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Demonetisation: News, Updates & Discussions

Discussion in 'World Economy' started by Mercury, Nov 8, 2016.

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Vote For or Against Demonitisation

Poll closed Nov 18, 2016.
  1. Good Idea, Well Executed

    19 vote(s)
    67.9%
  2. Bad Idea, Badly Executed

    1 vote(s)
    3.6%
  3. Good Idea, Badly Executed

    8 vote(s)
    28.6%
  1. Ghanta

    Ghanta FULL MEMBER

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    Is it true that 2000rs note will be banned today? A friend of mine had gone to a bank and he saw lot of people trying to deposit those notes there.
     
  2. Golden_Rule

    Golden_Rule Lieutenant FULL MEMBER

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    That is impossible. There is no reason for it. The whole economy will halt. Instead I feel, the opposite will happen, Modi will flood the market with Cash, 500 & 2000 rupee notes.
     
  3. vstol jockey

    vstol jockey Colonel MILITARY STRATEGIST

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    he did address many of the issues I raised and some need to be incorporated in the Finance bill which we might see in the coming budget.
     
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  4. Tejasmk3

    Tejasmk3 2nd Lieutant FULL MEMBER

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    Same gang behind Aadhar is also a part of USAID's partnership program with the govt for Cashless transactions. Wonder why govt needs USAID help for implementing this. A little scaremongering and CT-ish but raises some interesting points.

    A well-kept open secret: Washington is behind India’s brutal experiment of abolishing most cash
    US-President Barack Obama has declared the strategic partnership with India a priority of his foreign policy. China needs to be reined in. In the context of this partnership, the US government’s development agency USAID has negotiated cooperation agreements with the Indian ministry of finance. One of these has the declared goal to push back the use of cash in favor of digital payments in India and globally.

    On November 8, Indian prime minster Narendra Modi announced that the two largest denominations of banknotes could not be used for payments any more with almost immediate effect. Owners could only recoup their value by putting them into a bank account before the short grace period expired. The amount of cash that banks were allowed to pay out to individual customers was severely restricted. Almost half of Indians have no bank account and many do not even have a bank nearby. The economy is largely cash based. Thus, a severe shortage of cash ensued. Those who suffered the most were the poorest and most vulnerable. They had additional difficulty earning their meager living in the informal sector or paying for essential goods and services like food, medicine or hospitals. Chaos and fraud reigned well into December.

    Four weeks earlier

    Not even four weeks before this assault on Indians, USAID had announced the establishment of „Catalyst: Inclusive Cashless Payment Partnership“, with the goal of effecting a quantum leap in cashless payment in India. The press statement of October 14 says that Catalyst “marks the next phase of partnership between USAID and Ministry of Finance to facilitate universal financial inclusion”. The statement does not show up in the list of press statements on the website of USAID (anymore?). Not even filtering statements with the word “India” would bring it up. To find it, you seem to have to know it exists, or stumble upon it in a web search. Indeed, this and other statements, which seemed rather boring before, have become a lot more interesting and revealing after November 8.

    Reading the statements with hindsight it becomes obvious, that Catalyst and the partnership of USAID and the Indian Ministry of Finance, from which Catalyst originated, are little more than fronts which were used to be able to prepare the assault on all Indians using cash without arousing undue suspicion. Even the name Catalyst sounds a lot more ominous, once you know what happened on November 9.

    Catalyst’s Director of Project Incubation is Alok Gupta, who used to be Chief Operating Officer of the World Resources Institute in Washington, which has USAID as one of its main sponsors. He was also an original member of the team that developed Aadhaar, the Big-Brother-like biometric identification system.

    According to a report of the Indian Economic Times, USAID has committed to finance Catalyst for three years. Amounts are kept secret.

    Badal Malick was Vice President of India's most important online marketplace Snapdeal, before he was appointed as CEO of Catalyst. He commented:

    „Catalyst’s mission is to solve multiple coordination problems that have blocked the penetration of digital payments among merchants and low-income consumers. We look forward to creating a sustainable and replicable model. (...) While there has been (...) a concerted push for digital payments by the government, there is still a last mile gap when it comes to merchant acceptance and coordination issues. We want to bring a holistic ecosystem approach to these problems.“

    Ten months earlier

    The multiple coordination problem and the cash-ecosystem-issue that Malick mentions had been analysed in a report that USAID commissioned in 2015 and presented in January 2016, in the context of the anti-cash partnership with the Indian Ministry of Finance. The press release on this presentation is also not in USAID's list of press statements (anymore?). The title of the study was “Beyond Cash”.

    „Merchants, like consumers, are trapped in cash ecosystems, which inhibits their interest” in digital payment it said in the report. Since few traders accept digital payments, few consumers have an interest in it, and since few consumers use digital payments, few traders have an interest in it. Given that banks and payment providers charge fees for equipment to use or even just try out digital payment, a strong external impulse is needed to achieve a level of card penetration that would create mutual interest of both sides in digital payment options.

    It turned out in November that the declared “holistic ecosystem approach” to create this impulse consisted in destroying the cash-ecosystem for a limited time and to slowly dry it up later, by limiting the availability of cash from banks for individual customers. Since the assault had to be a surprise to achieve its full catalyst-results, the published Beyond-Cash-Study and the protagonists of Catalyst could not openly describe their plans. They used a clever trick to disguise them and still be able to openly do the necessary preparations, even including expert hearings. They consistently talked of a regional field experiment that they were ostensibly planning.

    "The goal is to take one city and increase the digital payments 10x in six to 12 months," said Malick less than four weeks before most cash was abolished in the whole of India. To not be limited in their preparation on one city alone, the Beyond-Cash-report and Catalyst kept talking about a range of regions they were examining, ostensibly in order to later decide which was the best city or region for the field experiment. Only in November did it became clear that the whole of India should be the guinea-pig-region for a global drive to end the reliance on cash. Reading a statement of Ambassador Jonathan Addleton, USAID Mission Director to India, with hindsight, it becomes clear that he stealthily announced that, when he said four weeks earlier:

    “India is at the forefront of global efforts to digitize economies and create new economic opportunities that extend to hard-to-reach populations. Catalyst will support these efforts by focusing on the challenge of making everyday purchases cashless."

    Veterans of the war on cash in action

    Who are the institutions behind this decisive attack on cash? Upon the presentation of the Beyond-Cash-report, USAID declared: “Over 35 key Indian, American and international organizations have partnered with the Ministry of Finance and USAID on this initiative.” On the website catalyst.org one can see that they are mostly IT- and payment service providers who want to make money from digital payments or from the associated data generation on users. Many are veterans of,what a high-ranking official of Deutsche Bundesbank called the “war of interested financial institutions on cash” (in German). They include the Better Than Cash Alliance, the Gates Foundation (Microsoft), Omidyar Network (eBay), the Dell Foundation Mastercard, Visa, Metlife Foundation.

    The Better Than Cash Alliance

    The Better Than Cash Alliance, which includes USAID as a member, is mentioned first for a reason. It was founded in 2012 to push back cash on a global scale. The secretariat is housed at the United Nations Capital Development Fund (UNCDP) in New York, which might have its reason in the fact that this rather poor small UN-organization was glad to have the Gates-Foundation in one of the two preceding years and the Master-Card-Foundation in the other as its most generous donors.

    The members of the Alliance are large US-Institutions which would benefit most from pushing back cash, i.e. credit card companies Mastercard and Visa, and also some US-institutions whose names come up a lot in books on the history of the United States intelligence services, namely Ford Foundation and USAID. A prominent member is also the Gates-Foundation. Omidyar Network of eBay-founder Pierre Omidyar and Citi are important contributors. Almost all of these are individually also partners in the current USAID-India-Initiative to end the reliance on cash in India and beyond. The initiative and the Catalyst-program seem little more than an extended Better Than Cash Alliance, augmented by Indian and Asian organizations with a strong business interest in a much decreased use of cash.

    Reserve Bank of India’s IMF-Chicago Boy

    The partnership to prepare the temporary banning of most cash in India coincides roughly with the tenure of Raghuram Rajan at the helm of Reserve Bank of India from September 2013 to September 2016. Rajan (53) had been, and is now again, economics professor at the University of Chicago. From 2003 to 2006 he had been Chief Economist of the International Monetary Fund (IMF) in Washington. (This is a cv-item he shares with another important warrior against cash, Ken Rogoff.) He is a member of the Group of Thirty, a rather shady organization, where high ranking representatives of the world major commercial financial institutions share their thoughts and plans with the presidents of the most important central banks, behind closed doors and with no minutes taken. It becomes increasingly clear that the Group of Thirty is one of the major coordination centers of the worldwide war on cash. Its membership includes other key warriers like Rogoff, Larry Summers and others.

    Raghuram Rajan has ample reason to expect to climb further to the highest rungs in international finance and thus had good reason to play Washington’s game well. He already was a President of the American Finance Association and inaugural recipient of its Fisher-Black-Prize in financial research. He won the handsomely endowed prizes of Infosys for economic research and of Deutsche Bank for financial economics as well as the Financial Times/Goldman Sachs Prize for best economics book. He was declared Indian of the year by NASSCOM and Central Banker of the year by Euromoney and by The Banker. He is considered a possible successor of Christine Lagard at the helm of the IMF, but can certainly also expect to be considered for other top jobs in international finance.

    As a Central Bank Governor, Rajan was liked and well respected by the financial sector, but very much disliked by company people from the real (producing) sector, despite his penchant for deregulation and economic reform. The main reason was the restrictive monetary policy he introduced and staunchly defended. After he was viciously criticized from the ranks of the governing party, he declared in June that he would not seek a second term in September. Later he told the New York Times that he had wanted to stay on, but not for a whole term, and that premier Modi would not have that. A former commerce and law Minister, Mr. Swamy, said on the occasion of Rajan’s departure that it would make Indian industrialists happy:

    “I certainly wanted him out, and I made it clear to the prime minister, as clear as possible. (…) His audience was essentially Western, and his audience in India was transplanted westernized society. People used to come in delegations to my house to urge me to do something about it.”

    A disaster that had to happen

    If Rajan was involved in the preparation of this assault to declare most of Indians’ banknotes illegal – and there should be little doubt about that, given his personal and institutional links and the importance of Reserve Bank of India in the provision of cash – he had ample reason to stay in the background. After all, it cannot have surprised anyone closely involved in the matter, that this would result in chaos and extreme hardship, especially for the majority of poor and rural Indians, who were flagged as the supposed beneficiaries of the badly misnamed "financial-inclusion”-drive. USAID and partners had analysed the situation extensively and found in the Beyond-Cash-report that 97% of transactions were done in cash and that only 55% of Indians had a bank account. They also found that even of these bank accounts, "only 29% have been used in the last three months“.

    All this was well known and made it a certainty that suddenly abolishing most cash would cause severe and even existential problems to many small traders and producers and to many people in remote regions without banks. When it did, it became obvious, how false the promise of financial inclusion by digitalization of payments and pushing back cash has always been. There simply is no other means of payment that can compete with cash in allowing everybody with such low hurdles to participate in the market economy.

    However, for Visa, Mastercard and the other payment service providers, who were not affected by these existential problems of the huddled masses, the assault on cash will most likely turn out a big success, “scaling up” digital payments in the “trial region”. After this chaos and with all the losses that they had to suffer, all business people who can afford it, are likely to make sure they can accept digital payments in the future. And consumers, who are restricted in the amount of cash they can get from banks now, will use opportunities to pay with cards, much to the benefit of Visa, Mastercard and the other members of the extended Better Than Cash Alliance.

    Why Washington is waging a global war on cash

    The business interests of the US-companies that dominate the gobal IT business and payment systems are an important reason for the zeal of the US-government in its push to reduce cash use worldwide, but it is not the only one and might not be the most important one. Another motive is surveillance power that goes with increased use of digital payment. US-intelligence organizations and IT-companies together can survey all international payments done through banks and can monitor most of the general stream of digital data. Financial data tends to be the most important and valuable.

    Even more importantly, the status of the dollar as the worlds currency of reference and the dominance of US companies in international finance provide the US government with tremendous power over all participants in the formal non-cash financial system. It can make everybody conform to American law rather than to their local or international rules. German newspaper Frankfurter Allgemeine Zeitung has recently run a chilling story describing how that works (German). Employees of a Geran factoring firm doing completely legal business with Iran were put on a US terror list, which meant that they were shut off most of the financial system and even some logistics companies would not transport their furniture any more. A major German bank was forced to fire several employees upon US request, who had not done anything improper or unlawful.

    There are many more such examples. Every internationally active bank can be blackmailed by the US government into following their orders, since revoking their license to do business in the US or in dollar basically amounts to shutting them down. Just think about Deutsche Bank, which had to negotiate with the US treasury for months whether they would have to pay a fne of 14 billion dollars and most likely go broke, or get away with seven billion and survive. If you have the power to bankrupt the largest banks even of large countries, you have power over their governments, too. This power through dominance over the financial system and the associated data is already there. The less cash there is in use, the more extensive and secure it is, as the use of cash is a major avenue for evading this power.
     
  5. ReddyMan

    ReddyMan FULL MEMBER

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    ^

    US has virtually nothing to gain and a lot more to lose with India's digital ecosystem. There are plenty of non-US options for cashless transactions. The whole tripe about US control on the banking system is more nonsense. US already has control over most international banking systems with the petro-dollar, control of International Trade, and sale of US Treasury Securities. This move adds almost nothing to their influence, if anything at all.

    US NGOs in particular have been hit very hard by this move, and we all know how Washington already feels about Modi curbing their influence. There is not reason for them to push a move that would once again harm their own NGOs. USAID has a lot of initiatives around the world, not everything is a conspiracy.
     
  6. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    false. All transactions are recorded in system and subject to scarification of RBI. Where ever banks have doen that, they are caught.
     
  7. HariPrasad

    HariPrasad Lieutenant FULL MEMBER

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    Exactly. People in small sector need financing which can be made by banks or NBFSC. If we even pour few thousand crores, economy will boom. We need a big employment generation like Vajpayee time and not like a useless growth of corrupt chiddu's time. We need to finance small and medium sectors and agriculture and food processing and dairy business to uplift rural economy and generate employment.
     
  8. GuardianRED

    GuardianRED Lieutenant FULL MEMBER

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    No link or this is your own thoughts?
     
  9. Tejasmk3

    Tejasmk3 2nd Lieutant FULL MEMBER

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    The second line
     
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  10. VCheng

    VCheng RIDER GEO STRATEGIC ANALYST

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    A good read:

    http://www.economist.com/news/finan...hdrawing-86-rupees-circulation-remain-elusive

    Many rupee returns
    The high economic costs of India’s demonetisation
    The benefits of withdrawing 86% of the rupees in circulation remain elusive
    Jan 7th 2017

    [​IMG]

    MOST economists might hazard a guess that voiding the bulk of a country’s currency overnight would dent its immediate growth prospects. On November 8th India took this abstruse thought experiment into the real world, scrapping two banknotes which made up 86% of all rupees in circulation. Predictably, the economy appears indeed to have been hobbled by the sudden “demonetisation”. Evidence of the measure’s costs is mounting, while the benefits look ever more uncertain.

    At least the new year has brought a semblance of monetary normality. For seven weeks queues had snaked around banks, the main way for Indians to exchange their old notes for new ones or deposit them in their accounts. That is over, largely because the window to exchange money closed on December 30th. The number of fresh notes that can be withdrawn from ATMs or bank counters is still curtailed, but the acute cash shortage is abating, at least in big cities.

    As data trickle through, so is evidence of the economic price paid for demonetisation. Consumers, companies and investors all wobbled in late 2016. Fast-moving consumer goods, usually a reliable growth sector, retrenched by 1-1.5% in November, according to Nielsen, a research group. Bigger-ticket items seem to have been hit harder. Year-on-year sales at Hero Motocorp, the biggest purveyor of two-wheelers, slid by more than a third in December.

    [​IMG]


    A survey of purchasing managers in manufacturing plunged from relative optimism throughout 2016 to the expectation of mild contraction. Firms’ investment proposals fell from an average of 2.4trn rupees ($35bn) a quarter to just 1.25trn rupees in the one just ended, according to Centre for Monitoring Indian Economy, a data provider. As a result, corporate-credit growth, already anaemic, has reached its lowest rate in at least 30 years (see chart).

    All this amounts to “a significant but not catastrophic” impact, says Shilan Shah of Capital Economics, a consultancy. Annual GDP growth forecasts for the fiscal year ending in March have slipped by around half a percentage point, to under 7%, from an actual rate of 7.3% in the last full quarter before demonetisation. Other factors, such as the rise in the oil price and the surge in the value of the dollar after the election of Donald Trump, are also at play.

    Whether the costs of the exercise justify the benefits depends, of course, on what those benefits are. In his speech announcing the measure, Narendra Modi, the prime minister, highlighted combating corruption and untaxed wealth. Gangsters and profiteers with suitcases full of money would be left stranded. But reports suggest that nearly 15trn rupees of the 15.4trn rupees taken out of circulation are now accounted for. So either the rich weren’t hoarding as much “black money” as was supposed, or they have proved adept at laundering it. The Indian press is full of tales of household staff paid months in advance in old notes, or of bankers agreeing to exchange vast sums illegally.

    Fans of demonetisation point to three beneficial outcomes. First, banks, laden with fresh deposits, will lend this money out and so boost the economy. Big banks cut lending rates this week (quite possibly nudged by government, the largest shareholder of most of them). But their lending recently has not been constrained by a lack of deposits, so much as by insufficient shareholder capital to absorb potential losses, and by the over-borrowed balance-sheets of many industrial customers.

    Second, Indians will move from living cash in hand into the taxed formal economy. Mr Modi has recently promoted the idea of a cashless, or “less-cash”, India (not something mentioned at the outset), as one reason for demonetisation. Progress towards getting Indians to pay for things electronically is indeed being made, but from an abysmally low base.

    The third upshot is the most controversial. Now that the demonetised bank notes are worthless, the government is intent on in effect appropriating the proceeds. The procedure requires trampling on the credibility of the Reserve Bank of India (RBI), the central bank, which must first agree to dishonour the promise, on all banknotes, to “pay the bearer” the value. If it does so, “extinguishing” the notes and its liability for them, it can transfer an equivalent amount to the government budget.

    With so much cash handed in at banks, the amount remitted to government by the RBI might amount to perhaps 0.2-0.3% of GDP. Proceeds from a tax-amnesty scheme for cash-hoarders may swell the figure. Even so, it will not be enough to justify the costs of demonetisation—or even, perhaps, the damage to the reputation of the RBI, which is already facing questions about its independence. But having imposed the costs, Mr Modi will be keen to trumpet whatever benefits he can find.
     
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  11. Ripcord322

    Ripcord322 Lieutenant FULL MEMBER

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    I really hope this move pays off....

    And I always wonder...How the deposited money beat government expectations....What went wrong in the Governments calculation...Did they overestimate black money or underestimate the intelligence of the people holding them....


    (

    Note : Some Context....

    When rolling out the move..The Govt. expected 3-5 lakh Crore Rs to never make it back into the system....This'black money' was supposed to be eradicated....But it made it back into the banking system...The Black money hoarders perhaps used multiple fake bank accounts or Jan Dhan accounts and with the help of corrupt bankers and government officials..it seems...anyway....what the government does next is yet to be seen....

    Refer :

    http://www.business-standard.com/ar...posits-belie-expectations-116120100682_1.html

    http://indianexpress.com/article/bu...lure-97-of-banned-notes-back-in-banks-report/

    )

    Senior Members please correct me if my understanding regarding this is issue is flawed....and how exactly the money came back into the system.....


    PS : I don't want a political debate about the competence of this administration...Just a reason how this happened....I wish this administration all the best in their future endeavors to root out black money ....
     
    Last edited: Jan 9, 2017
  12. Butter Chicken

    Butter Chicken Lieutenant FULL MEMBER

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    All stats will be clear in budget 2017....
     
  13. Inactive

    Inactive Guest

    It came in via proxy deposition no doubt, but that did get the currency in. Market needs circulation of money, if there is none, market will stagnate. So it is ok. It is a like a fresh start.

    A very misleading write up. That is all I would say.

    No. All rumours. Are you aware of the logic of printing Rs 2000 currency notes?

    Printing thrust is on Rs 500, 100 and 50 notes right now. Rs 2000 notes were pumped in initially to cater to the payment to be made for salaries of the unorganised sector. Since time was short and pay had to be given in first week of Dec, Rs 2000 denomination notes were printed exclusively. This was changed to Rs 500 and 100 in greater quantity in last week of November
     
  14. Nilgiri

    Nilgiri Lieutenant GEO STRATEGIC ANALYST

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    The money that has come in to bank accounts doesnt and hasnt turn insta-"white". Have they paid no attention at all to the tax numbers and the policies implemented by the I-T dept to verify all deposits above a certain amount?

    They haven't even bothered to wait for the overall figures from the budget session to be released or what policies on deposit investigating + withdrawal limits will continue till everything is run through with a fine-toothed comb.

    The Failonomist again shows it cannot do a neutral analysis. They have made up their minds on Modi (and India in general) a long time ago and will colour any article with their biased nonsense any way they can. It will definitely continue now with Trump as well (even after their clownish bias was exposed and ridiculed on that too). A remnant of British empire snobbery if I ever saw it.

    They always complain that many supposed reforms around the world are only "skin deep"...but here they are (again) presenting one number as the be-all end-all and not digging deeper into it (because their edifice would then look quite shaky). Hypocrites. Stopped reading them years ago because of it.
     
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  15. randomradio

    randomradio Mod Staff Member MODERATOR

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    http://www.firstpost.com/business/d...ection-figures-says-arun-jaitley-3179672.html

    Union Finance Minister Arun Jaitley on Thursday said that the impact of demonetisation is clearly visible with tax collection figures seeing double-digit growth.

    "The impact of demonetisation on tax revenue and collection is already visible. There has been a 26.2 percent increase in central indirect tax collection till November 30," he said at a press conference here, adding till 19 December, direct tax collection increase has been to the extent of 14.4 percent against a growth rate of only 8.3 percent previous year.

    Till 19 December, the net increase in direct taxes has been 13.6 percent after factoring in the refunds, he said.

    "In the central indirect taxes there is an increase of 26.2 percent till 30 November. Excise duty is up by 43.5 percent, service tax by 25.7 percent and custom duties up by 5.6 percent," Jaitley said.


    "Notwithstanding the critics, it is a very significant increase in all indirect taxes till November 30," he added.

    Life insurance, tourism, petroleum consumption, flow of mutual fund investment have all increased during this period, the Finance Minister said.

    Jaitley said demonetisation has brought a large part of money into the formal banking system which has increased the ability of the banks to lend.

    On the liquidity situation in the markets, he said that a major part of the demonetised currency has been replaced with new notes and circulation of Rs 500 has increased.
     
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