Another point to note is that Indian elections are funded by a massive corpus of cash, and when you suddenly make all existing cash illegal days before the elections, you cause complete disarray in your own political opponents' camps.

This was as much a poll winning strategy as it was, purportedly, about demonetization.

To me, regardless of whatever good this government does, it will remain one of the worst decisions economic decisions taken by any Indian government to date

> Another point to note is that Indian elections are funded by a massive corpus of cash, and when you suddenly make all existing cash illegal days before the elections, you cause complete disarray in your own political opponents' camps.

As well in your own camp. Your cash is not different from your opponent's cash. Unless the cash you are using is unaccounted.

That is assuming your camp didn't already know about what was going to happen.

https://www.huffingtonpost.in/2018/06/22/amit-shahs-director...

All parties have to file Income Tax returns which also includes sources of income. Had BJP been the only party with enormous cash, they would've been flagged by the IT department.

That's because how cash gets rotated among the Indian masses. Your Pendalwalla and Micwalla accept cash. Your party workers, campaign workers, alcohol suppliers, biryani suppliers etc etc .. Take cash.

So please drop this 'Income tax return' bogey. Most of the political donations and spending is unaccounted. You don't pay taxes on things that don't exist on your books.

Everyone knew that no one had cash. Your Pendalwalla and Micwalla had to earn money. They would have readily accepted checks or other forms of payment. The real trouble is that a lot of political parties fund their campaigns off the books. They can pay only in cash because it is untraceable to them. Your Pendalwalla, alcohol suppliers and Micwalla got cash before so they took cash. You pay them in checks and they take it.

> You don't pay taxes on things that don't exist on your books.

Its not others fault that you keep your party funding off the books. No one asked you to. You can keep it on the books, pay the tax, and pay you vendors legally without issue. The restrictions were on cash, not on any of the other payment systems.

1. BJP income rose after demonetisation. Parties don't pay taxes but file return for exemptions, expenses, etc. You don't even have to reveal the sources. https://www.dailyo.in/politics/demonetisation-noteban-party-...

2. If a party already knew that demonetisation is coming, it could have acted accordingly. https://www.financialexpress.com/india-news/demonetisation-b...

3. Ruling party had an advantage on getting money, organisational structure, advertisement, etc, etc. Many vendors don't accept checks but real currency.

I agree generally but this assumes all those Pendalwalla, Micwalla, liquor suppliers are okay with doing their sales in black. That's not always the case. Especially just after a massive government exercise that fell hard on cash, these guys are less likely to accept tons of cash. So, considering all this I don't see how one party clearly benefitted.

Even the US government is accused of weaponizing the IRS to target political opponents. Do you really think the IT department in India would operate without interference?

Or you had priority access to the newly issued notes.

When Modi announced it, he used Black Money under the garb of Black Money. Later on goal keep shifting. From damaging terrorist/Naxal money to digital transactions.

https://www.thehindu.com/opinion/editorial/shifting-goal-pos...

https://indianexpress.com/article/india/demonetisation-rbi-a...

https://economictimes.indiatimes.com/news/politics-and-natio...

Amit Shah, right hand man of Indian PM Modi, was the director of the bank who got significant cash deposits after this ill thought out demonetization move. And worse, the news articles highlighting this have disappeared or have edited out Amit Shah’s name from all the major English newspapers. So much for media partiality in today’s India. Co-op banks were exempted, quite conveniently.

https://m.huffingtonpost.in/2018/06/22/amit-shahs-directorsh...

I could not get this logic. Can you explain more? problem would have been, if he got that money before demonetization, or he would have bought lands/gold, even then , if money comes in bank, "blackness" goes away, no?

Just few days before demo, huge huge amounts of cash was deposited in his managed loxal bank, & when demo was declared, as that money was already in bank's vault, it was safe. Also, the bank was type of Co-operative, kind of local credit union, these types of banks does not need to be interconnected between branches or with a central place, neither do they need to keep digitally timestamped records, manual book keeping on paper is allowed.

Well this is what the headline says.

Ahmedabad District Cooperative Bank received deposits worth Rs 745.59 cr soon "after" the policy was announced, according to an RTI reply.

Please check it is "after" the policy and not Just few days before demo as you claim

That's exactly what has happened, black money got converted to white with help of politicians like Amit Shah. This FT article touches on this aspect.

https://www.ft.com/content/7dbe0e14-8d8a-11e7-a352-e46f43c58...

Even if you remove Amit Shah from equation, you can say black money converted to white, by paying 30% tax.

Also BJP campaign in UP was less affected by demonetization than opponents’

>>The actual intent of Demonetization was not the removal of Black Money.

This is one of those 80's era misconceptions that continues to exist today.

No one, not even beggars on Indian streets keep their cash beneath their mattress these days. Money is invested in businesses, where the unorganized sectors works. In short if you pull the plug on this kind of economy you ruin the livelihood of people working in unorganized sector. Which is basically most of the Indian economy.

The remainder of your post is basically the hilarity I have to deal with day-in-and-out from people and their round-corner-barber-shop level discussions on how their random hacks and their political heroes will go around fixing everything. Urban centers are full of these idiots. Who think their barely held together theories, which won't survive 5 why questions in a stretch, should be forced implemented and others be made to suffer through it as a test of patriotism.

Demonetization was a devastating failure for one simple reason. Tax accountability is one thing. Capital is a totally different concept. Capital has always been invested in productive businesses. If you destroy that you destroy the economy. In essence the question is how to fix tax accountability without destroying the economy along the way.

Nobody gets applauded for burning down a city to eradicate rats.

> No one, not even beggars on Indian streets keep their cash beneath their mattress these days.

That was my point. A point that I think went over your head. Maybe I need to dumb down my language more?

> people and their round-corner-barber-shop level discussions on how their random hacks and their political heroes will go around fixing everything.

The success of a democracy depends on these barber-shop level discussions. Any working democracy should be proud of the fact that normal people discuss and have their own political views. Democracy is born from the bottom, not handed down from the top by the ever changing and confusing whims of a failed dynast.

> Who think their barely held together theories, which won't survive 5 why questions in a stretch, should be forced implemented and others be made to suffer through it as a test of patriotism.

Where did I make any of these points? Please stay on topic. If you don't have anything relevant to the topic then please stop.

> Demonetization was a devastating failure for one simple reason. Tax accountability is one thing. Capital is a totally different concept.

What is difficult to understand? Demonetization cannot be a failure on tax accountability or capital because it was never intended for this. It was to make a purely political point and it made that very clear to the people. The GST reforms are the reforms for the tax system. Not demonetization.

Crossing into incivility like this will get you banned on HN regardless of how good your points are or you feel they are. Please review https://news.ycombinator.com/newsguidelines.html and follow the rules from now on.

Isn't it scarier if the government has ulterior motives as a political party?

What you are essentially saying is that the government is not beyond passing policies that result in disruption, death, drop in GDP, and more just to push their political party to win state and other elections

Total BS. The announcement of the demonisation by Modi repeatedly mentioned removing black money from the system. There wasn't a single mention of moving to a digital economy. When the blackmoney angle failed, the BJP govt started talking about digital India etc.

Yes, basically he kept shifting the goals, from black money, digital economy, etc etc

>> The real reason for this was political chest thumping.

As in many things in politics, things are not 100% this way or that way. Every political and Economical action has a "signalling" component, which in itself does not mean that "signalling" is the only component.

One needs to look at below for a counter viewpoint, if willing to hear both sides of the debate:

https://indianexpress.com/article/opinion/columns/demonetisa...

Excerpts from the above:

>> The return of cash:

Many of us felt (including the government) that of the Rs 15.8 lakh crore (or trillion) rupee notes that were demonetised, about Rs 2-3 trillion would not be returned. The assumption was that this was the minimum of black cash in the system, and since those hoarding cash would be afraid of getting caught by the tax official, they would burn the cash, rather than return it to the authorities.

What happened was that all the cash got returned, and those expecting that this would not happen, were naïve. Let me speak for myself — I am surprised, and at the same time I am impressed by the ingenuity of Indians, especially those with black money. If the only objective of demonetisation was to not get all the money back, then clearly the policy failed.

>> cash to GDP ratio

cash in fiscal year 2017/18 is 10 per cent below what it was in 2015/16 (the GDP has gone up for those wondering).

>> Tax Compliance:

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.

>> tax buoyancy, that is, the ratio of growth in tax revenues and growth in nominal GDP

The fact remains that an improvement in tax compliance has been a major success story of demonetisation.

>> Withdrawal of cash from ATMs (plus paper clearing) as a proportion of all transactions (for example, RTGS, POS, IMPS) has declined by 30 per cent in volume and 17 per cent in value. The two periods are Jan-June 2016 (pre-demonetisation) and Jan-June 2018 (post-demonetisation).

Having the will to take hard decisions is not a bad thing in general and getting work done is almost never discouraged.

I don't think they miss the point - the role of journalism in things like this is to detail in depth the failure of the ruse, thereby exposing the real motive.