India rupee ban: Currency move is 'bad economics'

[Jacob Martin]

Don't you think without surprise element demonetisation makes no sense at all because those people who have links with bank employees would been alerted in advance?

"GOTCHA" is something which is used in childhood games of cops-and-robbers. In the real world, there is the minor problem of logistics. RBI needs to release the printed notes. Cash vans need to deliver them to ATMs and Bank Branches. ATM machines need to be re-caliberated. When the biggest such move in history is involved, these are no small matters.

Let us just take the small example of printing notes. If RBI had no intimation, then all it has at its disposal are the pre-existing presses. Even otherwise, opening new presses just to close them in a few months makes no sense and is prohibitively expensive. At any time, a given quantity of high quality paper and ink needs to be stocked. Again, it makes ZERO sense to stock more than slightly above present printing rates. If no additional purchases have been made by RBI for maintaining confidentiality, then there is no way even 50% of the notes can be replaced by the end of December. This is especially so because currently 100 rupee notes are mostly being handed at ATMs.

Modiji has asked for 50 days of difficulty in return for freedom from black money. And everyone has taken his word for it. The currency supply will not be balanced in 50 days. If you have another opinion, then remember it, save it till then and gloat on your being right.

 

[Mitro]

If everything is secure no loop hole left then how on earth these marwadies taking old money and making commission 30-40%
Why they are not afraid of any thing .
Selling gold for 51000 per 10 grams with old currencies
There is some thing that ordinary people don't know

 

[wiseone2]

Firstly, let me point out a very simple piece of logic - that whenever such a wildly disruptive move is made, it is for the government to win the confidence of the public by explaining the entire roadmap, and not just expect people to take these claims of "wiping out" black money at face value. An extraordinarily high number of Bhakts prowl PDF - they are yet to explain how the menace of black money will be curbed going forward. Just that Modiji has said so it must be true.

Since they won't do the needful, let me try and address it as well as I can. Keep in mind that a rollback is not the point - just that it could have been handled a lot better.

As far as possible aims go -

1. Revenue collection - The amnesty scheme that was announced in July netted the government about Rs.29,362 cr on declaration of Rs.65,250 cr. Which is not a bad amount. But currently we are talking about a conservative estimate of Rs.2,25,000 cr out of the Rs.14,00,000 cr that has been taken out of circulation to be black money. It would have made better sense to time the amnesty scheme along with demonetization, as an alternative to those with money to declare. Faced with penalty and prosecution, much of this money is unlikely to be deposited in banks now. Elaborated in point no. 4 below

2. Terror financing through counterfeiting and illicit activities - Definitely stop it in the short term. As for medium/long term, my guess is as good as anyone else's. Who can state with certainty that these new notes will not be counterfeited by our Western Neighbour as easily as they did in the past? Again - because Modiji said so?

3. Campaign financing - Only to the extent of the money currently being taken out and replaced. All other factors remain the same as before. The cycle will re-start as soon as enough notes are in circulation.

4. Corruption and tax evasion - Connected to point no. 1. The government had already made PAN mandatory for all transactions above a certain amount. Cash deposits above Rs.50,000 are also to be mentioned with PAN. Also, PAN-based reporting was mandatory for any purchase of property above Rs.50 lakh. Additionally, cumulative Bank deposits above 10 lakhs, purchase of gold etc, annual mutual funds purchase above Rs. 2 lakhs in one FMC, annual credit card bill of Rs.2 lakhs on one card, and so on. Some of the figures and entries are not updated so feel free to do so. Furthermore, any investment reflected in Form 26AS, if it is above a certain threshold, is to be reported.

The IT Department gathers all the date collected through this reporting process. This data is then sieved through the CAS (computer assisted scrutiny) system which automatically flags transactions and assessees if they cross these thresholds. Show Cause notices are supposed to be generated and sent to the concerned assessee. Except for certain things like non-filing of returns when investments and deposits are over Rs.2.5 lakhs, which happes automatically, show cause notices are issued on a pick-and-choose (or ad-hoc) basis. Now before anyone jumps to the conclusion that this seems only fair, let me explain further.

A show cause notice is typically issued in the last month before limitation expires (six months from end of Financial Year). A typical show cause notice takes anywhere between 1-2 years to be disposed off. Ever since the present government came to power, these notices are usually re-issued every year, and the final order is passed only right before the two year limit. This is then subject to further appeals, especially in case evasion is alleged, and the matter is usually settled for a far lesser amount than the initial claim, just like any fish market.

The reason is that the IT Department simply does not have the requisite manpower to fully pursue all the cases that come up before it. In this scenario, where they cannot even deal with the backlog generated in the current system, where is the scope for adding a 10-fold glut of new information of evasion and do justice to it? simply declaring that evaders will be prosecuted will achieve little, as the resource crunch means that the authorities will chose cases on an arbitrary basis, and selectively target some persons while being forced to let others go scot free. Where is the justice in that?

This is the system which the government has put in place for monitoring consumption within the economy. The indirect tax regime is functioning in a much more low tech manner, and if anyone wishes to know I will gladly explain as to why it fails to generate the revenues the government wants and causes pain to businesses, with or without GST. Clearly, they are not happy with the results, so they think they can flush it out at one go. Except that someone please explain that if the current system is inadequate because they simply don't have the manpower to implement it, then how will the avalanche generated by demonetization be handled?

As far as benami property transactions and cash payment for sale/purchase of property is concerned, it is handled as above, meaning automatic flagging of any property purchase above Rs.50 lakhs, and scrutiny if not matching with known source of income. That system is already quite efficient, as one cannot quote a lower rate for transaction than the circle value for stamp duty calculation, which are being rationalized at a decent pace. So this demonetization drive hardly adds anything new to the picture in that sense.

5. Inflation and control over macroeconomics: Arvind Panagariya, head of Niti Ayog, argues that demonetization will curb inflation. Before anyone asks me as to how I can challenge the great wisdom of Arvind Panagariya, please ask him as to which country has carried out demonetization with the ancillary aim of macroeconomic planning. Inflation in the Indian economy is reasonably under control, and any ill-effects are felt by the lower-middle class and poor on price of essentials like food, rent, healthcare, transportation, etc. Black money affects none of them. It only affects the price of real estate (a lot), gold (a bit), silk sarees and other things hoarded by those who speculate using this black money. They do not hoard onions, rice and Brufen.

This move will suck out so much money from the economy that even the short term effects will have lasting impacts. Governments/central banks try to balance money availability by change in rates, increasing pay, etc. So decreasing money availability in the economy entails increasing the lending rate, increasing CRR, etc. Can the present move work? Well, it might. Except that no one has ever tried attaching a giant hose to all the money in the system and sucked out 86% in the short term and at least 10-15% in the medium term.

Ever since this government has come to power, they have been at the job of diverting money from various avenues into government instruments. Even the Bhakts might have noticed that rules have been changed to ensure that investment either moves into equity or government instruments such as bonds, NSC, PPF etc. This move, if nothing else, will at least ensure more of that. What does the government want all this money for? For a vaguely defined goal called development.

In the next part I would like to discuss as to why demonetization will not make a dent on the existing avenues and motivations for generating black money in the system, and the immediate impact on the daily wage labour and poor of the country.

I know that several knowledgeable members will disagree with certain parts, and I fully respect their views and would like to know about the specifics of what they think. Mindless Bhakts can stay away for all I care.

my only complaint would be lack of hard data
what % of black money is businessmen evading taxes ??
what % of black money is politicians and corrupt government employees ?
what is the % of black money in 500/1000 rupee bills versus total black money ?

you could not predict the outcome without answers to some of the above questions

 

[Jacob Martin]

Selling gold for 51000 per 10 grams with old currencies

This one is easy:

http://www.firstpost.com/india/afte...-to-support-black-money-hoarders-3099910.html

 

[Tiger Genie]

There are various aspects to this debate that I can think of :

1. The revenue implication will be negligible. If government wanted to tax the black money, it ought to have launched an amnesty scheme simultaneously. It is highly doubtful that many people will risk 200% penalty and possibly further prosecution, so the real cash hoards will not emerge in the banking system.

2. One way of looking at it is that Hawala and corrupt bank officials provide enough of a loophole for laundering the money. Hawala operators' daily lives consist of inserting money into the economy/banking system without detection - this is nothing new to them, just at a different level. As for bankers, they have access to millions of inactive and AADHAR-linked bank accounts which may come in handy for laundering black money.

3. Regardless of whether or not the government/IT authorities are able to detect the hoarded money through the information mechanism that they have put in place, the fact is that such information was already being generated in bulk by the PAN-based financial reporting system introduced a while back. Any major purchase made in India above a certain value is reported to the IT authorities. They have not been able to pursue all situations where scrutiny and assessment proceedings could be initiated. Where these have happened, they take 2-3 years to complete assessment and then settle the matter for some token amount. In other words, the IT department does not have the resources required to follow up on the avalanche of information that the government is expected to gather.

4. Whatever else demonetisation achieves, it will not make a dent on the real reasons for the generation of black money - overall corruption and culture of evasion, poor regulatory awareness, tedious laws and a venal and corrupt revenue department. The revenue proceedings here are adversarial and the assessee bristles at the indignation of humiliation at the hands of revenue officials who are unsympathetic, incompetent and corrupt. Much of the black money is generated by inadvertent evasion as laws are not clear or poorly implemented.

5. As an example, the government launched an amnesty scheme recently, wherein those declaring money were assured that no further proceeding will be initiated against them. However, at least two instances of information about declarations having being leaked has happened - and in one those cases it resulted in Vigilance proceedings eventually leading to suicide by an ex-government official. If the government does not play by the rules, it cannot expect its citizens to play by the same.

6. As things stand now, an overwhelming majority of transactions in the economy are cash-based. Demonetization has worked like throwing the baby out with the bathwater. Markets are empty, and traders have neither cash nor goods. Those who think that the pain is temporary must understand that these people live hand-to-mouth - they don't eat if they don't earn. They can't wait for 50 days for things to improve. Many will be on the streets begging before that. Expect a wave of violence and suicides.

7. The tremendous pain and harassment being faced by the poor as a result of this decision will not be felt by most people who can simply swipe a credit/debit card to make payments. In an effort at secrecy, the government decided to inform none of the stake-holders in advance - the banks, ATM operators, cash transport companies. As a result, this chaos was inevitable. Poor people are expected to bear the brunt of this move so that they can have a corruption-free country, and yet this move does not address the basic issue of further generation and detection of black money at all.

* We hear the blackmoney transactions are as much as 20%, may be more. In that case even a 50% reduction of such would mean a cool 10% increase to tax base. Is that revenue neutral? Can you suggest anyother single measure that can give you a 10% increase?

* Hawala & bank employees with access to fake or theft id's is a possibility - but this does disrupt them significantly and motivates people by making cost of black unacceptably high.

* Your point about black money information was already being generated is grasping at straws. There is no information on two decades of accumulated black money. This is how you bring it out.

* Your #4 is partly right and partly horse manure. Yes Indians have become very corrupt but black money can get generated again. But to say it has been generated inadvertently is naive at best. It is sheer dishonesty. you seriously think the guys buying an apartment at 30% black doesn't know he is not supposed to do that?

* You seem to be more sympathetic to the crooks that took advantage (first of weak tax regime and then the amnesty) - you talk of two leaks. Out of how many that availed the amnesty? BTW you have it backwards: people have to be honest ...THEN their government becomes clean.

* Stop with the threats and pathos. I will fully expect some crooks and hoarders with political connection will push some naive people to start something violent.

* The reason the move works is due to surprise.

 

[911]

if Modi does not allow loopholes folks with lot of black money in 500/1000 rupee denominations have lost their wealth

the next time around when they accumulate corrupt or black money they will convert it into something that Modi cannot snatch away

Yes and hope steps are taken against this.

Firstly, let me point out a very simple piece of logic - that whenever such a wildly disruptive move is made, it is for the government to win the confidence of the public by explaining the entire roadmap, and not just expect people to take these claims of "wiping out" black money at face value. An extraordinarily high number of Bhakts prowl PDF - they are yet to explain how the menace of black money will be curbed going forward. Just that Modiji has said so it must be true.

Ok. You seem to know better than FM who has a better view of Indian economy.

1. Revenue collection - The amnesty scheme that was announced in July netted the government about Rs.29,362 cr on declaration of Rs.65,250 cr. Which is not a bad amount. But currently we are talking about a conservative estimate of Rs.2,25,000 cr out of the Rs.14,00,000 cr that has been taken out of circulation to be black money. It would have made better sense to time the amnesty scheme along with demonetization, as an alternative to those with money to declare. Faced with penalty and prosecution, much of this money is unlikely to be deposited in banks now. Elaborated in point no. 4 below

Amnesty scheme and demonetisation togethor at same time does not even make sense. Much of the money is unlikely to be deposited now? Is that a warning? Who cares, only person with black money is at loss.

2. Terror financing through counterfeiting and illicit activities - Definitely stop it in the short term. As for medium/long term, my guess is as good as anyone else's. Who can state with certainty that these new notes will not be counterfeited by our Western Neighbour as easily as they did in the past? Again - because Modiji said so?

Who says that buying weapons guarantees enemy wont attack.

3. Campaign financing - Only to the extent of the money currently being taken out and replaced. All other factors remain the same as before. The cycle will re-start as soon as enough notes are in circulation.

Just for an example, awareness of crime against women is given to every citizen, even to those who already don't do it, but only criminals are punished. Even then criminals will always be there in society, doesnt mean we should give up.

Same is with black money, legitimate people will suffer for a while, but culprits will not be spared, while the fight against corruption will continue forever.

4. Corruption and tax evasion - Connected to point no. 1. The government had already made PAN mandatory for all transactions above a certain amount. Cash deposits above Rs.50,000 are also to be mentioned with PAN. Also, PAN-based reporting was mandatory for any purchase of property above Rs.50 lakh. Additionally, cumulative Bank deposits above 10 lakhs, purchase of gold etc, annual mutual funds purchase above Rs. 2 lakhs in one FMC, annual credit card bill of Rs.2 lakhs on one card, and so on. Some of the figures and entries are not updated so feel free to do so. Furthermore, any investment reflected in Form 26AS, if it is above a certain threshold, is to be reported.

The IT Department gathers all the date collected through this reporting process. This data is then sieved through the CAS (computer assisted scrutiny) system which automatically flags transactions and assessees if they cross these thresholds. Show Cause notices are supposed to be generated and sent to the concerned assessee. Except for certain things like non-filing of returns when investments and deposits are over Rs.2.5 lakhs, which happes automatically, show cause notices are issued on a pick-and-choose (or ad-hoc) basis. Now before anyone jumps to the conclusion that this seems only fair, let me explain further.

A show cause notice is typically issued in the last month before limitation expires (six months from end of Financial Year). A typical show cause notice takes anywhere between 1-2 years to be disposed off. Ever since the present government came to power, these notices are usually re-issued every year, and the final order is passed only right before the two year limit. This is then subject to further appeals, especially in case evasion is alleged, and the matter is usually settled for a far lesser amount than the initial claim, just like any fish market.

It seems as if you are narrating your own case against tax evasion in past. Demonetisation has nothing to do with this at all.

The reason is that the IT Department simply does not have the requisite manpower to fully pursue all the cases that come up before it. In this scenario, where they cannot even deal with the backlog generated in the current system, where is the scope for adding a 10-fold glut of new information of evasion and do justice to it? simply declaring that evaders will be prosecuted will achieve little, as the resource crunch means that the authorities will chose cases on an arbitrary basis, and selectively target some persons while being forced to let others go scot free. Where is the justice in that?

This is the system which the government has put in place for monitoring consumption within the economy. The indirect tax regime is functioning in a much more low tech manner, and if anyone wishes to know I will gladly explain as to why it fails to generate the revenues the government wants and causes pain to businesses, with or without GST. Clearly, they are not happy with the results, so they think they can flush it out at one go. Except that someone please explain that if the current system is inadequate because they simply don't have the manpower to implement it, then how will the avalanche generated by demonetization be handled?

The revenue generated by this step and when more people im future come under tax accordance with their real income, can in turn be used to put more recources/manpower for this task.

5. Inflation and control over macroeconomics: Arvind Panagariya, head of Niti Ayog, argues that demonetization will curb inflation. Before anyone asks me as to how I can challenge the great wisdom of Arvind Panagariya, please ask him as to which country has carried out demonetization with the ancillary aim of macroeconomic planning. Inflation in the Indian economy is reasonably under control, and any ill-effects are felt by the lower-middle class and poor on price of essentials like food, rent, healthcare, transportation, etc. Black money affects none of them. It only affects the price of real estate (a lot), gold (a bit), silk sarees and other things hoarded by those who speculate using this black money. They do not hoard onions, rice and Brufen.

You are right, black money will only effect those things which attracted black money hoarders, that is property, gold etc. Prices of these things will go down, and so will the purchasing power of those corrupt, reducing the gap between rich and poor. And you certainly dont care about poor.

In past according to you, high inflation didnt make any sense due to people not being able to invest, but now low inflation dont make any sense. You maybe know better.

Precisely. For Indians it does not make sense to invest in term deposits because inflation rates + taxes means that actual return is negligible. But if a country has 2% inflation, Indian term deposits are attractive and risk free investment. Central Banks should allow investors to put money in the banking system so that this interest arbitrage can be availed.

Bhakts can stay away for all I care.

Supporting this move does not make one a bhakt. But are you sure you are not one of them?

So it is all right for PAkistan to be a non-secular, Islamic state, with the Constitution specifically discriminating against Ahmediyyas and reserving the position of head of state, etc, for Muslims? But if ONE Indian politician makes the mistake of saying something like this, the knives are out? Pakistanis are proud of the fact that Pakistan is for Muslims ONLY, yet India has to uphold standards of secularism that Pakistanis themselves have no respect for. Take a hike.

https://defence.pk/threads/hindustan-is-for-hindus-says-assam-governor.409865/

How can you claim that 99% of Muslims don't support ISIS when offshoots of that ideology permeate radical organizations in the entire Islamic world?

https://defence.pk/threads/queen-ra...eres-nothing-islamic-about-them.408929/page-5

You have clearly not ready any of these links:


Half these pieces are from rabid Islamist blogs, the others are from conservative Christian websites. The only relevant ones talk about mistakes and outdated views, and nothing about teaching virulent hatred towards Hindus, Christians, Jews, Indians, Ahmediyyas, etc., like Pakistani text-books do. Show me where the articles from BBC, or the Hindu, preach hatred for minorities and support for jihadi enterprise, like Pakistani textbooks do?


Nice try though.

Dehatis are anyday better than jihadis.

https://defence.pk/threads/pakistan...e-age-for-harboring-terroroists.409499/page-7

Amazing. The article is full of instances where the author was discriminated against for being a Hindu. His loyalty questioned from school itself, having to show ID proof to prove citizenship, etc. Yet, the conclusion that he draws from all this is that he is the "star" of Pakistan. In India, if a Muslim wrote of such an experience, there would be universal outrage and a fresh round of "Award Wapsi" protesting against the treatment of minorities.

https://defence.pk/threads/my-journey-as-a-pakistani-hindu.414138/

Only BCCI can do it to WICB!!!


But on a serious note, while I agree that they should pay compensation on ground of equity, I also don't see the point of playing them. Hafeez Sayeed is still at large and so is Dawood.

https://defence.pk/threads/india-pakistan-series-unlikely-to-go-ahead.410759/

Don't worry. All those videos of hateful propaganda against "Hindu" India are still there, just that their visibility is a bit less now that Pakistanis find it difficult to get hold of their staple diet. And the "ghar mein ghusske mareenge" video was quite a rage among lumpen elements of society for quite a while. Only later did people realize that it was not some psychotic jihadi's dream, but a mainstream Pakistani news channel.

Arnab Goswami has not been caught committing forgery or been a suspect in the killing of his own mother. Such lovely samples are the exclusive preserve of Pakistani media.

https://defence.pk/threads/social-media-new-war-against-pakistan.409642/

Trust in Indian media has been damaged irretrievably since the Radia tapes. Ironically, people like Barkha Dutt, whose integrity was shattered by that episode, still get prime-time slots in NDTV. That seriously brings the English media into question. I make it a point to not watch NDTV just because of that.

Ergo the lack of faith. Clearly they (and you) do not know what the word "fascist" meant in practice. The only country today that comes close to the classic German/Italian/Spanish model are Russia and Turkey (and here I am not passing a judgment on them in any way). India is a chaotic land with pockets of tolerance as well as intolerance. It is very nice and convenient, but extremely dishonest, to attack India at all times for being a country without a collective will and common direction but suddenly change the tune while talking about the BJP/Sangh Parivar.

As for the photos, in the first one, we can clearly see posters against 84 Sikh Riots as well. So it was a congregation of malcontents, not Modi-specific. In the second one, we see two persons in a much larger group carrying Anti-Modi banners, while you can also see banners supporting Digital India. Again, a mixed crowd of people, with at best a few (two?) Modi-baiters. You make it sound as if the entire crowd was an anti-Modi protest.

You seem to have a short memory. The Radia tapes that exposed the media-polito nexus made its appearance under UPA-II. Journos were exposed trying to swing deals involving UPA ministers.


Your insinuation that the current governemt functions in the same manner is actually rumour mongering and unsubstantial BS, and of the highest order, at that.

https://defence.pk/threads/why-india-no-longer-trusts-anti-modi-media.411103/

"GOTCHA" is something which is used in childhood games of cops-and-robbers. In the real world, there is the minor problem of logistics. RBI needs to release the printed notes. Cash vans need to deliver them to ATMs and Bank Branches. ATM machines need to be re-caliberated. When the biggest such move in history is involved, these are no small matters.

Let us just take the small example of printing notes. If RBI had no intimation, then all it has at its disposal are the pre-existing presses. Even otherwise, opening new presses just to close them in a few months makes no sense and is prohibitively expensive. At any time, a given quantity of high quality paper and ink needs to be stocked. Again, it makes ZERO sense to stock more than slightly above present printing rates. If no additional purchases have been made by RBI for maintaining confidentiality, then there is no way even 50% of the notes can be replaced by the end of December. This is especially so because currently 100 rupee notes are mostly being handed at ATMs.

Modiji has asked for 50 days of difficulty in return for freedom from black money. And everyone has taken his word for it. The currency supply will not be balanced in 50 days. If you have another opinion, then remember it, save it till then and gloat on your being right.

This is not the rigt place for what you want. Go to Didi, Mayawati, Mulayam and AK and do protest at Jantar Mantar. Except how corruption is not possible to eradicate or how terrorism wont stop or how daily lives will suffer due to this you havnt talk anything else. Actually neither you care about economy of this country nor about poor people.

 

[randomradio]

As far as possible aims go -

1. Revenue collection - The amnesty scheme that was announced in July netted the government about Rs.29,362 cr on declaration of Rs.65,250 cr. Which is not a bad amount. But currently we are talking about a conservative estimate of Rs.2,25,000 cr out of the Rs.14,00,000 cr that has been taken out of circulation to be black money. It would have made better sense to time the amnesty scheme along with demonetization, as an alternative to those with money to declare. Faced with penalty and prosecution, much of this money is unlikely to be deposited in banks now. Elaborated in point no. 4 below

The idea is to punish them badly, so they don't do it again, not slightly inconvenience them. If what you say is done, then the rich won't fear demonetization. They will just pay an extra 15%, consider it a loss and life will continue for them.

So the next time the govt gives an ultimatum to black money hoarders, they will come running to banks with just 1 warning.

2. Terror financing through counterfeiting and illicit activities - Definitely stop it in the short term. As for medium/long term, my guess is as good as anyone else's. Who can state with certainty that these new notes will not be counterfeited by our Western Neighbour as easily as they did in the past? Again - because Modiji said so?

No, but the process will be slow. And in Modi's second term, he will demonetize everything above 100. And cash transactions will be scrapped below 2 lakhs. The country will go cashless. It's part of their Vision 2025.

3. Campaign financing - Only to the extent of the money currently being taken out and replaced. All other factors remain the same as before. The cycle will re-start as soon as enough notes are in circulation.

For many people, the effect has been as bad as 60-70%, maybe more, of their purchasing power. It will take them years to recoup, particularly the politicians.

4. Corruption and tax evasion - Connected to point no. 1. The government had already made PAN mandatory for all transactions above a certain amount. Cash deposits above Rs.50,000 are also to be mentioned with PAN. Also, PAN-based reporting was mandatory for any purchase of property above Rs.50 lakh. Additionally, cumulative Bank deposits above 10 lakhs, purchase of gold etc, annual mutual funds purchase above Rs. 2 lakhs in one FMC, annual credit card bill of Rs.2 lakhs on one card, and so on. Some of the figures and entries are not updated so feel free to do so. Furthermore, any investment reflected in Form 26AS, if it is above a certain threshold, is to be reported.

The govt does not have the manpower to scrutinize so many accounts. And tax officials can be bribed too.

So Modi removed the middleman.

This is the system which the government has put in place for monitoring consumption within the economy. The indirect tax regime is functioning in a much more low tech manner, and if anyone wishes to know I will gladly explain as to why it fails to generate the revenues the government wants and causes pain to businesses, with or without GST. Clearly, they are not happy with the results, so they think they can flush it out at one go. Except that someone please explain that if the current system is inadequate because they simply don't have the manpower to implement it, then how will the avalanche generated by demonetization be handled?

It's simple. The hoarders have gone broke. There's nothing more to it.

And the banks will be in the black.

Ever since this government has come to power, they have been at the job of diverting money from various avenues into government instruments. Even the Bhakts might have noticed that rules have been changed to ensure that investment either moves into equity or government instruments such as bonds, NSC, PPF etc. This move, if nothing else, will at least ensure more of that. What does the government want all this money for? For a vaguely defined goal called development.

There is a reason for this. Military-walas are discussing this on other forums. We will know for sure depending on what the strike corps do. There is a potential for war.

 

[Jacob Martin]

Yes and hope steps are taken against this.


Ok. You seem to know better than FM who has a better view of Indian economy.


Amnesty scheme and demonetisation togethor at same time does not even make sense. Much of the money is unlikely to be deposited now? Is that a warning? Who cares, only person with black money is at loss.


Who says that buying weapons guarantees enemy wont attack.


Just for an example, awareness of crime against women is given to every citizen, even to those who already don't do it, but only criminals are punished. Even then criminals will always be there in society, doesnt mean we should give up.

Same is with black money, legitimate people will suffer for a while, but culprits will not be spared, while the fight against corruption will continue forever.


It seems as if you are narrating your own case against tax evasion in past. Demonetisation has nothing to do with this at all.


The revenue generated by this step and when more people im future come under tax accordance with their real income, can in turn be used to put more recources/manpower for this task.

You are right, black money will only effect those things which attracted black money hoarders, that is property, gold etc. Prices of these things will go down, and so will the purchasing power of those corrupt, reducing the gap between rich and poor. And you certainly dont care about poor.

In past according to you, high inflation didnt make any sense due to people not being able to invest, but now low inflation dont make any sense. You maybe know better.



Supporting this move does not make one a bhakt. But are you sure you are not one of them?



https://defence.pk/threads/hindustan-is-for-hindus-says-assam-governor.409865/



https://defence.pk/threads/queen-ra...eres-nothing-islamic-about-them.408929/page-5





https://defence.pk/threads/pakistan...e-age-for-harboring-terroroists.409499/page-7



https://defence.pk/threads/my-journey-as-a-pakistani-hindu.414138/



https://defence.pk/threads/india-pakistan-series-unlikely-to-go-ahead.410759/





https://defence.pk/threads/social-media-new-war-against-pakistan.409642/












https://defence.pk/threads/why-india-no-longer-trusts-anti-modi-media.411103/

This is not the rigt place for what you want. Go to Didi, Mayawati, Mulayam and AK and do protest at Jantar Mantar. Except how corruption is not possible to eradicate or how terrorism wont stop or how daily lives will suffer due to this you havnt talk anything else. Actually neither you care about economy of this country nor about poor people.

All your arguments are nothing but juvenile first principle clap-trap. Anyone can be a smart-*** by posting what they think to be clever one-liners shorn of substance. Not a mention of procedures, monetary policy, logistics - nothing. Just some tilak-dhaari fanaticism. If empty sloganeering could alleviate poverty, fight corruption and improve the lives of citizens, then India would be the richest country in the world by now. Bhakti is no substitute for knowledge and competence.

Read my responses to other posters who know more and are well-intentioned than you are. And learn something if you can.

* We hear the blackmoney transactions are as much as 20%, may be more. In that case even a 50% reduction of such would mean a cool 10% increase to tax base. Is that revenue neutral? Can you suggest anyother single measure that can give you a 10% increase?

* Hawala & bank employees with access to fake or theft id's is a possibility - but this does disrupt them significantly and motivates people by making cost of black unacceptably high.

* Your point about black money information was already being generated is grasping at straws. There is no information on two decades of accumulated black money. This is how you bring it out.

* Your #4 is partly right and partly horse manure. Yes Indians have become very corrupt but black money can get generated again. But to say it has been generated inadvertently is naive at best. It is sheer dishonesty. you seriously think the guys buying an apartment at 30% black doesn't know he is not supposed to do that?

* You seem to be more sympathetic to the crooks that took advantage (first of weak tax regime and then the amnesty) - you talk of two leaks. Out of how many that availed the amnesty? BTW you have it backwards: people have to be honest ...THEN their government becomes clean.

* Stop with the threats and pathos. I will fully expect some crooks and hoarders with political connection will push some naive people to start something violent.

* The reason the move works is due to surprise.

I am in the middle of a conversation on these issues, so am avoiding multiple replies. Please read and comment on my other replies.

There are two points which I will not cover in my replies so let me address those. As for your point of revenue neutrality - assuming your figures of 20% are correct. When I spoke of negligible revenue impact, I was referring to taxing the black money in the system right now. What you are talking about is taxing money going forward. Two very different things. Considering the costs involved in the demonetization move - logistical costs, replacement costs, economic chaos in the short term - the revenue benefits would be maximized if those with the black money had any incentive to declare. Right now the choice is between the money turning worthless and facing penalty and prosecution. Most of those with substantial hoarding will chose the former - not smart for raising money.

Another point I would like to ask of you is are you a businessman in India? Do you deal with revenue/regulatory authorities on a regular basis? If not, then you should consider the option of not making sweeping statements which are irrelevant moral sermons. As to the point of inadvertent black money generation, I will address it in another post so feel free to read it.

Lastly, bare-minimum analysis which is more of the nature of personal opinion is rather tedious for the person who is trying to back up his arguments with whatever knowledge he has. You may not agree with everything I have to say, but surely you will understand that it is much easier to point holes in someone's carefully constructed arguments with a mixture of "you are wrong because I say so" and universal moral homilies learnt in the 5th standard.

 

[911]

All your arguments are nothing but juvenile first principle clap-trap. Anyone can be a smart-*** by posting what they think to be clever one-liners shorn of substance. Not a mention of procedures, monetary policy, logistics - nothing. Just some tilak-dhaari fanaticism. If empty sloganeering could alleviate poverty, fight corruption and improve the lives of citizens, then India would be the richest country in the world by now. Bhakti is no substitute for knowledge and competence.

Read my responses to other posters who know more and are well-intentioned than you are. And learn something if you can.



I am in the middle of a conversation on these issues, so am avoiding multiple replies. Please read and comment on my other replies.

There are two points which I will not cover in my replies so let me address those. As for your point of revenue neutrality - assuming your figures of 20% are correct. When I spoke of negligible revenue impact, I was referring to taxing the black money in the system right now. What you are talking about is taxing money going forward. Two very different things. Considering the costs involved in the demonetization move - logistical costs, replacement costs, economic chaos in the short term - the revenue benefits would be maximized if those with the black money had any incentive to declare. Right now the choice is between the money turning worthless and facing penalty and prosecution. Most of those with substantial hoarding will chose the former - not smart for raising money.

Another point I would like to ask of you is are you a businessman in India? Do you deal with revenue/regulatory authorities on a regular basis? If not, then you should consider the option of not making sweeping statements which are irrelevant moral sermons. As to the point of inadvertent black money generation, I will address it in another post so feel free to read it.

Lastly, bare-minimum analysis which is more of the nature of personal opinion is rather tedious for the person who is trying to back up his arguments with whatever knowledge he has. You may not agree with everything I have to say, but surely you will understand that it is much easier to point holes in someone's carefully constructed arguments with a mixture of "you are wrong because I say so" and universal moral homilies learnt in the 5th standard.

Hahaha tilak dhari fanaticism ))) nice. Do you even realise that the procedural garbage you are posting is known to everyone and that the step taken by government is against black money already in circulation, not that which will potentially go in circulation in future. Reforming of existing laws, removal of loopholes and flaws, and to increase the efficiency was not the purpose of demonetisation. There will be hopefully other steps taken for them.

 

[egodoc222]

Bhakt alert.

And you stinky aaptard!!

Hint - not real name.

Our country may survive people like you with their brain dead hero-worship, but our democracy is unlikely to.

May be, may be not but one thing is for sure...my country surely survives without fake evangelists like you!!

Of Course .It will affect the economy but that is just not that serious .
Deflation would be one the we are going to face initially .Govt can counter that using good interest rate.

Exactly, the benefits far out weigh the immediate hardships....last time I checked that was the prerequisite for any decision making!!
Just imagine 1.2 billion merged into a single market by universal banking and common taxation!! that would do wonders to the economy!! people crying are either short sighted or have vested interests!!

 

[911]

All the retards must speak out their exact problem with demonetisation in unison.

Is people suffering for few days is their real concern? or
That demonetisation cant discourage tax evasion? or
Are they accusing that BJP is scaming in this? or
They want more time but are ok with this ?

 

[randomradio]

Right now the choice is between the money turning worthless and facing penalty and prosecution. Most of those with substantial hoarding will chose the former - not smart for raising money.

RBI will reprint the difference and lend that.

So what you are saying is if a businessman has 100INR in black, he can declare that and pay 45% tax as before. So the govt can get at least 45% of the declared money as taxes. However Modi is not aiming for that.

What's happening now is if a person declares 100INR, he will only get back 10INR after taxes. If he doesn't declare and instead burns the notes, which the majority will do, then RBI will reprint that 100INR, which will become available as loans from RBI.

It is also possible that some amount of that reprinted money will go to the govt at no interest or less interest.

The country does not make a loss. The hoarders completely lose their money.

 

[PlugnPlay]

Dear Bhakt - Modi ka naam lo aur so jao.

Jesus ka naam lo .... aur Modi hai hai karo.

a bhakt, I am sure that fitness is the last thing on your mind. No doubt while I was running 21k in under two hours, you were gorging on Jalebis and Samosa. Check whether you can see anything below or does your protruding belly block the view?

Jesus freaks usually run after choir boys to rape and practice paedophilia. So go easy on running 21 km behind children and then pretend all is well by "confession". Stop fantasising about what lies below my belly.

First read what the logical fallacy of argument from authority is.
As for Raghuram Rajan's proposal, rest assured that he did not propose that a surprise be sprung on the unsuspecting citizenry, economy, banks, ATM operators and cash movers. If you think otherwise, why don't you show the proof that is what he recommended?

Give such advice to your lord and master Pappu.

 

[duhastmish]

If everything is secure no loop hole left then how on earth these marwadies taking old money and making commission 30-40%
Why they are not afraid of any thing .
Selling gold for 51000 per 10 grams with old currencies
There is some thing that ordinary people don't know

Ordinary people you mean bhakts?

Questioning is out of their dictionary. You dare questions and they will pull u to their level and beat with their stupidity.

Currency is getting sold for 50% how can this be good. Gold is sold for 65000 per 10 gram. Dollars for 110 rupees. Property are sold at dirt.
People are selling their small industries and big guns are making money. Look at their market.

This will create a mess for agriculture and small industries. We support our pm but this is unplanned. People are scared so market is down for everything for atleast a year. Even the fair one are scared that they will be unnecessarily harassed.

FDI is gone and banks have money to give bad loans to Malays and Ambani.

Let's see what happens. We are not worried for current situation but the future business.

 

[911]

RBI will reprint the difference and lend that.

He is a tool.

The country does not make a loss. The hoarders completely lose their money.

@Jacob Martin Hope you understand this time )))