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Comment by vthallam | Hacker News Reader

>Arun Jaitley, finance minister, on Thursday defended the demonetisation at a conference in New Delhi. He admitted that black money had come back into the banking system, but said that tax officials were combing through people’s accounts to identify and tax it. >He said: “The fact that money has got into the banking system does not mean that it is all now legitimate . . . The money got identified with the owner whom henceforth had been fixed with the liability of explaining that money and facing taxation on it.

This is the important part, money coming back to the system doesn't mean people can get away with it. An elaborate exercise is going on and I read multiple stories where the tax dept is sending notices to people with dubious deposits.

Also, This is always going to be a polarised debate. Digital payments certainly went up, people started using bank accounts. Yes, it's not significant, but change is really slow

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This. I think the headline title here is wrong. Prime Minister Modi has always said that demonetisation of Rs. 500 and Rs. 1000 is just the beginning and Step #1. The next step is to probe the bank accounts of these wealthy individuals and give them an opportunity to explain why the Tax has not been paid on it before seizing it.

Unfortunately PM Modi and his government have been constantly shifting the goalposts. In the beginning they did promise demonetization as a way to render all black money null.

Isn't auditing for tax purposes a means of annulling black money?

It is, but the initial claim was that this would basically convert the millions of rupees of black money that's hidden away into worthless paper. That was the promise on which millions of poor Indians were asked to stand in long lines—that even if it inconveniences them, it would inconvenience the rich and corrupt even more.

Clearly that did not happen.

The unfortunate truth, I hope I don't get hate for saying it here, is that those poor people who need the money the most suffered, and even died during the demonetisation exercise

http://mashable.com/2016/11/16/india-people-dying-demonetiza...

>>This is the important part, money coming back to the system doesn't mean people can get away with it.

Nobody with big money worth chasing after deposited money in the banks. There are some real estate developers who preferred to throw money in lakes than give it back to the government.

>>An elaborate exercise is going on and I read multiple stories where the tax dept is sending notices to people with dubious deposits.

Basically any body smart enough to put it back into the bank has long covered their tracks. Also it will take forever given the population scale.

>>Digital payments certainly went up, people started using bank accounts.

Temporarily, I'm back to DeMo days. People and shops around me too. These days if you say you will pay by PayTm they just give you blank stare and ask you to come back by cash.

Question is, was it worth it? Weren't there easier ways to increase Digital payments? Better ways to make people put money into banks?

Was it worth killing people? http://www.huffingtonpost.in/2016/11/17/day-9-demonetisation...

'Killing people' makes it sounds like they were shooting anyone who objected, but that article does do a good job of documenting the human cost of economic dislocation. The abrupt and absolute change appears to have given rise to numerous avoidable problems.

Was it worth extending the status quo where around 1 percent of the population pays any tax at all because of the rampant black market economy? (12.5 million people paid any tax at all on a population of 1.23 billion, source - https://www.cnbc.com/2016/05/03/guess-how-many-people-pay-ta...).

Recently I heard that a guy owned 100 trucks is selling his house for quite a low price. Probably lost a chunk of stashed black money. Well, this seems like the effect of demonetization. This is great. The thieves do deserve this.

That is just one anecdote. OTOH 103 people died in the process, productivity was lost by people standing in lines all day, GDP growth declined by over 2%, RBI's credibility has been destroyed. Sure, some rich suffered, but many more poor lost their livelihood.

Just out of curiosity, what makes you think RBI credibility is destroyed? Indian Rupee seems to be faring well compared to other currencies. Do you have any data around poor losing their livelihood? Last time I checked, street-side vendors continued selling stuff. Most poor people would rarely deal with 500/1000 so I don't know where is this coming from.

A simple google search gets you

RBI loosing its credibility:

http://www.hindustantimes.com/analysis/post-demonetisation-r...

http://indianexpress.com/article/business/banking-and-financ... > This has led to people such as former prime minister Manmohan Singh (himself a former RBI chief), former finance minister P Chidambaram, and former RBI governors Y V Reddy and Bimal Jalan raising concerns about the “harm” to the RBI’s “credibility” and talking of the “institutional damage” it has “suffered” in the process.

http://www.mydigitalfc.com/my-world/rbi-row-oppn-slams-govt-... > “I don’t think ever before, the employees of a government institution especially an independent and respectable institution like RBI have written against its national policy. Very clearly RBI has compromised to an extent never ever before. Prime Minister Modi and his government have destroyed RBI, its credibility and the role of an institution,” Congress leader Sandeep Dikshit told ANI.

Poor loosing jobs

https://thewire.in/157093/1-5-million-jobs-lost-2017-demonet...

http://indianexpress.com/article/india/demonetisation-35-per...

https://twitter.com/r0h1n/status/885774769622196224

3 out of the 4 persons mentioned here (Singh, Chidambaram and Dikshit) are opposition party leaders, so I wouldn't take their statements at face value.

Did you even read the articles? There are 5 people mentioned, two of whom are former RBI governors and apolitical. While Manmohan Singh and Chidambaram are from the opposition, they are noted economists - MMS had predicted back in Nov. 2016 that GDP growth would drop by two percentage points and he was bang on target. The third article was about a letter written by RBI employees about the RBI loosing credibility and the Congress spokesperson was simply echoing their words. I can't provide more sources right now (on phone) - during the demonetization period - ATMs were not working, shortage of new notes, RBI issuing new directives each day because it could not cope, a general confusion all around - all severely damaged the RBI.

BTW, the letter from RBI employees was about mismanagement rather than demonetization perse - http://timesofindia.indiatimes.com/business/india-business/f...

That article that you linked seems to be intentionally ambiguous.

It was about mismanagement stemming from the demonetization, loss of autonomy of the RBI.

Observations are not changing your prior belief. You should change name from "stat(istics)guy" to "con(stant)guy".

I did read the article, thanks for asking. Doesn't change the fact that those 3 persons I mentioned are opposition leaders. And hence I don't take their (Singh, Chidambaram and Dikshit) words at face value. I'm not even questioning Singh's credentials as an economist.

Edit: I didn't realize that you mentioned 5 people in your comment. I stand corrected on that account.

I wouldn't take the statements about credibility at their face value. AFAIK it didn't seem like RBI's credibility got affected. Also, as other poster cited, most of those seem to be the opposition and they are just "concerns" rather than "facts".

With respect to poor losing jobs, that seems like a play around statistics more so than actual facts. 1.5 million out of 406.5 million lost jobs, which equals to 0.36%. Employment usually goes in cycles so we don't know how this relates to the previous year. Given that April is the end of financial year, could it be the case that people usually get fired during that time? I don't know.

I have no meat in this game. I would consider myself as an observer interested in knowing how it worked out. This whole debate is very polarised and it is hard to separate fact from fiction. I would take everything with a grain of salt. As an Indian growing up in the hopes of seeing a developed country, I was hopeful that this could actually be the catalyst that roots out corruption. Unfortunately, that doesn't seem to be the case. Well, we keep dreaming on...

You may debate about job losses, but all of the aggregate effects have been captured by the GDP growth rate which has dipped to 5.7% compared to 7.9% the same quarter last year.

This is mostly due to GST impl. in July. Manufacturing had stopped and warehouses were no longer being filled from March onwards in anticipation of GST.

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