Can you elaborate on the "disaster" of demonitization? The only things I've read have been breathless tech press coverage about online transactions and such.
I have not really done any elaboration here. I would just link you to https://www.google.com/search?q=how+india%27s+demonetization.... I can answer follow up questions if any (or hopefully others might pitch in whether disagree or agree). I am assuming you are not from the place. I am not into finance and economics so I will try my best. I have one foot in an Indian metro and another in a village near a small town and I travel extensively during that time (in fact I happened to backpack across a fair portion of the country for 2 months during that period).
And yeah, a lot of initial tech coverage just limited themselves to the failed online transactions (and similar issues in the cities) and completely ignored what was happening to the rural people and people in the small towns where most of India lives and does business. It was far far far worse.
I never said it does and I never said that demonetization was successful. I was just replying with first hand experience that impact of demonetization was not too bad for the people from what I saw and that the google will show what you want it to show.
>It's insane that even educated people don't accept the truth and get carried away by emotional rhetoric
What made you think that I got carried away by emotional rhetoric?
Refusing to accept or understand failure means that there is something else that makes you argue for it even when there are explicit results for everyone to see. Also it was not directed at you personally, rather at anyone who supports this decision still.
Again, the amount of impact it has caused is there for everyone to see. The numbers are out. Arguing anymore about this is like arguing with flat earth society. Let's not downplay the Poor's suffering.
That's your opinion. Two people have already mentioned that what they saw is inconsistent with what you claim everyone can see.
Do you have a personal anecdote to share that describes your experience? If yes, do so.
Do you have substantive evidence that your experience has been the experience of the majority? If yes, cite such statistics from trusted sources.
The thing which is currently confusing and causing slowdown is GST implementation. Most businesses don't know what to do. This is to be expected. Feels like the govt wasn't fully ready with a streamlined implementation.
Describe your experience anecdotally or provide citations when you make broad claims about the country's experience, and speak substantially in both cases.
I understand that India is a developing country so growth should be faster but 6% is not that bad.
This is on the backs of a ridiculous plan to demonitize cash, in a cash based economy.
We saw an immediately slow down when GST hit. Certain sectors were entirely dead - real estate - for a while.
It’s been nearly 6 months, and the pain in the informal sector is now whip lashing its way into the formal economy.
Indians are born children - you are not taking toys away to make them behave.
Sorry for your loss pal. Lets hope things look up soon.
1. Promises Promises: The PM unveiled the scheme abruptly (no woes here), promising people discomfort for a week... Then two weeks... Then a month... And then literally six months. You can see how things slipped out of controls as the initial "discomfort deadline" was a mere week.
2. Impeccable Planning: The new Rs 2000 note was not made to-size with the current ATM standards. As a result, the entire nation's ATM machines had to be modified. That is so big a blunder, it felt like I was reading The Onion when I read that one.
3. The Verdict: This one was the real eye opener. I was sympathetic to the entire humdrum, the months of inconvenience caused to everyone. (Full disclosure, I was not in India during the time. IMO, I can still have an opinion on the matter). But if it really did solve some parts of the black money problem, some good would have come out of it. In the annual RBI report, it was mentioned that ~99% of the currency flowing in the form of Rs 500, Rs 1000 notes was returned back to the banks. This implies that 99% of the currency is now legal, white money. That less than 1% of the currency was unaccounted for, and that's the money gained by the RBI since those notes are now rendered invalid. Source: http://www.thehindu.com/business/Economy/only-12-of-demoneti...
In this light then, I can't help but think of the entire process to be shaky.
Edit: The link was an AMP link. Sorry about that.
Now they may have underestimated the logistical issues to verify how much currency was returned.
Communities/businesses who had good credit networks survived/weren't affected, those who didn't suffered.
Fair Point.
it wasn't done to help poor people. it was a ploy to win elections in UP and a successful one at that.
Small towns are towns like Barmer, Dausa, etc.
Remember: nearly 70% of India lives in rural areas. Your "small town" of half a million doesn't reflect the reality of these 900M people at all.
But I agree on the bias part I should have just suggested to search "India + demonetisation" and only suggested to play with the search terms as in adding words like "effects", advantages, disadvantages etc.
> Jammu
And the villages and towns I am talking about (esp. in the hinterland and the North East) are something entirely else if I consider Jammu a small town (I say this relatively)
You were lucky!
They mention a parable about a crocodile, where things will eventually re-adjust to favor the black market just as much as before, and these policies are just an inconvenience.... I'm not sure I understand how that would work, if transactions really do start to shift online.
It seems to me that at the very least these policies will shift things in the right direction? Or is that an incorrect interpretation of the situation?
Is it more a case of botched roll out of policies that are essentially positive for india, or is it just a political maneuver that won't change anything?
- India is a cash based economy. Most people, apart from the few doctors, lawyers, engineers etcz, are paid in cash and in turn pay for everything in cash.
- Since many businesses operate entirely in cash, revenue figures and tax payments are entirely self reported. The govt sees less tax receipts than it thinks it should.
- in November 2016 the govt decided that all high value notes were no longer legal tender and had to be returned to banks. The idea at the time being that businessmen who had hoarded mountains of cash would be forced to let their wealth disappear or deposit it and explain their sources of income. Also, people indulging in illegal activities such as politicians accepting bribes would be forced to throw the money away
- That's not what happened.
- As I said, the economy is cash based. With everyone's cash invalidated and the ATMs requiring retooling before they could work with the new notes, the economy ground to a halt. People stopped making purchases they otherwise would have, both large and small. They bought fewer TVs and washing machines, and also fewer cigarettes, fewer meals at restaurants, fewer clothes, fewer vacations. Every single sector saw their revenues fall, and a lot of people, mostly rural, lost their jobs. Farmers at the time were selling their produce for less than a tenth of what they did previously because they were desperate for money. So yes, GDP took a hit. But it's cool because the govt fudged the figures and made it appear better than it actually was.
- The real kicker however, is that the people with mountains of cash figured out ways to move that money into their accounts without raising any eyebrows. Brokers that did this merely took a 10-15% cut, rather than the 30-45% cut the govt hoped to take. 99% of notes were returned, hardly the success the govt hoped for.
- Later they changed the goalposts, claiming that the goal of this exercise was to promote digital payments, not catch the tax dodgers. Hogwash.
So to recap
1. Govt comes up with stupid scheme.
2. Implements it poorly when replacement notes are not available.
3. Scheme fails, innocent people are hurt, jobs are lost, growth grinds to a halt.
4. Govt shifts goalposts and claims victory.
Sources
1. The high economic costs of India's demonetization - https://www.economist.com/news/finance-and-economics/2171384...
2. Growth remains sluggish a year later - http://m.economictimes.com/news/economy/indicators/most-accu...
The productivity loss was immense and somehow no one seems to care about it.
Isn't this a victory? The money is in the system now, can't it be tracked better?