India rupee ban: Currency move is 'bad economics'

[Kaniska]

India rupee ban: Currency move is 'bad economics'

Soutik BiswasIndia correspondent

• 3 hours ago
  
• From the sectionIndia

Image copyrightAFP
Image captionIndia scrapped 500 ($7.6) and 1,000 rupee notes to crack down on corruption
India's dramatic move to scrap 500 ($7.6) and 1,000 rupee notes is poor economics, a leading economist says.

Kaushik Basu, the former chief economist for the World Bank, says the "collateral damage" is likely to outstrip its benefits.

The overnight ban on the notes last week was intended to crack down on corruption and so-called "black money" or illegal cash holdings.

But it sparked scenes of chaos outside banks and ATMs.

Low-income Indians, traders and ordinary savers who rely on the cash economy have been badly hit with hordes thronging banks to deposit expired money and withdraw lower denominations. As the anger mounted, the government raised limits on cash withdrawals on Sunday.

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Media captionOld 500 and 1,000 rupee notes are no longer in circulation
But some economists say the move will have a limited impact as people will simply begin to accumulate black money in the new currency as soon as that becomes available.

The government hopes this will bring cash worth billions of dollars in unaccounted wealth back into the economy. The two notes accounted for more than four fifths of the currency in circulation.

Prof Basu, who now teaches at New York's Cornell University, says India's Goods and Services tax, was "good economics, but demonetisation is not".

"Its economics is complex and the collateral damage is likely to far outstrip the benefits," he says.

Image copyrightAFP
Image captionKaushik Basu says the move could hurt India's economy
What Prof Basu, who was chief economic adviser to the previous Congress government, means is that this "demonetisation" just witnessed in India is at best, a one-time flushing out of the system and the return of black money is likely if not inevitable.

Many economists say the costs of such a one-time "flush" will be huge.

They say hundreds of thousands of ordinary people (including farmers who do not even have back accounts) who hold cash but not black money will get caught out and the fear of harassment by officials could trap them in a bureaucratic net they don't know how to deal with.

So it is possible that all this achieves is a sudden curtailment in the total money supply, effectively a kind of contraction of the economy.

'Helicopter drop'
Economists have long talked about "helicopter drop" of currency - printing large sums of money and distributing it to the public in order to stimulate the economy.

India's decision to scrap high denomination notes is simply the reverse and according to economist Prabhat Patnaik the government's move "betrays a lack of understanding of capitalism".

"Typically, what happens in capitalism in a situation like this is that there would be a new business opening up about how to change old currency notes into new ones... A whole range of people would come up who will say you give us 1000 rupees and we will give you 800 rupees or 700 rupees or whatever. Consequently, instead of curbing black business it will actually give rise to the proliferation of black business," he told The Wire news site.

Image copyrightAFP
Image captionLong queues at many banks were making it difficult to make withdrawals
But not all experts agree that it is such a risky move.

"India now operates under a monetary policy regime known as inflation targeting. If a portion of the stock of currency in circulation, consisting of currency and demand deposits gets 'burned', metaphorically or literally, the Reserve Bank of India, the central bank, can in principle fully offset this through what economists call 'open market operations'," Vivek Dehejia says.

"These involve purchasing bonds from the markets and injecting money (and therefore liquidity) into the markets in return. This is standard operating procedure for central banks."

To put it more simply: suppose a warehouse of cash owned by someone goes up in flames and the money stock drops. The central bank, economists say, can augment the money stock.

Image copyrightREUTERS
Image captionIndia is a predominantly cash driven economy
The loser is the individual whose money went up in flames - in other words, by analogy, someone holding illicit unaccounted cash that cannot be converted into new currency or deposited.

"There will be short run adjustment costs as the old notes are replaced by new ones, but I see no medium to long term impacts on growth, inflation or other pertinent macroeconomic variables," says Prof Dehejia.thi

"The gains will be a one-time tax on black money and a possible disincentive for future black money accumulation, in the event that there is a prospect for future demonetisations."

He, for one, is confident this move will achieve what it needs without damaging the economy.

http://www.bbc.com/news/world-asia-india-37970965

Every policy has some negitivities. So does for this one too. There will be some pain initially but its its long term impact will be good.

 

[Ajayk]

Every policy has some negitivities. So does for this one too. There will be some pain initially but its its long term impact will be good.

There are no negatives with this policy.

Difficulty in the implementation - sure
In fact, with what they had to do, I doubt they can could have planned or done it any better.

The long term positives of this action are way too many.

Just one I can see already, is that the small and even road side vege and food sellers are aware of cashless transactions and are adapting. I can bet a year down the line, this will be a big and safe way of payments.

 

[Jacob Martin]

Such 'incentive' as you want was offered till September as I understand. You want another?

No I am not a 'regular' basis dealer with Indian authorities. But what part of what I said strikes you as sweeping or irrelevant? I am not here for a 1 on 1 argument with you, but when I notice you or anyone else making blatantly erroneous claims and allegations I will respond if I can. Isn't that the purpose of a discussion thread? Surely you don't think you are an expert to come espouse your wisdom and everyone else just reads and accept it.



but you assumed anyone who favors this move is a 'bhakt'. May be you didn't mean to.

As for your point about incentives, I will address it in a longer post so bear with me.

About making sweeping statements - this is how it goes. Anyone who does not deal with politicians, officials and regulatory authorities in India will simply not know the underlying reasons as to why the human interface in governance sustains corruption. Any opinion on the subject not backed by this practical experience is of dubious value. As first year students in university we were cautioned against making what we thought to be very smart first principle arguments. First principle arguments are very easy to make, while it takes atleast a decade in work to really understand how things work - and also relying on reading something apart from things loaded with confirmation bias.

Tell me something - what are your arguments apart from being reactionary? I write something, you think about it and point a flaw based on your bias? Are you framing the debate? If we were to trade places, would you be in a position to even envisage all relevant points? Any child can listen and then be smart in reaction.

I never said that people take my opinion at face value - you are assuming I meant that. All I said was kindly refrain from generalizations and moral sermons. They are not the same thing.

As for whether someone is a bhakt, the devil is in the detail. It is not their position, but the arguments they forward that give them away.

Good for ya!

We all get that you are a bit better off and the contempt for those poor wage earners clearly reflects in your posts but somehow you are the only one who's a bit sour about the whole decision (with all that rhetoric in every post)

I mean you are in Germany and you ain't poor, so good or bad it doesn't really effect you!

Contempt for poor wage earners involves not understanding that most of them are wasting entire days while waiting in line to exchange/deposit such a small amount that they will need to repeat the cycle the very next day. Contempt for such people also involves not understanding that 50 days without money supply stops procurement and sale, and freezes their lives - something they cannot afford. Contempt for the ordinary person involves knowing that a woman, has stood in line from 6 in the morning while the Banks have not even opened at 10, all so that she can withdraw an amount which will not cover any part of her daughter's cash-based wedding. Contempt is not understanding that she and those like her are not "hoarders", but people who are crushed under this diktat. Contempt is looking at all this and assuming that as long as I pull through, others must be as fortunate, and anyone who complains is either corrupt or a sore loser.

 

[randomradio]

As for your point about incentives, I will address it in a longer post so bear with me.

About making sweeping statements - this is how it goes. Anyone who does not deal with politicians, officials and regulatory authorities in India will simply not know the underlying reasons as to why the human interface in governance sustains corruption. Any opinion on the subject not backed by this practical experience is of dubious value. As first year students in university we were cautioned against making what we thought to be very smart first principle arguments. First principle arguments are very easy to make, while it takes atleast a decade in work to really understand how things work - and also relying on reading something apart from things loaded with confirmation bias.

Tell me something - what are your arguments apart from being reactionary? I write something, you think about it and point a flaw based on your bias? Are you framing the debate? If we were to trade places, would you be in a position to even envisage all relevant points? Any child can listen and then be smart in reaction.

I never said that people take my opinion at face value - you are assuming I meant that. All I said was kindly refrain from generalizations and moral sermons. They are not the same thing.

As for whether someone is a bhakt, the devil is in the detail. It is not their position, but the arguments they forward that give them away.



Contempt for poor wage earners involves not understanding that most of them are wasting entire days while waiting in line to exchange/deposit such a small amount that they will need to repeat the cycle the very next day. Contempt for such people also involves not understanding that 50 days without money supply stops procurement and sale, and freezes their lives - something they cannot afford. Contempt for the ordinary person involves knowing that a woman, has stood in line from 6 in the morning while the Banks have not even opened at 10, all so that she can withdraw an amount which will not cover any part of her daughter's cash-based wedding. Contempt is not understanding that she and those like her are not "hoarders", but people who are crushed under this diktat. Contempt is looking at all this and assuming that as long as I pull through, others must be as fortunate, and anyone who complains is either corrupt or a sore loser.

Please tell me which poor wage earner gets paid with a 500 rupees note?

I have seen how poor wage earners get paid because my family and friends employ them. We keep a large amount of small notes in cash. I've seen my uncle bring home significant amounts of cash in 50s and less to pay daily wage earners. My friend is a builder, he said his business won't run if he doesn't pay them properly. I've seen huge deposits of such notes in his house.

You are knowledgeable about such matters, so please don't be so patronizing. No daily wage earner gets paid with a 500 or 1000 note. They are paid in small notes. And employers keep a buffer of a month of more in small notes, that's only a few lakhs even for the biggest employers, which is peanuts for them.

The daily wage right now is a little above 200. Employers don't give them 500 notes and take change from them. In fact the employers with black money are paying them a month's wages or more in advance, many times paying them extra also, which the labourers are exchanging for small notes in banks. Yeah, even they have accounts or are using their friends's accounts.

This talk of inconvenience is non-existent except for standing in a line. The lines have become smaller than they were the first day. So by next week, things will go back to normal.

 

[Jacob Martin]

It is not that the government is ill-intentioned, just that good intentions cannot make up for sound policy.

Here is the list of reasons as to why demonetization will not work qua black money as people are being made to believe:

(The point here is that the gains will be insignificant, compared to the disruption, and therefore the euphoria is unjustified. Silly arguments like so-you-mean-one-should-do-nothing make no sense here.)

1. Cash is a very small percentage of illegal holdings. Only those who don’t have access to sophisticated financial advice are stuck with too much cash. Cash recovery during IT raids from 2011-12 onwards has been around 6% of total recovery, and if you include non-seizure recovery, this percentage will become much lesser. So even at the high end, cash makes up only 6-7% of illegal holdings. The reasons are manifold:

- It makes sense to take the risk of injecting the money into the formal financial system. Inflation will otherwise eat away the value of the money. So people make bank deposits, FDs, RDs, buy MFs, bonds, insurance products, savings products, shares, because they want returns from their money. Let me give a real example. It is not hard to find people who have an annual declared income of Rs.7-9 lakhs, and yet have financial assets worth Rs.1-2 crores. Doesn’t add up. And yet, there are no consequences. That means the financial monitoring system is half-baked. Explained in point 2.

- Real estate investments are the most favoured way of channelling black money for a vast majority. Again, people with less than Rs.10 lakhs income with 3-4 properties worth a few crores. Cash is not presently involved in the picture at all.

- Gold and foreign exchange – self-explanatory.

- Overseas assets – Everyone knows of off-shore bank accounts in tax havens. What people don’t realize is that Indian politicians own mines in Liberia and banks and hotels in Singapore. Money in banks is the tip of the iceberg. Again, demonetization nets NOTHING.

- Investing black money in legitimate businesses, even loss-making ones, is remarkably easy. From real estate to restaurants, you name the industry and black money has financed a significant part of it.

- Handling and storing cash is not as simple as people who have not handled large volumes think. Yes, some people are forced to hoard cash but most people who make windfall gains in property transactions and bribes cannot wait to get rid of the cash. It is risky to handle.

- Informal negotiable instruments are the traditional backbone of the trading community in India. Hundi (IOU) is the de-facto bill of exchange for them. At any given point of time, all such instruments need not represent the total amount of cash at their disposal. So they can simply continue to trade in hundis, while biding their time and making payments if and when a hundi is presented or becomes due. These people have been doing business this way for hundreds of years and are not out of business because a bunch of college/office-going keyboard warriors declare so. In fact, they have found a very ingenious use for the old notes which I will explain in point 3.

- Normal people cannot understand the ingenious way in which the super-rich have already invested their fortune. Persian rugs, diamond watches, paintings by masters – the cumulative value of these is staggering. Sorry they don’t care about your demonetization glee.

2. Existing monitoring framework is evolving, and if allowed to would have done a better job in the medium term. The things which ultimately make a profound impact on the financial system do not involve public debate. PAN-based and mandatory reporting of large transactions is the system which the government is currently using and it works – as much as it is allowed to. Now take the advantage of investments – Form 26AS has now covered all bank deposits, but for mutual funds and bonds, there are separate limits of 2-5 lakhs for reporting. This means that interest paid on bank deposits is now fully covered and monitored.

There is a parameter-based system that sorts such information in the order of priority and then action may or may not be taken. The people at NIC (National Informatics Centre) who designed this system are really intelligent and hardworking, and if the government gave them full leeway to fine-tune the algorithm, along with adequate resources and oversight to the revenue department, the problem would have been mitigated much better. Instead it would rather invest in cheap parlour tricks.

Real estate transactions have, to a certain extent, been rationalized because the mandatory reporting system covers any sale/purchase of property above Rs.30 lakh. The scope for under-valuing property both to pay by black money and to evade stamp duty is much less now that the property value is deemed to be the rate for registration. Although in some places, especially recently converted agricultural land, this value is too less, in most urban centres the Municipal Corporation fixes reasonably accurate rates. But for those who think that the black money component is only paid in cash – I have some news. Since both depositing and withdrawing large amounts of cash has been made risky, a significant amount of black money is paid by cheque or demand draft. It is as simple as that. Again, the systemic failure has nothing to do with cash.

The government could easily modify the system to cover mutual funds, insurance, bonds, post-office savings, etc. So why doesn’t it do so? And if you think that the amount of black money invested in this way is small, understand that the total value of mutual funds under management in India is only marginally less than all the money sucked out due to demonetization. Now picture the rest for ULIPs, etc. You will get the point.

This would net a far greater amount of revenue, control over the economy, and for those interested in gleeful retribution on the wealthy – even punishment.

And now, answer a simple question – what is more important – that those with black money be punished for hoarding, or for investing, or not at all? Seems their money forms a large portion of the formal financial system, which funds infrastructure, businesses, creates jobs, and so on.

To be continued...

 

[randomradio]

It is not that the government is ill-intentioned, just that good intentions cannot make up for sound policy.

Here is the list of reasons as to why demonetization will not work qua black money as people are being made to believe:

(The point here is that the gains will be insignificant, compared to the disruption, and therefore the euphoria is unjustified. Silly arguments like so-you-mean-one-should-do-nothing make no sense here.)

1. Cash is a very small percentage of illegal holdings. Only those who don’t have access to sophisticated financial advice are stuck with too much cash. Cash recovery during IT raids from 2011-12 onwards has been around 6% of total recovery, and if you include non-seizure recovery, this percentage will become much lesser. So even at the high end, cash makes up only 6-7% of illegal holdings. The reasons are manifold:

- It makes sense to take the risk of injecting the money into the formal financial system. Inflation will otherwise eat away the value of the money. So people make bank deposits, FDs, RDs, buy MFs, bonds, insurance products, savings products, shares, because they want returns from their money. Let me give a real example. It is not hard to find people who have an annual declared income of Rs.7-9 lakhs, and yet have financial assets worth Rs.1-2 crores. Doesn’t add up. And yet, there are no consequences. That means the financial monitoring system is half-baked. Explained in point 2.

- Real estate investments are the most favoured way of channelling black money for a vast majority. Again, people with less than Rs.10 lakhs income with 3-4 properties worth a few crores. Cash is not presently involved in the picture at all.

- Gold and foreign exchange – self-explanatory.

- Overseas assets – Everyone knows of off-shore bank accounts in tax havens. What people don’t realize is that Indian politicians own mines in Liberia and banks and hotels in Singapore. Money in banks is the tip of the iceberg. Again, demonetization nets NOTHING.

- Investing black money in legitimate businesses, even loss-making ones, is remarkably easy. From real estate to restaurants, you name the industry and black money has financed a significant part of it.

- Handling and storing cash is not as simple as people who have not handled large volumes think. Yes, some people are forced to hoard cash but most people who make windfall gains in property transactions and bribes cannot wait to get rid of the cash. It is risky to handle.

- Informal negotiable instruments are the traditional backbone of the trading community in India. Hundi (IOU) is the de-facto bill of exchange for them. At any given point of time, all such instruments need not represent the total amount of cash at their disposal. So they can simply continue to trade in hundis, while biding their time and making payments if and when a hundi is presented or becomes due. These people have been doing business this way for hundreds of years and are not out of business because a bunch of college/office-going keyboard warriors declare so. In fact, they have found a very ingenious use for the old notes which I will explain in point 3.

- Normal people cannot understand the ingenious way in which the super-rich have already invested their fortune. Persian rugs, diamond watches, paintings by masters – the cumulative value of these is staggering. Sorry they don’t care about your demonetization glee.

2. Existing monitoring framework is evolving, and if allowed to would have done a better job in the medium term. The things which ultimately make a profound impact on the financial system do not involve public debate. PAN-based and mandatory reporting of large transactions is the system which the government is currently using and it works – as much as it is allowed to. Now take the advantage of investments – Form 26AS has now covered all bank deposits, but for mutual funds and bonds, there are separate limits of 2-5 lakhs for reporting. This means that interest paid on bank deposits is now fully covered and monitored.

There is a parameter-based system that sorts such information in the order of priority and then action may or may not be taken. The people at NIC (National Informatics Centre) who designed this system are really intelligent and hardworking, and if the government gave them full leeway to fine-tune the algorithm, along with adequate resources and oversight to the revenue department, the problem would have been mitigated much better. Instead it would rather invest in cheap parlour tricks.

Real estate transactions have, to a certain extent, been rationalized because the mandatory reporting system covers any sale/purchase of property above Rs.30 lakh. The scope for under-valuing property both to pay by black money and to evade stamp duty is much less now that the property value is deemed to be the rate for registration. Although in some places, especially recently converted agricultural land, this value is too less, in most urban centres the Municipal Corporation fixes reasonably accurate rates. But for those who think that the black money component is only paid in cash – I have some news. Since both depositing and withdrawing large amounts of cash has been made risky, a significant amount of black money is paid by cheque or demand draft. It is as simple as that. Again, the systemic failure has nothing to do with cash.

The government could easily modify the system to cover mutual funds, insurance, bonds, post-office savings, etc. So why doesn’t it do so? And if you think that the amount of black money invested in this way is small, understand that the total value of mutual funds under management in India is only marginally less than all the money sucked out due to demonetization. Now picture the rest for ULIPs, etc. You will get the point.

This would net a far greater amount of revenue, control over the economy, and for those interested in gleeful retribution on the wealthy – even punishment.

And now, answer a simple question – what is more important – that those with black money be punished for hoarding, or for investing, or not at all? Seems their money forms a large portion of the formal financial system, which funds infrastructure, businesses, creates jobs, and so on.

To be continued...

You forget that there have been a few other changes since the demonetization, and this wasn't just about curbing black money economy that exists.

1. Politicians cannot buy votes for the coming elections.
2. Counterfeit currency's killed.
3. Terror funding has stopped for now.

Basically, separatist funded stone-pelters have all gone home. Now students in Kashmir have gone back to school and are giving their exams.

As for all the other points you mentioned, a lot of people are aware of that, particularly the ones who did it, but you also need to know that the demonetization scheme is targeting people, not the currency itself.

What this policy has done is curb future creation of a black economy. Lots of new rules are coming up. Like you can't buy real estate with cash anymore, and all accounts will be linked with the Aadhar, which is linked to the IT dept. Large cash transactions will be made illegal, only electronic transactions will be allowed. New restrictions will be placed on the number of properties one can own, I've heard an individual will now own only 2 properties, not more. So property owners will be expected to start dumping their excess properties back into the market at cheap prices because there are too many people who don't have homes. Not sure to what extent this will work, or if it will be implemented, but you can expect some really radical changes to happen in the short term alone.

So what happens to all that you mentioned, we will know in time when they start revealing their policies, and start conducting raids.

Seems their money forms a large portion of the formal financial system, which funds infrastructure, businesses, creates jobs, and so on.

If property prices become more affordable and clean businesses are given the black money through legal means, then there is better utilization of the funds. Jobs will be created, the only difference is Modi wants clean businesses to create those jobs. Black money hoarders can go to hell regardless of the amount of investments they have made in order to benefit the economy in the past. It's that 6-7% that created the black economy, so it's a start.

By the way, all those lines are pretty much gone. Normalcy is returning slowly for the aam admi.

http://economictimes.indiatimes.com...-demonetisation-move/articleshow/55465263.cms

 

[cloud_9]

Contempt for poor wage earners involves not understanding that most of them are wasting entire days while waiting in line to exchange/deposit such a small amount that they will need to repeat the cycle the very next day. Contempt for such people also involves not understanding that 50 days without money supply stops procurement and sale, and freezes their lives - something they cannot afford. Contempt for the ordinary person involves knowing that a woman, has stood in line from 6 in the morning while the Banks have not even opened at 10, all so that she can withdraw an amount which will not cover any part of her daughter's cash-based wedding. Contempt is not understanding that she and those like her are not "hoarders", but people who are crushed under this diktat. Contempt is looking at all this and assuming that as long as I pull through, others must be as fortunate, and anyone who complains is either corrupt or a sore loser.

That's on the pretext that everything they earn is in 500 and 1000 rupee notes.

That overly bleeding heart makes me suspect that you clearly lost a huge chunk of your money.I have plenty of family members who suddenly started worrying about the poor.

 

[Cyberian]

Stupid and funny from India.

People from the Indian banana republic are always doing the dumbest things on the planet.

 

[karakoram]

Stupid and funny from India.

People from the Indian banana republic are always doing the dumbest things on the planet.

Off topic but how old are you kiddo ?

 

[randomradio]

http://www.financialexpress.com/eco...ing-transaction-limit-modi-government/445572/
The report quoted a government official as saying that the government is in the process of deciding if cash transactions above RS 3 lakh or Rs 5 lakh should be restricted. Additionally, the government may also consider capping high value cash withdrawals from banks.

 

[Dungeness]

Contempt for poor wage earners involves not understanding that most of them are wasting entire days while waiting in line to exchange/deposit such a small amount that they will need to repeat the cycle the very next day. Contempt for such people also involves not understanding that 50 days without money supply stops procurement and sale, and freezes their lives - something they cannot afford. Contempt for the ordinary person involves knowing that a woman, has stood in line from 6 in the morning while the Banks have not even opened at 10, all so that she can withdraw an amount which will not cover any part of her daughter's cash-based wedding. Contempt is not understanding that she and those like her are not "hoarders", but people who are crushed under this diktat. Contempt is looking at all this and assuming that as long as I pull through, others must be as fortunate, and anyone who complains is either corrupt or a sore loser.

Most PDF Indian members probably are lucky enough to work in "formal sectors", so they don't have to go through this pain.

 

[Ajayk]

 

[PlugnPlay]

I mean Hindutva wise cause I have seen him defending Hindus throughout his stay here. It may be he is financially less honest or messed up, but that does not make him anti-Hindu or a Christian bigot. So my alerting you was only on that account.

I know his arguments are weak, but it is a view held by the government too that sudden withdrawal of a large portion of cash from the economy is akin to a shock therapy to a patient and can get dangerous. Aftercare measures have to be put in place and things will be delicate for a while.

At one point of time even I held the view that black money is good for the economy. This was during the 90s when there was this argument that black money and even smuggling protected the country from going belly up during the Nehru/Indira Gandhi 100+% taxation eras.

Behti ganga mei sab haath dhote hai.

Its been my honest observation that most voices for Anti Demonetisation has been from Christians and muslims in pdf. If you want I can round up their names and posts for your benefit. The only hindus I have seen critical has been the closet commies from bengal.

The fact that he called out "bhakt" shows his deep rooted prejudice. Do you think such desperate name calling is sign of a "rational" mind ?

Everything in this world has its own share of dangers. Even crossing the road can get you killed. Driving a car can get you killed. None of those are "rational" arguments. To claim "danger" as a reason is a logical fallacy.

Ignorance can be countered by rational debate, Prejudice cannot be. IT can only be cleansed either by a good whipping (this is possible) or emotional happiness ( impossible to provide in pdf). So the way to deal with such perverts is clear.

One would be wasting his time trying to convince such a person with a rational debate. To do so would be to indulge in mental masturbation.

 

[Razia Sultana]

http://www.financialexpress.com/eco...ing-transaction-limit-modi-government/445572/
The report quoted a government official as saying that the government is in the process of deciding if cash transactions above RS 3 lakh or Rs 5 lakh should be restricted. Additionally, the government may also consider capping high value cash withdrawals from banks.

This was the first thing the govt should have done and stopped cash transactions above 99,999/-. or even better above 49,999/-.
Next it should have waited to print Rs. 2000 notes and rather printed excessive notes of rs 100/- and below.Then after 3 months rs. 500/- and after 6 months rs. 1000 new notes should have been introduced. There is no need for Rs.2000 notes.

Before announcing all the jandhan accounts should have been issued with debit cards.

After announcement the banks were kept closed..... that day should have been used for caliberation of rs.100 notes in the ATMs and the ATMs would dispense only 100 rs notes.

Instead of exchanging 4000 rs. per day for new currency... all the old cash should have been allowed to be deposited in bank accounts. Special provisions for those who do not have a bank account. Later the govt. would be free to question those who deposited more than 2 or 2.5 lakhs in their account. This would have acted as compulsory disclosure scheme and all unaccounted deposits would allow the government to deduct taxes with 200% penalty.

Banks to visit temples, dargahs and religious / charitable centers to collect the cash on 10th november...and after that these temples, dargahs and charitable organizations etc will not be permitted to deposit cash in the banks.

These are small things that the government should have done to avoid hardship to the people. This could be more refined but it would have substantially lowered the doubts on govt. intention.

http://www.financialexpress.com/eco...ing-transaction-limit-modi-government/445572/
The report quoted a government official as saying that the government is in the process of deciding if cash transactions above RS 3 lakh or Rs 5 lakh should be restricted. Additionally, the government may also consider capping high value cash withdrawals from banks.

This was the first thing the govt should have done and stopped cash transactions above 99,999/-. or even better above 49,999/-.
Next it should have waited to print Rs. 2000 notes and rather printed excessive notes of rs 100/- and below.Then after 3 months rs. 500/- and after 6 months rs. 1000 new notes should have been introduced. There is no need for Rs.2000 notes.

Before announcing all the jandhan accounts should have been issued with debit cards.

After announcement the banks were kept closed..... that day should have been used for caliberation of rs.100 notes in the ATMs and the ATMs would dispense only 100 rs notes.

Instead of exchanging 4000 rs. per day for new currency... all the old cash should have been allowed to be deposited in bank accounts. Special provisions for those who do not have a bank account. Later the govt. would be free to question those who deposited more than 2 or 2.5 lakhs in their account. This would have acted as compulsory disclosure scheme and all unaccounted deposits would allow the government to deduct taxes with 200% penalty.

Banks to visit temples, dargahs and religious / charitable centers to collect the cash on 10th november...and after that these temples, dargahs and charitable organizations etc will not be permitted to deposit cash in the banks.

These are small things that the government should have done to avoid hardship to the people. This could be more refined but it would have substantially lowered the doubts on govt. intention.

 

[Ajayk]

This was the first thing the govt should have done and stopped cash transactions above 99,999/-. or even better above 49,999/-.

How?

Before announcing all the jandhan accounts should have been issued with debit cards.

Agreed...but this was an excellent move that enabled at least 80% rural population has means to deposit

After announcement the banks were kept closed..... that day should have been used for caliberation of rs.100 notes in the ATMs and the ATMs would dispense only 100 rs notes.

Understand this. 500 and 1000 rupee notes formed 86% of total value of Indian currency.
There was no way 100 rupee notes could have made a dent in substituting the enormous volume, hence the 2000 rupee note.

Instead of exchanging 4000 rs. per day for new currency... all the old cash should have been allowed to be deposited in bank accounts. Special provisions for those who do not have a bank account. Later the govt. would be free to question those who deposited more than 2 or 2.5 lakhs in their account. This would have acted as compulsory disclosure scheme and all unaccounted deposits would allow the government to deduct taxes with 200% penalty.

That's exactly what they are doing.
The exchange of 4000 rupees was for daily expenses.

Imagine a person not having bank account and want money for expenses

People with bank accounts are expected to deposit in one go all their cash and go to ATM for further withdrawals.

The current making the finger is a step towards bridging this gap.

These are small things that the government should have done to avoid hardship to the people. This could be more refined but it would have substantially lowered the doubts on govt. intention.

This I completely agree.
Being sensitive and mobilizing people to make sure people standing in queues are taken care off..would have helped immensely.