Currency Demonetisation and Future course of Indian Economy

Karthik S · Post by **Karthik S** » 29 Nov 2016 08:45

Neshant wrote:Note I'm not against the elimination of BM attained through corruption.
I am against the creation of an even bigger robbery scheme setup under the guise of "eliminating BM".
If BM from corruption is bad, then institutionalized robbery through the fraud of private banks insisting on control over the earnings & savings of people is worse. If the former is BM, the latter is super-BM.

But do you even understand the above? If the answer is no, there is no point discussing it any further.

The assumption is that govt will control the digital currency and that control will not gravitate into the hands of private banksters. The history of how central banks (aka proxies for private banks) came into existence in the western world suggest that is the EXACT mechanism through which illegal & monopolistic control over society is attained by banksters.

Once private banksters gain control over the nation's monetary system and people have no exit from it, the people are little more than serfs.

Under all circumstances, the people who earn the wealth should choose the monetary system. Not "wise men" at the top claiming to be acting in the best interest of the people by forcing them to hand over control of their wealth to banksters as custodians. That is the objective of govt (and soon bankster) controlled digital currencies launched under the guise of preventing crime when in fact its objective is crime.

Looks like to you western banks is US banks. I am assuming you are talking about too big to fail banks that caused the financial crises and the US government had to bail them out as allowing them to shut down will cause far more loss to the economy.
If your source of misgivings to what's happening in India now is solely based on how banks performed in the US, you need to understand the basic difference between the economies and culture of two countries. They are market based and credit taking society, ours is opposite to that. Ours is banking and savings based societies. If customers of private banks come to know that their banks are investing their savings in stock markets, I bet the bank will lose many of its customers. If you want to take example of western banks, you can take a look at Japanese and German banks. Again the only banks in these countries that was affected during the financial crisis were the banks that were involved with the markets.

Nitesh · Post by **Nitesh** » 29 Nov 2016 08:45

ShauryaT wrote:
Nitesh wrote:But isn't cooperative banks have to show the KYC complied status and then only will get new currency/deposit to sponsor banks? I think this was the reason for the pawarful sahab to show the support, but this leak seems to have been plgged
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.

A farmer income is tax exempted anyway, so no problem at all, the only issue here is KYC according to RBI guidelines, the coop banks are not getting new currency, till they make sure they are KYC complied

ShauryaT · Post by **ShauryaT** » 29 Nov 2016 08:58

Shiv ji: My views on this issue have been formulated over decades and I do hold a sympathetic view on the matter coming from a family that used to be in small business and am still very plugged in to the network but residing outside really do not have a bone anymore. This is a decades old matter and if we go to count who is at fault and who is a cheat, it will go nowhere. I have no political issues with Modi or even demonetization but do think that the huge chasm of trust lacking between the creators of wealth and the so called custodians of the poor needs action by the government towards reform, which has been slow in coming. The likes of Karan Thapar have known political biases, so nothing new there. He seeks to make political points and is part of the opposition. Anyways, media is supposed to the fourth pillar of democracy. Their job to question and be adversarial. That is what they do.

I am not going to support this move just because the Modi government has done this. India will and has changed. Modi with his good intentions will at the end of the day try to do something good. The question to me is not about his intent but has he used the right tools to get to his own desired end goals. Namely to end BM and Corruption. It is the tooling where I have a disagreement not the end goals iteslf. Lastly, never forget Modi himself is a politician, a masterful one some say. He is not above the fray but in it. Like you have mentioned every political party is now short of funds. Guess who has raised the most funds which can be attributed to BM?

The last time someone tried to pull this type of a massive stunt in the name of the poor was Indira Gandhi with the bank nationalization move. Enriching the INC at the cost of other parties and their sources of funding. She also banned funding for political parties I think. I am deeply skeptical of government trying to do these wealth transfer moves, deeply skeptical that they are the answer to India's economic woes and have a direct controlling role to play. At heart a libertarian or IOW a committed federalist and a view that an "individual" is sovereign in their own right. Specific rights have been ceded to a government by way of contract and being a citizen of a state. To such a person, skepticism about governments comes rather easily.

arshyam · Post by **arshyam** » 29 Nov 2016 09:01

Neshant wrote:Do you know how and why the Federal Reserve came into existence. Do you know who's interest it represents. Do you know why the IRS came into existence at the same time the Fed came into existence? If you don't, you cannot hope to understand ANYTHING of the fiat monetary system and moves to separate the productive population from its wealth.

Err, the Federal Reserve (of THE USA) is a private bank that is not under the control of the US treasury. Every dollar it prints it 'lends' to the US treasury, which circulates or lends it further. Furthermore, there is a fat revolving door between the Federal Reserve (again, of THE USA) and the private banks on Wall Street, NYC (again, in THE USA). So bankers from Goldman Sachs and Chase Manhattan, etc. (again, of THE USA) move between their cushy jobs in Wall St and the Fed. The latter was set up not by the USG, but because a clutch of influential bankers got together in 1910 or thereabouts and 'lobbied' the then US prez to create the Fed. And the IRS - apparently, there is no law mandating income tax collection. Again, all this happened in the USA.

Now, I have answered your "do you know" type questions that seem to come from a world view that banking == Wall St and economics == whatever happens in the USA. Why don't you take this opportunity and educate me (and the rest of us) how this is all applicable to India, if at all. Considering that the RBI is well under the GoI and there is no visible revolving door between the RBI and, say, ICICI. And the largest banks in are still in the public sector, so banks in general cannot do whatever they want - unlike, again, in the USA. Also keep in mind that unlike in the USA, most economic activity in India happens well outside the 'organized' channels and stock markets. And unlike in the USA, most people in India have access to alternative currencies in the form of gold, so in a pinch or a doomsday scenario like you seem to imply, something will be worked out informally.

ShauryaT · Post by **ShauryaT** » 29 Nov 2016 09:17

shiv wrote: Until now the one aspect of demonetization that has not gained traction in public discourse is the fact that it could have bigger political consequences than financial consequences. Why?

1. Counterfeit currency from Pak is rendered useless leading to a sudden crisis for the Kashmir violence sponsors
2. Naxals are suddenly coming out of the woodwork hungry
3. Every political party is now short of funds for "rent a crowd" - the elephant in the room that is visible via the absence of widespread rioting despite the severe pain that the catamite/hijra talks about
4. What is worse? There is every EVERY possibility that the BJP itself has sent silent word around about Modis seriousness regarding Black Money and a huge percentage of BJP cadre may simply have converted their black to white in the 2015-16 period.

Discounting the 4th point - even though I have read some other suggestion on that angle, I agree this move has potentially more political benefits than an economic one.

One major political view point is the way Modi has played this. As something to give the rich some sleepless nights, asking the poor to cooperate in the short term difficulties. On the ground, the poor do see the rich in the same boat as them even if for a few days only. Many rich trying to use the poor to launder, benefitting many poor in the process. Bank coffers being filled, leading to some benefits eventually to the government one way of the other. The government then announcing ways to spend this one time gain to benefit the poor with Modi's infamous marketing skills.

Translation: Modi can legitimately claim a move that has or at least claim to have had benefitted the poor. The poor see this as an anti-rich move, cementing Modi's image as the man who has done something for the poor.

As for the economic benefits, I am skeptical, but it is a moot point. In about 6 months, this demonetization will not matter. Modi will reap the benefits of being able to spend some extra INR in the next budget, helping his case for 2019.

ShauryaT · Post by **ShauryaT** » 29 Nov 2016 09:26

Bart S wrote: Yep, we can count on MS Alhuwalia the UPA appointee who was booted out as soon as the UPA lost power and who was a key part of the economic debacle of UPA 1 and 2, to not have any vested interest and present a fair picture on a policy decision of the Modi government. On an interview with Karan Thapar no less.

Do you really expect a critique of this policy to come from the union cabinet or a modi bhakt?

But anyways, watch this from 14:40 onwards.

shiv · Post by **shiv** » 29 Nov 2016 09:27

ShauryaT wrote: The last time someone tried to pull this type of a massive stunt in the name of the poor was Indira Gandhi with the bank nationalization move. Enriching the INC at the cost of other parties and their sources of funding. She also banned funding for political parties I think. I am deeply skeptical of government trying to do these wealth transfer moves, deeply skeptical that they are the answer to India's economic woes and have a direct controlling role to play. At heart a libertarian or IOW a committed federalist and a view that an "individual" is sovereign in their own right. Specific rights have been ceded to a government by way of contract and being a citizen of a state. To such a person, skepticism about governments comes rather easily.

The point I am making is that this may be a move with huge political consequences, and a reasonable non zero economic impact.

The deadly dilemma it has thrown up is because it was a huge gamble. It works on the premise that everyone will be punished but terrorists and money hoarders will be hit the hardest. It is a "political surgical strike" because the assumption among political parties is "The poor are suffering and we are such philanthropists that we seek only to mitigate te misery of the poor" Modi's move is counter intuitive because he is openly saying that the poor will be inconvenienced, but the wealthy will get hit hard. The political masterstroke here stems from the fact that lack of large denomination notes, lack of liquidity and the need to stand in queues is normal for the vast majority of Indians. Every now and again a new queue is needed and this is one more new queue.

Political parties in India have acquired the reputation of being callous ba$tards because of the cash they wield. Every Indian knows that nothing will change either before or after election and every Indian knows that votes can be bought. In the 2014 general election our domestic help said "We got money from "Hand" (Cong) and "Flower"(BJP) No one likes this and there is a sense of euphoric Schadenfreude in watching the cocky local politicians squirm. Like you I am also very clued into local issues and perhaps more clued into the lives of the urban poor than most. When life gets disrupted in Bengaluru it is invariably disrupted by paid political action. No one likes it. The local economy is upset. The actual demonstrators nowadays are wealthy looking young men riding on motorcycles around the city carrying flags. "protestors" are bussed in and all are paid. Politics is an organization of criminals with money. The thought that those criminals have taken at least one hit is supremely satisfying.

As an aside, what I find extra fascinating is that he whole country can do nothing other than talk about the economic gains and losses and 'people's pain". But on the ground there is a feeling that makes people say "Fuk you" to the cash-bearing wealthy local political goon. We used to see them regularly - during religious festivals as well as political events. Every single one of them is now sitting with one thumb in his mouth and another in his backside. The feeling is one of intense satisfaction and I am enjoying it immensely, reinforced by seeing my thoughts echoed by the lay public.

Of course things may go back to the usual crap in a few months - but no one is going to forget this euphoria soon, or the feeling that comes from realizing that there is some power who has the ability to control and screw our local goons. If that euphoria gets translated into electoral gains - then the gains of demonetization will only be multiplied.

chetak · Post by **chetak** » 29 Nov 2016 09:42

yensoy · Post by **yensoy** » 29 Nov 2016 09:50

shiv wrote:Of course things may go back to the usual crap in a few months - but no one is going to forget this euphoria soon, or the feeling that comes from realizing that there is some power who has the ability to control and screw our local goons. If that euphoria gets translated into electoral gains - then the gains of demonetization will only be multiplied.

Three steps forward and two steps back will still be progress. At the very least, we proved to ourselves that we are a disciplined, orderly and principled nation at large.

yensoy · Post by **yensoy** » 29 Nov 2016 09:55

Neshant wrote:We've been through enough enslavement. Its time to wake up.

There are enough of these conspiracy theory nutcases in the US, buying up pounds of dried/canned foods & ammunition, and going off-grid in preparation of doomsday. Everything is a conspiracy tracing back to the killers of Jesus.

Please get real. Paper money is the biggest "conspiracy" because after all it's paper with someone's promise written on it, and you have seen that promise being broken. Instead barter your stuff and services for rice, daal, oil, water and wifi. Banking is not for you. After all, what good does a bank do? The nasty guys take your surplus funds and lend it out to someone who has a need for it - so unfair!

Suraj · Post by **Suraj** » 29 Nov 2016 10:11

Great posts yensoy and shiv

arshyam · Post by **arshyam** » 29 Nov 2016 10:16

Neshant wrote:The part you don't understand that this is the gateway.

Maybe. I expected your post to say how, in the Indian context. But all I get is a bunch of conspiracy theories from a much more controlled and homogeneous society. As it happens, that society is not India. If you think India can be controlled like how the US is, then you really don't understand this country.

Neshant wrote:So long as the people choose the money they transact in voluntarily, the country cannot be colonized/conquered.

What does this even mean? You mean to say that the currency notes we have been using for eons is voluntary? In that case, we should frequently see people buying property or a car for gold or a sack of rice. But we don't, do we? No one, at least in India, is the worse for it. I don't really care how it ended up in the US - they have a much different system from the ground up. Chalk and cheese, etc.

Currency notes are by fiat, fair enough. Currency notes residing in a bank a/c are also by fiat. What's the diff? The govt can pull the rug under either anytime (they just did, didn't they?). So how will arguing for fiat currency notes as some paragon of freedom ensure that very freedom? Sorry, but your posts fail on many counts. Just saying "you don't understand..." does not cut it. You need to make an actual, and relevant argument.

Suraj · Post by **Suraj** » 29 Nov 2016 10:26

Please don't feed Neshants posts . They will be moved back to the perspectives thread where they belong .

Manish_Sharma · Post by **Manish_Sharma** » 29 Nov 2016 10:36

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

Rs 2,16,617 crore withdrawn at banks = means just Banks or Banks + ATM

Yagnasri · Post by **Yagnasri** » 29 Nov 2016 10:36

As I posted before NCP and others in MH and Kerala might have used Co-Operative bank network to keep the money from this drive. I am worried that already 60% of the cash was deposited. The prediction of 30% cash not coming back may prove to be wrong.

If that is the case, then new ideas may have to be looked into. Stop printing notes above Rs. 100 or 50/- may be one of the way forward. AP state is already moving under a serious cashless transactions mode under CBN. I am not aware what methods CBN is coming up with. But it may be good to have a look at him. GST guidelines etc. can be relooked into to see if we can make cash transaction more common than as of now. I am not advocating any tax brakes, but there is a need to look into making payments between wholesale dealers to retail dealers compulsory.

vina · Post by **vina** » 29 Nov 2016 10:36

Lines back again in front of ATMs and bank branches this morning. Very noticeable during my morning commute as people were lined up waiting for the branches to open and functioning ATMs had lines in front of them. True with every bank I saw, SBI, HDFC, VijayaBank, Karnataka Bank, ICICI.. etc.

Probably month end , people waiting to withdraw cash.

Yagnasri · Post by **Yagnasri** » 29 Nov 2016 10:47

It seems Jetlle asked CBN to look head the parliamentary panel on demonetization yesterday. Anyone reported in MSM. I read nothing.

Sachin · Post by **Sachin** » 29 Nov 2016 10:57

Got this from the net..
RBI/2016-17/163
DCM.No.1437/10.27.00/2016-17

November 28, 2016

The Chairman / Managing Director/ Chief Executive Officer,
Public Sector Banks/ Private Sector Banks / Foreign Banks /
Regional Rural Banks / Urban Cooperative Banks/
State Cooperative Banks/ District Central Cooperative Banks

Dear Sir,

Withdrawal of cash from bank deposit accounts - Relaxation

It has been reported that certain depositors are hesitating to deposit their monies into bank accounts in view of the current limits on cash withdrawals from accounts.

2. As it is impeding active circulation of currency notes, it has been decided, on careful consideration, to allow withdrawals of deposits made in current legal tender notes on or after November 29, 2016 beyond the current limits; preferably, available higher denominations bank notes of ₹ 2000 and ₹ 500 are to be issued for such withdrawals.

Yours faithfully,

(P Vijaya Kumar)
Chief General Manager
----
SHQ is on her way again to the Cash chest today. Looks like the banks are now stocking up money to face the December 1st dead line. And the above order from RBI, may be benefiting the salaried people. The salary deposit happens after Nov 29th, and this amount can be withdrawn (from the bank) entirely. But such withdrawals would only be in Rs.2000 & Rs. 500 notes

.

vijayk · Post by **vijayk** » 29 Nov 2016 10:59

Tv9 in Hyderabad is going ballistic in their modi bashing

Sachin · Post by **Sachin** » 29 Nov 2016 11:00

Yagnasri wrote:It seems Jetlle asked CBN to look head the parliamentary panel on demonetization yesterday. Anyone reported in MSM. I read nothing.

CMs'panel to suggests ways for cashless economy
Finance Minister Arun Jaitley spoke to Andhra Pradesh Chief Minister N Chandrababu Naidu on Monday, asking him to head the five-member panel. Jaitley also spoke to Bihar Chief Minister Nitish Kumar, who has supported the ban on old notes, and requested him to join the panel.

Other members may include Odisha Chief Minister Naveen Patnaik, Telangana Chief Minister K Chandrasekhar Rao and Punjab Chief Minister Parkash Singh Badal. All these chief ministers have backed demonetisation.
---
Here you go. So looks like NaMo has decided to rope in some of the best state chief ministers, and others who have supported the demonitisation drive. The financial scientist from Kerala seems to be missing, and so are other luminaries from West Bengal.

Nitesh · Post by **Nitesh** » 29 Nov 2016 11:01

If you see any ATM is functioning and no queue, means it is giving away only 2000/- notes

.
In other incident, one guy went to bank to take 1 lakh rs out (current account holder) and 90 bundles of 10 notes and 2 bundles of 50 notes. Gone nuts completely

Philip · Post by **Philip** » 29 Nov 2016 11:17

I can confirm this is happening.I was sent a message from a site offering "queue rental services" at the rate of 90/hr. by their "boys" all above the age of 18! WE Indians love to break rules somehow or the other,why trying to eliminate "black money" will always fail.The only answer is to abolish personal Income Tax and have GST,transaction tax for cqs,financial transactions.

https://www.theguardian.com/world/2016/ ... or-queuing

Cash for queues: people paid to stand in line amid India's bank note crisis
As demonetisation continues, and websites offer ‘helpers’ who will hold your place in a bank queue, what are the ethics of India’s new national pastime?
People queue as they wait to exchange or deposit their old high denomination banknotes in Jammu, India.

Vidhi Doshi in Mumbai
Monday 28 November 2016
Outside the Churchgate branch of the Bank of India in south Mumbai, some of those queueing for cash have become familiar faces.

Ever since the prime minister, Narendra Modi, unexpectedly withdrew high-value 500- and 1,000-rupee banknotes from circulation, wiping out 86% of India’s currency overnight, queueing for cash has become a national sport. But for some, such as Santosh Garg, who comes here every day on behalf of his bosses at an insurance company, lining up has become a part of his job description.

“Obviously I don’t like coming and standing in line for two hours in the sun,” Garg says. “I do it because my boss tells me to. It’s not like I can say no.”

Modi’s money crunch has prompted an unexpected boom in the queue-sitting business, where people are paid to stand in line. Some people send their employees to hold their place, while others hire workers paid by the day to do the job. Tech startups such as BookMyChotu and DoneThing have also swooped in to capitalise on the queueing crisis, offering “helpers” who will hold your place in a bank queue for 90-150 rupees (£1-£1.75) an hour. The proxies wait until they are close to the head of the queue then call their temporary employer, who makes the transaction.

But the cash-for-queueing business is controversial. Some of those who have waited for two hours outside the bank near Churchgate argue that sending someone to hold your place in a queue is unethical and unfair to those who have no choice but to come themselves. Prathamesh Shroff, who has come to withdraw 12,000 rupees, says: “Everyone should do their own work. If you support Modi’s decision, you should show your support by coming here and standing in the queues with the rest of us.”

Some of India’s elite, such as the film star Ravi Babu, who queued for 15 minutes at a cash machine in Hyderabad holding a live piglet, have joined the crowds themselves. But most of the better-off have left the queueing to others.

In the Churchgate bank queue, Teresa Gonzalves says the country would grind to a halt if rich businessmen stopped working to stand in queues. “What’s wrong with sending someone in your place?” she asks. “I’m not going to get paid if my boss doesn’t have money to pay me. Rich men are not going to come and stand here. If our bosses come, the country will stop working. They have work to do too.”

Gonzalves’s view is surprisingly common in India, where paying for a line-sitter is being hailed as a form of jugaad, an Indian concept meaning creative corner-cutting. Jugaad implies that following the rulebook too rigidly is the act of a fool. While British colonisers saw a natural justice in the random orderliness of first come, first served, decades of bureaucratic inefficiency in post-independence, socialist India fostered a love for innovative rule-bending.

Queue-sitting is only one of many such shortcuts that Indians are taking to circumnavigate the cash crisis. Cash-rich Indians started thinking up ingenious ways to dispose of their high-value notes as soon as Modi announced their withdrawal on 8 November.

That night, a waiter at the stylish Umame restaurant in south Mumbai, was asked by a regular if he could pay 100,000 rupees in high-value notes before the note ban kicked in, as an advance for his next 10 meals at the restaurant. The following day, first-class tickets for India’s longest train journey between Dibrugarh and Kanyakumari were sold out for the next four months as people scrambled to buy expensive tickets with their notes, planning to get refunds later in small change or new currency.

Employers are offering, sometimes forcing, employees to accept advance salaries for the next six months in old 1,000- and 500-rupee notes. Others are buying gold, and taking backdated receipts from jewellers who can claim that purchases in high-value notes were made before Modi’s announcement. Mobile and electronic payments have surged, and cash-free, app-based taxi services and online grocery markets have seen a dramatic increase in customers. A small number of restaurants, gyms and bars are offering to take old notes, which can still be exchanged at banks until the end of 2016.

Queueing for pay is not a new concept in India, nor in other parts of the world. In New York, a place in a queue for a free public theatre performance can come for $125. In top Beijing hospitals, coveted doctor’s appointments, which can be subject to months-long waiting lists, can be bought from line-standers. Free-market economic theory suggests that there is nothing wrong with paying to take someone’s place in a queue if both parties agree.

But with the note shortage in India, cash is precious and the queue-jumping jugaad has a dark side. As banks quickly run out of cash, many have to go hungry if they cannot make it to the front of the line. Others have to take days off work to wait in line. One man, standing in the queue at the bank, who does odd jobs for a launderette, says he will phone his boss when he reaches the front, so that he can come and make a cash deposit. “Every man, whether he’s rich or poor, has a mouth to feed. But somehow, only ordinary folks like us end up standing in line,” he says.

Rammpal · Post by **Rammpal** » 29 Nov 2016 11:22

shiv wrote:
Of course things may go back to the usual crap in a few months - but no one is going to forget this euphoria soon, or the feeling that comes from realizing that there is some power who has the ability to control and screw our local goons. If that euphoria gets translated into electoral gains - then the gains of demonetization will only be multiplied.

Why or how ?
This is a major paradigm change, i.e.: if things could go back to normal, it would have taken place already.

sum · Post by **sum** » 29 Nov 2016 11:33

WE Indians love to break rules somehow or the other,why trying to eliminate "black money" will always fail.The only answer is to abolish personal Income Tax and have GST,transaction tax for cqs,financial transactions.

Yes, we break any and every rules.So why have any laws and rules in the first place?

chetak · Post by **chetak** » 29 Nov 2016 11:40

vina wrote:Lines back again in front of ATMs and bank branches this morning. Very noticeable during my morning commute as people were lined up waiting for the branches to open and functioning ATMs had lines in front of them. True with every bank I saw, SBI, HDFC, VijayaBank, Karnataka Bank, ICICI.. etc.

Probably month end , people waiting to withdraw cash.

This is salary week.

Govt was bracing for this by restricting cash supply during the previous week

This will continue for a week at least.

Philip · Post by **Philip** » 29 Nov 2016 11:50

Q.How are we in the future going to prevent bank scams as we've experienced,with govt. bankers giving scamsters like Mallya and co. incredible sums of money for worthless collateral? If so-called tainted money is mopped up by the banks,it gives even more room for bankers to engage in mischief,grant new loans (many to scamsters) which is the job of bankers..Some allege that this entire exercise was meant to obfuscate the massive holes in banks due to corporate NPAs like Mallya,Essar,etc. We've just seen how some eager-beaver bank officials have been trying to cash in on the crisis,pardon the pun, by collaborating with BMwallahs.

Secondly,bank frauds ,frauds in electronic transactions due to hacking is only increasing.Transactions being made on so-called "smart phones" is the riskiest way. The GOI seems to have little clue as to the future dangers which will assail the banking system,far more serious than simply stashing way bundles of notes. In future,more moolah will be squirreled away to foreign climes instead of remaining in the country in the "cash-and carry" business.

Akshay Kapoor · Post by **Akshay Kapoor** » 29 Nov 2016 11:55

Suraj wrote:
ShauryaT wrote:We continue to disagree. Many compelling techniques have been used in the past and have always failed as was the IDS plan. Your answers are vested in better and if necessary forceful compliance.
Any disagreement on your part right now is purely academic. It was a real discussion until Nov 8, i.e. "is this cash productive or not". Right now you're disagreeing with me, "should this toilet paper theoretically have value ?" Sure, feel free to disagree until the cows come home and figure out whether toilet paper 'should have value'. It STILL doesn't make it worth any more than toilet paper...
ShauryaT wrote:I am saying these alone will not work, as it has not in the past and the future is no exception. I will repeat this adage again, if there is a choice to an average BM person to pay 50% tax and convert the rest to usable proceeds or loose 50% and launder the rest, the choice being taken is to launder - and continue to avoid the tax net.
I urge you to look at the proposed amendment to the IT Act. It makes the penalty dependent on voluntary or involuntary admission. In other words, come forward and deposit your old cash, and you pay a lower penalty than if they find out later without your prior admission, or find that you lied in your admission. That's very good policy - step forward and get leniency. Keep trying to hide, and get a cripping penalty.
ShauryaT wrote:You have your logic on why it will be hard to do so at scale, I have mine too, along with some noted folks, who disagree with your confidence in BM wielders to not be able to launder successfully.
I'll simply remind everyone on 'your side' that you may have logic but no cash. You literally have no leverage of any kind . You can try to launder money, and while a few people may succeed, you'll be walking around with IT's crosshairs on you all the time, and that'll cost you business every day when your competitors have no such worries. ESPECIALLY when GST comes around. Good luck trying to convince upstream and downstream business colleagues to operate in black under GST - to take a haircut on THEIR credits to benefit you, and increase THEIR taxes to benefit you. That'll work out pretty well...
ShauryaT wrote:What has been achieved here is the BM holder has taken a haircut and the effects of this haircut will be felt in good and some bad ways too. e.g: Effect on real estate prices would be a much needed relief, its downstream effects on construction jobs and other effects of this haircut in reduced spending will be a negative effect on the economy. Net-Net, we will see after Dec or March.
Yes, negative effect. On the BLACK economy. Aren't you tracking RBI data ? Approx Rs.8.11 lakh crore / $125 billion - 60% of the cash outstanding - has been deposited. Backing that is maybe 5x as much economic activity, all of which is now official economic activity too. Notionally, GDP has already risen by that much, solely from all that's been reported so far, and will show up in official GDP when the CSO/MOSPI collects the corresponding activity data. The remaining 40% can disappear entirely and the GDP will still have a net positive. The 'economy is going to fail' argument is a day late and a dollar short, already.

+ 1000

Yayavar · Post by **Yayavar** » 29 Nov 2016 12:03

sum wrote:
WE Indians love to break rules somehow or the other,why trying to eliminate "black money" will always fail.The only answer is to abolish personal Income Tax and have GST,transaction tax for cqs,financial transactions.
Yes, we break any and every rules.So why have any laws and rules in the first place?

To know what to break

Murugan · Post by **Murugan** » 29 Nov 2016 12:04

putnanja · Post by **putnanja** » 29 Nov 2016 12:21

Suraj wrote:
ShauryaT wrote:I am saying these alone will not work, as it has not in the past and the future is no exception. I will repeat this adage again, if there is a choice to an average BM person to pay 50% tax and convert the rest to usable proceeds or loose 50% and launder the rest, the choice being taken is to launder - and continue to avoid the tax net.
I urge you to look at the proposed amendment to the IT Act. It makes the penalty dependent on voluntary or involuntary admission. In other words, come forward and deposit your old cash, and you pay a lower penalty than if they find out later without your prior admission, or find that you lied in your admission. That's very good policy - step forward and get leniency. Keep trying to hide, and get a cripping penalty.
....

Not to mention that even with 50% penalty, 25% is locked without interest in the PM Garibi Kalyan scheme for four years. So they can technically use only 25% of their BM in immediate future.

Dumal · Post by **Dumal** » 29 Nov 2016 13:09

Increasing stridency against de-mon! Congies cashing their chips with Kaushik Basu (former Chief Eco Advisor 2009-12, Padma Bhushan 2008, Amartya Sen - acolyte). Are we seeing the beginning of wave of manufactured opinion from congress-sponsored awardees a la the intolerance/award wapsi charade?

http://www.rediff.com/business/report/n ... 161129.htm

Wiki has a small snippet on his earlier experience with the babus and netas:

"he said his earlier experience of government, when he was setting up CDE (Centre for Development Economics at the Delhi School of Economics, which he founded in 1992 and served as its first Executive Director until 1996), was not a happy one. Letters and phone calls were met with no response. In desperation he went to see the then Finance Minister, Manmohan Singh. Many bureaucrats saw him waiting to meet the Minister. Thereafter their behaviour changed so markedly that he toyed with the idea of writing to the Minister to visit him periodically but not to disturb the Minister, just to sit in his waiting area for a while and go away.

vina · Post by **vina** » 29 Nov 2016 13:09

Philip wrote:In future,more moolah will be squirreled away to foreign climes instead of remaining in the country in the "cash-and carry" business.

Believe me. That is getting more and more difficult by the day and with the global treaties coming in with automatic information exchange, it will be impossible to do so in any civilised jurisdiction in a convertible currency in FUTURE. Sure. You want to hide it in North Korea or some random hell hole one way roach motel, sure, be my guest. That money is good as gone.

Past BM, is probably safe and gone. But future ones are going to be VERY difficult. I am expecting going forward to have a law for all gold/diamond/precious stuff business done ONLY electronically (jeweller /dealer buying back old gold /recycled gold and selling new gold etc) and not on cash. The entire chain will have to be done electronically.

It is very simple to do so. It can be made mandatory to have the jeweller gather an Adhaar number for every transaction that he does (today over a certain value PAN number is needed anyways) and force him to raise a bill for that via the UPI Bill payment route (yes, the UPI has a bill payment interface). Same story with buying new gold etc. That way, the store of value that Gold has, can be severely restricted , by cutting out the liquidity via cash route. Expect steps on that.

Real Estate too will have similar payment and receipt restrictions. Again, the BM liquidity in that can be severely restricted. Do these two, the BM has to remain in cash /benami accounts and that will be easy to raid and confiscate.

chetak · Post by **chetak** » 29 Nov 2016 13:26

big burnol moment

looks like their commie arses got burned pretty badly.

srin · Post by **srin** » 29 Nov 2016 13:26

I've read the comments of those who say that with all the excess liquidity in banks, we're now going to have a period of deflation. My question, is hypothetically, if the Govt partly uses the collected cash to distribute money into Jan Dhan accounts, will it reverse the deflation effects ?

chetak · Post by **chetak** » 29 Nov 2016 13:29

srin wrote:I've read the comments of those who say that with all the excess liquidity in banks, we're now going to have a period of deflation. My question, is hypothetically, if the Govt partly uses the collected cash to distribute money into Jan Dhan accounts, will it reverse the deflation effects ?

The RBI has stymied this by increasing the CRR.

hanumadu · Post by **hanumadu** » 29 Nov 2016 13:45

If there is deflation, it will be in high value goods which have been priced out of reach of most middle class. A little deflation is probably not such a bad thing.

vijayk · Post by **vijayk** » 29 Nov 2016 13:49

Andhra bank manager told me there was no cash received from Friday. He is supposed to receive it today

TKiran · Post by **TKiran** » 29 Nov 2016 14:05

vina wrote: Believe me. That is getting more and more difficult by the day and with the global treaties coming in with automatic information exchange, it will be impossible to do so in any civilised jurisdiction in a convertible currency in FUTURE. Sure. You want to hide it in North Korea or some random hell hole one way roach motel, sure, be my guest. That money is good as gone.

Past BM, is probably safe and gone. But future ones are going to be VERY difficult. I am expecting going forward to have a law for all gold/diamond/precious stuff business done ONLY electronically (jeweller /dealer buying back old gold /recycled gold and selling new gold etc) and not on cash. The entire chain will have to be done electronically.

It is very simple to do so. It can be made mandatory to have the jeweller gather an Adhaar number for every transaction that he does (today over a certain value PAN number is needed anyways) and force him to raise a bill for that via the UPI Bill payment route (yes, the UPI has a bill payment interface). Same story with buying new gold etc. That way, the store of value that Gold has, can be severely restricted , by cutting out the liquidity via cash route. Expect steps on that.

Real Estate too will have similar payment and receipt restrictions. Again, the BM liquidity in that can be severely restricted. Do these two, the BM has to remain in cash /benami accounts and that will be easy to raid and confiscate.

Vina sir, you are being too optimistic here. The BM hoarders worry about the paper that they get into their hands the day that falls on their hands. They immediately convert into white by starting businesses and buying land in their village. For example, I know a pandu with impeccable credentials (he was caught by ACB taking 2000 rupees bribe, got suspended, then after two years came back but was put into crime branch where there is no money, he paid 40lakhs bribes to get himself transferred to plum placement, took 2 years to pay back the politician from whom he took the loan of 40 lakhs at exorbitant rate of 36% interest. ) Then he started hotel business, he spent 11crores but showed only 2crores as capital expenditure. Now all his family members manage the hotel, now he is making money in the business, he buys a necklace to his wife, daughter every other month, also his father is still in the village now owns 40 acres lemon and lemonade garden, his technic is always he buys with loan from co-operative bank, once after 1 year or so, he repays loan amount, IT can't detect such transactions. All his businesses are in the name of his family members, who file the tax return promptly. He is making his father to contest elections,

According to him, all the currency gets converted to white money, No bribe taker keeps his bribe as caspa

Real estate also, he buys in the name of the partnership company, and files returns, he doesn't have any worries about IT guys, everything is white, only thing is he would have spent 5 crores for a villa, bought by loan with ICICI Bank, and after 1year the bank loan doesn't appear.

His latest move is to take a bank loan for his son for UG in UK.

It's public knowledge that he takes 30000 rupees cash and a blackdog every day, in fact, many people jealous of him write letters to IT Dept., but so far no ride on him, because IT Dept has more than 10years of his returns, shows nothing. He doesn't touch paper currency by hand, very afraid if the currency notes have red pigment attached to it. Ofcource he did not get any promotions in the last 10 years.

panduranghari · Post by **panduranghari** » 29 Nov 2016 14:06

chetak wrote:
srin wrote:I've read the comments of those who say that with all the excess liquidity in banks, we're now going to have a period of deflation. My question, is hypothetically, if the Govt partly uses the collected cash to distribute money into Jan Dhan accounts, will it reverse the deflation effects ?
The RBI has stymied this by increasing the CRR.

Saar why are you assuming deflation is bad? Deflation should just be a thing, like inflation. It should in theory make no difference to common man, unless he/she is heavily indebted. If RBI has increased the CRR, they are probably less concerned about NPA's than before. I doubt its to control the deflationary effects.

Srin ji,
Distributing money in JD accounts is like UPA's MNREGA. Why do such a thing? The explanation given by certain economists will be on the lines of the money supply has contracted so need to inject money into the economy. When you push them to explain the reasoning, they would claim common man is suffering. This is nonsense. Most of black money was held by vested interest groups who have no incentive to decrease poverty. They are more concerned about the reducing asset values which is the only other source of political capital left for these types.

In an ideal world -there should be deflation in the prices of the needs. There should be inflation in the prices of wants.

pankajs · Post by **pankajs** » 29 Nov 2016 14:46

http://www.financialexpress.com/economy ... -9/459219/
Fitch Ratings today lowered India's GDP growth forecast for this fiscal to 6.9 per cent from 7.4 per cent, saying there will be "temporary disruptions" to economic activity post demonetisation.

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Per Fitch, Approx 0.5 % off the growth rate but the economy is still expected to grow by 6.9 % in FY17.