If demo was any good you would see such exercises all over the world on a regular basis.
IndianBanks are in bad shape because of loans they have made and have to continue to make to politically connected individuals.
This affects state banks mind you - private banks never has that problem.
As Raghuram Rajan pointed out, the reason banks can’t make loans is because many firms have terrible credit. That’s what makes loans unaffordable to them.
And as current reports show - All of that money is back in circulation - so the banks are back to square one.
2 - if someone is telling you this, then they are confusing matters and are misunderstanding trade.
1) Volatility will always exist
2) foreign investments are something we want because trade and more resources makes our economy grow much faster
Additionally: black money is a misnomer - it’s money on which tax has not been paid.
A large portion of India’s economy is informal, and entirely cash based AND also below the taxable slabs - this is OK.
It’s a transition point for an economy as it goes from 1970 to 2030.
What people are upset about are corrupt people who cheat the system and then launder that money.
All black money is therefore not corruption.
But demo has not stopped corruption, and even during demo the corrupt found out ways to launder their money.
Not to mention none of this was free and necessitated a shut down of the entire economy - for nothing.
This move cost us billions in opportunity cost.
The mint wasn’t ready or warned, highlighting how unplanned this entire move was.
People died
And in the end nothing happened
All of those goals could be achieved correctly and more effectively.
That's nonsense. Demonetization was a contributing factor in the following:
* Increase in tax-payers
* Increase in E-filling
* Removal of fake currency
* Crushing of Real-estate black market
* Removal of shell companies
* Decrease in funding of Naxalites and Kashmiri separatists
Demo failed because the government didn't have a clear objective in the first place. Later they started shifting goal-posts to prove it as a success. However, saying that it acheived nothing is ignorance at best.
> People died
This is again nonsense. People are still dying in India due to the negligence of hospitals, civic officials etc. Blaming this on Demonetization doesn't make sense.
Demonetization deserves to be criticized but the criticism should be objective and not just a mere reflection of opposition propaganda.
Sources:
https://www.livemint.com/Opinion/sH5FSnXPkuAhknhzuPgH3M/Demo...
https://www.quora.com/99-3-demonetised-notes-came-back-conce...
Since then reality has only conspired to be itself, thus my assessments have been shown to be right.
And furthermore - my argument is gentle with people who support demonitization.
A full argument would be harsh and unforgiving.
The opportunity cost of Demonitization?
The actual execution cost of the whole exercise?
the HARM to the economy?
All that time standing in line? That was time people would have been working and generating tax revenue across the country.
That money to create 2000 RS notes which didn't fit ATM trays? The MANY technicians and over time which had to be paid to get everything working?
The country was brought to a standstill. IF the previous govt had done something like that we would have lynched them (and rightfully so)
What goes on in peoples minds to believe in these things?
Paint, Steel, Cement, Bathroom fittings, Tiles heck every single company that connects the RE market is on the stock exchange.
You can't register a hut in the property registration office since a decade without a PAN number. And builders haven't been taking cash since more than a decade now.
Where is this non-existent black money in the Real Estate market?
Looks like people build fictional theories in their minds and then go enact rogue policies which ruin many other things as side effect.
Anecdotally, RE is by far one of the largest destinations of black money. A friend is still unable to sell his flat 'coz he doesn't want to accept cash. Another has had to bring down the price from ~2Cr to ~1.7Cr, still no takers for the same reason.
Sure, all those measures (PAN etc.,) exist but so do enough loop holes. One common practice is to register the property at a super low (almost nominal) price compared to actual transaction amount. This is what I as a common person know. I'm sure those involved in daily RE dealings have more tricks up their sleeves.
So yeah, it's clearly not fictional.
Also don't forget bulk of India is poor with high birth rates, so you will have these problems for several decades may be even till the end of this century.
Bangalore alone gets hundreds if not thousands of people coming in every day. With that sort of demand, you can't run a housing market and supply homes at a cheap price. Nor will you be able to run a pure bank/electronic transaction based market. The reason for that is that the base infrastructure for such an economic ecosystem isn't ready. Even in Bangalore you have several hour long power cuts. And that is Bangalore. The rural centers have it way worse.
In all this your every day people, every one from street vegetable suppliers to cement and paint vendors for RE have to work seamlessly. That means 'cash' will be exchanged. Also merely cash being exchanged doesn't make it black.
Ultimately if you are buying cement, paint, steel, bath fittings etc. You are paying white money only, because it goes to registered and tax accounted compaies. Plus you can't buy a flat in any city from a medium and above builder in cash. No one accepts it. And yes, if you are buying a flat for 2 crores, you need to go in for a loan, which comes from a bank, so there is accountability at another layer. And registrations requires PAN, there you have door for audit open.
Another hard thing to come to terms with regards to Indian RE market is people invest in lands decades in Advance, These are not necessarily rich people, these are your ordinary businessmen, shop keepers, salaried masses. In Bangalore, outskirts lands are bought out like >20 years in advance for chicken feed prices, when the demand grows and people come to settle they are faced with impossible prices because investors have long bought the lands. Or they have to rent at exorbitant rates. Real estate is another of things where people with long term vision and enterprise to spend time physically, have a disproportionate edge over those who don't.
I have seen even top managers with top salaries end up with extremely bitter feelings and deep resentment towards common folks on the streets because the latter had the sense to buy lands some 20 years in advance and are now worth 20x more than the manager, despite the managers having 1000x a better career than them.
These problems are not going to go anytime soon.
And lastly even in the middle of DeMo prices didn't move in Bangalore. People who tossed around opportunities to buy flats at 50L-60L in 2008-2010 thinking they will buy in the crash period, were in for a big shock that prices are 1.2Cr-1.5Cr and the market didn't crash either.
The only way to win the RE game is to enter early and play. Come late or don't play you lose by default.
The fact is owners (not builders) of built houses are unable to sell them even 2years post DeMo because they don't want to accept cash. This has got literally nothing to do with paying for labourers, bathroom fittings as that payment has already happened.
I was responding to your dismissal of the GP's claim that RE is driven by and large by black-money. Specifically;
>>Crushing of Real-estate black market
> What goes on in peoples minds to believe in these things?
> Where is this non-existent black money in the Real Estate market?
The above statement just doesn't line up with the ground reality. Ask just about anyone who deals in RE on a daily basis. The real-estate-agent-shops are dime a dozen in Bangalore streets. They will straight up tell you that they expect you to pay a certain amount in cash (i.e., unaccounted) because the buyer doesn't want to show that money to tax authorities. This is how vast majority of RE dealings are done in India, the builders (i.e., RMZ etc.,) share of the pie is minuscule compared to untracked dealings.
> Ultimately if you are buying cement, paint, steel, bath fittings etc
A wise man once said RE is all about 3 key aspects;'location', 'location', and 'location'. But for location housing/building prices would be same across the country as cement etc., cost the same everywhere. So no, I'm actually not paying much for cement etc., as much as I'm for the location.
Just last week I visited a sub-registrar office in Mysore. Only couple of hours of observing activities there is sufficient to dispel the myth that black-money is non existent in RE. The number and amount of cash dealings going on there was mind blowing, PAN notwithstanding.
BTW this is just one aspect of RE. Then there's about farmland dealings. Just about every politician and govt employee of high ranking hide their cash in hundreds of acres of farm land by buying them in cash. This is not only black-money but also illegal too. You see the details in news all the time, when ED authorities raid a politician or public servant to unearth ownership documents of huge tracts of land.
tl;dr Indian RE is awash with black and illegal money. You either have to be blind or far away from ground action to deny that.
You have to be wilfully blind to say this. In every part of the country, real estate transactions used to have a cash and a cheque component. The value is under-reported to avoid paying stamp duty and registration, as well as in many cases to recycle black money.
The proportion of these transactions has reduced since RERA, GST and demonetization. But it still goes on.
Where I stay(Mumbai suburb), taking some percentage of money as cash was always the norm. For example, for a flat worth 90 lakhs, you were expected to pay 60-75 lakhs in white and the rest in black(cash). This inflated the costs and many folks could not afford a flat due to this. It's mostly gone now thanks to RERA but Demo also played some part.
Why do you think they have accounts in Mauritius?
Nothing. It's just blind faith in Dear Leader and in everything he says or does.
Most countries of the world don't have the black money problem that India does; and of those that do (many third-world countries) there is no will to crack down on black money.
and
>A large portion of India’s economy is informal, and entirely cash based AND also below the taxable slabs - this is OK.
50% of India's GDP is from the "informal" sector, and it employs something like 90% of Indians. So it's not just a "large portion". It is the majority. And it is this very informal sector that demonetization targeted so to formalize it. FDI makes a very small portion of GDP growth in India.
>And as current reports show - All of that money is back in circulation - so the banks are back to square one.
The money is back in circulation after people paying at least 50% tax if their cash was unaccounted for, but could range up to 200% penalty if the accounting was particularly shady. Which is why you see such a high deposit rate. People would rather see 50% of their cash than nothing.
So "all" that money going back into the economy makes sense. Now the government has actually account of what is going on.
You should look at the actual number of prosecution claims and convictions by the Income Tax department and the number of instances wherein compounding was admitted (taxpayers admitted to hiding income and paid a penalty), before you call demonetisation a big success in this regard.
Cases filed: 2225 Convictions: 48 Instances of compounding: 1052
Source: https://timesofindia.indiatimes.com/business/india-business/...
Also the voluntary income disclosure scheme of 2016 ran prior to demonetisation. Not many people signed up for that, but for whomever did so, it had nothing to do with demonetisation.
I wonder if it's mostly a logistics reason they don't do it often. To do it smoothly, you've got to produce and safeguard a mountain of currency, with a high degree of secrecy, and deploy it in short order when the demonetization is activated.
It reminds me a lot of the 1962 replacement of the Hwan with the Won in South Korea. I get the impression this was a complete shock change (new Hwan notes were introduced less than a month prior to demonetization, and the replacements were produced abroad).
They pulled it off only with a fair bit of challenge-- old coins got forced back into circulation, and several type of the new notes were replaced almost immediately, and this was in a country which had a tiny population and economy compared to India.
What works is vigilance, expenditure on policing, courts and the creation of civilized systems.
Which takes time, sacrifice and independent police forces/strong judiciaries.
1. I am from Tamilnadu, a southern state in India. A proud Tamil Indian from a middle class background. My father was a govt. employee and is a staunch anti Modi :-) oh also I am not a Tam.Bhram.
2. Modi wave is not a fact in Tamilnadu, similar to other southern states. I think it is difficult for any Hindi speaker to truly gain support. Arghh! Hindi! ;-)
3. I studied in a Christian Society of India school, am a Hindu but I know the difference between serving as a Christian and selling Christianity for money
4. I successfully exited my startup with 5x returns for my investors. As a startup founder I first hand experienced the govt. machinery and can vouch that being an entrepreneur in India is still difficult even after many reforms.
5. However 2 yrs back, the IT dept actually refunded me for 15lakhs without any follow up or bribe, the cheque actually came by mail, can you believe! The govt is putting all efforts to make the system non personal and digitized which has a huge effect on bribes. Bribes thrive where there is subjectivity and misinformation, automate it and you have bribe gasping for air.
So that's it, sorry for disappointing your stereotype assumption on me.
Its kinda funny to see that many people, whether they are pro or anti Modi expected overnight results for any actions taken. Many SMB type companies are ecstatic that refunds are automated. Sadly, for those who have no idea or information about such improvements, they'll only see the failures of such moves.
Indian banks' foreign currency assets have ballooned since demonetization [1], the principal source of which has been FDI. Long story short, Indian bankers' share of the economy grew by sacrificing the country's balance of payments.
As an American investor who knows many wealthy Indians: (1) demonetization was a boon to the wealthy in India, as it provided them with cover under which to move money and (2) the entire exercise has been destructive to the soundness of India's economy. Fortunately, the world economy is growing, so the country has time to mend. But this was a bone-headed move, albeit an expertly-marketed one.
[1] https://rbi.org.in/Scripts/PublicationsView.aspx?id=18271
Did your banker friend tell you that most people in queue were not millionaires but laborers and mostly people who didn't even fall under a tax bracket.
Did he tell you people couldn't withdraw money for months? Their own hard earned money. Not govt money, their own hard earned white money was locked up in banks.
RBI governor wasn't even in support of this decision so he was kicked out. Like how low can all this really get?
Doesn't all this sound like a dictatorship to you?
What did look like dictatorship to me was a prince tearing up a government ordinance and the poor PM running around trying to appease him. Or a queen pulling strings from behind with her own unaccountable "cabinet" - the NAC. Or the parcelling out of government departments among partners to loot the country. That is as low as it can get.
The huge NPA crisis that you see now happened under his watch. The Air India deal, the 2G scam etc etc. It is conveniently forgotten for example, that under Manmohan Singh in 2010 the congress government declared that more bank licenses will be given out, flatly contradicting the RBI whose job it is to issue these licenses.
By the standards we are holding this government to, almost any government prior to this would be called a dictatorship.
Banks have low funds, so you force the public to return their own cash. That doesn't solve the underlying problem of NPAs and public banks not being managed properly.
Also, FYI, RBI recently reported the cash in circulation right now is more than it was before the demo.
Increase in tax collection is great, but it's due to GST, let's not give credit to demo for that.
Yes it did some good, definitely, but have you seen how bad the situation got. I'm not sure if you've lived in a tier 3 city during the demo times but I've seen the plight of people. It was ridiculously stupid to just ban cash in an 80% cash society where majority of the small businesses (who bring in >30% of tax revenue) depend on cash.
People died, lakhs of businesses shut down, multiple factories shut down where they depended on cash to pay daily wages. Lakhs of jobs lost. GDP taking a solid 2% dive. So you're saying all this was worth it? Ground realities are very different from what your comment portrays.
It was a common sight to see people lining up outside ATMs at 2 in the night just to withdraw cash they earned through their hard work.
If this was meant to solve the "black money" issue, it was akin to using a flamethrower to kill an ant. The collateral damage was way, way too high
If you burnt the house down, and said "look, I killed the rats" would anyone in their right mind tell you "hey you did good?"
No not really, people are crying because messing with money happens in banana republics, I thought India was better.
> They would not be able to substantiate how they were personally impacted.
I personally lost 10,000 Rs because I dont want to go to India to exchange the notes, who is going to reimburse me when the govt steals my hard earned money?
You have no way to prove this.
> Most people who cry against demo are those who do it, just because they dislike Modi as a person (not a very charismatic personality).
You have no way to prove this. Also see No True Scotsman fallacy.
> They would not be able to substantiate how they were personally impacted.
You are implying nobody was actually impacted. And yet the economy lost a percentage point in GDP growth. The people that were the most impacted were people in blue collar jobs, and they are not on HN.
Rest of the question, I couldn't find the answer in the earlier BBC link though.
I abhor these thoughts and don't justify the association though.
Here is the video on YouTube: https://m.youtube.com/watch?v=uLXYzvI_FWs
Most people want it be biased in their favor.
Shutting down the economy... seriously? I was in the economy, it did not seem shut.
Unfortunately the outrage seems manufactured, like so much outrage nowadays.
All of these arguments are parrot-repeating-cliches kind of arguments made by Modi supporters in India.
Read his last para -
>Most people who cry against demo are those who do it, just because they dislike Modi as a person (not a very charismatic personality). They would not be able to substantiate how they were personally impacted.
This is not how someone makes an argument. This is just a political statement.
Also this para -
>Most US media outlets want to feed the stereotyped view of India and jump at any chance to do that
I'd say this is possibly a valid argument but this argument has been repeated so many times (esp in last 4 years) that it has become more of an excuse to discount/discredit every criticism. Ironically, stereotyping India is on the decrease but accusing western media of stereotyping India is on the increase (esp among right wing section. )
>Whether you like it or not one more area which encouraged bad money circulation was evangelism (convert to christianity for money) and that is one more area that also been severely impacted.
This is how right wing Hindu nationalists (Modi followers) look at everything these days. You talk quantum mechanics to them and they will tell you the knowledge of QM is already there in Vedas. Though religious conversion is a fact but the scale is relatively small and money involved (when comparing to the scale of demo) was also very small. And even after demo, this money was available within few months.
> Good and bad currency sweeping back into the system (Gov allowed conversion also) has effectively nullified the funding of militancy and the fact that from demo the country has not seen any terrorist actions is a possible indicator.
Poor guy. What a big white lie. Anyone can check the stats. The numbers of Indian army personnels casualties are far greater as compared to pre Modi era.
All of his arguments can be easily debunked. The fact is that not a single person from lower middle class/elite clads stood in a queue outside a bank to exchange/deposit money. And no one went bankrupt.
Only people from extremely lower economic class suffered badly. Many even died. And we don't hear their stories.
Pls check out my comment: https://news.ycombinator.com/item?id=17901835
linking this article (which argues, among other things, that "all money back" does not = no black money):
https://indianexpress.com/article/opinion/columns/demonetisa...
Excerpt from the above link:
>> I remember arguing in one of my articles that I wished all the cash was returned to the banks. Why? Because such people will be identified and will have to face the consequences of gaming the system. This is a long litigious process but major hints of the magnitude of black money involved (that was not supposed to be returned) is high. In his February 1, 2017 budget speech, Finance Minister Arun Jaitley stated the following: “After the demonetisation, the preliminary analysis of data received in respect of deposits made by people in old currency presents a revealing picture. Deposits of more than Rs 80 lakh were made in 1.48 lakh accounts with average deposit size of Rs 3.31 crores.” (Para 142).
Let us reflect on these data. Just after demonetisation, and even over the last few days, a lot of experts continue to opine that demonetisation was doomed to failure because “No one hordes black money in cash”. Just think about it — Rs 3.31 crore was approximately $5,00,000 (2017 exchange rate) and there are 1,48,000 such individuals. There are not that many Colombian drug lords who individually keep $5,00,000 in cash. In the aggregate, this cash — and it is reported to be cash — is close to Rs 5 trillion. How far is this number from the Rs 2-3 trillion that was supposed to not come back? It maybe the case that most of us made a very conservative estimate of black cash in the Indian economy.
BS. This is a right wing fundamentalist template cooked to save the face from pathetic failure of demonetisation.
As other commentators pointed out, it was underprivileged people who were most affected by this preposterous nonsense.
1. Poor people died of starvation, standing in queues at ATM i.e if they had a bank account in first place. [Only 53% had bank accounts as of 2014 & much of it was inactive] & mental agony of loosing their life long savings.
2. Privileged people exchanged their demonetized unaccounted money to new one's by bribing bankers & by forcing under privileged people to do it under their names.
3. Paytm (India's leading payment wallet) grew over 1000% in revenue with demonetisation running full front paged ads featuring the prime minister.
Shows how desperate the search for a justification of a horrible and rash public policy decision which costed lives, time and money has become.
Is that ... really common in India?
The church hides behind the garb of being a minority
representing about 3 percent in India, while actual
numbers are estimated to be much higher. It is not always
money, it can also be career. The church is extremely
well organised and way too powerful, no politician is
ready to face reality and deal with it.
On Christmas and other christian festivals, I personally noticed surprisingly large number of 'poor' people attending church prayers. And I found out they were all converted (though not sure about the extent money played a role).
Depending on the region, such conversion may or may not face any backlash.
I really wish the govt would show more interest in the plight of the 'lower' caste rather than just seeing them as a vote bank.
[1] https://www.theguardian.com/world/2015/feb/24/india-modi-rel...
As for evidence of conversions for money/material goods, here's a couple of links for you to browse at your own pace:
https://www.dnaindia.com/india/report-meerut-priest-tries-to...
https://amp.theguardian.com/global-development/2017/aug/15/t...
https://m.huffpost.com/us/entry/4470448
https://blogs.economictimes.indiatimes.com/et-commentary/con...
The Indian "Jati"system is similar to English/German family names based on profession like Mason, Smith, Carpenter or Schumacher.
The Indian "Varna" system is similar to the separation of the church and the state but included merchants. It was guidelines rather than a hard and fast rule.
A new population of untouchables/Dalits were created by the "Criminal tribes Act" that outlawed people by birth.
It is true that caste divisions and inequalities are a reality today but the solution lies in free market & economic development/mobility. This isn't something specific to India alone all ex-colonies like Rwanda, Syria .. have a minority ruling elite coopted by the colonist and the "others".
The Indian "Jaati" system itself was much more flexible and mobile compared to the European class system. The church has been so successful with this narrative that today the most prominent caste clashes and segregation is in the Christian population.
While older strands of Christianity have long since adapted to the culture of India the recent arrival of Evangelical Christianity from the U.S. since the 1980's is a problem since it is culturally jarring, morally self-righteous, and backed by donations from the U.S.
Christians are just 2% of Indian population (20 million out of 1300 million) After dividing into the various Christians sects you are talking about small groups of people that are linguistically and culturally disconnected. A Goan Konkani has little in common with a Keralite Syrian Christian or a Mizoram Presbyterian.
For Hindu nationalists, these distinctions don't matter and they have been very successful in creating a common Christian bogeyman to rally political support. Sadly, you can find these talking points repeated on HN by educated Indians.
If Modi does something wrong, his supporters wouldn't see this wrong. They would defend it.
Recently, Modi told a story about making tea with gas from gutter. His story was pure lie. Every sensible person knew it.
But his supporters nevertheless defended him. This was pathetic.
1. Banks were at a historical low in availability of currency in the system due to bad money hoarding and non performing assets. Dangerously near collapse. Demo as the report points out has brought so much money back into the banking system and successfully overturned this.
2. Prior to demo. the capital in the stock market was dominated by FII (foreign institutional investors) almost 70%. This resulted in volatility and the Indian economy being vulnerable to external influence. Now the table has turned, the capital in the market is predominantly from the Indian banking system leading to greater stability.
3. Now that money is inside the system,anyone who has tried to take money out in cash beyond 5000 USD knows how difficult to near impossible it is now. This is the real effect on bad money, generation is now so damn difficult!
4. Anyone honest who has tried to buy a home from big realty developers in India recently would be pleasantly surprised that now you have to purchase it with good money and also pay proper GST tax for it. Before demo this was one major area of bad money generation. It is as good as dead now. Recent reports on the huge huge increase in GST tax revenue increase is a proof.
5. Good and bad currency sweeping back into the system (Gov allowed conversion also) has effectively nullified the funding of militancy and the fact that from demo the country has not seen any terrorist actions is a possible indicator.
6. Whether you like it or not one more area which encouraged bad money circulation was evangelism (convert to christianity for money) and that is one more area that also been severely impacted.
Most US media outlets want to feed the stereotyped view of India and jump at any chance to do that.
Most people who cry against demo are those who do it, just because they dislike Modi as a person (not a very charismatic personality). They would not be able to substantiate how they were personally impacted.