The BJP govt. has cannily crafted a message where anyone who opposes this move is branded a traitor and conversely anyone who supports it must be a patriot - this is largely responsible for the "positive" feelings many people have around this move. That and the fact that the internet savvy already used Credit cards so they were largely shielded from this.
The Demonetization on the whole was a failure:
1) The strongest reason for pushing it was as an attack on "Black Money" (undeclared wealth outside the taxation net). More than 90 -95% of the demonetized currency is back in the coffers. This magical "back money" is nowhere to be found.
2) The growth rate fell by at least 1% - whatever the other impact this by itself means a massive loss.
3) A large number of "cash only" small-scale businesses have been badly hit - these people are not internet savvy and do not have a voice but they do exist
4) The so called "leap" to a digital economy is mostly a temporary phenomena - just wait till the new currency is available in sufficient quantities
So on balance - all the pain and suffering of the people will NOT bear the reward most of them think it would.
I don't understand what happened wrt #1. Was the black money like the mythical WMDs and unicorns? Or did it just make its way into the new money supply?
It got converted into white money by getting deposited into banks through other (mostly poor) people's accounts. Hence, a sum of 5 million rupees was distributed among 20 people (mostly domestic helps, gardeners, chauffeurs, etc). Each account's deposit is small enough to not raise suspicion. These amounts will slowly be withdrawn.
In addition, bank managers also acted in complicity with rich black money holders by documenting that their currency bills were actually exchanged by multiple ordinary folk, whose IDs' copies (necessary proof for exchanging) exist in large numbers at any bank.
80% of the demonetized currency was back into the banks, 20 days before the final date [0]. Bloomberg reports that the final number could be as high as 97% [1].
Now, the question you should ask is - How much of black money was in cash? The answer is approx. 6% according to Min. of Finance White paper on Black Money. So, effectively - 86% of the currency was demonetized to target 6% of unaccounted income. No matter how you slice/dice this policy, the costs significantly outweigh the benefits.
Multiple reports and research have said that black money in cash is approx. 6%. So, you can't get more than 6% back anyways and the government decided to demonetize 86% of the currency in the market.
About 75,000 CR (roughly $10 billion) did not come back in circulation. I don't think this is a small amount (more so by Indian standards) so while the estimates for #1 were way off, there was something uncovered. Nobody knew in advance how much black money existed so it was a wild guess before this exercise anyway. So I don't think your #1 criticism is valid.
The question is about Return of Investment. Sure, amount X did "come back" but what amount Y did you spend to make that money come back? Was it worth it? Based on various analyses by experts, it does not seem worth it at all.
I see, livemint's reputation for reporting facts is as dubious as nytimes. I say this because, livemint is owned by HT Media whose chairperson was a congress Rajyasabha (Upperhouse) MP.
> I see, livemint's reputation for reporting facts is as dubious as nytimes. I say this because, livemint is owned by HT Media whose chairperson was a congress Rajyasabha (Upperhouse) MP.
I doubt you read the link I posted. The report was from Bloomberg not Livemint. Would you now discard that too based on another tenuous link?
> I would rather have some trust in the official RBI's figures
RBI has been unusually silent on this. As of December 10 (21 days before the final date), 80% of the demonetized currency was back into the banks [0]. So, even if you trust the RBI figures - don't keep your hopes high.
You are right, I didn't read the link you posted because the moment I noticed livemint, I kind of jumped to respond (possibly due to my past experience with the articles on their website). However my point still holds, if RBI is not releasing the data how are these Bloomberg or any other entity getting their numbers?
I went through RBI's press release for December 2016 and didn't find anything stating the $220 billion deposits (as claimed by bloomberg).
> if RBI is not releasing the data how are these Bloomberg or any other entity getting their numbers?
The Bloomberg report is based on sources. For a moment, lets discard the Bloomberg reports and look at actual numbers from RBI. The data from RBI on December 13 shows that 80% of the demonetized currency was already back into the banks. RBI has not released data beyond that point of time. Based on a reasonable guesstimate, I would expect the final number to definitely touch 90% or above. Besides, we already know that unaccounted income in cash is 6% - so don't expect a number lesser than 90%.
Ya, I'd like to know this too. I was just recently in India for 3 weeks and I saw day after day that IT was bringing in people for black money (usually to the tune of $1M USD equivalent). Just propaganda then?
This is an unbelievably biased story. Reading the title you might assume as if there were widespread protests e.g. the term "begins to bite". In fact on the contrary banks have noticed a decline in use of digital payments due to remonetized currency notes. It appears that NYTimes really wanted a story about large scale panic/riots but not having found any it is now left with bunch of anecdotes while keeping a ridiculously click bait headline.
Edit: Also the image used clearly shows Indian Congress party supporters (identified by numerous flags with the hand symbol) yet they are termed as generic "activists" rather than supporters of a specific political party.
I think you read a bit too much into that title, it's just saying that the cash shortage is having an impact. It quite often mentions that it's nothing crazy within it, but uses the anecdotes to humanize a story; otherwise, it pretty clearly mentions that 'the pain is hidden for the most part' and underlines that the projected growth only dropped around ~1%.
Reducing growth by 1% is huge. The projected growth rate was 7.6% but was revised to 6.6%. That 1% is a percentage of the economy, not a percentage of overall growth.
Also, I will point out that the NYT never, and I do mean never, has a story on India that is anything but negative. I didn't realise this at first, but now I can't help but notice that every article they have on my country is just how we're all going to hell in a handbasket.
China is one of those countries where any non-Chinese-based news about them, even just a dry reporting of facts and figures, is considered bias and "hurting the feelings of the Chinese people." They cry bias so much that it just seems like whining.
There was one guy, Gordon Chang, who keeps predicting a complete collapse (not simply a crash, which is expected to happen from time to time) of the Chinese economy. Because his articles get published, the Chinese have now declared that western media has predicted a collapse of the China is imminent, when...if you search for China economic collapse, you only get Gordon Chang's articles, as well as the Chinese articles saying the western media has homogeneously predicted that. I don't know, perhaps they think western media speaks with one voice like Chinese media does, and fail to see the possibility that several viewpoints and opinions could exist.
Likewise, there are many things about China, like air pollution and internet censorship, that the western media fails to convey the full negative effects of. This is mostly a technical limitation, for sure, but people still come to Beijing and are surprised how bad the air really is along with the fact that they really can't use Facebook there.
I doubt that given that the world service is considered less biased - Mark Tully the BBC India Correspondent for decades was considered one of the most reliable news sources by Indians
Based on my experience, the world service and some other BBC programs seem to be managed differently than some of their online news, which far too often has basic typographical errors, and especially their social media accounts, which often post Reddit-style clickbait articles. Nothing wrong with that, but I would limit myself to the world service (though I have grown to enjoy NPR as well).
> Also, I will point out that the NYT never, and I do mean never, has a story on India that is anything but negative. I didn't realise this at first, but now I can't help but notice that every article they have on my country is just how we're all going to hell in a handbasket.
Ellen Barry has been the South Asia Bureau Chief since 2013, and for some reason, she really has a personal vendetta against India. Some of her stories seem somewhat reasonable if you read them by themselves, but if you look at her articles on India all together, it's clear what her bias is.
And some of them are just utterly absurd even by themselves. It's pretty disgusting.
Well... it's usually economic news, and the old saw is "economic news is always bad". The US doesn't have the history and cultural ties you see in the UK.
And to be fair, almost everything the NYT says about the US is negative, too.
> And to be fair, almost everything the NYT says about the US is negative, too.
Not the same way that the NYT portrays India. They repeatedly reuse racist stereotypes in their coverage - even in their headlines. I've never seen anything quite so appalling in their coverage on the US. It's a whole new level. It's gotten a lot worse since 2013/2014, which is when Barry and Baquet took over.
And sometimes they can't even be bothered to do the most basic fact-checking or even issue corrections to online articles about India, the way they almost always do for US coverage or coverage of other regions. It's really awful.
The coverage of China is very distinct too, this despite all the other propaganda ops they have going on.
The dislike for India is quite old, and entirely of a distinct kind... and India for shame is only too willing to be a plaything of the WASPs. The hatred that runs deep in the culture appears far more visceral IMO... not surprising that Humanities depts in the US would reflect this more markedly.
I'm reminded often of the picture of the देव-असुर binary; more amusing considering the ancient shared origins of IE people.
>And sometimes they can't even be bothered to do the most basic fact-checking or even issue corrections to online articles about India, the way they almost always do for US coverage or coverage of other regions.
I don't know about that. Every time I read an article related to something I know about personally, there are multiple problems. You won't see an NYT article about guns, for instance, that isn't riddled with errors.
> You won't see an NYT article about guns, for instance, that isn't riddled with errors.
Left-leaning media (like the Times) is generally pretty bad when covering guns, yes. But it's nowhere near the level of blatant disregard for facts that the Times has when covering India.
I agree with you that the NYT's coverage of India is heavily negative, though I think you could reasonably go far less specific and argue that broad focused American media in general tends towards negative coverage period (part of my major problem with it, "If it bleeds it leads" is not a new saying), particularly about international matters (because international matters are often shortchanged anyway, foreign desks have been reduced/eliminated, etc.). With that said, be careful of absolutes. I just went to the NYT's page for the topic of India, and yeah, it's massively negative, but just glancing through the last few months I saw:
That's just a quick look at recent news, and given that the NYT has to be feeling pretty down about the overall state of politics worldwide right now I doubt that's even a fair slice.
Honestly some of those are actually pretty nice/interesting pieces, which does bring up a point: I've long given up on making media more positive generally, negativity sadly seems to sell pretty well, so you have to go to alternates/aggregators that are better (including HN). But I really do wish there was at least a filter for "positive stories", a simple binary the NYT or WSJ or WP or whomever would use to broadly categorize stuff that was about /disaster/war/death/crime/terrorism/fights/eldritch horrors from beyond space time/ vs anything else. If you just go making a list of other stuff from a lot of media you might be surprised about the kind of interesting pieces that tend to get lost in the noise, and the important perspective on progress in the world it brings. Broad categorization seems perfectly doable there, doesn't need to be perfect to be highly useful in raising s/n, and I'd love if outlets would just do it themselves and see how their readers react to having a choice. I guess at some point ML/AI assistants might be able to do a helpful job based on word stats, but it'd be best if whomever wrote the article just tagged it at the start.
As an Indian, I feel this article is overtly negative and fails to capture the real public opinion. For example, everyone in my friends + relatives circle (mix of salaried and small business owners) have been impacted, we have borne the grunt of standing in lines for 2-3 hours just to get cash, but each and everyone welcomes the change. We in fact want the govt. now to focus on the other big source of black money - real estate.
The NY times also deliberately ignores the positive outcomes e.g. housing loans are now coming to a six year low, online transactions are increasing (which increases tax inflow to the govt. by bringing previously unreported transactions to tax bracket).
If you're posting on HN, you and your friends are probably not the audience for whom there's pain. Reading the NYT piece, it appears to be hitting contractual labor the hardest - people who earn $220/month or less.
From the article: "The worst affected by the cash crunch are the country’s hundreds of millions of farmers, produce vendors, small shop owners and daily-wage laborers who are usually paid in cash at the end of a day’s work." This makes sense as daily-wage laborers would form the backbone of any informal ecnonomy, and the lack of ready cash is killing the informal economy.
What the article is missing or did not say is that cash is now coming back. It's not like they took cash out permanently without any alternatives.
In reality, the 500 and 1000 rupee notes were removed, being replaced with notes of lower denomination. The time period in between the two is where commerce took a hit, no doubt. But it is also true that with cash back, things will return to normal.
> The time period in between the two is where commerce took a hit, no doubt. But it is also true that with cash back, things will return to normal.
For you, it looks like, it will - no longer standing in the lines for 2-3 hours. But for many others in the country the effects are probably not as easily reversible.
You can also be sure the cognac sipping bureau chiefs aren't well apprised of the problems of such people.
I spent over a week in a rural area and it didn't appear like the agricultural workers were facing problems that would impact their livelihoods significantly. Part of this has to do with the widespread availability of ₹100 notes.
I have heard this argument of the Indian middle class standing in lines but having a positive outlook of the future. That’s the general sentiment floating around. Many economists and social scientists in India have been highly critical of the move and its implementation too. The govt didn’t present data about how much dirty cash was scooped up through this move. It’s narrative changed from bringing back dirty money to digital transactions.
The population hit hard by this move is the poor, which frankly hasn’t got the kind of access to technology to be using credit and debit cards. Access to smartphones hasn’t picked up to the extent of substituting it as an alternative to cash. What about them? They form a large chunk. Not a lot of media attention has been given to this section of society - the daily wage earners, factory workers paid in cash, farmers[0]. Who’s talking about these folks? I would be more interested in some real insights into this instead of rhetoric and searching for some silver lining.
Virtually no economist of note has supported the move. The ones who did like Kenneth Rogoff, said that it was poorly implemented and India doesn't have the infrastructure to support a cashless economy. The above article that you linked to has selectively mined portions of comments by the Nobel Laureates out of context.
Maybe, but the decline in commerce captured there is eyepopping. Projected GDP growth cut 1% so far. Vegetable prices dropping 42-78% due to falling demand. Small-scale services industries cut staff 35%. Job losses in auto manufacturing and construction jobs projected to hit 35% by March. That is a major economic shock.
In fact I would not be surprised if the growth cut is significantly higher. The previous Prime Minister of India, a renowned economist and the architect of India's economic liberalization in 1991, asserted in the Indian Parliament that the growth cut was likely to be more than 2%.
> The NY times also deliberately ignores the positive outcomes
The amount of unaccounted income in cash is 6%. You can definitely have positive outcomes but the costs outweighs the benefits. It's like using an elephant to kill an ant.
I've been looking for this info. How did you arrive at the 6% figure, is it in the NY Times article? Honestly I thought it was a lot bigger, at least low double digits.
I think you are confusing between unaccounted income vs. unaccounted income in cash. The amount of unaccounted income (or black money) in cash is 6%.
Just like accounted income, owners do not prefer their unaccounted income to be in cash - they use real estate, gold etc. to park them. This 6% figure is from the Ministry of Finance white paper on black money.
How widespread is the use/acceptance of credit/debit cards? Can you typically get by for long periods of time without cash (e.g salary paid to bank account and then you buy food, pay rent with bank transfers or with a card)?
Credit cards are widely accepted in all major cities. I used to carry exactly ₹100 (equivalent of less than $2) with me in cash. My salary was paid directly in the bank account - India has a pretty good electronic fund transfer system and it's pretty instantaneous - unlike ACH or even clearXchange where you need to wait 3-5 days. All restaurants accept cards. All sizeable supermarkets accept cards.
This breaks down when you start interfacing with the informal economy - taxi drivers, road side stalls, small markets, street vendors, ...etc. And quite unintuitively for people here - large businesses - real estate, automobiles, big vendors (like the marriage vendors quoted), contractors ...etc.
Basically, the formal economy exist within a thin margin of every day purchases. Everything above and below is in black.
I am guessing that you are extremely well to do by Indian standards and probably among the top 10% of the country by wealth. You paint a very optimistic picture, I would be surprised if more than 10% of the Indian population regularly uses a credit card.
My question was whether they could (e.g. if cash dries up).
Of course, there is always a question of whether people can readily access debit cards and bank accounts. I heard stories from the US where even opening bank accounts and having debit cards (with zero credit) was out of reach for poor people for some reason. If that's the case in India then the fact that groceries and rent can be paid with debit cards or bank transfer is of little use to a large fraction of the population.
Yes, a large fraction of the Indian population >50% does not have a credit/debit card, and a significant percentage don't have a bank account. In fact, in large swathes of rural India, the nearest bank could be a few hours away by whatever means of transportation they have there.
It's only out of reach to poor people that have already had bank accounts and abused them by bouncing checks, etc. Or perhaps illegal immigrants who are unwilling or unable to show ID to open the account.
Otherwise there are plenty of free bank accounts that poor people can get in the US.
This is meaningless. If the majority of that 15% comes from big planed purchases, but 99% of the stores that sell food do not take cards, you will eventually see bread riots on the street as the implementations of the cashless economy proceeds.
The actual question to ask is, for how long could an average citized go without cash without failing to acquire an esential supply at regular market value? And how does the figure change if you are willing/able to pay at any price point?
Because black money boarders would get to know and figure out ways to exchange their money. The government officials are big time corrupt and once they get to know they would have figured out ways to sabotage the demonetization plans. The Government & Prime Minister Modi did an excellent job in keeping this as a secret till last minute. Otherwise, this scheme would have been a failure. Unlike the opinion expressed in the article, most Indians are happy about the demonetization step took by the gov.
Most daily wage labours and farmers did not face any issues as pointed in this article. They were able to buy food items and necessary stuff and pay the vendor later. India runs on this kind of mutual credit system.
> Otherwise, this scheme would have been a failure.
How is this scheme a success? The amount of unaccounted income in cash is 6%, the amount of currency demonetized was 86%. The benefits are minuscule compared to the costs.
I would think the main benefit from this point would be in the future.
If folks have a lot of money stashed away in their house, tax free - and they dont' turn it in, that money is lost. Moving forward, it will be more difficult to do the same sort of thing (in theory) because of the sheer inconvenience of storing up all of those small bills. And if the people do, in fact, wind up being more upfront about their monies, it'll mean more tax revenue for the government - you know, for all the stuff governments want to do. Roads and security and improvements and such.
Basically, this is a push for a better future, with some inconveniences and unfortunate stories in the present. There is some hope. Hope is pretty important.
I'm not sure the benefits are so minuscule compared to the costs.
The people with black money will never again use the rupee as a storage medium. They will convert it into gold or US dollars or euros or <insert fungible thing>. It might lead to a "dollarization" of the black economy. It seems to me, in my opinion, that all this is Modi and the BJP posturing before their base. They are "doing something".
> I would think the main benefit from this point would be in the future.
There is nothing to suggest that there would be any change in the future. The incentives and mechanisms still exist. We can hope and think whatever we want - the reality still lurks around.
The benefits are absolutely miniscule when you demonetize 86% of the currency to target 6% of unaccounted income in cash.
Indians (most unlike me) are a creative lot, the longer you take to implement a change, higher the amount of black money escapes, and smaller group knowing about the secret, the better
Mostly because they didn't think it through. It is very likely that the move was taken almost unilaterally by the Prime Minister on the advice of a maverick, without really taking into confidence the cabinet or the Reserve Bank as the subsequent missteps and fumbles by the government such as the ATM calibration fiasco show.
Black money is clearly a problem in India, and figuring out how to address it is almost certainly critical to the well-being of the nation. That said, simply cancelling 86% of the currency seems like an absolutely terrible solution, and possibly one of the most regressive monetary policies I've ever seen. Does anyone have more insight into what the government thought would happen? Did they expect the cash crunch? Did they simply not care that it would be those who are most likely to depend on regular work for basic necessities (the poor) would be hit hardest? Or was there some kind of plan here that wasn't rolled out well?
The Economist reported that ~15T of the 15.4T affected bills were redeemed. That would suggest that only ~$5-6 billion of black money was trapped. So as a way to kill black money, it seems woefully ineffective.
Well govt changed course mid-way by allowing people to deposit money and pay fines, lock-in period etc. It effectively ensured that most money would come in because any money left after fines and all is gain to hoarders as compared to zero by not depositing at all.
But it was effective if people and businesses switched to using banks. That could happen even if no black money was trapped. Get rid of petty and unintended corruption, and they you can focus on the truly corrupt whom this change hasn't affected.
My read is that they did understand the risks and had thought things through, but they they underestimated the degree to which average people (not just poor) and businesses shunned the formal banking/finance system.
One story told on NPR was of a couple getting married that had been saving money - in cash - for a few years, and had to get it all converted to the new currency before the wedding. All the vendors expected to be paid in cash (I assume because they are all corrupt) and they probably also needed to pay off some corrupt officials. Anyway, they distributed bagloads of cash to enough trusted family members that they were able to convert enough to go through with the wedding and pay all the vendors.
My understanding is that some honest Indians support Modi. I also understand that being honest in India is a fool's errand.
> they underestimated the degree to which average people (not just poor) and businesses shunned the formal banking/finance system
My aunt bought a CD for me from ICICI, an Indian bank, when I was young. Only I can withdraw the funds, and then only into an Indian bank account.
I started the process with another Indian Bank, YES Bank, in February of 2016. I got an account a month later, but online access did not work with a U.S. phone number. Emails routinely took 2 to 3 weeks to be followed up on, phone calls produced conflicting advice and two managers copied me as they went back and forth with other managers berating each other and their respective employees.
In December of 2016, I was able to log into the account. Unfortunately, I'd been tolled fees from February despite receiving assurances from a manager, in writing, that this would not happen. It is now January and nothing has happened.
Note that ICICI only started responding once I wrote a letter to New York State's Department of Financial Services, something that is possible only because ICICI have a legal presence in New York (and I am a New Yorker).
The amounts involved are small. I pursue it because it's right and I don't want to disrespect my aunt's generosity. That said, I would never, ever encourage anyone to deposit substantial amounts of funds for any amount of time, nor any amount of funds for a substantial amount of time, with an Indian bank.
My experience with Indian banks has been great albeit some unnecessary fees once in a while. I opened the non resident account in SBI when I visited last time and was able to get the account number, passbook and checkbook on the next day. They shipped the debit card and the pin to my home address.
The online banking details were not handed to my parents so I visited again when I went earlier last month and was able to get the online bank details right there. The account activated later that evening and I was able to transfer money the next day.
When I stayed there, I had similar experience wrt opening of accounts as Indian residents with Axis, Kotak and even ICICI. So this treatment is not new or limited to just NRI accounts.
But if they truly understood the risk, shouldn't they have had a handle on how many citizens (and more importantly, how much of the economy) depended on this?
I see. They basically try to remove the money that was coming back into the economy through bribes.
To reduce bribery (bad for way more clear reasons) they went after the money that was used for bribing. Taking money from the hands of people that dodged taxes is just nice educational side effect.
Did they even pay lip service to a plan? Even one that they never had any intent to implement, or one so obviously impractical that any rigorous thought would poke holes in?
Of course they did. It was said to remove corruption, stop black money and stop terrorism. Just emotional non sense and fake hopes. It shut a lot of people's mouths as they labelled the opposers as anti national. There was a lot of online abuse to netizens as well. Still is.
They efficiently managed to pull off this massive failure without widespread anger.
Words can do a lot of damage than weapons. Gandhi used it for uniting people into a good cause and this guy uses it for his own fantasies.
I'm glad the veil is coming off though. People are disgruntled that it's just talk and no work.
Creating fear in mind of corrupt. They need to he more creative. This increases the cost of corruption. If the cost achives parity with taxes, people will prefer paying taxes.
"Black money" will always exist as long as goods and services humans find valuable are illegal. Altering legal transactions to thwart "illegal" transactions will actually make it easier for illegal transactions to hide in plain sight as legitimate transactions are pushed into loopholes which look "illegal".
I think he means transactions not being accounted for properly, not necessarily for illegal goods. At least my experience of India is that there are quite a lot of deals being made that never show up in any government tax books.
This is mainly what I was referring to. Obviously black markets are essentially impossible to eradicate without the elimination of any sort of legal restrictions. But it seems like a big problem for India is that otherwise legal transactions are happening in cash, and off the radar of the required tax authority.
I wasn't commenting on whether this solution is a good one. It seems like a really poor one to me. Your comment that black markets/money will always exist as long as things people find valuable to be illegal is very true! That said, that doesn't mean that their existence (and particularly the size of it relative to the legitimate economy) isn't a problem for governments.
"Amitabh Kant said that even electronic payment methods may be "totally redundant" by 2020. Instead, all Indians will need for transactions is their thumb or eye.
"Each one of us in India will be a walking ATM," Kant said at the World Economic Forum in Davos. That would represent "the biggest technological leapfrogging ever in the history of mankind," he added.
... nearly 1.1 billion of India's 1.3 billion people have already registered their biometric data under the government's unique identification program.
The Indian government is testing a payments app that makes use of that biometric data, coupled with portable fingerprint scanners that cost about 2,000 rupees ($30) each."
Well faking fingerprints is quite easy if the reader only checks the print but not if the subject actually has a pulse, but I never heard about a faked retina yet...
I gotta figure it's a big risk and an uphill battle trying to push so much technology to such an underdeveloped place. "Biggest technological leapfrogging ever in the history of mankind" may be right, but there's big risks and growing pains that come along with that.
India switched to 100% electronic voting. People accept technology faster than you might assume.
Also since it doesn't have the Visa/Mastercard rent seekiny duopoly and dysfunctional ACH system. It can actually have smoother transition to a UPI based payment system. [1]
That's interesting to read. Don't get me wrong, though, I'm not doubting the willingness of the individual end users to accept and get used to it. I'm wondering more about the support infrastructure. Like, do they have reliable enough data nationwide for this? Do they have enough techs and spare parts and such to keep their data networks running around the nation 24/7? Do they have enough people to fix or replace the devices that break? That sort of thing.
The network coverage is definitely more comprehensive in India than in the US, in my experience, probably due to the significantly higher population density. I was able to get coverage on a dirt road in the middle of seemingly nowhere in parts of India, while I can't even do the same on many county highway connecting smaller towns in the US.
I did a little video about this last week: http://wakey.io/47 and tl:dr; All this does it punish the poor for using cash.
It's not so much that demonetization is bad - it's that it's hard to do with no notice. in a country this big. all at once. with so little time to phase out old bills. All the proposed benefits: more ecommerce, reduced black market transactions, better tax accountability could have been accomplished without going to such extremes. I mean, India isn't even using polymer bills yet -- so there will be at least one more big demonetization in the next 10 years.
This article seems to be totally biased and not entirely aligned to ground reality. It's what the general people call as a "hit job" by the (mainstream) media. Most of the points raised in the article are in line with what the opposition political party - Congress has said, a party universally known for corruption & for playing dirty appeasement politics, a party that has kept India backward & in abject poverty even though it was in power for the last ~70 odd years.
Yes, there were hardships. But Indians can see the benefits in not only black money reduction, but also in decrease in tax evasion, digitalization of the economy & also reduction of terrorism & anti-social elements like mao-ism, naxalism etc.
In any case, I think we should try & maybe fail & learn from this, rather than let the status quo of affairs go on as it has been since India's independence in 1947. This is probably the first bold move ever in Indian economic history.
> But Indians can see the benefits in not only black money reduction, but also in decrease in tax evasion, digitalization of the economy & also reduction of terrorism & anti-social elements like mao-ism, naxalism etc.
Except that you did not exactly require demonetization to achieve those benefits.
Ok. So what exactly do you require to achieve even a modicum of those benefits? And you think that was not tried in the last ~70 years of Indian Independence?
I'm not sure your angle, but most people are content with analysis, but there is no urgency for action - a situation of "blissful analysis paralysis". What's worse is that, when someone takes an action, any action, these people are the first to raise all sorts of objections against those very actions that were unable to, incapable of, or totally uninterested in taking.
> I'm not sure your angle, but most people are content with analysis, but there is no urgency for action - a situation of "blissful analysis paralysis". What's worse is that, when someone takes an action, any action, these people are the first to raise all sorts of objections against those very actions that were unable to, incapable of, or totally uninterested in taking.
Like repeatedly mentioned in the thread, the costs for this exercise significantly outweigh the benefits. If most people are happy with it, that does not change the benefits to cost ratio. In addition, "trying something" does not equate to success.
In the US, cash transactions over a certain limit get reported to the government. Even if you manage to hoard a bunch of cash, it's surprisingly hard to spend without drawing attention to yourself.
> cash transactions over a certain limit get reported to the government.
Who reports it? So let's say I pay a bribe of $1 million for some significant but slightly illegal favor. Will the 'bribee' report it, or is it the briber?
Where did the money come from? And what will the bribee do with it? Is there a separate bribe economy, where people bribe each other and never use the money to buy houses and cars?
Out of every 100 notes in circulation, 85 were either a 500 rupee or 1000 rupee denomination. Per Govt. report most non-reported (black) transactions were done using 500/1000 notes (black money - not reported to escape tax). The 500 also happened to be the most counterfeited one.
By removing the 500/1000s it is now much more difficult to do cash transactions involving large amounts (imagine the cash one had to carry now becomes 5-10 times).
But when doing the above, the govt. also affectively removed 85% of cash from the market - banks did not have enough cash to remit their users. However since then there is increase in cash printed and things are beginning to come back to normal.
Decline in commerce is true, but is also expected short term. As others have posted, things are coming back to normal. The daily cash with drawl is increased from 4K to 10K. People like me are hopeful about a system with more transactions happening online and black money being more difficult to hoard.
This article is really biased. I live in Mau, a small town in Uttar Pradesh. And this month, things are somewhat back to normal. My neighbour works in the State Bank of India, and he told me that the line outside the bank has decreased a lot. Cash is available in many more bank branches. The situation has gotten a lot better. Things were a bit tough initially, but I have not seen people in as big a panic mode as the article would have you believe.
I'm not sure how current this story is. As of a week ago, in Pune and Delhi, all the ATMs seemed to have plenty of money. The withdrawal limit has been raised to the normal 10k/day. I suspect things will go back to normal soon.
One thing I've been pretty shocked by is how people are taking it. In India, the ATMs don't work, people are losing their jobs, but it's just a topic of discussion. You can think it's a good or bad idea, all opinions are tolerated.
Compare to the insanity currently happening in the US - riots and political violence spreading, dissidents afraid to speak [1], virtually everyone is angry. It's quite a contrast to see up close. (I flew to India shortly after demonetization, and came back to the US a day ago.)
[1] Just after the election my social calendar was full. All the secret Trump supporters were desperate to talk to someone and I was the only person they felt safe speaking to.
The people quoted in the article lost their jobs as the contractor did not have the cash to pay them. The 'contractor' probably falls in the huge middleman category of 'businessmen' who operate only on cash for multiple reasons -
1. No need to pay tax
2. The people being paid may often not have bank accounts, or just find it easier to deal in cash.
I came across many such contractors in my last trip to India, as I had to deal with people involved in a preparing for a family wedding.
The onus here (probably) does not fall on Hero Corp, but on the contractor. The sad part is that, even when the contractor has money and needs to hire people, he will probably try to squeeze the employees on salary citing 'cash crunch'. :@
It seems like the issue is more about workers who depended on payments in cash (thus untaxed and the source of the black money in the first place) no longer being able to find enough work to pay for basic necessities. The implication is that their employers are simply not hiring as many people to make up for the additional taxes they are paying (this is my interpretation, this is really the first I've read about this, so if I am wrong or misunderstanding, very interested in learning more)
In India, if you earn < 2.5 lac/year (about $3500), you don't owe any taxes. The gdp/capita is about 1 lac/year (about $1500). The worker described in the article is making about $200/month or 1.6 lac/year.
The actual issue right now isn't so much taxes. It's not having physical cash. No matter how many crores you have in your bank account, you can't pay workers (many of whom have no bank account) if you can't withdraw physical bank notes. Further, even if you could transfer money to those workers, they can't buy vegetables unless they can find a vegetable seller who takes PayTM.
In India, most of the economy is cash based. The primary exception is in major cities where credit cards and PayTM (think Indian version of WeChat payments) have suddenly become vital. Suddenly many autowales and small restaurants have PayTM QR codes. Even some vegetable sellers take PayTM!
Sorry, I didn't think the issue was the poor not paying taxes. Perhaps this is just me applying US tax paradigms to India, but what seemed to be the issue to me was employers paying those workers in cash, thus avoiding any taxes the employer would need to pay. Your point on not being able to pay workers in cash when actual cash is just not available is a good one though, and definitely helped me in understanding what is going on a bit more, thanks.
>The implication is that their employers are simply not hiring as many people to make up for the additional taxes they are paying (this is my interpretation, this is really the first I've read about this, so if I am wrong or misunderstanding, very interested in learning more)
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That interpretation (hiring is less due to having to pay more tax) is likely only a minor part of it. The much bigger issue is likely the lack of actual physical cash since the demonetization started, which is a few months ago now. (Things have started improving only recently.) Lots of people in India - probably the majority - do not use electronic methods of money transfer (due to being illiterate or computer-illiterate, old-fashioned, being in remote areas or other reasons), so depend heavily on cash.
I'm not sure I see that as a positive thing. In my opinion the people SHOULD be upset in both cases. Horrible decisions by the government caused ATMs to not work and you lose your job and it is just a mild topic for discussion???
There was a documentary on the BBC about India a couple of years ago. In one scene a worker the filmmakers had been following got fired from his office job. He calmly left the building, went down the street and immediately got a new job in a scrapyard working as a welder after spending two minutes demonstrating that he could indeed weld. Not sure how representative that is but in that sort of world losing one's job really wouldn't be such a big deal.
The cars in my neighborhood were festooned with Clinton bumper stickers. If I'd put a Trump sticker on my car and it was only keyed I'd consider myself lucky. Trump supporters may not have been dissidents in relation to the government, but in many places you have to worry about the mob.
And when a window was smashed in on that car, would the owner decry the impulse to damage property belonging to someone with different political leanings, or would the owner (as we saw in the Rodney King riots) be upset because he got his window smashed in when he wasn't even a Trump supporter?
There is a different sense of freedom that I believe the person you replied to is alluding to. The cultural and social norms may be more ingrained in India, but there is a less litigious society that overlooks or ignores small offenses, or may not even have regulations preventing many things that would be illegal in the US from taking place. It's not necessarily desirable freedom, but freedom nonetheless.
> In the first month alone after the currency ban, micro and small-scale service industries cut staff by 35 percent, the All India Manufacturers’ Organization said, based on a survey.
> The International Monetary Fund this month cut its projected growth rate for India by one percentage point for the current fiscal year, to 6.6 percent.
This article is baseless, I am right. Ow can siting india and life is business as usual. No lines in front of the ATM machines. I am seeing a better India everyone accepting digital currency!! A welcome move by the government
This is still the most likely way World War III could break out in the next two years. Economic shock leads to food shortages. Food shortages lead to food riots. Riots lead to unrest. Unrest leads to war.
1) The strongest reason for pushing it was as an attack on "Black Money" (undeclared wealth outside the taxation net). More than 90 -95% of the demonetized currency is back in the coffers. This magical "back money" is nowhere to be found.
2) The growth rate fell by at least 1% - whatever the other impact this by itself means a massive loss.
3) A large number of "cash only" small-scale businesses have been badly hit - these people are not internet savvy and do not have a voice but they do exist
4) The so called "leap" to a digital economy is mostly a temporary phenomena - just wait till the new currency is available in sufficient quantities
So on balance - all the pain and suffering of the people will NOT bear the reward most of them think it would.
Edit: Source for #1 http://timesofindia.indiatimes.com/india/90-of-scrapped-note... Note that the actual number will be higher as newer estimates are released.