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.
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.