In Its Third Month, India’s Cash Shortage Begins to Bite
nytimes.com
nytimes.com
1) The strongest reason for pushing it was as an attack on "Black Money" (undeclared wealth outside the taxation net). More than 90 -95% of the demonetized currency is back in the coffers. This magical "back money" is nowhere to be found.
2) The growth rate fell by at least 1% - whatever the other impact this by itself means a massive loss.
3) A large number of "cash only" small-scale businesses have been badly hit - these people are not internet savvy and do not have a voice but they do exist
4) The so called "leap" to a digital economy is mostly a temporary phenomena - just wait till the new currency is available in sufficient quantities
So on balance - all the pain and suffering of the people will NOT bear the reward most of them think it would.
Edit: Source for #1 http://timesofindia.indiatimes.com/india/90-of-scrapped-note... Note that the actual number will be higher as newer estimates are released.
In addition, bank managers also acted in complicity with rich black money holders by documenting that their currency bills were actually exchanged by multiple ordinary folk, whose IDs' copies (necessary proof for exchanging) exist in large numbers at any bank.
Now, the question you should ask is - How much of black money was in cash? The answer is approx. 6% according to Min. of Finance White paper on Black Money. So, effectively - 86% of the currency was demonetized to target 6% of unaccounted income. No matter how you slice/dice this policy, the costs significantly outweigh the benefits.
[0] http://timesofindia.indiatimes.com/business/india-business/8...
[1] https://www.bloomberg.com/news/articles/2017-01-04/india-sai...
http://www.livemint.com/Industry/RlRLIaViu44DYPKASuX76K/Bank...
https://en.wikipedia.org/wiki/Mint_(newspaper) https://en.wikipedia.org/wiki/Shobhana_Bhartia
I would rather have some trust in the official RBI's figures, because they are accountable unlike some website.
I doubt you read the link I posted. The report was from Bloomberg not Livemint. Would you now discard that too based on another tenuous link?
https://www.bloomberg.com/news/articles/2017-01-04/india-sai...
> I would rather have some trust in the official RBI's figures
RBI has been unusually silent on this. As of December 10 (21 days before the final date), 80% of the demonetized currency was back into the banks [0]. So, even if you trust the RBI figures - don't keep your hopes high.
[0] http://timesofindia.indiatimes.com/business/india-business/8...
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx
PS: I am not trying to argue for the sake of arguing, I really would like to know the numbers to apprise myself.
The Bloomberg report is based on sources. For a moment, lets discard the Bloomberg reports and look at actual numbers from RBI. The data from RBI on December 13 shows that 80% of the demonetized currency was already back into the banks. RBI has not released data beyond that point of time. Based on a reasonable guesstimate, I would expect the final number to definitely touch 90% or above. Besides, we already know that unaccounted income in cash is 6% - so don't expect a number lesser than 90%.
Can you clarify?
Source: http://indianexpress.com/article/business/economy/demonetisa...
https://www.google.com/amp/www.livemint.com/Politics/uJnq2fp...
Edit: Also the image used clearly shows Indian Congress party supporters (identified by numerous flags with the hand symbol) yet they are termed as generic "activists" rather than supporters of a specific political party.
Photo taken by a viewer: https://i.redd.it/sxd9if9qimwx.jpg
Nepali note: http://www.banknotes.com/NP43.JPG
"Live from Tripoli." [1]
There was one guy, Gordon Chang, who keeps predicting a complete collapse (not simply a crash, which is expected to happen from time to time) of the Chinese economy. Because his articles get published, the Chinese have now declared that western media has predicted a collapse of the China is imminent, when...if you search for China economic collapse, you only get Gordon Chang's articles, as well as the Chinese articles saying the western media has homogeneously predicted that. I don't know, perhaps they think western media speaks with one voice like Chinese media does, and fail to see the possibility that several viewpoints and opinions could exist.
Likewise, there are many things about China, like air pollution and internet censorship, that the western media fails to convey the full negative effects of. This is mostly a technical limitation, for sure, but people still come to Beijing and are surprised how bad the air really is along with the fact that they really can't use Facebook there.
1. "A Photographer’s Homage to an Architect’s Modernist City": http://www.nytimes.com/slideshow/2016/11/03/t-magazine/art/m...
2. "Mark Morris’s Love Letter to India, Through Music and Dance": https://www.nytimes.com/2016/10/23/arts/dance/mark-morris-so...
3. "How Do You Hail a Tractor in India? All It Takes Is a Few Taps on Your Phone": https://www.nytimes.com/2016/10/18/world/what-in-the-world/t...
That's just a quick look at recent news, and given that the NYT has to be feeling pretty down about the overall state of politics worldwide right now I doubt that's even a fair slice.
Honestly some of those are actually pretty nice/interesting pieces, which does bring up a point: I've long given up on making media more positive generally, negativity sadly seems to sell pretty well, so you have to go to alternates/aggregators that are better (including HN). But I really do wish there was at least a filter for "positive stories", a simple binary the NYT or WSJ or WP or whomever would use to broadly categorize stuff that was about /disaster/war/death/crime/terrorism/fights/eldritch horrors from beyond space time/ vs anything else. If you just go making a list of other stuff from a lot of media you might be surprised about the kind of interesting pieces that tend to get lost in the noise, and the important perspective on progress in the world it brings. Broad categorization seems perfectly doable there, doesn't need to be perfect to be highly useful in raising s/n, and I'd love if outlets would just do it themselves and see how their readers react to having a choice. I guess at some point ML/AI assistants might be able to do a helpful job based on word stats, but it'd be best if whomever wrote the article just tagged it at the start.
And to be fair, almost everything the NYT says about the US is negative, too.
Not the same way that the NYT portrays India. They repeatedly reuse racist stereotypes in their coverage - even in their headlines. I've never seen anything quite so appalling in their coverage on the US. It's a whole new level. It's gotten a lot worse since 2013/2014, which is when Barry and Baquet took over.
And sometimes they can't even be bothered to do the most basic fact-checking or even issue corrections to online articles about India, the way they almost always do for US coverage or coverage of other regions. It's really awful.
I don't know about that. Every time I read an article related to something I know about personally, there are multiple problems. You won't see an NYT article about guns, for instance, that isn't riddled with errors.
Left-leaning media (like the Times) is generally pretty bad when covering guns, yes. But it's nowhere near the level of blatant disregard for facts that the Times has when covering India.
The dislike for India is quite old, and entirely of a distinct kind... and India for shame is only too willing to be a plaything of the WASPs. The hatred that runs deep in the culture appears far more visceral IMO... not surprising that Humanities depts in the US would reflect this more markedly.
I'm reminded often of the picture of the देव-असुर binary; more amusing considering the ancient shared origins of IE people.
Ellen Barry has been the South Asia Bureau Chief since 2013, and for some reason, she really has a personal vendetta against India. Some of her stories seem somewhat reasonable if you read them by themselves, but if you look at her articles on India all together, it's clear what her bias is.
And some of them are just utterly absurd even by themselves. It's pretty disgusting.
The NY times also deliberately ignores the positive outcomes e.g. housing loans are now coming to a six year low, online transactions are increasing (which increases tax inflow to the govt. by bringing previously unreported transactions to tax bracket).
Most daily wage labours and farmers did not face any issues as pointed in this article. They were able to buy food items and necessary stuff and pay the vendor later. India runs on this kind of mutual credit system.
How is this scheme a success? The amount of unaccounted income in cash is 6%, the amount of currency demonetized was 86%. The benefits are minuscule compared to the costs.
If folks have a lot of money stashed away in their house, tax free - and they dont' turn it in, that money is lost. Moving forward, it will be more difficult to do the same sort of thing (in theory) because of the sheer inconvenience of storing up all of those small bills. And if the people do, in fact, wind up being more upfront about their monies, it'll mean more tax revenue for the government - you know, for all the stuff governments want to do. Roads and security and improvements and such.
Basically, this is a push for a better future, with some inconveniences and unfortunate stories in the present. There is some hope. Hope is pretty important.
I'm not sure the benefits are so minuscule compared to the costs.
There is nothing to suggest that there would be any change in the future. The incentives and mechanisms still exist. We can hope and think whatever we want - the reality still lurks around.
The benefits are absolutely miniscule when you demonetize 86% of the currency to target 6% of unaccounted income in cash.
The amount of unaccounted income in cash is 6%. You can definitely have positive outcomes but the costs outweighs the benefits. It's like using an elephant to kill an ant.
I've been looking for this info. How did you arrive at the 6% figure, is it in the NY Times article? Honestly I thought it was a lot bigger, at least low double digits.
Just like accounted income, owners do not prefer their unaccounted income to be in cash - they use real estate, gold etc. to park them. This 6% figure is from the Ministry of Finance white paper on black money.
Basically, the formal economy exist within a thin margin of every day purchases. Everything above and below is in black.
Of course, there is always a question of whether people can readily access debit cards and bank accounts. I heard stories from the US where even opening bank accounts and having debit cards (with zero credit) was out of reach for poor people for some reason. If that's the case in India then the fact that groceries and rent can be paid with debit cards or bank transfer is of little use to a large fraction of the population.
Otherwise there are plenty of free bank accounts that poor people can get in the US.
About 15% of estimated Indian transaction volume happened online or by credit or debit card in 2015 [1].
[1] https://dazeinfo.com/2015/05/29/online-payment-india-account...
The actual question to ask is, for how long could an average citized go without cash without failing to acquire an esential supply at regular market value? And how does the figure change if you are willing/able to pay at any price point?
[0] https://thewire.in/89578/costs-of-demonetisation-dampening-s...
From the article: "The worst affected by the cash crunch are the country’s hundreds of millions of farmers, produce vendors, small shop owners and daily-wage laborers who are usually paid in cash at the end of a day’s work." This makes sense as daily-wage laborers would form the backbone of any informal ecnonomy, and the lack of ready cash is killing the informal economy.
In reality, the 500 and 1000 rupee notes were removed, being replaced with notes of lower denomination. The time period in between the two is where commerce took a hit, no doubt. But it is also true that with cash back, things will return to normal.
For you, it looks like, it will - no longer standing in the lines for 2-3 hours. But for many others in the country the effects are probably not as easily reversible.
I spent over a week in a rural area and it didn't appear like the agricultural workers were facing problems that would impact their livelihoods significantly. Part of this has to do with the widespread availability of ₹100 notes.
How much black money did this stop?
They efficiently managed to pull off this massive failure without widespread anger.
Words can do a lot of damage than weapons. Gandhi used it for uniting people into a good cause and this guy uses it for his own fantasies.
I'm glad the veil is coming off though. People are disgruntled that it's just talk and no work.
Source: http://www.economist.com/news/finance-and-economics/21713842...
One story told on NPR was of a couple getting married that had been saving money - in cash - for a few years, and had to get it all converted to the new currency before the wedding. All the vendors expected to be paid in cash (I assume because they are all corrupt) and they probably also needed to pay off some corrupt officials. Anyway, they distributed bagloads of cash to enough trusted family members that they were able to convert enough to go through with the wedding and pay all the vendors.
My understanding is that some honest Indians support Modi. I also understand that being honest in India is a fool's errand.
My aunt bought a CD for me from ICICI, an Indian bank, when I was young. Only I can withdraw the funds, and then only into an Indian bank account.
I started the process with another Indian Bank, YES Bank, in February of 2016. I got an account a month later, but online access did not work with a U.S. phone number. Emails routinely took 2 to 3 weeks to be followed up on, phone calls produced conflicting advice and two managers copied me as they went back and forth with other managers berating each other and their respective employees.
In December of 2016, I was able to log into the account. Unfortunately, I'd been tolled fees from February despite receiving assurances from a manager, in writing, that this would not happen. It is now January and nothing has happened.
Note that ICICI only started responding once I wrote a letter to New York State's Department of Financial Services, something that is possible only because ICICI have a legal presence in New York (and I am a New Yorker).
The amounts involved are small. I pursue it because it's right and I don't want to disrespect my aunt's generosity. That said, I would never, ever encourage anyone to deposit substantial amounts of funds for any amount of time, nor any amount of funds for a substantial amount of time, with an Indian bank.
The online banking details were not handed to my parents so I visited again when I went earlier last month and was able to get the online bank details right there. The account activated later that evening and I was able to transfer money the next day.
When I stayed there, I had similar experience wrt opening of accounts as Indian residents with Axis, Kotak and even ICICI. So this treatment is not new or limited to just NRI accounts.
Black money is clearly a problem in India
I doubt the government thought about this at all.
Why is it a problem? I understand that it means untaxed money. But what good will do just removing that money from trade entirely?
If they had inflation to stop removing money from the economy would be good idea but if not they'll cause inflation to drop, maybe become deflation.
Or do they want to print money in place of the one destroyed and distribute it in legal parts of the economy?
The real problem with black money is corruption. When money flows through the banks corruption is much harder to hide.
To reduce bribery (bad for way more clear reasons) they went after the money that was used for bribing. Taking money from the hands of people that dodged taxes is just nice educational side effect.
"Amitabh Kant said that even electronic payment methods may be "totally redundant" by 2020. Instead, all Indians will need for transactions is their thumb or eye.
"Each one of us in India will be a walking ATM," Kant said at the World Economic Forum in Davos. That would represent "the biggest technological leapfrogging ever in the history of mankind," he added.
... nearly 1.1 billion of India's 1.3 billion people have already registered their biometric data under the government's unique identification program.
The Indian government is testing a payments app that makes use of that biometric data, coupled with portable fingerprint scanners that cost about 2,000 rupees ($30) each."
Also since it doesn't have the Visa/Mastercard rent seekiny duopoly and dysfunctional ACH system. It can actually have smoother transition to a UPI based payment system. [1]
[1] https://en.m.wikipedia.org/wiki/Unified_Payments_Interface
1. Obviously Kant doesn't know what criminals do to ATMs.
2. Every copy of your fingerprint or retina-print out there will also be a potential "ATM" that someone else could withdraw from.
It's not so much that demonetization is bad - it's that it's hard to do with no notice. in a country this big. all at once. with so little time to phase out old bills. All the proposed benefits: more ecommerce, reduced black market transactions, better tax accountability could have been accomplished without going to such extremes. I mean, India isn't even using polymer bills yet -- so there will be at least one more big demonetization in the next 10 years.
Yes, there were hardships. But Indians can see the benefits in not only black money reduction, but also in decrease in tax evasion, digitalization of the economy & also reduction of terrorism & anti-social elements like mao-ism, naxalism etc.
In any case, I think we should try & maybe fail & learn from this, rather than let the status quo of affairs go on as it has been since India's independence in 1947. This is probably the first bold move ever in Indian economic history.
Except that you did not exactly require demonetization to achieve those benefits.
Who reports it? So let's say I pay a bribe of $1 million for some significant but slightly illegal favor. Will the 'bribee' report it, or is it the briber?
I'm not sure your angle, but most people are content with analysis, but there is no urgency for action - a situation of "blissful analysis paralysis". What's worse is that, when someone takes an action, any action, these people are the first to raise all sorts of objections against those very actions that were unable to, incapable of, or totally uninterested in taking.
Like repeatedly mentioned in the thread, the costs for this exercise significantly outweigh the benefits. If most people are happy with it, that does not change the benefits to cost ratio. In addition, "trying something" does not equate to success.
By removing the 500/1000s it is now much more difficult to do cash transactions involving large amounts (imagine the cash one had to carry now becomes 5-10 times).
But when doing the above, the govt. also affectively removed 85% of cash from the market - banks did not have enough cash to remit their users. However since then there is increase in cash printed and things are beginning to come back to normal.
Decline in commerce is true, but is also expected short term. As others have posted, things are coming back to normal. The daily cash with drawl is increased from 4K to 10K. People like me are hopeful about a system with more transactions happening online and black money being more difficult to hoard.
http://www.thenewsminute.com/article/while-you-stood-line-10...
10 crore = 1.47 million USD
EDIT: Corrected the conversion.
One thing I've been pretty shocked by is how people are taking it. In India, the ATMs don't work, people are losing their jobs, but it's just a topic of discussion. You can think it's a good or bad idea, all opinions are tolerated.
Compare to the insanity currently happening in the US - riots and political violence spreading, dissidents afraid to speak [1], virtually everyone is angry. It's quite a contrast to see up close. (I flew to India shortly after demonetization, and came back to the US a day ago.)
[1] Just after the election my social calendar was full. All the secret Trump supporters were desperate to talk to someone and I was the only person they felt safe speaking to.
The actual issue right now isn't so much taxes. It's not having physical cash. No matter how many crores you have in your bank account, you can't pay workers (many of whom have no bank account) if you can't withdraw physical bank notes. Further, even if you could transfer money to those workers, they can't buy vegetables unless they can find a vegetable seller who takes PayTM.
In India, most of the economy is cash based. The primary exception is in major cities where credit cards and PayTM (think Indian version of WeChat payments) have suddenly become vital. Suddenly many autowales and small restaurants have PayTM QR codes. Even some vegetable sellers take PayTM!
That interpretation (hiring is less due to having to pay more tax) is likely only a minor part of it. The much bigger issue is likely the lack of actual physical cash since the demonetization started, which is a few months ago now. (Things have started improving only recently.) Lots of people in India - probably the majority - do not use electronic methods of money transfer (due to being illiterate or computer-illiterate, old-fashioned, being in remote areas or other reasons), so depend heavily on cash.
IOW, yummyfajitas' statement:
>It's not having physical cash.
is right.
I don't think those words mean what you think they mean.
I came across many such contractors in my last trip to India, as I had to deal with people involved in a preparing for a family wedding.
The onus here (probably) does not fall on Hero Corp, but on the contractor. The sad part is that, even when the contractor has money and needs to hire people, he will probably try to squeeze the employees on salary citing 'cash crunch'. :@
I fear the latter.
> The International Monetary Fund this month cut its projected growth rate for India by one percentage point for the current fiscal year, to 6.6 percent.
What are those predictions made of?
Modi: Hold my beer