling *99# Try it..

There are still people moving around with old notes hoping to pass them off - I am guessing many of these people will queue up in Banks soon to deposit

This i s what I have done. My electrician/plumber has agreed to take a cheque for both my personal repair expenses and the colony repairs (that I am in charge of). The dometic help has agreed to take 50% of her monthly wage (2000) in cash and the rest in cheque. I helped her open a bank account after the demonetisation announcement. She had put by rs 40000 in past savings in 500 and 1000 rupee (genuine savings) in the years that I had employed her. The cleaning lady for the colony upkeep has a bank account and she too has agreed to take her monthly wages. I have been forced to divert some of my vegetable purchase to Reliance Fresh and Kovai Pazhamudir outlet away from my street vendor. I feel bad about it. But then he is also not very regular. The car cleaning cum the colony water pumping lad had already been put on standing instructions with my banker so they get paid electronically. Grocery and petrol are on credit card. That leaves only the Tasmac retail outlet. Heaven forbid, I don't want an electronic trail of the expenditure!

Marten · Post by **Marten** » 28 Nov 2016 22:37

They need to rework the tax brackets and exempt income for folks below 8-10lacs. The revenue/collection forgone would probably be 28-30,000cr.
Make income reporting a requirement - with a simpler form,even more Saral, if possible!

And if they tied up with a mobile manufacturer for issuing encrypted UPI-enabled pvt-labeled branded cellphones, should encourage more small traders to push towards going cashless. It is possible.

I foresee some andolan type activity if they do not sort out the liquidity issues within the next few weeks.

Nandakumar Saar, awesome. Almost all of my expenses except the autos are paid for electronically. SHQ managed to convince 3 maids that debit cards will help them withdraw as much as required and she will pay any additional charges that the bank may impose on them! Finally, we have some balance, but one maid is a holdout saying she doesn't want to carry a card but prefers cash so the amount on her person can be managed better. She has obviously read Neshant's post.

arshyam · Post by **arshyam** » 28 Nov 2016 22:41

^^ TASMAC sales have taken a huge hit, I am told.

rsingh · Post by **rsingh** » 28 Nov 2016 23:00

habal wrote:I have brahmastra for fish which has not been used yet, which is I will park myself in pickup on a sea shore and get the fish directly from the sea going boats. But this has a few problems.

1. problem of plenty. (I have no choice in this matter, & have to accept whatever they sell).
2. have to present myself @ beach by 5-7 AM.

actually there are many things like that
- Taking Taxi from departure. In good old time they were not making drama so I never stood in Q.
- buying Veg and fruits every 15 day fro wholesale market. Ask them to make fruit gift "tokri".........choose the fruit and it done. Fresh and cheap.
-Equal opportunity doesn't exist. I learned this very early. There is a reason why somebody get a deal but some other guy fail to get the same deal. Simple example you have lil extra wt (and traveling in cattle class ie you are paying from your own pocket) you go the the female worker on the check-in counter. she won't like to mess around. She wants to be adorable, she wants to impress you. If your GHQ or SHQ goes there then the brain starts doing typical female calculation........jealousy,complex,dress analysis etc etc. I have tried this trick since my college days along with GHQ and now right honourable SHQ. I even asked my fata chapal economy class friend as well. Most of the time it goes my way. We had a case study done (in MBA years). Tried this countless times. salam

kvraghav · Post by **kvraghav** » 28 Nov 2016 23:14

Got hold of 5k in 20 and 10 rs notes. Will go on a spending spree. Reminds me of the times when my dad said someday you will understand the value of 10 rs.

Gus · Post by **Gus** » 28 Nov 2016 23:29

arshyam wrote:^^ TASMAC sales have taken a huge hit, I am told.

I see less crowd during peak times and no crowd in afternoon hrs. But they have 100 notes ..so I went there for getting change. Bought a quarter and got 2k notes changed to 100s.

Bart S · Post by **Bart S** » 28 Nov 2016 23:30

I have not had to spend any cash really since Nov 8th. I had a total of 350 Rs in legit currency, and my main worries were paying 1> Toll charges to NHAI on the Chennai bypass and 2> Paying cash for parking on my weekly mall visit. For everything else I could pay without cash.

For 1> it has been free till now, and for 2> I paid Rs 60 for one week and the second week they had installed card readers and the problem no longer exists. If only the stupid NHAI guys deploy the electronic toll like they are supposed to issue 1> would be taken care of as well. I still have about Rs 250 of that left.

Apart from that I spent some money at a street vendor to buy tender coconut water, the guy was looking into paytm but didn't have it, despite having a smartphone.

Was already managing largely cashless earlier and now going 100% cashless with a vengeance...basically boycotting anybody who doesn't accept cards.

Not that big a deal really since even the hole in the wall 'Andhra mess' outlet near my office with 60 Rs meals has a card reader. Even the tiny in-house convenience shop in my apartment complex has one.

Bart S · Post by **Bart S** » 28 Nov 2016 23:37

arshyam wrote:^^ TASMAC sales have taken a huge hit, I am told.

Serves them right. The guys in those shops are among the most lazy and uncouth bunch of parasites around.

However, for those who want to buy liquor the TASMAC in the malls has always accepted credit cards, and is a much nicer place to shop anyway. Going to a 'neighborhood' TASMAC on a weekend evening exposes you to a crowd that make Uruk Hai look civilized - it's for good reason that most of them have iron grills protecting the storefront.

Viv S · Post by **Viv S** » 28 Nov 2016 23:47

saip wrote:Somewhat OT

I went to Universal Studios in LA. Went to a cafe bought some snacks and a coke. They game me glass which looked very much like the one you get in fast food restaurants. Just the Universal logo on it. After I filled the glass at the machine and finished my snacks and went for a refill. But the machine said no refills. How did it know? Any wild guesses? (BTW there were no barcodes etc on the cup which i could see)

Hmm.. I like puzzles. Temperature/IR sensor? (Used cup will be cooler.) Activated metallic strip? (Magnetic sensor.) Optical sensor? (To detect liquid residue.) Little imp/sprite living in the machine? Or a self aware AI?

Vadivel · Post by **Vadivel** » 28 Nov 2016 23:53

Bart S wrote:
arshyam wrote:^^ TASMAC sales have taken a huge hit, I am told.
Serves them right. The guys in those shops are among the most lazy and uncouth bunch of parasites around.

However, for those who want to buy liquor the TASMAC in the malls has always accepted credit cards, and is a much nicer place to shop anyway. Going to a 'neighborhood' TASMAC on a weekend evening exposes you to a crowd that make Uruk Hai look civilized - it's for good reason that most of them have iron grills protecting the storefront.

Which mall has Tasmac?

ShauryaT · Post by **ShauryaT** » 28 Nov 2016 23:54

^If nothing on the cup, then most likely your universal card was swiped with the status no refills. RFID chip on the card?

Rishi Verma · Post by **Rishi Verma** » 28 Nov 2016 23:58

Gov received a cool $100B by today. What should be the item to buy it there was only one thing. I would say buy 100 nuke subs at $1B each. Each with 40 nuke tipped Sagarikas.

VKumar · Post by **VKumar** » 29 Nov 2016 00:08

RBI announced today people can withdraw any amount from their account in 2000 and 500 notes. This is to combat liquidity and fear that cash will not be available soon.

JohnTitor · Post by **JohnTitor** » 29 Nov 2016 00:09

habal wrote:I have lost $3000 via debit card fraud a decade and half ago. Simply put, I used a debit card at a public bus/metro station without connecting another event which I noticed but didn't suspect anything at that time, that a small distance away the cables linking the ATM machines were disconnected and someone's briefcase was nearby.

Unlike credit card, in Debit card once you lost money, it is done and lost forever. Unless someone is priority customer with a bank etc. The bank gave me back $500 as a goodwill gesture.

I don't know about the US, but in the UK and EU, all cards are protected from fraud by the bank. It is mandated by the laws. If India is to go cashless, laws need to be implemented to protect customers from fraud. Unfortunately, the Indian banking system is archaic. Your account is linked to the branch you opened it in and not the banking group.

It is stupid to claim that an all cashless economy will put more power in the hands of the bankers or some of the other theories people have tried to float here. As long as banks are regulated by the government and the government guarantees consumer deposits to a certain limit, there is nothing that can happen.

Those who think that cash is safer than a bank forget that the cash is not backed by anything and can turn to toilet paper in minutes if trust is lost. I work in the financial industry in the western world and have much experience with such matters. Going cashless not only ensures that tax is paid but also criminal activity is curbed. The UK for instance mandated that scrap dealers can no longer accept cash because a good proportion of it went untaxed and did various activities deemed immoral to society.

At the end of the day, as long as you use a fiat currency which is not backed by anything, the risk of losing value exists - cash or cashless. The key is proper regulation and oversight. 2008 happened because regulations were eroded.

RajeshG · Post by **RajeshG** » 29 Nov 2016 00:12

http://timesofindia.indiatimes.com/indi ... 673166.cms

People have exchanged and deposited about Rs 8.45 lakh crore worth of scrapped Rs 500/1,000 notes at different banks till November 27 following demonetisation of the high value currency, the Reserve Bank of India (RBI) said on Monday.

The banks also disbursed over 2.16 lakh crore over the counter and via ATMs between November 10 and November 27, according to an RBI statement.

Its still below 8 lac cr + 2 lac cr = 10 lac cr legit cash in the mkt. These estimates were from Debroy.

--------

On another look at the IT amendments, it doesnt really look too attractive. Especially the locking of 25% for 4 years without interest didnt sound like it would look attractive to people.

Bart S · Post by **Bart S** » 29 Nov 2016 00:14

rhytha wrote:
Bart S wrote:
Serves them right. The guys in those shops are among the most lazy and uncouth bunch of parasites around.

However, for those who want to buy liquor the TASMAC in the malls has always accepted credit cards, and is a much nicer place to shop anyway. Going to a 'neighborhood' TASMAC on a weekend evening exposes you to a crowd that make Uruk Hai look civilized - it's for good reason that most of them have iron grills protecting the storefront.
Which mall has Tasmac?

All of the big ones. I know for sure that EA (lower ground floor where Big Bazaar is) and Phoenix have them, because those are the two that I regularly visit.

According to this link there are a few more:
https://www.quora.com/In-which-malls-an ... ite-opened

pankajs · Post by **pankajs** » 29 Nov 2016 00:22

I expect to see a substantial increase in the Income tax slabs as a "thank you" from GOI perhaps as much as to move the lowest slab from 2.5 Lakhs up to to 5 lakhs. Will exempt a lot of folks at the lowest income level.

One single move will put more money in the hands of people specially at the lowest level of income. It will also send a positive signal to the masses and push consumption and in the process lift business, both small and large.

Suraj · Post by **Suraj** » 29 Nov 2016 00:32

Karthik S wrote:
DeshGujarat ‏@DeshGujarat
Post demonetization move,upto November 27, Rs 33,948 crore exchanged, Rs 8,11,033 crore deposited, Rs 2,16,617 crore withdrawn at banks: RBI
Almost $90b with banks now, still a month to go! Hope banks immediately pass on the benefits to the people in terms of low interest rates.

Already 8 lakh crore ??? Wow. That is incredibly rapid. Withdrawals from regular accounts is fine since it's just providing cash liquidity; the deposit figure is the most critical one. More than half the old cash (Rs.13.6 lakh crore) there has already re-entered the banking system again, and it took only from Nov 10 to Nov 27 to do this. So much for the likes of Larry Summers talking of 'chaos and mismanagement' and people like DavidD parroting that.

I think the deposit figure will stall at somewhere around 12-13 lakh crore. The rest is cash that is being destroyed instead of deposited. The slow down in deposit rate is already visible, but the worst part of this is over. Most of the remaining money is the holdouts who are still hoping against hope for a way to squirrel away their ill gotten wealth.

Suraj · Post by **Suraj** » 29 Nov 2016 00:34

With a potential doubling or trebling of the taxable population base through the demonetization exercise, GoI should very likely be able to increase the lowest income tax slab from its current level.

There are millions of businessmen who made as much or more than the average salaried class who pretty much skipped under the radar, until. It's good to welcome them all into the net, after they pay the entry fee, err tax+penalty on their deposit.

KJo · Post by **KJo** » 29 Nov 2016 00:35

After the housing market, I think the next to be impacted will be inflation.

One of the reasons for inflation in India is that there was too much money in the market that people had not earned. It was money stolen from the Government by tax evasion. That should drop tremendously so people would not be able to afford the current high rates on everyday commodities and that should bring down prices.

It's shocking how money has very little value in India these days and people pay 1000s for things that used to cost Rs 50-60.

However, deflation is also a bad thing and I hope the govt is prepared for the effects. That will also bring down wages along with prices.

Karthik S · Post by **Karthik S** » 29 Nov 2016 00:41

KJo wrote:After the housing market, I think the next to be impacted will be inflation.

One of the reasons for inflation in India is that there was too much money in the market that people had not earned. It was money stolen from the Government by tax evasion. That should drop tremendously so people would not be able to afford the current high rates on everyday commodities and that should bring down prices.

It's shocking how money has very little value in India these days and people pay 1000s for things that used to cost Rs 50-60.

However, deflation is also a bad thing and I hope the govt is prepared for the effects. That will also bring down wages along with prices.

I think we need not worry about deflation yet as long as unemployment rate is maintained at 6% or thereabouts. IIRC, I think it's more than 10% now. Suraj or others may shed more light here, but deflation is more affected by the unemployment rates in the country.

Suraj · Post by **Suraj** » 29 Nov 2016 01:00

Deflation in asset prices is a given. Everything is likely to cost less, from food to houses. But that is not deflation in the typically implied sense, but an increase in purchasing power of white money in hand. The value that black money extracted has been forcibly taken away from the black economy and handed to the white economy. A 50lakh house going for 40lakh is just the result of that much of an increase in purchasing power, because black money is no longer competing with you for the same goods and services.

The only other issue is wage growth, but again, this is not a conventional deflationary situation. Formal wages are not affected. Informal economic activity now has to follow formal economy rules, including minimum wage and ESI/PF requirements. So there's a floor on any wage drop.

The only 'real' deflationary impetus is the people themselves not spending cash. The cash liquidity issue has the potential to kill a lot of small businesses. But I have said this multiple times and will say it again - government cannot fix it - it's upto the people. People talk about liquidity like it's something RBI controls with dry policy statements. Cash liquidity in small denominations is not RBI's business to fix. RBI has enabled over Rs.2 lakh crore to be withdrawn as cash so far. That money is literally in peoples' hands and they're not spending it.

There was a certain amount of Rs.100 and smaller notes in circulation before Nov 9, and that was enough then. It should be enough now. But it isn't, because both BMers and regular people are hoarding cash notes. This is NOT helpful. Every minute that Rs.100 spends in your purse, someone else is denied access to that Rs.100 . Guess what happens ? It causes some business to fail. Government reacts by printing more. People react to seeing business fail and prices drop by hoarding even more. THAT is a deflationary spiral.

The amount of cash out ther should be plenty enough for the entire economy to function on. But no, people still 'save 100s' and locally cause cash liquidity issues. The best thing you could do is to go find some small trader or seller who's struggling with cash liquidity and buy stuff in 100s from him, asking him to invest some of his earnings into cashless payment systems quickly.

disha · Post by **disha** » 29 Nov 2016 01:07

Deflation in Indian context may actually make people feel richer. In effect., "deflation" may not be a bad thing! That is with deflation., your Rs. 1 will go further. Your roti/kapda/makaan will feel cheaper too. As long as the economic activity continuous. This is not a problem for India., since India still needs significant infrastructure build out.

The part where economists fear about deflation is the 'total jamming up' of economy. Nothing moves. There is contraction in economic activity. Due to that there are no jobs. Which further contracts the economic activity creating depression.

With demonetization., another puzzle fell in for me. Again this is IMHO and all that., during the Maun McMohan Sigh era., India was in stagflation (no growth, high inflation) and from 2014 inflation was brought in check but there was this fear (in me) of how India can soft land into goldilocks zone of high growth and stable low inflation vs. land into high growth and high inflation. The problem with high growth and high inflation is that it starts creating winners and losers and the growth is not equitable (equitable in all sense, like some sectors will grow but others suffer., like some areas will grow and other suffer and some sections will grow and other sections suffer). The goldilocks is high growth., that is everybody has a job or finds one and further with stable low inflation, their purchasing power increases. That is a maid's 40k Rs does not erode in value., the maid is able to put a kid through school as well. The kid has better job prospects and participate in a growing economy and obtain a better standard of living.

The demonetization drive will enable India to land into goldilocks zone.

Suraj · Post by **Suraj** » 29 Nov 2016 01:08

ShauryaT wrote:
habal wrote:only way to release all this cash is to cut income tax to zero and announce tax holiday for 2-3 months. This may again stimulate consumption.
Better yet, announce that any BM "invested" to create employment will attract no/minimun tax/penalty and more important NO harassment. Win-Win for Modi and his support base and more importantly for India.

There's no 'cash' to release. All the old 500s and 1000s are toilet paper. There's no option to voluntarily decide whether or not to comply anymore. They had the choice to do all this during the IDS that ran from June to September. Anyone with black money could have paid much less tax then, than they are now liable for. As for now ? You deposit, and after paying penalty you keep the rest. If you don't deposit at all, your cash net worth is Rs.0 .

It's not any businessman's decision to decide whether or not to pay tax. The salaried class does not have that choice, and neither should a business man. Let them sit on their waste paper and lose their entire business if they refuse to declare the cash and deposit it. No further incentives are necessary since no one needs further incentive.

Threatening 'businesses will fail' is not going to help any business still trying to preserve its black money earnings from taxation/penalty. That's analogous to TSP shouting 'stop or I'll shoot myself'. Go ahead, shoot yourself. There's plenty of people with white money waiting to buy out your premises and business for paise to the rupee and profit once you've ruined yourself.

The smartest thing any businessman can do right now is shut up, go deposit his black money *ASAP*, pay the tax/penalty and turn around and buy stuff cheap while they can. Instead, the foolish business types cry and wail, while the smart folks hover over them like vultures waiting to buy them up once they fold.

This is a buyers market for all kinds of assets, people. I'm surprised so many businessmen don't get it. You're looking potentially 30-50% gain in purchasing power of your cash, and instead of quickly coming clean and buying up things on the cheap, you're crying ?

KJo · Post by **KJo** » 29 Nov 2016 01:48

disha wrote:Deflation in Indian context may actually make people feel richer. In effect., "deflation" may not be a bad thing! That is with deflation., your Rs. 1 will go further. Your roti/kapda/makaan will feel cheaper too. As long as the economic activity continuous. This is not a problem for India., since India still needs significant infrastructure build out.

The part where economists fear about deflation is the 'total jamming up' of economy. Nothing moves. There is contraction in economic activity. Due to that there are no jobs. Which further contracts the economic activity creating depression.

With demonetization., another puzzle fell in for me. Again this is IMHO and all that., during the Maun McMohan Sigh era., India was in stagflation (no growth, high inflation) and from 2014 inflation was brought in check but there was this fear (in me) of how India can soft land into goldilocks zone of high growth and stable low inflation vs. land into high growth and high inflation. The problem with high growth and high inflation is that it starts creating winners and losers and the growth is not equitable (equitable in all sense, like some sectors will grow but others suffer., like some areas will grow and other suffer and some sections will grow and other sections suffer). The goldilocks is high growth., that is everybody has a job or finds one and further with stable low inflation, their purchasing power increases. That is a maid's 40k Rs does not erode in value., the maid is able to put a kid through school as well. The kid has better job prospects and participate in a growing economy and obtain a better standard of living.

The demonetization drive will enable India to land into goldilocks zone.

Well, keep in mind that it is all a cycle. You will pay less at the store, but your employer will also make less revenue and they will cut wages or slash jobs. Overall, the average salaries will go down, so you may not feel as happy as you might expect.

On the other hand, the competition for big ticket items will be more fair. You will compete with another person who has worked hard or harder for his money, not someone who has higher buying power just because he evaded taxes.

So each Rupee can get more goods than earlier, but it will be harder to earn that Rupee.

vnms · Post by **vnms** » 29 Nov 2016 01:51

Suraj wrote:The smartest thing any businessman can do right now is shut up, go deposit his black money *ASAP*, pay the tax/penalty and turn around and buy stuff cheap while they can. Instead, the foolish business types cry and wail, while the smart folks hover over them like vultures waiting to buy them up once they fold.

This is a buyers market for all kinds of assets, people. I'm surprised so many businessmen don't get it. You're looking potentially 30-50% gain in purchasing power of your cash, and instead of quickly coming clean and buying up things on the cheap, you're crying ?

This is exactly what I was thinking!!

If I have been buying stock of a company that I like for the long term, everytime the stock price unexpectedly drops ( and not for any valid reason ) I look to add to my position. This is an excellent opportunity for business to expand their markets to people that were previously priced out. I'm pretty sure that all the smart businessmen are already planning around that without complaining about the situation.

Most businessmen are amoral i.e. not immoral or not moral. It's the nature of a business to make money. They will not jeopardize their business and will follow the 'new' norm.