Currency Demonetisation and Future course of Indian Economy

Gus · Post by **Gus** » 03 Dec 2016 18:37

sdas1645 wrote:pay day came and went and no riot on the streets?

People are vastly underestimating the close monitoring and corrective actions goi is taking now. We may not understand everything and have questions and criticism based on what we know, but there is no denying (imo) that they are quite clear on what they are doing.

UlanBatori · Post by **UlanBatori** » 03 Dec 2016 19:24

What stops ppl from catching a vijiting EnnArrEye and exchanging BM for WM? Then EnnArrEye can innojently get the old notes changed at sarkari bank, hain?

Not that I have any intention of doing that, but I do have 17 crisp old ones that I need to get exchanged when I vijit desh in Dejember. How does bank know I am not doing the above, hain?

TKiran · Post by **TKiran** » 03 Dec 2016 19:38

shiv wrote:
What you say here is still perfectly legal and dharmic. Nothing illegal that I can see - only play with words "I think about revenue not tax" . This is wordplay, not cheating. You may be avoiding (or reducing) income tax, but you are avoiding it legally. I do that too. There are many avenues to do that. As long as you declare returns, list losses, expenses and depreciation and balance your books what you are doing is staying within tax laws. There is nothing wrong in that - you are actually paying taxes in a sense because you are part of the legal economy paying indirect taxes. Purchases that add up as "depreciation" in your books only mean that you have books and are staying within the law. You may even be showing false/"ghost"/benami employees - but beyond a point the cheating can get more risky. As a businessman your income will have to be fairly high for you to actually pay 30% tax. You can always reduce that by so many means - and if you are clever enough you can keep it at zero tax. But that does not make you a cheat or a tax defaulter. Your books are clean-ish. You can hide some income. The government does not bother about that. The problem arises when the extent you cheat the government rises to very high levels and they can prove it. If you have 2-3 lakhs left over so you can celebrate diwali better than the mullas Id, it does not necessarily mean that you are a cheat

I disagree with your statement that tax is not your primary botheration. If it was not a botheration you would not use words like "depreciation" and "buying equipment" which is what every businessman does to avoid tax and it is perfectly legal. But it is still within the ambit of our tax laws.

Jaziya is what you would pay under Islamic rule. But Muslims don't pay jaziya - they pay Zakat. Zakat is basically a compulsory tax that they pay to the ruler who has money to keep an army. That army will make slaves and dhimmis of others, who will pay jaziya. Those Muslims who don't pay zakat and non Muslims who don't pay jaziya are punished. The national taxes you pay are for exactly the same reasons - so that the army can be maintained by the Sultan/GoI. Now the army can be used to keep invaders out. The same army, in the form of police forces can be used to punish those who don't stay within the tax laws.

I sell the year long scrap, oils, coolant, etc get lakhs in cash, I clean my premises as I believe that the corners should be clean, then only Lakshmi will stay, I celebrate Dussehra, very Grand, I show off. It's my Dharma. I hoard gold. In fact every time I visit Shanghai, I buy 10 GM 99.9% gold from people's bank of China, promptly paying tax, (it comes to around 17% tax). Still it is cheaper than buying 22 carat gold in India. I have proper receipts. As you know I hate the tax guys in India, though I am within the legal limits, I mix the coins with other 1RMB coins and nobody catches me when they scan. (Admin note: Such claims or confessions not encouraged in a National security oriented forum)The business man has to be very dynamic and very emotional. This is my Dharma.

I genuinely don't care if others are jealous of me, earning ARTHA is one of the most important thing for Hindus. All papers are clean. I keep my wealth with me, legally. If anyone has any problems with that I don't care.

But then, there is a saying,

పదుగురాడు మాట పాడియై ధరజెల్లు
ఒక్కకడాడు మాట యెక్కదెందు౹

Which means in a forum like this where everyone thinks that I should pay taxes (not zero tax), that will be the paradigm, and one man who has a different paradigm,will get warning or even ban.

But then the next stanza says,

ఊరకుండువాని నూరెల్ల నోపదు
విశ్వదాభిరామ వినుర వేమ౹౹

Which means, you still dont have a choice to remain silent, you have to say what you have to say. Otherwise you will take another Birth to post in brf. I fear taking birth again.

Lilo · Post by **Lilo** » 03 Dec 2016 19:43

In the moradabad speech modi clearly links why going cashless through mobile banking - even by the poor is necessary to reduce cash economy & thereby the quantum of new black money generation & corruption going ahead.

So DeMo is explicitly linked to going cashless now.

shiv · Post by **shiv** » 03 Dec 2016 19:45

TKiran wrote: I genuinely don't care if others are jealous of me, earning ARTHA is one of the most important thing for Hindus. All papers are clean. I keep my wealth with me, legally. If anyone has any problems with that I don't care.

Hmm - that is an interesting statement. Ideally what others think should not affect you at all. That means that you should not care whether others are happy for you or jealous about you. Both should have no effect on you. But you mention only one - which seems to be on your mind.

TKiran wrote: Which means in a forum like this where everyone thinks that I should pay taxes (not zero tax), that will be the paradigm, and one man who has a different paradigm,will get warning or even ban.

You do care what others think.

Subdas · Post by **Subdas** » 03 Dec 2016 19:50

The effect of cash less move will be fully felt around 2019 and this reform itself is big enough to carry namo to next innings. This coupled with gst should reign in inflation and corruption which is what mago people vote for in ge elections.

Sicanta · Post by **Sicanta** » 03 Dec 2016 19:55

Demonetisation: Petrol pumps get into digital overdrive, play up wallets

http://www.financialexpress.com/economy ... ts/463304/

Lilo · Post by **Lilo** » 03 Dec 2016 19:58

The days are numbered for all the "proudly" tax avoiding mercantalists - when the triple whammy of GST,DeMo & Cashless hit them together going ahead.

Then they have to truly emigrate to dubai or shanghai to still keep their business in cash & off the books.
Or they may stay here & adopt a hawala system of payments where gold here is exchanged for USD abroad - while continuously looking across their shoulders ever vary of the govt agencies like the common criminals they are !

UlanBatori · Post by **UlanBatori** » 03 Dec 2016 20:29

No wonder Trump called Pakistan a Fantastic Country. The Choice of the Smart Indian Businessman. :LOL

Karan M · Post by **Karan M** » 03 Dec 2016 20:30

This guy doesnt want to pay tax in India but will pay tax to China. He is bragging about evading customs by mixing his gold with chinese coins, if it is legal and everything he did was above board why would he care. And then he is bragging about not paying tax. Trying to convince people into believing that it is somehow dharmic to not pay tax to the nation.

And posting on a nationalist forum which has a majority of law abiding, nationally oriented people.

Akshay Kapoor · Post by **Akshay Kapoor** » 03 Dec 2016 20:32

Karan M wrote:This guy doesnt want to pay tax in India but will pay tax to China. He is bragging about evading customs by mixing his gold with chinese coins. And then he is bragging about not paying tax. Trying to con people into believing that it is somehow dharmic to defraud the nation.

And posting on a nationalist forum which has a majority of law abiding, nationally oriented people.

And moderators - maun !! Deafening Silence.

LokeshC · Post by **LokeshC** » 03 Dec 2016 20:34

What he is doing is cooking the books, no two ways about it. If he feels that the laws are unfair, trying to change them is a better option than breaking them.

Breaking the law is a slippery slope, but looks like he is way past that stage.

shiv · Post by **shiv** » 03 Dec 2016 20:50

TKiran wrote: I hoard gold. In fact every time I visit Shanghai, I buy 10 GM 99.9% gold from people's bank of China, promptly paying tax, (it comes to around 17% tax). Still it is cheaper than buying 22 carat gold in India. I have proper receipts. As you know I hate the tax guys in India, though I am within the legal limits, I mix the coins with other 1RMB coins and nobody catches me when they scan. The business man has to be very dynamic and very emotional.

This is totally weird. You are anyway legally allowed to import upto Rs 50,000 of gold (for men) and Rs 100,000 for women. That would be more than 10 grams for men - so what's the need to hide it.

What you do is your business but people who say I get gold cheap in Shanghai remind me of a neighbour in the UK who would ask

"Hey you bought a new TV. How much did you pay?
Me - "X pounds"
He: "Ha Ha You could have got it for 50 pounds less in Tottenham Court road in London from a shop I know"

I always felt this was stupid because it would cost me more than the price saved to travel to London.

You can claim your air and hotel expenses in Shanghai as "business expenses" and save on tax liability, but you can't claim meals, entertainment, tourism and gold. Ultimately you spend several lakhs (or tens of thousands) for the entire and claim that you saved a small amount on the gold. Its different if you brought in 1 kg of gold. But 10 grams? Seriously?

That aside I must point out that you are trying to send signals about about yourself to everyone on this forum - almost as if you have this deep need to tell people: "I earn so much. I don't pay tax. I hoard gold. I don't care if people are jealous" etc. You do know that thousands of Indians do all this both legally and illegally. There is nothing extraordinary. So why exactly do you feel this need to lay all this open on a forum?

shiv · Post by **shiv** » 03 Dec 2016 20:51

LokeshC wrote:What he is doing is cooking the books, no two ways about it. If he feels that the laws are unfair, trying to change them is a better option than breaking them.

Breaking the law is a slippery slope, but looks like he is way past that stage.

I don't think he is cooking too much He is mostly within the law but talks as if he is a great moneymaking hoarder. He seems to have a need to make people see him that way.

darshan · Post by **darshan** » 03 Dec 2016 21:00

RajeshG wrote:
darshan wrote: 2) Would certainly not like to see Congress and company be back with IT raids, absurd tax rates, confiscation of anything that can be grabbed and running court cases till eternity, etc.
India is a democracy. Indians know nothing will last forever. Even Rama Rajya didnt last forever. People expect NaMo to get re-elected for 2019 for second term. But people know that no matter how good NaMo is he cannot be the PM forever. People also know that when it comes time to file taxes the collector is not going to be NaMo - its going to be the same guy ( or type of guys ) they have been dealing with all along. IOW the notes have changed but the guys collecting are the same. People also know that when govt has complete control they either (a) mess up - 80+ % leakage (b) come up with grand schemes like reservations/MNREGA which become politically impossible to back out. People are like this onlee.

Random thoughts.
Certainly may be the case. And that is why over decades people like TKiran have come into picture. For example, let us say he suddenly becomes law abiding citizen. What is in it for him after 2019 if NaMo is not back and UPA goes for money grab with substantial increase in taxes now that they can enforce taxes more efficiently and have a wider base? UPA may loose an election or so afterwards but that will not bring time, lost tax revenue, and public goodwill back. Without substantial overhaul of rules and regulation and system clean up, lot of these seem transients if there is no systematic dismantling of many political parties. NDA1 came and disappeared while UPA1/2 managed to survive. I guess that we will have to wait till 2019 to find that out.

vijayk · Post by **vijayk** » 03 Dec 2016 21:03

One close relative was always proud that he never buys ticket in train and manages with TTE. He was always proud of it

Karan M · Post by **Karan M** » 03 Dec 2016 21:05

Looks like the BM/WM cashless scheme has put a big wrench into someone's tax free utopia.

Neela · Post by **Neela** » 03 Dec 2016 21:22

From a traditional small/medium sized Chit fund manager ( they are chettiars - traditional mercantile class ) in chennai.
His clients are all small / medium sized biz'men in Chennai. All of them whining to him that 50% tax is a lot and say 15 or even 20% is fine. When he asked why they did not declare before Sep 30, they admit they didnt take it seriously.
He is advising that this govt might go the full mile and hunt them down eventually. He has repeated "Pay 50% and sleep peacefully" many times over now.
He admits there was an attitude that being a crook and avoiding taxes was seen as being smart. Now he believes this smart alec stuff wont last long.

He also says many clients are directly getting in touch with shady guys in the IT dept...and he says there are quite a few of them there.

JohnTitor · Post by **JohnTitor** » 03 Dec 2016 21:49

shiv wrote:You can claim your air and hotel expenses in Shanghai as "business expenses" and save on tax liability, but you can't claim meals, entertainment, tourism and gold. Ultimately you spend several lakhs (or tens of thousands) for the entire and claim that you saved a small amount on the gold. Its different if you brought in 1 kg of gold. But 10 grams? Seriously?

I'm pretty sure he's bringing more than 10gm. Makes no sense to "save" a few hundred rupees on the tax for 10gm. More likely that he's bringing 500-1000gms and paying off the customs guys.

People throw around the word "dharma" as if they know what it is. Dharma is an extremely complex thing and requires spiritual insight. It is not some rigid thing that can be used to justify tax evasion because one employs a few labourers. If you evaded tax to bring down the Pakistani govt or to eliminate all criminal activity, it would hold more water.

SwamyG · Post by **SwamyG** » 03 Dec 2016 21:51

http://m.rediff.com/business/column/ban ... 161203.htm

The article paints a gloomy picture from both economic and political perspective. Looking at the cited reasons:

More deposits than the available money in the system before demonetisation increases government liability and weakens its financial architecture.

It exposes the government claim of unearthing black money. Black money hoarders may have actually laundered their black money into white by taking advantage of loopholes in government schemes.

This will expose the Modi government to a frontal attack from the Opposition, which will say that instead of achieving its stated objective of demonetisation, the government has attracted more black money because of its sloppy implementation.

yensoy · Post by **yensoy** » 03 Dec 2016 22:07

Things are going to get rough for Gold over the next 5-10 years.

Last couple of times my bank manager was pushing me quite hard to buy gold bonds. I think a lot of the draw of gold is in its inherent value and resistance to inflation; by introducing a product indexed to world price of gold plus a little more (and with some aggressive marketing) you can wean a section of population away from holding physical gold. For instance those with young daughters (being realistic, not patriarchal here) - if you want to accumulate gold for your daughter's wedding 10 years out, why buy physical and worry about its security instead of buying gold bonds?

The value of gold is precious little apart from being a perceived store of value. The jewellery aspect is overrated - gold plated, or 18k, or other metals are just as beautiful. India is the country holding up the price of gold; as restrictions kick in and alternative investment products show up (indexed to Gold or otherwise), look out below as the price crashes.

Dasari · Post by **Dasari** » 03 Dec 2016 22:07

It is premature to assess the success or failure of demonetization based on overall exchange/deposits. If it was assumed that mere scrapping of Rs 500 and Rs 1000 notes would cause black money hoarders to give up and dump all their money in sewage, nothing could have been more foolish. It is to be expected that hoarders will make every attempt to convert black to white.

The real work starts after Dec 30, where they have to go through millions of accounts and identify the fraudsters. I urge and assume that RBI will initiate a huge machine learning/artificial intelligence project and implement state of the art models to complement the manual effort in identifying potential fraudsters. They also need to create a parallel investigation on RBI and bank officers where lot of collusion is going on.

If the follow up action is not strong, then this whole effort is futile. The only positive outcome is acceleration of some cashless transactions but at the expense of huge disruption to economy.

Marten · Post by **Marten** » 03 Dec 2016 22:12

UlanBatori wrote:What stops ppl from catching a vijiting EnnArrEye and exchanging BM for WM? Then EnnArrEye can innojently get the old notes changed at sarkari bank, hain?

Not that I have any intention of doing that, but I do have 17 crisp old ones that I need to get exchanged when I vijit desh in Dejember. How does bank know I am not doing the above, hain?

It is clear we need to talk, great yak herder.

I have carried back a lot more cash than that with letters and bank details. Ended up asking a customs chap who laughed at my naivete and said he must focus on Gold instead of my question. Am sure all Gelf NRIs must think of this opportunity preaented by DeMo. Massamen, not as much.

ShauryaT · Post by **ShauryaT** » 03 Dec 2016 22:20

Lilo wrote:In the moradabad speech modi clearly links why going cashless through mobile banking - even by the poor is necessary to reduce cash economy & thereby the quantum of new black money generation & corruption going ahead.

So DeMo is explicitly linked to going cashless now.

Going less cash is an inevitable movement and a fact of the state of society and its trajectory. The question is to what degree can a government force the issue? Force by way of mandates directly and limitations on the currency float. 85% of all use of debit cards is only at the ATM machine. Half the cards not even for that. So, to what degree will this change. The electronic wallet transactions are way too insignificant at this time to really matter. How many B2C transactions will be done with a check, almost non-existent now. Not saying the government should not do anything, on the contrary there are many things it can such as scaling the RuPay infrastructure for India - that would be a huge enabler. Easy and seamless use of automated payments. Enabling a robust credit infrastructure through the banking system, etc. The JDY scheme just about has managed to cover the majority of Indians to have a basic bank account to start with. We are in its infancy in this evolution. The funny thing is, I was a little amused to know that at e-commerce sites one of the most popular payment methods was COD. It was clear that the low level of trust in society and its interacting organs will continue to be a huge impediment and much needs to be done to solve this underlying trust between institutions of government and the people and indeed within society itself. A government led transformation is usually not the best recipe for such a change. If we say 85% of all transactions in India (by count) is cash and only about 15% as electronic (all forms), what is the expectation that this will change to what in how much time?

Suraj · Post by **Suraj** » 03 Dec 2016 22:39

Picklu wrote:I will take the 1-2 lakh crore of BM in cash going kaput just fine.

But we must remember
a. That is 50% of the estimated total BM in cash of 3-4 lakh crore which means the other 50% got laundered to WM (at least temporarily) just fine.

No, that not correct. It means the rest was entirely declared. *Some* of the rest may have been laundered, i.e. declared through proxies who managed to evade detection. But the rest was declared, a penalty and tax paid upon it, and half the remainder put in the PMGKY. Undeposited money is a 100% gain to GoI. The IT notices upon the deposits will lag the deposits themselves, but just because there hasn't been one yet, does not mean there will not be one.

Picklu wrote:b. More importantly, without the curb on the generation side, it would not take much time to get generated once again. Worstly still, after getting wised up, they would do it in much more sophisticated manner to ensure that it appears white to even greater scrutiny. I gave some examples of what is happening (or happened in the last 5 years) already.

I think an absolutist view of this is unlikely to help. 100% coverage is impossible. Especially when people themselves are not perfect at enabling this to work. So what right do we have collectively to assess GoI's performance as either perfect or not ? For example, the BM is being fed anew, partly by peoples' own hoarding. They work within the constraints the people place upon them too.

However, the fact is that things are working out. Within a day of talking about a crackdown on corruption, GoI announces one themselves. They've already started efforts on land and gold BM holders .

TKiran · Post by **TKiran** » 03 Dec 2016 23:13

shiv wrote:
LokeshC wrote:What he is doing is cooking the books, no two ways about it. If he feels that the laws are unfair, trying to change them is a better option than breaking them.

Breaking the law is a slippery slope, but looks like he is way past that stage.
I don't think he is cooking too much He is mostly within the law but talks as if he is a great moneymaking hoarder. He seems to have a need to make people see him that way.

Shiv sir you are pretty close to cracking my pisko profile, but not yet there.

Let me help you with that. One broad clue, is Donald Trump, why he behaves the way behaves, but not much is known about him except that he didn't pay taxes for years together by exploiting some tax loophole. The other clue is my behavior with chaiwala. The other clue is my schadenfreude looking at the helplessness of some of the esteemed members. My obedience with some of the gurus and dikgajs. May be UBji has already cracked it, not sure.

But then my pisko profile could be more of academic in nature, and certainly OT here. My community you have already cracked, I got confirmation from your some other post.

manju · Post by **manju** » 03 Dec 2016 23:20

Hari Seldon wrote:^+1. Wonder when this dhaga will meet its 108.

did u mean its 72

UlanBatori · Post by **UlanBatori** » 03 Dec 2016 23:27

The value of gold is precious little apart from being a perceived store of value.

The value of gold investment is also that it does fairly steep excursions. For instance, I got badly burned buying Gold Phund (actually it invested in gold mining company stocks) some years ago when i thought gold was 30% down. It kept on going down. But I bought a bit more.
Then.. BLESS BREXIT!!! It went up to where I could get out at 50% gain. I did. At the peak. Made enough to buy a few Paper Dosas at Ulan Bator Udipis. Lesson learned. If I want to feel stupid again I can invest in airline stocks like I did many years ago.

That was Manipulation City onlee - I watched one day as someone sold off enough to make a stock crash, then bought heavily at the bottom 2 minutes later.

Rishi Verma · Post by **Rishi Verma** » 03 Dec 2016 23:29

TKiran wrote: I hoard gold. In fact every time I visit Shanghai, I buy 10 GM 99.9% gold from people's bank of China, promptly paying tax, (it comes to around 17% tax). Still it is cheaper than buying 22 carat gold in India. I have proper receipts . As you know I hate the tax guys in India, though I am within the legal limits, I mix the coins with other 1RMB coins and nobody catches me when they scan. The business man has to be very dynamic and very emotional.

I don't know why this self-confessed tax-cheat is allowed to crap on forum discussing something of national importance with his personal wild stories and gripes. Obviously he has a lot of time to spare. Besides Chinese "receipts" can be bought on the streets of Shanghai, Shenzhen, Beijing by the hundreds for $1. At least we have a new verb now as this thread is getting Tkiraned.

UlanBatori · Post by **UlanBatori** » 03 Dec 2016 23:39

Come on RV. Good ideas are always welcome, the term "good" being open to interpretation. I have to agree that the artificially high gold price inside India has always been at the root of corruption. Used to keep smugglers busy, it got Dawood Ibrahim trained, probably make a LOT of Customs Aphsars very rich. It's pretty silly to have something as standard as gold priced so that someone can make 14% profit in a day just flying out to Gelf and coming back in the evening. Much of the Mumbai skyline came up on the price differential of gold, I am sure.

Suraj · Post by **Suraj** » 04 Dec 2016 00:05

There's no 'artificially high price of gold' in India . The market sets the price. The black market absorbs a lot of gold demand and therefore the price stays high.

What TKiran does, is pay Chinese taxes and avoid paying Indian duties by deliberately hiding gold coins among Chinese currency coins when he travels back. There's no honor in any of this. He effectively follows their tax laws, and then proceeds to travel back and break Indian laws the moment he steps off the plane.

The absurdity of the argument is incredible.

Akshay Kapoor · Post by **Akshay Kapoor** » 04 Dec 2016 01:28

JohnTitor wrote:
shiv wrote:You can claim your air and hotel expenses in Shanghai as "business expenses" and save on tax liability, but you can't claim meals, entertainment, tourism and gold. Ultimately you spend several lakhs (or tens of thousands) for the entire and claim that you saved a small amount on the gold. Its different if you brought in 1 kg of gold. But 10 grams? Seriously?

People throw around the word "dharma" as if they know what it is. Dharma is an extremely complex thing and requires spiritual insight. It is not some rigid thing that can be used to justify tax evasion because one employs a few labourers. If you evaded tax to bring down the Pakistani govt or to eliminate all criminal activity, it would hold more water.

Plus 100.

Akshay Kapoor · Post by **Akshay Kapoor** » 04 Dec 2016 01:44

Rishi Verma wrote:
TKiran wrote: I hoard gold. In fact every time I visit Shanghai, I buy 10 GM 99.9% gold from people's bank of China, promptly paying tax, (it comes to around 17% tax). Still it is cheaper than buying 22 carat gold in India. I have proper receipts . As you know I hate the tax guys in India, though I am within the legal limits, I mix the coins with other 1RMB coins and nobody catches me when they scan. The business man has to be very dynamic and very emotional.
I don't know why this self-confessed tax-cheat is allowed to crap on forum discussing something of national importance with his personal wild stories and gripes. Obviously he has a lot of time to spare. Besides Chinese "receipts" can be bought on the streets of Shanghai, Shenzhen, Beijing by the hundreds for $1. At least we have a new verb now as this thread is getting Tkiraned.

Report him to mods. I almost certain he is all fart no shit.

I have come across some people like him in the valley. In fact unlike TKiran they had some shit cans not fart and made money. I remember one incident - this guy was a worthy in the local administration and also had a business. Made the mistake of coming to us to release a terrorist. Was using lots of arguments including bribe. One Jhapad was enough to bring him to his senses. Chap was in shock. Initially asked his JKP escort to do something. When they didn't and he was given another one he Started crying. He was quietly asked - you know how your friend has been interrogated. Want to join him ? He wet his pants.

UlanBatori · Post by **UlanBatori** » 04 Dec 2016 02:13

Suraj, isn't the price higher because there is a barrier at entry? The tax paid in China was when purchasing the gold. I don't understand why in this day India charges a duty/whatever on import of gold, that keeps the price high inside India. Last time I checked, there was at least 14% difference between price of gold between Indian west coast and the Gelf - 3 hours' flight away. A sure way of getting 14% ROI in a day except for the risk of being bothered by Customs, Polis etc.

It sure drives a lot of law-breaking, but mostly it is because of Babu-dictated criminalization of ordinary human societal behavior, isn't it?

If the price of gold is likely to slide to world levels, BM would not find it so attractive, would it? Better to hoard dollars or speculate in yuans, etc.

Karan M · Post by **Karan M** » 04 Dec 2016 02:38

Akshay, interesting anecdote. Some fellows mistake the amusement at their attention seeking, for some sort of affirmation and use words like schadenfreude. Nobody here seems much bothered by demonetization, except the chap who was depending on black money. So who exactly has schadenfreude (answer, the tax payers or others upset at BM do).

vera_k · Post by **vera_k** » 04 Dec 2016 03:51

UlanBatori wrote:If the price of gold is likely to slide to world levels, BM would not find it so attractive, would it? Better to hoard dollars or speculate in yuans, etc.

BM does not use gold for speculation. Gold is used for money laundering. Say you have Rs. 100 in black money. You'll go buy gold jewelry. When the jewelry is sold, it is now white money.

ShauryaT · Post by **ShauryaT** » 04 Dec 2016 04:19

Truth vs Hype: Myth Of Cashless India?

Suraj · Post by **Suraj** » 04 Dec 2016 04:24

UlanBatori wrote:Suraj, isn't the price higher because there is a barrier at entry? The tax paid in China was when purchasing the gold. I don't understand why in this day India charges a duty/whatever on import of gold, that keeps the price high inside India. Last time I checked, there was at least 14% difference between price of gold between Indian west coast and the Gelf - 3 hours' flight away. A sure way of getting 14% ROI in a day except for the risk of being bothered by Customs, Polis etc.

It sure drives a lot of law-breaking, but mostly it is because of Babu-dictated criminalization of ordinary human societal behavior, isn't it?

If the price of gold is likely to slide to world levels, BM would not find it so attractive, would it? Better to hoard dollars or speculate in yuans, etc.

China has a 35% gold import duty rate. They have recently ramped up domestic production, which has a 17% sales tax rate on sale. Online purchases face a 60% crossborder parcel tax.

India has a gold import duty of 10% in raw form upto 1kg. Weight in excess of 1kg is assessed 36% duty. There are other overlaid cesses. However, comparison of duties as a reflection of price does not work out, especially not for the alleged quantities TKiran speaks of. He was probably smuggling in excess of a kg.

Therefore the differential in price is a demand supply matter. Informal demand in India, particularly since demonetization, is significant. But historically, the black market has always coveted gold for its obvious ease of storage and handling.

Spot gold prices in India and US are not far apart. They sell at almost on exchange rate par:

This is not surprising, since any substantial arbitrage would be immediately exploited. I also disagree with your claim that there's a 14% spread between spot gold in Dubai and India. Here's live data:
Gold price
The price per gram is off by about Rs.2-3 regardless of which currency you convert - AED / USD / EUR... Any additional cost in India is entirely a local supply demand issue.

Gus · Post by **Gus** » 04 Dec 2016 04:28

UlanBatori wrote:Suraj, isn't the price higher because there is a barrier at entry? The tax paid in China was when purchasing the gold. I don't understand why in this day India charges a duty/whatever on import of gold, that keeps the price high inside India.

Duty is high to damp the import as that is a drain on economy. Sending money out to get gold in , instead of investing inside - is a major drain.

Smuggling is a small leakage and that will also get tighter because hawala is crippled now

Gus · Post by **Gus** » 04 Dec 2016 05:07

That 13k Cr dude who was absconding is now caught.