Currency Demonetisation and Future course of Indian Economy

[shiv]

But what happens to the exchanger guy ? He somehow has the means to get that money declared in a legal way. He takes the 1 crore in old currency and deposits it in bank under his own name. He will probably pay a smaller penalty or tax but the money comes back in to the banking system as white money.

I am no finance whiz, but the bolded part is the problem part

Unless the man can distribute 1 cr (100 lakhs) into 25 different accounts in collusion with a bank manger so that 25 real or benami account ssuddenly have 2.5 lakhs in them - that money is going to show up as a sore thumb. He will be asked how he got that money - and unless he has regularly been depositing 50 lakhs - 80 lakhs 1 cr etc month after month after month the Taxman will want to know how 1 cr suddenly appeared. And that too just after demonetization

Assume he manages to find a bank manager to create 25 benami accounts - the bank records will suddenly show new accounts with 2.5 lakhs each again accounts that have suddenly appeared after demonetization - or around this period. Those accounts will attract attention

[jamwal]

I understand. But lets just assume that he is depositing some money like that previously and the increase in deposit can be explained. Like a lot of shopkeepers are selling stuff in exchange of old currency but at a premium of 20-30%. They can show this old currency as a legal income with fudged receipts.

IYour point is true and I am thinking that some of the people raided recently by income tax department have been caught this way. BUt the exchaner guy must have a plan. Not many people are foolish enough to take old currency just like that.

[Shivaji]

the lion roaring

https://www.facebook.com/BJP4India/vide ... 331213519/

Around 34th minute in this speech, PM stated that they had gamed this and have been watching bankers, money hoarders since 8th November. He assured that such malpractices won't go unpunished. May take 2-6 months, but they would be dealt with.

The way he said that, it is sure he is not bluffing. He means it.

At the end it is if you believe him or not. I for one do.

Interesting times ahead.

[pankajs]

I understand. But lets just assume that he is depositing some money like that previously and the increase in deposit can be explained. Like a lot of shopkeepers are selling stuff in exchange of old currency but at a premium of 20-30%. They can show this old currency as a legal income with fudged receipts.

IYour point is true and I am thinking that some of the people raided recently by income tax department have been caught this way. BUt the exchaner guy must have a plan. Not many people are foolish enough to take old currency just like that.

Only commenting on the highlighted part. Confidence comes from a lot of factors not necessarily from a plan.

1. Some are by nature risk takers if it offers an appropriate reward.
2. Have gamed the system before will game it again i.e pure confidence on self.
3. Confidence on contacts in the banking system who have gamed the system before. This is the most crucial layer and without having an insider here no scheme for exchange can work to any scale.
4 GOI's past enforcement record at all levels.

Point 3. is linked to a plan where contacts have been identified and logistical arrangement made.

[shiv]

shiv saar, you should not say this. In another post you said if people were dying they would rush to hospitals.

lly if people had no drinking water, would they be living ? Living on subsistance wages mean mothers and kids die of various problems but atleast they have a chance. But now with no income, does their chance to living go up or go down.

roads and electricity have different dynamic. In many parts of the country, there is no economic justification for roads, it is a state largesse and favor done by the state to it's people. Same goes for electricity.

True - people will die without drinking water. I should have typed clean drinking water

Let me state a few things as I know them.

1. Why do people die? When should they die. If we leave aside karma we would like children to live to be adults. We do not want mother to die at childbirth. Ideally a person should live a full life and die of old age. This is the ideal that is accepted in India

2. In India too many children die young. They die young mainly because of diarrhea and undernutrition. The can also die of a number of childhood diseases (rare now) like diphtheria, whooping cough, tetanus, pneumonia and janudice. These childhood disease are prevented by vaccination.

3. Diarrhea comes from unclean water. A child who keeps on having diarrhea will become underweight and under nourished even if there is plenty of food available. Clean water requires certain precautions as does the treatment of diarhoea. Provision of these facilities require roads and power supply

4. In my line of work I treat a lot of dire emergencies where people could die, but very few emergencies that I treat are as serious and urgent as the emergency of a woman in labour pain. Every family in India has women who will have a baby and any one of the deliveries can be an emergency. Making sure that the emergency does not happen or that it can be treated requires infrastructure - I will deal with that separately below

5. Vaccination for children must be done regularly. Vaccines require a cold chain. A cold chain requires power supply for refrigerators and roads for vaccinators to travel long distances into interior India. Many women die because of anaemia during childbirth because the baby has sucked out all the nutrients from her body. So all pregnant women must be checked regularly and given extra nutrients like Iron and Folic acid. Transport of personnel for this requires roads. Complications that can occur in delivery can be diagnosed by ultrasound scan. Ultrasound scanning requires power supply and roads to transport the machine and trained personnel

6. Once labour starts - baby and mother could die in a matter of hours if there are undiagnosed complications. All can be saved by a caesarean section. This requires a hospital. And there must be access to that hospital by road, and the hospital must have electric power

With all due respect your statement that I quote below is ignorant nonsense. Your awareness of these things is worse than that of people we mock like Lalu Prasad Yadav. Rarely have I come across such pathetic bullshit being posted by anyone on" educated ahead of curve BRF". Apologies, but you are way waay off. Nothing you say can be taken as serious when you show such profound ignorance with great confidence.

In many parts of the country, there is no economic justification for roads, it is a state largesse and favor done by the state to it's people. Same goes for electricity

It astounds me that people say that deaths are being cause by queues when most people do not even know how and why people die.

[shiv]

I understand. But lets just assume that he is depositing some money like that previously and the increase in deposit can be explained. Like a lot of shopkeepers are selling stuff in exchange of old currency but at a premium of 20-30%. They can show this old currency as a legal income with fudged receipts.

IYour point is true and I am thinking that some of the people raided recently by income tax department have been caught this way. BUt the exchaner guy must have a plan. Not many people are foolish enough to take old currency just like that.

There are actually plenty of foolish people who exactly do stupid things. Most think they can get away with a bribe, Unfortunately they have been right most of the time. I hope that does not happen this time

[shiv]

A small thought experiment

If 50% of indians live on less than Rs 100 per day, what happens when they get a Rs 500 note. The first thing they will do is buy something and get change in notes of 100 and less. Most Indians do not need Rs 500 notes.

ONLY people who spend more than Rs 500 in one go need Rs 500 notes.

Why would any Indian need to spend more than Rs 500 in one shot? Typically a day's food (rice/wheat/dal/veg) for a family can be bought in less than Rs 500.

What do I need more than Rs 500 or more for to be spent in one shot in 1 day?
1. Petrol
2. Groceries/veg stocks for more than one day
3. Luxury purchases - eating out, books, cosmetics, movies, golf, liquor, clothes, maybe medical care

Maybe I am missing something. Why would anyone spend more than Rs 500 per day? Who are the exact people who miss Rs 500 notes?

As a parting shot - why are people complaining about Rs 2000 notes and the unavailability of Rs 500 notes?

Surely people who purchase things for 500 or more per day can easily purchase some more - say 2000 a day? No. I'm only kidding

What I am trying to say is that the poorest in India need less than 500 a day. The wealthier people need 500 or more per day but less than 2000.

Most day to day expenses in India are less than 2000. But they are more than 500 for wealthier people.

[a_bharat]

The common wisdom is that demonetization is deflationary. My experience is otherwise. My barber raised his fee from Rs. 150 to 200. The barber accepted payment by card (Rs. 4 extra charged). My doctor's fee went up to Rs. 800 from 600 (general physician at Apollo). In addition, the doc's receptionist said I would have to register if I wanted to pay by card, and that would be an extra Rs. 200.

Perhaps this is just a coincidence and has nothing to do with demonetization. May be not. For now, it is just a data point.

[Akshay Kapoor]

Jamwal ji,

on your original question my take is the foll :

Just getting the cash into the system is not that important whats important is the whole chain.

In the first case black is converted to white as its declared and tax is paid. In the second case white is withdrawn from the bank (someone else has paid tax on it - some one else's deposit) and converted into black. Money doesn't become black or white just because its in cash. It becomes black or white depending on how its earned (legit or illegit ie double black) and if tax is paid.

Black money cash does not come out of thin air. It comes from the banking system and somebody must have deposited it in white. So in the second case white is converted into black. And black needs to subvert the system and to keep converting white to bacl to survive - bribes, buying votes, criminality, terrror etc - all progreesively become possible as stakes increase. It distorts the economy , hurts national security, keeps poor poor and perpetuates the elite who have a huge stake in keeping the status quo.

Take buying property as an example. Cost is 100 and you have 100 in white. Does not matter if you pay cash or cheque. But the seller wants 40 in cash because he wants black. You pay. Your cash is white but when it moves to the seller it becomes black with the attendant problems above.

The only way the second case you gave is fine if the tax dept/enforcement agencies go after the exchanger and get the money to white. In this case getting the money into the system is important as it leaves a trail that the IT/ED can go after. But I am less sanguine that will happen - tax dept is the weakest link. And banks too - that's why this exchanger can exchange. And despite being a huge fan of Modiji I still feel he has not done any real administrative reforms - reform or abolish the so called All India Services, reduce discretion and gets away from babus. Babudom has destroyed the armed forces and our civil society and is the biggest hurdle to demo sucess. And Modi has done nothing pre demo about it - maybe its a blind spot for him or maybe they are just too dam powerful. But there are another 2.5 years left. And with demo all posiblities for radical reform open up. Lets see.

However demo still has benefits because it imposes some doubt in some people's minds. Just like our surgical strike imposed a cost. I still support demo despite all this.

[hanumadu]

http://www.businesstoday.in/current/eco ... 42054.html

Axis chandini chowk branch again. 450 cr (or 100cr?) in 15 fake accounts at this branch.

Question: If people are depositing 6 cr on average in an account, why deposit them in fake account. The govt will take 50% anyway. So why cant they deposit the money in their own account? These must be corrupt politicians or govt employees who cannot explain how they got such amounts.

[pankajs]

Or Hawala money wala or Criminals who cannot afford to let the GOI to watch them.

[pankajs]

The common wisdom is that demonetization is deflationary. My experience is otherwise. My barber raised his fee from Rs. 150 to 200. The barber accepted payment by card (Rs. 4 extra charged). My doctor's fee went up to Rs. 800 from 600 (general physician at Apollo). In addition, the doc's receptionist said I would have to register if I wanted to pay by card, and that would be an extra Rs. 200.

Perhaps this is just a coincidence and has nothing to do with demonetization. May be not. For now, it is just a data point.

Will barber fee go down? Not likely. OTOH it is likely to go up if he intends to declare his income and pay tax.
1. A barbers demand is not too flexible because hair will grow in good time and bad times though folks may stretch the time between cuts. So very slight deflationary even with DeMo.
2. OTOH, if the barber expects to report his earnings, he is likely to add the tax that GOI will demand to the bill making the impact inflationary.

Added later: GST is supposed to be inflationary while DeMo is supposed to be deflationary. DeMo will be inflationary for products/services that were offered without reporting to GOI. The overall impact will vary from product/service to product/service based on the demand elasticity.

[hanumadu]

PMO India ‏@PMOIndia 5h5 hours ago
Had asked for 50 days. You will see how things will change. This is a major step to rid the nation from corruption: PM @narendramodi

[jamwal]

Akshay sahab,
No arguments there, I get idea of black money and it effects. My query is about the thought process of exchanger. Pankajs explains it to some extent

http://www.businesstoday.in/current/eco ... 42054.html

Axis chandini chowk branch again. 450 cr (or 100cr?) in 15 fake accounts at this branch.

Question: If people are depositing 6 cr on average in an account, why deposit them in fake account. The govt will take 50% anyway. So why cant they deposit the money in their own account? These must be corrupt politicians or govt employees who cannot explain how they got such amounts.

Old Delhi markets are full of hole in the wall kind of shops which do business worth tens of lakhs every day in cash. Most of the shops there don't deserve a second look, but check their almirahs and it'll be overflowing with currency notes. People who own these shops literally take bags full of currency notes back with them after they close the shops. This is story of every single type of business there, spice market, iron market, sanitary ware, food shops, saree shops, jewelers you name it. There are people who have a 70 sq feet shop in a small alleyway in Chandani Chowk and own multiple properties in New Delhi and beyond. There is one old saree shop in the famous Paranthe Wali Gali and the owner was supposedly asking 40 crores for it.

Almost all of them don't have any proper billing system and all transactions are in cash. Traders like the ones there hardly pay any kind of taxes and bills if asked for are "kachaa bill" only. It is very safe to assume that a majority of shop keepers there (out of tens of thousands) are sitting on piles of cash in tens of lakhs with a large number having tens of crores too. Many were accepting old 500 and 1000 rupees notes at some premium on fudged invoiced dates and are probably still doing so even now. It is actually very surprising for me to see that there have been so few actions like this. I was expecting a lot more.

The market selling jewelery was closed for months and jewelers were protesting for months when government forced them to ask for PAN cards and imposed a cess. 1 day after demonetisation announcement, most of them kept their shops closed and only a handful are open now, even in this peak wedding season. Safe to assume that they sold off most of their gold in the panic rush. There are a lot of note exchangers on every other street corner who sell change . Haven't seen a single one with any currency note since Nov 8.

Maybe after the dust settles and income tax department analyses the data of deposits we will see some of the fatcats coughing up tax penalties. It's long overdue.

[Akshay Kapoor]

Jamwal ji,

Re, thought process of exchanger, Pankaj S covers all the ground I think. I think its impossible to exchange in some size without bank collusion. And there is this hire hundreds of mules option as well.

Its a constantly evolving battle between team Modi and the parasites amongst us. The outcome will also reflect on the fundamental character of our people - actually us. Lets see. I am eagerly waiting to see counter attack from the Modi side now. I was expecting a lot more enforcement too. Should have got 500-1000 new uncorrupt enforces from public and ex servicemen to enforce. A control room with ability to rapidly respond to people sending pics of stuff happening should have been there in all states and major cities. Public could have been roped in a huge way to send pictures of bank staff colluding and which branches are acting suspiciously.

[Schmidt]

There are US citizens who have opened FDs in post offices. That is not as per the law.

--------------------------------------------------------------

If they are PIO / OCI , they can open NRE accounts and FDs

Not sure about the Post office FDs

But then NRE FDs are tax free , whilst Post Office Fds are not , so it makes no sense for PIOs to open Post Office FDs

[AdityaM]

Corrupt Deal Disrupted Printing of Rs 500 Notes

four-set “finishing machine” procured for Rs 400 crore “did not meet tender specifications” and yet was purchased after suspected kickbacks were paid to top Indian government functionaries in 2009

[Singha]

http://www.ndtv.com/karnataka-news/rs-5 ... fe-1636395

[Singha]

^^ these are tier2 munnas who actually need to move money around and do the legwork for political masters. no political party will touch bm overtly, it will get its supporters to spend on the heads necessary directly like organizing the 500/1000 notes , biryani packets, publicity material, AV system and transport for rallies, fuel bills ....

[Dasari]

I am not good with most financial stuff, but one thing has been bugging me . I've read almost every single post on this thread and this query has not been answered in a satisfactory way yet.

Let us assume that a black money hoarder has 1 crore Rupees in old currency. He deposits the stash under his own name and risk paying a income tax penalty among other things. He doesn't want to do that. So he goes to someone offering this service and gets 80 lakh in new currency and takes a 20% hit. That 80 lakh is again out of circulation in an illegal black money stash,

But what happens to the exchanger guy ? He somehow has the means to get that money declared in a legal way. He takes the 1 crore in old currency and deposits it in bank under his own name. He will probably pay a smaller penalty or tax but the money comes back in to the banking system as white money.


I am assuming person 2 depositing money will not pay as much tax to the government, but still the money is coming back in to the system. So which action is overall good for economy ?

As I said before, I am not great with some stuff, so apologising in advance if I am missing something.

I get your point. So even assuming person 2 converts the 1cr to white, there are two benefits: 1. Tax paid by person 2(however small it may be) 2. The BM of person 1 is reduced 20%.

This is the worst case scenario. But I really hope Govt confiscates all that 1cr, even if it takes another 1 year to analyze this.

[prashanth]

http://www.ndtv.com/karnataka-news/rs-5 ... fe-1636395

And we keep wondering why there is a shortage of Rs 100 notes.

[JohnTitor]

So what is objective of aggressive taxation apart from fighting inflation. Or is it a form of punishment imposed for the crime of earning a profit. And secondly do we prefer a contracted economy with 70% tax compliance or a larger economy with 35% compliance with both percentages resulting in almost similar tax collection numbers.

LOL 3% tax base and you talk of aggressive taxation?

Either everyone pays tax or no one does. Only some people paying because they have no choice (employees) while others think it is their "dharma" (those using such words are seriously compromised for using such lofty words for what is essentially theft) to make money and celebrate festivals in a grand manner is simply unfair to everyone.

This is getting tiring and it is driving this thread off topic. Simple rules - either everyone pays or everyone doesn't. What kind of India each choice creates is one where those living in India will suffer.

[UlanBatori]

Indian currency crunch over!
I have Arrived! Came in with 17 ek-hajar notes, plus Rs 811 in assorted small notes and coins.
1. Gave the Rs. 11 in coins to pakistan attendants at the airport.
2. Bought Rs 420 breakfast-for-two at 4:30AM. The halal Udipi stall had a card-swipe machine that most persons in the queue were using, but I gave 5 ek-sau notes. Had to wait a few minutes for the guy to get another cash customer so he could justify the effort of opening the cash drawer for the first time that morning, but I got the Rs. 80 back.
3. Discovered that it is 400% halal to give old notes at places of worship - apparently their rules mandate depositing collections the next day.
4. Another 100 spent at place of worship, given to someone to make flower garland (that happens to be their occupation and they don't have a swipe machine yet).
4. Found out that small shopowner across the street from coujins, has not got a swipe machine and hence is suffering, so stopped by and managed to find enough things to buy to spend enough to be left with a grand total balance of Rs. 25 (not counting the ek hajars still left). That's because the shopowner, despite being told to not worry about the change until we returned next week, insisted on giving the change but didn't have small notes to make it the exact Rs. 24.

So what is the reaction of this suffering small shopowner? We asked him why he doesn't have a swipe machine yet.

"Can't get them, the bank is backlogged. But oh, once we get that it will be WONDERFUL! So many small transactions can be made! People have discovered the value of money. It used to be that these small kids would come by waving Rs. 500 notes, and buying things that they had no need for. But no more. Autorickshas have those swipe machines already, so they can't gyp someone saying they have no change: now if the meter says 24.95, that's exactly what you pay!

Oh, yes, it's a bit tough for us small shopowners, but when we get the swipe machines we hope to more than make up for that!

Generally proud of what guvrmand has done.

I was beginning to worry that my eyes would cloud over if I stayed any longer there.

Thaks! To the BeeArrEff experts for the advice on what to do. Now what is the swiftest way to get electronic transaction capability (other than Bank of Chengiz Khan credit cards?) Cellphone-based app? Is there such a thing as a pre-paid cash card like in South Korea? We do have halal bank accounts...

And oh! the neighborhood votes (in the past) like 80% Marxist.

[rsingh]

The common wisdom is that demonetization is deflationary. My experience is otherwise. My barber raised his fee from Rs. 150 to 200. The barber accepted payment by card (Rs. 4 extra charged). My doctor's fee went up to Rs. 800 from 600 (general physician at Apollo). In addition, the doc's receptionist said I would have to register if I wanted to pay by card, and that would be an extra Rs. 200.

Perhaps this is just a coincidence and has nothing to do with demonetization. May be not. For now, it is just a data point.

Ask doc at Apollo to write down their policies on notice board. Otherwise complain to tax authority (saying that you are sending the copy to PMO). Bring your earlier receipts of consultation which shows the difference. Act on this man, things won't change otherwise.

[JohnTitor]

a) ArmenT..ideally fake currency should be identified at time of depositing curreny into ur back a/c. the note counter identified fakes and shuld not be deposited. I am not sure if indeed this happened in KAshmir/NE ? b) my friend owns petrol pumps in delhi and he is happy with cashless stuff..saves him lot of hassles with cash counting, safety and transportation to bank. the people dispensing petrol are not so happy..sometimes they fill less and pocket the money !! so a small window of corruption get eliminated. c) while the banks are flush with cash..the interest on the deposits is also something which will hurt them ...not sure about the magnitude though.

The RBI should stop accepting counterfeit currency. This will stop banks from accepting them which in turn will push retailers and shop keepers to be careful. Further, it will also incentivize them to go cashless as it cuts down the risk.

I also feel the RBI should not accept defaced notes - I've noticed a lot of people seem to do basic maths and write on notes. This is plain disgusting and insulting. I have not seen this anywhere else in the world (excepting the Indian neighbourhood).

[Shaktimaan]

These days raids are catching huge amounts of new currency. The amounts (5.7 crore in one guy's toilet caught today) are too big to have come from some using deposit-and-withdraw mules which can only do a few thousand per week.

Where is this money leaking from... money chests of banks or even perhaps directly from the RBI printing presses during printing or distribution? Maybe there's another possibility which I'm not seeing.

[pankajs]

http://www.firstpost.com/india/promotin ... 50184.html
Promoting electronic transactions: NITI Aayog asks NPCI to incentivise digital payment makers
<---------
New Delhi: In a bid to promote electronic transactions, NITI Aayog has asked National Payments Corporation of India (NPCI) to frame an award scheme to incentivise people using digital mode for making payments through weekly and quarterly lucky draws.

NITI Aayog has requested National Payments Corporation of India to conceptualise and launch a new scheme to incentivise digital payments. NPCI is a not for profit company which is charged with a responsibility of guiding India towards being a cashless society.

<snip>

Under the proposal all consumers and merchants using digital payments shall be eligible.

There will be two levels of incentive amounts available under the scheme. First, weekly lucky draw of the transaction IDs generated in that week. The contours of which are being finalised, it said.

NITI Aayog has also proposed quarterly draw for grand prizes and asked NPCI that while designing the scheme the focus will be on poor, lower middle class and small businesses.

All modes of digital payments - USSD, AEPS, UPI and RuPay Cards - will be eligible under the scheme. For merchants, transactions made on the POS machines installed at their locations would be considered, it said

[rsingh]

I had this Dilli-Billi visiting me last year. She was boasting that her daughter (owns many business) will never have to pay the tax. She fixed that. I am not sure how she did it. She is high-flying type and here foreign trips are paid by somebody (one is ISCON). Met her husband (called himself scientist) who told me that he was involved in making " heat shield for Agni". And that he got some award from USA. The guy was singing like parrot. It seems he has an wikipedia page dedicated to him.

[pankajs]

http://www.newindianexpress.com/nation/ ... 47705.html
NITI Aayog to honour 50 Gram Sabhas that adopt digital banking

NEW DELHI: The special committee of the chief ministers on promotion of cashless transactions headed by the Andhra Pradesh CM N Chandra Babu Naidu has decided to honour the first 50 Gram Sabhas which go digital for banking functions. The NITI Aayog, which is coordinating the meetings of the special committee, has stated that the Maharashtra government would pass a legislation to give a statutory backing to Aadhar based banking transactions.

[Singha]

These days raids are catching huge amounts of new currency. The amounts (5.7 crore in one guy's toilet caught today) are too big to have come from some using deposit-and-withdraw mules which can only do a few thousand per week.

Where is this money leaking from... money chests of banks or even perhaps directly from the RBI printing presses during printing or distribution? Maybe there's another possibility which I'm not seeing.

A high level tiger team at pmo needs to crack this issue asap and act ruthlessly using nsg if needed to break down doors at midnight and frogmarch powerful people in their undies to hawalat

[Singha]

Has to be a whole gang of people involved. These cash handling process would have multiple checks and balances to avoid one person being corrupt.

[Deans]

I understand. But lets just assume that he is depositing some money like that previously and the increase in deposit can be explained. Like a lot of shopkeepers are selling stuff in exchange of old currency but at a premium of 20-30%. They can show this old currency as a legal income with fudged receipts.

IYour point is true and I am thinking that some of the people raided recently by income tax department have been caught this way. BUt the exchaner guy must have a plan. Not many people are foolish enough to take old currency just like that.

Jamwal, My sense is that you are partly right. The exchanger guy has a plan (excluding the ones, that Shiv rightly says are just plain dumb), but
only for a limited quantity of money. The BM holder loses 20-30% to convert even a limited amount of money (in your example) and his cost will
go up significantly as the amount increases (as will risk, if any of the exchangers get caught).
This risk will persist years after the transaction takes place.
At some point they might decide its better to pay the penalty upfront than take the risk on converting through `exchangers'.

[tandav]

I for one am waiting for UP elections for the DEMO verdict. The people will decide whether DEMO affected the commons greatly or not. I personally was not affected since I was anyway living life cashless in a tier 1 city and that too in a area where most shops, grocers etc accept cards, but my conversations with many outside this island of affluence have left me with a sense that many poor folks have been badly affected. I still feel that even if BJP loses UP Modi will not change strategy and will try to ensure that by 2019 some trickle down effects of the systemic changes being implemented will help retain control of governance.

[Deans]

I had Rs 4500 in cash at the start of DM, which I exchanged.
In the past month, our household has spent Rs 6500 in cash, without compromising on any expenditure. I made one withdrawal of Rs 10,000
from my bank during the month and one (before that) from an ATM for Rs 2000 - both of which took less than 5 mins.
Our household help had no problem with bank transfers, which we are doing for the first time - they had to stand in line but got money
from the bank after about an hour. The contractor painting my house had no problem with a cheque.

[Suresh S]

.. are there any precedents to this in history.

Precedents ? Every prosperous developed economy is a precedent It's absolutely true that weak political rule combined with regressive economic policies beget an informal economy. The converse is also true - a strong government trying to implement concrete policies will do everything to ensure informal activity moves to formal activity. DeMo is done and dusted. It's for the populace to now reorient their thinking from 'but but' and work within the new formal economy.

Yes that pretty much is the gist of the story

[Austin]

The Indians will be placed in the old banks large bills in the amount of $ 192 billion

Moscow. 9th December. INTERFAX.RU - Indian banks receive from the country's population of about 13 trillion rupiah ($ 192 billion) large bills face value of Rs 1000 and 500 the old model, which was suddenly withdrawn from circulation from November 9, said Attorney General Mukul Rohatgi country.

The Indians have already passed bills in the amount of about 12 trillion rupiah, even 1 trillion expected by banks before the end of this year, the public prosecutor quoted by Bloomberg. Since April 1, the storage and the use of old-style bills will be considered a criminal offense.

A sudden withdrawal of old banknotes from circulation is aimed at the fight against corruption and tax evasion. According to authorities, the money is often tampered with and used to finance the terrorist attacks of Islamist militants. Meanwhile, many experts predict a sharp negative effect of the reform on the economy as a denomination of 500 and Rs 1,000 in India account for 85% of the turnover of cash, while the country's economy is based mainly on cash payments.

[Prasad]

a) ArmenT..ideally fake currency should be identified at time of depositing curreny into ur back a/c. the note counter identified fakes and shuld not be deposited. I am not sure if indeed this happened in KAshmir/NE ? b) my friend owns petrol pumps in delhi and he is happy with cashless stuff..saves him lot of hassles with cash counting, safety and transportation to bank. the people dispensing petrol are not so happy..sometimes they fill less and pocket the money !! so a small window of corruption get eliminated. c) while the banks are flush with cash..the interest on the deposits is also something which will hurt them ...not sure about the magnitude though.

The RBI should stop accepting counterfeit currency. This will stop banks from accepting them which in turn will push retailers and shop keepers to be careful. Further, it will also incentivize them to go cashless as it cuts down the risk.

I also feel the RBI should not accept defaced notes - I've noticed a lot of people seem to do basic maths and write on notes. This is plain disgusting and insulting. I have not seen this anywhere else in the world (excepting the Indian neighbourhood).

If a branch recieves a fake note, they have to destroy it right there. More than five notes = mandatory police report.

[Suraj]

http://www.ndtv.com/karnataka-news/rs-5 ... fe-1636395

inlined image

And we keep wondering why there is a shortage of Rs 100 notes.

I've been saying that since the beginning Small denomination hoarding should be subjected to additional penalties because it hurts the mango man much more than hoarding 1000s does.

[Suraj]

I am not good with most financial stuff, but one thing has been bugging me . I've read almost every single post on this thread and this query has not been answered in a satisfactory way yet.

Let us assume that a black money hoarder has 1 crore Rupees in old currency. He deposits the stash under his own name and risk paying a income tax penalty among other things. He doesn't want to do that. So he goes to someone offering this service and gets 80 lakh in new currency and takes a 20% hit. That 80 lakh is again out of circulation in an illegal black money stash,

But what happens to the exchanger guy ? He somehow has the means to get that money declared in a legal way. He takes the 1 crore in old currency and deposits it in bank under his own name. He will probably pay a smaller penalty or tax but the money comes back in to the banking system as white money.

It was described before, but this thread moves fast.

The easiest way to explain it is make YOU the exchanger, so you have to think. You're here to make money. You didn't have any to begin with. You know people with empty bank accounts. You find Seth Kaladhan who has to launder Rs.1 crore. You offer conversion at 20% loss. That means:
a) you need to have Rs.80 lakh on hand in new currency.
b) You have only 20% margin off loss before YOU lose money - you just handed out Rs.80 lakh in good money and got Rs.1cr in bad money

Lets assume you got Rs.80 lakh through 100 people withdrawing Rs.80K from bank. Or 1000 people withdrawing Rs.8K . Each of them is given back Rs.1 lakh / Rs.10K in each example, to deposit. In reality you give them less since you have your margin to worry about.

That seems simple, but you have to find enough people willing to front you good money in the hope of being able to deposit bad money without suspicion. You can split it into smaller sums but that means an order of magnitude more people to find in each case. And you have to make a profit. You have to spend time and effort finding people, collecting money, ensuring their trust in you etc.

And all this for just 1 crore. The total money in question is Rs.15 lakh crore I think (Prasad posted exact numbers a few pages ago).

So let's review this and ask , when someone says "XYZ big fish already got away with it", the question is how ? Just because they got new cash and gave away old cash DOES NOT MEAN the story is over. The banks and RBI still have access to enormous amount of deposit data, and they have the wherewithal to identify abnormal looking deposits. E.g all of a sudden 1000 villagers in Nowherepur suddenly withdrew Rs.8k and deposited Rs.10K soon after. The problem with distributing across more and more people is that IT has more and more people to come and lean upon. Each person has less to lose by cooperating and more to lose by being arrested over Rs.8k in this case.

So in summary, when someone claims 'big fishes have gotten away with it', I think they are being too optimistic about that. The beauty of this is that the banking system has enormous piles of deposit data to track abnormal behavior from, and they can go after every bad guy when they have the manpower to do it.

Pretty much no one will 'get away with it' given the IT resources to track down abnormal deposits. The nature of 'distribute and hide' is that not all abnormal deposits have to be tracked. Just one approver out of N depositors needs to squeal, and the entire game is up.

[hanumadu]

GAURAV C SAWANT ‏@gauravcsawant 25m
Raid by @JointCP_CrimeDP team in R block GK 1, Delhi & recovery of approx Rs 10 crore + in new & old currency. Counting on. @IndiaToday