Blow to Modi: As Much As 97% Of Banned Notes Are Back In Banks

[PatriotLover]

NDTV NEWS LINK

Indians have deposited nearly all the currency bills outlawed at the end of the deadline last year, according to people with knowledge of the matter, dealing a blow to Prime Minister Narendra Modi's drive to unearth unaccounted wealth and fight corruption.

Banks have received 14.97 trillion rupees ($220 billion) as of Dec. 30, the deadline for handing in the old bank notes, the people said, asking not to be identified citing rules for speaking with the media. The government had initially estimated about 5 trillion rupees of the 15.4 trillion rupees rendered worthless by the sudden move on Nov. 9 to remain undeclared as it may have escaped the tax net illegally, known locally as black money.


A full validation of the bank notes is a set back for Modi who had been relying on this move to burnish his administration's corruption fighting credentials and boost its popularity ahead of key state elections. The anti-corruption measure has dented economic growth and forced millions into lengthy bank queues, although it remains broadly popular.

"The prime minister had been ill advised and the government was not prepared to handle the situation," said Nilakantha Rath, honorary fellow at the Indian School of Political Economy. "The government expectation has been belied."

Private indicators published over the past week signal that the $2 trillion economy will be hurt by the cash clampdown, raising fears that a continued slowdown will strip India of its position as one of the world's fastest-growing major economies. The Nikkei India Services Purchasing Managers' Index shrank in December, the second straight month of contraction, a report showed.

The benchmark stock index ended little changed in Mumbai on Wednesday, while the rupee strengthened 0.4 percent to 68.0450 a dollar the yield on the 10-year sovereign bond fell to 6.36 percent from 6.44 percent.

Banks have disbursed about 8 trillion rupees in new currency bills, the people with knowledge of the matter said. The figures of bank notes deposited are provisional and may change, they added. Finance Ministry's spokesman D.S. Malik didn't respond to a call and a message sent to his mobile phone.

Uttar Pradesh, a bellwether state of 200 million people that sends more representatives to India's upper house than any other region, will vote in seven phases between Feb. 11 and March 8, chief election commissioner Nasim Zaidi said Wednesday. Punjab and three other states will also vote during this period to select a local government. All results will be announced March 11.

Although Modi's credibility has been dented, the jury is out on the long-term economic and political fallout. So far his public support remains strong, with some standing in lines waiting to access cash still voicing their approval of his decision to target unaccounted wealth.

 

[yolo2016]

Warning: Below comment comes to you before I get banned for absolutely no reason by the mods here, the moment I make any comment. Oddly, they give no reason or even cite any post they felt deserved a ban. My honesty is a bit of a thorn to the propagandist here

If all banned notes come into the mainstream economy, would it not mean they are now subject to substantial penalties plus taxes, being investigated for means of income, and can be accountable?

Example: I took my 10 million of 'black money' and managed to get it into the banking system

- Now I have a paper trail to explain, plus subject to criminal and civil liabilities
- Bank is flushed with more cash which helps banks tremendously ala liquidity

BTW, I like Modi's move to a digital economy and going majority cashless. Below is how we grade in the U.S.
http://www.gallup.com/poll/193649/americans-using-cash-less-compared-five-years-ago.aspx

 

[somebozo]

Modi a Chai Wala has no company of white collar elite...only a fool would think someone keeps black money in local currency...

 

[Fireurimagination]

Only 3% didn't come back, darn the estimates were 10-15%. But I would rather wait for an official statement or confirmation though

 

[somebozo]

The thing u Pakistanis are not aware of is u can't transfer Indian rupee out of the country or exchange it to another's currency more than 1.75 Crore without consent of the RBI. Only way is hawala transfer which is being clubbed as we speak. India is not Pakistan to transfer money to dollar and invest abroad at will. All the black money that goes out of India went through hawala to Dubai then invested in a shelf company in Mauritius and bought back to India under double taxation treaty. But that route has been closed in the first two years of modi gov. It's the same reason congress and other political parties have financial intelligence agents eating their heads.

Hawala works both ways..means there should be people on both ends with required cash to pay...for example if funds needs to be taken from India to Dubai...you need someone who wants to take funds from Dubai to India..matching the transaction both ways is how Hawala works..so in reality the money does not leak out of economic system..it just changes hands locally....All money changers use similar system with only difference being legality...legal channels are regulated and keep record of all transactions with sender and receiver which can be traced..Hawala operates above these regulations in private capacity...with records often kept in hand written register....

Hundi on other hand is physical transfer of money often by concealed courier or simply taking a suitcase full of cash and walking out of airport..