India rupee ban: Snapdeal to deliver cash
bbc.com
bbc.com
As for Paytm, I really doubt their commitment to the security of their products. This was my experience on vulnerability disclosure on their product - https://medium.com/timebender-technologies/paytm-says-to-me-...
On the other hand, anyone disconnected enough not to have an ID or a bank account but wealthy enough to have a few high-denomination bills gets screwed because changing money at the bank requires you to have an ID or an account. They can also sell their cash on the black market, but they get a worse deal because they're trying to hawk a couple bills, not the large bulk transfers that wealthy people are doing.
And, of course, this move decreases the fungibility of Rupees and increases our expectation that the Indian government will do something similarly inconvenient in the future. If the Rupee ever hopes to be a strong currency, this probably didn't help.
I suspect a secondary goal of this move was to initiate a migration away from cash. Once you get rid of cash and make all legal money banked, you can do all sorts of fun stuff like impose negative interest rates. The ECB, Denmark, Sweden, Switzerland, and Japan have already experimented with negative interest rates; I expect to see other nations make moves towards it as well. It's an effective way of doing things like propping up property values, as long as you can force people into it.
Though I'm sure some enterprising folks will find way to electronically launder bribe money somehow - I expect a lot of people to suddenly inherit money from long-lost foreign relatives.
US average salary is ~50k.. so it would be equivalent with a $6,250 note.. which to me sure seems like a high value note.
Right now it seems that every measure seems to be to increase governments control over the masses and to reduce their corruption, without any measure to increase governments transparency or reduce government's corruption. Trickle down economics and trickle up anti-corruption measures.
But is plenty done out here - not just bricks, even suitcases. There are even slang terms for it in movies (taken from real life, like khoka - "suitcase" - meaning a crore or so, but I'm not a big movie watcher, so not sure of the exact terms ... :)
Again, movies, and probably real-life stings, though I don't have links to show.
See my reply to wyager.
It absolutely is a real problem. I would say that undocumented cash transactions are the default, not the exception.
> Let's ignore the fact that the last thing anyone with serious money is going to store wealth in is cash
The kind of "wealthy" people you're thinking of are not necessarily the sorts targeted. We're not talking about rich industrialists and financiers (those folks have access to the same tax avoidance tactics in use in the West, or they can just ship the money abroad), but entire industries like general retail, real estate and domestic construction that have been running almost entirely on cash that never goes on any audited book. Until demonetization, you simply could not buy most properties in India if you weren't willing to pay at least half the asking price in off-book cash. I'm not sure how those big-ticket transactions are taking place now, but one can probably guess from the number of people already caught with massive sums of the _new_ banknotes.
https://en.wikipedia.org/wiki/Large_denominations_of_United_...
So here we have the same motivation -- but a quite different implementation.
Instead, India could require all cash transactions over $10,000 to be reported. This is how the US actually catches money laundering via cash.
It is a very real thing, as every Indian knows and hears and sees (from generations past, probably even before independence. Hey, it even plays a part in Indian movies).
Please don't make assumptions. Check out the facts on the ground, preferably by coming to India and spending some time here, before talking about it. I see from your profile that you are scientific, but you are not really exhibiting that here.
>Let's ignore the fact that the last thing anyone with serious money is going to store wealth in is cash (especially not Rupees).
Maybe you are not from India (sounds like it) and don't understand the fact that infrastructure and conditioning and people's minds can vary a hell of a lot across countries (not even to start mentioning the differences between more and less developed countries). There have been reported (and exposed) labyrinthine schemes for evading tax and so on out here, maybe more than you can wrap your brain around (without knowing more).
Edit: to make it clear, I am not saying that the scheme is perfect. By reports in the papers as well as by my own experience, it has led to many issues. It could and should have been planned and handled better.
How do you know it to be a problem? Governments love to overstate the seriousness of things for political leverage. Many people make incorrect conclusions from what they hear and see in pop culture.
> Hey, it even plays a part in Indian movies
If this is what you mean by "know and hear and see", then I think you need more evidence. Movie production culture (from Hollywood to Bollywood) loves to latch onto political and criminal tropes regardless of how true they are. For example, there are a number of laws passed by US congress and state governments that can be directly traced back to exaggerations in Hollywood movies. The banning of Switchblade knives can be traced back to Hollywood incorrectly depicting them as a popular tool for mafia activity. The banning of gun suppressors can be directly traced back to exaggerated Hollywood depictions of their effectiveness. Basically, you shouldn't trust everything you see in movies. "Black money" is a great narrative vehicle that is stuck in the Indian pop culture memeome, so it makes sense that Indian movies reference it.
You seem to have not understood, or maybe I was not clear enough. It is not from the movies - those are secondary, reel life imitating real life. Neither is it based on what government says - though they do say it exists.
This is how (said earlier):
>It is a very real thing, as every Indian knows and hears and sees
That meant: from hearing from people one knows personally (and trust), who heard from others they know (ditto).
So what you're telling me is that you know the economic impact of this phenomenon from social gossip?
Like I said, you need actual evidence. For example, a survey from a reputable census data agency. "It is known" and "he said/she said" are not acceptable arguments.
>>from people one knows personally (and trust)
vs. what you're imputing to me (i.e. interpreting/twisting my words as/into, or you didn't bother to read before replying):
>So what you're telling me is that you know the economic impact of this phenomenon from social gossip?
So, words from a person you trust (like a close friend or relative), are "social gossip" to you?
If a close friend or relative tells you: "I saw that road A on the way to your work is being repaired, so has a barrier, I suggest you take alternative road B today", do you dismissively tell them that you "need actual evidence. For example, a survey from a reputable census data agency"?
There is a continuum from scientific facts proven by experiments -> things you can be confident about from hearing from people you trust -> roadside gossip. (And for that matter, scientific "evidence" or "laws" can also be proven wrong, so how about your census agency?? how about biased surveys, relevant people not participating (oops, of course black money hoarders are going to answer truthfully to a survey that they hoard black money! /s) People believed the earth was flat and/or that the sun revolved around the earth, before Galileo / Copernicus etc. If you could show a computer or smartphone or even a car - while in use - to a Neanderthal, he would think it was magic. Knowledge, including science, evolves.) Or do you also ask for scientific evidence before you do anything at all?
And:
>"It is known" and "he said/she said" are not acceptable arguments.
Acceptable to whom? That's the key point. You don't need to believe what I do, nor vice versa.
I was trying to clarify a misconception you had, as a person who likely did not know the situation on the ground. Not interested in continuing this discussion further.
Yes. Is that a serious question?
I also don't have any reason trust you or whichever random people you're citing as authoritative sources on large-scale socioeconomic phenomena.
> "I saw that road A on the way to your work is being repaired"
This is a straightforward factual claim that's not subject to misinterpretation or invalid inference. My criteria for evidence is therefore much lower.
Instead of getting mad that I called you out on making economic/sociological claims without any sort of non-anecdotal evidence, you could actually try to provide evidence. Maybe you tried that and gave up. But whatever, it's up to you.
> People believed the earth was flat and/or that the sun revolved around the earth
Probably because people they trusted told them as much. You should consider this when you accept "trusted" hearsay as evidence.
> I was trying to clarify a misconception you had
Thank you, but this typically involves introducing new information. I'm aware of the opinion of the average underqualified member of the Indian public. More anecdotes along the same lines doesn't clarify much.
Did no one consider the consequences of this move? Surely there were people in government that testified to the fact that over 80% of the currency in circulation were these larger bills?
Either this was intentional to move to the country to electronic payments or some elected people didn't listen to anybody, did no analysis and were so clueless they didn't realize this would happen?!
If their elected officials really cared about the people as much as they cared about stopping corruption, they should have figured out some type of gradual roll-out policy. Or they could have simply allowed 500/1000 notes but refused to print any more and ordered banks to send all of those notes to their mint. They could then slowly replace the notes over a year and eventually, declare 500/1000 not legal tender after a year, rather than trying to do this all at once.
> Did no one consider the consequences of this move? Surely there were people in government that testified to the fact that over 80% of the currency in circulation were these larger bills?
The supposed large hoards of untaxed cash in these denominations would be the very argument for this move.
It's quite possible they've messed up the implementation or got the distribution of these notes wrong, but the stated argument for doing this would be entirely moot if they didnt make up a large portion of the currency in circulation.
Lesser than 10% (most aggressive estimate) of the unaccounted income lies in cash. As such, the entire exercise has higher costs than benefits. The idea AND the implement both have no sound reason.
Rich people have a much lower cash:wealth ratio than poor or middle class people so I highly doubt many rich people, no matter how corrupt, are losing more than 10% of their wealth with this move.
[0] https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=...
> Prime Minister Narendra Modi handpicked a trusted bureaucrat, little known outside India's financial circles, to spearhead a radical move to abolish 86 percent of the country's cash overnight and take aim at the huge shadow economy.
> Hasmukh Adhia, the bureaucrat, and five others privy to the plan were sworn to utmost secrecy, say sources with knowledge of the matter. They were supported by a young team of researchers working in two rooms at Prime Minister Modi's residence, as he plotted his boldest reform since coming to power in 2014.
> It was made up of young experts in data and financial analysis; some ran Prime Minister Modi's social media accounts and a smartphone app that he used to solicit public feedback.
So, either they had experts in data and financial analysis running social media accounts and (creating?) a smartphone app he used to get feedback, or at least some of these "experts" had their area of expertise somewhere other than data and financial analysis. I know what I think is more likely...
(Observation) India is highly decentralized/resilient. In India, Govt is just a thing. People dont pay much mind to it. They minimize interaction with Govt and bear it when they have to. But this time I think Govt overdid it.
All my middle-class Indian friends applaud the move. More significantly, Modi appears to still be quite popular in India.
It seems people resent the black money more than they resent the inconvenience this change represents. YMMV.
NO ONE has ever before in Indian politics made such a bold move. The Modi government made this move a couple of months before elections in the biggest states and suddenly the gossip amongst common folks in the street is all about the attempts by the corrupt rich to desperately get rid of old banknotes, how bankers are being arrested etc. etc. and not about the political stance of the party which some castes and the minority community have historically found alienating.
From what I observe the corrupt in a soup appears to give most common folk much more satisfaction from schadenfreude than the inconvenience they are bearing
Got a citation for that?
> They are just deviating even farther from their goal: delivering goods.
I thought the goal of any business was to make money. IMHO, since cash is such a sought after good in India at the moment, this is a clever way to monetize the cash they get from their Cash on Delivery service. It saves them the logistics of depositing large amounts of cash, while making more money.
Flipkart had a golden opportunity to practically take over the e-commerce market in India. But they (like most other Indian companies) aren't/not willing to expand enough.
Could you expand on this?
India is definitely poised to become a booming e-commerce market in the future but it has no where near peaked for these companies to be content with. The consumer market is still heavily dominated by the US and European countries. If they do not expand they are doomed.
And this is not restricted to e-commerce players alone. I notice this even with payment gateways / payment processors. We have quite a lot of payment processors that have a strong local presence. Some are even as good as Stripe (see Razorpay) when it comes to API and ease of implementation. But then again, they have no ambitions to expand to other countries. So India essentially has no access to an International payment gateway (Paypal doesn't count as it's only used for remittances. There is no equivalent of Paypal IPN/Paypal Express Checkout/Paypal Marketplace). To disrupt these companies, all it takes is for Stripe to open shop in India. Nobody would then have any incentive to use these payment gateways and they'll start seeing their market share diminish.
Somehow the rather unfounded assumption was say they serve 50 million customers today and Indian population was 1.25 billion so there is opportunity to grow 10-20 times. The simple fact is 50 million might be close to maximum market size as remaining population simply do not have that kind of incomes to sustain e-commerce companies peddling frivolities. I say frivolities because if I am earning USD 5K/year equivalent in India I am in top 1.5-2% Indians. By Indian government tax data less than 3% people file income tax returns in India and remember those all who file returns does not necessarily means they pay income tax.
There is of course no reason for Flipkart/snapdeal founders to admit basic facts as their companies made them fabulously rich.
India is definitely poised to become a booming e-commerce market but it has no where near peaked for Flipkart/Snapdeal to be content with. They just cannot depend on the Indian marketplace alone. Just because we are 1.25 billion strong and will probably adopt cashless means does not automatically make us a market for Flipkart/Snapdeal. They have to compete to get the marketshare. The market is dictated by one who is not just innovative but also caters to all sections of the diverse society. Sadly, only Amazon is able to currently provide a complete experience even though it's a late entry into the Indian marketplace. Flipkart/Snapdeal is already losing a major portion of their marketshare to Amazon and that decline is going to continue unless they expand and compete directly with Amazon in their own turf. Innovation alone cannot sustain Flipkart/Snapdeal.
The consumer market is still heavily dominated by the US and European countries. If they do not expand they are doomed. They do not have enough cash to compete with the likes of Amazon/Ebay who have a better inventory and provide access to the global marketplace.
The fees are 1 rupee for every 2000 rupees (i.e. 0.05%), so with a 1% cashback card, each time I were to charge 2000 rupees, I would get back 20 rupees, but pay out 1 rupee in fees to Snapdeal, making a profit of 19 rupees. Repeat 1000x per day, I'm now earning 19000 rupees a day, sitting at home.
I guess Snapdeal won't deliver 1000x per day to the same address, and perhaps 1% cashback cards don't exist to begin with ...?
https://decipherdemon.blogspot.in/2016/12/a-monumental-disat...
https://ajayshahblog.blogspot.in/2016/11/trumping-black-mone...
https://ajayshahblog.blogspot.in/2016/12/the-demonetisation-...
Local smartphone based payments also require infrastructure which is not always available in india, power and connectivity can be very spotty even worse than some places in Africa. Also with most of these micro payment services they don't really use new tech, a lot of the time it's still based on SMS and is rather insecure and prawn to fraud.
You aren't going to be issuing smartphones with NFC and fingerprint readers and the terminals needed to accept such payments in impoverished regions.
Anything like Google/Apple pay and you need a bank account which many of those peoples don't have or don't want to have/use, and the Government is unlikely to like a secondary economy like in some African countries which is based on cash bought prepaid call minutes which are then used as currency.
In most countries Cash passes through banks or clearinghouses after a transaction is completed.
Your employer pays you with a cheque or a bank transfer; you take out cash from the ATM; you buy groceries with that Cash; The store deposits the Cash at a bank or a clearinghouse and receives a cheque or has it's account debited.
In this chain the majority of transactions; even cash transactions are "on paper", the problem with India is that people effectively trade with Cash without involving the banks; you get paid in cash (w/ no taxes paid); you buy something from the local grocer w/ cash w/o any recepiet; the local grocer pays their suppliers with cash again often w/o any receipts; pays their employees with cash and so on and on.
This means that the majority of the transactions are in effect conducted in grey or black markets.