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Modi move a huge blow to purchasing power, may backfire on PM: Swaminathan AiyerAuthor: Swaminathan AiyerPublication: The Economic TimesDate: November 9, 2016URL: a chat with ET Now, Swaminathan Aiyer, Consulting Editor, ET, says there will be some people with black money who will be trapped but there is going to be huge distress on the behalf of lots of ordinary common people holding Rs 500 and Rs 1000 notes who will suddenly find they cannot use them. Edited excerptsThis seems to be a bold move. But will this have the required result because people do not keep stash of cash at home or in their lockers? What they really do is they put an accountant for wealth in the pipeline. Let me say that this particular move is going to cause a lot of pain in the short run to everybody. Life is going to become difficult for everybody from the poor to the richest to the “blackers”, to the “whiters’’ – holders of all kind of money. This is deliberate. I think Modi recognises it. He seems to think that at the end of it there will be a net gain. It is true is that there has been a massive increase in the amount of cash in circulation in the last few years. Some of it will be with people who are using it for various nefarious means for tax evasion and idea is to try and catch them. But in the process, there are millions of people especially in rural where there has always been a cash economy, there is no cheque economy, no credit card economy. So fact is that you are creating a problem for 100% of the people to catch the top 0.1% of the people. So there is going to be huge distress and uncertainty. As far as the real economy is concerned, there is going to be huge blow to purchasing power. All kinds of people who were accepting notes are going to refuse to accept the notes and suddenly huge amount of purchasing power will dry up. There will be complete uncertainty on whether or not anybody can accept this note or accept that note.To try and replace the old notes by the new notes will take a lot of time and in that time there can be a huge fall in sales, very wide variety of items especially those that were conventionally brought. Rs 500 today is not a large sum of money. There are fruits selling at Rs 500 a kg in some cases. So as such, this enormous distress is being created. Will it result in the stoppage of a large amount of black money? In the long run at a discount of 20-30%, the biggest holder will find various ways of getting rid of this money in small lots and pieces into rural India. There will be some loss but black money will not end. Let me also say that the notion that you can stop black money just by demonetisation is wrong. You can run out of Rs 2000 note but even more than that there is something called gold coin worth Rs 31,000. I have already heard that there are people who are doing deals in black money in gold coins and not in rupee notes. So if all that you do as a result of this is to greatly increase the demand for gold coins, it is actually a negative for the economy. On balance, yes there will be some people with black money who will be trapped, who will get impoverished. They may not be able to utilise it because they will lose whatever they have to lose in order to try and convert their money into white but there is going to be huge distress on the behalf of lots of ordinary common people holding 500 and 1000 rupee note who will suddenly find they cannot use them and queue up in front of banks to try and convert these and go through all the paperwork. There is going to be bedlams in the banks and a bad scene for individuals.. There is going to be a huge fall in effective purchasing power in markets of all kinds. There is going to be huge distress in a large number of households. And yes, of course, there will also be distress among certain amount of black money operators or among counterfeiter or Pakistani agents using it. Modi is gambling that there will ultimately be such a positive thing saying I have cracked down on black money and counterfeiters that it will offset the distress being caused to the public. I am not sure that is entirely true. As a political gambit, this is a very risky gambit. It is going to cause a lot of pain to everybody. It may even backfire on Modi.I spoke to a former finance minister just a short while back and the point that he was making is very right. Everybody wants a crackdown on black money. But unaccounted for wealth is not available in cash all across the country. Black money is really in the pipeline and every month the RBI releases the calculation and people have cash balances on their balance sheet. It is all going to be perhaps be water down there. Do you agree with me? All I can say is that there was a huge increase in currency in circulation, tens and thousands of crores which you are probably aware of and there has been some kind of mist on what is this money and where is it going. I think, the point Modi is making is a claim that a large number of counterfeiters including Pakistan agencies have been circulating a very large number of Rs 500 and Rs 1000 notes into circulation. I do not know what the figures are. I do not know how large these things are. So there is a mix of various issues – one is black money, one is a counterfeiting, one is Pakistani agencies. There is a mix of all these things going out there into what is the out there in cash. There has been a debate among economist on what is driving this huge increase in cash balances in the economy, the official ones issued by the Reserve Bank itself. I do not think there is any complete clarity in it. Some people have been arguing that it is the boom in the rural economy, boom in rural wages, higher price of agricultural products have produced this boom. Now if that is true, then trying to crack down on the currency is cracking down on perfectly legitimate agricultural and rural activity. I really worry that Modi has shot himself in the foot. Suppose for instance at the end of it all, it is true that Rs 100,000 crore of black money in the hands of various guys become inoperative, they are unable to use it any more. Okay. So you have levied a penalty on black money operators. But if in the process, you have inflected all kinds of difficulties and harassment on millions and millions of rural people, what kind of political move is that? I had a conversation with Baba Ramdev on this issue some years ago. I said these things do not work. Demonetisation has been tried in many countries. It has not worked. And one reason it will not work among other things is that if you really say that you are going to crack down on currency, people will shift to gold. People will say that a gold coin of 5 grams is equal to Rs 15000. So in effect, they have Rs 15000 notes which cannot be demonetised at all and there will be huge surge in imports of gold. You need to look beyond just a demonetisation. There are going to consequences what will be the reaction of black money people to demonetisation of notes. One answer is let us get away from notes into gold which cannot be demonetised. What will you do then? As I said, the ramifications go far beyond this limited idea that by demonetising a certain amount of currency notes you are solving a problem. The ultimate problem is much deeper one that we are pathetically impotent in stopping illegal transactions of various kinds. The idea that you can make up for that by demonetisation which will cause immense distress in rural areas, immense distress in the hands of all kinds of people who deal in cash, in order to catch that small number of rich people, that small number of rich people are going to get away with a discount of 30-40%. They will find ways of converting this non-legal tender to legal tender by putting into rural areas and various other things like buying gold or whatever. So to my mind, this is very adroit move. It is covered with risk even of a political point of view, it does not seem to me that Modi has done something very sensible. It is a high risk thing politically and I do think it could backfire.View: Why demonetisation can be a vote-loser, not the vote-winner Narendra Modi aimed forAuthor: Swaminathan S Anklesaria AiyarPublication: The Economic TimesDate: November 23, 2016URL: finance ministry is reported to have projected a fall in GDP growth to 5.5% in Q3 (the October-December quarter) against 7.2% in the same quarter last year. It hopes for a recovery after that. But world-class economists in investment banks are coming up with darker projections. With every day of detailed analysis, the mess looks bigger, and projections get darker. Initial projections of a fall in annual GDP of maybe 0.4% are now increasing to 1-2%. Hence, foreign institutional investors have pulled Rs 10,000 crore out of the stock market. The darkest projection comes from Ambit Capital, which predicts that GDP growth in Q3 and Q4 will slow to just 0.5%, and may even turn negative. That would drag down GDP growth in the whole financial year to 3.5%, less than half the previous year’s 7.5%. Less Black, But More Red This implies a recessionary plunge. Ambit Capital thinks the adverse effects will continue into 2017-18, with GDP growth of no more than 5.8%. Remember that the Great Recession after the collapse of Lehman Brothers cut India’s GDP growth from 9.5% in 2007-08 to 6.7% in 2008-09, with a recovery to 8.6% the next year. Ambit Capital is now projecting an economic dip much sharper than in the Great Recession, followed by a weaker recovery. I think Ambit Capital is being too pessimistic. But nobody really knows. Given ‘jugaad’, I suspect people will find ways round their problems, and GDP growth may decline 1%. But even that means Rs 1,50,000 crore gone.Nobody knows how long or deep the economic shock will be. Every day brings reports of distress in new areas. Analysts daily identify new recessionary trends rippling through sector after sector. On the other hand, Mahesh Vyas of the Centre for Monitoring Indian Economy (CMIE) estimates that unemployment actually fell in the week after demonetisation, and theorises that the long queues at banks may be the ‘newly employed’ helping launder black money! There are stories of poor Jan Dhan account-holders getting big payments in return for the use of their accounts for laundering. So, while the media highlight distress, there may be many hidden beneficiaries too. Nobody really knows. High-value notes account for 85% of all notes, equal to 10% of the money supply. Freezing such a huge proportion of money stock has been a massive shock to both consumption and production. It has dislocated activity in rural India, which is cash-based. It has wrecked value chains (from raw material producers to retailers) across all small business, which is overwhelmingly cash-based. The stock market crash and worry about high-value notes have created anegative wealth effect. Elites feel poorer and so are spending less on highvalue goods, including cars, with knock-on effects on tyres and auto parts. Demonetisation has shrunk demand via the money supply. Optimists thought shrinking demand would reduce prices. But since transporters are semi-paralysed, big local shortages have risen. Dilliwalas complain of higher prices for cement and steel, even as cement and steel companies crash in the stock market: both producers and consumers are losers. Non-banking financial companies (NBFCs), which finance small businesses, face huge non-payments of up to 50%, and are in shock. The Reserve Bank of India (RBI) has relaxed its norms for recognising bad loans. But NBFCs fear this may actually induce borrowers to stop payment, knowing there will be RBI forbearance. Upsetting the Small Cart The shortage of new currency notes may ease by December-end. But the economic effects will surely spill over into the next quarter, and maybe the whole of 2017. Hitting black money has hit real estate, a legendary black money haven. But this has multiplier effects on the demand for steel, cement and other building inputs, with ripple effects on transport and housing finance. Employment data show that between 2004 and 2011, construction was the overwhelming source of additional employment. Agriculture and industry provided few additional jobs. This high-employment sector has been dealt a body blow. Nor does it guarantee that black money will be eliminated from real estate. The new Rs 2,000 notes and gold coins may well take the place of Rs 1,000 notes in keeping real estate black.The underlying problems include high stamp duties that encourage understatement of property values. Unless these are reformed, black money will come back. Worst hit is the unorganised sector, a constituency Prime Minister Narendra Modi has rightly been wooing, since it is a dynamo of entrepreneurism that has so far been starved of capital. But it is also substantially a black money sector that pays woefully few taxes. It is what economist Surjit Bhalla calls the ‘missing middle’ in tax compliance. Bank shares initially boomed on the assumption that banks would be flooded with low-interest deposits and would be able to lend more. But now investors realise that the fall in GDP growth and distress among borrowers may herald another spike in bad debts, just as the banks thought the worst was over. In sum, demonetisation has given Modi the moral high ground. But it has also hit the economy hard. If growth pessimists prove to be right, it may be a vote-loser, not the vote-winner Modi aimed for.Blowing in the wind: A Modi victory in UPAuthor: SA AiyarPublication: The Times of IndiaDate: March 5, 2017URL: ’s often said that all politics is local. Voters in eastern Uttar Pradesh may not vote like those in other parts of this giant state. Yet a trip through eastern UP suggests such strong support for the BJP that it will surely win.At the grassroots, local issues usually dominate. But once in a while a national wind blows everything else away. That wind today is Narendra Modi. His national sweep in 2014 was followed by electoral disasters in state elections in Delhi and Bihar in 2015.The Modi wind seemed to be dying. But it has revived with a vengeance. Demonetisation (or DeMo) last November was berated by critics as a human and economic disaster, and even as despotic (by Amartya Sen). They gleefully awaited a voter revolt. The very opposite has happened. After DeMo, the BJP has swept local elections across India.In Maharashtra, a traditional Congress stronghold where the BJP was historically the junior partner of the Shiv Sena, the BJP captured eight of 10 municipal corporations. In Gujarat, the BJP won 107 of 123 municipalities and panchayats. In the Chandigarh local election, the party won 21 of 26 seats. In Faridabad, Haryana, it got 30 of 40 seats. In Odisha, it made enormous strides to oust the Congress from second position and pose a challenge to four-time chief minister Naveen Patnaik.If a wind is blowing from Maharashra and Gujarat through Punjab and Haryana into Odisha, can UP be immune? No, politics in UP today is not local. There is little support for any local BJP leader. The chant you hear everywhere is “Modi, Modi, Modi.”For many liberals, Modi is the mass killer of 2002, beyond the moral pale. These liberals today struggle to cope with the reality that Modi has captured the high moral ground, and can sneer at liberal critics while the crowds roar approval. In one speech, Modi boasted that after denunciations by intellectuals from Harvard (read Amartya Sen), GDP data showed no negative impact of DeMo. The crowd guffawed when he said hard work mattered more than Harvard.Earlier, opponents galore had denounced DeMo. “Demonetisation catastrophe.” “Modi Digs Ditch for BJP.” “Core Insensitivity to the Poor and Rural Masses.” “The poor have to pay for the money laundering of the rich.”I myself wrote that DeMo would barely touch the stock of old black money, would not stop fresh black money generation without major additional reforms, and had caused much short-term pain to small enterprises and casual labourers. I still expect that when revised GDP data come in next year, covering small enterprises excluded in last week’s estimate, that economic growth will show a significant fall.But such economic analysis fails totally to capture the moral dimension of DeMo. It is first and foremost a political move to capture the political high ground, by taking on the dishonest rich in a blunt way that no professed socialists and communists have done. It has strengthened Modi’s charisma, that intangible characteristic that defies easy definition but is enormously powerful, like that of a rock star.Most rural voters say DeMo did not hit them, only the wealthy. Urban retailers say business was hit for two months but has revived. All say Modi is the only politician serious about catching the dishonest and transforming the status quo. They don’t know the many ways in which DeMo was bungled. But after seeing a cavalcade of politicians who swear by the poor and then enrich themselves, they see in Modi a politician from a poor family who has remained personally poor, has no greedy relatives exploiting his position, and is serious about economic development.My fellow columnist Aakar Patel wrote a perceptive column recently saying Modi was by far India’s most credible politician. His charisma rivals that of Indira Gandhi and Nehru, who remained popular for decades despite glaring failures. Modi too can shrug off failures like job stagnation and implementation bungles in DeMo. Aakar is an articulate, vocal critic of Modi. Yet he says, “The BJP will remain the dominant party in India for a long time. And those who do not like it or its policies must face up to this fact.”Aakar says Modi will survive even if he loses in UP. I agree, but must add that Modi will almost certainly win in UP, paving the way for re-election as Prime Minister in 2019.After political dividends, notebandi can also yield economic dividendsAuthor: SA AiyarPublication: The Economic TimesDate: August 15, 2017URL: his Independence Day speech, Prime Minister Narendra Modi said demonetisation (DM) was a great economic and moral success. The more modest claim of the Economic Survey, Volume 2, was that the long-term benefits would outweigh the short-term costs.I believe the short-term term costs are understated, and were exacerbated by terrible bungling in execution. Even so, the long-term benefits may, indeed, exceed the short-term costs.Pathetic planning meant that DM led to an acute cash shortage. Basic maths would have shown that printing enough new notes to replace the old would take 6-7 months. Modi could have issued Rs 2,000 and Rs 5,000 notes in 2014, inducing black money operators to hoard these, and demonetised these in 2016, sparing the Rs 500 andRs 1,000 notes held by ordinary folk.Size Does Matter That would have greatly reduced dislocation and distress. It was crazy to change the size of the new notes, shutting down ATMs designed for the old notes. This led to enormous queues at banks in which many people died.This government’s first Economic Survey said India was in a “sweet spot” for achieving 8-10% GDP growth. In fact, after achieving 8% in 2015-16, GDP growth fell in every quarter of 2016-17. The fall in the last two quarters was clearly exacerbated by DM.Gross value added (GVA) in the final quarter grew by just 5.6%. Excluding public administration and defence, it was only 4.1%. Excluding agriculture (boosted by a good monsoon following a drought), it was only 3.8%. Even these are underestimates, being based on data from mainly large industries, not the informal sector that was worst hit by DM. When the revised data arrive next January, GDP and GVA will be 0.5-1.0% less than the current estimates.GoI hoped that a big chunk of the outstanding Rs 15 lakh crore of cash would not be submitted for re-monetisation, hitting big holders. Alas, it seems — though RBI has yet to give its final tally — that virtually all black cash was laundered.Black money operators didn’t go scot-free. They spent maybe 30-35% on laundering cash through middlemen, comparable to the income-tax rate. The Centre for Monitoring Indian Economy (CMIE) found that in the second week after DM, employment and public satisfaction were up, probably because lakhs of people had been hired to stand in queues for laundering. That’s one reason for its popularity with voters.Data mining after DM revealed 1.8 million accounts getting huge cash deposits from people paying little or no tax, rich fodder for future investigation. New taxpayers in 2016-17 totalled 8.07 million, against 6.35 million in the previous year.The Survey estimates that DM accounted for 0.54 million of the increase. Income taxpayers totalled barely 30 million before Modi came to power. So, the additions since then are very impressive. However, the average income reported by newcomers in 2016-17 was only Rs 2.7 lakh. The big fish have not been tax collections in the first quarter of 2017-18 rose 14.8%, faster than nominal GDP. DM aided this improved compliance.Cashing OutA secondary objective of DM was to shift from cash to digital transactions, and from the informal to the formal sector. (This will be greatly buttressed by GST.) Before DM, India’s cash-GDP ratio of 12% (and rising) was among the highest globally. DM caused the ratio to crash in December 2016, followed by partial recovery.In June 2017, currency was Rs 3.5 lakh crore, or 20%, below the earlier trend. Digital transactions showed a similar encouraging trend. If these trends are sustained — which is not yet certain —that will mean major progress.Black money operators keep few of their billions in cash. Almost all is in assets yielding returns. DM has barely touched the black hoard. Nor can it stop fresh black money generation without several supporting reforms.Knowing this, Modi has gone for supporting measures, such as the benami property law, crackdown on shell companies, income-tax amnesties and cut in the first income tax slab to 5% (making honesty cheaper). AroundRs 800 crore of property has been seized under the benami property law, and 1.75 lakh shell companies have been de-registered. Between April 1 and August 5, 5.5 million newcomers filed income-tax returns, against 2.2 million in the same period last year. GST will also improve compliance.Modi came to power promising jobs for all and good governance. He has failed dismally to accelerate formal sector employment. Wages for casual labour have risen substantially, suggesting improved job conditions in the informal sector. But overall employment has been an area of failure for Modi.Hence, he has shifted focus to his other main promise: better governance. He has successfully projected himself as the first Prime Minister for decades to be serious about integrity. He cannot end corruption in the bureaucracy or state governments (which account for 62% of government spending and over 90% of governmental contact with citizens).But DM is one of many measures that have convinced voters that Modi is serious about raising moral standards in business and politics. That has already yielded political dividends. If sustained, it will also yield large economic dividends.Ready to work with CPM to save the country: Mamata Banerjee on demonetisationAuthor: Express Web DeskPublication: The Indian ExpressDate: November 12, 2016URL: the government anti-poor, the chief minister asserted that a few money launderers are profiting due to this 'black decision'.Taking her apprehension against demonetisation of Rs 500/1000 notes to a new level, West Bengal Chief Minister Mamata Banerjee on Saturday said she is ready to even work with CPM, despite ideological difference with them, to save the country. “We may have ideological differences with CPI-M but we are ready to work with it, Congress, SP, BSP to save the country. The anti-people Modi government has imposed an undeclared emergency in the country,” said Banerjee in a press conference in Kolkata.“Congress, Mayawati, Mulayam Singh ji, (Arvind) Kejriwal have protested against the demonetisation issue. Let all the opposition parties work together to save the country,” she said, adding that BJP will lose deposits in upcoming elections.Accusing Prime Minister Narendra Modi of conducting a surgical strike on the common people in the name of unearthing black money, she said that the demonetisation move was taken without any proper planning causing immense hardship. “The Modi goverment had misled the people on the surgical strikes (in POK). The people do not know what had happened,” she said.Turning to Modi’s statement from Japan on the future steps to curb black money, she said, “Now the Prime Minister is threatening the people of the country from foreign land. What will he do? He can put us in jail or shoot us for raising voice. I don’t care. He can also declare emergency,” she said.Demanding immediate withdrawal of the ‘draconian’ decision to demonetise Rs 500/1000 notes, Banerjee said the government’s move without proper planning was dangerous. “I personally visited several banks today to listen to tales of hardship of common people. More than two lakh ATMs are closed, money is not available; people are facing lot of problems,” said Banerjee.Calling the government anti-poor, the chief minister asserted that a few money launderers are profiting due to this ‘black decision’. “Only 1 % people hold black money; why are the other 99% being harassed for this,” said Banerjee adding that it is a betrayal with people.Banerjee reiterated that the common people were facing hardships because of government’s decision.”A sudden midnight decision was taken. But few people in the ruling party knew about it,” she said.Trinamool Congress has already given a notice in the Rajya Sabha for a discussion on the demonetisation issue on November 16, the opening day of winter session of Parliament. TMC leader in Lok Sabha Sudip Bandopadhyay has said the party would bring an adjournment motion in the house on the same day. Mamata also penned a poem on the demonetisation issue.---------------------------Mamata Banerjee @MamataOfficialI have penned a poem on the #DeMonetisation issue pic.V7Rnhpyii6November 12, 2016---------------------------Earlier in the day, Delhi Chief Minister Arvind Kejriwal alleged the ruling BJP and Prime Minister Narendra Modi alerted their ‘friends’ before announcing the move to demonetise Rs 500 and Rs 1000 currency notes.Calling it a ‘big scam’ in the name of fight against black money, Kejriwal said the government’s intention is wrong. He said there have been big bank deposits in the last quarter and that these depositors were warned by the government before the demonetisation move.PM Modi Gets This Message From Aishwarya Rai BachchanAuthor: Puja TalwarPublication: Date: November 12, 2016URL: the last three days, there have been long winding queues at banks and ATMs across the country as cash-strapped people wait to withdraw money for their daily needs.The discontinuation of old Rs. 500 and 1000 currency notes have inconvenienced many and given sleepless nights to those with stashes of undisclosed income.Aishwarya Rai Bachchan, who is usually reserved in her comments, today had a message for citizens and Prime Minister Narendra Modi, making a plea to people to see the larger picture."As a citizen, honestly I will say congratulations Mr Prime Minister. You have gone ahead with a very strong move for your larger plan to wipe out corruption in our country and that's the larger overview we as a country need to recognize. Change is not always comfortable, everyone will find their way to embrace it if they focus on the larger picture," the 43-year-old actor told NDTV.In a surprise announcement, the Prime Minister had announced on Tuesday night that Rs. 500 and 1000 notes will be discontinued from Wednesday midnight as part of the government's efforts to curb black money. Instead, new high security 500 and 2000-rupee notes will go into circulation.Opposition parties, including the Congress, Trinamool Congress, Aam Aadmi Party and also BJP ally Shiv Sena have questioned the move, saying it would inconvenience people.Ever since ATMs re-opened yesterday, there have been hours-long queues and agitated crowd outside them, leading to chaos when most ATMs ran out of money. Lakhs of people stood outside banks for a third day today for long hours trying to replace 500 and 1,000 rupee bank notes.Withdrawals from banks are limited to Rs. 10,000 a day and in ATMs, there will be restriction of Rs. 2,000 per day per card in the first few days, which will later be raised to Rs. 4,000 later. People can deposit the old notes of Rs. 500 and Rs. 1,000 in banks or post office accounts till December.Indian Banks Receive $30 Billion In Deposits: Foreign MediaAuthor: Divya PatilPublication: Date: November 13, 2016URL: banks received 2 trillion rupees ($29.8 billion) of cash after the government's Nov. 8 surprise move to abolish high-denomination banknotes, as customers queued for hours to deposit or exchange the old bills and ATMs ran dry.With the banned bills accounting for 86 percent of money out of circulation, there is tremendous pressure on the nation's banking system to replenish the cash. More than 70 million transactions were recorded through midday Nov. 12, the Ministry of Finance said in a statement late Saturday. There's adequate money in the currency chests at more than 4,000 locations and re-configuration of dispensing machines will be completed within two weeks, Finance Minister Arun Jaitley said.Lenders have been caught out by Prime Minister Narendra Modi's unexpected and widely-praised announcement of the withdrawal of 500-rupee and 1,000-rupee notes, part of a crackdown on tax evasion and the underground economy. Jaitley urged people not to rush to banks immediately and wait for a few days and to conduct financial transactions using electronic transfers, checks and credit and debit cards."A big regret is that people are getting inconvenienced, but currency replacement of this magnitude will cause some problems," Jaitley said at a press conference in New Delhi on Saturday. "There are long, but orderly queues. Such a big currency replacement can't be done overnight."State Bank of India, the country's largest, got deposits worth 478.68 billion rupees, Jaitley said. It handled 543.70 billion rupees of cash transactions in all, including deposits, withdrawals and exchange of banknotes, starting Thursday through 12:15 p.m. on Saturday, Jaitley said. The government-owned lender and its associates account for about 20 percent to 25 percent of the nation's banking system, he said.The government deliberately didn't reconfigure the more than 200,000 cash machines beforehand to help keep the announcement a secret, Jaitley said. The machines are being re-calibrated so that they can dispense new 500 and 2,000 rupee notes, which do not fit into the existing cash trays in the ATMs.The central bank's presses are printing banknotes at full capacity to ensure availability, Reserve Bank of India said on Saturday.'No Mismanagement'The cash crisis has seen people standing for hours in long lines to exchange the now-defunct notes, and political rivals of Modi's Bharatiya Janata Party relaying images of the chaos on social media.About 120,000 out of the 200,000 ATMs are operational, and presently only 100 rupee notes are being disbursed from the machines, according to the finance ministry's statement Saturday. To overcome cash-flow problems people are facing, the government allowed the use of old banknotes to pay court fees and utility bills until Nov. 14. It had earlier also suspended collection of tolls on national highways through the same period."The first few days are going to be a period of inconvenience, but long-term advantages of this are to the overall economy," said Jaitley. "There is no mismanagement at banks. Had that been the case then not so many people would have been serviced."Mamata dialling Yechury was a "desperate call" to save her corrupt leaders, says CPI (M)Author: PTIPublication: Date: November 13, 2016URL: Bengal CM Mamata Banerjee today called the CPI (M) general secretary, Sitaram Yechury, and urged him to wage a "united fight" against the BJPKolkata, Nov 13 West Bengal Chief Minister Mamata Banerjee today called the CPI (M) general secretary, Sitaram Yechury, and urged him to wage a "united fight" against the BJP and its "anti-people policies".A senior CPI(M) leader, however, gave her a rebuff, describing the call as a "desperate call" to save her own party leaders who were allegedly involved in corruption."Yes, today Mamata Banerjee called Sitaram Yechury and told him that all the opposition parties should come together to put up a united fight against the BJP. Yechury replied that since he was travelling, he could only comment on the matter after discussing it in the party," CPI(M) politburo member Mohammed Salim told PTI.He described Banerjee's phone call as a "desperate call" to save her own party leaders who were involved in "corruption"."This is a desperate call and an attempt to save her own party leaders who are allegedly involved in the Saradha and Narada scams. What is the credibility of the Trinamool Congress (TMC)? How can they talk about fighting against black money when her (Mamata's) own party leaders are involved in the Saradha scam and have been arrested," Salim said."When her own party leaders have been involved in Narada, this is nothing but a political gimmick. Those running their party in West Bengal through corruption should not talk much about black money," he added.Salim alleged that a "political match-fixing" was going on between the TMC and the BJP and that was why the CBI probe into the Saradha scam had "gone slow" over the last one-and-a-half years."They should first come clean on the Saradha scam and then talk about black money," the CPI(M) leader said.Banerjee had yesterday said she was ready to work with the CPI(M) and other opposition parties such as the SP, BSP, and Congress, despite ideological differences, to "save the country" from the NDA government.Raghav Bahl and the depressing jugaad of Indian journalismAuthor:Publication: Date: November 13, 2016URL: like no one’s watching, Sing like no one’s listening, and Write articles in the mainstream media like no one’s fact-checking: This seems to be the modern mantra. And one devout follower of this mantra is Shri Raghav Bahl, founder of the Bloomberg-Quint, an Indian online “Business and Financial” site, in tie-up with the worldwide giant Bloomberg. Bahl displays his fact-free lifestyle in a particularly obtuse piece titled: PM Modi, Demonetisation ‘Brahmastra’ Could’ve Avoided Hurting PoorAs is fashionable these days, the piece starts with an example of the quintessential maid, who is dumb enough to be conned into giving her Rs 5000 (in notes of Rs 500) to some “friend” shopkeeper for just 5 notes of Rs 100. Maybe this maid studied at FTII, but I have 2 maids (house-helps to be politically correct) at home and 1 at work; and all 3 of them knew exactly what was going on. Hope this maid of Bahl’s fantasies isnt like one of those fake “gau rashaks attacked me” stories.Bahl’s entire article argues that the government should have given time to people till 31st December. That may sound so good given the reports about inconvenience people are facing due to long queues at banks. But Bahl himself agrees that giving this time could have given an escape route to people with unaccounted cash, who could have indulged in some deals to turn that cash into white money or legal assets. Now they can’t deal with that cash as it’s no longer a legal tender.So what exactly is Bahl’s point? He essentially says that people can still do some “jugaad” and convert their unaccounted cash into white money. He offers ridiculously simplistic explanations (actually there are no explanations, just fantastical stories) in his article as how this jugaad can happen. If only real life was so simple as if playing a video game with cheat code.In this video game that Bahl is playing through his article, there is a character called “Rambhai”, the quintessential corrupt businessman. Before we get to how Rambhai actually manages to get rid of his ill-gotten cash through jugaad, let us study his character, through Bahl’s own words:“At 8 pm on 8 November, Rambhai would have finished a greasy vegetarian meal and settled down to listen to his hero, Prime Minister Modi’s specially televised address.”You say it best when you say nothing at all Raghav-bhai. What Bahl wanted to say was Rambhai was a Hindu, high-caste Gujju (hence vegetarian), possible gau-sevak, corrupt Modi bhakt, but wrapped it in euphemisms like “Ram” bhai, and “vegetarian meal”.Now that we know Bahl’s Rambhai, let us enter Bahl’s cuckoo world where all laws cease to exist and only jugaad (which he never cares to explain) reins.So Rambhai apparently has Rs 1 crore in unaccounted cash, which he has to finish before the deadline of midnight 8th November. How does he do it? Simply pays Rs 60 lakhs to a goldsmith (Shyambhai) for buying gold at 8.45 pm, and subsequently, at an undisclosed time, pays Rs 40 lakhs to a Tata Motors dealer for a sparkling new Jaguar XF.Forget about the gold for a bit and let’s talk about the Jaguar. In Bahl’s world, Tata Motor’s showrooms are open beyond 8.45 pm at night. Nonetheless, I checked up with the local Mercedes showroom for the procedure to buy a car. They said irrespective of my mode of payment, I would need to submit my PAN. Why, because a PAN is mandatory while buying or selling a four-wheeler that requires registration under the Motor Vehicles Act, 1988, irrespective of its value. PAN is also mandatory for all transactions above Rs 2 lakhs. And more recently, there is a levy of 1% TCS on sale of all motor vehicles costing over Rs 10 lakhs, which again entails a declaration of PAN.How does Raghav-bhai imagine Rambhai will avoid all this reporting? Jugaad. Yes, he says that the local auto dealer of Tata Motors would do some “usual jugaad”.So is Raghav-bhai suggesting that Tata Motors would sell a luxury car worth Rs 40 lakhs without an invoice? And would account for this mysterious disappearance of inventory by claiming “Modiji ne kiya hai”? Or does he suggest Tata Motors does not maintain documentation for purchases and the entire product chain, which is why it is so simple for them to do this magical “jugaad”? Maybe this is why Mistry was sacked then?Since there was no explanation or hint of this jugaad, I tried to hazard a guess; maybe the dealer puts a dummy guy’s PAN. Cash from Rambhai but PAN of Laxmanbhai (why should only Bahl create characters?). But even in that case, the dealer has to register the car in Rambhai’s name only. So again, it will be a mismatch and this jugaad can easily be spotted as fraud by authorities.So there is no explanation of how this “usual” jugaad is happening, but we are supposed to believe that it is happening. Going further, Raghav-bhai mentions that “Rs 40 lakh of black money has made its way into the Tata Motors’ balance sheet”, so how does this exactly work? Tata Motors dealer doesn’t do any documentation which incriminates Rambhai, YET, the money is reflected in Tata Motors accounts. Super-Jugaad this.At this point I was reminded of a post that I saw on Facebook by one of my friends. He claimed that some bankers were taking “cut” of 10% and converting unaccounted cash into white money. How? In the same Facebook post he claimed that he doesn’t know how, but this is happening. I laughed at such rumor mongering, but now I think he should be hired by Raghav Bahl as a senior correspondent at The Quint. He can also drop words like cut and jugaad without any explanation. Poor guy is writing Facebook posts when he could have written ing back to the Bahl’s Rambhai, he gets a car and gold and apparently all his accounted cash is now white, because taxmen are blind not to see a luxury car or glitter of gold. Yes, in Bahl’s story, Rambhai is all cool and safe. Now the story moves to Shyambhai, the person who sold gold to Rambhai and is saddled with the cash now.How does Shyambhai get rid of this cash in Raghav-bhai’s wonderful lala land? He buys a Harley, an iPhone and an “Italian Jacuzzi”. And just like that Shyambhai’s problems are over too. But what about the sellers of these goods, the other “bhais”? How do they account for this sudden cash without raising invoices in the name of Shyambhai? Unless Multinational companies like Harley Davidson and Apple also practice the “Tata Motors Jugaad” of not maintaining records yet adding to their topline?But this is the example of just one Rambhai, what about the millions of such Rambhais? Well, Raghav-bhai has an answer for that too:“They will round up 1 crore poor, unemployed people all over the country, especially in small towns and far-flung villages. For 50 mornings, these 1 crore people will throng banks and post offices, depositing cash in small quantities in their hitherto unused Jan Dhan accounts. Each will deposit an average of Rs 3 lakh, until Rs 3 lakh crore are in the bank.”Of course, rounding up 1 crore poor people and ensuring 100% secrecy and privacy for such dealings is so easy in the video game real world. I mean if the “Tata Motors Jugaad” is doable, why not this? It’s not as if the Government can not trace and monitor this sudden spurt in Jan Dhan Accounts now, can it?And that is how Indians like Rambhai and Shyambhai would have made their way around Modi’s seemingly impregnable plan. So easy no? And with that, Raghav-bhai proves that while corrupts like Rambhai and Shyambhai are all cool and safe, the poor and honest are inconvenienced by standing in queues and struggling for ready cash.And why is this all believable? Because the learned Raghav Bahl wrote this all while chewing on his beef steak after signing a petition for PETA (hey, even I can hazard a guess on Raghav-bhai’s dietary habits going by his world view right?). And of course because no Government or media body would ever dare take any sort of action an any of the highly misleading content. Why? Because then Raghav-bhai would scream “Emergency”.The chattering classes just don’t get this surgical strikeAuthor: Swapan DasguptaPublication: The Times of IndiaDate: November 13, 2016URL: unintended consequence of the demonetisation of the Rs 500 and Rs 1,000 banknotes last Tuesday evening was the onrush of concern among the chattering classes — at least those that love to proffer their views on social media — for their maids and maalis. “How will they manage?” became the overriding concern of that section which would rather have preferred that the Prime Minister expressed his concern about the black money menace and then proceeded to do absolutely nothing about it.Don’t get me wrong. It is not that there wasn’t any dislocation of everyday life or that there was no panic triggered by rumours and a paucity of information. There was. The Pakistani Uber driver in London who told me that India had confiscated the money of its people may have been wilfully gloating, but he was also reflecting the panic that inevitably sets in when something so dramatic happens abruptly. And the section of India that is either too poor or too disconnected from the media to gauge the implications of such a drastic financial move is quite understandably nervous, even if they have never seen a Rs 1,000 note.This is also to be not unmindful of the chattering classes’ real concern for the welfare of their maids, maalis and vegetable vendors. In all likelihood, they were aware of the dramatic consequences of the government move and, indeed, may have earlier even argued for zero tolerance of black money — while, at the same time, pointing out that no government would do anything because the politicians were part of the problem. It is just that they did not want Prime Minister Narendra Modi to run away with all the credit for finally acting on his promise to effect a surgical strike on a problem that had begun plaguing India since the late 1960s, after socialism, high taxes and plain venality forced many Indians to make dishonesty a way of life. Just as their notional faith in democracy didn’t prevent the angst-ridden classes in America from coming out on the streets to protest Donald Trump’s victory in a free election, the disquiet in India was not against the measure but the man whose political will made such a bold step possible.That indeed is the issue that baffles the bleeding hearts. The fact that a politician had directed a strike that is calculated (among other things) to decimate the rogue war chests of the political class as a whole seems quite inexplicable. After all, conventional wisdom had deemed that election funding was entirely a function of the underground cash economy, as indeed were lucrative businesses in property and mon sense and anecdotal evidence suggests that politicians are inclined to pamper their assured vote banks. Mamata Banerjee, for example, won’t stand up for gender justice on the triple talaq issue because she is far too dependant on the support of conservative Muslim organisations; and the Congress will drag its feet on fast-tracking the citizenship of Hindus and Sikhs from neighbouring countries because it wants that facility to be extended to Bangladeshi Muslims in Assam and West Bengal and even the Rohingyas from Myanmar. By that logic, the BJP would be loath to hit at the material interests of the trading community that has faithfully stood by it for long. It is hardly a state secret that the biggest source of black money generation is trade.What we are witnessing is something quite fascinating — the ability of an elected leader to use his mandate to look beyond sectional interests and address the national interest. Modi has actually taken a huge political risk by offending an influential section of the BJP’s traditional support for the sake of a higher national purpose, one that is calculated to make India more wholesome, if properly followed through.In 2007, during the Gujarat assembly election, Modi had come under intense party pressure to waive the dues and the prosecution of more than one lakh farmers caught pilfering electricity through unauthorised connections. At that time Modi had privately told his colleagues that he would rather step down from leadership than agree to this short-sighted amnesty. His calculation was that the electorate will appreciate forthrightness and loftiness of purpose.In Gujarat, the approach paid off. It is now on test in the whole of India. What we are witnessing is the leadership of a man who looks far beyond narrow calculations and towards the rebuilding of India as a world power. His audacity is admirable, but equally praiseworthy is his vision of India’s future.Lutyens zone works to derail PM Modi’s currency moveAuthor: Madhav NalapatPublication: Sunday Guardian LiveDate: November 13, 2016URL: of Narendra Modi say that from the start of his innings as Prime Minister of India, it was clear from his approach how far he actually was from the characterisation of Modi as vindictive. PM Manmohan Singh sent one of his own Cabinet colleagues to jail and was well on the way to a second meeting the same fate, even while others were made to resign after allegations of gross impropriety. On the contrary, Prime Minister Modi ensured that an official clean chit was given to the then Minister for Coal (Manmohan Singh) during the precise period when numerous allocations were made on the verbal and “unsigned chit” recommendations of key UPA members. No other UPA-era minister has been the subject of even an FIR, much less a CBI prosecution. Indeed, the UPA-chosen director of the CBI, Ranjit Sinha and many other officials were allowed to serve out their terms with dignity and retire with traditional honour. Many key positions within the Modi-led NDA government remain filled by officials who were active in the service of UPA ministers, including some who have been reported as having facilitated illegal transactions, including through the stock, commodity and currency markets. Indeed, several at the top of the present government’s civilian bureaucracy have long had close and open contact with the Lutyens Zone, including with Congress president Sonia Gandhi, who has long been the uncrowned empress of this pool of resourceful and influential policymakers.However, the fact remains that Narendra Modi is an outsider to the Lutyens Zone, and is known for his patriotism, integrity and refusal to act as a facilitator of vested interests nourished over decades by the Lutyens Zone. Hence, from the start of his term, the Lutyens Zone and its component groups have been silently working to undermine the Prime Minister and sabotage or at the least slow down the transformational measures that he has regularly been introducing since the past two years. Along with this, an entire “samizdat” industry has been developed that is designed to discredit the Prime Minister, and this despite his expansive and accepting approach towards those who were all powerful in past administrations. Senior officials in sync with the desire of Modi for transformation of the economy and the governance system warn that the currency measures announced by the Prime Minister on 8 November are being sought to be sabotaged such that public anger will swell to the detriment of the NDA. They are doing this in the context of the reality that the withdrawal of Rs 500 and Rs 1,000 currency notes amounting to 85% of the total money supply (as against less than 1% of the money supply in the 1978 measure targeting Rs 1,000 notes) affect practically all the 1. 26 billion people of the country. Should the measure go sour, the BJP as a party will pay a heavy price at the hustings.The public and economic dislocation caused in the aftermath of the currency-based surgical strike announced by Prime Minister N.D. Modi on 8 November has shown to those officials close to him the importance of ensuring administrative reform at an early date. “Without an efficiently functioning government machinery, the historic plans of Prime Minister Modi will not succeed”, a key official warned, adding that “this needs to be a priority for the coming year, so that from 2018 onwards, people will feel the positive difference” caused by Modi coming to power at the national level.Modi took office on 26 May 2014 with four key governance objectives: (a) making quality education widely accessible at all levels, including technology and vocations; (b) creating a framework for affordable healthcare that would place stress on prevention through measures such as vaccination and providing disincentives to toxic consumables such as tobacco; (c) ensuring that infrastructure reaches a scale and standard as would ensure that citizens be given a smooth interface to live and to work; and (d) work towards an enabling environment for the Knowledge Era that would place emphasis on high internet speeds and universal availability, as well as such essentials as freedom of speech. Thus far, the record has been less filled with spectacular outcomes than expected when Modi took office, and for this, those in government who are committed to his goals are pointing to the administrative machinery, and in particular its still colonial-minded and ossified higher echelons, where procedures and customs from the British-era past have not only been preserved but expanded upon so as to harass the citizen and deny him the rights and freedoms present in other major democracies.There has been a continuous campaign designed to portray Narendra Modi as an over-centraliser, whereas his close associates point out that he is known by those working with him as a decentraliser. As an example of the Modi approach to national governance, senior officials point to the Ministry of Human Resources Development. They say that a single agency and its satellite bodies have not and cannot ensure world-class educational standards. In such a context, a suggestion is to recruit global talent to fill some of the posts within major centres of learning, rather than confining the choice to those resident in India. In a similar way, a fresh approach has been suggested towards key posts in the Central government and its agencies. This is to ensure lateral entry of domain knowledge experts and those from the private sector with a proven record of practical achievement to at least 30% of middle and top jobs. “If the ratio is less, the change will be too small to be effective”, a senior official pointed out, adding that “the present system of reserving almost all the highest jobs to those from a single service (the IAS) needs to be replaced so as to ensure that those from all services are given the opportunity to serve in key posts”. Another pointed out that “it makes little sense to have someone with a History and not a Mathematics background as Head of Statistics, or to place a doctor who has joined the IAS in Sports rather than in Health or a Chartered Accountant in Animal Husbandry”. Senior officials committed to the transformational plans of Prime Minister Modi say that in the 21st century, domain expertise is crucial to good decision-making, and “this is conspicuous by its absence within the higher bureaucracy”.It may be mentioned that the IAS as a service is not First Among Equals but a Superior Service, the way the Imperial Civil Service was in the past. Almost all IAS officers reach the highest pay scales in the bureaucracy or in PSUs during the course of their career, and enjoy a two-year advantage over other services when promotions are being decided. Since the start, they have had the benefit of the same One Rank One Pension scheme that has been so difficult for Defence Minister Manohar Parrikar to navigate through the civilian bureaucracy. Although in theory those IAS officers who are incompetent or dishonest are weeded out, in practice this almost never happens. Instead, obviously incompetent or corrupt officers are frequently protected until they retire with pensions intact. “Any closed group without competition or effective accountability cannot deliver results”, an official pointed out, adding that in general, “senior officers abhor change and regard procedures as crucial while outcomes do not matter”.Those watching with dismay the efforts of the Lutyens Zone to slow down or sabotage key Modi initiatives say that apart from 30% lateral entry from outside officialdom, key posts should be open to all services and not simply to a single group. Among ministries where outside experts are needed, including at the top, such officers in sync with Modi’s goals pointed to Electronics, Telecom, Health, HRD, Defence and Civil Administration. Based on their experience, they say that “more than 40% of officers are deadwood incapable of achieving results” and of the balance 60%, “more than a quarter are corrupt”, some obviously so and yet escaping scrutiny and censure. Many of these officers said that the Administrative Reforms Commission headed by M. Veerappa Moily needed to be retrieved from the dustbin “as several of its conclusions and suggestions are relevant to present needs”. They say that the manner in which the currency initiative of Prime Minister Modi is being implemented, the glitches and procedural lapses in the details of Modi’s bold scheme, show the need to make administrative reform a key priority during the next six months “so that the crucial (to the 2019 polls) 15 months after that can ensure smooth and complete implementation” of Prime Minister Modi’s governance and policy initiatives.Meanwhile, it is becoming obvious that the present government’s light hand on those at the top of previous administrations who were guilty of past misfeasance on a gargantuan scale needs to get replaced with greater accountability and punishment, if the Lutyens Zone is to be scared off from further acts of sabotage in the remaining period of Prime Minister Modi’s term in office.Traders’ association scotches rumours of nationwide strikeAuthor: Special CorrespondentPublication: The HinduDate: November 12, 2016URL: Rs.1,000 and Rs.500 notes amounted to Rs.14.2 lakh crore as of March 2016 or about 85 per cent of total currency in circulation.The Confederation of All India Traders (CAIT) on Saturday denied that it has called a six-day nationwide strike to oppose Centre’s move to demonetise high-value currency notes, but said it has sought a meeting with Union Finance Minister Arun Jaitley to discuss the current scenario. “CAIT has been informed about Whatsapp messages stating that we have called a six-day all-India strike,” said Mr Praveen Khandelwal, who is the CAIT National Secretary General, the top traders’ body. “We strongly reject such messages and inform that we have not called any such strike. However, we have sought an audience with the Finance Minister to apprise him of the current market scenario and augmenting digital payments to ease the situation.” CII supportThe Confederation of Indian Industry (CII) came out in support of the Centre’s move. Chandrajit Banerjee, Director General, CII, said: “After a short period of some pain when the economy adjusts to the sudden withdrawal of cash, CII expects a much stronger economy. India’s cash-dependence is extremely high with a currency-GDP ratio of around 12 per cent compared to 4-5 per cent in other developing countries.” “As we transition to a greater usage of fintech for payments, spending will rise leading to additional economic growth. This is an economic masterstroke by the Prime Minister and must be allowed time to play out.” The prevalence of cash use has also made India prone to high inflation, the CII said, adding that corruption and excessive cash use tends to erode the purchasing power of money. “Lower cash use will have a dampening impact on inflation and this will be a further positive for India’s macro-fundamentals. The Reserve Bank of India will now have more room to cut interest rates as inflation subsides. Already, the bond market has reacted to the news with a reduction in the bond yields” Mr. Banerjee said. Banks’ liquidityThe Rs.1,000 and Rs.500 notes amounted to Rs.14.2 lakh crore as of March 2016, or about 85 per cent of total currency in circulation, the CII said, adding that if this is converted to current and savings deposits, there will be an increase in banks’ liquidity. This is also a great opportunity to transition to a “plastic economy”, where there is a prevalence of debit and credit cards for transactions, the CII said. Scrutiny fearsThe industry body said that in all likelihood, a fair proportion of the Rs.14 lakh crore in high-denomination currency will not return to the banking system, for fear of accounts being scrutinised. “If one assumes that about 20 per cent of the cash does not return to the system, this would amount to about Rs.3 lakh crore or $42 billion. This is a reduction in the RBI’s liability to the public, allowing it to print a similar amount of fresh money or transfer the gain to the government. “The biggest gain from this move will be greater formalisation of the economy. Currently, the costs of informality are evident in low tax base which impacts government revenues, lack of economic control through monetary instruments, and lower economies of scale,” it said. India’s tax base is low and its tax to GDP ratio needs to increase from the current level of 16.6 per cent, which is much lower than about 21 per cent in other emerging economies, the CII said. It added that less than 30 million Indians filed personal income tax with more than half of these paying no tax. The existence of a parallel economy provides unfair competition to organised industry which pays taxes and complies with standards, according to the CII.10 rumours related to demonetisation that you might have believed as trueAuthor: OpIndia StaffPublication: Date: November 13, 2016URL: we enter the 5th day of the government’s ambitious demonetization drive, the dust looks far from settled. People are flocking to banks and ATMs to get that wad of acceptable cash. While largely people are calm and accepting the inconvenience as a part of their sacrifice for the greater good of the nation, there are some who want the scheme to fail at all cost.Baseless rumours are being spread to create panic among the citizens. The culprits can be anyone; political parties with vested interests, power brokers in the media, your neighbours who sold their ancestral property for 60:40 cash, or maybe a stupid friend who believes everything he receives as WhatsApp forward.In such a scenario, it’s important to separate the wheat from the chaff and also to identify poisonous weeds in your backyard. So we list down 10 things that you or someone you know might have believed as true, but which are rumours or plain lies:1. Transporters are going on strike, so you must stock up essential goods in your householdYou might have received the following information on WhatsApp or seen it on Facebook or Twitter. It says that the transporters have decided to go on a strike starting tomorrow, due to which things like groceries or FMCG goods won’t be able to reach markets.--------------------------------1) Note All India Traders of All Stores, Resturant,CA, Shop keapers And Manufactures Has Called Indefinate Strike Angainst MODi GovT, BJP From MONDAY THAT IS 14.11.16TO TAKE OUT A SOLUTION FOR EXCHANGING NOTES NOTE IF WE DO NOT DO THIS THIS THEIR WILL BE NO CUSTOMERS IN THE MKT2) 90 Lakhs truycks n 20 Lakhs buses may go off the road by monday. In all over india.3) Guys plz fill ur food stocks... as d traders go on strike7:18 pm--------------------------------MORTHINDIA @MORTHIndiaNo call for strike by AIMTC. Please do not believe in rumours.10:39 PM - 12 Nov 2016--------------------------------2. Fake currency of new denomination already in the marketA story going around says that a vegetable seller claimed he was duped with a fake Rs 2000 note. This spread panic that the new currency was not secured enough. It turned out that he was fooled by a coloured xerox of the note. The headline of the new report was misleading that led to the rumour of a counterfeit currency being involved.Take a look at the supposed counterfeit note yourself below. While one feels bad for the poor vegetable seller, isn’t it too easy to spot that the one on the top is a coloured xerox copy? Just look at the edges. You don’t even need to look for further security features such as watermark.--------------------------------3. New 2000 rupees note has a nano chipWhile on one had you have rumours about the currency already being faked, there is a flip side to this rumour that claims that the note is super secure, loaded with a nano chip that can be tracked. Zee News even aired a report about it. No, there is no chip.--------------------------------4. Shopping mall in Delhi looted as people didn’t have cash to buy goodsThere are some reports about shops being looted in some parts of the countries because people didn’t have ready cash to buy things. A viral video clip shows people in Delhi looting a mall. People are sharing the clip claiming the looting happened due to demonetisation troubles.But that is far from the truth. The mall in question was a self-catering mall where card holding members take along the stocks they need. Yes, there was disorder due to some miscreants, but it was not looting. Delhi police too clarified it on Twitter.--------------------------------News Update Reports of miscreants taking away stocks from a Mall in Seelampur area are false and baseless. It is a self-ctering Mall which allows entery to card holders only and routine disbursal of stocks was being done. Some mischievous elements tride to show it as looting. Local Police intervened immediately and removed the miscreants. Regular operations are being carried out in all market places in Delhi. It is once again reiterated that rumours should naither as per law is being taken against any such rumour mongering.Delhi Police @DelhiPoliceNews Update7:52 PM - 12 Nov 2016 · New Delhi, India--------------------------------5. Salt is selling at high prices all across the countryThis one is perhaps the most rampant rumour, even NDTV reported about the rumour in such a way that it helped spread the rumour. In short, some wise men decided to spread the word that there’s a huge crisis of salt in the country which led to further rumours about its price per Kg increasing to Rs 400. It led to some panic buying, but salt was not being sold at any exorbitant rates in the country.Union Minister of State for Commerce and Industry, Nirmala Sitharaman herself had to step in to curb the rumours.--------------------------------Nirmala Sitharaman @nsitharaman1. No shortage in the supply of edible salt.Baseless rumors being spread. Salt Commissioner& Jt.Secretary Shri Raghavendra monitoring ....10:01 PM - 11 Nov 2016--------------------------------6. 200% penalty will be imposed on cash that will be deposited in banksVarious numbers are doing the round claiming people will have to pay high tax on bank deposits above 2.5 lakh rupees. From 95% tax on the deposited amount to whopping 200% on the deposit amounts. This OpIndia report debunks the rumour and is also a great insight about how the taxes will be levied.7. BJP leaders and their relatives already had 2000 rupee notesThis rumour has been spread by activists of the Aam Aadmi Party and the Congress party. This OpIndia report exposes the lies spread by Congress IT cell where picture of a bank employee was circulated as picture of a BJP leader’s daughter, while this report debunks another such claim made by AAP supremo Arvind Kejriwal.8. Violence outside banks and ATMs due to long queues of people withdrawing cashNews agency PTI put out a tweet claiming the Delhi police got a staggering 4.5 thousand calls about violence outside banks and ATMs. It should be noted that reports or information by PTI is carried as it is by news organisations and any error, rumour, or lie will be repeated thousand times.And this claim by the PTI turned out to be hugely exaggerated and misleading. Delhi police indeed received many calls but not related to violence outside banks or ATMs.--------------------------------Manak Gupta @manakgupta"4.5k calls as people took to violence" @PTI_News"Many calls but none reported violence" @DelhiPoliceIs media adding to rumours?6:08 AM - 13 Nov 2016--------------------------------Not only violence, people spread rumour about stampedes too, which again were false.--------------------------------Madhur Verma @DCP_North_DelhiThere is no stampede outside any #Bank or #ATM in #ChandniChowk. Please don't spread or come under the influence of any #Rumour !11:46 AM - 12 Nov 2016--------------------------------9. Many deaths due to inconvenience and unavailability of ready cashWhile there indeed has been an unfortunate death, it has now come to light that some other deaths are being deliberately linked to demonetisation by some in the media. For example, relatives of a person who unfortunately died, have themselves clarified that the death had got nothing to do with demonetisation.--------------------------------By: Express News Service | Mumbai | Updated: November 12, 2016 5:12 amMan dies outside bank in Mumbai, kin say not related to cash crisisFamily says he suffered from health issues, nothing to do with the demonetisation issue.A 73-YEAR-OLD Mulund resident died of a suspected heart attack Friday morning at a bank where he had gone to exchange demonetised currency. The deceased Vishwanath Vartak, a retired Public Works Department (PWD) employee, was in front of the State Bank of India (SBI) branch in Mulund (east) to exchange Rs 4,000 when he collapsed.--------------------------------Similarly, another such unfortunate death reported by media and linked to demonetisation is turning out to be a case of accident or suicide due to personal issues.--------------------------------Ketan C Bhate @BhateKetanFrom this, it appears that a spat between husband & wife led to alleged suicide. But the headline conveniently blames #DeMonetisation pic.GBnrVvDf5rKetan C Bhate @BhateKetanHusband says he doesn't know reason behind alleged suicide. Family insists no suicide. No one links it to closed ATM. Yet see the headline. pic.gGfsya9SbL10:25 AM - 13 Nov 2016--------------------------------10. Pictures of humongous queues at banks or crowds protesting against demonetisationWhile there is no denying the fact that there are queues outside banks and ATMs, many miscreants are spreading photos from different times and places claiming they were pictures of queues and chaos while withdrawing money. People belonging to political parties are even using old pictures of some other protests to claim that citizens are protesting against the demonetisation drive.Some of these have been exposed by people on Twitter, but you may still receive those on WhatsApp or Facebook:--------------------------------Spamnath Bharti @attomeybhartiRumormongers @JhaSanjay and @INCIndia use a photo from 2013 Kenyan election to create panic.11:30 AM - 13 Nov 2016--------------------------------Nupur @UnSubtleDesiFear mongering yet again by shameless congressi @brijeshkalappa. The video he quotes is from September 2016. Protests over Kashmir unrest.5:13 PM - 13 Nov 2016--------------------------------So be alert and aware, and don’t believe such rumours. Also, spread it in your social circle so that these rumours can be stopped from spreading and creating panic among the citizens.--------------------------------Congress Spreading Blatant Lies On DemonetizationAuthor: HinduPost StaffPublication: Hindupost.inDate: November 13, 2016URL: twitter users have caught Congress National Spokesperson Sanjay Jha spreading a lie started by one Naseem Ahmed, whose twitter bio shows him to be an ex-Congress worker. Ahmed had tried to pass off a photo of an election voting line from Kenya as a line of people gathered outside banks in Bharat due to the currency demonetization.-----------------------------Pappu @IHaveNoWork*Congress spreading lies.*Showing Kenya election photo as bank line.@TajinderBagga @dhaval24108611:09 AM - 13 Nov 2016-----------------------------Sanjay Jha @JhaSanjayWhat a photo this !!! Unbelievable ! …Spamnath Bharti @attomeybhartiRumormongers @JhaSanjay and @INCIndia use a photo from 2013 Kenyan election to create panic. pic.UBe4y6zpQa11:30 AM - 13 Nov 2016-----------------------------Congress Intent on Spreading Misinformation Regarding DemonetizationGaurav Pandhi, who by his Twitter bio is a “Nehruvian Congressman” and part of the digital communication at the Indian National Congress, has been caught spreading several rumors related to demonetization. As per this report –“He tweeted that a certain Nalini Maurya, apparently the daughter of UP BJP chief Keshav Prasad Maurya, was found holding Rs 10 lakh in new Rs 2000 notes.Through the tweet, he tried to insinuate that people related to BJP were being allowed to break the rule where one is not allowed to withdraw or exchange more than 10,000 rupees in one go, and that this could be being used for upcoming Uttar Pradesh assembly elections.This was a serious accusation that not only suggested that people related to the BJP were being favoured by banks, but that the government’s attempt to curb black money was compromised and the ruling party was indulging in cash hoarding.However, it didn’t take more than a few minutes to find out that the Congress IT cell member was propagating a blatant lie. The election affidavit (pdf link) of Keshav Prasad Maurya as well as his profile on the Lok Sabha website mentions that he has two sons and no daughters. The girl most probably works in a bank and was holding the new 2000 rupees note bundle that would be used to help people exchange their old notes. This is confirmed by a close look at the picture, which shows that the girl is holding the bundle from Jhandewalan chest in Delhi, and not somewhere in Uttar Pradesh.”Another rumor doing the rounds which was fanned by Gaurav Pandhi & even Arvind Kejriwal was that as Sanjeev Kamboj, head BJP Legal Cell Punjab tweeted the picture of Rs 2,000 notes on 6 November, it showed that BJP had informed its ‘friends’ beforehand about its decision to demonetise Rs 500 and Rs 1,000 currency notes, to help them fix their black money. But turns out that reports of the new Rs 2000 note being introduced were doing the rounds in media and social media, and Kamboj had just tweeted an image of the new note – he had not mentioned anything about demonetization.Another rumor that was apparently started by news website Scroll.in regarding a printing error’ on the New Rs 2,000 Note was also enthusiastically spread by Congressis. It turned out that the ‘error’ was actually just Konkani and Marathi text for ‘two thousand rupees’.In 2014, the same Congress propagandists were criticizing the Government move to set up SIT to recover black money stashed in Swiss bank accounts claiming that ‘real black money was domestic’, and now in 2016 they are claiming the opposite. Political opportunism, much?-----------------------------Sanjay Jha @JhaSanjayThe fact that is multiple times greater black money generated WITHIN India. Swiss bank accounts is a red herring. Listening BJP?2:56 AM. 25 Jul 14-----------------------------Sanjay Jha @JhaSanjayBankers in Switzerland having champagne with their dubious account holders, many of indian origin. In India, bankers & common man harassed.1:29 AM - 13 Nov 16-----------------------------Kartikeya Tanna @KartikeyaTannaMy @INCIndia's anmol ratan. 2014 mein Swiss banks red herring. 2016 mein champagne celebrating. #GeniusAlert @JhaSanjay cc @padhalikha10:06 PM - 13 Nov 2016-----------------------------Parties like Congress, and their latest imitation AAP, are struggling to stay relevant – they have shown in the past that they will go to any lengths to stir up instability and spread disaffection to somehow make a political comeback. They do not have any positive agenda to offer to the people, and hence can only rely on muck-raking of the worst kind. Aided by a compliant media which prefers the cozy Congress ecosystem of access journalism and political largesse, Congress knows that it can continue to lie blatantly but will not be held accountable. Even the NDA government has proved unable to take these rumor-mongers to task, which has only emboldened them.It is for the common citizen to exercise extreme caution when reading anything coming from political outfits like Congress, AAP and others of their ilk.Times Group Spreading False Rumors Of Demonetization Related DeathsAuthor: HinduPost StaffPublication: Hindupost.inDate: November 13, 2016URL: media goes into a frenzy reporting stories of inconvenience faced by people across the nation due to the demonetization of Rs. 500 & 1000 notes, we are seeing distressing evidence that many media groups and journalists are using the situation to further their editorial/political agendas.Times Group has run two reports in recent days which are a blatant distortion of events on the ground. One would imagine a more measured, restrained approach at such a critical moment for the nation, but such sensitivity is sadly lacking in this kind of mainstream media reporting.In a front-page report in yesterday’s Times of India (TOI) Mumbai edition titled ‘Servers crash, so do customers’, the paper claimed two instances where people had died due to difficulties created by demonetization –“In the Mumbai suburb of Mulund, Vishwanath Vartak, 73, died of a heart attack outside HSBC Bank while a housewife jumped to her death in Howrah after returning empty-handed from an ATM.”Fake Story#1 – Senior Citizen Dies Outside Bank Due While ‘Waiting in Line’Today, TOI has published a correction buried on the 7th page about the senior citizen dying outside the HSBC Mulund Bank – the bank pointed out that they don’t have a branch or ATM in Mulund.--------------------------Amit Thadhani @amitsurgBuried on page 7, TOI – apology for fake news of senior citizen dying outside HSBC Mulund. HSBC doesn't even have a branch or ATM in Mulund. pic.14tVpTrSxVNovember 13, 2016 --------------------------And this is what really happened, as another media report shows –“The incident took place at Hari Om Nagar in Mulund (east) outside the SBI branch around 11.30 am. Senior Inspector of Navghar police station Madhav More said the bank branch was hardly 100 metres away from where Vartak lived with his wife. “Vartak had been suffering from high blood pressure for the past 20 years. As he reached the SBI bank branch and was climbing the stairs leading to the bank, he started feeling giddy and his hands and legs started to shiver,” More said. He added, “There was no crowd outside the bank when he started feeling uneasy.A relative of the deceased said, “The family is upset that the media is linking his death to the demonetisation issue. He had been having health issues for a while and his death has nothing to do with him being in the bank.”Fake Story#2 – Housewife jumps to death after returning empty-handed from ATMEconomic Times ran a detailed story titled ‘Housewife ‘jumps to death’ after futile ATM visit‘. The contrast between the sensational headline and the content of the story could not be starker. The woman’s husband says he doesn’t know reason behind alleged suicide, while the family insists that the woman accidentally fell from the balcony. Police suspect she jumped off the balcony after a spat with her husband.No one – the husband, family, or police have blamed the closed ATM as the reason behind the death. The lady was a realtor’s wife living in a posh apartment complex – could a futile ATM visit really cause someone like her to commit suicide?An alert twitter user caught Times of India columnist Sagarika Ghose spreading the falsehood –--------------------------Ketan C Bhate @BhateKetanHeadline: "after futile ATM visit"Sagarika: "due to lack of cash" pic.WYmrRMxQzzNovember 13, 2016 --------------------------Public should be warned to take any news which appears in MSM related to demonetization with a pinch of salt. A new narrative, similar to the ‘Church Under Attack’ or ‘Dalits under attack’ is now being framed and will reverberate for the coming weeks and months. Common citizens should support one another, and support bank officials as the country makes this difficult, but important, transition. It is true that citizens are facing severe difficulties, but spreading such false sensational stories only adds to the panic.10 MORE rumours related to demonetisation that you might have believed as trueAuthor: OpIndia StaffPublication: Date: November 15, 2016URL: couple of days ago, we listed the 10 worst rumours which were circulating in the mainstream media and the social media with regards to the demonetisation scheme, which were causing unnecessary panic and misinformation. And even as some of those rumours might still be circulating, we were informed of even more such rumours. Here are the next set of rumours you ought to be aware of:1. Indelible ink to be used to identify people who’ve made withdrawalsThis comes from the latest press conference by the Economic Affairs Secretary Mr Shaktikanta Das. Even some editors and media houses claim this:The fact is, as seen in this video where the secretary is seen announcing the measure, the indelible ink will be used only for over-the-counter exchange (and not withdrawals) of cash for new currency notes. This is not a new rule per-se because even the original notification said that the Rs 4000 (now Rs 4500) exchange mechanism was available to each person only once, and not per day. Hence the use of ink only ensures stricter implementation of an existing rule.2. Colour comes out of new 2000 rupee note, so it could be fake or insecureSome viral messages and videos doing the rounds claim that the new 2000 rupee note is poorly designed and printed, especially because colour comes out if you rub it with wet a cloth. This too was rebutted by the Economic Affairs Secretary, who revealed that every note will have colour coming out if rubbed in that fashion. In fact, he added that due to a special ink used for pinting notes, the colour should come out of new notes. He clarified that even the 100 rupee notes, when freshly printed, would show similar results when rubbed with wet cloth or cotton.3. There are only 2500 ATMs in rural IndiaA person connected with the Congress party was spreading this news on social media that was believed by many in the mainstream media. This is very far from the truth. As on 31 Dec 2015, the number of ATMs in rural centres was 33,250, and in semi-urban centres there were 51,942 ATMs.4. Any woman who is about to be married can withdraw up to Rs 5 lakhs rupeesYou might have seen this WhatsApp forward:---------------------------jiski bhi behen ya beti ki shadi ho wo shake apne card par sp city ki mohar lagwa k 5 lakh rupaye taq rbi se nikal sakta h ye khabar age forward kar de for more information plz contact to me---------------------------There is no truth in this. Neither the RBI nor the Government of India has announced any such measure. Further, variants of the message bear the name of one Avinash Singh who is the ADM of some city. He too has written a letter denying any such option for women about to be married. DCP North Delhi has also denied this rumour:---------------------------Madhur Verma @DCP_North_DelhiThere is NO such decision that if DCP certifies regarding marriage in family, person can withdraw 5 Lacs from their account. It's a #Rumor!2:16 PM - 13 Nov 2016---------------------------5. Sensex falls by almost 700 points as markets open after weekendsThe Indian Express tweeted this but probably forgot that Monday 14th November was a holiday for the bourses on account of Gurunanak Jayanti:---------------------------The Indian Express @IndianExpressJust IN | Sensex falls by 698.86 points, currently at 268.82. Nifty at 8296.30.9:24 Am - 14 Nov 2016---------------------------6. Gandhiji’s pic deleted from new Rs 2000 noteThis is probably the most stupid rumour but there are people who actually believe this. Just hope they had flipped the note and seen the reverse. This is the case with most older notes as well, Gandhiji’s picture is only on one side.---------------------------kaveri @ikaveriGandhi getting deleted in stages. pic.pZ34hsWFqrNishant Gambhir @madnish30@ikaveri it’s there yaar pic.HZgg7csWHX8:46 PM - 8 Nov 2016---------------------------7. RBI plans mass leave on November 19 to protest against Modi’s Black Money CampaignYou might see this news on sites like “The Times Headline”---------------------------The Times HeadlineRBI plans mass leave on November 19 to protest against Modi's Black Money CampaignBy Tarushi Aswani - November 13, 2016---------------------------Fact of the matter is this news is based on a similar story from 2015, when Reserve Bank’s employees proposed one-day mass leave to protest what they termed as the government’s intention to curb the apex bank’s activity and intervening into monetary policies. This is a story from 2015 and has no relevance today. AAP too has been caught using old news articles to create confusion and chaos.8. Gold (presumably converted from black money) worn by BJP leader’s daughterEarlier Congress IT cell circulated picture of an unidentified girl, claiming she was a BJP leader’s daughter with bundle of new 2000 rupee notes. Same trick has been repeated again by circulating picture of a girl wearing gold ornaments and claiming she was a BJP leader’s daughter. A journalist working at The Hindu even tried to link it with the demonetisation drive. Perhaps to suggest that people related to BJP have already converted their black money into other assets, as is being claimed by Arvind Kejriwal. Fact is the girl in the picture circulated on social media is not BJP leader’s daughter, and in fact doesn’t look like her even remotely.---------------------------Nistula Hebbar @nustulaDid anyone say #demonetisation?kaveri @ikaveriSaw Janardhan Reddy's daughter Brahmini as a bride? Mustbe very strong to be able to carry around all that weight in gold.10:15 PM - 13 Nove 16---------------------------9. News about demonetisation was leaked and published in a Gujarati newspaper in April this yearCongress and AAP have claimed that the news about demonetisation was leaked to some people and they have been making ridiculous claims as proof. One such proof is provided as cutting of a Gujarati newspaper that has a news report published in April, which said that government has decided to discontinue 500 and 1000 rupee notes.Truth is that the above news report was actually a April Fool’s prank that the Gujarati newspaper had published.10. Gujarati businessman who bought Modi’s suit deposited 6000 crores in cashA viral news article claimed that Surat based businessman Laljibhai Patel had surrendered a whopping 6000 crore rupees in cash after the demonetisation drive. He was identified as the same diamond merchant who had bought Narendra Modi’s monogrammed suit, which was auctioned by the Prime Minister to raise funds for cleaning of river Ganga. After the news went viral, local media contacted Mr. Patel, who denied surrendering such huge amount of cash. He pointed out that even the unverified reports say that the man rumoured to have surrendered so much cash was a builder, while he was a diamond merchant.---------------------------Funnily, or rather tragically, The Indian Express blamed the social media for spreading the rumour, while its sister publication was the one guilty in spreading this rumour:---------------------------Neha Srivastava @neha_aks"Surat guy surrendered 6k crore": @FinancialXpress …Nw @IndianExpress blames SM fr false news …3:33 PM - 15 Nov 2016---------------------------Ravish Kumar hides a trader’s Congress affiliation in a bid to attack DemonetisationAuthor: OpIndia StaffPublication: Date: November 16, 2016URL: Kumar, the NDTV India anchor, who claims to be the gold-standard in reporting, has landed in yet another controversy. In a bid to show how the demonetisation scheme was hurting businessmen, Ravish Kumar tried to pull off a fast one, but was caught in the act.In his show he introduced an Ajay Arora as the head of Traders Association of Delhi, all the while forgetting to mention his Congress background. All this came to light via this expose---------------------------Tajinder Pal S Bagga @TajinderBaggaTajinder Pal SinghExposing NDTV-Ravish-Cong Nexus against PM Modi's Black Money Surgical Strike #CongKaRavish 11:01 AM - 16 Nov 2016---------------------------The video starts with Ravish in a bid to maintain his neutral image defended the demonetisation scheme from some disgruntled men. As the video progressed a crowd gathered around Ravish which very vocally starts supporting Modi and his demonetisation scheme. Suddenly the scene cuts to a terrace where Ravish was found standing with a mere 5-7 people. He explained the reason behind the location change was to get away from all the ‘Bheed-bhaad’. Incidentally in the opening scene of the video Ravish was heard commenting about how the area lacked it’s usual hustle and bustle.Ravish then introduced Ajay Arora as the head of the Traders Association of Delhi. Arora then proceeded to bash the government’s scheme with a vengeance, by lamenting about the immense hardships he and other traders are facing, the men accompanying him also echoed his viewpoint.The whole report was called into question when Tajinder Bagga searched the facebook profile of the eminent trader association head, Ajay Arora and found him to be the convener of All Delhi Traders Congress and in one of his photos was seen sharing the stage with Delhi congress chief Ajay Maken.After a bit of digging we managed to find some Facebook posts which might cement Arora’s congress links. The first one shows Arora standing next to Ajay Maken during some fogging program and the second one shows him being part of Trader’s Congress’s “vasooli diwas” accompanied with people who were wearing Congress party’s Gandhi topis. These Facebook posts also might clear the air that the Congress in All Delhi Traders Congress refers to the Political party and is not a synonym to an ‘Association’.All of the above facts were probably missed by Ravish Kumar during his research.This is not the first time Ravish has been caught of misreporting facts, had earlier reported how Ravish Kumar in his blog ‘I am not a super journalist’ twice distorted facts to discredit Kiran Bedi.How demonetisation was wrongly blamed for some unfortunate deathsAuthor: Rupa SubramanyaPublication: Date: November 16, 2016URL: ’m embarrassed that I even have to write a piece like this but sadly what I’m about to analyse reflects the pathetic state of the media in India. In particular I’m reacting to a bizarre and ludicrous piece of propaganda alleging a relationship between currency demonetisation and deaths of individuals.The piece by Deputy Editor of Huffington Post India, Shivam Vij, claims that “there have already been 33 deaths due to demonetisation in 6 days”. The author is thus asserting a causal relationship between the government’s demonetisation of high denomination notes and these deaths.Vij goes on to cite thirty three cases which allegedly support his claim but it doesn’t take much to figure out, that one can’t establish in any credible way a causal relationship between demonetisation and an individual’s death in so many of these cases.Start with one of the most ludicrous cases where a “businessman” in Faizabad, Uttar Pradesh allegedly felt chest pains and died soon after watching Prime Minister Narendra Modi’s announcement of demonetisation on November 8. Are we supposed to believe that it was what he was watching that led to his death? So for example, if he were watching Star Wars, would we blame Darth Vader for his death?Take the case of a 96-year-old man in Udupi, Karnataka who died allegedly waiting in a long queue in a bank. Guess what? The man’s son says his father’s death had nothing to do with waiting in queue at the bank. So this one is at best poor fact checking or poor attempt at propaganda by the author.Up next, a 45-year-old man in Kerala dies while falling from a construction area in the bank branch where he was depositing money. He had already successfully deposited money the previous day at the same bank. At best, you could blame lack of barricades that would have saved him falling but it’s more than a stretch to blame Modi and demonetisation.It only gets bizarre from here. An elderly woman in Kanpur died apparently counting currency notes. Tragic, but had she died while reading the newspaper, presumably this intrepid journalist would blame the newspaper for her death?How about an elderly person who didn’t even have to wait in a queue but collapsed of a heart attack upon reaching the bank? If he’d collapsed outside a movie theatre would this journalist blame the movie that was screened for his death? And even here, the man’s two sons say he had a pre-existing medical condition, wasn’t even standing in line and his death had nothing to do with demonetisation. The family has also expressed anger that their father’s death has been wrongly linked to demonetisation by the media.Or how about a 45-year-old cashier in Bhopal who collapsed while working at the bank. The spin is he died overworked because of demonetisation but not a shred of evidence is offered to back this up.A 17-year-old, son of a Border Security Force jawan allegedly commits suicide because his mother wouldn’t give him small denomination notes. There’s almost no limit to the implausible connections this writer can draw.A couple have already been debunked. Consider where a doctor says she had to turn away parents of a sick baby not because they were carrying demonetised notes but she just didn’t have the right equipment to treat the baby. As it happens this doctor is now the subject of a First Information Report.In another case a wife is allegedly taunted by her husband for her “inability” to stand in a queue at an ATM. She apparently commits suicide and her husband is now the subject of an investigation in abetting her suicide. So let’s get this straight. A possibly abusive husband taunts his wife for not waiting in queue at the mandi, is the vendor now the cause of what played out subsequently?You get the idea. In each of these cases, someone dies, shortly after demonetisation but there’s no credible causal link between the two events. Also many of these stories have only a single source suggesting perhaps the version of the stories presented didn’t seem entirely credible even to other news organisations.As I remarked at the outset, it’s embarrassing that one even needs to debunk such tripe. Any death is tragic but it’s shameful and scandalous that they’re wrongly linked to demonetisation, no less than from an international media house like Huffington Post.That the Huffington Post does not like demonetisation is clear from pieces on the subject such as “Why the demonetisation drive violates our fundamental right to life” as shown below.---------------------------HUFFPOSTPOLITICSWhy The Demonetisation Drive Violates Our Fundamental Right To LifeWhat's going on is a clear violation of Article 21 of the Indian Constitution.15/11/2016 4:28 PM IST | Updated 15/11/2016 6:24 PM IST---------------------------G Pramod KumarSo Supreme Court refused intervene is something that was unconstitutional?---------------------------This is clearly not journalism nor is it even good propaganda. But that’s the Indian media scene for you.- (Written by Rupa Subramanya, who is an Economist and Columnist. Follow her @rupasubramanya)How sensationalist media obfuscated the truth about terrorists having Rs. 2000 notesAuthor: soulinexilePublication: Date: November 23, 2016URL: mainstream media has mastered the Art of Obfuscation – especially when it comes to headlines. TRPs trump the truth, almost always (I’m using the term TRPs figuratively; it includes, viewership, circulation, clicks, shares, etc.).In the current era of information overload and short attention spans, few read beyond the headlines or the tweets. And more often than not, the news is so predictable – that most readers can even adequately guess the pattern of news contents.Knowing well that most people don’t read beyond headlines, the headlines are worded such, that they deliberately obfuscate the way media wants to. Take an example from yesterday.Army killed two terrorists in Bandipora in Kashmir. In the operation, some Indian currency, including the new Rs 2000 notes, were recovered from them. If your read the headlines or tweets from media houses, you will believe that terrorists, presumably from Pakistan, were having huge cache of new currency notes:-------------------------ANI @ANI_newsNew Rs 2000 notes recovered from terrorists gunned down by Army in Bandipora (J&K) today.-------------------------After reading these, you will start wondering how did they get this cache of new currency notes? Is Pakistan already printing fake currency notes (a rumour many have spread)? Is our banking system compromised? And obviously, has demonetisation failed (because we just need a sensationalist headline, like death tolls, to conclude that)?In fact, some articles didn’t leave that to your imagination and went on to suggest that the demonetisation goal of striking hard on the fake currency and terror funding networks had failed:-------------------------Rs 2000 notes recovered form terrorists in kashmirLast updated on: November 22, 2016 16:09 ISTIn a development that should worry the government which hoped that terror funding had been badly hit by the demonetisation of Rs 1,000 and Rs 500 notes, new currency notes were recovered from the possession of the terrorists who were killed in an encounter on Tuesday in Jammu and Kashmir.-------------------------Bingo! Mission Accomplished.Whether done for agenda or for TRPs by the respective media houses, the sensationalist headlines were used for nothing else but agenda and misinformation by political Smart Alec’s and their sidekicks on the social media.Look at these reactions:-------------------------digvijaya singh @digvijaya_28 - 5hNew Rs 2000 notes recovered from gunned down terrorists goo.gl/zc9ty7-via @inshortsHow did they have 2000 notes when others don't-------------------------Priyanka Chaturvedi @priyankac19BTW am yet to get a 2000 note, amazed that terrorists got their hand on it before us desis who are queued up. Zaalim Zamaana.#DeMonetisation1:51 PM - 22 Nov 2016-------------------------Arvind Kejriwal RetweetedAnurag Dhanda @anuragdhanda . 12hPeople struggling to get new currency from bank and ATMs... How come terrorists got new currency so soon?ANI @ANI_newsNew Rs 2000 notes recovered from terrorists gunned down by Army in Bandipora (J&K) today.-------------------------If you haven’t drilled into the news report details by now – can you guess how much of this new currency was with those terrorists?A grand total of “Two notes”. Yes, Rs 4000/-.Is it a big deal for two new notes to find their way to terrorists through their handlers, supporters, well-wishers in the valley? In fact, reports confirm that security forces raided private houses after receiving information about the terrorists. So those private houses of local residents can’t provide two terrorists with one new note each? Internet is splashed with people clicking selfies with new 2000 rupees notes, but we are to believe that no one in India has seen those?Unless of course the editors in each of our reputed media houses think that terrorists in Kashmir live in snow caves beyond Siachen where Pakistan supplies them everything, and that Article 370 debars RBI to release the new currency in Kashmir valley, or that new currency has been only home delivered only to BJP supporters alone so far.To be fair, there was one media house that did report the news with accurate headline telling readers that only two new notes, along with cache of arms and old currency notes, were recovered from the terrorists. And guess what, the report has got just one share on Twitter and another on Facebook (till the time of filing this report):-------------------------Two new Rs 2,000 notes found on slain terrorist in KashmirDECCAN CHRONICLE.Published Nov 23, 2016, 12:50 am ISTUpdated Nov 23, 2016. 7:07 am ISTA senior Army officer told reporters that the duo was in possession of Indian currency including two new banknotes of Rs 2,000.-------------------------So truth is struggling to register its presence while lies have ubiquitously found its way everywhere.Least we can expect is this article being widely shared, so that media knows that truth also sells, not just TRPs. Assuming that they care about the truth.Teary eyed Modi takes on rivals, reaches out to people on demonetisationAuthor: PTIPublication: The Indian ExpressDate: November 14, 2016URL: lips trembled and there were long pauses when, fighting back tears, he said, "My dear countrymen, I gave up everything...my home, my family. I gave up everything I had for this country."Blending emotion with aggression, Prime Minister Narendra Modi on Sunday mounted a counteroffensive against the opposition over demonetisation of high-value currency notes, promising more anti-graft measures in future “even if I am burned alive”. Taking the opposition, particularly Congress, head on for targeting his government over demonetisation, Modi said those involved in mega scams were now standing in queues to exchange Rs 4000.“They thought if they pull my hair, I will stop and do nothing. I will not be cowed down. I will not stop doing these things, even if you burn me alive,” Modi said addressing a function in Panaji, turning emotional and aggressive in turn.Making an emotional but combative speech, he said he was ready to face the consequences of his moves as certain forces were “up against me” because their “70 years of loot” was in trouble as a result of demonetisation. “I know that (some) forces are up against me, they may not let me live, they may ruin me because their loot of 70 years is in trouble, but I am prepared,” Modi said.His lips trembled and there were long pauses when, fighting back tears, he said, “My dear countrymen, I gave up everything…my home, my family. I gave up everything I had for this country.”Under unrelenting opposition attack over demonetisation of Rs 500 and Rs 1000 currency notes and the misery it has brought for the common people, Modi said,”This government does not want to bother honest people but doesn’t want to spare the dishonest. Bear with me for 50 days. Has India been looted or not? ….. I am not going to stop at this. I will expose the history of corruption of 70 years since Independence.”The Prime Minister declared the war against corruption will not end with the current demonetisation exercise and that he would now target those owning benami property.“This (demonetisation) is not an end. I have more projects in mind to make India corruption-free. …. We will take action against ‘benami’ property. This is major step to eradicate corruption and black money … If any money that was looted in India and has left Indian shores, it is our duty to find out about it,” he said addressing functions in Panaji, Belagavi in Karnataka and Baramati in Maharashtra.Apparently tartgeting Congress vice president Rahul Gandhi, one of the most vocal critics of his demonetisation exercise who vented his anger against the government action after exchanging money at a bank recently, Modi said,”Those who were involved in the coal scam, 2G scam and other scams, now have to stand in queues to exchange Rs 4000.”“When Congress banned 25 paise, did we say anything? You could dare to stop only 25 paise, that’s what your power was limited to. But you did not make higher denomination currency notes illegal. … We did it. People have chosen a government and they expect so much from it,” he said.Reaching out to the harried people, Modi said,”if you find anything wrong with my intentions or my actions, hang me in public. I promise you I will give you the India which you desired. If someone faces problem, I also feel the pain. I understand their problem but this is only for 50 days and after 50 days we succeed in this cleansing.”He said the people had voted against corruption in 2014 when they elected him to lead the country.“I am doing what I was asked to do by the people of this country. This had become clear from the very first meeting of my Cabinet when I formed the SIT (on blackmoney). We never kept the people in dark.”“Soon after assuming power, a Supreme Court monitored Special Investigation Team was formed to investigate the black money parked outside the country. Previous governments neglected this. Did I hide anything? We took a key step to help the honest citizens defeat the menace of corruption.“We collected Rs 67,000 crore under amnesty scheme. But in the last two years, through raids, surveys and declarations, the government has collected Rs 1,25,000 crore in its exchequer … I kept on administering small doses of medicine to improve the economic situation of the country since I came to power,” Modi said, referring to the Jan Dhan scheme aimed at financial inclusion.Talking about efforts that preceded the demonetisation, the Prime Minister said it was “a secret operation I started 10 months back and had formed a small team.“The secret operation was of course not the one like (Defence Minister Manohar) Parrikar had launched (surgical strike in PoK). We had to print new currency notes and take other steps in secret”, otherwise the corrupt would have found other ways to deal with the situation.Stressing on the need to go cashless in transactions, he said, “There is talk about a cashless society and we should shift to plastic money. That’s why we have removed all taxes from debit and credit cards in the budget.”He also asked to the people not to panic “by exchanging Rs 500 for Rs 300” and get the full value of their hard earned money. “When common people are facing hardship, I too feel bad about it. Please don’t consider the decision (regarding demonetisation) as my arrogance. I do understand the problems that the countrymen are currently facing but this inconvenience and suffering will last only till December 30. Once the cleansing is over, not even a mosquito will be there,” he said, adding “there is pain due to demonetisation but more to gain.”PM Narendra Modi harnessing sentiment of masses against the richAuthor: November 14, 2016Publication: The Economic TimesDate: November 14, 2016,URL: the raging debate over government’s decision to withdraw notes of Rs 500 and Rs 1,000 from circulation, emphasis has been on listing pros and cons of move and whether temporary inconvenience caused to people will be neutralised by long-term gains.Consequently, the audacious crack that PM Narendra Modi has taken to recast the BJP’s core constituency coupled with his decisive step towards leaving an indelible stamp on the nation’s history, has not been dwelled on.As of now, there is no certainty that Modi’s gambit will be successful. There, however, is no doubt that politically, this step is possibly the biggest game-changer so far in the Modi regime, though it cannot be said whether the game will alter in favour of Prime Minister or against him.For long, the BJP and its previous avatar, the Jana Sangh, was a political party of small traders. By aggressively advocating the Hindutva idea from 1990s onwards, the party secured support of dominant social communities in different states.As chief minister of Gujarat, Modi outreached select corporates.The tactic drew charges of crony capitalism but widened the party’s economic constituency. In the 2014 parliamentary elections, the BJP was also backed by several socio-economic groups, including in rural India, who had previously not rallied behind BJP.They comprised even Dalits and agricultural workers and the socio-economic coalition that propelled BJP to power, was cobbled together by mobilising people on the emotive cultural-nationalistic plank infused with the development agenda.Yet, the primary base of the BJP remained the middle-middle classes and above. Economic groups below these sections and social communities outside the party’s traditional bases were transitory additions.Why then would Modi choose risking support of primary supporters? Despite the wave in 2014, the BJP’s vote share remained pegged at 31 per cent and in the past two and a half years, change, if any to this figure, is downward though diehards will issue denials.Support can increase only if it looks beyond existing class base and forges a new socio-economic coalition, more ‘proletarian’ in character.Modi is trying to force a tectonic alteration in its traditional constituency but has left the bulk of the party anxious at the outcome of the turn.At mid-point of his regime, Modi had little option but to explore new avenues because policies and programmes he pursued since coming to power do not ensure political immortality. Most of his predecessors have at least a decision or two that ensure permanence in history.None of Modi’s initiative so far matches signatureslikethatof JawaharlalNehru (Five Year Plans and PSUs), Lal Bahadur Shahtri (push towards Green Revolution), Indira Gandhi (bank nationalisation and 1971 war), Rajiv Gandhi (communication revolution), PV Narasimha Rao (economic liberalisation), Atal Bihari Vajpayee (Golden Quadrangle) and Manmohan Singh (RTI and rural employment guarantee).The decision to demonetise High Denomination Currency Notes sets the political agenda for the second half of Modi’s tenure.Just as the BJP has attempted to alter the discourse with the “surgical strikes”, the move against black money is also a political ploy.Reiteration by Modi, and backed by party leaders, that the proclaimed offensive against parallel economy will be a continuing strategy makes it evident that the offensive does not have just an economic purpose.Critics of the decision will be termed anti-nationals just as they were labelled several times over in the past. Modi is attempting to harness the latent sentiment of masses against the rich.He hopes to capitalise on the belief among all sections that inconvenience or losses are more for those higher on the economic ladder. Modi will hope that everyone, up to a certain class of people, imagine themselves as ‘havenots’ and accept hardship because it spells trouble for the ‘haves’.This form of egalitarianism is new to BJP in practice, though in theory, it has been propounded by Deendayal Upadhyaya.Months before crucial assembly elections, Modi has taken a huge risk. But then, Modi has gambled in the past too. He has walked the black money talk in hope that it enables another term in 2019 and becomes his hallmark. Time will tell if he made the right call or not.Demonetisation issue: An open letter to Delhi CM Arvind KejriwalAuthor: Mehul ShahPublication: The Times of IndiaDate: November 13, 2016URL: am a practising Chartered Accountant, aged 28, in Surat and I was hoping you would support the notification for demonetization of currency and was very eager for your reaction. Since your entry into politics you have supported every small move to reduce black money and corruption and, this was indeed a very big and bold move!But after going through the video released yesterday, my expectations from AAP as a common man were shattered once again. I believed that a person of such stature and designation as you would spread positivity all around without any ifs and buts to make this mega clean-up drive possible and help the common man in mitigating the problems rather than nagging about the same and hence I would like to bring to your knowledge the following points.Point 1As you have stated in your video that it took 2 whole days for you to understand the various aspects of the scheme and even after consultation with various experts, you could not basically understand the logic of why Rs 2,000 notes were released instead of Rs 1,000. I would like to make an attempt to tender my best possible logic (please enlighten me, if I am wrong somewhere) as follows:Let us simply take 2 scenarios to understand the logic.Scenario A: If as per your suggestion, Rs 2,000 note are not issued but only new Rs 1,000 notes areLet’s say, for instance Mr X has Rs 1 lakh black money in 100 old notes of Rs 1,000 each.Mr X divides those Rs 1 lakh into 10 equal bundles, each comprising of 10 old notes of Rs 1,000 each and puts each stack on a table.On Day 1 , in the morning Mr X would deposit the first bundle i.e. 10 old notes of Rs 1,000 valued at Rs 10,000 into the bank and on same Day 1 in the evening he would withdraw 10 new notes of Rs 1,000 again valued at Rs 10,000 and put it in the locker in his house.Now the real game starts.On Day 2: Morning, Mr X would deposit the second bundle of 10 old notes of Rs 1,000 valued at Rs 10,000 kept on the table. However, in his books of accounts submitted to Income Tax Department, he will show that he has deposited the same 10 new notes which was withdrawn on Day 1 in the evening (which is actually still lying in the locker of house).On Day 2: Evening, Mr X would again withdraw 10 new notes of Rs 1,000 valued at Rs. 10,000 and keep the same in locker. So at the end of Day 2, Mr X has Rs 80,000 on table in old notes and Rs 20,000 in new notes in locker.Now Day 3 will come in next week as limit of Rs 20,000 per week.The same exercise shall continue till Day 10 and by the end of Day 10, Mr X shall have no old notes and Rs 1 lakh in 100 new Rs 1,000 in the locker.However, to the Income Tax Department, Mr X has shown that he was having only Rs. 10,000 as black money initially (i.e. one bundle of 10 notes of Rs 1,000) and he has rotated the same Rs 10,000 by depositing it into bank account in the morning and withdrawing it in the evening and again redepositing the same on next day and so on.Thus, Mr X has paid tax only on initial Rs 10,000 whereas he has managed to convert all his black money of Rs 1,00,000 into new notes.This Modus operandi is called Peak theory i.e. theory of rotation of same money which is accepted by most of the High Courts and Tribunals. Revenue is also helpless to catch Mr X because the above scenario can also occur in genuine cases where you withdraw money from bank to purchase something and then when you think that no good deal is available, you may again deposit the same money into your bank account and are not required to pay tax again.Scenario B:Watch what happens when PM issues new Rs 2,000 note instead of Rs 1,000Mr X deposits first bundle of 10 old notes lying on table in the bank on Day 1 morning and then he withdraws 5 new notes of Rs 2,000 on Day 1 evening and keeps it in locker.Now on Day 2 morning, when he goes to deposit second bundle of 10 old notes of Rs 1,000 each and wrongly shows the Income Tax Department that he has redeposited the same money which was withdrawn on Day 1 evening – Bingo!He is caught red handed, because the bank slip on Day 2 submitted to bank shows deposition of 10 notes of Rs 1,000 each whereas the govt knows that Mr X could never have withdrawn on Day 1 any note of Rs 1,000 because they were never printed!Now isn’t it really a master stroke by Mr Narendra Modi, the beloved Prime Minister of our country?Sir, you have stated in the video that if someone gives you the logic of issuing new notes of Rs 2,000 instead of Rs 1000, you will salute the PM and support him in his endeavour. I hope this explanation finds you in good health and I am waiting for the support in full sense.Even if the above explanation is not completely true, we should rely on and respect the PM of our country who is elected through clear democratic majority.Further, the fact that when someone is holding the new Rs 2,000 note , he is psychologically getting a sense of freshness that the country is in the growth phase. Messages are being circulated not to write anything on new notes. Imagine if the government would have never issued new higher denominations notes with inflation and growth we would still be dealing with Annas and Pavlis!Sir, the above example also gives you an explanation as to why the withdrawal limit is kept so low because the above modus operandi can still be done with Rs 500 note, however, the incentive would be less because Mr X cannot withdraw more than Rs 10,000 in a day and even if he withdraws Rs 10,000, there is every possibility that banks shall give Mr X Rs 2,000 note. So Mr X cannot follow the above modus operandi.And believe me sir, each and every condition in the notification is seen to take care of the problems likely to be faced by citizens and at the same time making sure that such sophisticated theories are not resorted to by black money hoarders, but questioning everything in the name of freedom of expression may create panic situations or bring out loopholes and hamper the success of reforms.Point 2Sir, you have again criticised and stated in the video that printing Rs 2,000 note will help to increase corruption because stacking those Rs 2,000 notes would require lesser space as compared to stacking Rs 1,000 notes.In this regard, I would like to ask that, have you come across any case where the “babus” have not taken any bribe and done work honestly because they had a small bag which could not be fitted with Rs 1,000 notes?Or have you come across any businessman who has declared unaccounted money solely because there was no space to keep those Rs 1,000 notes?Point 3As stated in the video by you, it is true that in spite of PM efforts, there shall be dubious commission agents and unaccounted investment in gold through jewellers, but as far as I remember when the jewellers were on strike for 45 days when our PM levied excise duty on gold in month of April 2016, it was you who supported their strike. It shows that whenever some changes are suggested to regulate a particular market, AAP opposes them and then you nag about gold market being unregulated.Infact I believe that the PM had a full blueprint for the development of our country right from Day 1 of his being elected if I recall my last three years as a professional.Firstly, they asked for all the bank account number in your Return of IncomeThen they linked your PAN with AadharThey linked all the subsidies, pension and other benefits directly to your bank account through Direct Benefit Transfer Scheme.Then, they gave opportunity to everyone to open an account with bank through Jan Dhan Yojna.They entered into revised treaty with most of the countries in which unaccounted money goes through HAWALA, for example, Mauritius and thus the route of black money coming from Mauritius which everyone knew is stopped.They passed few strict laws to overcome the evil of black money such as Benami Transaction Act and Foreign Black Money ActThey levied excise duty on gold.They also made TCS compulsory for Cash transactions above Rs 2 lakhs.They withdrew lakhs of pending income tax and service tax litigations where common man had won at appeal level and department had gone further.They also entered into information exchange agreement with such countries.Then they gave last opportunity to all black money hoarders through Income Declaration Scheme, 2016.Now they have a Scheme for Dispute Resolution Panel again to reduce Litigation till December 2016.Now the masterstroke, that they have banned Rs 500 & Rs 1000 denominations.Not only the destination of this whole process is commendable but even the journey or the chronology of these events is interesting which explains the ultimate destination and who knows , maybe the journey is still not over and the ultimate destination may still be the Swiss account holders!Point 4Further, you have stated in your video that penalty would be levied at the rate of 200%. The said statement has created a panic and people have stated discounting their own hard earned cash.Being in Income tax Department in the past , you ought to know that as per the present Income Tax Act,1961 penalty is never levied on cash deposits but on “concealed income”. Hence, when the common man is depositing cash in hand which is duly accounted or out of his past savings and even out of unaccounted current year’s income whose return is yet to be filed, there shall not be any penalty if there is no mismatch between returned income and assessed income. Even the government officials in their statement used the words “underreporting” or “mismatch”. To understand the definition of “underreporting”, please refer Section 270A of the Income Tax Act or go through the following article:No penalty on high denominations notes deposited into bank if such amount is declared in return of income by paying appropriate taxInstead you could have encouraged the citizens to pay appropriate tax.Point 5Nowhere in the video have you stated anything relating to fake currency or counterfeit notes because you know that the issue of existing fake currency is solved foolproof.Which situation would be better?Scenario A:A labourer standing in queue to exchange notes from bank just for a few days.Scenario B:A labourer working hard whole day to get a fake note at the end of the day?The issue of terrorist funding is also tackled but you chose to remain silent on the same.You have stated that Modi should have infused Rs 100 note from before and it would have been you only to have said in this video that: “Arey, ATM se do din pehle se hi sirf Rs 100 ki note bahar aa rahi thi toh sab ko pata tha , yek koi secret nahi tha”ConclusionNow, if I am to believe that you really don’t understand these simple concepts even after consulting with experts for 2 days as already described by you, I am deeply saddened because the common man believe that you are an IIT-ian and have spent considerable time in Income Tax Department as well.Contrary to the same, if I am to believe that you already know the benefits of demonetization which I first learnt in standard 8th when subject of Economics was introduced to me and the concept of ‘Peak Theory’ which is described by me earlier and which I learnt with my very limited experience while pursuing my profession of Chartered Accountancy, then I am more saddened and feel AAP as more dangerous because I believe that above any religion, politics or reservations in any caste or creed, it will always be education which shall uplift the common man and it is the common man who has elevated you to a position where you are looked by millions as their idol and it is your duty to educate them and spread knowledge and not keep them in ignorance to preserve your vote bank.I am grateful to all my teachers who have selflessly shared their knowledge and some fellow members of CA fraternity who are playing an active role in creating awareness and educating commoners about the positive consequences of demonetization true to the jewel crowned to the profession as “Partner in Nation Building” and I would, therefore, like to advise the citizens not to sell the notes at discounted prices or deposit the cash into bank accounts of other benami persons in fear of penalty. Further, do not claim any bogus expenses or bogus loss to gain more trouble. Do not manipulate accounts by creating bogus cash on hand. Be sporty and pay your taxes honestly.Removing Corruption In India Needs More Than Banning Currency Notes: Chinese State MediaAuthor: Press Trust of IndiaPublication: Date: November 14, 2016URL: 's decision to demonetise Rs 500 and Rs 1,000 currency notes was "bold and decisive" but the "risky" move is far from delivering a corruption-free country, the Chinese media said today.Chinese official media said the currency ban is "far from enough" and India may "look at ideas" from China's crackdown against corruption which has shown "efficiency"."(Narendra) Modi means well and his decision was made based on the reality in India, since most illegal business in the underground economy is cash-only, and 500 and 1,000 rupee notes constitute over 80 per cent of all cash circulation in India. Nevertheless, we can hardly count on the new rule to fully root out corruption," the article titled 'Beijing offers clues for Modi's new anti-corruption moves' in state-run In Global Times said.Since PM Modi assumed office, he has carried out a number of measures to crack down on black money, corruption and tax evasion. However, many of them are believed to be "without teeth and can't begin to scratch the surface of the problems he faces", it said.India's new policy to scrap high value notes is considered a "risky, but a bold and decisive step", it said."And yet, delivering a corruption-free country requires more than banning currency notes. The key should be reforming systems. In this regard, New Delhi might need to look for ideas from Beijing," it said, referring to the massive anti- graft campaign carried out by President Xi Jinping in which over a million officials at different levels were punished.Since the 18th National Congress of the Communist Party in 2012, during which President Xi was elected as its general secretary, and taking over as the Chinese President and military chief launched the anti-graft campaign which also attracted criticism that he used it effectively to consolidate his power emerging as the most powerful Chinese leader after party founder Mao Zedong."Over the years, China promoted anti-corruption laws, improved the supervision system, deepened judicial system reforms and adopted measures to make sure the system is transparent," it said without referring to criticism about the campaign."For instance, China's foreign ministry has lately published information about the families of 12 senior officials on its website in an effort to fight against corruption through familial networks by improving transparency. These steps are taken to ensure that achievements made in the struggle against corruption can be consolidated by laws and systems," it said.China is still on its way toward building a comprehensive anti-corruption system. But "compared with India, Beijing's method has already shown its efficiency", it said."More time is needed to see whether Modi's new policy will turn into a huge blow against corruption in India. The hard truth is that the corrupt and fraudulent won't just conduct shady deals by using cash, but with gold, real estate and overseas assets."Corruption can be bred in a variety of ways. Blocking the circulation of large currency bills is without question far from enough," it said.Modi baiter Sharad Pawar backs demonetisation, praises PM's intent to serve the nationAuthor: Kritika BanerjeePublication: Indiatoday.inDate: November 13, 2016URL: NCP chief today shared the dais with the PM at the inauguration of a conference in Pune.NCP chief Sharad Pawar today hailed Prime Minister Narendra Modi's decision to demonetise Rs 500 and Rs 1,000 notes.Sharing the dais with the PM at the inauguration of the International Conference on Sugarcane Value Chain in Pune, Pawar said the decision reflects the Prime Minister's "intent to serve" the nation.Pawar appreciated the PM for "working round the clock" in the interest of the country.A day after the government announced Rs 500 and Rs 1,000 notes invalid, the NCP chief had tweeted his support on the decision. "This will curb black money and terror financing," Pawar had tweeted. -------------------Sharad Pawar @PawarSpeaksWe welcome the decision to #demonetise currency notes - Rs 500 & Rs 1000. This will curb #BlackMoney and #terror financing.November 9, 2016-------------------Why India scrapped its two biggest bank notesAuthor: S.PPublication: The EconomistDate: November 13, 2016URL: a surprise televised address on the evening of November 8th, Narendra Modi, the prime minister of India, delivered a bombshell: most of the money in Indians’ wallets would cease to be accepted in shops at midnight. The two most valuable notes, of 500 and 1000 rupees ($7.50 and $15), were to be “demonetised”, economist slang for taken out of circulation. Indians have until the end of the year to visit banks to either exchange their cash against newly printed notes or deposit it in their accounts. After that, their notes will become mere pieces of printed paper with no value at all. Citizens and businesses face weeks or months of disruption as the new currency stock is deployed. So why bother?The government justified the move in part due to concerns over a proliferation of counterfeit notes (not unusually, it pointed the finger at neighbouring Pakistan), which it claims is fuelling the drug trade and funding terrorism. But its main impact will be on “black money”, cash from undeclared sources which sits outside the financial system. Perhaps 20% of India’s economy is informal. Some of that is poor farmers, who are largely exempt from tax anyway. But the rich are perceived to be sitting on a vast illicit loot. Though a large part of that sits in bank accounts in predictable foreign jurisdictions, a chunk of it is held in high-value Indian notes. Purchases of gold or high-end real estate have long been made at least in part with bundles (or suitcases) of illicit cash. The impact of the move is that everyone will have to disclose all their cash or face losing it. Those with mere bundles of 500 rupee notes clearly aren’t the target: the government has said tax authorities won’t be told about deposits of less than 250,000. But those who have stashed large piles of notes are in a bind. A recent amnesty programme for “black money” has just passed meaning the tax man is unlikely to look upon undeclared cash piles with sympathy.The question is not whether the scheme will work but whether the cost of implementing it is worth it. The notes being nixed represent 86% of all cash in circulation: everyone is impacted. Queues have snaked around banks for days as Indians have tried to convert their notes into new money. And the “black money” hoarders have ways to liquidate their loot, for example hiring lots of people to deposit their notes into their own accounts and then send it back, all for a fee. The benefits are hard to gauge for now. The government is keen to be seen to be cracking down on tax-dodgers on behalf of the “common man”. But if the poor fellow then has to spend his days (like your correspondent) scouring the streets for an ATM that works, he may end up wondering if he is a beneficiary of the scheme or its victim.Malda, India's fake currency capital, is feeling the demonetisation pinchAuthor: Subrata NagchoudhuryPublication: Scroll.inDate: November 14, 2016URL: Bangladesh border, through which the counterfeit notes make their way in, has fallen silent. But security forces don't expect the lull to last long.The government’s announcement on Tuesday night to demonetise Rs 500 and Rs 1,000 notes is a massive blow to Kaliachawk. This border town in the West Bengal district of Malda is the ground zero of the fake currency network in India, with the counterfeit notes making their way in from Bangladesh through the border. Many residents of the town make their living from this illegal trade, mostly working as couriers. And all fake Indian currency notes, known as FICN, seized across the country are more often than not traced back to Kaliachawk.In the days since the big currency notes were rendered illegal tender, the flourishing undercover business of counterfeit cash running into crores has come to a screeching halt overnight, unsettling hundreds of people. The border has fallen silent. There have even been rumours of currency notes being dumped in rivers and fields.The Border Security Force, which dedicates a large amount of its time to keeping a watch on this illegal trade, is a relieved lot. But they say the business will be up and running again.“We are looking at a time frame of one month to three months before we make the first seizure of a fresh consignment of fake Indian currency, this time most likely Rs 100 notes,” said a senior BSF officer who did not want to be identified. “That’s our feedback from across the border in Bangladesh.”The officer said inputs suggested the government’s move to clamp down on black money had hit big dealers in counterfeit currency in the neighbouring country and several thousand couriers on either side of the border. “But the duration of a FICN-free market place is going to be short-lived,” he warned.But for now, the border force will relish this lull. “The overall and immediate impact of the currency ban has been stunning all along the India-Bangladesh border,” said special DG RP Singh. “The Central government’s move has come as a big relief to the force engaged in these areas and particularly in districts like Malda in West Bengal.”The BSF covers 4,096 km of the border with Bangladesh in the five states of West Bengal, Assam, Meghalaya, Mizoram and Tripura.The illegal tradeMalda sector, in BSF parlance, has a border of 223 km with Bangladesh, of which about 150 km is fenced while the rest is mostly riverine, open border. The shifting sands of the Ganga create charland – raised land as a result of silt deposition – on this non-demarcated border during the winter months, while its gushing waters wipe away the border in the monsoon. The border is said to have 58 outposts and a 2,500-strong contingent of the BSF to man these.According to security forces, the trans-border trade in fake currency is done mostly along the fenced border. Picking spots where vigil is slack, couriers from Bangladesh toss up the consignments in plastic packets for their counterparts on the Indian side to pick up.“The movement is done in chains,” explained a security official who did not want to be identified. “From the point of origin of the consignment in Bangladesh to the destination in Kaliachawk, there would be no less than 20 to 25 couriers in each chain. Each person in the chain normally covers a distance of 100 meters to hand over the consignment to the next one in the chain. It is an intricate network and very difficult to trap and dismantle.”The fake notes then make their way across the country in various ways, the most prolific method being through syndicates dealing with the construction business in states like Pune, Maharastra, Delhi, Chennai, Bengaluru and Kerala. Construction workers from Malda and Murshidabad, another district in West Bengal, have often been used as couriers of fake currency to other states.In April 2014, the Pune police arrested a resident of Malda with fake Indian currency valued at Rs 1,96,000, which had been sourced from Kaliachawk. In December 2015, the Special Operations Group of the Mumbai crime branch arrested two brothers from Murshidabad with fake notes worth Rs 8,00,000. The police claimed the arrested men had admitted they had delivered around Rs 1.5 crore in fake currency to Delhi, Gujarat and Maharashtra in the last two years. In 2014 and 2015, 150 cases of fake currency seizures across the country had their origin in Kaliachawk.Such seizures – often said to be the tip of the iceberg – registered a sharp spike in these two years. According to official statistics, fake currency seized in the South Bengal Frontier, including Malda, totalled Rs 3.6 lakhs in 2012, Rs 80.9 lakhs in 2013, Rs 1.7 crores in 2014, Rs 2.6 crores in 2015 and Rs 1.3 crores this year till October. Officials said there had been a slump in the trade since the terror attack on a café in Dhaka in July.According to a BSF officer who has done research on the circulation of fake Indian currency in the area, the Dhaka terror attack was a turning point for the illegal border trade. “The illicit border trade has been somewhat volatile since July after the terror attack, which called for better coordination between the Bangladesh Border Guards and the BSF,” he said. “Surveillance by the Bangladesh Rapid Action Battalion and Border Guards on their side and by the BSF and the National Investigation Agency on the Indian side was stepped up.”All quiet on the borderThe slump can be seen all along the border in Malda.“I made a round of some of the border outposts on Wednesday morning,” said a Border Security Force officer who deals mainly with fake currency matters. “A vast majority of the youth on the border seem to have lapsed into wait-and-watch mode with anxiety written large on the faces of these syndicate members dealing in FICN. They are familiar faces. But suddenly, there are no takers and no suppliers as there is no demand. There was least activity on the border. An all pervading lull greeted me as I travelled through the winding roads.”The officer, speaking on condition of anonymity, said the force had received a tip-off about a consignment from Bangladesh having landed in Kaliachawk almost coinciding with the demonetisation announcement on Tuesday night.“Earlier, we would have rushed to the spot, lest it find passage elsewhere,” he said. “But this time we just did not respond. Who will touch this currency now? They are as good as waste paper.”He added, “I checked with my sources across the border in Bangladesh and the same despondency seems to have struck dealers on the other side.”Santosh Das (name changed) lives in Churiantapur, considered one of the most porous points on the border as far as the illicit currency trade is concerned, and witnessed the sudden halt in the business. “The scene has changed radically overnight,” he said. “The mafia groups who would be running up and down the border roads in their motorbikes are suddenly missing. It’s been a bolt from the blue for them. And there have been rumours about fake currency notes being found in abandoned fields and in adjoining rivers.”Swadhin Sarkar, the Bharatiya Janata Party MLA from Baishnavnagar in Malda, said, “I do not know about fake currency floating in the river but in Doltola area of Kaliachawk some fake currency was found abandoned in a field.” He added, “Local kids took those away and the police were not informed.”Sarkar also said the lull in the counterfeit currency trade came with other risks. “We are worried about the mafia groups who dealt in currency and what their next step will be,” he said. “Many fear that criminal activities like robbery, snatchings and assault might increase.”But for the Border Security Force, the lull gives them a chance to deal with other clandestine business in the area.“Our main energy was diverted towards dealing with the fake currency network,” said a BSF commander who did not want to be identified. “The fake currency trade was driving other clandestine operations like cow smuggling and trade in opium and illegal arms. Local contacts say the illegal trade is concentrated in villages like Churiantapur, Char Sujapur and Pardeonapur on the Indian side and Thutupara, Kusumpur and Ghughudanga on the Bangladesh side. We are reassessing our priority areas now with the focus on fake currency totally eliminated.”Another BSF official said the force would be keeping an eye on the border population involved in the fake currency trade as they may venture into other areas of smuggling, such as electronics, gold, mobile phones, cows, narcotics, arms and even essential commodities.However, district police administration officials were sceptical about the halt in the illegal currency trade lasting too long. “It is just a matter of months before we hear about fake currency having landed in Kaliachawk in denominations of Rs 100 and also the new Rs 500 and Rs 2,000 notes,” said one official.The officials added that Bangladesh wasn’t the only source of fake currency. Police investigations had found that large-scale manufacture of the notes may also be done in Pakistan and the consignments transported to Dubai or Nepal for entry into India, they said.As Nation Faces Cash Crunch, This Tea-Seller Takes To PaytmAuthor: CNN-News18Publication: Date: November 14, 2016URL: the ongoing nationwide cash crunch, a tea-seller in RK Puram, Sector 9 in Delhi has started taking Paytm money for a cup of tea.Speaking to CNN-News18, the tea-seller said,"I have been using Paytm since the past 10-15 days, and a lot of people are making their payments through it."Initially, he faced problems in getting customers but the numbers increased with time. He now has 10-15 customers who pay him through Paytm daily."Paytm users are increasing. Now, I have 10 to 15 customers on a daily basis who pay me through Paytm." he said."The step taken by PM Modi is very good. Yes people are facing obstacles, but if they start using paytm most of their problems will be solved," he said hailing Prime Minister Narendra Modi for his decision to demonetise Rs 500, Rs 1,000 currency notes.At a time when ATMs are running out of money leading to serpentine queues outside banks, services of Paytm can be seen as a breather for both the customers and the local shop owners.Demonetization: Fact and FictionAuthor: Vivek DehejiaPublication: Date: November 14, 2016URL: past week has witnessed a series of surgical strikes on our common sense, with commentary on the government’s demonetization of high denomination currency notes ranging from claims that it is a political masterstroke for Prime Minister Narendra Modi to claims that it is political suicide, from claims that it will be a bonanza for the economy to claims that it will be a disaster. It’s high time to separate fact from fiction, and conjecture (well founded or ill) from propaganda.First, given that the old 500 and 1,000 rupee notes are being replaced with new 500 and 2,000 rupee notes, what is involved is, in effect, a one time wealth tax on black money. To be more precise, this will be a one time tax on unaccounted cash held in high denomination notes, and therefore represent a partial attack on black money. After all, black money that has been converted from cash into gold, property, or other assets will be unaffected, or at any rate, unaffected directly. (A crash in property prices, induced by demonetization, will indirectly affect the wealth of those who have parked money, whether illicit or otherwise, in the property market.)That having been said, it would be hard to deny that those with large stashes of unaccounted cash are going to take a hit in the short run, and it will take a period of months if not years for an equivalent stock of black money in the newly printed currency notes to be built up. Black money will take a hit, at least for a while, and that cannot be a bad development.Second, the costs of demonetization are the short run adjustment costs caused by a liquidity crunch during the transition period in which old notes are swapped for new notes. These are, literally, the shoe leather costs first year economics textbooks write about -- the cost of waiting in a queue to exchange or deposit legitimate stocks of old currency notes. There should be limited or no medium or long run effect on the level of aggregate demand in the economy, a bizarre claim being put out there even by some well known economists who ought to know better.Thus, celebrated economist Kaushik Basu is quoted in the Financial Times as saying that the demonetization plan is a “very risky correction of money supply” and is likely to cause a drop in aggregate demand and thereby lead to slower growth. This is very puzzling indeed, considering that India now operates under a monetary policy regime known as inflation targeting, a fact which Basu most certainly knows. Thus, if a portion of the stock of high powered money is destroyed by some of the high denomination notes being burned -- literally or metaphorically -- the incipient drop in M1 can be fully offset by open market operations of the Reserve Bank of India. In more technical terms, the RBI, can, to a first approximation, fully “sterilize” the monetary effects of that demonetized currency which is “burned” and not deposited or exchanged for new notes.More fundamentally, in a world of inflation targeting, unlike the world of the first year textbooks that Basu seems to have in mind, the money supply is endogenous, as the policy instrument is the central bank’s policy rate -- in India the repo rate, not adjustments to the money stock or its growth rate. Thus, in terms of our textbook analytics, the LM curve is horizontal at the central bank’s chosen interest rate, rather than vertical at a policy-determined money stock. The intersection of this horizontal LM curve with the downward-sloping IS curve determines the level of aggregate demand, at a given nominal price level. There is no role here for demonetization to play.Third, armchair analysts of the short run impacts of demonetization have in some cases succumbed to a very basic confusion, that between a one time change in the price level and the rate of price inflation. Suppose that, because of changed consumer and producer behaviour, there is a one time shock to the price level. This level effect has no effects on the medium and long term rate of inflation, which is a function of the underlying growth in the stock of money, which, in turn, is a function of the central bank’s policy interest rate as determined by its inflation targeting policy framework. This confusion between levels and growth rates equally infects discussion of the Goods and Services Tax, in which it is wrongly argued that inflation will be the result when what is meant is a one time change in the price level.Fourth, the beneficial effects of demonetization in the longer run are likely to be an increase in financial inclusion, as more of the unbanked are goaded to enter the financial system, and this can only be a good thing. Relatedly, to the extent that those inconvenienced during the liquidity crunch of the transition switch over permanently to debit and credit cards and electronic payments, the economy’s reliance on cash will diminish, although it will by no means disappear (nor should it, for that matter).Fifth, and last, a long run solution to the problem of black money must tackle it at its source, and that means dealing with hot potato issues such as election finance.Bottom line: Demonetization is likely to have some good effects, and its bad effects are overhyped by critics who either do not understand monetary economics or perhaps have a vested interest in seeing the laudable efforts of the government to crack down on black money fail. Let us give this a chance.- Vivek Dehejia is economics professor at Carleton University in Canada; resident senior fellow at IDFC Institute in Mumbai; and columnist, Mint, India. He may be reached at vdehejia@.Here’s Why We Should Give Demonetisation Push A Fair ChanceAuthor: Vivek DehejiaPublication: Date: November 15, 2016URL: past week has witnessed a series of surgical strikes on our common sense, with commentary on the government’s demonetisation of high denomination currency notes ranging from claims that it is a political masterstroke by Prime Minister Narendra Modi to claims that it is political suicide, from claims that it will be a bonanza for the economy to claims that it will be a disaster. It’s high time to separate fact from fiction, and conjecture (well founded or ill) from propaganda.First, given that the old 500 and 1,000 rupee notes are being replaced with new 500 and 2,000 rupee notes, what is involved is, in effect, a one-time wealth tax on black money. To be more precise, this will be a one-time tax on unaccounted cash held in high denomination notes, and therefore represent a partial attack on black money. After all, black money that has been converted from cash into gold, property, or other assets will be unaffected, or at any rate, unaffected directly. (A crash in property prices, induced by demonetisation, will indirectly affect the wealth of those who have parked money, whether illicit or otherwise, in the property market.)That having been said, it would be hard to deny that those with large stashes of unaccounted cash are going to take a hit in the short run, and it will take a period of months, if not years, for an equivalent stock of black money in the newly-printed currency notes to be built up. Black money will take a hit, at least for a while, and that cannot be a bad development.Second, the costs of demonetisation are the short run adjustment costs caused by a liquidity crunch during the transition period in which old notes are swapped for new notes. These are, literally, the shoe leather costs first year economics textbooks write about – the cost of waiting in a queue to exchange or deposit legitimate stocks of old currency notes. There should be limited or no medium or long run effect on the level of aggregate demand in the economy, a bizarre claim being put out there even by some well known economists, who ought to know better.Thus, celebrated economist Kaushik Basu is quoted in the Financial Times as saying that the demonetisation plan is a “very risky correction of money supply” and is likely to cause a drop in aggregate demand and thereby lead to slower growth. This is very puzzling indeed, considering that India now operates under a monetary policy regime known as inflation targeting, a fact which Basu most certainly knows. Thus, if a portion of the stock of high-powered money is destroyed by some of the high denomination notes being burned – literally or metaphorically – the incipient drop in M1 can be fully offset by open market operations of the Reserve Bank of India (RBI). In more technical terms, the RBI, can, to a first approximation, fully “sterilise” the monetary effects of that demonetised currency, which is “burned” and not deposited or exchanged for new notes.More fundamentally, in a world of inflation targeting, unlike the world of the first year textbooks that Basu seems to have in mind, the money supply is endogenous, as the policy instrument is the central bank’s policy rate – in India the repo rate, not adjustments to the money stock or its growth rate. Thus, in terms of our textbook analytics, the liquidity money (LM) curve is horizontal at the central bank’s chosen interest rate, rather than vertical at a policy-determined money stock. The intersection of this horizontal LM curve with the downward-sloping investment saving (IS) curve determines the level of aggregate demand, at a given nominal price level. There is no role here for demonetisation to play.Third, armchair analysts of the short run impacts of demonetisation have in some cases succumbed to a very basic confusion, that between a one-time change in the price level and the rate of price inflation. Suppose that, because of changed consumer and producer behaviour, there is a one-time shock to the price level. This level effect has no effects on the medium and long term rate of inflation, which is a function of the underlying growth in the stock of money, which, in turn, is a function of the central bank’s policy interest rate as determined by its inflation targeting policy framework. This confusion between levels and growth rates equally infects discussion of the Goods and Services Tax, in which it is wrongly argued that inflation will be the result when what is meant is a one-time change in the price level.Fourth, the beneficial effects of demonetisation in the longer run are likely to be an increase in financial inclusion, as more of the unbanked are goaded to enter the financial system, and this can only be a good thing. Relatedly, to the extent that those inconvenienced during the liquidity crunch of the transition switch over permanently to debit and credit cards and electronic payments, the economy’s reliance on cash will diminish, although it will by no means disappear (nor should it, for that matter).Fifth, and last, a long run solution to the problem of black money must tackle it at its source, and that means dealing with hot potato issues such as election finance.Bottom line: Demonetisation is likely to have some good effects, and its bad effects are overhyped by critics, who either do not understand monetary economics or perhaps have a vested interest in seeing the laudable efforts of the government to crack down on black money fail. Let us give this a chance.- Vivek Dehejia is economics professor at Carleton University in Canada; resident senior fellow at IDFC Institute in Mumbai; and columnist, Mint, India. This post was first published on his blog, and has been republished here with permission.Surprise : 34 Things Modi Achieved For IndiaThrough Demonetisation?1.Maoists hit2.No stone-pelting in J&K3. Burning schools stopped in J&K4.Corrupts burning cash5.Arhar dal crashes to Rs.80/kg in UP6. Kirana shops/Panwalas installing debit card machines7.Municipalities making record recoveries of house tax8.Bijli companies making huge record recoveries of past arrears9.Medicine shops making big sales10. Delhi Metro smart cards sales increase11.Many businessmen recovering past dues as old as 4 years and getting advance for new orders12.Huge opportunities for mobile wallets13. Banks plush with funds.Rs.3 lakh crore banked in 4 days!!! Cost of funds reduced for banks14. Labourers paid Dihadi for standing in queues15. All property deals involving black money in jeopardy.Bayana in jeopardy16. Property prices come down by 25%17.Democracy deepened. All castes/creeds standing in same queue.18.Fake currency rackets hit19.Political parties spends in Punjab/UP hit20 Najeeb Is suddenly Found & OROP is well21. Rs.2000 notes will cut currency printing costs for Govt22.Notes burnt by corrupts will reduce fiscal deficit as liability cancelled21. ATMs to be reprogrammed. Business opportunities for software firms21. Drug peddlers in Punjab hit22.IT raids unerathing black money23.Cops detecting /unearthing hug cash in nakabandi27. Public not wasting time on faaltu test matches and watching faaltu bollywood movies. Facing real life !!!28. Havala has come to a stand-still29. Betting , Satta industry hit badly30. Great precedent set-political leader takes hard decision benefitting nation not bothering about his political costs31.People realise there can be a selfless politician.32.People willing to bear short-term pains for long-term gains33.Demands in other countries (Pakistan/Australia) to emulate India’s step. India again on way to regaining?#Vishwaguru34. Message sent to the world that despite being a large diversified democracy India can take tough decisions and same well-received by people.Rahul Gandhi visits bank to experience pain of people, gives them more painAuthor: OpIndia StaffPublication: Date: November 11, 2016URL: Gandhi, who had vowed to learn from AAP after the grand old party suffered defeat in 2013 Delhi assembly elections, seems to have perfected the art. The Congress Vice President beat Arvind Kejriwal of AAP in creating a TV drama when he decided to stand in a queue outside a bank today.The party claimed that this step by Rahul Gandhi was to stand in solidarity with the common man who was facing inconvenience due to demonetization of old 500 and 100 rupee notes.Earlier, there were media reports about long queues outside banks and ATMs and new currency notes not being available at some bank branches. NDTV, the TV news channel considered close to the Congress party, even asked people to send video clips that showcase the trouble people have been facing.And it appears that Rahul Gandhi volunteered to make one such video clip.In the afternoon today, Rahul Gandhi visited the Parliament Street branch of State Bank of India in Delhi to exchange 4000 rupees of old notes. If the aim was to witness how people were inconvenienced, Rahul Gandhi succeeded, for his presence made life tougher for people standing in the queue.Rahul Gandhi’s visit was accompanied by security persons as well as media persons visiting the aforementioned bank. This caused even more inconvenience to people standing in the queue. There were reports that people were even not allowed to enter the bank after Rahul Gandhi went inside to exchange the money.A senior correspondent with Hindustan Times shared a video clip where a man was complaining about inconvenience he faced due to Rahul Gandhi joining the queue:-----------------------Sweta Goswami (@sweta_goswami.@OfficeOfRG enters bank at Parliament St. Public clearly unhappy. Waiting for the “VIP” to leave #DeMonetisation @htTweets @htdelhi pic.FVM6SbtV63November 11, 2016-----------------------Among those inconvenienced by Rahul Gandhi’s photo-op were senior citizens who couldn’t endure the pain of standing too long in the queue as the proceedings got delayed with a VIP entering the bank.-----------------------Sweta Goswami @sweta_goswami“We can’t stand for so long. Our knees are hurting. No body allowed to enter the bank as @OfficeOfRG is inside:” senior citizens @htTweets pic.s4v3gBQp3ONovember 11, 2016-----------------------Finally, Rahul Gandhi blasted Narendra Modi for causing inconvenience to people.Why the so-called liberals forced Paytm to take off an adAuthor: Rahul RoushanPublication: Date: November 14, 2016URL: India, more than being a liberal – where you are willing to accommodate dissenting voices – it is important to appear a liberal – where you shout every hour that you’re liberal and thus drown out the dissenting voices.This shouting is a form of virtue signalling that helps people with otherwise sad credentials to aspire for respectability in a particular social circle.And a lot of so-called liberals indulged in collective shouting yesterday after mobile wallet brand Paytm released an ad that hurt their guilty conscience.The ad showed a woman from upper middle class talking about how demonetisation stopped her from paying money to her maid, as she didn’t have ready cash. The character was going on and on with her rant when the maid interrupted her and asked her to stop making excuses and transfer money to her via Paytm. The upper middle class woman in the ad was shocked at this awareness and technology adoption by her maid. And that was the end of the ad, telling people to use Paytm if cash was not available.The ad upset some “liberals” so much that they uninstalled Paytm from their smartphones and tagged its founder Vijay Shekhar Sharma on Twitter, threatening that all of them will uninstall the application and thus hurt his business.Many of these outraged shouting virtue signalling liberals were from the media industry that has the power to hurt a brand’s image through biased reporting. Perhaps that led to Vijay Shekhar Sharma apologising and Paytm deleting the ad from its Twitter page.---------------------------Madhu Menon @madhumanwebThis ad made me unistall the @PayTM app, @Paytm/status/7...---------------------------Vijay Shekhar @vijayshekharThanks for feedback @madmanweb @ShoaibDaniyal @sahuSKNT @suraiya95 @bainjal, the ad is now removed. Good night.11:29 PM - 13 Nov 16---------------------------While economic boycott is a different matter, what is crucial here is to notice how the ad pricked the guilty conscience of the so-called liberals, who grouped up to launch a mob attack. But just as their threat was dressed up as “feedback”, their angst at being exposed was dressed up as “compassion”.Some of them claimed that the ad was patronising towards the maid. Really? Fact is that the ad showed a confident maid shutting her patronising employer up. Others said it mocked situation of people who were facing inconvenience due to demonetisation. No. It mocked those who were using the excuse of inconvenience to be lazy in general and unfair to maids in particular, so far as the ad’s copy was concerned.The truth is that the ad touched them where it hurt the most. Where a privileged class person arrogates the right to speak for the underprivileged class under the garb of activism. Where this class assumes that maids must be poor enough not to have a smartphone (even though some really cheap ones are available) and stupid enough not to know how to use apps (though maid’s husbands can be Uber drivers using an advanced app? A hint of sexism there? Poor women can’t use apps?).When a maid decides to speak for herself and comes up with a view that is not aligned with the ‘liberal’ stand, this privileged class is taken aback and is forced to shut up. This makes them angry. And this is what made them shout, uninstall the app, and tag the Paytm founder with their threats.The bunch that shouts ‘rising intolerance’ and ‘free speech’ on every possible occasion, successfully arm twisted a brand to take off their ad.But as it happens on Twitter, every shouting is met with counter shouting. People asked Paytm if they will wind up their business if enough shouting virtue signalling liberals told them that their business was a scam? No argument, no logic required?Finally good sense prevailed and Paytm brought back the ad with a minor modification; where the maid is being a bit more respectful to her employer by not terming her excuses as “drama”. Ah, that was another thing that hurt the guilty conscience of virtue signalling liberals. The drama by the elitist snobs of being considerate towards the unwashed masses.-------------------------Paytm @PaytmWith our strong belief in financial inclusion for every Indian, here is our upgraded ad. pic.DiUbNuERGKNovember 14, 2016---------------------------This is not for the first time when the so-called liberal crowd has forced brands to take off ads in the last couple of years, all while shouting that they were facing intolerance under the new regime. Earlier Pepsi was forced to delay release of its ad as some so-called liberals claimed it mocked FTII and JNU students. Havells was forced to take off an ad as people who can’t see beyond caste termed it casteist. And was attacked for an ad that had a character similar to JNU lout Kanhaiya Kumar.So much for creativity, free speech, tolerance, accommodation, and liberalism.Demonetization is a hollow moveAuthor: Pronab SenPublication: Date: November 14, 2016URL: Modi’s publicity coup has penalized the entire informal sector while doing nothing to curb corruption or tax evasionAt the stroke of the midnight hour of 9 November 2016, India lost 86% of its monetary base. The media—print, electronic and social—has been fulsome in its praise of Prime Minister Narendra Modi’s “master stroke” by which he has reportedly destroyed the base of corruption in India. “Surgical strike”, “shock and awe”, “big bang reform” are only a few of the laudatory phrases used to describe the pre-emptive demonetization of Rs500 and Rs1,000 notes. There is no doubt whatsoever that Modi has pulled off a major political and publicity coup and substantially enhanced his reputation as a muscular leader, but surely somebody needs to ask: at what price? Let me begin with the supposed gains from this measure. At the heart of all the rejoicing is the assumption that all those who have accumulated substantial amounts of ill-gotten wealth keep their takings in the form of cash, and use this cash to amass even more ill-gotten wealth through the black or parallel economy in an ever-growing spiral. If this is indeed true, then the demonetization will certainly have a huge positive impact on the state of the Indian economy by choking off the stock of liquidity which finances black activities. Unfortunately, this assumption is only partially, and not even substantially, true. While there are certain criminal activities (such as smuggling, drug peddling, gun running, etc.) that follow this pattern, they collectively account for a minuscule fraction of what is commonly understood as “black money”. The really big bucks come from two other activities—corruption and tax evasion.In both these cases, “black money” is a recurring income, and the recipients use the funds as all of us do our incomes—either consume it or invest it for future consumption. In either case, the cash does not stay with them for long and moves along an ever-widening ripple of transactions, most of which are perfectly legal. The illegality, if any, happens only to the extent that tax is evaded on the income from these secondary and tertiary transactions. For example, if a jeweller accepts cash in payment for gold or an ornament, he is committing no illegality (indeed, by law, it would be illegal for him to refuse to accept legal tender). If he conceals this income, however, then, and only then, it remains “black” (this, by the way, is also true of real-estate transactions). Now let me come to the cost. Eventually, the bulk of the cash finds its way into the informal sector, where it provides a part of the essential liquidity for virtually all transactions within the informal sector and between the informal and formal sectors. Considering the fact that the informal sector in India accounts for about 45% of gross domestic product (GDP) and nearly 80% of employment, disruption of this liquidity can be very costly indeed, both in terms of growth and equity. To make matters worse, some of this cash is held by hundreds of millions of the poor as savings and for meeting contingencies, and they have little else to fall back upon. To be sure, eventually most of these funds will be replaced; but during the interim, the human cost will be substantial. The magnitude of the cost obviously depends upon the speed at which the currency replacement happens, and also on the processes that are used for the replacement. At the moment, neither holds much cheer, especially in rural and semi-rural areas. The officially projected best-case scenario is three weeks, which is a lifetime for the poor and indigent. And what of the unfortunates who have no proof of identity?There is, however, one component of the economy that may actually experience a permanent effect—the informal financial sector. This sector, comprising not only the much-reviled moneylender but numerous other institutions such as nidhis, hundis, chit funds, etc., will have a very hard time exchanging its stock of currency (some of which may well be black money), and may indeed suffer a permanent erosion in its lending capacity. We might not shed any tears for them, but spare a thought for those whose livelihood depends on the capital provided by this sector because the formal financial sector will never touch them with a barge-pole. How large is this problem? I had made a rough estimation of this during the preparation of the 12th Five-Year Plan, and it came to nearly 40% of formal bank lending—i.e. 26% of GDP—which is not a joke.So what has this grand exercise actually achieved? First, it has certainly eliminated terrorist funding through counterfeit currency. Second, it has imposed a punitive cost on those who held their black assets as cash, and completely missed those who had converted their cash into real assets and foreign holdings. Third, it has put a dampener on certain kinds of criminal activity. Fourth, it has penalized virtually the entire informal sector, and perhaps damaged it permanently. Fifth, it has done absolutely nothing to curb either corruption or tax evasion. And all this at the cost of Rs12,000 crore in printing new notes and nobody knows how much in the logistics of exchanging the currency. Talk about cutting your nose to spite your face.Published with permission from Ideas for India (ideasforindia.in), an economics and policy portal.- Pronab Sen is country director of the India Central Programme, International Growth Centre (IGC).Funds tap turns dry for terror and Maoist groups after demonetisationAuthor: Bharti Jain, TNNPublication: The Times of IndiaDate: November 16, 2016URL: of higher denomination currency notes by the government seems to have dealt a body blow to funding of terror in Jammu & Kashmir as well as Left-wing extremist violence across several states.While hawala cash transfers to terrorists and separatist elements based in Kashmir, which were mostly in denomination of Rs 500 and Rs 1,000, have come to an abrupt halt, Maoist groups, particularly in states like Bihar and Jharkhand, are at pains to "convert" the extortion money that has been stocked as piles of cash into 'legal tender', according to sources.An intelligence officer tracking terror funding in Jammu & Kashmir said hawala channels had run dry after the the scrapping of Rs 500 and Rs 1,000 notes. With no unaccounted cash to fund violence and protests in the valley, the lead trouble-makers have been forced to lie low. For, they no longer have the money to pay the local youths to pelt stones and stage violent protests.A source said logistics for any terror operation or mob protests require money, which is almost entirely paid through hawala. "It is therefore interesting to note that no major terror attack has been reported in the valley since November 8," he said."Though this could be partially on account of normalcy having returned to the valley prior to demonetisation, it also indicates that terrorists are now finding it difficult to fund their activities," said a senior officer of the security establishment.The officer said the lull in terror operations could be utilised by the security forces to step up counter-operations against terrorists holed up in the valley. "First turn off the resources of terror outfits and then neutralise terrorists before they can find a way of replenishing their coffers," said the officer.According to intelligence inputs, the bigger casualty in terms of sheer volume of funds, however, is Left-wing extremism. Intercepts of recent conversations among CPI (Maoist) leaders based in Bihar and Jharkhand show them discussing the fear of losing their piles of cash collected through extortion and 'levy'. Government agencies have, meanwhile, stepped up surveillance to track money flow in naxal-infested areas. There are intelligence inputs that Maoists may target banks and cash vans to make good their losses, leading the security forces to step up vigil.It is learnt that senior Maoist leaders have contacted their trusted relatives and friends to explore possibilities of exchanging their stashed cash. Maoist undertrials have expressed helplessness in saving their cash stacked with confidants.As per estimates of intelligence agencies and other experts, the annual money collection by Maoists may be over Rs 1,500 crore. The extortion from tendu patta contractors itself amounts to Rs 200 crore per state. Besides, 'levy' is collected from road contractors and big industrial houses carrying out mining activities in states like Chhattisgarh and Jharkhand.As many as 124 incidents of extortion/levy by Maoists have been reported so far this year, resulting in death of 17 civilians. Most of these incidents were concentrated in Bihar and Jharkhand. In a recent crackdown on Maoists on November 3, three persons were arrested and around 86.5 lakh recovered.Maoist fronts in metros like Kolkata and Delhi have come forward to publicly oppose demonetisation, with some holding protests demanding a rollback and members of a CPI (Maoist) student wing in Delhi launching propaganda against demonetisation through social media posts.Modi's cash revamp rattles Maoist financesAuthor: Avarnita MathurPublication: India Today Date: November 15, 2016URL: Minister Narendra Modi's dramatic ban on the country's biggest banknotes will cripple Naxal activities more severely than any security operation could have in the recent past, according to an assessment by highly-placed intelligence and police officials.In Naxal strongholds of Chhattisgarh, Jharkhand and Odisha, the insurgents have buried their finances in Rs 500 and Rs 1,000 bills deep in thick forests of the three eastern states on the red corridor, top officials told India Today.VIGIL INCREASEDSecurity forces have now intensified their vigil after an information that the guerrillas might attempt to dig their expired cash holdings out of their jungle hideouts, the sources added."Authorities have stepped-up monitoring of all entry points to the forests where Naxals could have dumped their funds," intelligence officials said."If the Maoists are in possession of even a fraction of the amount estimated by security agencies, they will be hit badly," disclosed a senior police official. Some security officials, however, also warn that a cash crunch could also push the Naxals to a reckless extortion overdrive for liquidity.The ultra-left militants get much of their financial supplies through extortion from contractors of tendu patta, infrastructure firms and from businessmen.According to security agencies, the Maoists also extort illegal mining mafias and charge what is called a Maoist tax from vehicles passing through the so-called "liberated zones" in red belts."MAOISTS MAY HAVE BURIED RS 7,500 CRORE UNDERGROUND"In its 2013 report, the Institute of Defence Studies and Analysis pegged the Naxals' extortion revenue at Rs 140 crore per year. But police on the ground consider this figure conservative.Intelligence officials believe the Maoists could have buried as high as Rs 7,500 crore underground at this point in time in the state.In 2007, the arrest of Misir Besra, a central committee member of the CPI (Maoist), revealed the reach of the Maoists' parallel economy.Besra reportedly disclosed to police that the Naxals had earmarked Rs 42 crore for arms, ammunition and explosives, Rs 2 crore for intelligence-gathering and Rs 16 crore for propaganda, computer training, documentation and transport in their one-year budget. In 2009, Maoists attacked a police team in Bihar and freed Besra.Security officials say the exact location of cash dumps is known only to the top committee leaders of the Maoists.Desperate, these Naxal commanders may now pass on the word to some of their trusted tribals to take the money out, police in Chhattisgarh believe. The Maoist leaders might be aware that their own movements into jungles could be filled with risks, said a top police official.In Jharkhand, the Naxal extortion machine collects close to Rs 320 crore every year, Central Home-Ministry officials said. But the crucial question is how safe the money stays, they added.BAG CONTAINING RS 29 LAKH EATEN UP BY TERMITES In August this year, a bag containing Rs 29 lakh in the 1,000 denomination was eaten up by termites in the Chakri-Bakrakocha jungles of Jharkhand, authorities said. It is believed that the money, obtained through extortion, was buried by Kanhu Ram Munda, one of the CPI (Maoist) leaders in the state.Maoist influence in Odisha and Maharashtra has been on the wane though. Last month's shootout in Odisha's Malkangiri, in which 30 Maoists were killed, is a pointer to the ability of the security forces to push them on the backfoot and hit their leadership, senior officials say.But given the expenditure incurred by the Maoists on intelligence-gathering, weapons and ammunition and medical emergencies, it is not yet clear how much they would be putting in for safekeeping of their finance dumps in forests.Police sources say Maoists are also reported to pay a monthly remuneration to their cadre in the range of Rs 2,000 to Rs 5,000, depending on their so-called rank and tenure in the outlawed organisation.Since November 10, police are also keeping an eye on banks in Maoist-affected areas for anyone coming with large amounts.Overground Maoist sympathisers in villages, towns and cities could also be safekeepers of Naxal cash, intelligence officials suspect.No banks, no ATMs. How a Sunderbans island survives in the time of demonetisationAuthor: Shiv Sahay SinghPublication: The Hindu Date: November 16, 2016URL: runs on the strength of credit, as there is no way to change cash Over the past week, little cash has changed hands at Ghoramara, an island in the Sunderbans, which has no banks or ATMs. The boatman, the shopkeeper, the fish seller, and the woman running the ICDS centre use credit. Ghoramara, which sits at the Hooghly’s meeting point with the Bay of Bengal, is famously sinking, slowly claimed by the sea. It has over 5,000 people and is one of West Bengal’s 700 gram panchayats without a banking facility. During a 30-minute boat ride, Kalipada Karak, who runs the Ghoramara Ferry Service, complains of a drop in passengers and flashes a yellow token that he is giving passengers instead of change. “When someone gives me a 10-rupee note, I give this in return,” the boatman says. Rubi Mete, who runs the island’s ICDS centre serving 72 people, including 51 children and 13 pregnant and nursing mothers, has to ensure food for a big group. “There is no bank. I need at least Rs. 150 to go to Sagar [another island] to withdraw cash, but I don’t have that much money,” she says. Ms. Mete has kept the centre going with public support — shopkeepers who sell on credit and villagers who offer produce on deferred payment. The creditors include Kanai Lal Guchait, who has a small shop in Bagbazar area and has sold Rs. 1,500 worth of goods since morning. He expects that the credit will keep rising. “This has been the story since Wednesday. I had some Rs. 500 notes, but had to go to Namkhana to get them exchanged,” Mr. Guchait said, showing a notebook where he has recorded every transaction. A few metres away, Amit Karak has spread fish for sale. No customers come and he pleads with Sankar Giri, another villager, to buy some fish on credit. Giri, who came to Karak’s rescue, points out that even if islanders want to help, they cannot. Betel leaves wilt Mr. Giri owns a betel plantation and the leaves are sold on the mainland. “We got Rs. 300 for a bundle of 100 leaves, but now no one is willing to pay even Rs. 100,” he laments. Ghoramara has a post office — the only place to deposit currency and make withdrawals. On Monday, it was closed for Guru Nanak Jayanti. Abhimanyu Mondal, the manager, says, “I have got 1.15 lakh rupees in denominations of 500 and 1,000. I have to record the number of every note before they are deposited at subdivision headquarters.”Eminent citizens' appeal to govt for demonetisation rollbackAuthor: Rosamma Thomas | TNNPublication: The Times of India Date: November 15, 2016URL: than 150 eminent citizens, including economist Prabhat Patnaik, Aruna Roy and Nikhil Dey of Mazdoor Kisan Shakti Sanghatan, laywer and activist Prashant Bhushan, columnist and academic CP Chandrashekhar, commissioner to the Supreme Court in the Right to Food Harsh Mander and musician TM Krishna have appealed to the government to roll back the demonetization of Rs 500 and Rs 1,000 notes, saying the move is "misconceived and will not address the problem of black money".They have put forth nine points to explain why the move is not likely to achieve the desired ends.If high-value notes are used to "hoard black money", then "issuing even higher value Rs 2,000 note is completely inexplicable," they say. "Black money is generated through evasion of taxes on income from lawful activities and money generated from illegal activities. In the absence of steps to curb the generation of black money, demonetization is a futile exercise, as it proved to be in 1978."The letter writers explain that in IT raids in the last five years, only about six percent of black money was found kept in hard cash. Those who have amassed black money can convert it to bullion, real estate and foreign currency - such organized middle-men are already in business, turning black money to white for a commission. A study by the Indian Statistical Institute showed that only Rs 400 crore worth of fake currency was in circulation in the economy - that is just .028% of the Rs14,180 billion worth currency demonetized in Rs 500 and Rs 1,000 notes.The letter writers note that the former RBI Governor and the current chief economist of the World Bank have both spoken against demonetization. Eighty-six percent of currency in circulation and 97% of all transactions by volume are done in cash. "Summary demonetization has created chaos", the letter notes, saying at least five people, including an infant, have died as a direct effect of this move.Only 30% of the Indian population has access to the banking system, as per data compiled by the finance ministry. The distribution of banks is extremely skewed, with a third of all bank branches in the Tier 1 and 2 cities - "people in rural India who often also suffer from inadequate information have become the worst victims of demonetization," the letter notes. Reports have indicated that the digital payment systems have been unable to keep up with the new volume of transactions. In their last point, the authors write: "All currency only has value because of the inherent trust in the banking system. Summary demonetization has shaken this trust."The letter writers also seek clarifications from the government on the following points."Rs 1.14 lakh crore of bad debts have been waived by the government banks in the last three years. At the same time, loans worth lakhs of crores of rupees are still outstanding. Why has the government not made public the names of the beneficiaries of the waiver and the names of big defaulters, both individuals and corporations?" The letter notes that a key campaign promise was to bring black money stashed abroad back - why has the government not made public the names of those holding such accounts in off-shore banks?"Were BJP leaders and friends given prior information about the impending demonetization," the letters writers ask, citing the case of the BJP's West Bengal unit reportedly having deposited Rs 3 crore in Rs 500 and Rs 1000 notes in the days before the announcement was made on TV by the prime minister.The letter writers ask why the government announced that cash deposits of over Rs 2.5 lakh would be scrutinized and tax return with 200% penalty imposed for any tax evasion - this appears to be intended to dissuade people from depositing money so that the government can claim success of demonetization and forewarn people to split their deposits among different accounts and different depositors the letter says.The letter writers note that conversions can be done only after filling a form and attaching ID proof - this comes as major harassment of the poor and illiterate, many of whom have no identity card. The writers note that the cost of replacing the currency is estimated at Rs 20,000 crore - besides, far greater losses will be incurred in markets predominantly run on cash. The whole process was apparently implemented without proper planning, the letter writers note - adequate new notes should have been printed; arrangements should have been made for its proper distribution, ATMs should have been recalibrated before the move was brought into effect."We are all concerned about the use of money power in elections. Why has the government not proposed state funding of elections? Why is the BJP resolutely against transparency in its own funding, by refusing to come under the Right to Information Act?" The letter writers note that the unplanned demonetization has caused a "riot-like situation in the country". Common people should have immediate access to their own money, the letter writers say, adding that the "role of government is to undertake honest tax administration and not treat the common person like a criminal, making him/her stand in line and fill forms to access his or her own legitimate money."82 per cent Indians favour demonetisation: SurveyAuthor: IANS Publication: The Economic Times Date: November 14, 2016URL: many as 82 per cent Indians favour the government's decision to demonetise Rs 500 and Rs 1,000 denomination currency notes, a survey has said. According to the survey by Inshorts in collaboration with IPSOS, 84 per cent of the respondents think the government is serious about curbing black money, while 52 per cent disagree with the decision to cap ATM withdrawls to a maximum of Rs 2,000 (since increased to Rs 2,500) daily.Inshorts is India's highest-rated news app while IPSOS is a global market and opinion research specialists. The 'Pulse of the Nation' survey was conducted on November 8 and 9, soon after Prime Minister Narendra Modi announced scrapping of Rs 500 and Rs 1,000 currency notes. The survey garnered almost five lakh responses with the participation of 2,69,393 app users. "The survey clearly shows that majority of respondents hailed the demonetisation. The government's strategic clampdown on black money and tax evasion has surely gone well with the young and urban India," said Amit Adarkar, CEO of IPSOS India. More than 80 per cent of those surveyed were below the age of 35 and belong to one of India's top 10 metros and cities -- New Delhi, Mumbai, Bengaluru, Chennai, Kolkata, Pune, Hyderabad, Ahmedabad, Chandigarh and Lucknow.Currency note ban sends electricity bill collection in UP through the roofAuthor: Priyangi Agarwal, TNNPublication: The Economic Times Date: November 13, 2016URL: Pradesh Power Corporation Limited (UPPCL) started accepting payment in old currency notes of Rs 1,000 and Rs 500 after Piyush Goyal, union minister of state with independent charge for power, coal, new and renewable energy and mines, tweeted about it.Ever since they announced they will be accepting banned currency notes, their coffers have spilled over with cash collection going up 10 fold in many districts of UP, including Agra, Bareilly, Badaun, Pilibhit and Shahjahanpur. Bareilly zone, where average daily collection of bills used to be Rs 2-3 crore, saw over Rs 25 crore deposited just on Friday. The corporation, which has over Rs 1000 crore in unpaid electricity bills across the state, has set up 154 special camps in Bareilly zone to deal with people making long queues to pay their pending power bills. Uttar Pradesh Power Corporation Limited (UPPCL) started accepting payment in old currency notes of Rs 1,000 and Rs 500 after Piyush Goyal, union minister of state with independent charge for power, coal, new and renewable energy and mines, tweeted about it. However, no advance payment is allowed for it and individuals and households can pay current and pending bills. Chief engineer Rajkumar Agarwal said that this is the first time that the department has set up such a large number of special camps for collection of power bills. The power department is collecting payment of power bills from 9 am to 12 midnight and it will continue till the midnight of November 14. Considering the huge rush at these special camps, UPPCL has deployed all office staff here. "For the convenience of people, we have set up a total of 154 camps inside power substations of 33 KV in Bareilly zone which has four districts. Besides, we have deployed 15 mobile vans in Bareilly to facilitate consumers. Though both online and offline payment modes are available, we set up camps to help people residing in rural areas," Agarwal added. The daily collection of the department has gone up 10 times. "On Friday, we collected Rs 25 crore from Bareilly zone. Before the demonetisation, we used to collect around Rs 2-3 crore every day. Looking at the huge rush, we believe that we will collect similar amount on Saturday also," he said. Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL) superintendent engineer Rajeev Jain told TOI, "On Friday, we accepted bill payments till midnight which will continue up to November 14. Our collection on Friday in Agra and Fatehabad circle was around Rs 7.5 crore." On an average day, DVVNL collects around Rs 8-10 lakh from the region. Of the total Rs 25 crore, the highest amount of Rs 10 crore was collected from Bareilly. (With inputs from Deepak Lavania in Agra)Odisha: In country’s poorest district, ‘biggest single day deposit’, but no cashAuthor: Debabrata MohantyPublication: The Indian ExpressDate: November 16, 2016URL: Nabarangpur town, the lack of adequate Rs 100 notes has disrupted the weekly market cycle.DESPITE ITS main SBI branch experiencing a record deposit of Rs 7.1 crore on Monday, as against the normal daily deposit of Rs 1 crore, Nabarangpur district, arguably the country’s poorest, continues to reel from a cash crunch precipitated by the demonetisation of Rs 500 and Rs 1,000 notes. “It is the highest ever single-day deposit in the bank,” chief manager Abhimanyua Sahu said.But that is little comfort for farmers like Saheb Singh, of Chitrakot village in the district, who have been struggling to obtain currency ever since demonetisation was announced a week ago. Singh, 40, who owns about two acres of land, had managed to exchange old notes worth Rs 2,000 but spent the amount in managing the daily expenses of his 13-member household comprising his mother, brother, aunt, sister, daughters and nieces.A couple of days ago, he was forced to take a loan of Rs 5,000 from a local moneylender, by mortgaging his wife’s gold jewellery, to harvest the maize and paddy grown in his land. As of Tuesday morning, he was left with just about Rs 2,000. Singh says he has no heart to make efforts to get money too. He had stood for hours before the SBI ATM at Tentulikhunti, about 3 km from his home, on Monday but had to return empty handed as the ATM remained shut through the day.“It is difficult for me to go on like this. My rice stock of 25 kg is depleting and much of the other grocery items are not available. I have a couple of thousand left in the bank which I need to withdraw,” said Singh. “I can withdraw some money from the SBI ATM at Nabarangur town, but for that I have to hire an autorickshaw at Rs 350.”It’s a similar story for the other OBC farmers and tribals who make up the population of this village, about 30 km away from Nabarangpur town. The sarpanch of Anchalguma panchayat, under which Chitrakot falls, said demonetisation has hit the people of the region hard.“Not too many have bank accounts and even those who do, prefer to keep money at their homes. They have not been able to exchange their Rs 500 notes,” said sarpanch Debaki Majhi.In Nabarangpur town, the lack of adequate Rs 100 notes has disrupted the weekly market cycle. Hawkers like Batima Harijan, who had brought mushroom, found few takers, while a couple of traders took to buying Rs 100 notes from middlemen, who handed back Rs 400 for every Rs 500. “Business has been very dull since last week. We normally take groceries from big traders on credit in the morning and pay them off in cash at night. People are bringing Rs 500 notes and we are forced to turn them away. My daily business has gone down by over 80 per cent,” said B Doctorbabu, a grocer in Nabarangpur’s China Market.The district also continued to reel from rumours of Rs 10 coins being declared invalid, with small traders refusing to accept them.India's new strike against black money backfiresAuthor: Mihir SharmaPublication: The Economic TimesDate: November 16, 2016URL: (This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners) One week after India’s sudden declaration that 500- and 1,000-rupee notes were no longer legal tender, the economy is in chaos. And that’s perhaps because the policy was designed as much to shock and awe observers with the government’s command of the Indian economy as to control India’s “black money” problem. What seemed at first to be a masterstroke by Prime Minister Narendra Modi now looks like a grave miscalculation. India's Aspirations Modi is beginning to sound like he may agree. His recent speeches on the subject have been frankly bizarre. In one, he seemed to laugh at those inconvenienced by the ban; in another, he broke down while speaking of the “sacrifices” he'd made for India, and warned that he might be assassinated by “forces” desperate to protect their “loot." What’s changed in a week? Well, for one, it’s become clear that the government was simply too cavalier in its planning. Now that 86 percent of India’s currency is no longer valid, the central bank has struggled to print replacement denominations -- and the new notes are the wrong size for existing ATMs. Modi’s asked people to be patient for 50 days, but the process could take as long as four months. You have to wonder if Modi truly sought expert advice, or relied once again on a small and trusted set of politicians to determine policy. India’s simply too big and complex for shock and awe. Large parts of the rural economy use cash for 80 percent of transactions and have been hard-hit. In seafood-mad West Bengal, for example, the fishing industry is in a state of near-collapse; in the wheat-growing states of the northwest, farmers halfway through the sowing season have run out of cash to buy seeds. Few villagers have access to an ATM. Most have to trek to a bank branch to change their cash, which means losing out on crucial days of labor. Many Indians, particularly women, still don’t have an active bank account. Finance Minister Arun Jaitley wondered aloud how many poor people would even have 1,000-rupee notes -- probably a rhetorical question, but surely it shouldn’t have been. Someone should've sought the answer before shutting down India’s financial system. Among India’s middle class, Modi’s “surgical strike on black money” still appears to be popular. It’s the old “vegan fallacy” -- if something tastes terrible, it must be good for you. Enough Indians are suffering that they believe it must be in a greater cause. It’s a moral project, not an economic one. Stand in line, we’re told, and you honor our brave soldiers at the border. But will that support last? The government’s plan is likely to be ineffective in the long term. Economists agree it will have no effect on the generation of black money through corruption. Meanwhile, estimates of the amount of black money that will eventually be recovered vary widely. The optimists (wrongly) think enough cash will be destroyed by hoarders that the central bank will be able to pay a hefty dividend to the government. Others point out that a very small fraction of black money tends to be held as cash and that there are a dozen ways still available to launder that fraction. The government has largely failed to close these loopholes. Worse, rumors of the demonetization were reportedly circulating before Modi’s announcement, leading to suspicions that the well-connected may have had time to dump their cash piles. India's Scramble to Switch 23 Billion Banknotes Even in the best case scenario -- that a significant proportion of the outstanding currency is destroyed -- there’s no reason to suppose it was all black money and not the savings of regular citizens scared of harassment by tax authorities. Modi has dropped dark hints that this is just the beginning, raising fears that business should now worry about of constant tax raids and the reopening of decades-old cases. In fact, that dark new age may already be here. Even setting aside the painful adjustment, the long-term effects of this monetary shock on India’s informal economy could well be severe; a large proportion of marginal firms may not survive the loss of a fortnight of income. The informal financial sector -- unregistered moneylenders who provide loans to businesses worth 40 percent of total bank lending -- will be decimated. The costs to the government could be equally high. Modi's administration has put political considerations over economic detail once too often -- and this time, it's severely dented its image for efficiency and practicality. Even if the long queues vanish in the next few weeks, that damage to the government’s reputation is permanent.Demonetisation: How aam aadmi is helping PM Modi fight this battleAuthor: Vivek SurendranPublication: Indiatoday.inDate: November 15, 2016URL: across India are standing in queues to get their hands on their hard-earned money after PM Narendra Modi announced demonetisation of Rs 500 and Rs 1,000 notes on November 8. While some are complaining, there are many people who are doing their bit to help the prime minister to fight this battle.On November 8, prime minister Narendra Modi announced the demonetisation of Rs 500 and Rs 1,000 notes from the financial system of India. For the next few hours, all those who understood what it meant ran to their nearest ATMs to withdraw as much money as they can, hoping the money will come out in Rs 100 denomination. Since that night, almost all functional ATMs across India have long queues outside. Queues have been a constant at bank branches as well where people are trying their best to get the demonetised notes exchanged. While there are many people who are whining about the long queues and the inconvenience this move has caused, there are others who have been doing their bit to make the lives of those who are struggling to get some money out of their bank accounts better.MangaloreSadiq, an auto driver in Mangaluru has been offering free rides to those people who are going to the banks to get their Rs 500, 1,000 notes exchanged. His auto has a banner, with PM Modi's photo, that says, ""Free ride to people going to banks for currency exchange".---------------------------Harjinder S Kukreja @SinghLionsSikhs in Mangalore serving Langar (Free Food) at Mangalore Railway Station to help people as they can't buy food because of lack of change.11:13 AM - 15 Nov 2016 · Ludhiana, India---------------------------DelhiMany youngsters came forward in various parts of Delhi to help common man who were wondering how to fill the exchange forms.---------------------------Tanmay Shankar @ShanktanAmazing! Lot of volunteers are supporting common man in filling their exchange forms outside Banks. Asked who are you? They said INDIANS??1:27 PM - 12 Nov 2016---------------------------PuneA photo of two kids serving water to those who were standing in the queue outside an SBI ATM at Pune's Kalewadi Phata was shared on Twitter.---------------------------Avinash Mishra @Amishra1303@suhelseth These kids distributing water at SBI Kalewadi Phata, Pune. After the good deed they rushed to help at the next ATM. Remarkable3:37 PM - 13 Nov 2016---------------------------Demonetisation: Ignore the Leadership Dividend at Your Own PerilAuthor: V Anantha NageswaranPublication: Date: November 16, 2016URL: friend of nearly four decades shared his thoughts in two emails and permitted me to share them without specific attribution. I am largely sympathetic to his views. In May 2014, when Narendra Modi became the PM, I was invited to speak at a session organised by the Singapore Gujarati Association. I mentioned that the leadership change alone would boost GDP by 1.0 to 1.5% points because of the feeling that someone is in charge, really.I cannot say that whether the GDP growth improvement happened because of that or because of statistical methodological revisions. But, what I had in mind was something similar to what the PM did on November 8. That shows leadership. A very important component of leadership is decision-making under uncertainty and hence, risk-taking. It is entrepreneurial. His decision fulfilled all these. He has taken enormous risks. That deserves enormous credit and acknowledgement. That is a reason I singled out Monika Halan’s article in MINT in my last blog post.Who knows? The expected short-term contraction may not happen if the ‘feel-good’, ‘feel-proud’, ‘feel faith’ and ‘feel happy’ factor generated by the decision of the government combined with likely lower cost of capital in the formal economy offsets the squeeze on spending that occurs in the cash economy.That is what my friend’s emails alluded to:Dr. Pronab Sen is highly respected economist and I had the opportunity to listen to him recently.Seemed to be very down to earth person. I can understand his concern for the poor and the marginalised.But he himself should have bifurcated the good and the bad based on short term and the long term. All of us know there is short-term pain.But now there is fear instilled in the minds of those who sponsor terror, thrive on black markets and what not. This will have a telling effect on the psyche of the perpetrators of such crimes. Cost of dishonesty has suddenly gone up. This cannot be captured by economic calculations. That is why Modi himself has talked about threat to his life.The problem with terrorists either economic or otherwise is that they always use Common man as their shield and when there is a surgical strike like this there could be collateral damage. People must accept this for larger good and vast majority have realised this.Last week I had the opportunity of travelling through 4 states, Delhi, Haryana, Uttarakhand and Telengana immediately after demonetisation. People in general have only welcomed this move despite personal losses and difficulties. Even those CAs who have helped in money laundering for some small businessmen in remote towns like Rudrapur have only said this move will have a salutary effect on those black money peddlers. This rat race among people running after money and amassing wealth by any means has been temporarily stopped or perhaps slowed. ???? ????????? ?????? ???? ??????????? stone-age culture has spoiled the mindset of an entire generation. Now at least there is a pause in this.Obviously, the stunning silence in J&K has revealed how Terror’s pangs have been cut but again this could be temporary. But this breathing time should be effectively utilised for further Confidence Building measures.Last Friday, Dr. Rangarajan, former RBI Governor, spoke on this as a special invitee to a CII Forum in Chennai. He said it affects only those who have unaccounted cash sitting idle but this could be quite substantial given the size of cash economy in general. But he said that this should be followed up with more measures to encourage cashless transactions. One of the speakers also mentioned that Election funding is a major area generating black money and this should be nationalised as suggested by Rajaji.At a more personal level I am happy, at least, that those bureaucrats who harassed us and taken money have temporarily been jolted and forced to run helter-skelter.Even those who put their money in real estate/jewellery will not be able to find buyers with black money at least for some time to come. Perhaps this inner feeling of having taken a revenge through Modi cannot be described in words. At least in the present context many people are, indeed, positive since many feel that they are bearing this burden for the sake of the country. In hierarchy of needs, this should indeed give maximum personal satisfaction because it indirectly gives a vicarious feeling of fighting a war for many. Human behavioural scientists may know better.One small point, however. Our informal economy may not go down easily. Just rewind and go 25 years back in time. In ration shop queues and bank cashier counters, (before ATMS arrived) we all have spent numerous hours endlessly waiting. Worse, during terror strikes, war times, religious and caste conflicts, partition etc. even life of the common man was always in danger and full of uncertainty. But, has the informal economy collapsed even in those difficult times?That said, now with so many SHGS and NGOs the life of the downtrodden will not be left uncared for. Of course, it will not be 100% foolproof. What I am saying is it is not as depressing as we tend to imagine. Even my housemaid and driver suffered for two days and human mind always tries to exaggerate misery. After that, they are back to normal routine.While you are angry about the mad rush at banks, here’s what the bankers are going throughAuthor: Ankita RajeshwariPublication: The Times of IndiaDate: November 16, 2016URL: surprise demonetisation move caught the entire nation off guard. As PM Modi announced demonetisation of higher currency notes on November 8, people across the country wondered what would follow.And what followed was serpentine queues outside banks and ATMs, cash-strapped citizens and utter chaos.While a large number of people supported this “financial surgical strike” by PM Modi, there were others who could not overlook the suffering of the common man. But amidst all of this, a small segment of the population, those working in private and government banks, were seemingly forgotten.Humans of Bombay, on Wednesday, posted a story of a banker in Mumbai, and her ordeal following the demonetisation.She narrates her harrowing experience in the past several days in which bank customers have yelled at her, cursed her, threatened her for not doing enough.“Just 4 hours ago I received a call from a man from a place called Nanded who screamed at me non-stop. He went on yelling, blaming me, cursing in Marathi and I’m sitting there just wondering what I could possibly do and we’ve received dozens of such calls each day. Not just that, but the threats have also come”.Read her story here:“I’m the manager at a bank. On 8th November, I was working a bit late when my husband called me and said, ‘how did you not tell me that 500 and 1000 Rupee notes are getting scraped’ and I was shell shocked. None of us had any idea what was going on…we just knew it was huge. So we went into work the next day, preparing for the days to come but no amount of preparation could fully prepare us for what was coming.People’s view of the whole situation was limited to the lines they saw outside the bank, but what was happening behind closed doors was entirely different. We became a part of the dirty cycle that runs in this country. On one end there were chaiwallas, istriwallas who are queuing up to deposit their hard earned money but on the other end we’re receiving black money that had been stashed away for years possibly and all this cash smells like rotten leather to the point where every one of our branches has ordered masks for the cashiers — that’s how unbearable the stench became! From fights breaking out and the police intervening to educated people storming our offices and violently asking us for money — we’ve dealt with it all. Just the other day a builder who’s had an account with us for many years, came forward to finally pay us an amount that he had defaulted on a Non Performing Asset. When we had chased him for months to pay up, he had defaulted but all of a sudden he came forward! He has over 300 crores in black money, but before this he claimed to have none at all — that’s how dirty the business is. Don’t get me wrong, i’m not complaining about what has happened — it’s a revolutionary move that will only strengthen our country and I completely understand what the common man is going through as well, but what can we possibly do? There’s only so much cash we have, and only so many people who can attend to such a large population. What’s ridiculous is how people are behaving— they’re treating us so badly. Just 4 hours ago I received a call from a man from a place called Nanded who screamed at me non-stop. He went on yelling, blaming me, cursing in Marathi and I’m sitting there just wondering what I could possibly do and we’ve received dozens of such calls each day. Not just that, but the threats have also come. We get calls from people who are politically endowed and threaten to ‘send media to expose us’ or to ‘create a scene’ if we don’t move money — I mean when will we learn? We’re bankers — there’s only so much we can do! We’ve hardly slept these past few days, we’re not taking any weekends off…in fact most of us haven’t even exchanged our own 500 Rupee notes because we’re trying to help others first. Our banks are losing money on interest and there’s already enough chaos…do we really need to add to it? We’re all in the same situation, we just need to sit tight and understand that steps are being taken to aid the process — this is for the future of our country and the least we can all do at a time like this is have patience and believe that everything will stabilise soon. And for heaven’s sake, stop trying to use more corrupt methods to get out of an already corrupt situation…we don’t need any more of it!” While it is completely understandable that standing in these never-ending queues is a hassle for us, it is outright unacceptable to vent your aggression on those who are doing the very best they can. Bank officials across the country are working overtime, sacrificing their holidays, not getting enough sleep, just to make it easier for the general public.Why India wiped out 86% of its cash overnightAuthor: Justin RowlattPublication: Date: November 14, 2016URL: is in the middle of an extraordinary economic experiment.On 8 November, Prime Minister Narendra Modi gave only four hours' notice that virtually all the cash in the world's seventh-largest economy would be effectively worthless.The Indian government likes to use the technical term "demonetisation" to describe the move, which makes it sound rather dull. It isn't. This is the economic equivalent of "shock and awe".* India raises withdrawal limit as rupee anger mounts* India rupee ban: Currency move is 'bad economics'* Can India's currency ban really curb the black economy?Do not believe reports that this is primarily about bribery or terror financing, the real target is tax evasion and the policy is very daring indeed. You can see the effects outside every bank in the country. I am in Tamil Nadu in the south of India and here, as in every other state in the country, queues of people clutching wads of currency stretch halfway down the street.Mr Modi's "shock and awe" declaration meant that 1,000 and 500 rupee notes would no longer be valid. These may be the largest denomination Indian notes but they are not high value by international standards - 1,000 rupees is only ?12. But together the two notes represent 86% of the currency in circulation.Think of that, at a stroke 86% of the cash in India now cannot be used. What is more, India is overwhelmingly a cash economy, with 90% of all transactions taking place that way.And that is the target of Mr Modi's dramatic move. Because so much business is done in cash, very few people pay tax on the money they earn.According to figures published by the government earlier this year, in 2013 only 1% of the population paid any income tax at all. As a result huge numbers of Indians have stashes of tax-free cash hidden away - known here as "black money". Even the very poorest Indians have some cash savings - maybe just a few thousand rupees stored away for a daughter's wedding, the kids' school fees or - heaven forbid - an illness in the family.But lots of Indians have much more than that. It is not unusual for half the value of a property transaction to be paid in cash, with buyers turning up with suitcases full of 1,000 rupee notes.The size of this shadow economy is reckoned to be as much as 20% of India's entire GDP.Mr Modi's demonetisation is designed to drive black money out of the shadows.At the moment you can exchange up to 4,500 (?48) of the old rupees in cash for new 500 (?6) and 2,000 (?24) rupee notes. There is no limit to the amount that can be deposited in bank accounts until the end of December, but the government has warned that the tax authorities will be investigating any deposits above 250,000 rupees (?2,962).Breach that limit and you will be asked to prove that you have paid tax. If you cannot, you will be charged the full amount owed, plus a fine of 200% of the tax owed. For many people that could amount to be pretty much the full value of their hidden cash.This is brave politics. Some of the hardest hit will be the small business people and traders who are Mr Modi's core constituency. They voted for him because they believed he was the best bet to grow the economy and improve their lot. They will not be happy if he destroys their savings.Mr Modi says he is simply delivering on his pre-election promise to tackle corruption and tax evasion.He says he warned that he would squeeze black money out of the system and had already offered amnesties to those who declared their black money holdings.And, so far at least, the policy seems to be popular, in spite of the long queues and the fact that much day-to-day business in India has ground to a juddering halt.Most Indians resent the fact that many of the richest among them have used black money to evade paying their fair share of tax and are happy to suffer a few weeks of what Mr Modi called "temporary hardships" to see them face justice.They also recognise the benefits of drawing more people into the income tax net. India has very low rates of tax compared to many other countries. The tax-to-GDP ratio - how much tax is raised as a proportion of the output of the economy - was 17% in 2013. The average across the economies of the Organisation for Economic Co-operation and Development - a club of mostly rich nations - was over 34%. Demonetisation is part of a wider project to draw Indians into the formal economy and to get them to start paying the tax they owe.Curbing tax evasion is part of the agenda for the "aadhaar" scheme, a giant digital database designed to give hundreds of millions of Indians a unique ID, and of the new Goods and Services tax.And reducing tax evasion can only be good for India. The more money it raises in tax, the more it has to spend on useful stuff like roads, hospitals and schools.The more the country spends on public goods like that, the faster the Indian economy is likely to grow - or so the argument goes.So the big question is: will it work?Some economists have questioned the decision to introduce the 2,000 rupee note. They say if the policy is designed to force people into the banking system why issue a higher denomination note - presumably an even more convenient vehicle for black money transactions?But the headlines about chaos and confusion are a bit misleading. There have been virtually no reports of violence despite the huge disruption this policy has caused.The queues are orderly and the worst you hear are the irritated mutterings of those whose days have been wasted standing in line. But Mr Modi needs to be careful. The new notes are in short supply and there are not enough smaller denomination notes to go around, so the banks regularly run out of cash.That cannot go on for long without irritation turning to anger.But some queuing may be excusable, because in one regard the policy has already been a complete success: it came as a surprise to the entire country.Think what that means. The government managed to plan this audacious policy, printing billions of new notes without anyone letting slip what was happening.Reportedly, even senior members of the cabinet were not told what was being planned, for fear that if word got out the entire policy would be undermined. The hoarders would have time to empty their mattresses and launder their stashes into gold or other assets.Keeping a secret of this magnitude in India, a country that thrives on rumour and gossip, is nothing short of a triumph and surely a reasonable justification for a few hiccups along the way.Nitish favours demonetisation, seeks action against 'benami property'Author: PTIPublication: Date: November 16, 2016URL: Chief Minister Nitish Kumar today favoured demonetisation of Rs 1,000 and Rs 500 notes and sought "action against benami property".Bihar Chief Minister Nitish Kumar today favoured demonetisation of Rs 1,000 and Rs 500 notes and sought "action against benami property", even as he slammed the Centre for "not doing its homework" before taking the step causing hardships to the poor."I am in favour of the decision to demonetise Rs 1000 and Rs 500 notes which will help end '2 number ka dhanda' (illegal business)," he said addressing a 'Chetna sabha' here at the start of his second leg of 'Nishchay yatra'."I want an attack on benami properties earned through illegal means for more effective results against black money," Kumar, who is also the JD(U) national president, said.Contradicting Prime Minister Narendra Modi's assertions that the poor are "enjoying a sound sleep" after his decision, the Chief Minister claimed, "Farmers and common people toil hard in fields, but those involved in number illegal business buy benami property and enjoy deep sleep."With reports of inconvenience to the masses standing in serpentine queues outside banks and ATMs pouring in from across the country, Kumar demanded suitable arrangements so that the poor and women can change the demonetised high-value notes easily.Criticising the BJP-led government for "improper" arrangement for undertaking the demonetisation exercise resulting in inconvenience to people, Kumar said he always executed programmes for people after meticulously going through minor details.By way of example he said youths going to district registration centres to enrol themselves for interest-free loans for higher studies and other facilities as part of his 'seven resolves', need not stand in long queues.Accusing BJP of turning its election promise on black money to 'jumla' (false promise), Kumar claimed, "We are not jumla baaz (practitioner of jumla). I make only those promises to people which can be executed."During the second leg of his 'Nishchay yatra', Kumar informed the people about the programmes launched to realise his 'seven resolves' and also the "good results" prohibition is yielding.You have been warnedAuthor: Pratap Bhanu MehtaPublication: The Indian ExpressDate: November 17, 2016URL: politics unfolds as a vast morality play. Its imagination unleashes the state on you, in the name of protecting your own virtue.The so-called demonetisation is a watershed event for India. It signifies the arrival of a new kind of politics that will redefine the relationship between citizen and state. The scale of this event is so unprecedented that we are struggling to see where all the chips will fall.It has to be acknowledged that, in many quarters, reactions seem to be driven less by the force of reasoning, but on prior assumptions, how much we trust this government to know what it is doing. But this much can be said. A major move was required on black money. But the government itself has taken a gamble, without any reasonably rigorous reasoning on the costs and effects. Much will now depend on how quickly the economy will re-monetise. Second, the measure has failed two reasonable administrative tests. There is a shocking degree of callousness about the hardships these measures impose. But equally importantly, as Suyash Rai of NIPFP, has argued in a wonderful analysis, the policy falls short on one test: Were there more reasonable, less risky, more predictable policy measures that would have yielded as much benefit as this one? The answer is: Yes.But it will take a moment’s reflection to recognise that demonetisation is not about the calculus of costs and benefits. In fact, that is why there is lack of clarity over objectives. Its distributional consequences are an afterthought. Nor is it about politics in an opportunistic sense.It would be churlish not to recognise that it comes from the prime minister’s depth of conviction and sincerity. But that is exactly its danger. What it threatens to institutionalise is a new kind of politics. This is politics as a vast morality play whose three central elements are personification, puritanism and punitive imagination. A new state is emerging and it is not what you think it is.Just as a matter of political analysis, the sheer audacity of this move is breathtaking. To dismiss it as a characteristic piece of propaganda or theatre would be to miss its significance. When was the last time there was a policy measure that required, in a manner of speaking, the total mobilisation of society on this scale, where literally every citizen is being enlisted (or conscripted, if you prefer) in a policy cause?When was the last time literally every citizen is being inducted into a behaviour change, albeit temporarily? As the consequences of these policies unfold, the backlash against the government will grow. But for a very short window, at least, the very performance and sweep of the idea is being taken as proof of its sincerity. This ability to translate a policy measure into a national project is unprecedented.But this is exactly the danger, since this move is premised on dark institutional undercurrents. The personification of policy works at different levels. To work as a national project, all individuality, all questions of distributive consequences, have to be effaced. Every citizen will appear, alternatively, as a patriot or a criminal: The histories of their individual life worlds, whether they have bank accounts, how much cash they use, how far they live from an ATM, all these questions pertinent to the distributive consequences of these actions will be immobilised. This personification has been present in the prime minister’s speeches, the construction of the figure standing in line as a 2G scamster. It is evident in the undifferentiated account of “hardship” and “sacrifice” where distributional consequences again don’t matter. But most of all, it is evident in the premise of this exercise: The perfidy of the few can justify imposing hardship on all. We are all criminals, who through the process of this dialysis, by the mere act of standing in lines, will come out patriots.With personification comes a punitive imagination. The state is telling you that the honest have nothing to fear. But there is every sign of unleashing the worst aspects of the Indian state on even ordinary citizens. The culture of raids on small shopkeepers and business engaging at best in marginal perfidy of getting rid of undeclared stocks has been reopened. The threat to audit cash injections into Jan Dhan accounts is silly in the extreme. Even if a few poor are lending their accounts to launder a lakh or two for commissions, it will probably be a net redistributive gain.Investigative energies are best concentrated elsewhere. But in any case, you get more than a sense that this whole chain of events will now be a pretext to bring back a Seventies-style domination of punitive tax imagination on citizens. As always, it is not directed at specific big targets, but indiscriminately in a perverse equality: The Jan Dhan account holder and Vijay Mallya on the same plane.The state may want our patriotism.But it still does not trust us. The state is still the font of virtue that stands above us. It is not an accident that we are now reintroducing indelible ink marks on those who try and withdraw even their own money more than once.Thebasic paternalism and suspicion the state has of citizens will not go away. That was the philosophical basis of the punitive imagination of the Indian state, now remobilised under the guise of cleansing.There is also a moral puritanism in this: As if the world is entirely black and white.It is manifested in this odd distinction between black and white money, forgetting the elementary fact that whether money is black or white depends on where it is at in the cycle of circulation. Hence they have perpetuated the illusion that we can extract the black, without hurting the chain of circulation of the white. It is not an accident that this measure will largely be a wealth tax on those not sophisticated enough to launder; those who have laundered will go unpunished.Will this succeed politically? The answer will depend on the degree of economic and institutional regeneration. I suspect the measure of this that will matter to most people is not crony capitalism, but whether government officials at mid to lower levels stop asking for cash bribes. With a measure of this magnitude we will learn quite a few things about economic ingenuity and institutional adaptation. There will be some benefits. Economists can give a better account of demonetisation. But be very wary of the institutional imagination that underlies it. It will again unleash the state on you, in the name of protecting your own virtue. What starts as a morality play will end in more statism.- The writer is president, CPR Delhi and contributing editor, ‘Indian Express’PLAYING SOLDIERAuthor: Major Gaurav Arya (Veteran)Publication: Majorgauravarya.Date: November 16, 2016URL: I was serving in the Indian Army, Capt. Abhay (name changed) would lament, always privately, that the countrymen did not acknowledge the army’s sacrifices. Well, it seems that the pendulum has sharply swung the other way. The Indian Army is now the flavor of the season, the new touchstone, which must certify if your gold is actually gold, or an alchemist’s fantasy.Demonetization has happened. I understand that many have been inconvenienced and many continue to face inconvenience. A creative few have compared themselves standing in long, serpentine queues to soldiers standing on the Line of Control. When I read it in the social media for the first time, I was deeply pained. Where was this coming from, I asked myself? Who were these social media warriors who compared their few days of discomfort with a soldier’s death on the Line of Control?Did we really need to belittle the soldier to make ourselves relevant?Yes, there are long queues and money has dried up overnight. Small retailers are hit and daily wagers are struggling. But this inconvenience is temporary. It will end. However, the war on the Line of Control has been going on for seventy years. It is likely to go on for decades more. The Indian Army is fighting a very determined enemy. Every day we hear stories of bodies of our martyrs being brought back from the frontline, to cities and mofussil towns bearing names unheard of. To compare the inconvenience of standing in an ATM line to martyrdom on the border is not only grossly insensitive; it defies all logic.Everyone’s struggle is worthy of respect, the shopkeeper’s and the soldier’s, both. Each fights their own battle the best they can. To compare is to willfully belittle the other.Let me tell you what happens on the Line of Control. Maybe that will lend perspective, and make comparisons a little fairer.The LoC is mostly active at night. It is at night that the shelling, cross border firing, raids by BAT (Pakistan Army’s Border Action Teams), infiltration of terrorists, attacks on posts and bloodshed peaks. By day, soldiers tend to their wounded and dead, replenish ammunition and food and also take much needed rest. There is no Saturday or Sunday. There is no “taking it easy”. If an enemy artillery shell does not find you, an SSG (Special Services Group of Pakistan Army) sniper will. It’s a 24/7 cat and mouse game, in which the game is always played with the highest possible stakes, your life and the life of your brothers. Sometimes you kill, sometimes you die.Many social media warriors may think that standing in a line outside a bank is as difficult as duty on the LoC. If that were indeed the case, and let us assume for a minute that it is, why not swap roles for a day? Just one day, I ask of you.When violence on the LoC started peaking a few weeks back (it is still peaking even as I write these lines), many people wrote to me saying that they wanted war with Pakistan. None of them were soldiers, but I understood the emotions. I did tell them that war means a lot of hardship for non-combatants and what we take for granted in our daily lives would be very suddenly disrupted. I mean, seeing enemy F-16s flying over your city is no one’s idea of fun. “We want war”, they said in unison. “We will sacrifice for our nation”, they said bravely.Well, lets start with the ATM lines.Major Gaurav Arya (Veteran)#adgpiModi's cash crackdown hits rivals' election campaign coffersAuthor: Rupam Jain and Tommy WilkesPublication: Date: November 17, 2016URL: Minister Narendra Modi's shock ban on high-value banknotes will hit the war chests of his rivals before a key state election next year, sparking accusations that his strike against "black cash" will unfairly boost his party's chances.That is despite widespread anger among millions of Indians forced to queue outside banks to change small amounts of old money for legal tender, possibly denting support for the ruling Bharatiya Janata Party (BJP) at least in the short term.Opposition politicians are scrambling to redraft campaign plans ahead of the ballot expected early next year in Uttar Pradesh, a state of more than 200 million people which will be crucial to Modi's long-term plan for re-election in 2019.The prime minister last week outlawed 500 and 1,000 rupee notes in a drive to rein in corruption and a shadow economy that accounts for a fifth of India's $2.1 trillion gross domestic product.With no state election funding, illicit cash is the lifeblood for political parties that collect money from candidates and businessmen, and then spend it to stage rallies, hire helicopters and hand out "gifts" to win votes.Spending on the Uttar Pradesh election is forecast to hit a record 40 billion rupees ($590 million), despite the cancellation of big notes.MIXED REVIEWSModi's demonetisation drive has so far proven popular among increasingly aspirational voters who are tired of corruption, although views among the broader population and economists are divided over the efficacy and fairness of the move.Opposition politicians have united to decry it."We will have to plan the entire election strategy all over again," said Pradeep Mathur, a senior Uttar Pradesh leader of the Congress party that was trounced by the BJP in 2014 national elections.His concerns reflect a view that the BJP, with more members than its rivals and close ties to big corporate donors, can survive the cash crunch better, helping Modi win Uttar Pradesh and four other territories heading to the polls early in 2017.For Modi, winning India's main battleground state is vital to strengthen his party's position in the Rajya Sabha, where it is still in the minority, before seeking a second term in the 2019 general election."Their calculation is that this is going to hurt everybody, but in relative terms the BJP is going to come out stronger," said Milan Vaishnav, a South Asia expert at the Carnegie Endowment for International Peace in Washington.According to the Delhi-based Centre for Media Studies (CMS), which tracks campaign financing, the BJP relies on cash for less than two-thirds of its funding in a state like Uttar Pradesh.Its regional rivals use cash to cover 80 to 95 percent of campaign spending.SCALING BACKDemonetisation will force Congress to hold smaller rallies, said Mathur, and there will be fewer "freebies" for voters.Other parties are also adjusting plans in Uttar Pradesh. Ashok Agarwal, a politician with the incumbent Samajwadi Party in the city of Mathura, will have to rely more on his team of 1,000 volunteers to connect with voters.In a bid to limit the squeeze, parties are paying workers to queue at banks and swap old notes for new ones and evade scrutiny from tax inspectors, said party activists in Mathura.Event managers, whose businesses usually boom at election time, are worried."No political party except the BJP wants to organise big rallies before January. All of them depend on cash," said Rajesh Pratap, who has provided loudspeakers, outdoor air conditioners and security to party rallies for over a decade.Mayawati, a powerful former leader of Uttar Pradesh who Modi's aides view as his biggest electoral threat in the state, says the demonetisation timing appeared highly political. BJP officials accuse Mayawati of hoarding "black" money garnered from selling tickets to candidates to fund her campaign.One senior official and a close aide to Mayawati said some of her party's rallies would be axed and replaced by more door-to-door campaigning."Last month ... we had to bring over 300,000 villagers from across UP (Uttar Pradesh) to Lucknow city for a day ... It's not just us, but every political party spends money at grassroots level to win votes," the official said.Modi has not explicitly linked demonetisation to a clean-up of electoral funding, but officials in his party say rivals should have heeded his warnings earlier this year that he was serious about clamping down on "black" cash."You cannot call it a bolt from the blue because Modi ... had dropped sufficient hints that he will take strict action," said a close aide."MOTHER OF ALL CORRUPTION"While an immediate liquidity crunch for parties is clear, the longer-term impact on funding is less so.The symbiosis between businessmen seeking favours and parties needing cash has sent campaign funding soaring.In Andhra Pradesh, three in four voters reported receiving money from parties during the last general election, according to research by CMS.The group's chairman N. Bhaskara Rao describes electoral corruption as "the mother of all corruption" in India. In the 2014 election, when Modi swept to power with an electrifying campaign that included 3D holograms of him giving speeches in villages across India, parties spent a record 370 billion rupees ($5.4 billion), CMS estimated.They have also long circumvented rules and learned to avoid using cash - parties get donors to acquire equipment for rallies directly, or local traders to buy gifts for would-be voters, such as mobile phone credits. ($1 = 68.0221 Indian rupees)(Additional reporting by Mayank Bhardwaj in MATHURA, Sharat Pradhan in LUCKNOW and Subrata Nagchoudhury in KOLKATA; Editing by Douglas Busvine and Mike Collett-White)The ‘Perfumed Dishonesty’ Around The Demonetisation DebateAuthor: Nupur J SharmaPublication: Date: November 17, 2016URL: the past few days, the burning topic that everyone seems to be talking about, and rightly so, is the government’s move to demonetise the Rs 500 and Rs 1000 denomination currency bills. We have heard a myriad of arguments for and against this move. But the most surprising argument that reduces the entire debate to facetious levels is being made by some of the elite who seem crestfallen that their “maids” (yes, most of them call them “maids” and not domestic help), chauffeurs, fruit vendors, vegetable vendors, newspaper boys, milk man and so on and so forth are being adversely affected. Yes. I can’t disagree with the temporary inconvenience or hardships caused, but their hollow arguments peddled against demonetisation would be laughable if not so uninformed and/or sinister.A cascade of rhetoric has descended upon us. From how their “maid” doesn’t have a morsel to eat, to how the chauffeur is distraught because he doesn’t have money for his daughter’s wedding. What stood out in all this was the sheer hypocrisy in their concern.Unsurprisingly, those who went on and on about how their maid had no money to buy food didn’t once urge fellow citizens to spare some Rs 100 bills for the needy. Not once did they inspire others to perhaps use their debit/credit card to buy groceries for their domestic employees. Not once did they talk about giving the help a paid leave so they could line up to exchange their money.Then there were others who spoke about how the financial inclusion plan was flawed to begin with. Flawed because the poor—and their marker for poor is limited to their domestic help—don’t even have bank accounts to help them withdraw or deposit money with ease. That made me wonder why the flower class, which is suddenly so concerned about the well being of the downtrodden, didn’t once bother to help their domestic employees open Jan Dhan Yojna (JDY) accounts. Of course, they had no means to foresee this demonetization step, but the PMJDY has so many benefits that could help the financially marginalized when in need. I wondered why their concern for their domestic help didn’t percolate down to helping them get overdraft facility or the insurance that comes with the PMJDY account. Their pietism left me in splits when the very people who spent days, if not weeks, deriding the “Sukanya Samriddhi Yojna”, a scheme that was meant to help people save for their daughters’ wedding, expressed such extraordinary concern for how their chauffeur would manage cash for the same purpose.The hilarity of their blatant hypocrisy gives way to anger when one realizes just how much work has been done, and how much more could have been done if the elite class that is in the position to sway opinions, basically compromising of journalists, TV lawyers, analysts etc, in their hate for current establishment, hadn’t resigned themselves to silence over measures taken for true financial inclusion. A total of 25.51 crore bank accounts have been opened under PMJDY with a cumulative balance of Rs 45636.61 crore and the amount of overdraft availed was well over Rs 31581.68 lakhs. I can’t even imagine what the results of PMJDY could have been if the intellectuals, whose concern for the financially downtrodden is suddenly at its peak, would have perhaps grown into their Samaritan role earlier.The quintessential intellectual’s liberal hypocrisy is glaring in their omissions. While being supremely concerned about the plight of the poor, they conveniently, probably willfully, mislead people into believing that the “poor” constitute only of the people who are employed by the elite. Sadly, the educated liberal has forsaken the worst victims of the underbelly of black money dominated parallel economy that infests our country like the plague.Global March Against Child Labor’s report states that in totality, the Commercial Sexual Exploitation industry in India generates revenues amounting to $360 billion per year (per Mr. Kailash Satyarthi). Anywhere between $35 to $360 billion is the rough estimate of how much this parallel economy generates by torturing, enslaving and using girls as sex objects, to be bought and sold, raped and abused for labour. It is said that the parallel economy estimates around 2 per cent-20 per cent of India’s GDP in quantum. The amount of black money generated for one victim in a brothel can amount to 3 – 14 lakhs. I am shocked that the torch bearers of poverty-stricken, marginalized, exploited men, women and children, downright refuse to talk about how severely demonetisation will break the very backbone of these syndicates. Every year, roughly 1,00,000 minors are forced into prostitution. I am saddened and broken about the fact that the liberal elite have forsaken these women and children. Perhaps, using the plight of their domestic help for making a political point is far more important than educating the masses about how a multi-billion dollar syndicate that exploits women and children, stands devastated after demonetisation of high value currency bills. Their entire parallel economy burnt to ashes.Another result of the government’s move is that the Naxals and Maosits have taken a severe financial hit. It is said that the Naxals had stashed away over Rs 7000 crore in the Bastar region alone. This was buried deep into the forest and used to procure arms and ammunition and to pay the cadres. It is said that the money collected by Maoists exceed Rs 1500 crore annually. Extortion rackets from tendu patta run into over Rs 200 crore per state. These groups function mostly from tribal areas and severely affect economic growth in the red corridor. I also hardly see our elite Samaritans talking about how, post demonetization, not one incident of stone pelting has been reported from Kashmir. Or how the counterfeit notes pumped into the country by Pakistan for terror activities has taken an irreparable hit.These contradictions baffle me. From the human trafficking syndicates, to Naxals, Maoists and terror operators in Kashmir, they all affect the most financially and socially marginalized people of our country. I wonder, does their pain not affect our elite? Does a terror attack have to happen at a 5 star hotel for them to wake up and take notice? And even then, the pain is soon lost in the politically correct chatter of champagne sipping gatherings.Is their concern merely a charade to wash away their blatant nonchalance towards us “unwashed masses”?The demonetisation move brought along a stark divide in the narrative. The “unwashed masses” standing in unending queues saying, “It’s a temporary problem. But this is good for the nation”, and the perfumed class saying, “It's not about us! What about the poor people?”.I, therefore, beseech the perfume scented class. I understand how difficult it must be to personally stand in those never ending queues. Your expensive sandals aren’t built for it. Your little jeweled bag isn’t meant to carry all that cash, and that’s fine. I for one am the last person to demonise the rich. But please, for the sake of sanity and integrity, don’t off load your sentiments on us masses. The “unwashed masses” are going to be fine with or without your condescension. The very least you can do is at least be honest. I therefore, as a common citizen, say to this to you today: NOT IN MY NAME.If these 10 temples give away their wealth, India's poverty will be solvedAuthor: Vivek SurendranPublication: Indiatoday.in Date: November 16, 2016URL: is known for its temples as much as it is known for the cultural diversity. We have always heard about how much wealth these temples possess. So here's a list of India's wealthiest temples.After Prime Minister Narendra Modi announced the demonetisation of Rs 500 and Rs 1000 notes from the financial system of India on November 8, people who were hoarding black money were sent into a frenzy.These people, who have been doing all they can to convert their black money to white, were found making donations to temples across the nation.Let's see which temple has got how much.PADMANABHASWAMY TEMPLE - KERALA It's the richest temple our country has got and possesses wealth of around 20 billion dollars (Rs 13,60,99,90,00,000).TIRUMALA TIRUPATI VENKATESWARA TEMPLE - ANDHRA PRADESHTirupati temple gets an annual donation of Rs 650 crore, and alone makes 11 million dollars (Rs 75,00,00,000) from selling laddus.SHIRDI SAI BABA SHRINE - MUMBAIThe third richest temple in India has gold and silver worth Rs 32 crore and coins worth more than Rs 6 lakh. The annual donation of the temple is around Rs 360 crore.VAISHNO DEVI TEMPLE - JAMMUThe second most visited temple in India earns Rs 500 crore annually.SIDDHIVINAYAK TEMPLE - MUMBAIThis temple's average annual income ranges from Rs 48 crore to Rs 125 crore.GOLDEN TEMPLE - AMRITSARThe temple's canopy is made of gold and the altar on which the holy book of Guru Granth Sahib is placed is studded with diamonds and other precious stones.MEENAKSHI TEMPLE - MADURAIWith more than 30,000 people visiting the temple, it earns a revenue of Rs 6,00,00,000 every year.JAGANNATH TEMPLE - PURIThe exact evaluation of the temple is still a mystery, but the temple is believed to have gold articles weighing nearly 130 kg and silver articles weighing more than 220 kg. Once, a European devotee even donated Rs 1.72 crore.KASHI VISHWANATH TEMPLE - VARANASIThe temple has three domes and two of them are gold plated. The annual donation of the temple is around Rs 4-5 crore.SOMNATH TEMPLE - GUJARATThe richest temple in Gujarat has an annual revenue of Rs 33 crore.Bill Gates lauds govt’s demonetisation moveAuthor: ET BureauPublication: The Economic TimesDate: November 17, 2016URL: Gates, founder of Microsoft and co-founder of the Bill & Melinda Gates Foundation, has hailed government's move to demonetise high-value denomination notes saying it will help to move from shadow to a more transparent economy. Speaking at the second lecture series of Niti Aayog on transforming India, Gates spoke on host of issues ranging from technology to health, education and sanitation. Excerpts: Technology: I'm a big believer in technology but technology is only as powerful as the people who use it. Technology is only as flexible as the regulations and systems that enable it and technology is only sustainable if the world we live in is sustainable, too. What India is trying to do no country has ever done before. India knows it has big challenges to address. It also has a government that is committed to solving them. A large and growing talent pool and many of the building blocks are in place to realize a truly world-class innovation economy. This is an amazing and pivotal moment in India's history. If India focuses on the right things, it will improve the human condition at a scope and scale never witnessed before.The potential benefit to India and to the world is incalculable. But India needs to seize these opportunities by making smart investments in the right things and by leveraging this country's long administrative tradition in bold new ways. When it does, India will write a new chapter in the history books about how a people and a country can rise to big challenges. Financial inclusion and demonetisation: The bold move to demonetise high-value denomination notes with higher security features is an important step to move away from a shadow economy to an even more transparent economy. Digital transactions will rise dramatically here. In next several years India will become the most digitised economy, not just by size but by percentages. A more concerted shift to digital transactions will further enhance transparency and reduce leakage. India has all the pieces in place for a compelling vision for digital financial inclusion. Embracing Innovation: Especially for a country the scale and size of India, waiting for others to come up with answers isn't a realistic option. India has to find its own solutions - tailored to its own unique needs. Countries that embrace change and enable it with strong innovation ecosystems will be well-equipped to address their own domestic challenges and show others the path forward. For India to tackle some of its big domestic challenges and contribute to innovations globally, steady funding to build world-class research institutions is going to be critical. Agriculture: It still employees the majority of Indian workforce. Over last half century India has made amazing progress through Green Revolution. But there are challenges. With growing population we need to solve malnutrition as well as address the challenge of climate change. Addressing these challenges and achieving the government's vision of doubling farmer income by 2022 will require advances in science and technology to boost productivity. Sanitation: Poor sanitation imposes a huge disease burden on India. The ineffective treatment and disposal of human waste contaminates India's scarce water resources. The Prime Minister has drawn attention to this long-neglected issue by launching the Swachh Bharat Mission (SBM). The program has ambitious goals and the country is making commendable progress. But solving the sanitation problem will require technology innovation to move on from outdated, resource-intensive solutions that require large-scale underground networks and treatment plant.Chai at ATM Queues: Darjeeling Tackles Demonetisation CheerfullyAuthor: Upendra M PradhanPublication: The QuintDate: November 16, 2016URL: is close to midnight in Mirik, and Bishan Rai and his friends, who run the popular Facebook page “Mirik ko Sero Fero,” are busy discussing the logistics for the next morning; their goal is to help the people who line up in the banks to deposit or withdraw money.Like every other place in India, the Darjeeling hills too saw a scramble to ATMs and banks following the demonetisation announcement by Prime Minister Narendra Modi. Ours being a mountainous region, ‘Digital India’ is yet to arrive here, thus almost 99% of the transactions are dependent on cash. As it gets more difficult to find smaller denomination notes, lining up to withdraw cash, which started off as a minor inconvenience, has turned into a major headache over the past week. People are starting to complain, and tempers are finally starting to flare up.But this is where the narrative between the people of Gorkhaland Territorial Administration and the rest of India diverges.While elsewhere, flaring tempers would perhaps lead to fights or even riots, in Darjeeling, it’s the opposite. The youth feel the growing tension, and are looking for ways to help subside it. That is where people like Bishan and his friends come in. After about three hours of discussion, filled with friendly banter and jeers, they agree to serve tea and refreshments to those lined up. A few volunteer to help fill up forms for those who cannot (elderly and illiterate), and a few others volunteer to help with the cleanup afterwards.Despite the increasing frustration over the non-availability of cash, people are highly supportive of the demonetisation initiative. Everyone we talked to said they supported the move, and a few suggested how it could have been done better.A small businessman in Kalimpong asserts, “Yes, we are having a problem, but we are very happy that the Narendra Modi government has taken this step to curb black money. However, I feel that other major parties too need to help. They are just blaming the Modi government; instead they should find ways to assist the government.”Vivek Pradhan from Bijanbari agrees. Living in the suburbs of Darjeeling, he sees this move as a historic measure, “Among other thing, this move will help conduct fair elections in India. One of the positives I see from this move is that, it’s an opportunity for common people like us to serve our nation. The onus of doing something for our nation should not be confined to the soldiers; common people have to bear equal responsibility.”‘Serving the Nation’ is a theme which finds wide resonance in Darjeeling region, which is home to the largest number of retired soldiers in India. Mr Manoj K Gurung, Manager at the Darjeeling branch of HDFC bank explains, “The most important thing we did was, we gave first priority to tourists who were stuck here in Darjeeling, exchanging their notes. For tourists who were HDFC bank customers, giving them Rs 10,000 of withdrawal, tourists who did not have any cheques, we allowed them to withdraw money on cash slips on their request… so this is what HDFC bank Darjeeling has been doing, and we hope to do more in the coming days also… the bank staff are very taxed, very tired… we are going home at 11-11:30 in the night, coming back in the morning at 8:30. Practically, we are working about 15 hours a day, but for the sake of the nation, I think, we will do it.”HDFC stayed open till midnight on Sunday, allowing people to withdraw money and make deposits. This is the level of commitment and dedication that people across the Darjeeling region have continued to display.The same sense of responsibility is felt by almost everyone. Mr Bikas Tamang, an elderly man from Kurseong says, “we the common people completely support this move… PM Modi has asked for 50 days time, if he wants longer, we will support him… we want to completely eradicate black money and our PM has our full backing and support.”Change is always painful, but at times it becomes necessary. Perhaps it would help, if the rest of our country learned from Darjeeling and its people, and supported each other, instead of whining and complaining.When times are difficult you can choose to either ??? ?? (participate) or ??? ?? (run away), I am glad that whenever our nation has needed us, the people in Darjeeling have always chosen to participate, be it for defending our nation from the enemies outside, or from the enemies within.- (Upendra M Pradhan is the editor at large for The Darjeeling Chronicle and writes the column “Voice of Darjeeling” for )Committing Suicide Also Radical, Says Arun Shourie On Notes BanAuthor: Nidhi RazdanPublication: Date: November 17, 2016URL: Disinvestment Minister Arun Shourie has strongly criticised the government's decision to ban 500 and 1000 rupee notes, saying while the stated objective may be good, the idea was not well thought out.In an exclusive interview to NDTV, Mr Shourie said the government had not anticipated the distress that would be caused by doing "away with 85% of Indian currency.""Small and medium enterprises, the transport sector, the entire agricultural sector...I can't reach six lakh villages," he said, adding, "They did not think about this? It is about being carried away by a big idea, getting into a self-image that I have to do some surgical strike. Therefore every week you see them saying - its been a week, a month, I have to do something."When asked if he thought it was a bold and radical move by Prime Minister Narendra Modi, Mr Shourie said, "jumping in the well is also very radical, committing suicide is also radical...if you want to make a beginning, make a beginning on reforming the tax administration."The former minister, who has been critical of PM Modi in the past, said he did not think the cash clean-up would get to the heart of the black or untaxed money problem. "People who hold this black money or black assets don't hold it in cash...they are not going to put their money under the mattress...they are holding it abroad, and there also they are not dollars, in gunnybags. It is property, jewelry, maybe other assets which we don't know about, maybe stock markets," he said.What was needed, he said, was strict and fair enforcement. "Then you will be acting against the bribe taker and bribe giver. But if you let disproportionate assets cases fall through because you don't present evidence, you are doing nothing on the Vyapam scam, you are doing nothing on the Sarada scam, the Narada scam, you let Hasan Ali go, nothing happened, Moin Qureshi goes away, Vijay Mallya is saying bye bye, Lalit Modi keeps sitting outside, then what will the officer think?"Mr Shourie, who was a union minister in the BJP-led government of Atal Bihari Vajpayee, said he did not think India was ready to move to becoming a cashless economy. "I have been writing on it for 35 years and I am all for it but this is the not the way to go about it," he said.In Joint Warning, Mamata Banerjee And Arvind Kejriwal Set 3-Day Deadline On Notes BanAuthor: Raija Susan Panicker Publication: Date: November 17, 2016URL: Banerjee and Arvind Kejriwal made a double bore attack on the government on Thursday, warning that there will be intense protests and unrest if it does not withdraw its ban on 500 and 1,000 rupee notes. They also visited the Reserve Bank of India to check on the progress of printing new notes, Mr Kejriwal said."Take back this decision in three days... Don't test people's patience. Otherwise, there will be a 'bhagawat' (revolt) by people," said Delhi Chief Minister Arvind Kejriwal at Delhi's Azadpur Mandi, the country's biggest wholesale hub.He called the demonitisation the country's "biggest scam since 1947.""Prime Minister Modi has broken constitutional rules...Why did not you (Modi) make a proper plan before the implementation (of demonetisation). The common man is suffering due to it. We are giving you three days. If you do not fix all problems, we will not leave you. We are still alive," vowed Mamata Banerjee, who is West Bengal Chief Minister.Together the leaders also visited the office of the Reserve Bank of India in the capital. "How much currency needed? How much printed? What is capacity? How many more days will it take? Me n Mamtadi at RBI to get this info," Mr Kejriwal tweeted.Ms Banerjee had led a march on Wednesday to petition the President against the notes ban, but Mr Kejriwal had not joined her protest because, said sources, he did not wish to share space with the Shiv Sena, which is an ally of the ruling BJP, but threw in its lot with Mamata Banerjee's Trinamool Congress on this issue.Mamata Banerjee's party, the fourth largest in the Lok Sabha, is trying to also move an adjournment motion in the house on demonetisation, which entails a debate followed by a vote.Both houses of parliament were adjourned on Thursday as opposition members raised slogans against the government on the notes ban. In the Rajya Sabha or upper house, they demanded that Prime Minister Narendra Modi respond to questions they have raised in a debate on the issue.The government has refused to give in to that demand. Finance Minister Arun Jaitley this evening said "there is no question of a roll back" of the decision to abolish 500 and 1,000 rupee notes, aimed at ending black or untaxed money. He also ruled out the formation of a Joint Parliamentary Committee as demanded by the opposition.At the public rally, Mr Kejriwal asked who was responsible for the death of 40 people who have reportedly died in incidents linked to the notes ban.The sudden move to scrap high value notes has caused huge disruption to daily life with people standing in long queues for hours outside banks and ATMs.Gujarat Village Thumbs Nose At Cash Crunch, Pays Through SMSAuthor: Rohit BhanPublication: Date: November 17, 2016URL: tiny village in Gujarat could not be less bothered about the great cash crunch that's giving the rest of India sleepless nights, sometimes literally, waiting in queue outside ATMs. The people of Akodara are making their payments, even for sums as small as Rs. 10, through a simple phone text message.The messages - mentioning the recipient's account number and the amount to be transferred -- are sent to the bank, which then does the needful.Akodara in Sabarkantha district, just 90 km from Ahmedabad, is considered the country's first digital village - with 24-hour WiFi. But what has helped more is the pilot project from a private bank that was launched a year ago."If I have to buy any item worth even Rs. 10, I just have to SMS to my bank with the grocery shop's account number. The money is debited from my account and is deposited it the grocery shop's account," said a resident, Piyush Patel.Mr Patel, who runs a dairy, says even his own customers pay him the same way and the money is credited to his account.The grocery shop owner says he isn't worried about the din raised by the currency ban. "These days there is a problem of currency, but not in this village. An SMS is triggered and our account is credited with the money and we sell the goods,'' grinned Pankil Patel.The only ATM in the village has money, but no serpentine queues cane be seen outside.More than a year ago, the private bank, in association with the state government, had adopted Akodara under the digital village programme.Today, 1,200 of the 1,500-strong population of the village have bank accounts. "Every account holder has been provided with an online money transfer system. The village is completely WiFi. But considering that not many people would have smartphones, we introduced this form of money transfer through SMS,'' said an official of the bank.Depending of the success and feasibility, the system can be replicated elsewhere, he said.Before the digitization, retired teacher Mohanbhai had to travel to the nearby district headquarter to pick up his pension. Twice his pocket was picked. But now he doesn't worry about pickpockets.The pension, he says is deposited in his account. And online payments take care of the rest.Demonetisation: Trader deposits money in lower denominations, says wants to help those in queuesAuthor: TNNPublication: The Times of IndiaDate: November 17, 2016URL: government's decision to demonetise the existing currency notes has led to long queues outside banks and ATMs with people trying to withdraw money to meet their daily expenses. Amid the chaos that has ensued, some people are doing their bit to help people.One such effort has been made by a trader in Uttar Pradeh's Moradabad who has deposited Rs 1.55 lakh in denominations of Rs 10, 50 and 100 at the bank."I deposited money in lower denominations for the convenience of others who are queuing up to withdraw money," said Avdesh Gupta.-------------------------------ANI UP @ANINewsUPUP: Trader Avdesh Gupta deposits Rs 1 lakh 55 thousand in denominations of 10, 50 and 100 at bank in Moradabad7:08 PM - 17 Nov 2016-------------------------------On November 8, Prime Minister Narendra Modi announced the decision to ban the existing currency notes as part of government's crackdown on black money and said people will get new Rs 500 and Rs 2000 notes. He also announced limits on withdrawal of notes.Since then, people have been queuing up outside banks and ATMs to get their hands on new currency. Some of them arrive as early as 3am and stay in the queues for 6-7 hours. "Most ATMs are closed in the city. We had to wait for over an hour to withdraw cash," said Venkatappa, a motorcycle mechanic in Bengaluru.The few lucky ones who got their hands on the new currency notes aren't happy either. "I had Rs 2,000 in old notes. A bank on MG Road exchanged it with a new Rs 2,000 note saying they didn't have Rs 100 notes. Who'll now give me change in Rs 100 notes?" said RB Rajanna, a private firm employee.The government has acknowledged the problems being faced by people and made an appeal to be patient. Finance minister Arun Jaitley said the government knew currency change can't be done overnight and will take time. "I think the situation will normalise in 2-3 weeks," Jaitley said.Bill Gates backs demonetisation, says it's worth the painAuthor:Publication: The Times of IndiaDate: November 18, 2016URL: glimpse of how much the world's richest man, whose current net worth of $87.4 billion is more than the market value of India's largest private sector company Reliance Industries, enjoys India could be witnessed at Delhi's India Gate on Thursday morning.Bill Gates was zipping around in a phut phut (modified three-wheeler) for a virtual reality film being shot on the Bill & Melinda Gates Foundation.Since 2002, when it started operations in India, the foundation has invested $1 billion in India. It's looking to do much more in the country. "I am very optimistic on India. Even if one of my ideas contributes to making a difference to the lives of 1.3 billion Indians, it will be huge for me," Gates told TOI in an exclusive interaction.He was referring to the ideas he shared during his lecture on technology for transformation at Niti Ayog on Wednesday. The lecture was attended by Prime Minister Narendra Modi, finance minister Arun Jaitley along with other ministers and top officials.Gates believes digital payments can transform the lives of poor, and if demonetisation+ helps quicken digitisation, the temporary pains may be worth going through."Government transitions are never managed perfectly and never easy," he said, referring to the transitory problems caused by the replacement of high-value currency notes."India is pushing towards digitisation in a big way. The scale of the country means that once India gets there, the amount of digital innovation here will be greater than anywhere else in the world," Gates said. Among big benefits of digital financial transactions, he counted a deep reduction in the cost of borrowing for the poor.Swachh Bharat is another government initiative Gates is excited about. His foundation is working with California Institute of Technology to develop what he calls a "reinvented toilet" that will dispose of waste without the toilet being connected to a sewage system.The India that Gates sees now is very different from the one he saw during his active years with Microsoft. "Now I am more in Patna than in Hyderabad and Bangalore. And it's great to see progress in Bihar," he says, proving that his optimism for India is not skin deep.Robin Hood rap: Don’t let high rhetoric of class war overtake demonetisation debateAuthor: EditorialPublication: The Times of IndiaDate: November 18, 2016URL: and government may have a million differences on demonetisation, but each of them claims to speak on behalf of the poor and accuses the other of being in bed with the rich. Kapil Sibal of Congress suggests that government is going to use the money common people are depositing in banks to bail out big industrialists who have defrauded the banks. Arvind Kejriwal of AAP likewise underlines how it’s not Ambani-Adani who are being tormented but farmers, rickshaw-pullers, shopkeepers and labourers. On the other side government is claiming full support of the poor in its battle against black money. Prime Minister Narendra Modi has gone so far as to declare that while the rich are running from pillar to post for sleeping pills, the poor are sleeping peacefully!This high rhetoric of class war insinuates that the key yardstick for judging the demonetisation of Rs 500 and Rs 1,000 notes is whether it hurts the rich, no matter what its consequences are on the poor. It confuses the battle against corruption, black money and fake currency with a competition for the crown of Robin Hood. This can be povertarianism of a dangerous variety: look at what sustained class war rhetoric has wrought in Venezuela. In his quest for a more equal society El Commandante Hugo Chávez tore apart its social fabric, mangled its economy, and created terrible shortages of basic goods like medicine and food despite Venezuela being wealthy in natural resources (which India is not).Economic inequality is a real problem in India. Actually, across the world anger has grown because policy makers have promoted the interests of the few against the many. But demonising the creation of wealth is no solution at all. Tax evasion is a true villain, which racks up a poverty premium in the form of shortage of basic social services. This does not negate how wealth creation creates jobs and funds the country’s health and education. So don’t tar companies with white incomes that are struggling to withdraw cash to pay their workers with the same brush as black marketers.Law abiding enterprises have also been hit hard by the demonetisation drive. Government must now use its revenue gains to upgrade the business infrastructure alongside the welfare system. And all political parties must remember that the goal is to flush out illicit wealth. Don’t demonise licit wealth.How Demonetisation Has Affected India's Agricultural And Food MarketsAuthor: Nidhi Nath Srinivas Publication: Huffingtonpost.inDate: November 17, 2016URL: versus reality.India's 17 lakh-crore agricultural and food markets, from the mandi to the neighbourhood grocer, are at a standstill. Demonetisation has vacuumed liquidity from this virtually cash-only economy that provides livelihood to half the population. Prices have crashed and fresh produce lies rotting. The situation indeed appears dire.Business is forecast to revive only after people in 7,500-plus mandis and 600,000 villages are re-stocked with new currency. Yet, those with the courage to look beyond this doomsday scenario can spot the proverbial rainbow.It is a myth that farmers refuse to accept cheque paymentTake farmers first. It is a myth that farmers refuse to accept cheque payment. Small dairy farmers in Andhra Pradesh accept cheques. Sugarcane farmers accept cheques from sugar factories. Moong farmers are accepting cheques from government procurement agencies. Apple farmers accept cheques from large buyers. Potato contract farmers accept cheques from food companies. Maize farmers in Nabrangpur, Odisha's poorest district, and coconut farmers in Karnataka took cheques from state agencies. The list is growing.In Karnataka and Andhra Pradesh, which have adopted the Rashtriya eMarketServices-run Unified Markets Platform, produce worth ?39,000 crore has been sold with cheque payment in the last four years. The 250 mandis in 10 states that have adopted the electronic National Agricultural Market (eNAM) platform for sale of primary produce are designed for cheque payment. So far, 1.60 lakh farmers, 46,000 traders and 26,000 commission agents have been registered on the e-NAM platform.Food Corporation of India tried but failed to pay Punjab and Haryana farmers by cheque for wheat, only because the powerful commission agents want to first deduct the loan repayment amounts.Direct benefit transfer for seeds has been a success even among the small and marginal farmers of Uttar Pradesh. Moreover, of the seven crore Kisan Credit Cards issued in India, more than one crore are ATM-enabled debit cards. Farmers accept insurance and disaster relief cheques. So to portray the farmer as a Luddite is both unfair and untrue.What's more, marketing practices are changing in several crops, especially oilseeds, maize and certain spices. Farmers now have the option to store their produce in modern warehouses for a market-driven rent and take a bank loan against them. So even if the mandis stay shut until the cash shortage recedes, the farmer can still borrow against his commodity.Farmers now have the option to store their produce in modern warehouses for a market-driven rent and take a bank loan against themIt is true that the small and marginal farmers who sell off their produce in the village itself are hurt by the demonetisation. Similarly, value chains with minimal processing and direct consumer sales such as fruits and vegetables are hit. Most fresh produce is sold by small hawkers and vegetable mongers in the streets of India. Since they take payment in cash and buy their wares from the mandi in cash, business is down. These are symptoms of the crying need for reform.The millers and processors who have raw material in their godown to last two-three weeks are in no panic. In any case, business in the mandis has to pick up within a month. Food is not a discretionary expenditure. The pent-up retail consumer demand will eventually pull up prices sufficiently high to lure traders and re-start the market engines.Visible difference will come if the government uses demonetisation to persuade two intermediaries in the value chain — the trader and the village shopkeeper — to adopt electronic payments. All the APMC markets are regulated by state governments and used by the larger traders. They should be made cash-free.The high incidence of indirect taxes have made it lucrative for wholesalers and distributors to stay below the radar and offer the savings as discount to consumers in a low-margin and highly competitive commodity market. Tax avoidance has become their formula for survival. A solution can be found through GST.Visible difference will come if the government uses demonetisation to persuade two intermediaries in the value chain — the trader and the village shopkeeper — to adopt electronic paymentsTo convince agri-input and other merchants, the government should make it easier and cheaper for them to adopt card payment and mobile wallets on a trial basis. Shopkeepers should be educated about how they can expand business by moving from "cash only" to "cash and card" because it attracts more customers. Those customers also spend more because they are not hampered by lack of cash. Once village retailers accept digital payments, rural customers will follow. Exactly the way mobile wallets picked up with Ola and Uber. Economists call it the network effect.It doesn't end there. Good customer experience is the key to adoption. The biggest argument in favour of cash is its convenience. You don't need literacy or tech savvy to use cash. Or travel miles to use an ATM. So the push for adoption of digital payments has to begin with easy documentation, quick and hassle-free KYC norms to incentivise utilisation of financial services in rural areas. Usage charges should be low and competitive so that farmers don't find them prohibitively expensive.Electronic payment points should be available at walking distance. Users should find apps easy to use and in their local language. They should quickly receive delivery, be assured of complete back-end security and have plenty of choice. The entry of payment banks will hopefully ease some of these pain points.Once the agricultural value chain adopts electronic payments and cleans up its books to align itself with the financial supply chain, benefits will follow. The biggest will be the inflow of private and banking capital, which is waiting to power agricultural growth, and social impact capital to improve rural lives.Cash is an inefficient medium of exchange. The World Bank estimates that the Indian government can save 1% of the GDP annually from digitising current cash-based subsidies alone. Farmers, traders, processors and retailers will never again blindly trust cash. That makes it the perfect opportunity to prise open closed minds and introduce new payment habits in this otherwise opaque part of the economy.- Chief Marketing Officer at NcdexBreaking the back of the blackAuthor: Sanju VermaPublication: The PioneerDate: November 18, 2016URL: is true that there have been long queues and minor disruptions too, but neither the bonafide intent nor the execution of the demonetisation drive can be questioned. It is precisely the ‘surprise element' that will yield phenomenal resultsEons back, former Prime Minister Indira Gandhi gave the clarion call of ‘Garibi hatao’ but it remained a pipe dream. Rajiv Gandhi, who succeeded her, too did precious little. He tried hard to straddle between VP Singh and Sam Pitroda, but eventually left behind a forgettable legacy. The less said about the UPA Government the better. Former Prime Minister Manmohan Singh was not called an “underachiever” by TIME magazine for nothing.However, the most enduringly corrupt legacy of Nehruvian socialism and successive Congress Governments, that ruled India for more than 60 years, is the yawning chasm between the rich and the poor, made worse by a parallel ‘black economy’ that at an estimated 20 per cent of gross domestic product (GDP), comes to over Rs30 lakh crore or $460 billion, assuming India’s current GDP at $2.3 trillion.The great news though is the massive assault, launched on the shadow economy, by Prime Minister Narendra Modi on November 8, via demonetisation of old Rs500 and Rs1,000 notes which is one of its kind for its sheer size, scale and timing.It would have been funny had it not been ironical that, Trinamool Congress chief Mamata Banerjee allowed the Rs2,600 crore Saradha scam and the Rs40,000 crore chit fund scam to loot more than 20 lakh investors through more than 250 shadow companies and 2,500 fictitious bank accounts, should talk of the hardships faced by the downtrodden!As for the Bahujan Samaj Party leader Mayawati’s fetish for installing more than 130 ‘elephant statues’ in pink sandstone, all over Uttar Pradesh, at the expense of taxpayers money, rankles to this date. Coming to the Samajwadi Party, the only thing that competes with the infamy of Uttar Pradesh being the new rape capital of India, under the inept leadership of Akhilesh Yadav, is the infighting between the ‘chacha-bhatija’ duo.While it is true that there have been lengthy queues and minor disruptions too, neither the bonafide intent nor the execution of the Modi Government can be questioned. It is the ‘surprise element’ that is precisely the reason why this demonetisation exercise is set to yield phenomenal results.In the final count, one-third of the Rs14.5 lakh crore (money held by way of Rs500 and Rs1,000 notes) will never find its way back into the banking system as it is unaccounted for/illegal. Liability of the Reserve Bank of India (RBI) will, therefore, to that extent, reduce. If assets reduce by as much liabilities, it will only end up as a balance sheet adjustment on the books of RBI but if assets do not reduce likewise, the RBI will be left with a massive surplus that will accrue to its reserves.More importantly, this exercise should eventually add between $30 billion to $45 billion or between two per cent to three per cent to India’s budget alone which is three times the size of Iceland’s economy!The Government of India then has the leeway to spend this additional money unearthed by way of demonetisation (between three lakh rupees to Rs4.5 lakh crore) on social services like health care, education, affordable housing et al.Hence, fear mongering that demonetisation is deflationary is a lot of humbug. True, cash dependent supply chains will face transient glitches, but demonetisation is the cleanest and one of the most efficient and prudent way of pump priming the economy, without the associated evil of adding to undue inflationary ernment’s finances will get a further thrust from the fact that fiscal deficit of Rs5.3 lakh crore for 2016-2017 is expected to reduce by a whopping 50 per cent. Some estimates suggest that fiscal deficit could actually be fully wiped away!Assuming a possible situation where tax/GDP remains constant, India, with little luck from future telecom airwaves auctions and PSU disinvestments, can actually cough up a fiscal surplus, a year hence, which will be a first in the longest time in its economic history.Lending rates should fall too! Don’t forget that India’s 10-year sovereign bond yield that was trading at 7.38 per cent as recently as July this year, was trading at just 6.64 per cent, within two days of the ‘demonetisation’ announcement!Ten-year bond yields are seen sliding to between 6.15 per cent to 6.4 per cent by March 2017. If that indeed happens, it would mean a secular downtrend in both, short-term and long-term lending rates, including home loans.A 25bps fall in interest rate on one crore rupee home loan for 20 years, for instance, could lead to savings of four lakh rupees and a 50bps fall could actually lead to a savings of eight lakh rupees, over the tenure of the loan! That, coupled with a 25 per cent to 30 per cent fall in property prices thanks to “freezing of the black component”, is nothing short of an “honesty bonus” for the commoner who under 60 years of Congress rule, had his back broken.For naysayers who say India is a cash economy with only 2.5 crore credit cards, 57 crore debit cards and 1.3 crore e-wallets, well, the ball has been set rolling for the move from paper to plastic! Also, on extrapolating data from various Government of India websites, including the RBI site, it is now clear that under the Modi Government, more bank accounts were added in the last two years, than the total number added under an inept Congress between 2004-2013! Thanks to ‘Jan Dhan Yojana’, atleast eight out of 10 people have access to banking and that ratio is growing exponentially. Number of households in India, with no access to banking, has shrunk to as little as few than 23,000.Assuming informal sector at 20 per cent of GDP and assuming formal sector is taxed at an average rate of 15 per cent to 20 per cent, with demonetisation, once the formal and the informal merge, the boost to GDP on this count alone could be between three per cent to four per cent. It’s mathematics and numbers don’t lie.- (The writer is an economist and chief spokesperson for BJP, Mumbai unit)Robin Hood rap: Don’t let high rhetoric of class war overtake demonetisation debateAuthor: EditorialPublication: The Times of IndiaDate: November 18, 2016URL: and government may have a million differences on demonetisation, but each of them claims to speak on behalf of the poor and accuses the other of being in bed with the rich. Kapil Sibal of Congress suggests that government is going to use the money common people are depositing in banks to bail out big industrialists who have defrauded the banks. Arvind Kejriwal of AAP likewise underlines how it’s not Ambani-Adani who are being tormented but farmers, rickshaw-pullers, shopkeepers and labourers. On the other side government is claiming full support of the poor in its battle against black money. Prime Minister Narendra Modi has gone so far as to declare that while the rich are running from pillar to post for sleeping pills, the poor are sleeping peacefully!This high rhetoric of class war insinuates that the key yardstick for judging the demonetisation of Rs 500 and Rs 1,000 notes is whether it hurts the rich, no matter what its consequences are on the poor. It confuses the battle against corruption, black money and fake currency with a competition for the crown of Robin Hood. This can be povertarianism of a dangerous variety: look at what sustained class war rhetoric has wrought in Venezuela. In his quest for a more equal society El Commandante Hugo Chávez tore apart its social fabric, mangled its economy, and created terrible shortages of basic goods like medicine and food despite Venezuela being wealthy in natural resources (which India is not).Economic inequality is a real problem in India. Actually, across the world anger has grown because policy makers have promoted the interests of the few against the many. But demonising the creation of wealth is no solution at all. Tax evasion is a true villain, which racks up a poverty premium in the form of shortage of basic social services. This does not negate how wealth creation creates jobs and funds the country’s health and education. So don’t tar companies with white incomes that are struggling to withdraw cash to pay their workers with the same brush as black marketers.Law abiding enterprises have also been hit hard by the demonetisation drive. Government must now use its revenue gains to upgrade the business infrastructure alongside the welfare system. And all political parties must remember that the goal is to flush out illicit wealth. Don’t demonise licit wealth.What foreign media thinks about PM Narendra Modi’s demonetisation moveAuthor: Express Web DesPublication: The Indian ExpressDate: November 19, 2016URL: foreign media has not stayed far away from the issue and many leading international newspapers have given their opinions on whether the decision to demonetise currency was a 'masterstroke' or a 'policy failure'.Prime Minister Narendra Modi on November 8 announced the government’s decision to withdraw old currency notes of Rs 500 and Rs 1000 and replace them with new currency notes of Rs 500 and Rs 2000 notes with an aim to weed out black money from the system. While declaring the ‘bold’ move, the Prime Minister said people will be allowed to replace their old currency from banks till the end of December. The government also decided to put a cap on the amount of money that can be withdrawn from the bank in a single visit. The move received support from several sections of the society but also caused massive problems for thousands of others, who were forced to stand in long queues outside banks and ATMs across the country to avail cash.Being the wedding season, several families faced troubles to make proper arrangements due to the massive cash crunch caused by the move. Several daily wage labourers were forced to leave their work and many lives were lost as people could not pay for food and medicines.This is how the foreign media interpreted the demonetisation move of the government.The Guardian“The rich will not suffer, as corruptly acquired fortunes have almost all been converted to shares, gold and real estate. But the poor, who make up the bulk of the nation’s 1.3 billion people, will lose out. They don’t generally have bank accounts and are often paid in cash. For them, getting to a bank and queueing for hours will cost money and time they don’t have. In less than a week the policy has reportedly claimed more than a dozen lives. The government says that it will take weeks to sort out the problems,” an editorial said.“Mr Modi’s scheme has more in common with the failed experiments of dictatorships which led to runaway inflation, currency collapse and mass protests. While Mr Modi campaigned to end corruption, it would have been better if the government had updated its antiquated tax system to realise such a task,” it added.The New York Times“Cash is king in India. It is used in an estimated 78 per cent of transactions, compared with 20 per cent to 25 per cent in industrialised countries like Britain and the United States. Many people do not have bank accounts or credit cards, and even those who do often must use cash because many businesses don’t accept other forms of payment,” the article read.“At least, that was the plan. The change, however, has thrown the economy into turmoil, with many millions of people forced to line up at banks to deposit or exchange their old bills,” the editorial read.Bloomberg“What seemed at first to be a masterstroke by Prime Minister Narendra Modi now looks like a grave miscalculation… What’s changed in a week? Well, for one, it’s become clear that the government was simply too cavalier in its planning. Now that 86 percent of India’s currency is no longer valid, the central bank has struggled to print replacement denominations — and the new notes are the wrong size for existing ATMs. Modi’s asked people to be patient for 50 days, but the process could take as long as four months,” Bloomberg said.“Few villagers have access to an ATM. Most have to trek to a bank branch to change their cash, which means losing out on crucial days of labor. Many Indians, particularly women, still don’t have an active bank account. Finance Minister Arun Jaitley wondered aloud how many poor people would even have 1,000-rupee notes — probably a rhetorical question, but surely it shouldn’t have been. Someone should’ve sought the answer before shutting down India’s financial system,” it said.Herald“A currency note is a promise that must be kept, whatever the circumstances. Because this trust has been broken in India, queues have formed outside banks and ATMS, with banks closing down mid-way through the business day, saying they have run out of cash… Pro-establishment die-hards would snigger and argue that the two high value notes have been withdrawn to check black money. It had to be done in total secrecy, they say, to thwart nefarious attempts by hoarders to dump currency. But what is it that these hoarders could have done in a reasonable time frame that they are not doing now?” the Pakistani magazine said.Demonetisation Riots? We Should All Worry When SC Talks Like A KejriwalAuthor: R Jagannathan Publication: Date: November 19, 2016URL: do the Supreme Court’s latest actions not surprise anybody? Yesterday (18 November), Chief Justice of India (CJI) T S Thakur told us that the Collegium had sent back the 43 names rejected by the government for appointment as high court judges. That not even one of the objections made by the government was accepted tells us that the Collegium is into asserting its own untrammelled power, and not necessarily protecting the power balance mandated by the Constitution.In another observation, this time over demonetisation, the CJI made injudicious remarks over the government’s inability (so far) to reduce queues outside bank branches seeking to exchange demonetised notes. "It is a serious issue. This affects the entire population. You (the government) cannot deny there is a serious problem. There could be riots,” The Times of India quoted the bench as observing.Question: did the Supreme Court itself not cause huge inconvenience when it ordered that all buses must run on gas? Does it even today not cause untold hardship to citizens who have to wait years on end for court verdicts? Even assuming there is a shortage of judges, can the Supreme Court claim everything was hunky-dory before the current conflict between the judiciary and the executive over the memorandum of procedure slowed down the appointment of judges even further?On demonetisation, there may be huge public inconvenience due to the government’s perceived failure to ensure quick replacement of old notes, but why was it necessary to suggest that riots could happen? Isn’t this the kind of irresponsible statement one would expect from an Arvind Kejriwal rather than the Chief Justice of India? When the top-most court talks of the possibility of riots, isn’t this almost like telling people that if riots happen, we may have to intervene?Let’s assume that the government goofed badly (it certainly was not fully prepared for the crowds milling outside banks) in meeting the post-demonetisation challenge, and let us also presume that some people may be ready to riot, but isn’t that why the police are there? Even assuming there is rising public anger over the government’s handling of the issue, surely the public can punish the party in power at the next opportunity. How is it the Supreme Court’s job to judge whether the government has done right or wrong?That the Supreme Court is more concerned about its own unchecked powers was demonstrated again last week when a bench comprising Justices Ranjan Gogoi, Prafulla Pant and U U Lalit issued contempt notices to former Supreme Court justice Markandey Katju for a highly critical blogpost. The blog said the court erred in not convicting a rapist for murder. The convicted rapist, Govindachamy, had raped Soumya on a moving train. Soumya either fell off the train by jumping or was pushed, but the bench relied entirely on a bystander’s comment that she jumped. But, surprise, the bystander is nowhere to be found. The decision to not convict Govindachamy for murder was based on two witnesses, who claimed to have heard the bystander saying she jumped.The bench, whose ire was prompted by Katju’s blogpost (now removed), first invited the former judge to defend his views in court, and when he turned up and made his points emphatically, the court was further incensed and had escorted him out and issued a notice of contempt.A P Shah, retired Chief Justice of the Delhi High Court, wrote in The Times of India that the contempt law is questionable “in a free society where criticism of the judiciary is inevitable. Judges have vast powers and people will not remain silent about the exercise of such powers. Just as decisions of other branches of government attract criticism, judicial decisions would also invite the same.”He added: “The Supreme Court has held that for the judiciary to function effectively, the dignity and authority of the courts must be respected and protected at all costs. But the need to respect the ‘authority and dignity of the court’ is borrowed from a bygone era; it has no basis in a democratic system. The law of contempt should be employed only to enable the court to function, not to prevent criticism.”Quite. If respect for authority is that important, why should the executive or the legislature not claim the same principle and privilege? The legislature does have this privilege, but does not use it as often as the courts, for legislators ultimately have to go back to the people to get elected. Democracy puts checks on elected representatives that it does not on unelected judges.It is quite obvious from the above examples that the Supreme Court has lost its way. It is seeking legitimacy by repeatedly trying to foray into executive domain on populist issues, and wants to remain unaccountable by insisting on absolute powers to appoint judges – a system that no other democratic country countenances. It is one thing to ensure judicial independence, quite another to expropriate powers that were never given to it under the Constitution.Can such a Supreme Court really uphold the Constitution in letter and spirit?After Seeing Airport Queues, Bill Gates Flip Flops On DemonetisationAuthor: Nitin SethiPublication: The WireDate: November 18, 2016URL: Wednesday, the founder of Microsoft had described demonetisation as a “bold move” and an “important step” in moving away from a shadow economy.A day after calling the demonetisation of Rs 1,000 and Rs 5,00 notes as an “important step to move away from a shadow economy” and a “bold move”, Bill Gates did a U-turn on Thursday and said, “I have no opinion about demonetisation”. He avoided commenting on the government’s move despite repeated queries even as he put his full weight behind the growing digital economy.On Wednesday, the founder of Microsoft and now the co-chair and trustee of the Bill and Melinda Gates Foundation at a public lecture, hosted by NITI Aayog, had said: “The bold move to demonetise high-value denominations and replace them with new notes with higher security features is an important step to move away from a shadow economy to an even more transparent economy. And digital transactions really, I think, will rise dramatically here.”But on Thursday, speaking to a select group of journalists, Gates avoided making a comment on demonetisation one way or the other.One of the journalists asked: “We saw today morning some comments in the newspaper that you supported Modi’s position on demonetisation. Do you think making people stand in queues to access their money is good governance?”He replied, “I had nothing to do (with it), I had no advanced notice, no involvement. Nobody asked my opinion.” When asked yet again to clarify on his statements on Wednesday, he said, “I already answered that. Nobody consulted us before or after. All I knew is that a few days before, I read about demonetisation in newspapers. When I was at the airport, there was a long queue. Someone pointed to it and said that is demonetisation. I do know that independent of demonetisation, digitisation is a good thing.”“We are certainly for digitisation. I do not have opinion about demonetisation. I still don’t…You know what it is, better than I do,” he added. “If you want Rs 50 transactions to happen on less than two per cent overhead, be able to send money to your relatives at a distance, sell your crops and save a certain amount for the next season, the digital platforms will let us to do great financial services for the poor people in a way that the non-digital system will not let you do,” he said.He noted the digital economy, running on payments banks, mobiles and other forms would be more cost-efficient than micro financing, which had provided modest benefits but not as dramatic as people had expected.“As you digitise those things, the interest rates, the transaction rates go down and the ability to make savings go up. So, we have been dealing with the government with payments banks. Those we think will be activated very soon.” He also extolled the virtues of digitisation for delivering health benefits to people. He gave the example of the Foundation’s efforts to eradicate polio in Nigeria. Gates noted that GPS-based tracking had helped the polio teams reach the right villages and only through that the country had been able to come close to eradicating polio in the country.On how cashless a society could turn through digital transactions he said, “It is very modal. There are countries where cheques have reached a critical mass and countries where cheques are a joke. In Nordic countries, there is very little cash today because their debit cards have very little fee. Those debit cards are now moving on to cellphones.”By arrangement with the Business Standard.T N Ninan: Our post-truthsAuthor: T N NinanPublication: Business StandardDate: November 18, 2016URL: Modi is a master in evoking the emotional reasoning that is the essence of post-truth - as indeed is Donald TrumpMidway through his prime ministership, Narendra Modi has made his first blunder, the botched exchange of high-value currency notes for new. But the remarkable point to note, politically, is that so many people have said (at least in the initial days) that they are willing to live with the inconvenience and dislocation, since it is in a good cause: attacking the black economy. This is one more example of Mr Modi’s ability to get the country to accept the narrative that he spins out. Weeks earlier, much of the country had bought another Modi narrative, as he successfully diverted attention from the extreme alienation, violent unrest and prolonged curfew in the Kashmir valley, by posing tests of nationalism that rode on the back of an army operation (don’t question the army, don’t question the government — or you are an anti-national). Economists can argue till they are blue in the face that the scrapping of un-surrendered currency notes deals only with the existing stock of black money, not the flow of black economy transactions — which will continue. Reporters will draw attention to the thousands of crores that the BJP (and Congress, among others) has received in the past from unnamed sources —underlining the underlying hypocrisy. Analysts will point out that all economies have black economies that range from a low of 9 per cent of GDP to 30 per cent and more in even the advanced countries — no higher or lower than in India. What is worse, the black component of economies has generally been growing faster than GDP. The scrapping of old high-value currency notes, therefore, may cause unrecorded transactions to stop for a while, but they will resume. Undaunted, an emotional Mr Modi has stuck to his script and vows to take even more drastic steps. This must be our version of what Oxford Dictionaries has declared to be the word of the year: post-truth. Mr Modi is a master in evoking the emotional reasoning that is the essence of post-truth — as indeed is Donald Trump. Don’t confuse me with the facts, what I feel is the reality. For decades, commercial advertisers have sought to exploit this limbic level of reasoning and consumer response by mixing up images of consumer products with, say, movie stardom, or success with the opposite sex. Mr Modi needs no such props. He is the messenger and the message. The second point to note, mid-way through the life of this government, is how much a cadre-based party of many leaders has morphed in such a short space of time into having just one leader whom no one in the system will dare question. The party could not name a chief ministerial candidate in the Bihar elections last year, and is unable to name one for Uttar Pradesh now. To many observers, this is Indira Gandhi re-born. She had her post-truths too: three decades after her death, millions of poor voters continue to believe that she stood for the poor, though her record during 16 years of prime ministership shows that poverty barely declined. But like Mrs Gandhi, Mr Modi has become a populist. It is also uncanny that her advisors told her that, with bank nationalisation, it may be possible to abolish the income tax because the government would have access to so much money. Today, the Pune-based Arthshastra Prathishthan that says it met Mr Modi and advocated the currency note expropriation also argues that the income tax should be scrapped! And so India has slipped into the category of countries with strongman leaders, democratically elected. Russia’s Putin and Turkey’s Erdogan are the contemporary examples usually cited for this category, but there is a slew of East Asian leaders before them who are seen to have delivered for their people. For Mr Modi at this point, it is easier to get marks for effort than for results; but that is only in the world of unemotional facts and numbers. For the future, we have to wait on events to see whether the strongman narrative plays out differently from other countries.Arvind Kejriwal calls BBC corrupt for questioning charge against demonetisationAuthor: Publication: The Economic TimesDate: November 19, 2016URL: chief minister Arvind Kejriwal lost his cool with a BBC reporter who questioned his rationale behind linking 55 deaths to Modi government's demonetisation drive. Kejriwal, who has been very vocal about his displeasure about the note ban, called the reporter and the channel corrupt after he pointed out that the deaths need to be probed and cannot be attributed directly to the cash drive without proof. The argument irked the AAP leader considerably. "Yeh janta dekh rahi hai ke BBC waale kitne imaandaar hain. Fifty-five people have died over the issue (demonetisation) and BBC says we can't link this to demonetisation. This is their honest journalism."Kejriwal said: "Mujhe sharam aati hai ke aap jaise patrakar yeh kehte hai ke usko link nahi kiya jaa sakta hai." Kejriwal reiterated that the Centre's demonetisation of high-denomination currency is the "biggest scam in independent India" and demanded its rollback. Kejriwal claimed the move was aimed at benefiting big corporates by waiving off their bank dues. "It would be anti-national to support demonetisation in its present form." On November 17, Kejriwal and West Bengal Chief Minister Mamata Banerjee warned of a public revolt if the Centre's decision was not reversed in three days.India’s Strange Cash ProblemAuthor: EditorialPublication: The New York TimesDate: November 17, 2016URL: Minister Narendra Modi of India has declared war on corruption, a big factor in perpetuating poverty in that country. But his shocking decision on Nov. 8 to remove and replace large-denomination paper money was poorly thought out and executed.Cash is king in India. It is used in an estimated 78 percent of transactions, compared with 20 percent to 25 percent in industrialized countries like Britain and the United States. Many people do not have bank accounts or credit cards, and even those who do often must use cash because many businesses don’t accept other forms of payment.Paper currency makes it easy for people to avoid taxes and engage in corruption. For example, real estate sales are often split into two parts: a smaller portion, which is reported to the government, is paid by check, and a larger, undeclared sum is paid with stacks of cash, or “black money” as it is often referred to in India. Business people and criminals routinely buy off government officials and politicians with envelopes and briefcases of cash.Mr. Modi’s solution to a systemic problem is an odd one. Last week, he announced that the government would get rid of the 500- and 1,000-rupee notes (worth about $7.50 and $15), which together make up about 80 percent of currency in circulation, and replace them with new 500-, 1,000- and 2,000- rupee notes.The move, which went into effect last Wednesday, is meant to force tax evaders and corrupt officials hoarding cash to deposit or exchange their old notes at banks by Dec. 30. Those with very large sums will be forced to explain how they amassed so much cash and pay taxes owed on the money.At least, that was the plan. The change, however, has thrown the economy into turmoil, with many millions of people forced to line up at banks to deposit or exchange their old bills. One man told The Times that a bank turned him away because he didn’t have a government-issued identification card, which is required to swap or deposit old bills. He was hoping a charity would feed him and his family while he waited to convert his stack of 500-rupee notes, worth about $148. Meanwhile, many traders have established lucrative money-laundering services to help the cash-rich get rid of their old bills.Mr. Modi acknowledged that the currency swap would cause “temporary hardships” to “honest citizens.” But his government did not appreciate the extent of the pain it would inflict, for what may be only a short-term solution. The government has begun circulating new 500- and 2,000-rupee notes, which means that cash-based corruption and tax evasion are almost sure to return as people accumulate the new bills.Dear Pratap Bhanu Mehta, You Disappointed Us!Author: Shubhrastha Publication: Date: November 19, 2016URL: latest article by Pratap Bhanu Mehta in the Indian Express on the demonetisation row describes the move as a ‘watershed event’ and a ‘new kind of politics that will redefine the relationship between citizen and state’. Agreeing partly on what Mehta says is a watershed moment for India and disagreeing on this move as being an ‘event’, I propose a humble critique to what he wrote in his latest article.I choose to do this because his criticism seems to be a classic representation of what the detractors have been saying in different voices – some shrill, some caustic, some personalised and some delusional – all bound to each other in content but may be differing in form. What Mehta has attempted is a value judgment of a public movement that has started off with India Against Corruption in 2012 against corruption at multiple levels – government, media, intellectual space, politics and society.He rightly analyses the step as a ‘gamble’ which I would prefer calling a risk – a sign of a truly entrepreneurial governance model. The article goes on to critique the step because of its ‘sheer audacity’ and because ‘it threatens to institutionalise a new kind of politics’. The rest of the article essentially builds up on this theory of emergence of a new political order and critiques it on the ground that it is puritanical.I have multifold problems with this kind of critique, especially because it came from Pratap Bhanu Mehta. Unlike most other intellectuals in the country, Mehta represents a voice of sanity who has been known for his nuanced writings and analyses of questions of public interest. But of late, his intellectual voice has been replaced by an agenda-driven voice, which is quite merciless in its assessment of issues from a point of view, which is definitely not grounded. It would have been still ok, if he cared not to cloak his writings with that sense of puritanical and pretentious wisdom on what the public feels.In this piece for instance, among the din of opinionated and by and large, non-grounded journalism with respect to demonetisation, one expected Mehta to take a historical recount of things, compare what was written or said or talked about demonetisation historically, make an account of the pros and cons of this economic storm and compel the public to believe in arguments based on analyses. But what did he do?He invoked a 15th-16th century literary motif in Europe – the Morality Play tradition – to talk about the economic scourge of corruption. It was not just odd but reeked of a genuine intellectual distance Mehta maintained to consolidate his hold within a certain coterie of Anglophile intellectual elites, who would have certainly had the English literary tradition under their finger tips, making himself oblivious and inaccessible to the general mass of readers, who often found in him an intellectual succor.He did that purposely because the problems of morality and puritanical wisdom that Mehta critiques is a recount that can happen only in a certain class of Indian society. An average Indian is still run and directed by common threads of a moral tradition. We still respect elders and hence you saw instances being shared on social media, where youngsters came forward, stood in long serpentine queues and helped the elderly get cash. We still respect trust and social camaraderie and hence you saw in North East, how various societies easily and without any fuss, transitioned from being cash driven to barter or paper-driven. We still believe in the good versus evil worldview and hence not just celebrate Ravan Dahan each year and keep fast on every Eid, but also see poor women in my village happy that finally there is someone, who will come down on the feudal sarpanchs, notorious for his extravagant lifestyle on black money.And this is an average Indian that Mehta does not want to talk to. Why just Mehta? There are the likes of Arundhati Roy, in the same vein, who answered me when I asked her why she does not support the India Against Corruption movement and she said because it is a middle class conception. She went on to explain how there are a lot of people at play always when such large scale movements happen. As an impressionable 23-year-old I was confused if such intellectuals really stand for defending democracy or a certain idea of democracy being nursed in selfish coteries of self-aggrandisement that helps maintain their relevance and their self-serving demands, which are hailed as frugal and moral because they are not in public view. What explains this attitude of shying away from public support of issues, which public endorses when all they have uttered and spoken of is about issues of public interest. Why such hatred for public wisdom?When Mehta says that ‘the audacity of the move is breathtaking’ and that ‘this ability to translate a policy measure into a national project is unprecedented’, he exposes the vulnerability of the intellectual elite, who seem to have been shaken with their turf being taken away from them. It has been assumed for far too long that audacity must flow only from the pens of the rebels. It has been assumed that audacity must make heroism and heroic an ideal that none could achieve, because if it is achieved, the value of appreciation becomes invested in a life-size character replacing the value of their imagination. This hurried writing off of the move as an imminent danger is but a reflection of that threat.If the problem, as Mehta says, is the mass moral appeal of this initiative, readers like me are confused. Were we to write off Batukeshwar Dutt, whose birth anniversary we ought to be celebrating today, because he along with Bhagat Singh, dropped a bomb in the middle of the courtroom to protest against the colonial rule and was audacious and bold enough? Were we to write off Raja Rammohan Roy because he also made a moral appeal against sati? Were we to write off Dr B R Ambedkar in the case of demonetisation, who openly advocated for change in currency every 10 years on moral and economic grounds?On the particular issue of demonetisation, there are lapses. Implementation of any policy measure in a country of a billion-plus population is a humongous logistical exercise. But, perhaps, this is where the intellectual class must have stepped in. They must have offered practical solutions, guided a government built on moral support to help it carry forward an agenda, which they themselves call ‘pathbreaking’. They must have called the civil society and academia to step in for shramdan. They must have openly denounced the government for any ill doing but would have at least shown moral support for a movement, which has undoubtedly garnered public approval on all counts. They must have appealed to the media to stop misinformation campaigns and agenda-driven journalism, where either there is a GPS-enabled money bunch that will solve all issues, or there are people dying in the country because of long queues!Full Text Of BJP Resolution On DemonetisationResolution passed by the BJP Parliamentary Party?"The BJP Parliamentary Party(BJPP) unanimously welcomes the historic announcement made by the Prime Minister, on November 8, 2016, withdrawing the Legal Tender value of currency notes of?Rs.500 and?Rs.1,000, and compliments the Prime Minister, the Government and the Reserve Bank of India for the same.The BJPP is supremely confident that this bold initiative will achieve the intended objectives of cutting off financial support to terrorist and extremist organizations, address the problem of counterfeit currency besides checkmating unaccounted money in the system and serving as a serious warning to those indulging in corruption.The BJPP acknowledges this initiative as a national project of cleansing the system and of great significance that will usher in behavioral and attitudinal changes encouraging honesty in personal and public life, particularly political life. This will benefit the poor and the common man in several ways.The BJPP also compliments the Government for its pro-active responses on a daily basis towards enabling the people overcome the inconveniences caused during the transition, till full-scale remonetisation is done.Over the last 70 years, common man has resigned to grudgingly accept the foul ways of those in power and close to power, to exploit the system and make ill-gotten wealth.During the last 12 days, the poor and the common man and the other honest people have made the most profound statement, ever made in our country in recent times. That being, that they don't mind putting up with short term inconvenience for the larger good.They are 'queueing for a better India'. This in our view is the most profound statement to ever come from the people of our country.It's a well-known fact that our nation is made of honest people and it is only the minority dishonest that are exploiting the system to the detriment of common man and the poor.Every major transformational initiative results in some discomfort to start with. The initial pain leads to substantial gain.The BJPP is grateful to the people of the country for supporting the Government's well meaning initiative, by bearing with the inconveniences with patience and discipline and the management and employees of banks, for rising to the occasion, and helping the people with exchange of old notes for the new ones.The BJPP condemns the malicious efforts of some political parties who are desperate to provoke violence and chaos having been rattled, by the wide spread support of the people to the Government's initiative, and bent upon disrupting the proceedings of the Parliament on one pretext or the other.At this crucial juncture, the political parties have to choose whether they would stand by the government and the people or protect the interests of black money hoarders. It is time for all political parties to deliberate on measures to eliminate the scourge of black money.Then only national interests will be served.The BJPP congratulates the Prime Minister for his historic, daring and pro-poor decision in the interest of nation. The BJPP urges the Prime Minister and the Government to call for other effective measures to clean up the entire system.Why Prime Minister Narendra Modi has already won the demonetisation gambitAuthor: Manu JosephPublication: The Hindustan TimesDate: November 18, 2016URL: is often a misunderstanding of suicide or gamble. It appears that Prime Minister Narendra Modi, whose devotees are celebrating his “boldness” for delegitimising large bills, has in fact made a calculated gamble. And it is turning out to be an excellent move. He has already gotten away with it, only the extent of his rewards is unclear.This may not be apparent at first glance, especially if you are not very fond of him. There are communism-grade queues outside banks, which do not have enough cash to distribute. For the first time an Indian economic crisis is not about people being broke but about their inability to reach their sufficient or abundant money. There are stories of the old dying in the queues, the poor distraught, restaurants and malls bleeding, commercial sex workers unemployed.There is no doubt that the citizens are furious, but they will not punish Modi for it. He did suspect that. He may not have been so confident about inflicting demonetisation in the summer months when people, especially in north India are prone to violence.Even though people have suffered greatly, and many have lost portions of their hard-earned illicit money, it is hard to dispute that the government has performed a moral act. Surprisingly, the government has been able to communicate the reasonable message widely and deeply. It is rare for people to have an accommodating view of a sudden policy that only has long-term benefits, especially one that has hurt them. But there is observable evidence that the general public is with Modi on this.The hostile reactions to the cash crunch are understandable and worthy of respect, but some of the anger should amuse us. It reminds me of the men who used to burn the effigies of cricketers, including Sachin Tendulkar’s, after an Indian defeat. Journalists usually portrayed such extreme reactions as emotional outbursts of fans. In reality most of the effigy-burning was performed by bettors who had lost money on their emotional backing of India. Reactions to the demonetisation, too, contain the grief of hoarders clinging on to honourable reasons to be angry, reasons that they probably even believe to be true.An unknown portion of India’s unrecorded economy is run by politics. Parties receive cash through illegal means, which they then spend on illegitimate or nefarious activities, which include efforts to win elections. The important question is why does Modi’s BJP need less black money than other political parties? Is the party comparatively cleaner, or does it have more sophisticated systems in place, systems that a Putin would recognise? We will go there another day.One strand of the moral outrage against demonetisation has been led by the refined urban class that dislikes Modi.They are excited by any story that assures them that Modi has made a catastrophic mistake. The reason why the story about the new Rs2,000 notes bleeding colour received good play in the social media even after the government pointed out that the notes are meant to lose colour, and that if they don’t they are counterfeit.There is something clownish about the urban middle class. They keep whining about the state of the nation but when powerful solutions appear they reject them. They reject them because they are as corrupt and harmful as the aspects of the nation they despise.Not long ago they prayed for a clean, highly-educated politician who was not the genetic material of political dynasties; but when Arvind Kejriwal miraculously made an appearance they loved him only till he was a gadfly fast-until-orange-juice activist. When he turned out to be a sharp politician they suddenly wished to dismiss him as an “anarchist”. In Delhi they keep whining about pollution but they do not tolerate any inconvenience to their car travel. Their grumblings about demonetisation are in line. Their lament cloaks the immediate prospect of the policy as a highly effective and even popular measure.A war against cash hoarding and illicit cash flow is also a war against disorder and informality, which means it is a war against two central qualities of the Indian way of life. Such wars against the Indianness of Indians can be destructive to politicians who wage them. But there can be great rewards, too, to those who take a chance. Some people may have theorised that the Delhi Metro, which sought to ban Indians from spitting and littering, would be defeated by rampaging mobs. Instead, commuters ended up appreciating how the Metro constricted their exceptional freedoms as Indians. It is highly likely that Indians would exhibit such a capacity for appreciation for Modi’s attempt to end an economic disorder. Also, he knows how to spin every economic good news in the coming months as a consequence of demonetisation.It is tempting to imagine what would have happened if the Congress government had taken the same step. Or say, if the Aam Aadmi Party, if it had been at the Centre, had made the move?It may have been disastrous because of how the parties are perceived by the people. Modi, for now, has the charm to get away with many reforms that other politicians and parties cannot. We must use this man to get some difficult things done.- Manu Joseph is a journalist and the author of the novel, The Illicit Happiness of Other PeopleSC On Demonetisation: With Power Comes Responsibility, And Most Importantly, Self-RestraintAuthor: Kartikeya TannaPublication: Date: November 19, 2016URL: this week, hearing a plea by the central government seeking a direction that no other court in the country should entertain petitions challenging the government’s notification to demonetise currency notes in the denomination of Rs 500 and Rs 1,000, the Supreme Court bench remarked, among other things, that “people are frantic” and that “there may be riots”. These words were reportedly stated in the context of permitting people across the country to approach respective courts in their states.Although a large number of people have come out in support of demonetisation, the fact that there are question marks on implementation thereof and the resultant inconvenience throughout the country is not in dispute.What, however, happens when the apex court of the country makes gratuitous remarks, which have no relevance whatsoever in evaluating the legal bases on which the central government’s plea may be determined? Given the issue is before the Supreme Court, these remarks finding their way in a written order even as obiter dicta would be a highly unforeseen occurrence. (Obiter dictum is an incidental expression of opinion which isn’t essential to the decision and is not binding opinion).It is highly unfortunate that the trend of late with the Supreme Court has been to make casual headline-variety remarks, which do not quite add to the legal wisdom, which would benefit students of the law. To be sure, governments have often been found in dereliction of its duties and the Supreme Court has often stepped in through an expansion of its ambit, in particular, with the steady rise of public interest litigation matters.The Supreme Court, however, must be aware of its power and authority – that of being the final authority on law in India. Right or wrong, Supreme Court’s decisions on legal interpretation and even on the constitutional soundness of laws are final, and rightfully treated as such.What happens, though, when the final arbiter of law in this country, which the Supreme Court indisputably is, uses its position of power to attempt to be the final arbiter of public opinion or hyperbole?There are real limits on the ability of others to judge, evaluate or assess the Supreme Court’s functioning. Apart from areas to which a contempt of court charge applies, there are many ‘permissible’ areas of criticism, which other wings of our democracy such as the legislature, executive, media and the polity in general exercise restraint in indulging in. Of all the other institutions, the Supreme Court enjoys the choicest authority not only as per law, but even in accordance with customary practices.When the judges use this supreme position to transgress the sphere of legal reasoning and enter the realm of sensationalism, the only reason other wings of our democracy may not erupt in protest is this ‘choicest authority’ accorded to the Supreme Court.With one irresponsible remark after another, however, that ‘choicest authority’ keeps eroding slowly, but surely. What used to be a rare occurrence, a knowing transgression by the apex court only to stand up to the mighty executive grossly misusing its power, has become a matter of daily habit.The choicest authority it wields not only in the eyes of law, but also in the eyes of those ruled by it, must be a constant reminder to our apex court that responsibility and self-restraint are but the choicest virtues.Arvind Kejriwal calls BBC journalist ‘dishonest’ for questioning his claimsAuthor: OpIndia StaffPublication: Date: November 19, 2016URL: Chief Minister Arvind Kejriwal has teamed up with Mamata Banerjee these days and is in the forefront on attacking the Modi government over the demonetisation move. Both the leaders jointly addressed a rally in Delhi recently and have threatened mass agitations if the government doesn’t roll back its decision.Both the leaders wear simple clothes and draw their popularity from being ‘aam aadmi’ lifestyle and mannerisms. Both of the leaders claim not to be communists, but their rhetoric and policies are often on the left side of the ideological divide. And cadres of respective parties of both the leaders are largely made up of people who got disillusioned with Congress.Now in yet another similarity with Mamata Banerjee, Arvind Kejriwal has started showing petulance and reductionism that the West Bengal Chief Minister is often accused of. Just like Mamata declared anyone “Maoist” or a “CPM cadre” for asking uncomfortable questions, Kejriwal has started declaring people “dishonest” for not toeing his claims and narrative.This facet of Kejriwal’s character came to the fore yesterday when he declared a BBC journalist “dishonest” and “lacking courage” when he dared to question some claims made by the AAP supremo in an interview.In the interview, Kejriwal claimed that 55 people in India had died while standing in queues outside banks and ATMs. When the BBC journalist wondered how could he link all the deaths to demonetisation only – a fact that this article also highlights – Kejriwal got angry and declared him dishonest:-----------------------Rahul Roushan @rahulroushanKejriwal declares BBC journalist dishonest as he doesn’t repeat Kejri’s propaganda of linking all the deaths entirely to demonetisation. pic.JcaD1o1VuFNovember 19, 2016-----------------------During the entire interview, Kejriwal’s behaviour and body language was intimidating and aggressive, and he was not willing to answer counter questions about his claims. Instead he made up for that by accusing the journalist of being dishonest and bringing bad name to the legacy of BBC.This belligerent behaviour is a sea change from the Arvind Kejriwal one saw during the Anna Hazare days, when he was most willing to talk to the media and would answer all kind of questions without losing his cool or indulging in character assassinations of those who questioned him.Also, it is interesting that Kejriwal is insisting of an exaggerated and inflated data of 55 deaths due to demonetisation, while his own government is removing the official data of deaths due to dengue and chikungunya.Demonetisation FAQs: The Process, The Reasoning And The NecessityAuthor: Subhomoy BhattacharjeePublication: Date: November 20, 2016URL: week, I explained demonetisation at length – its principles, what it does and what it doesn’t. Here, I delve into the the process, reasoning and necessity of demonetisation.1. Was the demonetisation route planned with any rigour at all?The scale of preparation is noticeable from the way in which it was carried out. For example, almost no one has noticed that the Narendra Modi government has not called it a demonetisation move in its press releases. It has termed it as cancelling of the legal tender of high denomination notes. This is important because, as A K Bhattacharya has pointed out in Business Standard, post-1978, no demonetisation is possible except through an amendment of Section 26 (2) of the Reserve Bank of India (RBI) Act. Former finance minister Yashwant Sinha had to issue an ordinance to bring back Rs 1,000 in circulation. The unambiguous wording of the press releases show there has been a considerable degree of thought given to the hows of the move.The finance ministry and the RBI realised that both the introduction of a new currency note of Rs 2,000 and the withdrawal of Rs 500 and Rs 1,000 will need an amendment to the law if demonetisation was to be done. So, instead, they used the power conferred by the Act to withdraw a legal tender and replace it with another set.The other part of the plan was the resetting orders given to the Security Printing and Minting Corporation of India Ltd. There were two aspects to these orders. The push for indigenisation of the paper used for printing the notes and the addition of printing lines as per the annual report of the finance ministry. It was, therefore, not an ad-hoc decision.2. Was there any other way to carry out this withdrawal of high-value currency notes?The demonetisation process has little academic or administrative history to fall back upon. After this one, there will be a lot of new volumes on the process, but so far there is hardly any research paper in economic theories available on the whys and hows of demonetisation.So, even if the finance ministry or the Prime Minister’s Office were to ask economists and administrators outside the government on how to do it, it is very likely that the experts would not have come up with any better suggestions themselves.Several states, including Andhra Pradesh and Maharashtra, have asked for allowing cooperative banks to function as money-dispensing agents. But the cooperative banks do not have as many branches as post offices; so it makes little sense to give these banks the mandate to dispense cash. Besides, given the intimate connection of these cooperative banks with their politician owners, this might just be a good way to ensure that demonetisation fails in its objectives.Once it has been rolled out, it is only then that the government can modify instructions, based on experience, which it has done. It is impossible that all of the changes made will be equally successful, but it is also possible that no matter what is done, the last-mile challenge of making cash reach those at the bottom of the food chain will take time.3. How much of the currency needs to come back into circulation for normal conditions to resume?Let’s look at the Rs 500 note, which is the most challenging unit of currency in this episode. There were about 16 billion pieces of these notes in circulation prior to 8 November. Since all estimates put the extent of black money in the range of 25-30 per cent, we can subtract about four billion notes as the sum not needed to keep the economy on its feet. The amount of currency people use as storage is about another fifth of the 12 billion (I am making this assumption on the basis of the ratio between M1 and M3 in India) to get a figure of about nine-and-a-half-billion pieces. Again, using the recorded production rate of the currency printing presses, they can supply about seven billion pieces a month. Since the overwhelming majority of it would be the Rs 500 note at this juncture, one should expect normalcy to return even in the deep rural pockets before the end of December.To the extent that the middle class moves into electronic transactions, these numbers will improve, and the ATMs, banks and post offices should be streamlined earlier.4. Was demonetisation necessary?The primary reason for demonetisation was the massive rise in currency in circulation over the past one year. There was no apparent reason for this increase. The finance ministry has pointed to this development in its comments following the 8 November announcement; the State Bank of India Research Unit has referred to it in its publications and former RBI Governor D Subbarao has pointed to it in his article on demonetisation or de-legalisation. While the real gross domestic product rose by 7.56 per cent and inflation rose at 6 per cent, the currency in circulation rose by 15 per cent. It is, as he points out, “significantly faster than the trend rate of 10.7 per cent over the previous three years”.Remember, the RBI itself has not accelerated its production of notes in the printing presses. Nobody has been able to provide a cogent explanation for this rise. There was obviously something happening here. This spurt can lead to a massive rise of money in the economy in the second order through the banking system.Since the government was obviously keen to push its anti-black-money agenda, this was therefore as good an occasion as any to strike.Finally, here’s a question to draw a connection. What is common between banking cash transaction tax, Aadhaar-based identification of beneficiaries of government expenditure programmes, the move to exclusively card-based payment at petrol pumps and dematerialisation of insurance papers?The answer – They are all meant to introduce transparency in financial dealings. Which is why they have been opposed vehemently by some sections.Protests against demonetisation fit with that line of thought, just as Mamata Banerjee has opposed direct credit of NREGA wages to the bank accounts of beneficiaries, bypassing the state administrative structure. Incidentally, there has hardly been a murmur against her demand for this rollback.PM Modi’s currency swap enters a critical weekAuthor: Madhav NalapatPublication: Sunday Guardian LiveDate: November 20, 2016URL: in sync with the objectives of Prime Minister Narendra Damodardas Modi claim that there is global appreciation for his “braving personal unpopularity and the risk of low future seat tallies for the BJP” so as to implement a scheme that he has “had in mind since 26 May 2014”, his first day in office. Given his “methodical mindset”, the substantial and uncontrolled role of the informal economy has occupied much of Modi’s time. Not only does the government not control this vast sector, “it does not even have any idea about its extent and activities”. To the Prime Minister, “such an unregulated sector is akin to the ‘Dark Net’, the shadowy world of the deep internet that is resistant to policing”, an official said. The officials say that from Day One, the Prime Minister has been determined to ensure that all transactions in the economy get recorded, “both for revenue purposes as well as to ensure that anti-national elements do not misuse their access in order to create trouble for citizens”. They point to the Jan Dhan Yojna, PAHAL and MUDRA schemes as being “part of a continuum of activities leading up (to the 8 November currency swap)”. The Prime Minister’s vision is to see “every adult citizen of India have a bank account and access the internet in the palm of his hand”, and he has “worked on a plan to ensure both before 2020”. Early on, PM Modi tasked officials with “working out ways to ensure 100% access to banking and conversion of the informal economy into the formal space”, but by May 2016 as he entered the third year of his term, the Prime Minister was “feeling impatient at the slow progress made and decided to quicken the pace by leading from the front”. Two officials, who were in “complete harmony with the Prime Minister’s desire for speed, were Principal Secretary to the Prime Minister, Nripendra Mishra and National Security Advisor Ajit Doval”. According to the officials spoken to, “both were enthusiastic advocates of the currency swap scheme in internal meetings”, albeit for different reasons. From the outside, finance guru S. Gurumurthy played an “important role in selling the idea (of a lightning currency swap) to the top”. The official reiterated that “none of the bankers consulted expressed any apprehensions about the scheme” and that the RBI leadership was “totally in support of the move, as was the Economic Advisor to the Finance Minister and other officials of the Ministry of Finance”.A characteristic of the Second Generation NDA Government has been that those from the outside with dissenting or out-of-the-box views have been excluded from participation in the policy process. Official advisory bodies have been few and those created have been both truncated and filled with retirees from service who may be expected to faithfully echo the line taken by the government. According to an official, the Prime Minister is under severe pressure of time and hence unable to meet with as many people outside the bureaucracy as was the case when he was Gujarat Chief Minister. Access to PM Modi is much more difficult (and in most cases impossible) than was access to CM Modi. While a flood of suggestions comes in via the internet, “almost all of this gets dealt with at the junior officer level”, and often these “lack the judgement needed to decide which should get referred to higher ups and even the Prime Minister”. Modi has always shown a willingness to accept new ideas and listen to different voices, that is, provided these gain access to him. “While he lasted, P.N. Haksar as Principal Secretary to Indira Gandhi used to ensure that the PM met at least two or three individuals of strong and contrary views each week. The same needs to take place now”, a former high official said, adding that “the way the currency swap is being implemented in practice shows the weaknesses of our inbred bureaucratic system that listens only to echoes of its own voice from the outside and dismisses the rest as inconsequential or motivated.”The colonial bureaucracy’s focus on a single objective to the detriment of the overall benefit is illustrated in the continued refusal of the authorities to permit the (free from direct taxes) farm sector to use extinguished currency notes for sale and input purchase. The loss of farm output through wastage and for other reasons as a consequence of the severe liquidity shortage the farm sector has been experiencing since 8 November, is far more than any gain consequent to lesser tax evasion. Already sluggish rural consumption is heading for a major dip this financial year, with discretionary spends in both urban and rural areas down as citizens hoard their small denomination notes rather than risk spending them. Mandis are unable to purchase fruits and vegetables from the farmers, who themselves are unable to purchase essential inputs. Given the lower access to banking infrastructure in the rural areas, the severe post 8 November restrictions put in place for monetary transactions (including deposits and withdrawal) will lead to a much slower return to liquidity in rural areas, while the urban areas too are likely to remain stressed. Rural distress has been accentuated by cooperative banks being denied access to cash. Even mobile recharge numbers have sharply fallen. The abundance of cash mentioned by some bank chairpersons and the RBI seems to be in evidence only in their imaginations, leading to a loss of credibility in such institutions. The way the currency swap has been implemented is leading, according to an official, “to a pronounced slowdown in sales of consumer goods, including those usually fast moving”. This will have an impact on revenue collections and increase pressure on the tax authorities to conduct raids and raise assessments in a situation where profits may be negative and income growth low. If the RBI and the more voluble bank chairpersons are correct in asserting often and in public that currency stocks are ample, their success ratio in reaching these where most needed, has been low to absent. Because of fear of continuing cash shortage, the velocity of currency is slowing down as holders store rather than spend their depleted hoards. As for the money coming into the banking system, only the restrictions on access to currency are keeping much of it there. Across the country, millions are experiencing the effects of a slowly liberalising economy suddenly returning to a planned mode. That several at the apex of the banking pyramid in this country have very limited knowledge of ground reality seems clear from bank officials’ remarks such as “the line outside branches and ATMs is coming down”. This is not because of lack of demand for currency, but a lack of cash in ATMs and in bank branches. Those where there is some cash to dispense are seeing long queues. As for the rural areas, currency supply has been much lower than in the cities, despite the political importance of the rural vote. In UP, Uttarakhand, Punjab and Gujarat, the way in which the currency swap scheme is being implemented is likely to impact voting behaviour substantially. The transport industry is down with trucks idle, while retail business has fallen across the country. Latest by the close of 50 days beginning 8 November 2016, access to cash needs to get restored to pre-8 November levels for the economy to right itself. Any further delay would result in an unimaginable situation very different from that anticipated by Prime Minister Modi when he signed off on the suggestion from some officials that he approve the shock withdrawal of Rs 500 and Rs 1,000 notes. The “reason for the Rs 2,000 notes was to speed up the volume of money supply as these get printed at the same rate as the Rs 100 or Rs 500 notes”, an official claimed, adding that “the level of safety features is the same as in the older versions”. The total currency in circulation on 30 September was Rs 17 lakh crore, of which 500 and 1,000 rupee notes amounted to 15 lakh crore rupees in value. The Rs 100 notes were 12% in value, the Rs 500 notes 46% and the Rs 1,000 notes 40%. A total of 21 billion notes of 500 and 1,000 were in existence. In the four currency printing presses, only 3 billion notes of all denominations can get printed in a month. Of this, the 6 billion Rs 1,000 notes will get cut down to 3 billion Rs 2,000 notes. Printing Rs 100 notes takes the same time as printing a Rs 2,000 note, and there is a looming shortage of these, as demand has spiked since 8 November. Apart from printing, the average time taken for dispensing to consumers is 36 days, according to an official. The math will show the speed at which the currency shortage can get addressed in a meaningful way. About six months is the minimum, which is why those saying that currency supplies are adequate need to explain their remarks.The coming week will be a crucial period for the bold scheme announced by Prime Minister Modi. Unless the ground situation improves substantially, economic distress will be unmanageable. Those whom the Prime Minister has trusted with handling the machinery of government will need to deliver on their promises to him, so that he himself can keep the promise he has made to the people of India, of witnessing a smoothly running and corruption free economy within 50 days of this unprecedented decision. Modi’s bold move will enter the Guinness Book of Records for a single decision affecting the maximum number of people (1. 26 billion) in the shortest possible time (less than four hours). Those who are well-wishers of Prime Minister Modi hope that the team personally chosen and assembled by him will deliver the results expected of a government led by a maestro of the calibre of Narendra Modi.‘Panic following withdrawal of notes has largely faded’Author: Special CorrespondentPublication: The HinduDate: November 19, 2016URL: CMD Ananthasubramanian says Rs.500 notes will further ease situation The panic and anxiety that followed in the immediate wake of Prime Minister Narendra Modi’s demonetisation announcement had largely died down, Punjab National Bank (PNB) CMD Usha Ananthasubramanian said. She added that improved supply of Rs.500 notes would further ease the pressure.“A person who would have earlier withdrawn Rs.5,000 was now withdrawing double that because of the uncertainty and the anxiety,” Ms. Ananthasubramanian said at a press conference on Saturday. “The supply of Rs.500 notes being ramped up will ease the situation. Already the panic seen on day one and day two has faded to a great extent.”PNB had accepted Rs.47,000 crore of deposits since the demonetisation announcement on November 8, Ms. Ananthasubramanian said. “CASA (current account savings account) deposits have surged. This gives an opportunity to revisit deposit rates. It will also have an impact on lending rates, but first deposit rates should come down.”The banker also said that PNB had recorded 68.47 lakh transactions for the exchange of Rs.2,514 crore worth of notes since November 8.The government has allowed families celebrating weddings to withdraw Rs.2.5 lakh each from the groom’s and bride’s side. However, banks were yet to act on the move as guidelines were still awaited, Ms. Ananthasubramanian said. Banks were likely to receive them by Monday or Tuesday, she said.Business as usualThe PNB chief said although the focus of the bank was on receiving deposits, disbursing cash and making ATMs functional, normal banking activities continued. “We are running some of our branches on double shift so that the employees are fresh. Even loan recovery is taking place.”State-run oil marketing companies on Thursday announced a tie-up with State Bank of India to allow bank account holders to withdraw up to Rs.2,000 from petrol pumps equipped with SBI point-of-sale machines. Punjab National Bank is following suit, according to Ms. Ananthasubramanian.“We have 201 petrol pumps in the country with our POS machines,” she said. “We are working out how to get cash to them for this.”In light of the cash crunch, the RBI had authorised banks to release soiled Rs.100 notes as well as Rs.10 coins to the public, Ms Ananthasubramanian said.“RBI has told us it has authorised the distribution of soiled Rs.100 notes, and coin distribution is also taking place,” she said. “It is better to have 10 Rs.10 coins than one soiled Rs.100 note, isn’t it?”Pathetic journalism – when media thought you can get STDs from ATMsAuthor: Dr. ShwetaPublication: Date: November 19, 2016URL: a self destructive attempt to malign a government initiative, the Indian media has once again unmasked their own “illiteracy” (can we still call it a mask after the million holes put in it by OpIndia?) and spread panic and rumour in the process. I am referring to some of the reports in the media, which claimed that ATMs may cause STDs (Sexually Transmitted Diseases)!I first broke into laughter. It soon turned into horror as I wondered what exactly these media people were doing to those ATMs to get STDs! And how?! Ewww!But worse, there still are people who believe the mainstream media, trusting them with veracity of information.But I don’t trust them. So I looked at the source of this stupid news item. They all seemed to have picked it up from a news service IANS, but the ‘STD spreading’ headlines were the work of horror by our their own editorial teams. India Today even went so far as to link it to the “note ban”. Economic Times also linked it indirectly, but they didn’t put STD in the headline.First, the facts:These news reports quote a research to back their sensationalist headlines. The research quoted was conducted in New York by a biologist. What the media understood from the research was that ATMs are potential source of STI causing pathogens. The spin is that the pathogens are present on ATMs.But this micro-habitat is also present on any other object that is commonly used by public; for example, door of a cab, bus, metro railings, office desk and even toilet seat at your home.Yet, how often are we visiting venereologists after coming in contact with these objects? These pathogens can cause anything as small as common cold to grave illness like Tuberculosis. But the chances of contracting STD are negligible.What is an STI? Sexually transmitted infections (STIs) are infections that are spread primarily through person-to-person “sexual” contact. I am still wondering how the i?n?t?e?l?l?e?c?t?u?a?l?s? of our society are having fun with Automated Teller Machine that they are fearing about getting STD?The truth is that the microbes mentioned in the news reports are the ones that are frequently present either as normal flora of our body or are result of unclean hands (something that is not the result of demonetization, at least).News article says that microbial communities extracted from the ATMs in New York were those found in food, environment, residual DNA from meals, Lactobacillus (which is usually found in decomposing plants or milk products). As far as basic science is concerned, you can be assured that none of them can cause STI.Study quoted in article also agrees that “the most common identified sources of microbes on the keypads were from household surfaces such as televisions, restrooms, kitchens and pillows, as well as from bony fish, mollusks and chicken.”So aren’t we struggling with more risk in our own cosy beds than those shabby ATMs?So how exactly did the media convince the ATMs to spread STDs?According to the news, “the research team found a parasite typically seen in the gut of humans, along with a species closely related to the human parasite Trichomonas Vaginalis (TV), which can potentially cause STD.”Now, the question is that how a species “closely related” to TV became TV itself and started causing STDs? Is it the new sci-fi parasite? It is like saying that anopheles which is a malarial vector, can also cause zika or dengue just because it is also a mosquito. But that never happens and so similar parasite cannot become TV and cause STD.More importantly, when I went through the original research, I found that they could not confirm the presence of TV. Researchers in original article said that they were not able to differentiate Trichomonas vaginalis from closely related zoonotic species using 18S rRNA loci alone and in their study they could not confirm the likely source of eukaryotic pathogen species.The other time they mentioned about TV where they said that it is from avian (birds) source: “A species closely related to the human parasite Trichomonas vaginalis that was originally isolated from avian sources were also recovered from ATM keypads.”From this we can infer two things:1. The researchers could not confirm the presence of pathogen that can cause STI.2. The tumult created by media headlines was alarmist and gloom-mongering.But you can’t expect the media to be responsible enough to go into the details of research reports before spreading rumours and panic. Indian media will conveniently blame the agencies they source the news from. But remember, the headlines are all theirs.When they see something that sounds too strange to be true, you would expect them to crosscheck with some experts. But, they see STD and ATM in one report and were more than happy to run them with alarmist headlines, especially at a time when people are thronging ATMs, with some even linking it to the “note ban”.Now you know, that it is actually the media that is spreading STD (Stupidly Through Discourse?) rather than the ATMs.Demonetisation to root out corruption? How Singapore, others, gained from such a moveAuthor: Vaibhav Gupta and Samudra AcharyyaPublication: The Financial ExpressDate: November 21, 2016URL: can take some cues from the benefits such a move has yielded to some countries, like SingaporeDemonetisation of currency notes of R500 and R1,000 is a show stopper moment in India’s history. This move is one chord that touched every Indian much like the notes themselves which were once part of every wallet. As the elephantine exercise of remonetising the ATMs and banks with the newer currency unfolds, it exposes the severe inconveniences people have to undergo. However, for any status quo to change, short term inconvenience has to be viewed in light of the long term vision. If implemented in the right earnest, this single move has the ability to transform and remodel the economic as well as social mindset about the country.Demonetisation will clearly have far reaching consequences across sectors. Real estate and jewellery segments are likely to witness a significant disruption. Particularly for the real estate segment, which drives the economy to a great extent, the impact could be seen in the form of correction in prices in the short- to medium-term, both in the primary and secondary markets. Coupled with the implementation of RERA, this could set in motion a cleansing exercise for this sector. If these moves are implemented effectively, the Indian realty sector could be on par with the global players. The PM has indicated intent to address black money parked in real estate and jewellery as well. In all probabilities, the clamp down on black money sought through these measures will trigger a spiralling clean-up exercise over the next few years.The move is also positive in recapitalising the balance sheets of banks which have been reeling under the pressure of rising non-performing assets (NPA). With more money deposited in banks, one should look at a lower interest rate cycle in the medium-term, pushing down inflation levels and enlarging credit growth. Secondly, the tax revenues mopped up through this process will help improve government finances which should push up spending on infrastructure, medical facilities, defence and education. The increase in private, as well as government spending, is likely to lead to growth in employment opportunities.As government revenues rise, it may not be wrong to expect the benefits being passed over to the public potentially in the form of reduced taxes in the next 1-2 years. Rising disposable incomes on account of increased employment as well as reduced tax outgo should further push up discretionary consumption expenditure.Evidently, the kind of acceleration the move can trigger across the economy can be unprecedented and very welcome. While it is difficult to estimate the impact on GDP growth, it may not be wrong to state that an acceleration of a growing economy has the potential to catapult the country’s global positioning and attractiveness. The impact should be seen and felt far and wide, on the stock markets, foreign investment inflows, current account deficit, balance of payments position.There have been discussions around the impact this has on digital and cashless payments. Undoubtedly, if even some portion of the current form of cash payments can be moved digital with this move, it will be a big step in multiple ways. On the one hand, it helps reduce the costs of the transactions, it also presents itself as a long term solution to addressing the parallel economy issue that the country has been grappling with for a long time. While demonetisation schemes have been brought in India in the past on two occasions, their impact was limited due to inefficient implementation. We should hope that with the kind of rigour this has been announced and followed through this time, realisation of the potential benefits may not be distant.One can take some cues from the benefits such a move has yielded to some countries, such as Singapore, a country that hardly has any illegal funds or black money. But the credit of cleansing Singapore of the illegal funds not just goes to its former PM Lee Kwan Yew, but also to each and every citizen of Singapore who toed the line and stuck to the rule like an infant would to its mother. Besides cleansing, Singapore government also ensured that the new currency notes have multiple security features making it impossible to be reproduced by illegal printers. While Indian government has denied that the notes are chip based for additional security, it would have been really nice to see such features on our notes.What is noteworthy is the vision with which the Indian Government has moved about on this. Starting with the Jan-Dhan Yojana in August 2014, which saw opening of over 25 crore bank accounts, the centre announced the Overseas Black Money Law in July 2015, which led to declaration of more than R4,000 crore of undeclared foreign income. This was followed by the Income Disclosure Scheme, popularly called IDS, which closed on September 30 this year and led to declaration of over R65,000 crore of undisclosed income. Next in line was the new Benami law, which has been made effective from November 1 this year, and seeks to bring to book benami properties and other assets and shareholdings. The turn of the events are reflective of a strong political will to tackle the menace of black money and hoarded assets in the years to come.Gupta is associate partner, Acharyya is principal, Dhruva Advisors. Views are personalAn Indian fairytale: from riches to ragsAuthor: Saba NaqviPublication: The Tribune IndiaDate: November 20, 2016URL: (the King) cast magical spells through speeches that were broadcast live by many loyal soldiers of what was called the Ministry of Transmitting Magic.Once upon a time in a not-so-far-away land there lived a great King and many, many subjects. The King was a great Wizard and a practitioner of magic designed to keep the people spell bound so that they could forget their many miseries and the failures of the state. He cast magical spells through speeches that were broadcast live by many loyal soldiers of what was called the Ministry of Transmitting Magic. Like all large kingdoms this fairy tale land had some problems and the Wizard King kept wishing them away through magical speeches. He knew that if you fool most of the people most of the time, it would not matter what some of the people said some of the time. So the King said that he had ordered surgical strikes on the Enemy that lived to the West of the Kingdom and inflicted great damage and the people believed him although the Enemy kept saying nothing had happened. The King also said that he had given gold coins to the people through magical outlets called banks and the people believed him although there were no coins in their banks (this was a special magic trick called Jan Dhan or People’s Wealth and the beauty of it was that most of the people had no clue what a bank was but they liked the idea of gold coins). You see, the People believed because this was a great and glorious time in the life of this Kingdom that was known as the Age of Good Days. It was so because the King said it was so and the Ministry of Transmitting Magic said it was so. The people loved the King because he opened up an imaginary world for them that did not exist but could exist if they believed him although there were some Traitors called Liberals who did not believe and were determined to mislead the People. But no matter, there were armies of creatures called Trolls and Ogres who set off to defend the King every time a Liberal committed Treason. These trolls were special people with special powers that allowed them to abuse and become Tormenters of those who showed disloyalty to the Wizard King who also had a very broad chest. There was also a council of wannabe wizards that was meant to advise the King but he knew better than all of them put together and rarely consulted them and they were trained to only speak if they could say Hail Great King at the beginning of each sentence. And so it came to pass that one day the King got up in the morning and said Eureka. He said so because he had an idea that convinced him he was more brilliant and benevolent and brave than he already knew that he was (the King had a magic mirror that he would ask, mirror, mirror on the wall, who is the greatest of us all. Except for one day when the King stood in front of the mirror wearing a suit that had his name written all over it, the mirror always told him he was the greatest). So, on the morning that he said Eureka the King decided to take out his wand and do a magic spell that would turn gold to dust and make the People’s money disappear. He did so after he had sent secret messages to the Special People with some magical powers of their own who produced gold coins that were often delivered to the King’s soldiers so that the Ministry could keep on transmitting the magical message. It was for the ordinary People that the King had a special plan. He knew that the people hated those who had stolen some gold coins so he said he was making the coins worthless in order to punish such people. But the few brass copper and silver coins of the ordinary folk also became hard to get, so the King made one of his magical speeches and promised them a brilliant future after just 50 sunsets and sunrise. You see, the King believed that he understood the mind of the People: He thought that if they were subjected to constant punishment they would be happy with a little relief. He thought that most people have nothing much to lose anyway and if they got the little they had after a struggle they would then have a sense of achievement. He knew that the Trolls and Ogres would drum up support for him in case the people and the little leaders of far flung corners of the empire began to protest. In case some people faltered in the great exercise, the King believed he could build their faith again by saying their sacrifice was needed to defeat the plans of the Enemy on the West. It was all quite simple really and there was even a 91 year old fairy god-mother who gave kind blessings to the People when their suffering became too much. In the end the riches became rags and gold turned to dust and the people lived in queues ever after.(This is a work of fiction and any resemblance to living people or characters is deliberate)A harrowing tale of a demonetisation loserAuthor: Pia Kahol @piakaholPublication: Dailyo.inDate: November 20, 2016URL: son’s teacher had warned you not to vote for this man.You had just stretched out on the bed in your village house courtyard, waiting for dinner to be served. It was 8pm. There was slight chill in the air. It was a long day but nothing unusual. The whole of that day you were planning to buy a surprise gift for your wife for the anniversary next month. An earring. She would like that. You were smiling to yourself thinking of the moment you would bring it to her. Or maybe you should take her to the store. Women like that.You have been very happy for the past few days. Just a month ago, you had sold your ancestral land in the village for Rs 12 lakh. The seller had insisted it will be in cash. This was the way in the land. You had the cash hidden under your shirt. You had talked to a few people about what to do. You had never seen so much money in your life. But you were happy. You felt rich. You had taken your family for a big dinner that day in the nearest city. The bill was Rs 300. You had paid happily. You paid the waiter Rs 30 tip. He did a salam to you. You felt like your sahib.You had allotted small part of the money for your wife’s gift and mother's gift. Better to buy ghar ki Lakshmi something, you had reasoned. The rest you planned to invest in fixed deposits. You had calculated. It will become Rs 20 lakh in five years, according to your brother who worked as a driver in the big city. That was good.You will not have to worry about your daughter’s wedding. Or maybe you will buy a decent apartment in town with it. You hadn’t made up your mind. That is why it was lying around. There was still time, you thought. What about your parent’s medical expenses? They could pay for themselves. Their shanty had also increased in value. They would sell that, come live with you in your new apartment, and will use that money to help them in their old age.Everything was under control. The pressure cooker was whistling. Soon you will have dinner. Life seemed to working out well. You have done well and you deserved this. You smiled to yourself. You slept well.Next morning your neighbour woke you up and said the Prime Minister came on TV in his new dress. How is he always dressed for a wedding, you wondered. The Prime Minister was a charming man, a common man. He spoke with his heart, your neighbour said. You listened. Then the neighbour said, your money was trash. You are a criminal. You will be persecuted. Your neighbour had a wry smile and a celebratory gait when he walked away.Your world just came crashing down. Your brother from the city called and said, be scared. You saw taxmen coming to your door. With it, your hopes, your dreams crashed. What if you went to jail? What about your son and daughter? What will your wife do? You felt frantic. You tried to think of a friend who could help. Maybe that cousin’s son who works in the credit card company call centre. Maybe. No hope, he said. Then he called again, said he knows someone who will take 50 per cent for changing your money to the new valid notes. Think about it.Your brother’s sahib has a CA. He has a lawyer. He tells you to deposit the money. He says something about “rural income”. You thought what is the difference now. Yesterday my income was income, today it is called rural income. You don’t understand and TV talks about more persecution. The more you hear, the more nervous you feel. Your brother tells you the money will all be taken.The banker will ask you questions. You may even come on TV. They have cameras. Your brother is like you. You feel the fear rising from within. You sold the land, what is your fault, you thought? You call the buyer, ask him to take it back and give the land back. He say bugger off… you cry, you beg. He says get lost. Get lost. Brother calls, calms you down, suggest that you at least put some money in the bank.The bank is 2.5km away. It’s a small rural bank. The big one is in the city some 20-odd km away and you hope you don’t have to go there. There they don’t treat you well. They call you names and think you are scum. So you go to the rural bank and you stand in the line. Men push you from behind. There are war cries. An old man stands next to the line clutching a bundle of notes. He is partially blind. He pleads with you to do it for him.He needs it for his disabled wife at home. You hesitate but don’t agree. You are told to get a photocopy of your card. There is no electricity and now everybody including the bank is suggesting that you go to the dreaded city. Here you will anyway after standing in line get only Rs 500 and not the media-promised Rs 4,500. You think you will go to the city the next day for your new cash.But the neighbour with radio says the government announced that you are dishonest. It is on to you. It is making new rules every day. The government is convinced you are a criminal. You feel bad. You love your motherland and your family. Who will believe you now?The Prime Minister once again came on television and this time you are in the city to see it in the neighbourhood TV shop while waiting in line. Three dresses in one day, you count. You feel the small hole in your pyjama. You, the criminal. He promises to the world that you will be persecuted. Thousands of men and women clap their hands. They all wear white caps.You try to calculate the number of caps and money per cap. Who spends on such things, you wonder. It reminds you of a school function. Children in blue caps of the same colour. You feel sombre. They laugh. At you. Your family. You worry for your parents. Their shanty will never sell now. The Prime Minister promises he will hire thousands of sahibs to hunt you down. You don’t feel life is worth living any more.Your son’s teacher had warned you not to vote for this man. He is a fascist, she had said. You didn’t know what that even means. You had smiled politely. Others said you were being misled. You made a choice. You wanted a common man on the seat. Someone who would understand your pain.Now you feel like a fool. You feel angry and insulted. He mocks you. You feel scared. Not just for yourself anymore. But for your country. And your countrymen who are watching him in thousands of small houses. They are waiting for the authorities too. Tiny men in a powerful state. Just like you.Parrikar's grand delusions: Stone pelting in Kashmir affected by demonetisationAuthor: Manoj JoshiPublication: Dailyo.inDate: November 21, 2016URL: data shows that such incidents were already showing a downward trend since September 2016.Prime Minister Narendra Modi has called him the brightest jewel of his court.But for us columnists, Union defence minister Manohar Parrikar's greatest value is that he regularly provides us fodder for our copy.And so it is with his latest that demonetisation has led to a reduction of stone pelting in Jammu & Kashmir. There are two problems with this.First, it is not factually correct. J&K government figures show that stone pelting incidents had been declining month on month since their height of 820 incidents in July; in August they came down to 747, in September to 119, 157 in October; and this month till November 14 there were 49 incidents, with 15 of them taking place between November 8 when demonetisation was announced.Flaws in theoryThe second is the flawed effort to put "stone pelting" and "terrorism" in the same box.By doing so, the government of India mixes apples and oranges and this has consequences for its policy, or the lack of it, in J&K.If Parrikar and the government think that the youngsters who come out to throw stones because they are paid in Rs 500 and Rs 1,000 notes, they are deluding themselves.Consigning all protest and militancy in J&K to someone paying people to do something just does not fit with the facts on ground.The same problem arises with militant attacks and terrorism. There have been several incidents after the Uri attack, but none of them were such that would have required some huge outlay of money to execute.For example, the al Qaeda raised hundreds of thousands of dollars because they had to send the 20-odd terrorists to live and train in the US to carry out the infamous 9/11 attack.There is already an existing infrastructure of militants in the Valley, they are now not too many in numbers, but they are there and armed.In the main, their strikes are against unarmed or poorly armed J&K police personnel.The attacks are so few that correlating them with demonetisation would be a tricky exercise.Electoral dividendsThere is one set of "anti-nationals" who will be affected by the demonetisation. But Parrikar & co are not so bothered about them since attacking them will not give then the electoral dividends they seek by attacking Kashmiri militants and Pakistan.These are the Maoists of Central India, who have a core of 10,000 fighters with some 15,000-20,000 full-time supporters and a larger number of overground workers.These people have depended on money derived from extorting traders and mining companies to function.For obvious reasons, they hold their money in cash and they are the people who will now find it difficult to function. They operate over a large area; have to buy food, medicine, weapons and equipment.Besides, their overground workers have to be regularly paid.Almost in all such movements, be it the Chinese Communists in the 1920s and 1930s, or the Taliban of today, money has been a deciding factor in their success.In the case of the Taliban, a great deal of it has been gathered through the drug trade, though Arab and ISI donations have been important.In the case of the CPC, without the support of the Soviet Union's money, often provided through Comintern agents, it is doubtful that they could have escaped Chiang Kai Shek's encirclement campaigns and made their famous Long March.Red herringComing back to Kashmir, it is true that hawala money has played a role in the Kashmir uprising, but in the past. Today that movement is a shadow of its past self.This was in the main in relation to the active militant groups like the Hizbul Mujahideen and the Pakistani groups.When they operated in significant numbers in the Valley, they needed money to move around, as well as for living expenses for themselves and their families.The Lashkar-e-Taiba even now regularly pays stipends to its militants and their families, especially if they die in action.Kashmiri political parties also need money, just like other parties in India. But many of them have built properties and markets and probably have enough "legitimate" assets to keep them afloat. However, to extrapolate this to the so-called stone pelters would be an error.Most of these are kids who live with their families and they throw stones because they are frustrated by the circumstances they are living in and are easily manipulated by their more savvy leaders.It is important to, therefore, analyse the declining trend of stone pelting in an accurate fashion.Introducing red herrings like demonetisation will only serve to prevent the government from formulating policies that could help restore normality in the state.Demonetisation: Rhetoric as policy and people as foolsAuthor: Abhinav Kumar @AbhinvKPublication: Dailyo.inDate: November 21, 2016URL: Modi expects us to believe the drive's success depends on blessings of old women.BJP president Amit Shah in a recent election rally in Bundelkhand announced that if illegal mining is stopped, then every house in Bundelkhand would get a Maruti car.Party leader Rajnath Singh promised that if the BJP gets power then the drought issue in Bundelkhand will get solved in five-ten years.The rhetoric used is very similar to what the BJP said in the 2014 Lok Sabha elections, during which it promised that it will bring back black money stashed abroad and deposit Rs 15 lakh in every Indian's account.Leaders from all parties keep making these bogus claims in order to swing public opinion for their own benefit. With unrealistic expectations raised during election time, the government is always under pressure to do something popular and big. The appearance of doing something big takes priority rather than doing things the right way.The current demonetisation drive announced by PM Narendra Modi is a result of this tendency. The government keeps telling us that the move will end corruption, will end the fake currency racket as well as terrorism and every other problem in India that arises from black money. Supporters of the BJP went a step ahead and announced that it will make India great again.When questions are raised about how this is going to curb black money or corruption or terrorism, the PM has only jokes on offer. His responses ranged from taking potshots at those asking questions to getting emotional, but no answers are provided to the genuine concerns of the people.What is the evidence that the demonetisation drive will work?The PM, while referring to a few Rs 1,000 notes that were found floating in the Ganga said, "Earlier people use to throw coins in the Ganga but now they are throwing 1000 rupee notes".Is this how we are going to decide whether a policy is successful or not?He also said: "People are depositing money in the account of their mothers whom they had abandoned in old age homes."In his rhetorical style, he asked people "tell me if the blessings of these old women will make this successful or not?"So this is what the success of our policy now depends on - blessings of old women.No wonder the whole thing has turned into chaos.The government is yet to explain the "how" of the move. By just claiming that the drive will do this and that is not sufficient. Senior party leader Venkaiah Naidu in his speech in the Rajya Sabha said "this step will increase the formal economy, improve tax collection, increase opportunity for the poor, and decrease funding of arms, hamper terrorist activities, recapitalise banks, decrease the fiscal deficit, and improve infrastructure and social spending." He added that "there will be some pain but it will be followed by a long term gain".But how do we understand when you will not explain the rationale behind the decision? Please enlighten us how all this would be achieved. Back your claims with numbers, you must have anticipated in your ten months of planning. You must have applied your brains before taking this decision.Please show us. Unless, what Naidu actually meant was that please believe this will do all the things we are claiming because our intentions are good and our PM is a great man. But this cannot be the reason why one should accept the claims made by the government.He said the PM has the political will and administrative skills to take this step. Looking at the way the drive is being implemented, I have no reason to believe administrative skills are a part of it, and political cannot be a substitute for logic.Did the government calculate the cost and benefit of such a drastic step? If yes, then it should make it public. What problems did the government anticipate and what steps did it plan in order to mitigate them?It is not sufficient to say, we have been planning for ten months; it must say what exactly was being planned. Looking at the current scenario, it seems the government failed to anticipate issues arising out of the situation.A government indulging in callous planning and getting away with it - by just being emotional or rhetorical about the issue - reflects on the ability of a society to hold its government accountable. Haven't we learnt any lessons in 70 years of democracy?This is not about the PM deciding which suit to wear; it is about a serious policy decision which is affecting the lives of all Indians. The government is accountable to the people of this country for all its decisions and Modi must not be allowed to get away with emotional and political rhetoric.Naidu in his speech also said: "They might not understand the full consequences, but they are celebrating this step." This is the kind of citizen this government wants us to turn into - conformist and believers. It is extremely important for people to not be swayed by emotional and political rhetoric of politicians.Public discussions must be based on facts. Each politician must explain the how and why of policy choices. They should show what options were available and why was any particular choice made. They can't say anything and get away with it because they are in power or in the opposition.We must ask how all promises made during and after the elections will be realised, and whether they have a concrete plan for it. It must be evaluated whether it is feasible or not. What will be its short-term and long-term implications?Our failure to ask these questions is the reason why governments take decisions without serious thought and planning. There have been many instances, like the plan to ban NDTV India for a day or the step to monitor all SMS and messages, when the current government had taken a decision and then backtracked due to public criticism.This shows lack of planning. They are not able to understand the implications of what they are doing. They still get away with all of this because we "the citizens" don't care about the logic; all we need are assurances wrapped with rhetoric, however useless they may be.Demonetisation and the battle for the minds and hearts of IndiaAuthor: Anil PadmanabhanPublication: Date: November 21, 2016URL: preaching so successfully against corruption and elite capture of India in the general election, Prime Minister Narendra Modi has now begun walking the talkIn a few days, it will be a fortnight since the dramatic moment of 8 November when Prime Minister Narendra Modi, in a live telecast on television, announced partial demonetisation—withdrawing currency notes of Rs1,000 and Rs500 denominations. Like every action of Modi, this, too, is proving to be polarizing. It is not just in the media, but even on social media channels such as WhatsApp groups, people have begun to adopt extreme views on the subject—often based on rumours and, sometimes, plain lies.Nonetheless, it is important to ask the question as to whether there is a subtext which is getting drowned out by the noise and distraction of this ongoing rhetorical exchange.Indeed there is: it is the political battle for the minds and hearts of new India; a face-off between the Bharatiya Janata Party (BJP), the new pole of Indian politics, and its opposition—including its traditional rival, the Congress party, as well as regional satraps such as Mamata Banerjee. Seen this way—where there is so much at stake—it is easy to understand the rhetoric.The political opposition has been caught unawares by the move to demonetize the country’s two key transactional currency denominations. Yes; there will be fiscal losses to be borne; but who is going to admit to holding illegal wealth, leave alone defending it?The bigger threat is that Modi may be running away with the political initiative; and, like in anything else, playing catch-up is never a winning strategy.Consequently, the counter has been vitriolic and carefully crafted around the dislocation caused by the demonetisation. (Clearly, the roll-out of demonetisation could have been substantially better and, for this, the bureaucracy running the Reserve Bank of India and the ministry of finance are jointly culpable.) Given that the Parliament is in session, it has provided the opposition a very high-profile platform to vent. But the clock is ticking: not just because the winter session will conclude by mid-December, but also that the current bottlenecks so visible in urban areas may ease or shift to rural areas and, consequently, fade from the public eye.On the other hand, from Modi’s point of view, it is a fact that he has enviably staked his claim to the high moral ground.After preaching so successfully against corruption and elite capture of India in the general election, Modi has now begun walking the talk (no matter how clumsily). And in this, he has cleverly positioned himself as a vanguard of the bottom of the pyramid and the aspirational class (what he defines as the neo middle class).Unlike never before, this demographic segment is emerging as a key factor in the Indian economy as disruptions (like the share economy symbolized by taxi share service) and structural reforms inspiring a transition to a rules-based regime (like the roll-out of the goods and services tax, or GST) take root.Precisely to target this segment, he made it a point to bring up demonetisation in the election rally in Agra on Sunday. Highlighting the fact that all of a sudden banks are flush with deposits, he said, “Now, as the banks are cash-rich, they will distribute it as loans to our entrepreneurs and youth.”In politics, perceptions matter: it is not what you are doing, but what you are seen to be doing. While the economists can slug it out on the impact on the Indian economy, it has undeniably left a feel-good moment with most Indians—precisely because, in popular perception, the corrupt and the elite are at the receiving end. Probably why, despite the provocations from some political parties, we have, so far, not seen things descend to chaos as people queue up outside banks to withdraw cash.But every political action has its consequences. In this case, the trader class, particularly among jewellers, who normally conduct their business in cash, have been severely hit. They have also been a constant factor backing the BJP. They are unlikely to forgive Modi or the BJP very soon.Whatever their response (or of other similarly disenfranchized groups), it will be made apparent in the four upcoming assembly elections in which the BJP is either a contender or an incumbent; or whether this will be offset by gain in vote share among the aspirational class.For the moment, Modi has the last word. As he said in Goa, in his first public speech after the demonetisation, “Analysts (and critics) have failed to recalibrate (after I assumed power) the metrics they used to assess previous governments and old-generation politicians. This is exactly why they have failed to grasp the import of what happened on 8 November.”- Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics.The Effects of India's Currency Reform? "Chaos" Say AnalystsAuthor: tim sullivan, associated pressPublication: ABCNews.Date: November 18, 2016URL: sudden withdrawal of 86 percent of India's currency has left cash in short supply, retail sales stumbling and wholesale markets in turmoil.That's just the immediate fallout from Prime Minister Narendra Modi's surprise effort to stamp out corruption by making cash hoards in large denomination bills worthless. But what lies ahead could be even worse, some analysts say."Basically, you've created chaos," said Steve H. Hanke, an applied economist at Johns Hopkins University in Baltimore and a global authority on currency policy. "India is a cash economy. It's not like Europe or the U.S. where everyone is running around with a credit card. That's not the world of India.""It doesn't look like this thing was thought through at all," he said.Every day or so, soothing assurances about India's overnight currency reform spill from the offices of top government officials."Enough cash is available," Economic Affairs Secretary Shaktikanta Das said Thursday during a nationally televised press conference, as millions of people waited in hours-long lines. A few days earlier, the finance minister urged patience with what he called "a period of inconvenience."But the decision to ban India's highest denomination bills, 500 rupee and 1,000 rupee notes worth about $7.50 and $15, goes far beyond an inconvenience.India's economy has become one of the world's largest in recent years, but millions of businesses, and hundreds of millions of people, lack bank accounts and use cash to pay for everything from groceries to hospital stays to land purchases.The shadow economy — countless transactions hidden from the authorities — is believed to amount to about a quarter of the country's gross domestic product.The government used a similar demonetization in the late 1970s. But it failed to curb corruption, and the underground economy has grown immensely larger since then.Plenty of Indians do use cash transactions to hide their wealth and avoid taxes — less than 3 percent of the population pays income taxes — and the authorities occasionally arrest businesspeople or corrupt officials with currency hoards that can fill trucks. But plenty more people use cash because of habit, poverty or a lack of easy access to banks.So instead of just aiming squarely at wealthy tax dodgers, the demonetization is also hammering the poor, the working-class and small business people whose lives have been turned upside down during the transition to new currency notes.Across India, people are waiting in lines that often form hours before banks open and last well into the afternoon, though the government has limited most withdrawals and currency exchanges to a maximum of $30 a day."It is unclear whether this exercise will achieve any lasting results other than having created a national economic crisis, destroying confidence in the national currency and unleashing tremendous suffering for ordinary Indian citizens," Rajiv Biswas, Asia-Pacific chief economist at HIS Global Insight, said in an email."This will have a direct negative effect on retail sales and industrial output during the coming weeks," Biswas said.A research report this week from the banking giant HSBC predicted that imports of consumer goods would fall, but added that could be offset by a spike in demand for gold, as unsettled Indians look for ways to store their wealth.In worst-case scenarios, the effects of demonetization could last for years, driving the country into recession and pushing Indians to keep their wealth in more stable currencies, such as the euro or U.S. dollar."When you don't trust a currency and you don't trust a government you start using foreign currencies," said Hanke. "That's what this is going to do, I think: People will not trust the rupee."Raghuram Rajan, the former head of India's central bank and one of the country's most respected economists, warned in 2014 that demonetization programs can easily stumble."It's not that easy to flush out black money," he said after a speech, while he was still the country's top banker. He added, "my sense is that the clever find ways" to get around currency overhauls.Rajan has instead suggested better monitoring of financial transactions, such as using government ID cards to track major purchases, and improved tax enforcement.Hanke was surprised that India would even try a demonetization program, given that its failure in the 1970s is well-known in currency policy circles."They're usually done in some kind of crisis situation and panic," said Hanke, "and they ultimately have all kinds of negative unintended consequences."Ashok Gulati Refutes Reports of Demonetisation Hitting Farm Supplies HardAuthor: Swarajya StaffPublication: Date: November 21, 2016URL: Gulati, Infosys Chair professor for agriculture at the Indian Council for Research on International Economic Relations, has termed demonetisation as Prime Minister Narendra Modi’s boldest economic and political reform so far. Writing in the Indian Express on Monday (21 November), Gulati says that this is perhaps the first time that an honest person was given dignity and a premium was put on honesty. However, he does caution that if the inconvenience for the common man lingers for long, it can sour the mood.Gulati also called bullshit on media reports telling us that “volumes of fresh produce in agri-mandis have dropped significantly, trucks have stopped plying, and farmers are in deep distress”. He said that while there is some truth to it, the claim is largely exaggerated. If what media is reporting was indeed the case, consumers in urban areas wouldn’t be getting their daily essential commodities at regular prices, and there would have been long queues to buy daily essential goods. This is certainly not the case. In fact, Gulati is even noticing a significant behavioural change with more and more people taking to online or card transactions.Gulati calls for expediting the transition to a cashless economy. He suggests the following steps:1. The state governments should announce that every commission agent in all agri-mandis must have electronic data capture (EDC) machines for swiping credit or debit cards. Those who don’t comply should have their licenses cancelled.2. The state governments should lower the stamp duty in real estate transactions by half. This move, Gulati believes, will not hit revenues, and will instead encourage honest people to transact honestly.3. In the short term, Gulati recommends staying vigilant on unaccounted black money flowing into Jan Dhan accounts. He calls for catching a few culprits in the act and delivering firm and quick punishment to them so that a message is sent before it’s too late.4. High priority should be given to re-calibrate ATMs for new notes, extending working hours of banks, continuing employee shifts 24×7 especially for the withdrawal of money by people from their accounts and opening special extension counters through, say, mobile vans.Most sweeping change in currency policy in the world in decadesAuthor: Natasha Sarin and Lawrence H. SummersPublication: Date: November 21, 2016URL: of us (Larry) has long advocated the abolition of the $100 note in the US context and the 500 euro note (aka the Bin Laden) in the European context. We assumed the next step after the ECB’s announcement that the 500 euro note would be phased out would be discussion of the $100 bill and of the particularly pernicious 1000 Swiss franc note.Like everyone else, we were surprised by the dramatic action taken by Indian Prime Minister Narendra Modi to demonetize the existing 500 and 1000 rupee notes. This is by far the most sweeping change in currency policy that has occurred anywhere in the world in decades.First, it impacts notes that are in widespread use, being valued at 7.34 and 14.68 dollars respectively. While it might be argued that since India is much poorer than the United States $15 in India is equivalent to $100 in the United States, the reality is that most Americans in the top 1 percent of the income distribution do not handle $100 bills on even a weekly basis whereas 500 rupee notes are very widely used in India.Second, and more fundamental, actions like those taken by the ECB or those proposed for the US end the creation of new high denomination notes. They do not contemplate declaring what has been legal tender to no longer be legal tender essentially overnight It is the imminent prospect of notes currently held becoming worthless that has created such alarm and disruption in India. Small and medium-sized merchants have seen their shops (which transact mostly in cash) deserted and ordinary Indian citizens have spent the last week in line outside banks hoping to be able to exchange their cash holdings for legal tender.We recognize that many of those who hold large quantities of cash in India have come by their wealth in corrupt or illegal ways. So, the temptation to expropriate is understandable. After all, as the argument goes, anyone who came by their wealth legally has nothing to fear from coming forward and exchanging old notes for new ones.Most free societies would rather let several criminals go free than convict an innocent man. In the same way, for the government to expropriate from even a few innocent victims who, for one reason or another, do not manage to convert their money is highly problematic. Moreover, the definition of what is illegal or corrupt is open to debate given commercial practices that have prevailed in India for a long time.There are also questions of equity and efficacy. We strongly suspect that those with the largest amount of ill-gotten gain do not hold their wealth in cash but instead have long since converted it into foreign exchange, gold, bitcoin or some other store of value. So it is petty fortunes, not the hugest and most problematic ones, that are being targeted.Without new measures to combat corruption, we doubt that this currency reform will have lasting benefits. Corruption will continue albeit with slightly different arrangements.On balance, nothing in the Indian experience gives us pause in recommending that no more large notes be created in the United States, Europe, and around the world. We were not enthusiastic previously about the idea of withdrawing existing notes from circulation because we judged the costs to exceed the benefits. The ongoing chaos in India and the resulting loss of trust in government fortify us in this judgement.Larry Summers’ Fluffy Piece On Demonetisation Fails To ConvinceAuthor: Rupa SubramanyaPublication: Date: November 22, 2016URL: , where slavish adherence to authority and credentials seems to be hardwired more than sifting arguments and evidence, it’s not surprising that a throw away blog post co-written by celebrity economist Larry Summers and Natasha Sarin has received so much play.Normally, a 140 character tweet should be enough to respond to this fluff but in India anything said by a celebrity is taken seriously, like the pronouncement of an oracle.Let’s take the first two paragraphs which are introductory and tell us nothing new except the authors were surprised like everyone else by Modi’s announcement to demonetise Rs. 500 and Rs 1000 notes on November 8. The next six paragraphs follow which contain their argument, if you can call it that.So what are you telling us we didn’t know, Larry and Natasha?First, you point out that high value notes are in common use in India. Yes thanks Larry and Natasha, we in India knew that already given that the old notes represented 86 per cent of the value of currency in circulation at the time of demonetisation. But perhaps your American readers will have learned something new when you tell them Rs 500 notes are used widely in India.Second, you tell us this is not demonetisation but a currency swap of old notes for news notes. Again we already knew this but then you add gratuitous “facts” that small and medium sized merchants have seen their shops deserted. While this was reported in the immediate aftermath after demonetisation, it’s no longer widely the case. Business is gradually getting back to normal, so your facts are out of date.Third, you tell us that many people who hold large amounts of cash came by this in corrupt or illegal ways. This is a powerful insight from a former US Treasury Secretary and we in India would never have figured this out otherwise if not for this blog post.Fourth, you make a dubious normative judgment when you assert a free society would rather let several criminals go free than convict an innocent man. As it happens “different societies” make different choices. So in the country in which you live, many states have capital punishment because they prefer the deterrent and punitive value of capital punishment over the prospect of a few innocent people being put to death. Meanwhile, other free societies such as Canada don’t have capital punishment for the reasons you hold. The basic point is, well meaning people will come to a different assessment of the trade off you imply.You further confuse your argument by asserting that what is illegal or corrupt is open to debate.I doubt very much you, Larry, would have made such an argument when you were Treasury Secretary. But abiding by the law applies in civilised countries like the US but should be ignored in poor countries like India, right? Would you have said as Treasury Secretary that US tax laws are complex so illegality or tax evasion should be a matter of debate? I don’t think so.Fifth, you tell us you strongly suspect a lot of black money has been laundered into property, foreign exchange, gold etc. Again we needed the penetrating insight of the nephew of two Nobel economists to tell us this since we had no idea.Sixth, we also were clueless about the fact that a one time currency swap does not fix the long-term roots of corruption. Except for the fact that many including this author and others have repeatedly pointed that out in saying that the currency swap is not a magic bullet but a one time tax on black money. And further reforms need to follow in order to tackle the sources of black money.But the most egregious is your conclusion where you let the cat out of the bag that you’ve already prejudged what you’re going to say by asserting you were never enthusiastic about demonetising high value notes. It’s not surprising therefore that you don’t favour India’s move.But the truly most egregious is the last sentence where you assert without evidence there is “ongoing chaos” in India and this has resulted in a loss of “trust” in the government. Let’s parse both claims.Given that life is gradually returning to normal, “ongoing chaos” is an exaggeration, at best. While the temporary liquidity crunch is affecting markets which have been historically cash-based, the introduction of the new 500 and 2000 rupee notes, and the switch away from cash toward electronic payments, suggests we are on the path toward a return to normalcy, even if the situation is not yet fully back to normal. This is a far cry from “ongoing chaos”.However, given that this is still an unfolding event, and given how treacherous it is to generalize from a few anecdotal accounts in newspapers and from speaking to people on the ground, I would hesitate making a sweeping assertion. This seems to be no problem for you, however.Even more problematic, you provide absolutely no evidence of a loss in trust in the government. This is a fact free judgment like your claim, Larry, that hate crimes have spiked since Donald Trump’s victory. Here are two blog posts (first, second) that debunk this fact free claim of a spike in hate crimes.If you’ve seen opinion polls which suggest a drop in trust for Prime Minister Narendra Modi and his government, you should share them with us as I’ve just shared information debunking your view that hate crimes have spiked in the US. Now this truly would be new information to your Indian readers. Otherwise we only have your word on it from your perch in Harvard Square.But of course I’m not a world famous economist, all I can do is sift facts and arguments to see if they make sense. By that score, your fluffy piece failed to convince.Post-script: As it happens, shortly after this piece was published, C-Voter came out with a survey suggesting a large majority of Indians support Prime Minister’s Narendra Modi’s currency swap. As reported here, 1,212 were surveyed across 252 parliamentary constituencies. About 87 per cent of respondents felt that the currency swap was harming those with black money and 85 per cent felt that the temporary hardship was worth it. Furthermore, given much touted implementation glitches, more than 66 percent thought this was both a good step and well-implemented. So over to you Larry and Natasha.- Rupa Subramanya is an independent commentator and economist based in Mumbai. Follow her @rupasubramanya .India just made a big mistake with its currency banAuthor: Lawrence H. Summers and Natasha SarinPublication: The Washington PostDate: November 22, 2016URL: of us (Larry) has long advocated the abolition of the $100 note in the U.S. context and the 500 euro note (a.k.a. the bin Laden) in the European context. We assumed the next step after the European Central Bank’s announcement that the 500 euro note would be phased out would be discussion of the $100 bill and of the particularly pernicious 1,000 Swiss franc note.Like everyone else, we were surprised by the dramatic action taken by Indian Prime Minister Narendra Modi to demonetize the existing 500 and 1,000 rupee notes. This is by far the most sweeping change in currency policy that has occurred anywhere in the world in decades.First, it affects notes that are in widespread use, being valued at $7.34 and $14.68, respectively. While it might be argued that because India is much poorer than the United States, $15 in India is equivalent to $100 in the United States, the reality is that most Americans in the top 1 percent of the income distribution do not handle $100 bills on even a weekly basis, whereas 500 rupee notes are very widely used in India.Second, and more fundamental, actions like those taken by the ECB or those proposed for the United States end the creation of new high-denomination notes. They do not contemplate declaring what has been legal tender to no longer be legal tender essentially overnight. It is the imminent prospect of notes currently held becoming worthless that has created such alarm and disruption in India. Small and medium-size merchants have seen their shops (which transact mostly in cash) deserted, and ordinary Indian citizens have spent the past week in line outside banks hoping to be able to exchange their cash holdings for legal tender.We recognize that many of those who hold large quantities of cash in India have come by their wealth in corrupt or illegal ways. So, the temptation to expropriate is understandable. After all, as the argument goes, anyone who came by their wealth legally has nothing to fear from coming forward and exchanging old notes for new ones.Most free societies would rather let several criminals go free than convict an innocent man. In the same way, for the government to expropriate from even a few innocent victims who, for one reason or another, do not manage to convert their money is highly problematic. Moreover, the definition of what is illegal or corrupt is open to debate given commercial practices that have prevailed in India for a long time.There are also questions of equity and efficacy. We strongly suspect that those with the largest amount of ill-gotten gain do not hold their wealth in cash but instead have long since converted it into foreign exchange, gold, bitcoin or some other store of value. So it is petty fortunes, not the hugest and most problematic ones, that are being targeted.Without new measures to combat corruption, we doubt that this currency reform will have lasting benefits. Corruption will continue albeit with slightly different arrangements.On balance, nothing in the Indian experience gives us pause in recommending that no more large notes be created in the United States, Europe, and around the world. We were not enthusiastic previously about the idea of withdrawing existing notes from circulation because we judged the costs to exceed the benefits. The ongoing chaos in India and the resulting loss of trust in government fortify us in this judgment.Lawrence H. Summers, the Charles W. Eliot university professor at Harvard, is a former treasury secretary and director of the National Economic Council in the White House. He writes occasional posts on Wonkblog about issues of national and international economics and policymaking.- Natasha Sarin is a JD/PhD candidate at Harvard University, with a focus on research in finance and labor. She recently co-authored a paper with Lawrence Summers entitled “Have Big Banks Gotten Safer,” which is forthcoming in the Brookings Papers on Economic Activity.Demonetisation aftershocks: Black money jolt for Kolkata bankerAuthor: Saikat Ray, TNNPublication: The Times of IndiaDate: November 10, 2016URL: Sarkar (name changed on request) a senior manager with Dharmatolla branch of a nationalized bank could not believe his ears. One middle aged person straight went to his chamber as soon as the bank opened on Thursday morning introduced him as a city based businessman and proposed to deposit Rs 75 crore in cash. "First I thought I heard it wrong. I asked him how much money he had taken with him. He replied that he wanted my help in depositing Rs 75 crore in cash. He also assured me that he would compensate me for my risks involved in such an illegal transaction. I showed him the door at once. But it was really a nerve wracking experience in my 25 years of banking career," Sarkar said.Sarkar and his colleagues looked fatigued on Thursday afternoon after working the whole night preparing for making payments to thousands of depositors. We were dog tired as we had to work for 18 hours at a stretch. Handling depositors' rush is something that we are trained to do. But handling strange people with the request of depositing black money in crores is something which is disturbing our peace of mind now. I have received requests from at least 10 persons who offered me good money in lieu of service of depositing 500 and 1000 rupee notes worth crores," said a senior manager of the bank.Sensing this sort of trouble and a directive from the Reserve Bank of India the bank authorities installed extra CCTV cameras inside the office. "RBI officials in plainclothes and intelligence department officials have been deputed to keep a watch on illegal transactions," the bank official said. Handling such unscrupulous persons sitting at the heart of the city is different. But take the experience of a bank manager working for a nationalized bank in southern suburb. Sanjay Mitra the bank manager had to take help of local police station when a person threatened him for refusing to accept Rs 49 crore in cash. "He wanted to deposit Rs 49 crore in various names and sought my help in the entire transaction. He offered me a good amount too. But when I refused he got furious and threatened me with dire consequences," Mitra said.We did say we wanted less corruptionAuthor: Monika HalanPublication: Date: November 10, 2016URL: decades, the honest have felt like fools in a nation that runs on graft. The complicity, and active encouragement, of the political leadership gave feet, legs and body to this parallel economySome of us in India have paid, what I call, the ‘honesty tax’ for decades. Our money is salaried, there is nothing on top, we pay our taxes, keep our accounts clean, pay for large spends by card, do real estate deals in white and become the guys who obey traffic signals while others in bigger cars zoom away with a smirk. We pull out our cards and carry home our small shopping bag. The guy in the next aisle pulls out a brick of cash and thumbs out a lakh in notes to take home the high-value gadget. We drive our Maruti home with the EMI (equated monthly instalment) sitting in the backseat, the luxury SUV guy comes with a sack of cash and scrapes our car out of his way. We wait to buy a house with white money, don’t get the choice set, pay more and end up feeling like losers for being honest. For decades, the honest have felt like fools in a nation that runs on graft. The complicity, and active encouragement, of the political leadership gave feet, legs and body to this parallel economy. There is a saying that in any organisation 25% of the people will be honest, always; 25% will be corrupt, always; and the middle 50% will look at the boss and do what he does. The political boss has spoken in India finally, giving teeth to the war against corruption by making currency notes of Rs500 and Rs1,000 worthless overnight. Why will this help? It makes the current stash of undeclared cash useless. Those who did not take the government seriously and did not declare their unaccounted income by 30 September, by paying a 45% tax plus penalty, now see a 100% loss rather than a partial loss. Those who converted their cash into gold, art and real estate—the three sumps of black money—will sit on their assets for a while. When they do sell, the deal is likely to be completed electronically rather than in cash. With buyers unable to pay with old stashes of cash, how will the sellers sell? They will either barter or be forced to use a bank to route the money. Barter may work: in 2008, during the financial crisis, certain kinds of art became currency, after the price inflation in gold made it a bubble. Something similar may happen here too. Is it the end of black money? No. This is about raising the cost of keeping unaccounted for cash. There will be an underground market for sure: already you hear of a Rs1,000 note selling for Rs300 in the Mumbai grey market, but it just gets tougher to keep it black. What about conversion to gold and real estate? Yes, conversion to gold will happen. But think it through— will you see a guy pull out five gold coins to buy an iPad at a mall? The government is just making the use of black money difficult. Why give just 4 hours? What would have happened in a month? It may have made the transition easier. Two things. One: cash would have been converted to gold and high-value purchases over the month. Already there are reports of brisk sales by jewellers till early morning of 9 November. Cash hoarders would have found ways to convert their money. Two: cash that was about to die, would have found its way to the weakest in the food chain: those who don’t know they have to, or don’t have the power to, say no to getting paid with such notes. End noteIt’s not as if Prime Minister Narendra Modi has not taken a risk—both personal and political. The move to demonetise currency notes, to suck out black money, will upset BJP’s key constituency: traders, realtors and small businessmen. The ground speak is that this government doesn’t know how to do dhanda (business)—who pays 30% tax anyway? It is unlikely that the party cadres preparing for election were prepared with Rs100 currency notes. If other parties have lost money, so has the BJP cadre. This is a big political risk. Modi is probably calculating that things would settle down in the next 18 months before the next general election. Modi also risks short-term growth by removing cash from the market. This cash pays for jewellery, high-value cars, gadgets, clothes, hotel bills. By suddenly making the stashes of cash useless, he risks offtake of goods from the market, which could affect the economy. So the risk is real. Modi has taken a calculated gamble and we’re all hoping that it pays off. No transition is painless. He is pressing the reset button on corruption. We, who had so desperately wanted to kill corruption, now need to support this bold move by the government.- Monika Halan works in the area of consumer protection in finance. She is consulting editor Mint, consultant NIPFP, and on the board of FPSB India. She can be reached at monika.h@.Foreign Media on India's Cash Chaos, Why This Clampdown Is DifferentAuthor: Jeanette RodriguesPublication: Date: November 22, 2016URL: Modi's decision rattled the world's second-most populous nation, where cash dominates day-to-day life.Serpentine queues spilling from banks. Parents worried that they can't provide for their families. Prime Minister Narendra Modi appealing to Indians to bear the pain for just a little while longer. These pictures continue to dominate media coverage in Asia's third-largest economy, even two weeks after the government's shock clampdown on cash. While supporters of the move say it will help root out tax evasion and graft in the years ahead, critics question the administration's planning and execution. What many outside the country can't comprehend, though, is the reason for the chaos. Surely global governments in the past have suddenly banned certain currency denominations, too, haven't they? Why India's Cash Clampdown is Different As most Indians gathered around for dinner Nov. 8, Modi blindsided citizens by announcing on national television that their 500 rupee and 1,000 rupee ($15) notes would be worthless come midnight. The step was essential to clamp down on "black money," he said, the local term for cash stashed away to avoid tax. In terms of the share of currency in circulation, Modi's move was akin to sucking out from the system all U.S. dollar bills except about half of the $1 notes. The decision rattled the world's second-most populous nation, where cash dominates day-to-day life. Strange tales were whispered around neighborhoods that night, of the wealthy rushing to purchase gold and luxury watches to extinguish unaccounted cash, while housewives stocked up on groceries. Morning dawned to even more confusion, and when banks reopened the next day people lined up to exchange their now worthless currency. Newspapers reported that sacks of torn notes turned up across the country as people destroyed and abandoned them to avoid prosecution. It's not as if the notes would turn into paper at the stroke of midnight. They'd still retain their value, the government ruled, but only if they were deposited into bank accounts by Dec. 30. Strict caps were imposed on the exchange of physical bills into new notes, and those depositing the old notes had to submit signed declarations and come armed with identification. That doesn't sound so tough, you may say. Try this: as many as 600 million Indians probably don't have bank accounts, central bank data show. A disproportionate number of these live in more than 600,000 villages, earning daily wages in cash. To meet demand, banks stayed open for longer hours, offering water and coffee to hassled clients. Reports began trickling in -- several disputed -- of Indians collapsing as they waited to exchange their bills under the biting sun, as well as bank staff dying under the strain of the job. Tourists were left stranded without money and touts fleeced visitors who had been until then enjoying the beaches of Goa or the shrines of Rajasthan. Part of the reason for the trouble is that India is woefully under-banked. Cash machines are few and far between, even though demand for services has been surging over the years. Amid rising public anger, Modi appealed for understanding. Give me 50 more days, he requested Indians in a teary-eyed address on Nov. 12. "After that, if any fault is found in my intentions or my actions, I am willing to suffer any punishment given by the country." Modi's motive was clear: he sought to take account of each of the big bills in circulation. Of the 15 trillion rupees that needed to be turned in at banks, about a third wouldn't be deposited, the government's lawyer told the Supreme Court. However, as the days rolled on, it became increasingly clear that the logistics weren't completely thought through. To pump out the new notes, cash machines needed to be refitted, which banks scrambled to do after being caught unaware. Printing the required number of new notes could itself take as long as six more months, according to some estimates. Alternative payment providers saw their window of opportunity. Mobile wallet companies such as Paytm and Freecharge.in reported a jump in transactions. Again, most of this came from cities and towns. Most of India, data show, is unfamiliar with the available options. One reason for the lack of technological options is that the availability of third-generation mobile spectrum and broadband is limited. Of India's 1.3 billion population, less than 300 million use the Internet. Of the total number of Indians who own a mobile phone, only about 26 percent have smartphones, which are essential to run payment apps. The relatively low penetration of smartphones in India is because the cost of a smartphone is prohibitively high in the nation with the lowest living standards among major emerging markets. That leaves Indians back where they started -- relying on cash for their daily survival, but not getting quite enough of it.Demonetisation is Like Sucking out 85 percent Blood From a Body: ExpertAuthor: Tushar DharaPublication: Date: November 22, 2016URL: expert on black money has said that removing liquidity from the economy via demonetisation is unlikely to have an impact on the generation of black money, though it may send the economy into a tailspin. “Cash is like blood throughout the economy and if you suck out 85 percent of the blood from somebody and replace it with 5 percent of the blood that person will collapse,” Arun Kumar, who has taught Economics at Jawaharlal Nehru University and researched India’s black economy for over three decades said in a Facebook Live interaction with News18.Finance is the lifeblood of any economy and keeps the wheels of trade and commerce chugging. Financial transactions can be conducted in cash or via banking channels. Cash is used in India for business, trade, industrial and household transactions.All these sectors have been affected by the demonetisation of 500 and 1,000 rupee banknotes, Arun Kumar said. The rationale behind demonetisation was to strike at the roots of black money. But Professor Kumar estimates that cash is a tiny fraction of India’s domestic black economy, not more than 2-3 percent.The size of India’s economy is currently $2.2 Trillion, or about 150 lakh crore rupees. Out of this 62 percent, or about 93 lakh crore rupees is generated as black income every year. Arun Kumar estimates that only 1 percent of all the black wealth in the economy is in the form of stacks of cash in suitcases, safes and gunny bags. This amounts to just Rs 2-3 lakh crore, which is the amount that demonetisation has liquidated. “For uncertain gains it has put the entire economy in jeopardy,” Prof. Kumar added.The rest of the black wealth is in the form of gold, real estate, stocks and shares, or just stashed abroad in tax havens.Around 40 percent of the black money stashed abroad comes back to India via ‘round tripping’. Illicit money that has been ferreted out of India via hawala channels or trade mis-invoicing is deposited in international tax havens. From there the money comes back to India via an investment route like Mauritius, which has favourable tax treaties with India. Black money is now effectively ‘whitewashed’.Demonetisation in a booming economy is like shooting at the tyres of a racing car: Jean DrèzeAuthor: Vasudha VenugopalPublication: The Economic TimesDate: November 22, 2016URL: "Demonetisation in a booming economy is like shooting at the tyres of a racing car," says development economist Jean Drèze . A leading advocate of welfare policies, Drèze who was a member of the National Advisory Council during the UPA regime, tells ET that the sudden move to demonetize high-value currency notes has created a scary situation for people who live on the margin of subsistence, and that opposition parties may well be the real targets of the move. Edited excerpts: How do you view this sudden demonetisation measure? The debate on monetisation is vitiated by delusional hopes of the impact it might have on the black economy. Tall claims are being made about the ability of demonetisation to “flush out black money”, “crush the shadow economy”, or achieve “an all-out assault on the parallel economy”, to quote just a few expressions used by the government and its admirers. These claims are based on what might be called the hoard theory of black money. In this view, black money is a gigantic hoard of illegal income that keeps growing and needs to be flushed out. This is wrong. Crooks know better than to keep their illegal income in suitcases of cash. Instead, they spend, invest, launder or convert it in one way or another. They use it to buy property, fund lavish weddings, shop in Dubai or oblige politicians. Of course, at any point of time some black money is likely to be lying in jars or pillow-cases. But going after that residual liquidity is like mopping the floor under the shower. Thinking of it as a decisive strike on the black economy is a severe delusion. This point has already been made by many eminent economists, but the government seems to prefer its own echo chamber. The main cash hoarders are likely to be political parties. For them, it makes sense to accumulate cash over time, in anticipation of election campaigns. Opposition parties may well be the real targets of the demonetisation move. Being in power, the ruling party is less vulnerable. I am all for preventing fraud among political parties, but this is not the best way to go about it. How has it affected rural India? Some of the short-term costs are already clear – the time people waste in long queues, the liquidity crisis in the informal economy, the worker layoffs, and of course many tragic deaths. Wider economic costs are likely to be felt soon. Some reports already suggest that economic activity in rural markets has slowed down. For instance, a study by Nidhi Aggrawal and Sudha Narayanan at the Indira Gandhi Institute of Development Research shows that mandi arrivals of non-perishable agricultural commodities crashed across the board within a week of demonetisation. The declines range from 30 per cent for cotton to 87 per cent for soyabean, and did not occur last year at this time. When farmers are short of cash, agricultural labourers and local artisans are bound to suffer too. NREGA workers are also likely to be badly hit. As it is, they are affected by chronic delays in wage payments. With bank staff out of action for weeks, it is bound to become even harder for them to collect their meagre wages. The same applies to social security pensions, a lifeline for millions of poor widows and elderly persons. For people who live on the margin of subsistence, this is a scary situation. The present government is pursuing the vision of a cashless economy. Your comments on this and what could be done to improve financial inclusion? Real financial inclusion means providing effective banking services to everyone. Today, many people have bank accounts but they are still deprived of banking services because the banks are distant, understaffed, overcrowded and often unfriendly towards poor people. One reason why demonetisation is causing so much havoc is that banks are out of their depths in the first place, especially in rural areas. For instance, they are finding it difficult to keep up with wage payments, pensions and scholarships. Now, bank staff are going to be diverted full-time for weeks to renew bank notes. You can imagine the chaos this is going to create, well beyond the demonetisation deadline.The answer does not lie in magic bullets such as a cashless economy. We are decades away from that. Meanwhile, simple measures such as extra bank counters, functional ATMs and better queuing systems could go a long way in improving banking services in rural areas. This is not rocket science. The opposition has criticised the introduction of the new 2000-rupee note and argued that this undermines the demonetisation drive. Your comments? I don’t see any serious inconsistency here. The release of 2000-rupee notes does not make it easier for those who hold black money to launder their cash. So, demonetisation can serve its limited purpose even with 2000-rupee notes being printed. Withholding them would perhaps make it more difficult to hoard black money, or rather black currency, in the future. But the complete absence of high-denomination notes would cause much inconvenience to the public, and I doubt that it would have a major impact on the black economy. Remember, black money in the sense of illegal income may or may not be earned in cash, and even if it is earned in cash, it can easily be converted into other stores of value. The Centre’s argument is that the money that would come into the system with demonetisation will compensate the negatives. There is also a view that the demonetisation could improve liquidity in banks and thereby help boost the economy. Your comments. Demonetisation on this scale is a huge gamble with the economy. The full consequences are difficult to predict. The best-case scenario is that the economy will stay the course, after the initial disruption, and that significant sums of black money will be neutralised. The worst-case scenario is a prolonged economic slowdown, with very little result in terms of preventing illegal activity. The initial economic shock, already visible, can easily have ripple effects over the next few months. For instance, delayed sowing of rabi crops today could affect the harvest months from now. With employers short of cash, labourers are likely to lose jobs. It is also important to remember that macroeconomic trends depend a lot on expectations. If the initial shock creates adverse expectations, the economy’s growth trajectory could be derailed. In a booming economy, blanket demonetisation is a little bit like shooting at the tyres of a racing car.BW Businessworld-HuffPost-CVoter Survey | 87% Back Modi Govt's Demonetisation MoveAuthor: BW Online BureauPublication: Businessworld.inDate: November 22, 2016URL: Narendra Modi-led National Democratic Alliance (NDA) government's demonetisation move got a total support from people across India, urban and rural, young and old, reveals a BW Businessworld-HuffPost-CVoter surveyThe Narendra Modi-led National Democratic Alliance (NDA) government's demonetisation move got a total support from people across India, urban and rural, young and old, reveals a BW Businessworld-HuffPost-CVoter survey. According to the survey, almost 87 per cent of respondents felt the radical move was hurting those with black money, and 85 per cent were of the view that the inconvenience caused by scrapping of Rs 500 and Rs 1,000 notes was worth the effort of fighting unaccounted / untaxed money.The survey was conducted by CVoter on 21st November across 252 parliamentary areas for BW Businessworld and the Huffington Post. In all, 1,212 respondents were surveyed. Respondents in rural and semi-urban areas appeared somewhat less enthusiastic.Prime Minister Narendra Modi dropped a bombshell on November 8 by abolishing Rs 500 and Rs 1,000 currency notes that accounted for 86 per cent of cash in circulation. The move was aimed at cracking down on the shadow economy but has brought India's cash economy to a virtual standstill.Asked about the implementation, a meagre 22 per cent gave a positive response. When asked the rate the quality of implementation, 63 per cent felt it was good, 24 per cent said it was okay and 7 per cent were of the view that was poor.People gave a mixed response when asked who was more hurt by demonetisation, the rich or poor. Around 44 per cent felt it was hurting the rich more than the poor, about 36 per cent felt otherwise. Almost 16 per cent, however, felt it was hurting the rich and poor alike.Asked how big was demonetisation a problem for people, nearly 13 per cent said it was an unmanageable disaster while 34 per cent said it wasn't a problem at all. In general, 66 per cent felt it was a good step and one that was well implemented.The survey also found approximately 70 per cent respondents felt that the crusade against black money would help the BJP in forthcoming elections. If the government were to buckle under opposition pressure and rollback demonetisation, 62 per cent felt support for Modi would diminish.The survey’s figures also indicate that around 44 per cent people were not sure if demonetisation would hamper political parties' campaign or which party's finances would be hurt the most. Around 19 per cent believed it would hurt the Congress the most, 10 per cent felt the BJP would be the worst affected.Over 80 percent don’t mind inconvenience of demonetisation, says C-Voter pollAuthor: TNNPublication: The Times of IndiaDate: November 23, 2016URL: demonetisation of Rs 500 and Rs 1000 notes is being seen positively by a large part of the population cutting across the lines of age, income levels and area of residence, a nationwide survey conducted by C-Voter has suggested. A whopping 80-86 percent of those surveyed said the inconvenience caused by the demonetisation is worth the effort of combating black money.C-Voter, an international polling agency headquartered in India, conducted its survey in close to half the total parliamentary constituencies on Monday.The wide-ranging support for the demonetisation cut across the barriers of categorisation. The numbers remained consistently high when broken down on the basis of area of residence, income levels or by age groups.A landslide 86 percent of the respondents living in urban and rural areas said the inconvenience was worth it. This was 80.6 percent in semi-urban areas. The highest level of support however seems to come from those from the higher income group, 90.6 percent of whom said the move is worth it. Also tellingly, the lowest level of support in the 'below 25', 25-45, 45-60 and 60+ was 83.3 percent.A picture of broad support also emerged for those who thought the demonetisation was a 'good move and equally well implemented'. This sentiment was reflected in 71 percent of those surveyed in urban areas, 65.1 percent in semi-rural zones and 59.4 percent of rural respondents.Conversely, 23.8 percent of urban, 24.3 percent of semi-urban and 36 percent of rural respondents agreed with the charge of some opposition parties that demonetisation was a 'good step but poorly implemented'.Significant pluralities of the respondents also said the problems caused by the demonetisation were 'little, easily manageable'. This was reflected by 38 percent in urban, 35.5 percent in semi-urban areas and 36.8 percent in rural belts.The difficulties that the demonetisation of Rs 500 and Rs 1000 notes were perceived as an 'unmanageable disaster' by about 12.6 percent. However, rising income levels saw a fall in the number of people who saw the situation as disastrous - 4.4 percent of high income group, 12.6 percent of middle income group and 15.1 percent of the lower income group respondents.Well over 55 percent of those polled thought support for Prime Minister Narendra Modi would take a beating if he succumbs to political pressure and rolls back the demonetisation of the currency. This view was held by 62.6 percent in urban, 67.3 percent in semi-urban and 54.8 percent in rural pockets.Suleiman and Anwar join bank queueAuthor: Minhaz Merchant @minhazmerchantPublication: Dailyo.inDate: November 22, 2016URL: can’t be that bad if even the cab driver seems happy, Suleiman reflected.Suleiman Khan blinked in the early morning Delhi sun. He took a deep breath. The smog hit him like a dense blanket of smoke.Anwarbhai was right, he thought to himself, as he maneouvred his luggage trolley out of Indira Gandhi International Airport. Delhi can be injurious to health.His mobile rang. It was Anwar Sheikh. “Suleiman! Welcome to Delhi. I would have come to pick you up from the airport, but I’m stuck standing in a queue at my bank.” “So early in the morning, Anwarbhai?” Suleiman glanced at the imitation Rolex watch he’d bought during his last visit to India. It was 7.45am. “Do banks open this early in India?”Anwar’s voice crackled hoarsely over the phone. “Suleiman, I’ve queued up at my bank since 6 this morning. The surgical strike our Prime Minister has launched on black money is killing us.”Suleiman was surprised. "But I heard your finance minister Arun Jaitley saying on TV the other day that the queues were shortening, everything was under control.”Anwar groaned over the phone: “Look Suleiman, just grab a cab and go over to my place. I’ll join you as soon as I can deposit my old Rs 1,000 notes into my bank account.”“Okay, Anwarbhai, I’ll go to your house and fix myself a cup of tea. Come soon.”Suleiman waved a taxi down. He was in India on his annual winter holiday. He had heard back home in Saudi Arabia about the demonetisation of Rs 1,000 and Rs 500 notes. At the airport foreign exchange counter he was careful to exchange his Saudi riyals for the new Rs 2,000 notes.The cab fare to Anwar’s house in south Delhi came to Rs 400. Luckily, the driver had change in 100 rupee notes which he offered Suleiman with a smile.Things can’t be that bad if even the cab driver seems happy, Suleiman reflected as he settled down in Anwar’s living room, waiting for his friend to arrive. Two hours later Anwar walked in, looking careworn. The two friends hugged and then Anwar launched into a bitter tirade.“I tell you, Suleiman, this time (Narendra) Modi has gone too far! He’s ruined us!”“How so, Anwarbhai?” asked Suleiman, bewildered by the mixture of anger, bitterness and weariness in his friend’s voice. “I thought the demonetisation scheme is a success. Bill Gates has praised it. So has Deepak Parekh. Even Narayana Murthy! Short-term pain for long-term gain...”Anwar cut him off mid-sentence. “That’s all rubbish, Suleiman. Do you know how much my political friends have lost in black? Crores! All gone. Overnight! Some political parties in Delhi, Punjab and Bengal don’t have enough cash to pay voters in state elections and by-polls due very soon.”“Pay voters?” Suleiman asked, puzzled. “Why would they need to do that?”Anwar shook his head in mock exasperation. “My dear Suleiman, you’ve been away in Saudi for too long. In India every political party pays voters in cash or kind.”Suleiman smiled as he thought to himself: in Saudi we don’t have elections so no worries about paying voters.To Anwar he said aloud: “I hear Arvind Kejriwal and Mamata Banerjee want a rollback and Arun Jaitley has refused point blank.”Anwar’s eyes narrowed. “Yes, Kejriwal and Mamata are right. This move has hurt the poor and brought the cash economy to a standstill.”Suleiman turned thoughtful. “I hear though that Pakistan is as upset as some Congress, TMC and AAP leaders seem to be. Their counterfeit notes, which were used to pay stone-pelters in Kashmir, have become worthless overnight.”Anwar looked quizzically at Suleiman who was now hitting his stride. “I also saw Ghulam Nabi Azad on TV comparing demonetisation to the Pakistani terror strike on Uri which killed 20 of our jawans. The Pakistani media reported Ghulambhai’s statement, made in Parliament, with the same glee they had reported Kejriwal’s doubts over India’s surgical strike on Pakistan’s terror launchpads on September 29.”Anwar shook his head wearily. “Okay Suleiman, let’s go to my bank tomorrow morning, I need to deposit some more old notes. You’ll see the chaos for yourself. Even our very upright Chief Justice of India has warned of riots if the government doesn’t get its act together.”Joining the queueEarly next morning, the two friends drove down to Anwar’s bank. Expecting a wait of a few hours in a serpentine queue, both had packed a box of biscuits and a bottle of mineral water.As they entered the bank, Suleiman nudged Anwar, pointing ahead. “Look Anwarbhai, there’s the queue.”“It had around ten depositors standing in an orderly line. Within 20 minutes Anwar was at the counter. He deposited Rs 20,000 in old 1,000 rupee notes and turned to look at Suleiman with a trace of embarrassment.“Today seems an exception,” he said sheepishly. “I believe the queues in villages and small towns are huge. And ATMs routinely run out of cash. Dozens have died waiting for their own money. This move will spell the end of Modi.”Just then a TV camera crew walked into the bank. The reporter thrust a mike aggressively under the nose of a simply dressed senior citizen standing quietly in the queue: “Sir, do you think the surgical strike on black money is actually a surgical strike on the poor?”The senior citizen levelled an even gaze at the TV reporter. “Most of the people here in the queue seem happy. They support the move. I don’t know about the villages. There is a problem in implementation despite what the finance minister says. But things are improving gradually.”The TV reporter seemed disappointed at the response. He spotted Suleiman and thrust the mike towards him. “What do you think , sir?”Suleiman glanced at Anwar who stood by impassively. “Well, I’m from Saudi Arabia,” Suleiman began tentatively. “If I criticised the ruler there I’d be in jail or get 100 lashes. Here everyone condemns the prime minister, Kejriwal even calls him awful names. If he did that to the ruler in Saudi, he’d lose his head - literally.”The TV reporter was livid. "Don’t compare us to Saudi. Just tell me what you think of the government’s handling of this so-called war on black money.”Suleiman looked around the bank. The queue had since shortened to just five people, two of them women. They seemed relaxed. He shrugged at the TV reporter: “It looks as if the war on black money is being won.”The TV reporter managed a forced smile. It wasn’t what his producer back at the studio wanted to hear.Anwar put his arm around Suleiman’s shoulder and led him to the bank’s exit door. “You’ll never improve, Suleiman, never,” he smiled good-naturedly. “By the way, that TV reporter is a well-known, highly respected anchor.”As they left the bank, the smog outside hit them. “Anwarbhai,” Suleiman said, “this is what Kejriwal should fix first.”Anwar coughed in agreement as the dark haze enveloped them.“Demonetization changed my life” This Kashmiri Muslim’s Letter to PM Modi is going Massive Viral!Author:Publication: Date: November 21, 2016URL: Letter is written by a Kashmiri Muslim to Prime Minister Narendra Modi – We are publishing it, as it is.Dear PM Narendra ModiThe life of a Kashmiri is unimaginable for the rest part of India. How a Normal Kashmiri, who works hard everyday to feed his family, lives his life amidst the constant tussle between separatists and Security forces, though it is really a sorry state but we have to live with it.I am a Normal Kashmiri– Afzal Rahman- and I am not from the 2% separatists in Kashmir. I am a husband, a father of 4 and a son of aged parents- And yes I am a proud Indian and a Kashmiri who runs a “Garments Shop” in Srinagar.Only thing that I think over and over again is to give a good future to my children. Thus, even after so many threats, I asked my elder son to go for the “Police admission Exams” this year. One of my daughter is studying in class 12th, and I am aware how big this year means in her life, Career and Growth.But last 4 months have been very unsettling. With almost No Business for 4 months and Curfew almost every day. How can a lower middle class man survive without work? Somehow, I managed to feed my family with past savings- but that was not the only problem.My daughter lost so many days of her schooling, in such an important time of her life. My son was very demoralized with the situation he saw. The youngsters of his age, who were unemployed, were throwing stones on the security forces. They were given money by separatists. But then what an unemployed man can do?- He will do anything to get some money which could feed the aged parents and crying children.My own so, who was an aspiring police man, joined the gang of stone pelters, without my knowledge. I got to know about it when he was shot on his arm, by pallet gun.When the tussle slowed down a bit, they started burning the schools in the valley. My daughter’s school was also there in the list of those 29 torched schools.Our life was totally down and out, neither we could sleep, nor we could eat, and we were not even allowed to die.But then on 8th November we heard a news on Radio-Kashmir. You took a decision on banning currency notes of 500/1000. The decision scared us further. We had a little money left with us and that too was in the currency notes of 500. And the option of exchange was never with the Kashmiris, due to unrest.The whole India thinks about Black Money but Kashmiris think about survival. We never thought this decision of yours would give us our lives back, but it certainly did.There wasn’t any stone pelting on streets, though the forces were there but pelters were not. With in one or two days traffic started moving in the valley. We opened our shops, there were people in the market. We could certainly see some happy faces.At other part of India, they must be feeling pain standing in lines, but we Kashmiris are enjoying standing in the bank queues, and socialize.We were worried about my daughter’s exam, but now she went there to take her board exams. And it was not my daughter who took the exam. There were so many other happy faces came to take the exams. It was the highest attendance of students in examination hall this year- almost 95%.With all this positive happened- We all sat together and started talking about what went well? We came to the conclusion that -These separatists have had only 500/1000 rupee notes which no one is taking now.I don’t know what rest of India thinks but we in the valley are very happy with the decision.Yours Afzal Rahman.This article was first published in (all credit goes to them)Demonetisation: Amul to start paying milk producers via bank accountsAuthor: PTIPublication: The Economic TimesDate: November 22, 2016URL: , 60 percent of Amul's milk producer members have bank accounts and the cooperative is taking steps to open new ones for those who do not have it.Dairy major GCMMF, which sells products under the Amul brand, today said it has taken all necessary steps to pay its milk producer members directly into their bank accounts.Already, 60 percent of its milk producer members have bank accounts and the cooperative is taking steps to open new ones for those who do not have at present, it said."In view of the demonetisation of currency notes by central government, we have made necessary arrangement to pay milk producer members for their milk price through direct credit in their bank account," Gujarat Cooperative Milk Marketing Federation (GCMMF) Chairman Jethabhai Patel said.About 60 percent of milk producers already have bank accounts, "but, due to some vested interests, the payment was made in cash", he said in a statement.The cooperative is in the process of opening bank accounts of those milk producers who do not have them at present, he said, adding that GCMMF has asked all dairy unions to help farmers open their accounts in the next couple of months.GCMMF and its 18 associated milk unions are paying around Rs 450 crore on a weekly basis to 36 lakh milk producers through 18,500 milk cooperatives in Gujarat, Patel added.Noting that rural milk producers are facing shortage of cash due to demonetisation of currency notes and restriction by RBI on District Cooperative Banks, Patel said, "However, central and state governments have made alternative arrangements with the help of RBI for cash disbursement through District Cooperative Banks to milk producers."This will definitely help milk producers meet their daily expenses related to animal husbandry and other requirements, he hoped.Patel also said there has been no impact of demonetisation of currency notes on milk procurement and sale of milk in the market so far. "In fact, milk procurement of member unions of GCMMF has increased," he added.The cooperative has nearly 60 processing plants, of which 40 are in Gujarat only. There are 18 member unions of GCMMF associated with more than 36 lakh farmers across 18,600 villages of Gujarat.Arvind Kejriwal: The fiery BBC interview that went viral in IndiaAuthor:Publication: Date: November 21, 2016URL: BBC Hindi Facebook Live interview with the chief minister of the Indian capital Delhi, Arvind Kejriwal, went viral after his angry responses to some of the reporter's questions about his stand on India's cash crisis. BBC Hindi's Nitin Srivastava describes what happened.Mr Kejriwal, casually dressed in bathroom slippers and trousers, was a busy man that Friday evening, with back to back interviews planned at his official residence.I was there with the BBC Hindi team for a scheduled Facebook Live session, then an interview, with Mr Kejriwal about his views on India's cash crisis.The fiery chief minister has been one of the most vocal opponents of the government's shock decision to ban 500 and 1,000 rupee notes overnight. He is demanding that the move be entirely rolled back, citing the difficulties it is causing the common man.The interview never took place. And that's because of what happened during the Facebook Live session.Mr Kejriwal was combative right from the beginning, and grew increasingly agitated as the interview progressed.He got particularly angry when I refused to let him use the live event as a platform to accuse several prominent businessmen of being corrupt with the blessings of the government.What happened next was extraordinary.Mr Kejriwal told me that the BBC and I were both "neech", which translates from the Hindi as "low class", adding that we were biased towards Prime Minister Narendra Modi's government. He refused to listen to my arguments.'This is not journalism'The tipping point came, however, when he alleged that "55 people had died because of the cash crisis". I responded by asking him what proof he had to say this so conclusively.A livid Mr Kejriwal now decided to address the audience himself. Looking straight into the camera, he said: "55 people have died over the issue and BBC says we can't link this to demonetisation. This is their honest journalism." As the Facebook Live event ended, Mr Kejriwal stormed out of the room, refusing to participate in the sit-down interview we had agreed to. His parting words to me were: "This is not journalism and you have an agenda against me". The live event was viewed more than 2.7 million times and was covered by all India's mainstream media organisations as it rapidly went viral in India. Meanwhile the young and dynamic social media team that accompanies Mr Kejriwal everywhere he goes did not share the Facebook Live as promised earlier. This is symptomatic of a worrying trend in India, where journalists are often accused of being "biased" towards one camp or another when they are only trying to do their job and ask valid and legitimate questions.Such accusations are more worrying when it's not just supporters but politicians themselves who are making them.Fact Check on Mihir Sharma’s article on demonetisationAuthor: deveshPublication: My VoiceDate: November 22, 2016URL: ’s demonetisation scheme seems to have hurt a lot of people. It has exposed a lot of people who sided with the BJP & Modi as long as they had a balcony seat ticket to see them demolish the much hated Congress, time and again. The moment the demonetisation affected them personally, they switched.Some have always made their allegiance to the Congress known. Be it by circulating propaganda, fear-mongering posts or by instigating crowds in foreign lands to play the victim card and project the Modi “Bhakts” as the evil love children of power and arrogance.One such case that I came across was an article on Bloomberg & ET from a “journalist” – Mihir Sharma. Now, he has had his fair share of misleading posts from “Samosas will be banned in canteens” to the “Super PM does not need headphones for translation” joke but this one was under the garb of an economic journalism.Simply going through the article, you would feel that India is doomed. Demonetisation was the worst step by PM Modi and that the poor are going to starve to death in a few days. A few moments later, you’d realise that there is not a single fact, reference or an honest data analysis but a singular opinion posted as “News”. Yeah, go climb up that fourth pillar of democracy!Quotes from the article are in italics.His recent speeches on the subject have been frankly bizarre. In one, he seemed to laugh at those inconvenienced by the ban; in another, he broke down while speaking of the “sacrifices” he’d made for India, and warned that he might be assassinated by “forces” desperate to protect their “loot.”Whether I start the reply with your “ban samosas” lies or the “Modi needs no headphones” tweet, you know how it ended. Every other SM user gave you the evidence that your beloved samosas were not being banned in any government canteens; and who can forget the epic reply from Vivek Kumar – the guy from the end of the table, to ruin your so called “joke” on Modi. The point I’m trying to make is that, this, is called evidence. What your have put forth is called “assumption” that is convenience based.Modi’s asked people to be patient for 50 days, but the process could take as long as four months.Again, reference? Any kind of research that proves this correct, should be published. Otherwise this is mere fear-mongering.In seafood-mad West Bengal, for example, the fishing industry is in a state of near-collapse; in the wheat-growing states of the northwest, farmers halfway through the sowing season have run out of cash to buy seeds.Why is the fishing industry in a such a state, again? Every opportunity for financial inclusion through the PMJDY was provided to each and every Indian. Where the question is of hard earned money, it isn’t inaccessible to anyone. Every change comes with a discomfort. To keep focusing on that trivial isolated pain point and ignore the larger betterment, would be simply, “Penny wise, Pound foolish” (something you’d relate to).Few villagers have access to an ATM.Let me see you ask ONE question to the Congress why this is the state of affairs in our country even in the 21st Century. Please.Many Indians, particularly women, still don’t have an active bank account.Thankfully, the number is drastically lesser since Modi has become the PM. Well, let’s give credit where it is due!Finance Minister Arun Jaitley wondered aloud how many poor people would even have 1,000-rupee notes — probably a rhetorical question, but surely it shouldn’t have been. Someone should’ve sought the answer before shutting down India’s financial system.Probably a fact to ponder upon. People having 1,000-rupee notes to the tune of Rs. 2.5 Lakh are certainly not “poor”. Someone sought the answer, all right. Just because you didn’t like it, doesn’t make it wrong.Among India’s middle class, Modi’s “surgical strike on black money” still appears to be popular.And here I was thinking that the move backfired and people were largely pained by the move. Please find out that the business elite have also lauded the move. Business elite – check. (Inconvenienced but Honest) Middle class – Check. (Not having 1000-rupee notes) Poor – Check. So, backfire? Masterstroke?Stand in line, we’re told, and you honor our brave soldiers at the border.By who? Just because the PM mentioned that the black money was being used to fund terrorist activities from across the border, this comes up? Also, not one sentence on the peace in Kashmir since this move? The “near nil” incidents of stone pelting violence? Come on! Be fair!!But will that support last? The government’s plan is likely to be ineffective in the long term. Economists agree it will have no effect on the generation of black money through corruption.“Perhaps after the nationalisation of 14 major commercial banks way back in 1969 by the then Prime Minister Indira Gandhi, this is the most significant event in the economic history of India”, said Norbert Lobo, associate professor and head of department of economics, St Aloysius College.On the positive front, Lobo said that over a period of time, it will give a sharp boost to all formal channels of payment like banking, use of plastic money and other financial institutions that will trigger rapid economic growth. He also foresees that inflation will go down, rupee will strengthen, real estate prices will fall leading to deflationary impact in general. “The move will also promote cashless and paperless economy in future, thereby, puts a curb on money laundering and counterfeiting and drastically reduce corruption and bribery,” he noted.”“Dharmendra B Mehta, president, CREDAI, welcomed the decision saying that it will give them a level playing field by insulating them from those manipulating the system with their black money. “Most of the builders in Tier II do white transactions, so this decision will have no impact. But it will weed out fly-by-night operators who were spoiling the market. This will make the trade better and raise customer confidence and make industry truly an organised sector,” he said.He also said the cost of apartments may come down. “We face pressure from land owners. Now, we can buy land directly and save costs. The land owner was exploiting the situation and making maximum out of the situation, which translates into higher cost of apartments. Because of this, land value will come down when black money goes out of the system,” he added.”Reference link.Worse, rumors of the demonetization were reportedly circulating before Modi’s announcement, leading to suspicions that the well-connected may have had time to dump their cash piles.News of the new 2000-rupee note was being circulated beforehand. That does not establish the knowledge of demonetisation. Please post some vetted facts rather than starting rumours about a particular rumour.Even in the best case scenario — that a significant proportion of the outstanding currency is destroyed — there’s no reason to suppose it was all black money and not the savings of regular citizens scared of harassment by tax authorities.Again, citizens scared of harassment by tax authorities for their legitimate savings? Didn’t you find a better mask to push this propaganda through?Modi has dropped dark hints that this is just the beginning, raising fears that business should now worry about of constant tax raids and the reopening of decades-old cases.Modi has stated and proved his intentions about cleaning up the system and financial reforms since day 1 in office. I think the simple words you missed out in that sentence was : “money laundering businesses” should now worry.Even setting aside the painful adjustment, the long-term effects of this monetary shock on India’s informal economy could well be severe;Correction : short-term ill effects. Long term benefits – as pointed out by many experts. (References easily available with a simple painless search).A large proportion of marginal firms may not survive the loss of a fortnight of income.Why is there a loss of a fortnight of income? Cheques are completely accepted and being honoured. Fear mongering again?The informal financial sector — unregistered moneylenders who provide loans to businesses worth 40 percent of total bank lending — will be decimated.So it comes down to this? Defending the livelihood of “unregistered moneylenders” who are partially the reason for the mounting debts? Why is it difficult to instead open a PMJDY account in a bank and apply for a loan? Mudra Loans also available?Modi’s administration has put political considerations over economic detail once too often — and this time, it’s severely dented its image for efficiency and practicality.Opinion presented as fact.Even if the long queues vanish in the next few weeks, that damage to the government’s reputation is permanent.I thought this was going to be 4 months. Then I thought Modi was a shrewd operator who knew the pros and cons of taking decisions. Much before I thought, Modi spent a lot of money in making his own image up. Again, opinion presented as a fact.If something tastes terrible, it must be good for you.New slogan: If it’s contradictory and anti-establishment, it must be intellectual and important.Conclusions left at the discretion of the readers.Strapped for cash in the Age of DeModitisationAuthor: Kaveree Bamzai @KavereebPublication: Dailyo.inDate: November 21, 2016URL: a minor twist - it's all paid for by Paytm.At the risk of being declared anti-national, may I, as an ordinary homemaker and consumer, explain how life functions in The Age of DeModitisation.If you have cash, you don't have the right kind of cash.If you have the right kind of cash, then you cannot spend more than a certain amount, even if you need to.If you have a card, then there are shops that don't have card swipe machines.If you have a shop with a card swipe machine, it is not necessary that your card will work - it could be the time of day when there are too many transactions and the system breaks down.Welcome to a world where ordinary grocery shopping has become a logistical exercise worthy of a General Election.If you're using public transport, then you have to make sure you have enough cash in smaller denominations.Once you get to a market, you have to ensure it is a place where every shopkeeper has a card swipe machine. Otherwise, best of luck in finding everything you need under one roof.If you have the misfortune of falling ill, you will also have to try several chemists before hitting upon one that has a card swipe machine.If you have normal needs as a family or as an individual, you have to forego tips to servers at restaurants and beauty parlours; payments to parking attendants and petty loaders.Prime Minister Narendra Modi may find it funny - after all, he finds our desperate search for Rs 100 notes so funny that he made a joke of it to impress Chris Martin and company.But this is how middle class India lives. It has to eat, it has to commute to work, it has to drop children to school, and it has to buy medicines. Occasionally, even when it knows it is not adding to the greater national good by doing so, it entertains itself by going out for a meal. Or grooms itself - though not everyone has the privilege of attending rock concerts that the prime minister addresses, or attend weddings of businessmen his party is close it.But perhaps a government run by pracharaks would not understand natural consumerist impulses. Pracharak meals are usually taken care of by admirers, the requirement of clothes is minimal, and entertainment consists of various exercises of the body and mind.Middle class Indians are indulgent, given to amusing themselves, with a tendency to not keep to schedules.They are unruly, often undisciplined, and thoroughly individualistic.And therefore viewed with great suspicion by a party that dislikes anything or anyone that questions the convention.It abhors the middle class which is the repository of everything it despises - liberalism, Westernisation, consumerism, secularism, and above all, democracy.Democracy puts individual freedoms front and centre of public life. Indian democracy in particular celebrates Fundamental Rights as mandatory while giving Directive Principles, which are loftier ideals for the collective good, a lower status.The Age of DeModitisation would like to reverse the order - it would like to make it mandatory for the citizen to do his collective duty while circumventing or curtailing his fundamental rights.In another age, The Age of Indira, it started with nationalisation and ended with the Emergency.In newly socialist India, it started with demonetisation. Who knows where the cashless trail will lead? To a Brave New World based on Henry Ford's assembly line: mass production, homogeneity, predictability, and consumption of disposable consumer goods?With a minor twist - it's all paid for by Paytm.Demonetisation: Windfall for municipalities as 47 civic bodies collect Rs 13,192 croreAuthor: Dipak K Dash, TNNPublication: The Times of IndiaDate: November 23, 2016URL: Centre's demonetisation decision has led to a windfall for 47 municipalities, pushing up their total tax revenue for this month to over two and a half times the sum collected in November last year.According to the Union urban development ministry's estimates, by Tuesday, the municipal tax collection for the 47 civic bodies had reached Rs 13,192 crore. Last November, the municipalities had collected just Rs 3,607 crore.Mumbai has the maximum share of the increased tax collection at Rs 11,913 crore, which is 90% of the total revenue. This is over three times Mumbai's collection for 2015. However, Hyderabad accounts for the maximum increase — 26 times the tax collection in November 2015. Surat's tax revenue of Rs 100 crore marked a nearly 14-fold increase.Sharing the details, Union urban development minister M Venkaiah Naidu said this was one kind of change that had happened as a result of the decision to demonetise the old Rs 500 and Rs 1,000 notes. He said the government's move had forced defaulters to deposit their dues. There have been reports of people queuing up with old notes to pay their dues.Naidu said the municipal bodies would use the money to better services.He added that the current NDA government had approved more houses for the urban poor than UPA's did in 10 years. In the past one and a half year, 12.84 lakh affordable houses had been sanctioned, against 12.40 lakh under UPA, he said. Naidu claimed this "speaks volumes about the sense of urgency that this government is according to make a difference to the urban sector, which is the need of the hour".On Tuesday, two lakh houses for the poor were approved across several states. All work sanctioned under the PM Awas Yojna entails an investment of Rs 70,145 crore.Quixotic quest? Pain from demonetisation is tangible, gains appear out of reachAuthor: EditorialPublication: The Times of IndiaDate: November 23, 2016URL: India’s painful cash queues stretch on endlessly, data from RBI suggests why. It managed to release by Monday currency notes worth Rs 1.36 lakh crore, which is less than 10% of the value rendered illegal by the November 8 demonetisation. India’s cash requirement is estimated at Rs 10 lakh crore, which will need seven more weeks to be met if currency notes are released at the current rate. Secrecy has clearly trumped preparation for the big demonetisation move; implementation is turning into a logistical nightmare.Apart from the suffering caused to vulnerable sections of the population such as migrant labourers, farmers, senior citizens and those employed in the informal sector, a cash drought running into nine weeks will likely cut economic growth and jobs over the next year. Even the government expects that growth over the next two quarters will take a hit. While the gains from demonetisation are nebulous – black money will not go away as long as wildly unrealistic spending caps on election campaign funding are allowed to stay in place – the pain is tangible and not about to go away easily.When India was supposed to enter a brave new 21st century era demonetisation appears to have catapulted us back into the pre-liberalisation days of the 1970s – characterised by a shortage economy, unending queues and exhortations to citizens to sacrifice for patriotic reasons. While the late 1960s and 1970s were characterised by radical, supposedly pro-poor moves such as nationalisation of banks and other industries, it does feel now as if people’s money has been partially nationalised, as they spend much of the working day standing in queues to withdraw as little as Rs 2,000 of what is, after all, their own money.An economy is a delicate mechanism and radical disruptions can create any number of unintended effects rippling across different domains. For example, if truckers are stalled due to a cash shortage, that could translate into rampant inflation in the prices of food and essential commodities in cities. If a referendum were held today demonetisation may still be popular as the notion of striking against black money elicits sympathy from people. But, as Prime Minister Narendra Modi said in another context, this is just the beginning. As the economic damage from the move becomes clearer, Modi and the NDA government could have all their work cut out managing its political fallout.Demonetisation and a divided India Author: Ali Khan Publication: The Times of IndiaDate: November 22, 2016URL: has divided India. These divisions tell a tale where those fortunate enough to have their salaries paid into their account or indeed those who have bank accounts to begin with, have gushed over just how brave and far-sighted the government has been. Of course, nothing can be further from the truth. While the very people who have access to internet and telephone banking argue on social media about how people should bear some pain for ‘the nation,’ others who depend on daily cash payments have been stuck in interminable lines outside banks. It seems that many people think that the life of the poor is not anyway circumscribed by hardship and pain. Meanwhile, citizens have been told that they can only access a limited amount of their money while the very same public banks into which money is being deposited are being unable to collect loans worth billions from wealthy individuals and corporations. Indeed, it is incredible how large parts of the middle classes and the elites have bought into the narrative that this move is all about fighting corruption and terrorism. Both these issues evoke such emotional and indeed visceral responses that most people are unwilling to think about them dispassionately.Firstly, it is a mistake to think of corruption as one homogenous problem. Indeed it is crucial to separate the high-powered world of rent seeking from the everyday corruption that is practiced by petty officials including bureaucrats, police officers and low-level government employees. It is the latter that affects the vast majority of the population with the former largely being the subject of interminable judicial commissions and sporadic parliamentary and public debates. Then there are instances such as the Vyapam scam, which involved both high and low level officials. The large scale admission and recruitment scam of petty officials perpetrated by an organised network of senior politicians, officials and businessmen, is no longer even whispered about in the corridors of power. It is still unknown just how many people paid kickbacks to obtain a government post. Furthermore it is precisely this level of government servant- food inspectors, teachers, transport officers, forest guards and petty clerks amongst many others- whose corruption affects citizen’s daily lives. It is undeniable that the demonetisation will affect these kinds of officers but it is a gross exaggeration, actually completely wishful thinking, to assume that the move will also affect those big builders, politicians, bureaucrats and government officers whose scale of corruption is nowhere near taking a few thousand rupees to move a file from one desk to another.Tackling the kind of low-level corruption practiced by revenue officers, local policemen and municipal government employees amongst others is a positive step but it would be mistaken to think that demonetisation will eradicate larger-scale corruption from India. Of course there are those who have hoarded large amounts of cash and who will now be stuck as to what to do but for the most part, anyone with half a brain and a large amount of cash will have already laundered it. Gold, diamonds, property and even luxury watches- the ones that do not depreciate-, are just some of the ways in which this money is converted. Another efficient way of laundering money and one that is highly visible across India is by building educational institutions. It is virtually impossible to drive across rural constituencies in any state without noticing the plethora of engineering colleges, polytechnics, law schools, dentistry colleges and teachers training colleges that have cropped up. Most of these places will only have a small number of real students and then have many more ghost students on their rolls who do not really exist but who are phantoms that pay fees. The point is that anyone worth their salt would not only have converted their illegal cash but furthermore would have created ‘legitimate’ businesses in order to protect their assets.As is already abundantly apparent, people have found ways to get around demonetisation and as is usual the poor and those who have kept their life’s savings in cash are getting affected. The going rate in UP for 2000 rupees last week was 1800 rupees. Obviously those conducting these transactions have a way of guaranteeing their profits. Prominent politicians have already started mobilising workers and others to convert old currency for a cash incentive. Money-lenders and others are having a field day converting money for a cut and now there are also stories of bribes being paid in kind rather than cash. The fact is that people will always find ways around corruption when large sections of society are also looking for a shortcut or a way to bypass the system. It is nothing less than na?ve to think that demonetisation will suddenly transform India into a country of upstanding politicians and government servants and even more upright citizens. It is not as if a land registry official or a petty clerk at a government office will stop accepting bribes in the new denominations out of some nostalgia for the old currency. Neither is demonetisation going to suddenly inculcate civic sense where people will happily pay a fine rather than get away with a bribe at a fraction of the cost. In any case, for larger transactions there are always other ways to pay bribes: foreign bank accounts and gemstones being just two.Meanwhile, as the government slowly realizes that demonetisation will have an adverse impact on the upcoming state elections in Punjab and UP, local BJP workers have started to overplay the terrorism card. There is no doubt that terrorist networks often operate with cash so as to not leave a trail behind but the fact remains that these very same networks also have trans-national actors and other states backing them who will merely switch to another currency: real or even virtual, like bit-coins. So the fact remains that while the demonetisation might make a temporary dent in criminal organisations, it is not going to do anything more in the long term. Indeed, the whole terrorism discourse is actually manifesting itself in communal way on the ground where in parts of western UP, which is already largely divided along Hindu-Muslim lines, the presence of women in burqas in bank lines is being deduced as some kind of massive money laundering ploy by ‘terrorist’ organisations.As it happens, most of the people involved in the informal cash economy in Western UP are Muslims and so their families are coming out in large numbers to deposit cash. This is not only being equated with them hoarding black money but also resonates with the old adage that ‘all Muslims are not terrorists but all terrorists are Muslims.’ And so the whispering campaign has begun where common people, frustrated by the demonetisation, have yet again found the mysterious, visible yet invisible ‘other’ onto which they peg their problems, rather than facing the reality that the government’s policies are fundamentally the cause of their current problems. The resentment bourn out of this will no doubt benefit those who are seeking to communalize and divide the electorate as various states go to the polls.Terrorism, by its very nature, is present everywhere and yet nowhere because it is largely grounded in a fear that the terrorist can strike anywhere at anytime. This trope lends itself well to misdirecting people’s insecurities as well as public anger. The spectre of terrorism combined with a false sense of nationalism- the comical equivalence drawn between standing in a bank queue and defending the borders- has meant that people have willingly ignored the cold hard reality of demonetisation and have sought to justify it by invoking emotional and moralistic arguments. Ultimately, demonetisation, like most anti-corruption measures, only adds another obstacle or impasse that has to be negotiated by those who seek to bypass the system. Real measures involve institutional reform but these rarely pay the political dividends that populism, at least in the short-term, guarantees.In enlightened self-interest, political parties must welcome electoral reformAuthor:Publication: The Hindustan TimesDate: November 21, 2016URL: law ministry’s rejection of the Election Commission’s proposal seeking powers to cancel elections if voters are bribed reflects the political class’s opposition to any qualitative change in the electoral system.That the electoral system is not perfect and needs change is a widely accepted fact. But unfortunately successive governments — irrespective of their ideology — have chosen to ignore the issue of electoral reforms. This is not the first time that the government or political parties have rejected such a proposal. Many of the reforms — including those on decriminalisation of politics — suggested by the Election Commission almost two decades ago are still hanging fire. Way back in 1998, it had made a proposal for disqualifying (from contesting election) a person against whom charges have been framed by a Court for an offence punishable by imprisonment of five years or more. The proposal was reiterated in November 1999, July 2004 and October 2006, but to no avail.The case of political parties’ reforms is similar. The EC has been suggesting that legal provisions should be made to regulate the functioning of political parties and it should be empowered to regulate the registration as well as de-registration of political parties. It had also demanded that political parties should be legally required to get their accounts audited annually. The audited accounts should be put in the public domain. There should be transparency in the fund raising and expenditure of political parties. In its 255th report, submitted to the government in March 2015, the Law Commission had recommended that political parties failing to hold internal elections in accordance with its constitution should be de-registered. Demanding powers to enforce internal democracy in political parties, the commission recommended wide-ranging changes in the Representation of People Act, 1951, to ensure this and also to make their funding transparent.Often criticised for judicial overreach, the Supreme Court has done a commendable job on this front in the last 15 years. Be it making mandatory for candidates to declare their assets, liabilities, educational qualifications and criminal antecedents or immediate disqualification of lawmakers on conviction or giving the NOTA option to voters, the top court has enforced many such electoral reforms.However, political parties continue to oppose such moves, including the implementation of RTI. They need to understand that the profile of the average voter is changing very fast. If they overlook the need for change, they run the risk of going against the aspirations of the people and it is in their own enlightened self-interest to clean up their act.Shiv Sena Changes Stance On Cash Ban, Calls It 'Bold And Historic Move'Author: Indo-Asian News ServicePublication: Date: November 22, 2016URL: a complete U-turn in their stance on the currency ban, a delegation of Shiv Sena lawmakers on Tuesday met Prime Minister Narendra Modi and lauded the move as "a bold and historic decision" and assured of their full support.The Members of Parliament, who called on the Prime Minister in his Parliament House office, stated that they are with the BJP-led National Democratic Alliance (NDA)."Our MPs had a good meeting with the Prime Minister. The delegation assured him that we are all in the NDA," a senior party leader told Ino-Asian News Service."Nothing much or politically significant should be read in the Sena participating in the march to Rashtrapati Bhavan with Trinamool Congress chief Mamata Banerjee," he added.However, the delegation led by the party's floor leader in Rajya Sabha, Sanjay Raut, urged the Prime Minister "to make judicious use of the dense network of co-operative banks and allow them to participate in the demonetisation drive".According to sources, during the meeting, Mr Modi also recalled the BJP's long association with the Shiv Sena.The two-page memorandum submitted to the Prime Minister, however, said that the "on-ground situation" in the last 13 days -- since the announcement to ban high denomination currencies -- has become "alarming".The letter signed, among others, by Sanjay Raut and party lawmakers like Anandrao Adsul (Deputy Leader of Sena in Lok Sabha), Chandrakant Khaire and Arvind Sawat, pointed out that as per the government directives, the rural and co-operative banks and credit societies are not eligible to handle currency exchange transactions."A large section of our population, who don't have accounts in nationalised banks, has been put in a precarious situation after this move," the letter said.The Sena also demanded that the banned notes collected by various institutions in the cooperative sector in Maharashtra since demonetisation "be accepted by the nationalised banks".Team Modi Must Plan For These 4 Big Disruptors To The EconomyAuthor: Yashwant SinhaPublication: Date: November 23, 2016URL: Persson was the Prime Minister of Sweden for ten years from 1996 to 2006. Before that, he was Sweden's Finance Minister. Persson was on a visit to India recently and wanted to meet me. We have known each other in the past. The first question Persson asked after exchange of pleasantries was why jobs were not growing in India despite high economic growth. "Is India in the grip of jobless growth?" was his direct question to me. I was aware of this problem generally but had not studied it in detail. I offered some explanation to him, and made some excuses. But later, I decided to make some enquiries and this is what I found.When the Modi government assumed office, it assured the nation that it would create 250 million jobs over the next ten years. This works out to 25 million or 2.5 crore jobs per year. Vajpayee had similarly promised the creation of one crore jobs per year and we had ended up doing better than that. The present government is in the middle of its term and a mid-term review will be useful for the government also.The latest figures of job creation released by the Labour Bureau of the government of India show that in the last quarter of 2015, there was actually a decline in job creation by 20,000 jobs. In the previous quarter, the figure of new jobs created stood at 1.34 lakh, in itself one of the lowest in the last six years. The total number of jobs created in 2015 stood at 1.35 lakh jobs only, compared to 4.93 lakh in the previous year and a high of 12.56 lakh in 2009.Considering that figures of employment generation become available with a considerable lag in our system, one has to depend on other sources to glean these figures. Care Ratings recently carried out a survey of 1,072 companies in India to find out how many jobs were created by them. This figure is most discouraging and generally tallies with the Labour Bureaus figures. It shows that all these companies together created only 12,760 jobs in 2014-15 compared to 1,88,371 jobs the previous year. Employment growth in the manufacturing sector actually declined. The argument that fewer jobs are getting created in the organized sector because jobs are being outsourced does not hold water either. The Labour Bureau figures show that the number of contractual jobs in the January-September quarter of 2015 also declined by 21,000 compared to an addition of 1.20 lakh in the corresponding period of 2014.These figures are sobering. The reasons for this state of affairs are not far to seek. The economy continues to face major legacy problems even after a lapse of 30 months since the present government assumed office. Demand, specially investment demand in the economy, has not yet picked up. As is well known, if demand is sluggish, fresh capacity is not created and fresh investment does not take place. In addition, existing industries are not doing too well either. In July and August, the index of industrial production registered negative growth, and in September, the growth has been a meager 0.7%. The figure of growth for the first six months of this fiscal has declined by 0.1% compared to plus 4% during the same period last year. The stressed loans of banks rose 15% in June to 9.7 lakh crore rupees. These are all legacy problems from the last government, which, naturally, will take time to resolve. As a result, fresh job creation also continues to suffer and will lose its connect with economic growth, specially when such growth is calculated on the basis of value added instead of actual increase in production. This may explain why job creation has not kept pace with high economic growth. But I am sure economists would have more to say on this issue.What is important for us politicians to remember however is that the aam admi is not concerned with theories. He wants results, and if we fail to provide the people with job opportunities in adequate numbers, they will be disappointed. The Indian economy is likely to face three expected disruptions in the near future. The elevation of Donald Trump to the presidency in the US has created uncertainties the full scope of which has not become clear yet and may take months to fully fan out. The US Fed is likely to raise rates in its December review with its deleterious impact on the inflow or outflow of funds from India. The introduction of GST will also lead to some disruption in the domestic market. Since these disruptions could be anticipated, one would like to assume that government would have prepared for them and would take appropriate steps at the appropriate time. But the massive disruption, entirely unexpected, which will be caused to the economy in the short term as a result of demonetization and the question mark which hangs on its long-term benefits is the fourth disruption with which the Indian economy is faced today. Only the future will tell how we shall cope with this disruption. It is also difficult to tell how many out of the four will be creative disruptions with a beneficial impact, and how many will be destructive with adverse impact.There is much that is going right for this government; its ratings are still high despite the short-term inconveniences to the people as a result of demonetization. I am sure those in government are aware of the facts and are taking steps to remedy the situation. However, more needs to be done for the infrastructure, housing and real estate, small and medium industries and self-employment sectors in order to create more employment opportunities which is issue number one in the economy. The policies are already in place. We need vigorous implementation now. I hope that it is done sooner than later. - (Yashwant Sinha is a senior BJP leader and former Union Minister of External Affairs.)'This Is Just Noise': Paytm’s Vijay Shekhar on Criticism of Ban on Old NotesAuthor: Gopal Sathe and Natasha JogPublication: Date: November 23, 2016URL: India grapples with a huge cash crunch, Paytm, which enables digital sales, has made it possible for small shopkeepers to accept credit or debit cards without a swipe or point-of-sale machine.Paytm founder Vijay Shekhar Sharma pointed out that currently, there are only 1.4 million of these machines in India."If there is a smartphone, we can change things," said Mr Sharma to NDTV. In response to the opposition alleging that the ban on 500- and 1,000-rupee notes has crippled most of India, Mr Sharma refuted, “look at the bigger agenda, this is just noise. The pain is for massive gain.”Certainly, Paytm has gained. After the high-denonimation notes were cancelled on November 8, business has been going gang-busters with a reported 7 million daily transactions worth about Rs 120 crores every day. This allowed PayTm to cross its sales target of 5 billion dollars four months ahead of schedule.The latest update to Paytm’s Android app will rescue many small vendors. Here’s how. Even if you don't have a Paytm account (a digital wallet where you have deposited some money), the shopkeeper will generate your bill and then give you his phone to enter your credit or debit card details.Then, you will receive an OTP or one-time password (just like for any online shopping) on your cell phone - enter that into the app on the shopkeeper’s phone, and it will complete the transaction. It is a little cumbersome, but represents a big saving for small vendors such as your local vegetable seller, for example, who will be able to accept payments from your debit card. The OTP protects the info you’ve entered in the shopkeeper’s phone from being misused.PM Narendra Modi In Lok Sabha, Opposition Disrupts House Again Over Notes Ban: 10 UpdatesAuthor: Sunil Prabhu, Edited by Shuchi ShuklaPublication: Date: November 23, 2016URL: Minister Narendra Modi was in the Lok Sabha today and the government said it was ready to discuss the ban on 500 and 1000 rupee notes, but opposition parties continued to disrupt proceedings forcing the House to adjourn till tomorrow. Here are the 10 latest developments:1. The deadlock continues as the government is refusing to agree to a discussion in the Lok Sabha that ends in a vote. It has also rejected the opposition's demand that the Prime Minister speak in the Rajya Sabha, where the government is in a minority.2. "The opposition is demanding that the PM come to the house, he came. Why are they not allowing the house to function?" asked senior minister Venkaiah Naidu, stating that the BJP's "excellent" performance in by-elections yesterday showed that "citizens are happy with this revolutionary step."3. The BJP, Mr Naidu said, "represents the poor of this country and we protected their interest," with the notes ban, aimed at combating corruption, black money and money laundering.4. The opposition has planned protest across the country separately on Monday giving separate calls for demonstrations and marches against the government's move to ban big currency notes.5. Near the Gandhi statue in the parliament complex this morning, about 200 opposition lawmakers led by Congress vice president Rahul Gandhi stood in a single line protest against the impact of the notes ban.6. "We are in a line like the nation is," said Rahul Gandhi, referring to the long queues at banks and ATMs as people have struggled to get new currency amid a cash crunch after the demonetisation, which he called the "the world's biggest impromptu financial experiment."7. The BSP's Mayawati alleged that the "PM does not have the courage to face parliament."8. J Jayalalithaa's AIADMK, which has supported the BJP-led government on many issues in the past, joined 11 other opposition parties in today's protest.9. BJP ally Shiv Sena has, however, had a change of heart and has now described Prime Minister Narendra Modi's ban on high value notes to combat corruption and black or untaxed money as a "a bold and historic decision". Last week they had joined a protest led by West Bengal Chief Minister Mamata Banerjee.10. Mamata Banerjee is back in Delhi for round 2 of protests on the streets of Delhi and is holding a dharna at the capital's site for protests Jantar Mantar today.$88 Billion Of Old Notes Means Cheaper Loans: Centre To Supreme CourtAuthor: A VaidyanathanPublication: Date: November 23, 2016URL: success of the scheme that cancelled 500 and 1,000-rupee notes to fight black money is now visible, the government asserted in the Supreme Court today, stating that the lines of people waiting at banks to get new notes have shortened considerably.Listing benefits of the reform, the government told judges today that as old notes are deposited, "the real advantage is banks will have more money and interest rates for loans will come down." 88 billion dollars of old notes have been deposited so far, Attorney General Mukul Rohatgi disclosed. Last week, the Supreme Court had warned the government that riots could result from the extreme cash crunch that the country plunged into after 86 per cent of the notes in circulation were suddenly withdrawn on November 8.Apart from the top court, petitions have been filed in courts including in Chennai and Kolkata asking for the demonetisation to be declared illegal, which judges have said they will not do because that would amount to interfering with a major government decision.PM Narendra Modi has said the ban on high-denomination notes will attack the root of black money, corruption and counterfeiting. The initiative, while praised for its intent, has created a crisis for rural India which does not have bank access and operates in a cash economy.The centre said that there is no shortage of the new 500 and 2,000-rupee notes and that it is transport problems that are causing some delays in the delivery of new bills to banks.The judges today said that for now, they will not stop other courts from hearing appeals against the reform, but will, on December 2, consider the government's request to club together all the petitions and hear them in Delhi.Cash Crunch Hits Sadananda Gowda as Hospital Refuses to Release Brother's BodyAuthor: Deepa BalakrishnanPublication: Date: November 23, 2016URL: 's not just the common man but Union Minister DV Sadananda Gowda on Tuesday became victim of the hardship of demonetisation scheme which was implemented by his own government on November 8.Demonetisation came as double whammy for Gowda when his brother passed away on Tuesday at Kasturba Manipal Hospital (a private hospital) in Mangaluru and the hospital administration refused to accept the full and final payment in old currency notes of Rs 500 and Rs 1,000 to hand over his brother's body.Gowda finally paid the bill through cheque and took a written declaration from the hospital that they refused to accept old currency notes.Sources told CNN-News18 that the Union Minister has written a letter to Prime Minister Narendra Modi to brief him about his ordeal. "I can understand how inconvenient it can be for people if old currency notes are not accepted at hospitals. Whatever the hospital administration did was inappropriate. A probe may be ordered in the case," Gowda said. The central government has clearly said that all private hospitals are supposed to accept old currency till November 24, 2016. On one hand, the Narendra Modi-led NDA government insists that note ban trouble is for greater good but on the other the drive has caused serious problems for citizens across the country.Prove demonetisation is successful and I’ll chant Modi’s name, says Arvind KejriwalAuthor: Aman SharmaPublication: The Economic TimesDate: November 23, 2016URL: the prime minister can prove demonitisation has unearthed black money, I will clap and chant his name, Delhi Chief Minister Arvind Kejriwal told ET. Speaking at length on Narendra Modi’s attack on black money, the combative Kejriwal, locked in a long-running and bitter political fight with BJP, said the PM’s “ego” is coming in the way of acknowledging “implementation failures”. “The thing is that they have completely botched up and now PM is being guided by ego and stubbornness...and the country has taken a hit,” Kejriwal told ET. “The economy is in shambles.” The Delhi CM said money deposited in banks so far was all white money. “If government can prove Rs 50,000 crore or so of black money has come, I will clap for Modi and stand on the street and shout Modi... Modi...Modi,” he said. Kejriwal also alleged the scheme was a “conspiracy” to write off bad loans of businessmen and said the step was not serving its publicised purpose of tackling corruption and counterfeiting as bribes were already being taken in Rs 2,000 notes and fake notes had been detected. “Let them say the Rs 2,000 notes issued so far will continue to be legal tender but Rs 500 and Rs 1,000 notes be also legal tender for two months till the scheme is brought again with proper implementation... people may forgive you (the PM) then,” Kejriwal said.Demonetisation Rush at Banks has Cashiers 'Weeping', Say Bank UnionsAuthor: Debayan RoyPublication: Date: November 22, 2016URL: massive rush at bank branches to exchange scrapped currency notes post the demonetisation drive has cashiers “weeping” as they end up paying from their own pockets for mistakes committed out of “high level of stress,” bank employee association leaders told News18.“Where there were around 50 to 60 transactions a day, these days there are over thousands of transactions. Cashiers can hardly concentrate in such an atmosphere. Not only are they losing out on personal cash but they also end up accepting duplicate notes,” said JP Sharma, vice president of All India Bank Employee Association.Every employee in a bank these days is a cashier, Sharma said, pointing out that the role of a cashier is one which demands a certain level of expertise. “But fearing angry customers, employees from peon to a manager are working as cashiers, and they often make mistakes while dealing with the crowd which leads to their own financial loss,” Sharma said.According to RBI, various banks across the country has received Rs 5,44,571 crore in deposits and old notes submitted for exchange from the time banks reopened after currency demonetisation till November 18, the Reserve Bank of India (RBI) said. This includes deposits of Rs 5,11,565 crore and exchanged currency notes of Rs 33,006 crore.CH Venkatachalam, General Secretary of the All India Bank Employees Association, claimed he has received thousands of complaints from banking staff across the country post the demonetisation announcement.“There are 10 lakhs bank employees and they have catered to almost 25 crore people in these two weeks. Why is it that only banks and post offices have been involved to disburse cash? The government should have involved railways, LIC office, government offices and this will help people spread across without creating an extra burden on the banks,” he said.The trade union leaders complained that bank managements are not bothered about how the employee seeks to address the disparity in the accounts, which needs to be tallied before they leave office.D Gunasekaran, vice-president of the State Bank Staff Union, told News18 that bank employees often have to resort to desperate measures to mend their mistakes. “Banks will not wait to deduct salaries of cashiers. If the accounts do not tally, then they have to debit their personal account that evening itself or take loan from others to settle the accounts before leaving the bank. In case an official fails to do this, proceedings can be initiated against him,” he said.A lot of the human errors being committed at the teller counters has got to do with multitasking that involves checking forms, identity proofs, veracity of the old notes and then giving back the exchange in new notes. “Every bank knows their regular customers, but now there is a new set of unknown customers who lose their temper and shout at bank officials. Some customers claim that they have not been paid and the cashier is confused. They end up paying the customers twice over. Even the cash management software is adding to their woes by often juggling up entries,” said Venkatachalam.Secretary of the Bank Employees Federation of India, Kolkata, Joydeep Dasgupta, believes that this problem has its root in the large scale of vacancies left unaddressed in the clerical and sub-ordinate sector of the banking industry. Dasgupta told News18 that retired banking officials and clerks have now been called by several banks to fill in the vacancies and help serve more customers.“There are over 2 lakh posts which are yet to be filled from 1987 to 2007. This crunch is being felt now when everyone in the bank is grappling to meet the rising demand of customers looking to either withdraw or exchange their old notes. In this situation cashiers are bound to be under pressure which leads to cash misplacement and their own personal financial losses,” he said.KS Chauhan, Senior Vice-President of the Indian Banks Association, told News18 that although they are not concerned with such complains considering they are a private body but even IBA has received innumerable such complaints from banking staff over the past few days.“The sad part is most of the cashiers have a limited salary and such issues in tallying of account shave direct impact on their personal financial standing,” Chauhan said.Sharma said that Cashiers are also facing the problem of accepting duplicate notes and be held responsible for the same at a later date. The sudden increase in the work load has led to compromises in the ‘vigilance practiced by banking officials’.State Bank Staff Union’s Gunasekaran said that mostly cashiers are incurring losses of Rs 8,000 or Rs 10,000 which they are paying out of their own personal accounts but in the event of a sum larger than 50,000, or 1, 00,000, the higher management would have to be brought into the picture.Engineer with 'black money' stash: Bribes not tabooAuthor: APPublication: The Times of IndiaDate: November 23, 2016URL: engineer was in the middle of his evening meditation session when a colleague called and told him to turn on the television. The Prime Minister was saying most of India's cash would hold no value by morning.The objective was to rid the country of illegal "black money" for which taxes had not been paid. Money often associated with illegal activity such as bribery. Money like the 4.8 million rupees ($70,000) stashed in a steel trunk, under a makeshift settee, in the engineer's bedroom."For first few minutes I could not understand," the engineer said, speaking to the Associated Press on condition of anonymity for fear of prosecution.The engineer, employed by the public works department of Uttar Pradesh, and many of his colleagues had amassed piles of cash by taking bribes for public contracts — a practice so common it has become accepted by many as part of the price of doing business in India. They felt confused — even betrayed — by the government cracking down."A bribe is not a taboo in a government job," the engineer said.Modi, in his November 8 televised address, announced the demonetization of Rs 500 and Rs 1,000 notes, which made up 86 percent of the country's currency. He said it would wipe out rampant corruption, though in a country of 1.3 billion where most people don't have bank accounts, it also wiped out legally collected savings."With this decision we have, in one stroke, hit at the root of the sources of corruption," finance minister Arun Jaitley said a day after Modi announced the demonetization. "We have freed up the country from these sources of corruption."Demonetized currency can be deposited in banks, but immediate access to those funds is severely limited and the government said it will severely penalize those who deposit amounts that don't match their income. Anyone depositing more than 250,000 rupees ($3,700) over the next two months will be flagged for tax inspection.On the phone with friends, the engineer said, "I sensed desperation in their voices. I knew they also had bribe money" in amounts high enough to raise red flags.Did he feel shame, or guilt? No."Taking this extra money as commission is a necessity" just to meet expected payments and to advance in one's field, he said while calmly sipping whisky and adjusting the light from an overhead chandelier by remote in his home in Lucknow.Each festive season, he said he's expected to offer costly gifts like wristwatches, fine suits and gold pendants to his superiors, and even their sons. "One needs to keep them happy. ... but would you expect me to give a gift from my salary? No, never."The engineer said the bribes he accepts are most often already written into price estimates for projects like road construction as a so-called commission. "You do not have to ask for it," he said.Illicit money changes hands at nearly every project stage, from the public tender to completion. Almost everyone benefits from the "commissions," from the highest ministers to the rank and file, he said."What I get as bribe is nothing compared to what others take," he said, noting the palatial homes near his more modest house in an up-market Lucknow neighborhood. "I have a small hatchback car while others roam around in sedans and SUVs. Don't our superiors notice this?"Graft in India is so accepted that it is out in the open. On September 4, another Uttar Pradesh bureaucrat named Ashok Kumar told reporters in the town of Basti, southeast of Lucknow, that he was giving up on becoming a district magistrate because he did not have 7 million rupees ($103,000) to pay the bribe. Kumar was suspended from his job in the National Integration Department after making the statement, though he never revealed who would have been taking that bribe.The fight against corruption has been frustrating for retired bureaucrat SP Singh, who spent more than 30 years in India's civil service trying to rid government departments of graft."The tendency to take bribe stems from a desire to have best in life," he said. "The lure of lucre is so intense."Part of the problem, he said, was that politicians were in cahoots with bureaucrats to keep bribery schemes secret. "A bureaucrat helps an illiterate politician in making money by bending rules. Acting as conduit, he ends up thinking, if a minister can make money why not he," Singh said. "The rot has set in."On Tuesday, Modi lambasted critics of the demonetization drive by saying they want graft to continue."Values in public life are eroding... I see that people in public life are giving speeches in support of corruption and black money. They are brazenly out in open doing so. In any country, erosion in values is the biggest crisis," he said during a book release event in New Delhi.Yet there are doubts about whether the demonetization drive will truly make an impact on corruption and tax evasion. India's underground economy is so big it accounts for up to a quarter of the country's gross domestic product. And many of those possessing piles of black money have come up with ways to save much of it without drawing government attention.Some have bought gold, sending gold prices soaring. Some were buying US dollars or euros. Some have used cash for down payments on new apartments, with obliging real estate firms back-dating the invoices to before the currency overhaul. Some have bought expensive first-class train tickets to be canceled later for cash, once enough new notes are printed.The engineer, despite his initial panic, said he did manage to find a way to launder his savings. What was it? He won't say.Demonetisation: Are the poor really suffering?Author: Krishnamurthy Subramanian, Prasanna TantriPublication: Date: November 23, 2016URL: advocating the difficulties faced by the poor are being disingenuous in pushing their claims for political gainsIn the political battle that has emerged out of the demonetisation exercise, both proponents and opponents are ostensibly defending the interests of the poor. Some politicians are relying on anecdotal evidence to advocate the difficulties being faced by the common man. We instead use data from the National Sample Survey Organization’s (NSSO) survey to estimate such difficulties faced by the poor. The survey provides estimates of earnings in cash and kind by different income categories. We use the survey data for 2011 which comprised approximately 500,000 individuals across the country. Our estimates suggest that the poor are likely to have visited a bank branch at most once to exchange their earnings in the old currency notes to new currency notes. Thus, we infer that the politicians advocating the difficulties faced by the poor are being disingenuous in pushing their claims for political gains. To estimate the above, we make the following arguments. First, the poor are unlikely to have substantial savings stored in Rs500 and Rs1,000 notes. Second, the bottom half of the population ends up spending almost their entire earnings on consumption. Third, only two weeks have passed since the demonetisation was launched on 9 November. Therefore, the weekly earnings of the bottom half of India’s income earners provide us the estimate of the cash that the poor would have in their kitty, which they would have to exchange in a nearby bank or post office. Finally, since the survey was conducted in 2011-12, we inflate the earnings by the average rate of inflation per annum during the period from financial years 2011-12 to 2016-17. This is likely to overstate the earnings of the bottom half of the population because, unlike salaried individuals and other richer sections of society, the earnings are unlikely to get adjusted for inflation in a consistent manner. However, the overestimation of earnings would only reinforce the bias against the inference that the poor are likely to have visited a bank branch at most once to exchange their earnings. As the adjoining table clearly demonstrates, the bottom half—be it rural workers, daily wagers, weekly wage earners, or fortnightly wage earners—earn less than Rs1,350 per week. In fact, even the bottom half among the urban population earns at most Rs1,970 per week. Even if the bottom half of the population has saved up to two weeks of their earnings, the amount they have to exchange will be less than the Rs4,000 limit that was set by the government in the first week. The above inference assumes that the daily, weekly or fortnightly wage earners were fully employed in the past several weeks so that they could not only earn enough for their consumption but also to save. In practice, such wage earners are chronically underemployed. As a result, the total cash in the hands of the bottom half is likely to be less than Rs4,000. Thus, it is quite clear from this data that the bottom half of the country’s population would have by now visited the local bank or the local post office at most once to exchange their old currency.This conclusion then suggests that the long queues seen stem from two sections of the population: (i) people from the top half of the country’s income distribution, i.e. the richer folks, who want to exchange their honestly earned savings for new currency; and (ii) people who are acting as agents for the dishonest. The significant decrease in the queues after the government decided to use indelible ink to identify people that have exchanged their currency suggests large presence of the second category of people.Beyond doubt, the former category is inconvenienced and the government and the Reserve Bank of India should take all steps to ease their difficulties. But this category comprises people from the top half of the country’s income distribution, certainly not the poor. In contrast, those from the second category who stand in the queue are only making efforts to earn a premium from the dishonest, who are willing to pay them such premium to convert their black money into white. No politician who genuinely wants the country to clean up the black money menace should sympathize with the latter category. After all, they are abetting the dishonest in evading the legitimate tax and penalty.With respect to the difficulties that the country’s poor are likely to face till 30 December, note that around seven weeks of earnings are left before the deadline for depositing the demonetized notes. So, based on the estimates provided in the adjoining table, the maximum cash earnings of the bottom half would be around Rs8,000. Even if we suppose that they will be paid entirely using old currency till December, at most two more visits to the local bank or the local post office would suffice to deposit their old currency. Of course, it is quite likely that these workers refuse to accept their wage in old currency. In that case, they would not need to make the visit at all. As workers in this income category are likely to have been underemployed sometime in the past, they would have a bank account to receive Mahatma Gandhi National Rural Employment Guarantee Act payments. Therefore, future wage payments can be made via cheque by honest employers. In this case, such workers may have to visit the bank once to encash the cheque.Note, we are not arguing that poor people are not facing difficulty because of demonetisation. Of course, standing in the queue for a day can mean loss of a day’s earnings for the poor. However, using the large sample data and careful analysis, we would like to highlight the exaggerated claims of disingenuous politicians who profess to be fighting for the poor.- Krishnamurthy Subramanian and Prasanna Tantri are associated with the Indian School of Business.Kejriwal caught spreading false information again to hurt demonetisation driveAuthor: OpIndia StaffPublication: Date: November 22, 2016URL: the country progresses in the era of demonetisation, there has been no shortage of rumour mongering as was continuously reported by us [1] [2] [3]. One of those who appear to have emerged as the front runners in rumour mongering to spread panic among the masses is Arvind Kejriwal and his supporters.We did a piece recently exposing how AAP on 13th November used news clips of 2015 in order to spread panic among the people. The news piece from 2015 reported how RBI planned a mass leave on 19th November 2015 to protest against Modi Government’s alleged intrusions. Posting such a news just before 19th November 2016 exposed AAP’s intent, i.e. to make people believe this is a recent news.AAP’s supremo Arvind Kejriwal later went a step ahead and shared a picture of an alleged poor bank customer who had killed himself out of utter frustration of being unable to withdraw cash. The truth however was that the man was a bank robber and committed the act after he was trapped by locals. The tweet which Kejriwal shared was later deleted, the twitter account of Youtuber Abhishek Mishra who was the brain child behind the rumour was reported to the cops and the account was deactivated, yet Kejriwal’s false tweet exists and he has not apologised for his lies.After getting repeatedly exposed and panned heavily, one might feel that Kejriwal would have learnt his lesson and would finally stop spreading false news. But today he tweeted this story from a little known site:-------------------------Arvind Kejriwal @ArvindKejriwal????? ?????? 6000 cr ??? ???? ?? ????, ?? ??? ??? ??????? ????? ?????SBI to give $1-billion loan to Gautam Adani 22, 2016-------------------------The allegations that the Government might be using the demonetised cash and bank deposits to fund crony capitalism were pretty severe. But Kejriwal’s tweet was fully exposed on social media:News from 2014AAPtards made a site resembling India Today-------------------------Ankur Singh @iAnkurSinghKejriwal uses it to Lie Modi is giving loan to Adani from #Demonetisation money pic.BCdrYeWXOGNovember 22, 2016-------------------------This was a fraud of epic proportions. First of all, the news of SBI proposing to give a loan to Adani was from 2014 as noted from the Indian Express article. Presumably some miscreants made a clone site of India Today in which they passed off this old report as news from 4 days ago. It might be noted that ‘’ to the unobservant eye might easily have passed off as Indiatodaylive, thereby giving credence to Kejriwal’s tweet. Not just that, Kejriwal even retweeted a tweet by an AAP-leaning journalist which shared the same news.When we last checked, the site had changed the date of the article to November 18, 2014, thereby completely back-tracking. The journalist too had deleted his tweet carrying the misleading news. Yet Kejriwal still believes and has already spread the rumour that this news is as recent as 4 days back.Kejriwal’s tweet is intact. Just like the earlier case where Mishra, the original tweet and tweeter both have disappeared but Kejriwal’s tweet remains. Because his job is to spread rumour, not spread the reality?The 2nd level of this fraud by Kejriwal and the site is the fact that way back in April 2015 itself, it was reported that this proposed loan from SBI to Adani had not materialised.So try to gauge the extent of Kejriwal’s lies: He blindly trusts an unknown site which posted a 2 year old news item as a recent one. He uses this to link the news to demonetisation to incite the public. The site back-tracks but Kejriwal is firm. The underlying news event which was supposed to have happened, never happened. And Kejriwal’s blind followers have lapped it up and are posting this news as fact on every social media forum.Can this be a coincidence? AAP shares a 2015 news report. Kejriwal shares a hoax death tweet. Kejriwal again shares a 2014 news item which never happened. In all three cases neither AAP nor Kejriwal retract or offer any apology.Are these honest mistakes? Or is this a plan? Is this the next progression from Kejriwal’s “Is it true” campaign? If so Indian politics may have just descended into very dark days.How Indian media tried to link every issue in the world to DemonetisationAuthor: S Sudhir KumarPublication: Date: November 22, 2016URL: “Demonetisation may hit fee reimbursement” screamed this front page headline of The Hindu on Nov. 21st . They were alluding to the fee the Telangana state government has to reimburse for all engineering colleges in the state. To save you the pain of reading through the whole report, here is the summary:* State government owes more than Rs 2000 crores to engineering colleges from the last 2 years.* It has recently released ~Rs 250 crores only.* It has promised to release ~Rs 600 crores “soon”.* In a totally unrelated topic, the report states that the state government is claiming losses to the tune of ~Rs 2000 crores due to demonetisation.* The Hindu is therefore running a story that demonetisation will impact further payments!The sheer logic behind running this story boggles the mind. This problem has been pending for more than 2 years and amounts were not even released in hay days. In fact, there was the exact same problem back in 2012 too! It looks like the latest fad in town is to blame all teething problems to the demonetisation drive!“Telangana set to lose Rs 2000 crores per month” – screamed the front page headline on November 11, 2016. However, on November 16, 2016, the same newspaper, The Hindu had a front page report that told us that Telangana is losing ~ Rs 1000 -Rs 1250 crores per month.So what changed from the 11th to the 16th? Upon reading the headline on 16th, one would assume that the change is because of the cut in expenditure. But a detailed reading of the report tells us that nothing changed from the 11th to 16th! Both the times there is a reference to the CM talking to the governor once, with “supporting statistics”. It looks like a mere miracle that the losses came down by a whopping 50% in just 5 days, without doing anything! Perhaps we wait for a few more days, and this problem is gone then?“Demonetisation: Severe cash crunch compels citizens to seek psychiatric help”, screamed this headline of First Post. The first case study itself sent me into a tizzy. Let me summarise it for you (all emphasis mine):* A student went to a renowned psychiatrist* He felt “tormented” because his dad didn’t give him his weekly pocket money of Rs. 1200/-.* He claims he cannot drink tea or eat a snack. Neither can he borrow because he has already piled up on debt.First of all, it beats me why anyone would want to carry high denomination notes to drink tea in canteen. Secondly, if a student who despite getting Rs.1200/- per week has piled up debt in college canteen, then he needs to go see a financial adviser and not a psychiatrist! Thirdly, it does not mention anywhere that the student approached the doctor only because of this *crisis*.The article goes on to mention another case study, because of the impact of marriage planning. This sounds like a genuine problem, given how anxious we can get during marriage, even in good times! The article then stops giving any more examples and merely talks about “most cases”. To top it all, we also come to know that psychiatrists are thinking that the “fabric of trust” in this country is breaking because of demonetisation!Modi’s demonetisation of old 1000 and 500 rupee notes, a blunder in every imaginable way” screamed the headline (headline has been changed later) in Economic Times. I read through the article. It is based entirely on hearsay. Sample these points:* Over 90% of the transactions in India are cash transactions,* More than 90% of the cash in India is not black money .* As per a recent estimate, only 6% of black money is kept in the form of cash.The “Recent estimate” of 6% was from another news report from Hindustan times, which was interpreting this data from IT raids in the past one year. The 90% has been pulled out of thin air, and random conclusions that link this with what Mao did to sparrows in China are being thrown at the readers!What do you do when you run out of pictures? Use them again! Take a look at the image below.The whatabouttery of the image is baffling too. I can walk into a jewellery shop at 10 am any day and can click a picture of an empty shop! Secondly, the headline on Nov 15 says that “Small traders hit hardest”. How come jewellers are now “small traders”? If buying gold was another way to get rid of black money, isn’t it a good thing that this is being moderated now? But no, the papers won’t tell you that!“Revenge No Development Strategy” – screamed this headline on Times of India. I was desperate to read some articles that talk about alternatives to the current move announced by Prime Minister Modi. This article was mentioned on an MP’s timeline, so I checked it out. After doing some comparisons with countries like Pakistan, Vietnam, North Korea, Zimbabwe etc, the author tells us that “Modi also chose an odd moment to attack corruption, which appeared to be in retreat.” Whoa, retreat? The source of this information is the “rebound” in our rankings from being the 95th most corrupt country to 76th! Nice job, let’s pat ourselves on the back and go back to citing these numbers to the people of the country!Apart from the privatisation of banks (I still don’t know how this will help control black money, because the author just mentions it as the only good idea and doesn’t discuss further!), we get to read about another possible way. “There is also a better way to downsize the black economy, which Modi’s government tried but with underwhelming results.” He tells us that Indonesia’s income declaration scheme imposed only a 4% tax on black money, so a lot more was recovered. Now – the headline makes sense! Don’t think about revenge on those poor black money hoarders! Let’s perhaps molly coddle the black money hoarders into getting them to pay much much less tax than what the salaried class pays!Apart from the shameful coverage of linking many unfortunate deaths to this demonetisation drive, the media is also trying to whip up passions across a section of the society by writing such contradictory, sometimes meaningless articles in their publications! Nothing better was anyway expected from the English media. As a parting shot, take a look at the image below, with the caption –“Vendors at Musheerabad Fish market in Hyderabad wait for customers”.Is it just me, or do you also not see any “vendors” in the picture?Post demonetisation, whopping Rs 21,000 crore deposited in Jan Dhan accounts; max from WBAuthor: IANSPublication: ABPLive.inDate: November 23, 2016URL: demonetisation, a whopping Rs 21,000 crore has been deposited in Jan Dhan bank accounts.The money has come in after November 8 when Prime Minister Narendra Modi declared 500 and 1,000 rupee notes would no more be legal tender.The maximum deposit was reported in West Bengal, Finance Ministry sources said on Wednesday.A total of 24 crore bank accounts were earlier opened in the Jan Dhan financial inclusion scheme so as to link every household with a bank account.Seeking to close all the gaps for people to turn their black money into white, the Finance Ministry had warned against using others’ accounts to hoard cash and said that those allowing his or her account to be misused would face prosecution.“It is hereby clarified that such tax evasion activities can be made subject to income tax and penalty if it is established that the amount deposited in the account was not of the account holder but of somebody else,” the ministry had said.Also the person who allowed his account to be misused for this purpose can be prosecuted under the Income Tax Act.Earlier in the day, all the banks were directed not to take the old Rs 500 and Rs 1,000 notes as deposits in the small savings schemes with immediate effect.“The government has decided that subscribers may not be allowed to deposit demonetised currency in small savings schemes.“Banks are, therefore, advised not to accept the old Rs 500 and Rs 1,000 notes for deposits in small saving schemes with immediate effect,” the RBI said.The small savings schemes include Public Provident Fund (PPF), Post Office Saving Schemes, National Savings Certificates (NSC), Senior Citizen Savings Scheme (SCSS) and Kisan Vikas Patra (KVP) among others.Naked man caught screaming 'Modi Modi' at CST railway stationAuthor: mid-day online correspondentPublication: Mid-Date: November 23, 2016URL: a bizarre incident, a naked man, on Tuesday night was spotted at Chhatrapati Shivaji Terminus (CST) railway station allegedly chanting 'Modi Modi'.The incident ocurred at around 8 pm at night. Onlookers were horrified at the sudden sight. According to a Twitter user, the guy was apparently chanting Narendra Modi's name.The reason for his misbehaviour is unknown.When mid-day contacted Central Railway PRO, A.K Singh, he said, "I have no knowledge of the incident."Prime Minister Narendra Modi, on November 8th announced the big demonetisation news which has kept the country on its toes for cash exchange, withdrawals and deposits.Duplicity of CPI-M – Want to save Co-Op Banks in Kerala but want action on them in West BengalAuthor: Team PGurusPublication: Date: November 22, 2016URL: CPI-M taking opposing sides at the same time on the same issue?CPI-M has often shown to be using different yardsticks while ruling Kerala and as an enervated opposition in West Bengal. The latest saga is after demonetization. In Kerala the majority of the Co-Operative Banks are the control of ruling CPI-M and these banks have lost secrecy and cannot exchange cash due to demonetization. The CPI-M is hell bent with protests for saving the autonomy to Co-Operative Banks and the entire state cabinet led by Chief Minister Pinarayi Vijayan staged a dharna (protest) in front of the regional RBI office urging for autonomy and non-control on Co-Op Banks. This protest march was inaugurated by the Party General Secretary Sitaram Yechury. CPI-M MPs met the Prime Minister and Finance Minister for exemptions to the Co-Operative Banks in Kerala, while the party’s MPs from West Bengal shot off letters to all authorities to control and probe and even block the money in the Co-Operative Banks, allegedly stashed by their rival party Trinamool Congress.But in the same week, CPI-M’s West Bengal leaders wrote to the Union Finance Ministry, Reserve Bank of India and several investigative agencies to control and probe the deposits in the Co-Operative Banks in the state. The accusation was that the ruling Trinamool Congress is parking black money and conducting hawala operations in these Co-Operative Banks.This funny situation played out in the Parliament as CPI-M MPs met the Prime Minister and Finance Minister for exemptions to the Co-Operative Banks in Kerala, while the party’s MPs from West Bengal shot off letters to all authorities to control and probe and even block the money in the Co-Operative Banks, allegedly stashed by their rival party Trinamool Congress.CPI-M Deputy Leader in Lok Sabha Mohammed Salim went ahead and wrote to the RBI and alleged that every Co-Operative Bank in the state was conducting black money operations and stashing illicit funds.Now CPI-M General Secretary Sitaram Yechury has come out with a curious explanation that Kerala’s Co-Operative Banks controlled by them are like angels and West Bengal’s Co-Operative Banks controlled by the rival Trinamool Congress are like demons! In ruling Kerala, demonetization is a pain and in West Bengal it is joy for the CPI-M.The fact of the matter is that the Co-Operative Banks are totally controlled by political parties and they are not observing RBI or Banking or any Income Tax norms. There is no transparency in the deposits or accounting pattern or administrative procedures in the Co-Operative Banks. It is time to bring them under the rules of Banking and prevent money laundering and parking of unaccounted money. In ruling Kerala, demonetization is a pain and in West Bengal it is joy for the CPI-M.This is not just limited to the CPI-M. Can Sharad Pawar explain why he was supporting demonetization on November 9th only to oppose it a few days later?Note: 1. Text in Blue points to additional data on the topic.21 lakh tea, jute workers set to join banking systemAuthor: Pratim Ranjan BosePublication: The Hindu Business LineDate: November 22, 2016URL: has come as a blessing in disguise for nearly 21 lakh tea and jute mill workers in Assam, West Bengal and Andhra Pradesh. Their wages will now be credited to their bank instead of being paid in cash. Following the demonetisation, 80-odd jute mills in India started using the banking channel to transfer fortnightly salaries of the nearly 3.7 lakh workers.An earlier account said only five of the 62 mills near Kolkata were paying via banks. West Bengal accounts for 75 per cent of India’s jute goods production.“It’s a transformational change,” Raghavendra Gupta, Chairman of the Indian Jute Mills Association, told BusinessLine. “We have already cleared 50-60 per cent salaries. The rest will be cleared this week,” he said. Earlier, the industry blamed workers for not giving bank details. Statutory duesAsked if transparency in payments would help mitigate issues related to non-payment of statutory dues, Rao said there have been no fresh cases over the last five-seven years. The organised tea industry has been citing the remoteness and inadequacy of the banking network for making cash payments to 12 lakh workers in Assam and five lakh in Bengal. However, a joint initiative of the Assam Government and the Centre is set to put an end to the practice. ATMs in tea estatesThe Assam government has ordered over 800 tea estates to open accounts for all tea workers by December 5 and asked banks to establish ATMs/micro-ATMs in tea-growing regions by December 15.Though the West Bengal government didn’t take such an initiative, banks held meetings with nearly 300 organised tea producers in the State with a similar mandate. “We had a meeting with tea producers in North Bengal last week. We will use the banking correspondent network to open accounts and micro-ATMs. A mobile ATM will also be deployed,” said Pawan Bajaj, Managing Director and CEO of United Bank of India. UBI accounts for nearly 30 per cent of the banking services in West Bengal and the North-East. Welcoming the move, Azam Monem, Chairman of the Indian Tea Association (ITA), said the tea industry was ready for bank transfer, but felt banks might not find it easy to extend the services in remote areas by the December 15 deadline.“A majority of tea workers don’t have accounts due to the poor banking network,” he said.How will India destroy 20 billion banknotes?Author: Soutik BiswasPublication: Date: November 23, 2016URL: 's central bank will have to destroy, by one estimate, some 20 billion "expired" banknotes after it scrapped two high-value denominations - the 500 ($7.60) and 1,000 rupee notes - this month to crack down on "black money" or illegal cash holdings.To give some idea of the amount of the currency that represents - there were more than 90 billion banknotes in circulation in India last March.Most central banks destroy soiled and mutilated banknotes on a regular basis and replace them with new, crisp ones.The Reserve Bank of India, similarly, shreds such notes and makes briquettes of them. But they are not your usual briquettes.* India rupee ban: Currency move is 'bad economics'* Can India's currency ban really curb the black economy?* How India's currency ban is hurting the poorBriquettes - usually made of farm waste in India - are used for cooking, lighting and heating. They are cheaper than coal, have lower ash content, are less polluting, and easier to store and pack. They are mostly used as fuel in factory boilers.But briquettes made out of shredded cash are brittle and serve no such purpose, a senior central bank official told me.So the bank's 27 shredding and briquetting machines in 19 offices across India will now snip the expired banknotes into the smallest of pieces and the resulting briquettes will be then dumped in India's vast landfills.Sometimes the shredded currency is also recycled to make files, calendars and paper weights and ballpoint pen shells, tea coasters, cups and small trays as souvenirs for guests.The practice is similar in the US: counterfeit banknotes are sent to the Secret Service, while unfit notes are shredded and sent to landfills or given away as souvenirs to the public touring the Federal Reserve Bank.Central bank officials believe shredding 20 billion banknotes will not be a huge challenge. In 2015-16 the Reserve Bank of India destroyed more than 16 billion soiled notes. More than 14 billion were removed in 2012-2013 after nearly 500,000 fake notes were found in the system."Destroying so much cash is not a challenge because we have enough shredding and briquetting machines with very high capacities. These are automatic machines which shred the cash into the finest of pieces," says an official. So, India's mountain of expired currency will soon become rubbish, literally. Cash in India* India is the largest producer and consumer of currency notes after China* Banknotes in circulation have increased from 124 million in 1935 to more than 90 billion in 2016* Early currency in form of IOUs and promissory notes issued by banks and royal courts began in India in the late 18th century* Use of government paper currency began in 1861* The Reserve Bank of India took over money supply operations in 1935* Indian currency notes were printed in England until the late 1920s* India has four presses printing banknotes and four mints for making coinsTone Down Praise Of Notes Ban, Allies Warn Nitish KumarAuthor: Manish KumarPublication: Date: November 23, 2016 URL: Kumar's fast and frequent praise for Prime Minister Narendra Modi's ban on 500 and 1,000-rupee notes has upset both his allies, the Congress and Lalu Yadav.Earlier this week, Mr Kumar, who is the Bihar Chief Minister, flexed some flourish when he said the PM "is riding a tiger" to crackdown on tax evasion, forgery, and counterfeiting.Mr Kumar has annexed a disclaimer to his public compliments for the PM's outlawing of old notes, stating that the long lines at banks and the despair in rural India which suddenly finds itself cashless is problematic.The fine print has not appeased the Congress, which is the most junior of the three parties that compose the Bihar government. Ashok Choudhary, who is a minister and heads the Congress in Bihar, warned today, "Nitish kumar should be more frank on this issue. We are in this government on the basis of the high command's orders. We can also pull out if they order that."The Congress has hosted several meetings of opposition parties in Delhi to coordinate a combined attack on the government in parliament over PM Modi's decision. All parties say that though they condemn black money, the reform is poorly planned and incompetently executed. The cancelled notes formed 86% of the cash in circulation. New high-denomination bills of Rs 500 and Rs 2,000 are in short supply, and less than half of the country's ATMs are able to dispense them.Sources said that top Congress leaders including Rahul Gandhi and Gulam Nabi Azad who has charged PM Modi with introducing "India's biggest economic decision" without consultation, have conveyed to Mr Kumar that he must employ stronger language to condemn the hardship caused by the notes ban.More problematic for the Chief Minister is the reported anger of Lalu Yadav, whose party won the most seats for the alliance. Lalu, as he is known, has said the PM's attempt will fail in checking black money, and is upset with Mr Kumar's declaration of his "full support" to Mr Modi.While the Chief Minister has complimented the PM, his party's top leaders and parliamentarians have participated in the protests in Delhi against demonetization. Sources close to Mr Kumar say that he believes that the PM's move is largely supported by the public, which is why he does not want to attack it. At the same time, he has been careful to say that farmers and the poor must not suffer, allowing him to have all bases covered.Five upsides of Narendra Modi's demonetisation moveAuthor: Manish SabharwalPublication: Date: November 21, 2016URL: most crucial and long-term impact of the move to demonetise high-value notes will come in the form of a re-legitimisation of the rule of lawSince the 1970s, India has been stuck in a low-level equilibrium with large transmission losses between how the law is written, interpreted, practiced and enforced. This ‘sense of humour’ about the rule of law has been dissolving since economic reforms began in 1991, but suffered its biggest blow on November 8 this year with the central government’s move to demonetise high-value currency notes (Rs 500 and Rs 1,000) and the consequent requirement that such notes be deposited in banks or exchanged for new ones.Of course, demonetisation is only one of the many steps that are needed to end black money, but it is an important step that has at least five upsides vis-à-vis productivity and wages, cost of real estate and money, terrorism and crime, corruption and rule of law.Former chief economist at IMF and professor of economics at Harvard University Kenneth Rogoff’s book The Curse of Cash is clear that high-value paper currency is responsible for many of today’s intractable problems. He believes that moving to a society in which cash is used less frequently, and mainly for small transactions, will have a positive impact on corruption by public officials, terrorism financing, the drug trade, tax evasion, human trafficking, informal employment, money laundering and extortion.Rogoff believes that physical cash is still the most preferred for criminal activities because of its anonymity, portability, liquidity, and near-universal acceptance. Since 80 percent of physical cash is in $100 notes in the US, and since a million dollars in $100 bills weigh just 10 kg and can fit into a shopping bag, he says getting rid of the denomination will make it harder to count, verify, handle and store large amounts. According to Rogoff, physical cash is used far more for illegal activities than for legal ones and he advocates a “less-cash” society, although not a cashless one.His works have important implications for a country like India, so let’s look at five upsides of the recent demonetisation move:Productivity and WagesIndia’s problem is not jobs but wages; anybody who wants a job has one, but not the wages he or she wants or needs. The war on black money has big positive implications for India’s formal jobs because 100 percent of net job creation in the last two decades has happened in small, low-productivity enterprises; of India’s 6.3 crore enterprises, 2.4 crore do not have an office or address, only 85 lakh have any form of tax registration, only 11 lakh pay the mandatory provident fund, and only 18,000 companies have a paid-up capital of more than Rs 10 crore.If you rank manufacturing companies by size, firms at the 90th percentile and 10th percentile have a difference in productivity of 22 times. Productivity comes from the access to talent and credit that comes from formalisation. Over the next decade, I anticipate that the number of enterprises in India will decline by over 50 percent, ending the self-employment that is self-exploitation, and low-productivity informal firms that operate in cash. The US economy is more than seven times the size of India’s, yet enterprises there number only a third of that in India as informal enterprises find it hard to exist and exploit workers.Price of Real Estate and MoneyIndia has long mispriced land and money. Analysts like Saurabh Mukherjea of Ambit Capital suggest a huge decrease in the price of both; he believes India’s low rental yield of 2 percent reflects our black economy because globally, rental yields and borrowing rates are similar. He estimates that rental yields will double as the price of residential real estate halves. This is important for labour migration. At a recent job fair, a job seeker told me: “Give me Rs 4,000 in Gwalior, Rs 6,000 in Gurugram, Rs 9,000 in Delhi and Rs 18,000 in Mumbai; my bags are packed, so tell me where you want me to go.”This purchasing power parity model reflects a massive divergence between real and nominal wages and is an outcome of mispricing real estate in big cities. The coming cratering of real estate will be wonderful for labour migration, low-rental and low-cost housing. This mispricing extends to money; we have among the highest nominal and real interest rates in a world that is awash with capital and has $13 trillion of government debt trading at negative interest rates.Saurabh also estimates the shift from black to white savings (banks received over Rs 3 lakh crore in deposits in the first seven days of demonetisation) could reduce our interest rates by 350 basis points (one basis point is one hundredth of a percentage point). Ending the mispricing of real estate and money is wonderful for entrepreneurship, global competitiveness and job creation.Terrorism and CrimeFor somebody born and brought up in Kashmir, like me, it has long been obvious that a huge amount of terrorism is financed from across the border and Pakistan is a huge source of counterfeit notes. It is also clear that a huge amount of the drug trade, extortion, kidnapping and other forms of crime are conducted, lubricated and amplified by physical currency. The Financial Action Task Force—an inter-governmental organisation that develops policies to combat money laundering—in an October 2015 report titled ‘Money Laundering through the Physical Transportation of Cash’, estimated the amount of physical cash involved in crime to be hundreds of billions of dollars globally. Demonetisation greatly disrupts the financial supply chain of criminals and terrorists. CorruptionBesides the informal sector, the biggest source of black money is corruption. It is important to acknowledge that the demonetisation of high-value notes does nothing to cut the roots of future corruption; that needs a re-imagination of the state, with lower ‘regulatory cholesterol’; a new citizens’ interface (paperless, ‘presence-less’, and cashless), lower discretion, massive improvements in the ease of doing business, better urban infrastructure and much else.Demonetisation will force political parties to think creatively about financing and create the grassroots and retail funding machinery that, political scientists suggest, creates more accountability and political participation than wholesale financing by interest groups.Rule of LawThe most long-term and highest impact of the demonetisation comes in re-legitimising the rule of law. Black money is the biggest enabler of mutilating law enforcement and this decision simultaneously influences the supply and demand of discretion. A society that is based on rules is richer than one based on deals, but that is possible only if you dry the swamp. The biggest impact of this action is changing the norms of what is expected, accepted and acceptable. A society’s norms and values—what philosophers call unacknowledged legislation—are much more powerful than legislation and there is nothing cultural about black money. We don’t have to be Western to be modern.Ending black money is not a bulb that goes on suddenly, but a gentle sunrise; this needs a number of statistically independent and genetically diverse tries. De-notification builds on new legislations—Black Money Act, revamp of the tax treaty with Mauritius, Benami Transactions (Prohibition) Bill, GST, TDS/PAN requirements, etc—and financial inclusion (Jan Dhan, Aadhaar, direct benefit transfer, mobile banking, Universal Payment Interface, Bharat Bill Payment System, new bank licences, etc). Future possibilities include a cap on cash payments, tax on cash payments, re-registration of properties, applying big algorithms to consumption and savings data and much else.Mahatma Gandhi once said that the gap between what we know and what we do could solve our problems. After decades of rhetoric, decisive action on black money, however painful, bridges the gap Gandhi talked about. And, as a lawyer, he would have been delighted with the end of India’s sense of humour around the rule of law. - (Manish Sabharwal is chairman, TeamLease Services. Views are personal)Currency reform: a risky natural experimentAuthor: Niranjan RajadhyakshaPublication: Date: November 23, 2016URL: reform is a game-changer in the true sense of the word, even though the immediate impact may be negativeThe popular quip being circulated in social media is on the money: India has seen an exponential increase in the number of economists ever since Prime Minister Narendra Modi announced his decision to withdraw banknotes of high value. There has been a gush of commentary on the impact this will have on the economy. Some of the best economists have jumped into the fray. Meanwhile, the hardship borne by ordinary citizens is undeniable. Professional economists have a good reason to keep a close watch on the evolving situation. The currency reform is a great example of what economists call a natural experiment—albeit risky one. It is a sudden exogenous shock that completely alters the way participants in an economy take decisions. Such natural experiments usually offer rare insights into the economic process. They are analysed using statistical techniques that are not used in more normal times. Hence, how this decision plays out over a longer period of time needs to be watched carefully rather than jumping to quick conclusions.Here are a few broad issues that deserve immediate attention.First, the decision to withdraw old banknotes of high value has disrupted the monetary base in India. Currency in circulation accounted for 80% of the reserve money in India on 11 November. Some 86% of this currency in circulation was in notes of Rs500 and Rs1,000. So, the withdrawn notes are around 69% of the monetary base (and not the entire base as some have written). Never before has there been such a deliberate monetary shock to a smoothly functioning economy.Second, what matters in a modern economy based on bank credit is not the monetary base but some measure of broad money, which includes both cash and bank deposits. It is important to remember that money is not the same as cash, though at least one investment bank seems to have made this rather elementary error in its research report on the impact of the withdrawal of old notes on the economy. A quick look at Indian monetary statistics shows that currency with the public accounted for only 7.3% of the broad money in the economy. So, the impact on broad money is far less severe than the impact on base money. What is happening right now is a shift in the composition of broad money—from cash to bank deposits.Third, the stock of broad money in India is more than five times the stock of base money. In other words, the money multiplier is around 5.6. This standard analytical tool in monetary economics is determined by three variables—the monetary base, the cash reserve ratio and the ratio of cash to bank deposits (C/D) in an economy. The second is a policy variable which the central bank tinkers with while the third is a behavioural variable. The C/D ratio is normally stable—but the currency reform could change it dramatically. A drop in the C/D ratio (or when people begin to hold more of their money in bank deposits rather than cash) will push up the money multiplier, as long as banks lend out the money pouring in. In other words, the behavioural shift towards bank deposits could lead to an unexpected expansion in money supply, and perhaps provide a cushion against the reduction in the monetary base.Fourth, the big problem is that a large part of the Indian economy is still outside the banking system. So, the cash shortage will hurt the informal sector that does most of its transactions in cash. The distinction between money and cash hardly matters here. The problems in the informal sector will pinch the formal sector as well. The drop in biscuit sales at the local paanwala will eventually hurt companies that supply these biscuits. If one looks at the structure of employment in India, cash-based activities such as construction, transport, small retail and restaurants account for a big chunk of employment outside farms.Fifth, one of the intense debates within monetary economics is on the rather technical question of how money is created. Is it created by the central bank through the expansion of its balance sheet? Or is it created through the expansion of bank credit that the central bank then accommodates? Is money exogenous or endogenous? The ongoing natural experiment in which money is first being destroyed and then created could offer some interesting insights into this tricky issue.The point is that the currency reform is a game-changer in the true sense of the word. It is quite clear that the immediate impact on the economy will be negative. However, the massive expansion of bank deposits will bloat the contribution of financial services to the increase in gross domestic product in the third quarter, a statistical illusion that could downplay the real impact on economic growth.The real puzzle is what this means in the long run. Much depends on whether this exogenous shock alters citizen behaviour—in terms of whether less cash will be used in the future, whether the tax base will expand as more transactions are done through the formal financial system and if other policy measures restrict the creation of fresh black money.There is a good reason why the attention of economists around the world is focused on India. This is a rare, and perhaps unprecedented, natural experiment whose deeper effects will be known well after the dust settles down.- Niranjan Rajadhyaksha is executive editor of Mint.Name one Swiss Bank account holder who had heart attack: Arvind KejriwalAuthor: Aman SharmaPublication: The Times of IndiaDate: November 23, 2016URL: Chief Minister Arvind Kejriwal tells Economic Times that by introducing Rs 2,000 notes, PM has facilitated hoarding of unaccounted cash. En route to Moga from Bathinda, Kejriwal says PM is not rolling back note recall because of his ego. Excerpts:Q.: Why do you call demonetisation a scam?A.: PM Narendra Modi has stabbed people in the back and is causing much misery to the poor and middle-class people. Modi says black money hoarders are distressed and common man is happy with the move. There are big black money hoarders...there is a list of 648 Swiss Bank account holders with PM... tell me one person who is sad.? If it was a surgical strike on black money, at least a couple of them should have suffered heart attacks. But who is suffering heart attacks - farmers, labourers and common man in queues.I fail to understand how replacing Rs 500 & Rs 1,000 notes with Rs 2000 notes will reduce black money and corruption. It is more convenient for the corrupt to carry and store black money - Modi has, in fact, caused more convenience to corrupt. Already there are cases of bribes being taken in new Rs 2000 notes and new fake currency notes. So, it is clear the step will neither check black money nor counterfeit currency.Why has the step been taken is the million-dollar question? What is now emerging is that there are Rs 8 lakh cr worth bad debts with banks, and these belong to the richest and the most powerful people in this country. Modi government has already waived off Rs 1.14 lakh cr worth bad debts. There were still Rs 7 lakh cr left and there was no money. So they hatched a conspiracy. People are now depositing money in banks - they estimate Rs 11-12 lakh crore will come by way of deposits. Out of that, the rest of the bad debts will be waived off. Biggest evidence that they will do this happened recently when SBI wrote off Rs 7,000 cr of 63 billionaires, including that of Vijay Mallya.Q.: Are you levelling these charges as Modi is now emerging as the new anti-corruption mascot?A.: That is too simplistic. Amit Shah said Kejriwal's black money for Punjab elections has got all spoilt. I want to ask Shah and Modi - you got the CBI and Income Tax to raid me. IT opened all cases of donations to us since inception of the Aam Aadmi Party. You left no stone unturned still you did not find a single rupee of black money with us. Mind you, if they had found even a paisa of black money, they would have put me in jail.Q.: You and Mamata Banerjee are demanding a rollback. How is it possible now?A.: It is possible. Let them say all Rs 2,000 notes issued till now will continue to be legal tender and the Rs 500-1,000 notes still with people will also be legal tender for two months. Par Modi ji bahut ade hue hain. I am questioning his intention but for a moment let's keep intention aside. The implementation is all botched up - all of India and world is admitting it. So you roll it back for now and bring the plan again after two months with proper planning. They say farmers can get seeds with old notes but it is only from government stores... bulk of farmers buy seeds from private stores. And what about fertilisers? How will they grow seeds without fertilisers? Is anyone even thinking in this government? The thing is they have completely botched up and now PM apni zidd pe ade hue hain, apne ego pe ade hue hain (PM is being stubborn and not budging because of his ego) and...aur apni ego aur zid mein inhone pure desh ka batha betha diya hai. India's economy is in complete shambles.Q.: Should the PM have done prior consultation?A.: The difficulty is that this PM works all alone, he takes no one into confidence - not even his own ministers. There is only one expert he consults, who knows everything - that is Amit Shah. So it is a complete mess. In the next 10 days or so, the picture seems to be becoming very scary. I still appeal to him with folded hands - and the country will also forgive him - if this is rolled back and implemented again after two months with proper preparation. People who have died should be compensated. PM says it is a little inconvienence for the sake of country - I am saying it is criminal, there is no value of a human life or what? You are misusing the country to hide your scam.Q.: PM says the move will kill black money. Isn't it a genuine intention?A.: They say it is for black money. In last 12-13 days, let government say how much black money has come. If government says they have got Rs 50,000 cr of black money, I will clap and stand on the street and chant Modi, Modi, Modi. But the money which has been deposited is our white money, tax payers money. Not one paisa of black money has come so far. People are saying black money is being shifted to BJP with hawala traders working rampantly who people say are BJP proxies. A person from Gujarat told me it is a standard template that when Modi does a big goof-up, he does two things — first he cries, and then he says his life is in danger. Slowly, the country is realising you cannot ruin the country by emotional blackmail.Q.: Why are you always on collision course with Modi? Why is PM so angry with you?A.: (Laughs) Only Modi Ji can say why he is so angry with me! Last year I had met him. I told him, sir aap mujhse bahut naaraz rehte ho. Aap batao kyun naaraz rehte ho. I told him I'm much younger to him and if I am doing something wrong, I can improve. I told him let's work together...it is not a happy situation that state government in Delhi and Centre work at cross purposes. I am implementing all his programms - skill india, swachh bharat - I told him I will make Delhi as clean as a European city in two years and that I am only asking for one thing - don't interfere and let us work. Woh nahi maane.Q.: Do you regret your controversial tweet on PM, calling him a coward and psychopath.A.: No I don't. I think people of the country by now would have also realised that what I had said was the truth.Q.: What are your chances in Punjab?A.: Most surveys have not given us less than 85 out of 117 seats. Our own survey shows 96-97 seats. People are fed up of Akali Dal...in fact more than fed up, they are very angry with Akali Dal. Overwhelming issue among the public is that Badals have to be defeated this time, whichever way. Public sees that Captain Amarinder Singh is in collusion with the Badals. Earlier, UPA at Centre did not act against Bikram Majithia as Captain saved him after speaking to Sonia Gandhi. Now, Badals have withdrawn cases against Captain. There is a quid quo pro. Badals know they will lose so they are backing Captain, people say at many places Captain's hoardings are sponsored by Akalis. AAP has emerged as a honest party - no one questions our integrity here.Q.: Why pitch Mr Bhagwant Mann against Sukhbir Badal from Jalalabad?A.: It is very important to defeat people like Sukhbir. Their impure feet should not enter the Vidhan Sabha now.Whoever has looted Punjab has to be defeated. Sukhbir is one of the most hated figures and the leader of the entire mafia called Akali Dal. If he fights from two seats or abandons Jalalabad, people will realise he is scared. Let Captain also fight from Jalalabad. If he wants to save Punjab, why fight from a safe seat Patiala.Q.: Who is your CM face?A.: It is not important. People trust AAP. At the correct time, CM bhi nikal aayenge.Q.: Congress and Sukhbir Badal say you want to be Punjab CM .A.: They are spreading rumours...even in their dreams, they see me as a ghost. They say anything.Q.: So are you ruling yourself out?A.: We are not discussing the CM issue in our party. Tell me who is Congress CM face? Have they announced Captain Amarinder Singh? There is a doubt... people are saying Navjot Singh Sidhu could be Congress CM face.Q.: Sidhu did not join you, why? Did he want to be CM?A.: That only he can tell. I can only say he never asked us to declare him as CM face. There were lots of efforts to bring in Navjot Singh Sidhu but it is now a closed chapter.Q.: Badals say they have done development and that the drug issue is exaggerated.A.: Public will decide. If development has been done, people should vote for them. But you go anywhere in the state and you find that people hate them. Sukhbir Badal wants to fight the elections on basis of some studies to downplay the drug issue...the public will teach him. AAP has a blueprint ready for drug menace. We need to stop supply. Only we can do it. Captain and Majithia are very close and related to each other.Hence you vote for Captain or Akalis...it will be the same. Very powerful forces are involved. We will stop drug supply within one month. The addicted youth will be treated on war-footing in six months by setting up temporary clinics in Punjab and if need be, bringing in doctors from other states. All false cases against the addicts will be reviewed.Q.: Majithia wants you to agree to daily hearings in defamation case he has filed against you.A.: Is the whole judiciary is sitting idle for Majithia? Why not expedite rape cases or SC/ST atrocities cases? Has he raised his voice for that? Why expedite his case only? Why should Majithia be given preferential treatment?Is Arvind Kejriwal’s AAP using DTC to exchange illegal currency notes?Author: FE OnlinePublication: The Financial ExpressDate: November 22, 2016URL: Kejriwal-led Aam Aadmi Party has been accused of using the Delhi Transport Corporation (DTC) to convert its illegal Rs 500 and Rs 1000 notes into legal currency.Arvind Kejriwal-led Aam Aadmi Party has been accused of using the Delhi Transport Corporation (DTC) to convert its illegal Rs 500 and Rs 1000 notes into legal currency. The allegation has been made by Delhi BJP president Satish Upadhyaya, who has also written a letter in this regard to Lieutenant-Governor Najeeb Jung. The matter came to light after DTC deposited Rs 3 crore revenue. Most of it was in old Rs 500 and Rs 1000 notes. It is believed that this is how AAP is converting its money that was collected through donations, Hindi daily Jansatta reported.In his letter, Upadhyay asked as to how DTC can submit revenue in old Rs 500 and Rs 1000 currency notes when the fares in public buses range from Rs 5 to Rs 25 and the bus conductors never have enough cash for the change. People travelling in DTC buses generally belong to lower middle classes and pay their fare in change, the letter said.It has been found that the most part of the revenue submitted by DTC is in banned currency notes. This raises suspicion of wrongdoing and the money may be connected with the donations collected by ruling party (AAP), the letter said.The BJP leader asked the LG to tell the DTC management to come clean on the issue of old notes so that the image of a public institution doesn’t get maligned.AAP chief Arvind Kejriwal has been running a campaign against demonetisation announced by Prime Minister Narendra Modi on November 8. While the decision was considered revolutionary move against corruption and black money, Kejriwal claims it is the biggest scam in the history of India.Demonetisation: Govt rushes teams to speed up printing of notesAuthor: Maneesh ChhibberPublication: The Indian ExpressDate: November 24, 2016URL: presses are now working 24x7 and the staff has been promised financial incentives to get them to work extra hours and also give up on their holidays.With the opposition keeping up the heat on the government over continuing queues outside banks and ATMs for new currency notes, the Centre has rushed teams headed by senior officers to Nashik (Maharashtra) and Dewas (Madhya Pradesh) — the two locations where new currency notes are printed to personally oversee speeding up of the process of printing and distribution of new notes.The presses are now working 24×7 and the staff has been promised financial incentives to get them to work extra hours and also give up on their holidays.Sources told The Indian Express that the government has also asked the RBI, which also prints new notes at its Mysuru (Karnataka) and Salboni (West Bengal) security presses, to speed up the process. While 65 per cent of the currency is printed at the RBI units, the rest is printed at government presses.The teams, comprising senior functionaries of the Union Finance Ministry, are also working with various other agencies, including the Indian Air Force and commercial airlines, to ensure seamless airlifting of currency to various parts of the country.With sowing season already on, the focus is on supplying currency to rural areas. Since scarcity of Rs 500, reintroduced with a new design, and Rs 100 notes is causing problems to those who have received Rs 2,000 notes, the focus is now shifting to these denominations.“It has come to our notice that people holding Rs 2,000 notes are facing inconvenience in getting businessmen and shopkeepers to accept these notes due to shortage of smaller currency. We are now focussing on the smaller denominations. Also, since the sowing season has started, we are going to focus more on ensuring supply of notes in rural areas,” said a source.The RBI presses, which are currently printing only Rs 2,000 notes, are also expected to begin printing Rs 500 denomination notes by early December, for which new machines are also being installed. The RBI has been asked to ensure adequate supply of the high-security paper on which the currency notes are printed.While admitting that there were “some issues” with the supply, sources said the government expected the situation to return to “near-normal” by December-end. “There were some logistic issues which have mostly been sorted out,” said a source.Nagaland MP's son-in-law held, 'missing' Rs 3.5 crore cash foundAuthor: TNNPublication: The Times of IndiaDate: November 24, 2016URL: cash of more than Rs 3.5 crore in scrapped Rs 500 and Rs 1,000 notes that disappeared from Dimapur on Tuesday after being flown in by a chartered flight resurfaced on Wednesday in an equally dramatic manner.Nagaland police chief L L Doungel told TOI, "The money, seized by the CISF, was handed over to officials of the income tax department. They handed it over to the claimant, Naga businessman Anato Zhimomi, after he produced an I-T exemption certificate."Zhimomi - who is the son-in-law of Neiphiu Rio, the sole Lok Sabha member from the state - has been arrested. Rio backs the BJP government at the Centre.Income tax and intelligence officials in the national capital suspect that the Rs 3.5 crore in scrapped currency notes seized from a chartered flight in Nagaland could be part of a big money laundering racket, with the masterminds exploiting tax exemptions for tribals in the northeast and non-existent security at smaller airports.A probe by the I-T department revealed that some businessmen, including the Gurgaon-based owner of a printing and packaging firm, allegedly roped in Anato Zhimomi, who claimed the seized money after producing an I-T exemption certificate, and took advantage of the absence of security at a small airfield in Hisar to haul at least Rs 11 crore in outlawed denominations of 500 and 1,000 to Dimapur by a chartered plane. The money thus ferried was deposited into the account of Anato, the son-in-law of three-time Nagaland CM Neiphiu Rio, the sole representative in the Lok Sabha from the state who backs the BJP-led NDA at the Centre. Anato's father Khekiho Zhimomi served as a member of the Rajya Sabha from the Naga People's Front party.Anato, who has been arrested, was supposed to transfer the money back into the account of the businessmen through RTGS.I-T officials have already tracked another Rs 7 crore allegedly deposited by Anato in his Axis Bank account in Dimapur.Sources in the I-T department said Anato had "confessed" to have ferried cash thrice from Hisar to Dimapur by the same plane on November 12, 14 and 21. Besides, tax officials have also questioned Anil Sood, the Gurgaon-based owner of a printing and packaging firm, in whose bank account Anato had been making transfers through RTGS after cash was deposited in his Dimapur account. The proprietor of the airline is also under the scanner, with the I-T department seeking to verify Anato's claim that the last cash shipment belonged to the former.Besides highlighting the desperation of those with stashes of scrapped notes, the incident has rung alarm bells among authorities over the absence of security at the airfield belonging to Hisar Flying Club - something which the group capitalised on. Inquiries suggest that those involved in shipping cash faced no questions as they loaded their cargo onto the aircraft chartered from Air Car Airlines. "Today, this is a case of money laundering. Tomorrow, any terrorist can similarly fly from an unscheduled airfield to land at a scheduled commercial airport to wreak havoc," said an official source.First the caveats. I am an Indian and I love my country.Author: Peri MaheshwerPublication: Date: November 22, 2016URL: the caveats. I am an Indian and I love my country. I am all for removing black money. I supported Modi when he announced the demonetisation. I never questioned his intentions nor ascribed political motives to the decision. I believed him for his word. For me, He was waging a war on black money.However, the arguments that good intentions will necessarily lead to good consequences, that integrity of character would lead to the most efficient decision making, are flawed to the core. They are mutually exclusive. A good decision doesn't come inbuilt with flawless execution. And To be told that we must all support the government is vague, abstract and even idiotic.This is the time to course correct a policy whose execution leaves many myriad questions. The foresight was missing. The execution was missing. The plan B was absent. We didn't think through this. RBI is silent. We never imagined and estimated the collateral damage that may drown us. While the move was to curb black money, the collateral damage is bigger, greater and debilitating the economy. All available indicators point at a slow down, a GDP fall and a trickle down that will bear-hug India for long time to come. The inter connect that the formal economy has because of the informal economy is best felt now. We also realise how important our rural economy is for the survival of those in the metros.In the last few days, I have spoken to economists, CEOs, Manufacturers, traders and academics. The reaction is uniform. 'Self Goal', 'Shot ourselves in the foot', 'Surgical strike against India' is how they described it. Many of them were ardent supporters of this government. Cash has completely dried out. Consumption is down. Investments are down. Organised Retail is down. Unorganised retail is dead. Mandis are closed. Traders have downed shutters. So have jewellers. Every other decision other than essentials are being postponed. The first indicators will come when you see the sales of the two wheeler companies - Hero Motors, Bajaj and TVS motors. I am informed of a 30% fall. This would ensure that ancillary industries suffer, leading to job losses and migration of labor back to villages. This will be followed by auto, white goods, real estate, FMCG, media companies etc. I predict a dramatic fall in December quarter advance tax collections. The rural economy largely driven by cash, would be down to a trickle. Farmers are sitting on stock that cannot be sold. Agricultural sector has been starved of money in the harvest season. In 6 months, villages won't have money and the cities won't have enough food stock.We are in a situation where there is greater demand for cash and less supply of it. We have greater supply of consumables and lesser demand for them. Check what economists call this situation as? This is not the time to sit on a high horse and go by the choreographed chorus. I would rather pay attention to what the nay Sayers say. We must revive consumption. That in turn would revive the economic activity. This would revive manufacturing, trading and services. That would save jobs.The arrogance of power, the patriotic support of the masses and a sycophantic bureaucracy are a lethal cocktail. I am happy to be proved wrong. If I am an international investment bank, I will short India and the rupee. The stock markets are already reacting. The FIIs are selling India. Listen to the critics as Indira Gandhi did when she nationalised the banks. Their is no pride in a loss. Because if Indian economy goes down, the common man and poor will suffer more. And the ensuing tsunami will not distinguish between those in power and outside of it.Rs 500 and Rs 1000 ban: How Infosys, Flipkart and others are helping employeesAuthor: Rica Bhattacharyya, Prachi Verma & Varuni KhoslaPublication: Date: November 24, 2016URL: currency note conversion desks to mobile ATMs and temporary cash withdrawal counters, India Inc. is going all out to help its employees tide over the cash crunch after the government made high-denomination notes illegal two weeks ago.The sudden invalidation of 86% of India's currency by value, along with curbs on withdrawals from bank accounts and ATMs and on exchange of old notes, made cash scarce and resulted in long queues outside banks every day.To help meet the cash needs of their employees, companies, including Infosys, Flipkart, MakeMyTrip, Yatra-.com, Mahindra & Mahindra, Godrej, EY, Vodafone, Ericsson India, Chaayos and Marico, have been proactive since November 8, more so as the end of the month approaches and the next salary cycle starts.What companies have done, broadly, is bring banking facilities to the office premises and switch to cashless modes of transactions such as plastic currency and mobile or digital wallets. These apart, they have been generous with time off for staff. Ecommerce giant Flipkart, based in Bengaluru, has tied up with a bank to set up desks at its offices where old notes can be swapped for new, in accordance with RBI guidelines. The facility has been used by more than 60% of the employees. "This provision was also availed by office support staff as they would need it the most," said a Flipkart spokesperson.The Godrej Group partnered with ICICI Bank to set up a currency exchange desk at its headquarters in the Mumbai suburb of Vikhroli on November 15. All Godrej employees could exchange old notes with official identity documents. ATMs on its premises were upgraded to dispense new currency notes."We host two ATM machines at our headquarters in Mumbai. They were recalibrated and replenished with the official currency on November 10, which has been very useful," said Sumit Mitra, head-group human resources and corporate services at Godrej.Axis Bank, where several top companies have their salary accounts, said it is organising micro-ATMs for employees of Tata Motors, Mahindra & Mahindra and Infosys, among other private and public sector panies are granting employees leave to go to banks, providing advances to those travelling on work, organising sessions to educate staff on mobile wallets and making in-house vendor transactions sys and Chaayos are encouraging employees to use smart cards and digital wallets. MakeMyTrip is telling staff to bill their travel expenses, including tickets, to the company so that they don't incur any expenditure on their own. "We have had sessions to educate the staff on mobile wallets so that they can use them more. All our inhouse cafe transactions have been moved to Paytm," said Ripudaman Gill, head of human resources at sys is working closely with multiple service providers and most of the ATMs on its campuses have been recalibrated to dispense new notes. The IT company has started a token system in its office premises to reduce time spent standing in ATM queues, said Richard Lobo, head of HR. All its ATMs are replenished at regular intervals to cater to about 25,000 employees in Bengaluru. There are 10 ATMs in the 50 Infosys buildings located in the city. The country's second-largest software services company has embarked on a zero-cash model at its food courts. "We are also exploring the option of installing micro-ATMs via certain service providers," said Lobo."Employees are asking for time-off for going to banks. So, we don't have a problem with them taking leave for that. We are allowing them to take leave as and when they need to for this," said Sharat Dhall, president of travel portal . Additionally, Yatra is giving advances to those travelling on work so that they don't have to spend their own cash, he said. Companies agree that apart from meeting the immediate cash needs of their employees, such measures ensure that the staff don't have to stand in serpentine queues to withdraw cash during office hours, which could affect productivity.Vodafone India, the country's second-largest telecom company, is educating employees about its M-Pesa app, which enables cash withdrawal from select M-Pesa stores, apart from setting up cash withdrawal counters at its premises.All vendors within Vodafone offices are now M-Pesa-enabled. Employees can load their M-Pesa wallets with debit or credit cards and use them. "All our employees have appreciated this initiative as they have found an alternative to skip long ATM queues. In some offices, we have set up cashout counters to assist employees withdraw cash through M-Pesa," said a company spokesperson.EY, one of the Big 4 audit firms, said it plans to continue with kiosks and mobile ATMs at periodic intervals across its offices. "This will make sure that a maximum number of our people can benefit from this facility in the office premises," said Sandeep Kohli, national director of human resources.Telecom company MTS India installed its first on-premises ATM at its corporate office in New Delhi. The company had requested the facility about two months ago and by expediting efforts after the demonetisation was announced, was able to get the ATM installed on November 10.Close out the war on corruptionAuthor: R.K.RaghavanPublication: The HinduDate: November 24, 2016URL: done, the government must now draw up a firm strategy to show the door to the corrupt and lax in higher bureaucracy The Modi government has set the cat among pigeons by demonetising two high-value currency notes. I am alive to the criticism that this ‘surgery’ could have been undertaken with greater finesse and after sustained preparation. There seems to be some merit in the argument, even after factoring for the need to keep the entire operation under wraps so as to protect its confidentiality. I am equally conscious of the assessment that the impact of the shock treatment might not last long. In such a case, the government could at best be accused of overestimating demonetisation as a weapon against black money, and not of malice or malevolence. If the objective was to shake up dishonest elements in the country — especially those ensconced in industry and the bureaucracy — I believe that it has been achieved. This flexing of muscle should more than convince the unscrupulous that the scope for dishonesty in the Government of India has considerably shrunk.Demonetisation should go hand in hand with a merciless hounding of those who had either underpaid taxes or did not pay at all. Here, there are neither friends nor enemies. A majority of those affected by demonetisation are people outside government, either self-employed or in organised industry, who had prospered with the help of a conniving bureaucracy. This is why a well-coordinated post-demonetisation offensive has to tackle both the groups.Go after the big fishBlack money is definitely generated through corruption. Having said this, I would advocate that the government should not — at least for a while — fritter away its valuable energy getting distracted by the petty corruption that is part and parcel of the cutting edge of the administration. This is somewhat of a reversal of my earlier stand that it is this phenomenon of lack of integrity at the level of a police constable or a lower division clerk at a government office that needs to be addressed first before we move up the hierarchy.This change of perception is influenced by the rising graph of graft among Class I officers who are recruited through a stiff competitive examination conducted by the Union Public Service Commission and are well paid, after the last Pay Commission recommendations, even by private sector standards. Their lack of inhibition is abominable and is traceable mainly to the shameless and unforgivable greed in tune with the times in which we live. It is also due to a declining fear of the law arising from the tortuous judicial processes which take an enormous amount of time in establishing conclusive proof against the guilty. I am not pushing the case for making the existing penalties stiffer. I am only looking for plugging obvious loopholes in the procedure to discipline those who deviate from the law by making punishments certain over a reasonable period of time.There needs to be evidence within government of an application of minds and a resolve to weed out corrupt elements swiftly without waiting for the wheels of the justice system which are notoriously slow to grind. There was a lot of criticism during the Emergency days in the mid-1970s of the misuse of the provision in the Conduct Rules for compulsory retirement of those civil servants who had either reached the age of 50 or had put in 25 years of service, and who had ceased to work effectively or whose integrity was suspect. Some complaints of arbitrariness and vindictiveness in those eminently forgettable times were unfortunately genuine. There is now an urgent need to resort to this rather draconian scheme to send down the message that neither sloth nor dishonesty would be permitted in the superior civil services.Purge sloth and dishonestyWe have fortunately more than a handful of senior officials at the Centre who can be expected to be objective in drawing up the list of those who should be shown the door. The margin of error in identifying those who deserve to be axed is minimal if this list is vetted by a committee of officers known for their integrity. This should be followed by vetting by another group, before being agreed to by the Prime Minister and one or two of his senior Cabinet colleagues (such as the Home and Finance Ministers in the present dispensation). In a modified form such a drill is currently in place to make sure that there is no arbitrariness in empanelling officers to the rank of Secretary in the Government of India. Interestingly, this is being implemented with the assistance of retired officers who had earned a name for honesty and effectiveness.Even at the risk of being considered brash, I would strongly urge that the process of purge should begin with key organisations such as Income Tax, Customs and Central Excise, Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI). In the wrong hands, these become instruments of harassment and torture. There have been several recent instances of officials from one or more of these organisations being hauled up by the CBI for direct receipt of bribes or accumulation of assets disproportionate to their known sources of income. The most shocking of these is the reported communication from the ED giving adverse information against two former CBI chiefs. If this report is true, nothing can be more damning to the pursuit of integrity in the higher echelons of government.While the situation has vastly improved at the Centre following the arrival of the Modi government, the scene in the States remains appalling. It is tragic that there is no hope of a change as long as the authority to enforce honesty in state apparatuses remains with the State administration. State Anti-Corruption Bureaus (ACBs) are a joke in many States. In one southern State, a lady officer who had given new dimensions to corruption was appointed to head the ACB. If foreign investment in some States has lagged behind the others, it is directly attributable to the expectation of ‘speed money’ at the highest levels. Such money is invariably an astronomical figure that drives away a potential investor. There is an undeniable consensus over the need for a political will to transform this scenario. As long as political power remains in the hands of a dynasty or those who form an enduring clique, there is hardly hope for things to improve.The need to stay the courseWho will be the change agent? These are undoubtedly crucial moments in Indian history, when faith in democracy as an effective and honest machinery to upgrade the lives of millions who live below the poverty line is under challenge. The government cannot therefore afford to lose the plot by succumbing to the machinations of those who already stand discredited for their unabashed corruption. The Modi government is under test and scrutiny by many commentators within the country and outside. A few of them are well meaning and would like him to succeed. There are also a substantial number of those who are not so well motivated. The situation is exacerbated by the critical comments of scholars and administrators like Larry Summers, former U.S. Treasury Secretary, who seem convinced that there is utter chaos in India, and corruption in the country is so deep that it is irreversible. In a recent co-written piece posted on his blog, Mr. Summers said: “Without new measures to combat corruption, we doubt that these currency reforms will have lasting benefits. Corruption will continue, albeit with slightly different arrangements.” The impulse therefore of some in government will be a desire to produce quick results through half-baked measures, just to score over detractors. An ad hoc approach, however, requires to be spurned if we are to place on ground a firm strategy to combat corruption. There is enough expertise in the country for seeing through this laudable scheme.- R.K. Raghavan is a former CBI Director.Mohanlal's views on demonetisation reflect selective amnesiaAuthor: TS Sudhir @IamtssudhirPublication: Dailyo.inDate: November 23, 2016URL: Malayalam superstar has shown himself to be deeply disconnected from ground reality, while attempting to preach from atop a pedestal.Travelling through Malabar region of Kerala in April this year ahead of the Assembly election, I stopped when I saw a serpentine queue outside a government-authorised wine shop in Kozhikode. A partial prohibition is in force in Kerala with only star hotels allowed to serve liquor.There are beer and wine parlours but those addicted to the real thing throng these shops, which are few in number.A person who identified himself as Chacko was trying to ensure order in the queue, even though he was himself inebriated. "Don't say anything bad about this line,'' he warned me, flashing his index finger menacingly. "My wife asks me to go and stand in the queue outside the ration shop to buy rice. Why would I? I will come and stand in this queue only.'' I found Chacko incoherent but there was admiration for his pearls of alcohol-inspired wisdom from others in the line, with some of them cheering him on. The bottomline was that the queue in front of the liquor shop in Kerala was sacroscant and not to be criticised.Post-demonetisation, Kerala's craze for the small and the large has inspired jokes. Like this one which said : "PM Modi should either ask liquor shops to accept old notes or ask banks to sell liquor. We Malayalees can't stand in two queues daily.''How come then Malayalam superstar Mohanlal was oblivious to Bacchus worship in the state where he too is deified?In his latest blog titled "A big salute to virtuous India", Mohanlal praised Prime Minister Narendra Modi's demonetisation move, saying it was necessary in a country where "corruption has become a way of life''. But what got the actor in the firing line was his jibe at the liquor queues. "We stand in queue before liquor outlets, theatres and places of worship without any complaint. I think there is nothing wrong in standing in queue at a bank or ATM for a while for a good cause,'' he wrote. Mohanlal's blog had the effect of antagonising both the drinkers and the non-drinkers. The drinkers were angry that the actor had looked down upon their love for a drink. Because in the worldview of people like Chacko, it is not a waste of time.The other half of Kerala was angry that Mohanlal had compared standing for hours outside banks and ATMs, struggling to withdraw a bit of their own hard-earned money, to a wasteful indulgence in liquor. Angry reactions poured in on social media, with critics starting a hashtag campaign called #TheCompleteDisaster, taking off on Mohanlal's title of "The Complete Actor".They asked him if he had ever stood in a queue to be lecturing them on how it is to struggle to make ends meet, and pointing out that people have died waiting to get their money.Others said that in wedding season, people are in dire straits because of an artificially created monetary crisis. Some of them even recalled income tax raids on his house in 2011, during which a couple of elephant tusks were recovered. The fact of the matter is that Mohanlal has shown himself as deeply disconnected from the ground reality, while attempting to preach from atop a pedestal.In a state like Kerala, where just about everyone is politically aware and given to expressing opinion, this was asking for trouble.While supporting demonetisation is Mohanlal's right as a free citizen of India, to turn a blind eye to the demise of over 70 people while standing in queues, smacked of selective amnesia.For a realistic actor like Mohanlal, to ignore the reality of death was shocking. Therefore, Mohanlal was told by Kerala: "Lalettan, don't preach''.And even though the barrage of criticism coming Lal's way would be deemed as intolerance, there is little sympathy because the actor's fans have been guilty of ugly trolling for many years now. Much of it is usually directed at actors whose films clash with Mohanlal's release. But in a recent instance last month, Nisha Menon, a resident of Thrissur was trolled for her Facebook post criticising Mohanlal's latest film, Pulimurugan. Nisha said the superstar's fans unleashed demeaning and abusive comments, including threats directed at her and her family. But it is not as if there are no supporters for Mohanlal's freedom of expression. It has become a political issue with the BJP, for obvious reasons, backing the actor.The saffron backing, in turn, has raised doubts if there was a political motive to Mohanlal blogging in support of the PM's move. Kerala has recently seen movie thespian Suresh Gopi join the BJP and become a Rajya Sabha MP. Doubts over whether there is a quid pro quo are bound to arise. Mohanlal is known to pen down his thoughts in his blog to reach out to his fans directly, which is commendable. He does not shy away from writing on contentious topics, be it patriotism or the JNU controversy. But after this experience, it might be a better idea to know about things first hand before writing. Otherwise he will remain just an armchair blogger, with little idea of what is happening in the world outside.India's reform architect trashes PM Modi's cash crackdownAuthor: Rajesh Kumar SinghPublication: Date: November 24, 2016URL: Indian Prime Minister Manmohan Singh on Thursday tore into his successor Narendra Modi's clampdown on the cash economy, calling it an "organized loot and legalized plunder" of the country.Singh - the architect of economic reforms that led to years of rapid growth - dubbed Modi's shock move to scrap 500 and 1,000 rupee banknotes a "monumental mismanagement" that could shave at least 2 percentage points off economic growth.The so-called demonetization drive is part of a crackdown on corruption, tax evasion and militant financing, but the decision to suck out 86 percent of cash in circulation threatens to push Asia's third-largest economy into a liquidity crisis.Opposition parties led by Congress have stalled parliament, demanding a reply from Modi and compensation for the families of dozens of people reported to have died while queuing at banks to swap old money for new.Belying his reticent image, Singh launched a broadside on the Indian leader, urging him to find pragmatic ways to ease the distress caused by the cash crunch."What has been done can erode our people's confidence in the currency and banking system," said Singh. "In fact, it's a case of organized loot and legalized plunder."Modi, citing a survey he launched via a smartphone app, says that 90 percent of people expressed their support for the ban on old banknotes. The survey was not representative but drew half a million responses.With a small stock of smaller notes available and people struggling to get hold of scarce new 500 and 2,000 rupee bills, consumers are holding back spending and businesses are suffering.Delays in replacing canceled notes and restrictions on cash withdrawals "reflect very poorly" on Modi's team, the finance ministry and the Reserve Bank of India, Singh said.In the year to March 2017, the cash crunch is expected to pull down economic growth from last year's 7.6 percent by as much as 4.1 percentage points, brokerage Ambit Capital reckons.Moody's Investors Service on Thursday warned the persistent cash crunch could worsen asset quality at Indian banks.- (Reporting by Rajesh Kumar Singh; Editing by Douglas Busvine and Kim COghill)India rupee ban: Ex-PM Manmohan Singh rubbishes Modi crackdownAuthor:Publication: Date: November 24, 2016URL: Indian Prime Minister Manmohan Singh has rubbished the government's move to ban two major currency notes, calling it "monumental mismanagement".Mr Singh, the architect of economic reforms in the 1990s, said GDP would fall "by about 2%" because of the move.Earlier this month Prime Minister Narendra Modi announced that 500 and 1,000 rupee notes had become illegal as part of a crackdown on corruption.But scarcity of new notes has brought the economy to a virtual standstill. Mr Singh, who is credited with opening up India's economy when he was finance minister in 1992, told MPs the move "can weaken and erode our people's confidence in the currency system and in the banking system".He said it amounted to "legalised plunder". Earlier, the rupee fell to almost 69 to the US dollar, a record low."[The] prime minister has been arguing that this is the way to curb black money... I do not disagree with these objectives, but there is monumental mismanagement of which there are no two opinions in the country as a whole," Mr Singh said."Even those who say that this measure will do harm or cause distress in the short term but be in the interests of the country in the long run should be reminded of what John Keynes said once, 'In the long run all of us are dead'."Mr Singh has rarely addressed parliament in the two and a half years since his party lost power.He and other opposition MPs are insisting that Mr Modi address parliament on the cash crisis, which he has not yet done.There have been chaotic scenes in India ever since the currency ban was announced two weeks ago. People have been queuing up for hours outside banks and cash machines which are fast running out of money.In some instances the police have had to be called in to manage queues of anxious customers trying to change their savings in banned notes for legal tender.People have been told they can deposit or change their old notes in banks until 30 December and new 500 and 2,000 rupee notes have been issued. A new 1,000 rupee note will also be issued, but there is no clarity on when.Until midnight on 24 November Indians are also able to change a small sum of old cash into legal tender as long as they produce ID. This amount was reduced from a total of 4,500 rupees to 2,000 rupees on 17 November. Anything above this amount needs to be credited to a bank account.Demonetisation: Manmohan Singh’s full speech in Rajya SabhaAuthor: Express Web DeskPublication: The Indian ExpressDate: November 24, 2016URL: Singh that the implementation of the scheme looked poor on the PMO and the RBI both.Calling it a ‘monumental mismanagement’, former Prime Minister Manmohan Singh on Thursday said that the demonetisation of high value currency notes has caused great distress to the common man of the country. He remarked that the GDP of the country could shrink by 2 percentage-points due to the way it has been implemented.Here is the full text of Manmohan Singh’s full speech in Rajya Sabha:I rise to highlight some of the problems that have risen after the decision to demonetise Rs 500 and Rs 1000 currency notes.Prime Minister has been arguing that this is the way to curb black money, to prevent growth of forfeiture currency notes and also to help in control of terrorist finance activities. I do not disagree with these objectives. But I do want to point out this that in the process of demonetisation monumental mismanagement has been undertaken about which today there is no two opinions in the country as a whole. Even those who say that this measure will do harm or cause distress in the short term but be in the interests of the country in the long run should be reminded of what John Keynes said once,” In the long run all of us are dead.”And therefore, it is important to take note of grievances of the ordinary people who have suffered as a result of this imposition on the country overnight by the Prime Minister. And I say so with all responsibilities, that we do not know what will be the final outcome.Prime Minister has said that we should wait for 50 days. Well 50 days is a short period. But for those who are poor and from the deprived sections of the society even 50 days torture can bring about disastrous effects. And that’s why about 60 to 65 people have lost their lives, maybe more. And what has been done can weaken and erode our people’s confidence in the currency system and in the banking system.I would like to know from the Prime Minister the name of any country he may think of where people have deposited their money in the banks but they are not allowed to withdraw their money. This alone,I think, is enough to condemn what has been done in the name of greater good of the people of the country.And Sir, I would further like to point out that in my opinion that the way the scheme has been implemented will hurt agricultural growth in our country, will hurt small industry, will hurt all those people who are in the informal sector of the economy. And my own feeling is that the national income, that is the GDP, can decline by about 2 per cent as a result of what has been done. This is an underestimate, not an overestimate. Therefore, I feel that the Prime Minister must come up with some constructive proposal on how we can implement this scheme and at the same time prevent this distress that has been caused to the common people.It is no good that everyday the banking system comes with modification of the rules, the conditions under which the people can withdraw money. That reflects very poorly on the Prime Minister’s office, on the Finance Minister’s office and on the Reserve Bank of India. I am very sorry that the Reserve Bank of India has been exposed to this sort of criticism which I think is fully justified.I, therefore, would not like to say much more than this. I urge upon the Prime Minister to find practical, pragmatic ways and means to relieve the distress of the people who happen to be a great majority. After all, 90 per cent of our people work in the informal sector, 55 per cent of our workers in agriculture are reeling in distress. The cooperative banking system which serves large number of people in the rural areas is non-functional and has been prevented from handling cash. So, in all these measures convince me that the way this scheme has been implemented is a monumental management failure, and in fact, it is a case of organised loot, legalised plunder of the common people.With these words, sir, I conclude. It is not my intention to pick holes in what one side does or another side does. But I sincerely hope that the Prime Minister will view that this late hour will help us to find practical, pragmatic ways and means to provide relief to the suffering of the people of this country. Thank you.Manmohan lashed out against Modi after being nudged by Sonia GandhiAuthor: Javed M Ansari @javedmansariPublication: Dailyo.inDate: November 24, 2016URL: called the government's handling of the demonetisation move 'monumental mismanagement' in Parliament.It was his second speech in Parliament in the last two-and-a-half years, but one that was made with telling effect. His brief five-minute intervention had the entire House, including Prime Minister Narendra Modi, listening with rapt attention.Dr Manmohan Singh has deliberately chosen to maintain a low profile and has refrained from wading into the political battles that are fought almost on a daily basis in Parliament, much to the chagrin of some of his partymen.His rationale has always been that being a former PM he needs to remain above the fray. On Thursday, he broke his self-imposed silence, but not without a little prodding from Congress president Sonia Gandhi.While Dr Singh has been conspicuous by his absence from the demonstrations staged by the Opposition in Parliament, he has been quite critical of the government's demonetisation move in party meetings. Sensing his mood, Sonia reportedly encouraged him to speak his mind, which he finally did to good effect in the Rajya Sabha.Dr Singh has for most parts in his political career shunned the spotlight, often even when he was Prime Minister. But in the course of his brief five-minute intervention he stole the thunder.He is perhaps the only person in the country who has been the RBI governor, economic adviser, finance minister and the Prime Minister. Using his experience in the government and his knowledge of the subject, he delivered what many in the Congress consider to be his best speech in the last few years.He called the government's handling of the demonetisation move "monumental mismanagement" and warned that the decision could have "disastrous effects". He sounded a grim warning to those patting themselves on the back for this decision, pointing out that India's GDP will fall by "at least 2 per cent".His next line had the entire opposition benches on their feet, cheering him loudly. Looking directly at PM Narendra Modi, he delivered his punchline - "this is organised loot and legalised plunder".How former PM was persuaded to speak in HouseAuthor: Saubhadra Chatterji saubhadra.chatterji@Publication: Date: November 25, 2016URL: prime minister Manmohan Singh delivered a stinging riposte to the government on Thursday over demonetisation but the ground for his stirring speech in Rajya Sabha was created by separate events a few days earlier.Singh, after all, was least likely to speak in the winter session but for the uproar over a comment by the leader of opposition in the Upper House, Ghulam Nabi Azad, who drew a parallel between people killed by terrorists and death of people linked to demonetization. Sources said after the BJP latched on to Azad’s comment and tried to project the Congress as “insensitive”, at least three top opposition leaders felt there was an urgent need to “change the narrative” of the discourse.“The BJP tried to link the issue with patriotism while we wanted to focus on the plight of the people,” said a senior opposition leader.Last Friday, two opposition leaders spoke to Azad and Anand Sharma. Both suggested that the Congress should field “a prominent, respected face” to speak on the subject so that the BJP can’t have its way.During back channel discussions between the Congress and other parties, three names came up as choices for a “surprise speaker” in the debate: Manmohan Singh, Karan Singh and AK Antony. “All three leaders command a different level of respect. (It was felt) their intervention would certainly divert the path of the discourse,” said a high-profile opposition leader involved in the strategy.As the Congress started mulling its strategy, a senior non-Congress opposition leader also reached out to Congress vice-president Rahul Gandhi, requesting him to consider these three names as the representative of the united opposition. Gandhi got similar a request from another Opposition leader. Gandhi told both leaders that the party is talking to Manmohan Singh, Congress sources added.After Gandhi spoke to Singh, the former PM agreed to take on the government on the floor of the House, the sources said.Congress floor managers also negotiated with other opposition parties to ensure that they will allow Singh to talk first and will not divert on any other issue when the former PM speaks.And the man the BJP had pilloried earlier for his “silence”, showed that a few measured words can be as effective as the most potent missile.Demonetisation update 12- Dr. Singh’s scoot and thunderAuthor: Anantha NageswaranPublication: The Gold standardDate: November 24, 2016URL: of the important lessons of ageing is to appreciate the virtue of silence. There is dignity in that. Some not only do not appreciate it but travel in the opposite direction.I read the text of Dr. Manmohan Singh’s speech in Rajya Sabha as reported in ‘Indian Express’. He got a few things right and many things wrong.He was right to focus on the short-term travails and chaos. That is where the government’s vulnerability lies. Well, the government is actually paying the price for the lack of capability of the machinery of the Indian state to pull something off like this on a national scale at short notice. Back in 2003, Dr. Arun Shourie had lamented that the Indian state got the odd big project right (Kumbh Mela, for example) but did not sustain it. This one is even more challenging. No surprise that there is chaos and hardship. There will be some economic costs to the nation and to the people. Hope it is negligible.He was right not to criticise the demonetisation exercise itself. He focused on the process. That is about it. He got the rest of his speech wrong.If he did not disagree with the objectives and if he did not wish to favour ‘this side or that side’, then why did he characterise it as organised loot and legalised plunder? Strong words but what is the basis? Did he mistakenly think that we were in 2010 when there was organised loot and both legalised and illegal plunder of national resources?He is right that even 50 days is too long for the poor to suffer. But, in that case, was it right to let them suffer for 1830 days between May 22, 2009 and May 26, 2014? Annual average consumer price inflation was 10.1% in that period (based on CPI-IW) and food inflation was 10.5% per annum. The poor suffered enormously. The rupee plunged 50%. Businesses collapsed. Telecom licenses were handed out to cronies. Supreme Court cancelled them. Mining licenses were allotted arbitrarily. Supreme Court banned mining. Economic growth, which was flying high due to the global boom pre-2008 collapsed to 5% to 6%, thanks to UPA missteps and loot and plunder. The 50-days that the current Prime Minister is talking about must be seen in this perspective.Let me try another argument. The suffering of the people is incremental to the suffering that the State has been inflicting on an ongoing basis. Further, if the issue of corruption remained untackled, how could even one compute the suffering that would endure for much longer? By definition, that is harder and even almost impossible to estimate. Isn’t it?Dr. Singh invoked John Maynard Keynes. Well, most economists know the context in which Keynes talked about the long run. It was in the context of the great economic depression of the 1930s and the advocacy of government remaining passive by the Austrian school. He advocated government intervention. Keynes may have been right (or wrong). It is hard to find out for it is impossible to construct the counterfactual. Indeed, many think that the non-intervening UK recovered better and faster than the American economy despite (or, because of?) Roosevelt’s interventions.Be that as it may, in India, the situation has arisen out of government action (and not inaction) and it is handling the implementation challenges by responding to them immediately. So, Keynes’ analogy does not apply in this context at all.Indeed, the long-run arrived for India in 2014 and the economy was nearly dead when the present government took office. It has been a struggle for it to breathe life into the economy left comatose by Dr. Singh’s government.Dr. Singh is right that there will be economic impact in the short run and the long-run benefits are not easily identifiable or quantifiable, at this stage. That does mean that they are unlikely.Indeed, much of India’s present economic fragility is traceable to UPA’s errors of omission and commission. Certainly, the public sector banks’ Non-Performing Assets is a UPA legacy. That is just one of many legacies of his government that India could have done without, some of which I have recounted above.If the economic fragility persists longer, political uncertainty will follow in its wake and the Indian economic revival will end even before it began.The government faces a very tough challenge. It has to keep up with structural reforms if it has to shut further avenues for corruption and, at the same time, mind economic growth and job creation. Not easy. Dr. Singh cannot be blamed for not offering any advice to the government in this regard, despite his impressive economic credentials. Unfortunately for him and for India, under his leadership, the government neither carried out structural reforms nor facilitated economic growth. So, he has no experience of either. Those were the dark ages.Both this government and India need all the luck they can muster to avoid a return to those times in 2019. Palms folded or fingers crossed.[Postscript: Here is Keynes’ full quotation on the issue of long-run. It is easily located in the Internet:But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again. Source: A Tract on Monetary Reform (1923), Ch. 3, p. 80.Keynes was addressing some economists. In the case of India, no one is advising the government not to address the short-term issues nor is the government being indifferent to them.]From underachiever to poodle: It keeps getting worse for ManmohanAuthor: FP StaffPublication: Date: July 16, 2012URL: it was a Time magazine cover that heaped coals of fire on Manmohan Singh's head by calling him an 'underachiever'.The report which said Singh needed to get out of his 'personal and political gloom' to set India back on the growth path, created huge buzz in the country as the media, government and opposition all pounced on it in their haste to react.The Time magazine report, truth be told, said nothing new. Local media had already been pointing out the same problems with Singh's administration and the opposition parties had been shouting 'policy paralysis' to anyone who would listen.But somehow an 'established' and 'international' magazine saying it, suddenly made the issues seem more real and more problematic. It had become embarrassing. Singh was a national shame, letting down India's good name in the international arena.And now another one of those 'international' publications has got in on the act. The UK based newspaper The Independent has run a report titled, "Manmohan Singh: Saviour or Sonia's poodle?""Once credited with rescuing India, Prime Minister Manmohan Singh is now criticised as a weak underachiever", it says, explaining that while Singh may be the architect of India's liberalization, his seeming inability to act, coupled with blind fealty to Congress President Sonia Gandhi may just be his downfall.Again, no big secret. Political analysts have been telling us all just that for months now. But is calling Singh "Sonia's poodle" in an international publication justified? While the facts on which they criticize him may be true, he is still the Prime Minister of India and surely the position deserves some respect?Apparently not.While it may still be something of a shock to see the picture of the Prime Minister splashed across an international publication with 'underachiever' or 'Sonia's poodle' emblazoned across it, we're at a point of time where the media does not shy away from calling a spade a spade, foreign protocol be damned.And in this age of international news in real time, everyone is fair game.The British themselves are notoriously irreverent about their own leaders. Former Prime Minister Tony Blair was publicly called Bush's lapdog, especially during the hugely unpopular decision he made to back the US 'war on terror' against Iraq and Saddam Hussein.And Indian media are not overawed by the Prime Minister's position either. The media famously debated whether or not Manmohan Singh was a 'lameduck' Prime Minister, while others have called him a 'Doormat'. So much so in fact, that he has even stopped reacting it.But perhaps the international criticism could serve as a wake up call to the premier. The Independent report quotes a close aide of the Premier as saying that he felt the international criticism was unfair. It's high time he actively did something about it then.Unlike Manmohan Singh, Modi doesn't want policy paralysis, says JaitleyAuthor: TNNPublication: The Times of India Date: November 26, 2016URL: minister Arun Jaitley on Friday again took on former PM Manmohan Singh who had on Wednesday called the demonetization decision an "organised plunder" and a "monumental mistake".In an exclusive interview to Times Now channel, the finance minister raised questions about Manmohan Singh's achievements in office, saying that he left a legacy of "do-nothing-approach", policy paralysis and crony capitalism. Jaitley took issue with the former PM for mocking government's claim that the demonetisation will benefit the country in the long run. "In the long run we are all dead," Singh had said in Rajya Sabha quoting legendary economist, John Maynard Keynes, as he sharpened his argument about disruptions caused by the scrapping of Rs 500 and Rs 1000."Dr Singh said that in the long run we all are dead. Of course, we in the long run will be dead. But the issue is that when we get an opportunity to be in government, should we think only about our own generation. The country will live on long after we all are dead. Therefore, the question is what kind of legacy to leave behind. From 2004 to 2014, they didn't want to take any decision and therefore they left behind an unenviable legacy," said Jaitley.He further said, "Present PM does not want to leave behind a legacy of "do-nothing-approach" or of policy paralysis. Therefore, he has taken a courageous decision by which he wants to strengthen India. In the long run, he is going to leave behind a better India, rather than a status quo where 'so much in cash and so much in cheque' is the norm".The interview to the channel saw the finance minister justifying the decision to disallow conversion of scrapped currencies at banks, saying that the facility was grossly misused by those with illegal cash as they hired others to deposit their money in banks. He also dismissed as "sham" the criticism of government's stress on cashless transactions will put some industries at a disadvantage and will make it difficult to pay their workers. The finance minister argued that switching over to cheques and digital mode of payment, will prevent the workers from being "short changed" . They are more reliable and veifiable, said the finance minister.Jaitley said that he "deeply regrets inconveniences", but said that some " inconvenience cost" in the short-run was unavoidable. He, however, asserted that demonetisation will result in greater growth and a cleaner economy and other benefits like "reasonable interest rates".How Dr Manmohan Singh was made to wait before delivering his knockout punch on demonetisation in ParliamentAuthor: Sanjeev SinghPublication: The Times of IndiaDate: November 24, 2016URL: experience tells us it is not often that former Prime Minister Dr Manmohan Singh speaks. As a former RBI Governor, finance minister and two-time Prime Minister, the renowned economist’s views should have been a matter of keen interest on the issue of demonetisation. Yet when Dr Singh got up to speak in Rajya Sabha, it was met with stiff resistance from the treasury benches on Thursday. In the end, it was a remarkable role reversal for the previous and current Prime Ministers as Dr Singh landed precise blows while Narendra Modi took them silently.When the House convened during zero hour, Leader of Opposition Ghulam Nabi Azad got up from his chair and requested Vice-Chairman PJ Kurien to allow former Prime Minister Manmohan Singh to speak on demonetisation. The Chair agreed and just as Dr Singh was getting up from his chair to speak that there was an intervention.-----------------------------India Today @IndiaTodayFormer PM #Manmohan Singh gave a thumbs-down to the way @narendramodi's #DeMonetisation drive was executed. …1:48 PM - 24 Nov 2016-----------------------------Finance Minister Arun Jaitley raised the issue of the proceedings not being conducted as per rules. He highlighted Rule 276 and 228 to drive home the point that when an issue is already listed for debate, another similar issue cannot be taken up. Jaitley requested the Chair to let Dr Singh speak only after the debate starts rather than immediately.-----------------------------#RachitUppal @RachitUppalLook who's talking ?#Demonitization - 'Monumental Management Failure': Dr Manmohan Singh On Notes Ban …12:38 PM - 24 Nov 2016-----------------------------It was then that opposition members objected and Trinamool Congress MP Derek O’Brien requested the Chair to take the sense of the House on the issue. At that point Kurien agreed to allow Dr Singh to speak in zero hour as the demonetisation debate was slated during question hour time. While the din was on, Union minister Mukhtar Abbas Naqvi requested the Chair to start the demonetisation debate right away and then Dr Singh could speak. The verbal exchange between the treasury and opposition benches ensured that the House was adjourned and Dr Singh had to wait till noon for his turn to speak.-----------------------------nikhil wagle @waglenikhilDemonetisation: Manmohan Singh’s full speech in Rajya Sabha … via IndianExpress2:07 PM - 24 Nov 2016-----------------------------The government knew that they were in for some sharp criticism on their decision to demonetise Rs 500 and Rs 1,000 banknotes which made them delay the inevitable. But when he did speak, a frail looking Dr Singh launched a scathing attack on the government for its “monumental mismanagement” of the situation as Prime Minister Narendra Modi sat through the speech. His second tenure as PM was marked by numerous allegations of corruption, but Dr Singh’s integrity was never in doubt. Perhaps it was his rich experience as an economic administrator and his personal credibility which unnerved the treasury benches.Manmohan Singh's take on demonetisation inaccurate, cash flow into system has increased: Jayant SinhaAuthor: Anindya BanerjeePublication: India Today Date: November 25, 2016URL: Prime Minister Manmohan Singh had in Parliament yesterday said demonetisation would bring the GDP down by about 2 percentage points.Jayant Sinha may have long bid adieu to the Finance Ministry, but if it's about defending the government on economic issues like demonetisation, he never shies away from putting his best foot forward. He questioned Manmohan Singh's assessment of demonetisation, a day after the former Prime Minister termed the decision "organised loot, legalised plunder".Sinha, who is currently the MoS for Civil Aviation, was earlier the Minister of State for Finance.MANMOHAN SINGH'S ASSESSMENT INCORRECTSpeaking to India Today, Jayant Sinha said, "Manmohan Singh's assessment is not accurate. He should know that whenever you put the economy on a high-growth trajectory, there will be a compounding effect in the long run. And initially, there will be mild disruptions. There was disruption even in 1991", Sinha was referring to the era when the economy was unshackled under the leadership of the then Finance Minister Manmohan Singh himself."Yes, there are people who are facing problems. But cash flow into the system has been increased", the former economist said. Manmohan Singh yesterday in Parliament attacked the government's decision sharply. He said, "In my opinion, the way the scheme has been implemented will hurt agricultural growth in our country, will hurt small industry, will hurt all those people who are working in informal sectors of the economy. And my own feeling is that the national income, that is the GDP, can decline by about 2 percentage points as a result of what has been done."CASE OF SEIZURE OF Rs 3.5 CRORE ON FLIGHT UNDER PROBE When asked about the amount of Rs 3.5 crore in old currency notes that was seized yesterday from a chartered flight after landing at Dimapur airport from Hisar, Sinha said, "I know that the case is under criminal investigation. But one may rest assured that we are keeping a tab on all chartered flights that are flying across India".How Bibek Debroy countered Manmohan Singh and Kaushik Basu on demonetisationAuthor: FE OnlinePublication: The Financial Express Date: November 28, 2016URL: Aayog member Bibek Debroy has slammed the critics of Modi government's demonetisation drive, including former PM Manmohan Singh and ex-World Bank chief economist Kaushik Basu.Renowned economist and Niti Aayog member Bibek Debroy has slammed the critics of Modi government’s demonetisation drive, including former PM Manmohan Singh and ex-World Bank chief economist Kaushik Basu. In an interview to India Today, Debroy said that Dr Manmohan Singh has been the PM for a decade and has more expertise in on the issues of loot and plunder. “He (Manmohan Singh) has been prime minister for 10 years, he has far more expertise on organised loot and legalised plunder. So I would not like to comment on what he has said, let’s move on to the more substantive issue. I have a great deal of respect for him and and I have a great deal of respect for his expertise in those two expressions,” Debroy said.His remarks came after the Manmohan Singh had in Parliament said that the Modi government’s demonetisation move is “organised loot, legalised plunder of the common people”. “…these measures convince me that the way this scheme has been implemented is a monumental management failure, and in fact, it is a case of organised loot, legalised plunder of the common people,” Manmohan Singh had said. Singh had also predicted that India’s GDP can decline by about 2% as a result of demonetisation and its poor implementation. Singh had also questioned the benefit of such a painful exercise.Countering that argument, Debroy said that the gains would not be limited to the amount of black money that would be rendered useless, but also extend to government’s massive revenue generation. This, Debroy said, would help the government spend massive amount of money on building public goods and making more public services available.Debroy has also said that critics are unaware of the situation on ground, the extent of financial inclusion that has been undertaken by the Modi government, and how the revenue generated will help in enhancing public investment. Debroy told PTI that economists who live out of India normally do not have accesss to the latest data, and are hence more prone to drawing conclusions that may not hold true in the present situation. “They (economists living abroad) base their understanding essentially on reading English newspapers. Otherwise, how would they know? English language newspapers understood many things wrongly,” PTI quoted Debroy as saying.Debroy’s statement came after Kaushik Basu’s remark that demonetisation was not ‘good economics’ and would cause great ‘collateral damage’ “Where does Dr Basu work now? He is based in US. I have a great deal of respect for him…That someone who is away from India may not necessarily be aware what is happening in India,” Debroy said, adding that with the PM Jan Dhan Yojana a lot of people now have access to the banking system – a fact that Debroy feels Basu may not be aware of.The government’s move to withdraw the old Rs 500 and Rs 1000 notes from circulation and introduce new ones has divided economists, both domestic and global, into two camps – those who are calling it a bold step and others who are raising doubts over its benefits.So Manmohan lived for his present, not India’s future?Author: Kanchan GuptaPublication: The PioneerDate: November 27, 2016URL: Prime Minister, he didn't even bother to change the dressing of the maggot-infested cake. Theft turned into robbery and robbery into loot. His utterance may have been slip of a mind haunted by scams of his timeAges ago there was a Hindi film called, Kasme Vaade, starring Amitabh Bachchan, Rakhee, Randhir Kapoor, Neetu Singh and Amjad Khan. I was in high school and have vague memories of watching the film with my classmates. But this is not about the movie so much as one of its songs, “Kal kya hoga kisko pata, abhi zindagi ka le lo maza”, which was quite a rage among kids on the verge of adulthood, or at least among those who thought it was fashionable to put on an air of nonchalance.I had forgotten all about the film and the song till I heard former Prime Minister Manmohan Singh speak in Parliament, which by itself was a wonder since I couldn’t recall the last time I had heard him speak from a public platform. He made four points that merit comment.First, that he was not against the objective of the demonetisation announced by Prime Minister Narendra Modi. He couldn’t have said anything to the contrary as that would have meant disagreement with the purpose of flushing black money out of the system. But frankly, that’s neither here nor there.Second, while agreeing with the objective, he described the demonetisation exercise as a “monumental mismanagement”. We could give him leeway for this exaggerated assessment of the implementation process which, by all accounts, has been far less than smooth. After all, the Opposition and its leaders can’t be expected to gloss over the Government’s apparent lapses in the planning and execution of re-monetising the economy after demonetising high value currencies.Third, and this is where Manmohan Singh’s statement in the Rajya Sabha began unravelling, he described the demonetisation of Rs1,000 and Rs500 notes as “organised loot and legalised plunder”. This truly boggled the mind. How exactly is rendering currency notes illegal and replacing them with new notes of an equal value, provided people can account for the money they have in their possession, an “organised loot and legalised plunder”?More important, it ill behoves a man who as Finance Minister presided over possibly India’s worst securities and banking scam, and then as Prime Minister didn’t so much as lift his little finger in admonition as his Ministers emptied the public till right under his nose and on his watch, robbing the nation of hundreds of thousands of crores of rupees, to casually accuse another person who has a fetish for probity and integrity and ruthlessly imposes that fetish on his Cabinet colleagues, of “organised loot and legalised plunder”.And, finally, Manmohan Singh scoffed at the suggestion that the problems being faced by the people were a passing phase, that things would settle down, and a better future would more than compensate for the hassles of the moment. Quoting John Maynard Keynes (he needed to remind MPs and the people of this country that he was not just another politician but an economist-turned-reluctant-politician, never mind the fact that the reluctant bit is not true at all) he squeakily declared, “In the long run we are all dead”.So if in the long run we are all dead, why bother about unsettling the present for a better future? Why disturb the status quo? Why disrupt life as we know it? Why not let things meander and flow? Why not go with the flow? As the film song went, and Manmohan Singh might as well have broken into its rendition, “Kal kya hoga kisko pata, Abhi zindagi ka le lo maza”. Or he could have done a rendition of “Que sera, sera”, which would have equally served the purpose.Manmohan Singh was not necessarily being superciliously smart or pointlessly silly. It is another matter that he quoted Keynes out of context. By reminding a disruptive Prime Minister who has smashed the status quo that “in the long run we are all dead”, he has sought to articulate the principle by which Governments have lived all these decades since India’s independence: Let the system be, just change the dressing of the rotten cake.As Prime Minister, Manmohan Singh did precisely that; his critics would say he didn’t even bother to change the dressing of the maggot-infested cake. Theft turned into robbery and robbery turned into loot. His utterance may well have been the proverbial Freudian slip of a mind haunted by the scams that shall forever remain his abiding legacy.How the demonetisation will exactly pan out is anybody’s guess. We can only presume that Modi did his sums and got them right before embarking upon this humongous mission to cleanse India of dirty money and nudge Indians into going digital for their daily expense. For those truly inconvenienced by the sudden cash crunch, he has words of compassion and has urged them to hold on for 50 days, of which a fortnight has passed.By January next year, things would have returned to normal, though the new normal, let us be clear, will not resemble the past. We will be increasingly using lesser physical money and the sooner we get used to this idea, the better it shall be for all concerned. Beyond the troubles caused by Modi’s disruption, there’s little at stake for the masses. For the corrupt who stashed away illicit funds in cash, the future no doubt is bleak. But frankly, beyond losing their ill-gotten money, they too have little at stake.On the other hand, Modi has staked the future of his Government, his party and his own leadership by daring to take a step no other Prime Minister even dared think of. With Assembly elections coming up in Uttar Pradesh, Punjab and Goa, there’s this big question mark: Which way will the voters turn? Will they vote Modi as they are quite enthused by the idea of fixing the corrupt who have got away with their misdeeds with impunity and for far too long? Or will the disruption make them reconsider their options?Opinion polls are fickle and do not always reflect the ground reality. So to take them too seriously can cause self-inflicted wounds. The mood, however, is firmly in favour of Modi. Whether that will survive the disruption, which is far from over, remains to be seen.Meanwhile, Manmohan Singh has not done himself a favour by predicting a two per cent decline in GDP. In the event that does not happen (Rabi season sowing is on full swing and there has been a sharp increase in acreage being farmed for Rabi crops after demonetisation was announced) he would look utterly silly. He should have known better. But then again, he could just retort, “Kal kya hoga kisko pata…” - (The writer is commissioning editor and commentator at ABP News TV)Going aheadAuthor: EditorialPublication: The Indian ExpressDate: November 29, 2016URL: for government: To earn back trust, not brush warnings under black carpet.Former Prime Minister Manmohan Singh reckons that India’s GDP would take at least a two percentage point hit from the NDA government’s decision to scrap high-value notes. He isn’t the only one to sound a warning. A host of rating agencies, brokerages, economists and analysts have cut their growth forecasts for 2016-17, with the decline ranging anywhere from 100 to 350 basis points. At the end of the day, these are matters of detail. What is not in doubt is that the Indian economy is going to register a dip in growth —at least over the current and next quarters — from the cash crunch and it will take some time for liquidity to be restored in the system. And this comes when two of the economy’s growth engines — private investment and exports — were already sputtering. Demonetisation could take the shine off private consumption, the sole bright spark until now. The fact that there are fiscal constraints in the way of revving up the fourth engine — government spending — further increases the challenge for growth returning in the immediate term.Yet, if handled well, the strain may be short-lived. In the last few years, activity in the informal sector or the “shadow economy” — which is estimated to be as high as one-third of India’s formal economy — has helped keep the growth engine humming. It is this sector that is going to be hit the maximum by demonetisation, as the firms in this case deal largely in cash which also helps keep their transactions outside the tax net. With demonetisation and implementation of the goods and services tax, many of them may go out of business. That opens up two possibilities. The first is that firms in the informal sector will choose to function by going increasingly cashless and bringing most of their transactions on board. The potential benefits of such sweeping financial inclusion far outweigh the short-term pain. Alternatively, and this is where the government needs to do a lot more, there will be those who will wind up and cede market share to organised players. Either way, the economy gains as the tax base expands. Right now, we have a very perverse system of a limited number of people and firms shouldering most of the burden of taxes. It results in high tax rates, which, in turn, further encourages evasion and parallel economic activity.Manmohan Singh is right when he points out that the restrictions placed on withdrawal of cash by people from their own bank accounts are unprecedented in any country. Indeed, the way the present demonetisation exercise has been implemented, the way there are announcements and amendments day by day, is a textbook example of a government not having done its homework. As the next phase begins, the government needs to earn that trust. The onus for proving that this was a sacrifice worth it — in terms of giving a decisive push towards a formalised, less cash-oriented and more tax-compliant economy — lies with it. It has its task cut out. Making of a mammoth tragedyAuthor: Manmohan SinghPublication: The HinduDate: December 9, 2016URL: decision to demonetise will cause grievous injury to the honest Indian who earns wages in cash. The dishonest black money hoarder will get away with a mere rap on the knuckles It is said that “money is an idea that inspires confidence”. At the stroke of the midnight hour, on November 9, 2016, the confidence of more than a billion Indians was destroyed. Prime Minister Narendra Modi had declared that more than 85 per cent of the value of money held in notes of Rs.500 and Rs.1,000 was worthless overnight. In one impetuous decision, the Prime Minister has shattered the faith and confidence that hundreds of millions of Indians had reposed in the Government of India to protect them and their money.The Prime Minister in his address to the nation said, “there comes a time in the history of a country's development when a need is felt for a strong and decisive step,” and propounded two primary reasons for this decision. One was to check “enemies from across the border… using fake currency notes”. The other was to “break the grip of corruption and black money”.Both these intentions are honourable and deserve to be supported whole-heartedly. Counterfeit currency and black money are as grave a threat to the idea of India as terrorism and social division. They deserve to be extinguished using all the firepower at our disposal. However, the popular saying “the road to hell is paved with good intentions” serves as a useful reminder and warning in this context.The underlying premise behind the decision of the Prime Minister to render Rs.500 and Rs.1,000 currencies as illegal overnight seems to be this false notion that ‘all cash is black money and all black money is in cash’. This is far from reality. Let us understand why.Life thrown into disarrayMore than 90 per cent of India’s workforce still earn their wages in cash. These consist of hundreds of millions of agriculture workers, construction workers and so on. While the number of bank branches in rural areas have nearly doubled since 2001, there are still more than 600 million Indians who live in a town or village with no bank. Cash is the bedrock of the lives of these people. Their daily subsistence depends on their cash being accepted as a medium of valid currency. They save their money in cash which, as it grows, is stored in denominations of Rs.500 and Rs.1,000 notes. To tarnish these as ‘black money’ and throw the lives of these hundreds of millions of poor people in disarray is a mammoth tragedy. The vast majority of Indians earn in cash, transact in cash and save in cash, all legitimately. It is the fundamental duty of a democratically elected government in any sovereign nation to protect the rights and livelihood of its citizens. The recent decision by the Prime Minister is a travesty of this fundamental duty.Black money in India is a genuine concern. This is wealth that has been accumulated over years by those with unaccounted sources of income. Unlike the poor, holders of black money have access to various forms of wealth such as land, gold, foreign exchange, etc. There have been various attempts by many governments in the past decades to recover this illicit wealth through actions by the Income Tax department, the Enforcement Directorate and schemes such as Voluntary Disclosure. These measures were targeted strikes at only those suspected to be holders of such unaccounted wealth, not on all citizens. Evidence from these past attempts has shown that a large majority of this unaccounted wealth is not stored in the form of cash. All black money is not in cash, only a tiny fraction is. Against this backdrop, the decision by the Prime Minister is bound to have obverse implications by causing grievous injury to the honest Indian who earns his/her wages in cash and a mere rap on the knuckles to the dishonest black money hoarder. To make it worse, the government has actually made it easier to generate such unaccounted wealth in the future by the introduction of a Rs.2,000 note. This brazen policy measure has neither tackled the stock of black money holistically nor has it stemmed the flow of it.It is no surprise that the logistical challenge of replacing billions of old currency notes with new ones is a monumental one. It is a huge challenge in most nations, and in a country as vast and diverse as India it was bound to be doubly so. This is also one reason why most nations that have undertaken such currency swap operations have done so over a certain time period and not as a sudden overnight operation. It is heartbreaking to see and hear of millions of poor Indians standing in long lines to withdraw some money for basic sustenance. As someone who has experienced long lines for rationed food during war time, I never imagined that one day I would find my own countrymen and women waiting endlessly for rationed money. That all of this suffering is due to one hasty decision makes it even more disconcerting.The macroeconomic impact of this decision of the government is likely to be hazardous. At a time when India’s trade numbers are at multi-year lows, industrial production is shrinking and job creation is anaemic, this policy can act as a negative shock to the economy. It is indeed true that India’s cash to GDP ratio is very high vis-à-vis other nations. But this is also an indicator of the Indian economy’s dependence on cash. Consumer confidence is an important economic variable in a nation’s growth prospects. It is now evident that this sudden overnight ban on currency has dented the confidence of hundreds of millions of Indian consumers, which can have severe economic ramifications. The scars of an overnight depletion of the honest wealth of a vast majority of Indians combined with their ordeal of rationed access to new currency will be too deep to heal quickly. This can have ripple effects on GDP growth and job creation. It is my humble opinion that we as a nation should brace ourselves for a tough period over the coming months, needlessly so.Unintended consequencesBlack money is a menace to our society that we need to eliminate. In doing so, we have to be mindful of the potential impact on hundreds of millions of other honest citizens. It may be tempting and self-fulfilling to believe that one has all the solutions and previous governments were merely lackadaisical in their attempts to curb black money. It is not so. Leaders and governments have to care for their weak and at no point can they abdicate this responsibility. Most policy decisions carry risks of unintended consequences. It is important to deftly balance these risks with the potential benefits of such decisions. Waging a war on black money may sound enticing. But it cannot entail even a single loss of life of an honest Indian.- Dr. Manmohan Singh was Prime Minister of India from 2004 to 2014.PM Narendra Modi Asks In Rare Attack On Manmohan Singh, Whose Legacy Anyway?Author: Alok Pandey, Edited by Deepshikha GhoshPublication: Date: December 22, 2016URL: Minister Narendra Modi, in his broadside against top Congress leaders including Rahul Gandhi today, did not spare predecessor Manmohan Singh, unusually referring to him by name."Look at Manmohan Singhji. Do you know he has been in the core team of those in charge of the country's economy since the 70s, even he says that in the country where 50 per cent people are poor, how can all this digitization happen. Now is this his report card or mine? Whose legacy am I dealing with?" the Prime Minister said at an event in his constituency Varanasi in Uttar Pradesh. For Mr Gandhi, the Prime Minister dialed up the sarcasm, saying he is "learning how to make speeches" mocking the Congress Vice President's threat of causing an "earthquake" with details on "personal corruption" of PM Modi. "It is good that he has started speaking, we now know that there's no chance of an earthquake," said the PM.In parliament last month, Manmohan Singh, a renowned economist, had criticised the government's handling of the notes ban decision as "organised loot, legalised plunder".He followed it up with a sharp critique of PM Modi's decision to ban high value currency notes in an editorial published in The Hindu newspaper, calling it a "travesty of his fundamental duty" and accusing him of shattering the faith of more than a billion Indians.In the editorial - "Making of a Mammoth Tragedy" - Dr Singh predicted a ripple effect on GDP and job creation, and "grievous injury" to the honest Indian.His next class actAuthor: Shekhar Gupta Publication: The Indian Express Date: May 30, 2009URL: radical revamp of higher education is the only way to do justice to the politics of aspirationIn his first innings as a politician, Dr Manmohan Singh liberated our economy. In his second, as prime minister, he brought about a paradigm shift in not only our foreign policy, but also our entire worldview. In each case, he persisted with change at great risk to his neck, and reputation. So what will be the change in his third stint in public office? Or, rather, what should he?Our guess, and wish, is that he now does to our higher education what he did to our economy and foreign policy in 1991 and 2008, respectively. It is fashionable in India now to talk of our demographic dividend. By 2020, we will be probably the youngest nation in the world with an average age of 29. Our dependency ratio, the number of healthy breadwinners for each dependent — someone too old (above 65) or too young (below 15) to earn — is already near a healthy 1.8. By 2030, at 2.1, it will be nearly the highest in the world. (China’s will have declined steeply to about 1.7 by then.) Unless our totally moribund system of higher, technical and vocational education is totally revolutionised, this dividend will become a curse. India would then end up having the largest population of angry, unemployable young lumpens in the history of mankind. Even a society as resilient as India will not survive that calamity. On the other hand, if he can now revolutionise our education, the same young India will be a qualified, productive, creative and joyful pride of the global community. If 1991 unleashed Indian entrepreneurship and 2008 liberated us from a six-decade fear of Westoxification, this is a real opportunity to take a crack at discrimination, deprivation, inequality and even at caste and communalism.Just as the licence-quota raj created self-inflicted scarcities of telephones, scooters and cooking gas, our utterly authoritarian, cynical and intellectually bankrupt higher education policy has created humongous shortages. We all know the odds for a candidate to qualify for premier engineering, management and medical colleges. Those with means now pay their way to colleges in Australia, Singapore, Qatar, besides indeed the traditional “exporters” of education to India, the US and the UK. Various estimates put just the cost on Indian parents of educating their children abroad between $5 billion and $6 billion per year. This is an entirely one-way trade, as very few foreign students come to study in India, and some of those who wish to, like researchers, even Fulbright scholars, are given hell by our Orwellian (or you could coin an Indian equivalent, Arjunian, Murlimanoharian) HRD establishment. Where does it leave the poor who can’t afford to buy their children seats overseas? Where does it leave Indian enterprise and industry — even the government, its armed forces, hospitals, PSUs — which can’t find enough skilled manpower and therefore have to pay exaggerated wages, distorting all economics? Yet, do advertise for a security guard on and see how many applications you get from MAs, MScs, even PhDs. These are young Indians who have invested the most valuable years of their lives collecting degrees but no knowledge, education but no skills. Unless this disaster is stemmed now, these numbers will multiply faster than you can imagine, and they will be angrier than you wish to imagine. But if you can fix it, the dividend you reap will be not merely demographic, but even economic and political. While our army of the unemployable increases we suffer from crippling shortages of not just engineers, doctors and managers, but also of nurses, welders, electricians, plumbers, masons, carpenters, teachers and of course social scientists. Engineering, management and medicine at least have their IITs, IIMs and AIIMS. What brand name can Indian social sciences and the liberal arts boast of? They, in fact, have a bigger problem than lack of resources: lack of intellectual freedom, diversity of thought and opinion. The few social science centres that we have, therefore, produce clones. Usually these are clones of professors steeped in the heady ideologies of the ’70s incapable or unwilling to notice that the “revolution” has passed them by. JNU is a perfect example.It is known that education liberates. But it also follows that better education, particularly greater access to higher education, creates a virtuous cycle of improved collective self-esteem, equality, ambition and satisfaction that dovetails so nicely in this new resurgent India that is choosing politics of aspiration over politics of grievance, and which will continue to get only younger for another 25 years. It is only because of increased opportunity that a paanwala’s son now can get to IIT, or one modest coaching centre run by one motivated individual in Patna can send 70 Bihar kids to our topmost engineering colleges. And this opportunity has arisen when our IIT-JEE system now provides 8000 seats. This looks like a lot now, compared to just 2000-plus in 1988. But given the needs of our young people, and of our economy and industry, it is way too little. Compare this to UCLA (25, 000 undergrad and 11, 000 postgrad), MIT (4, 172 undergrad, 6048 PG), Harvard (6, 714 undergrad and 12, 442 PG) and a total student strength of 11, 250 at Yale. In comparison, our venerable JNU has 5000 and it is the only one of its kind in all of India, while there are 10 UCs (Universities of California). This shortage, this criminal undersupply of quality education, is the most cruel atrocity on a society blessed with so much intellect, and such respect and longing for education. Dr Devi Shetty of Bangalore’s Narayana Hrudayalaya points out to me that given the diabetes epidemic, India is now the kidney disease capital of the world. Yet, do you know how many nephrology MDs our medical colleges produce in a year? It is only 70. Neurology does worse, with 63, cardiology a little better with 88 and oncology, the specialisation to treat cancers, only 15. And we hope to earn foreign exchange from medical tourism! In each of these specialisations, India could absorb, and needs, at least 10 times as many per year. Can you imagine a country of 110 crores producing just 7332 MDs per year? America produces 16, 000 and little UK 4200.This undersupply of quality education at all levels is entirely self-inflicted, and unnecessary. Every year we see a scramble for private and even central schools admissions, court cases, madness of 90 percenters failing to get into even economics and English honours in our better colleges (actually just about 10 all over India). And the definition of “better” college here is where at least classes are held regularly since the UGC, a three-letter word from hell or Kim Il-Sung’s North Korea, won’t even let a college charge its pupils more if they were willing to pay, or pay its teachers more than the salaries it mandates. The result then is the phenomenon you see on your TV screen all day. The advertisement telling you that India’s largest private university is Lovely Professional University in Punjab, of course with UGC certification. Now, why pick on a name, you might ask? The Americans have business schools named after Kellogg and, who knows, perhaps Mickey Mouse. But comparisons should stop about here. This is what Manmohan Singh now has the opportunity, time and political space to change. He has made a good beginning by choosing Kapil Sibal, our first “modern” HRD minister in two decades. This is an issue Rahul Gandhi feels strongly about. There is no real opposition from the BJP which should be as embarrassed of the record of its Murli Manohar Joshi in HRD as the Congress should be of Arjun Singh’s. So if 1991’s near- bankruptcy created the justification for economic reforms, and a new intellectual-philosophical urge fuelled the nuclear deal and thereby a generational foreign policy shift, the new demographic reality and politics have both created the space for a revolution in education and HRD. On this one now, there are no excuses. No Dr Joshi, no Arjun Singh, no fake ideology, no Left. sg@Manmohan Singh presided over monumental mismanagement of nation: Venkaiah NaiduAuthor: ANIPublication: The Economic TimesDate: December 9, 2016URL: Information and Broadcasting Minister M. Venkaiah Naidu launched a scathing attack on the Congress party by squarely blaming former Prime Minister Dr. Manmohan Singh for mismanaging the country. "Manmohan Singh has presided over the monumental mismanagement of the country." Naidu claimed that Congress has been unable to digest the revolution being brought about by Prime Minister Narendra Modi through demonetisation decision. "I ask the opposition, is it foolish to take action against the counterfeit money of Pakistan, taking action against drug mafia, black money? Can Congress explain?" said Naidu. Mentioning the number of scams that surfaced during the UPA regime, Naidu said the Congress is negating demonetisation because they could not come out with such a revolutionary move. "2G, 3G spectrum, Agusta, Commonwealth Games scam, coal scam - All scams have happened under whose regime?" he said. Regarding the everyday ruckus in parliament, leading to an adjournment of both houses, Naidu said, "If you really want to expose the government, then expose it by having a debate in parliament." Responding to the Congress' claim of number of deaths taking place under the Bharatiya Janata Party's regime, Naidu said lakhs of farmers committed suicide in Maharashtra, Karnataka during the UPA regime. Applauding the government's decision to ban high-denomination currency, Naidu said, "The PM of India has taken a historical and bold revolutionary decision for the transformation of India. Naidu demanded an apology from the opposition for obstructing parliament and called out for a proper discussion on all issues raised by opposition. Naidu also termed opposition's 'Bharat Bandh' a big flop.Not a tragedy, but the remedyAuthor: S. GurumurthyPublication: The HinduDate: December 13, 2016URL: Modi is correcting the monumental mismanagement of the economy by the economist Dr. Manmohan Singh In his article (“Making of a mammoth tragedy”, The Hindu, December 9), Dr. Manmohan Singh attacked the demonetisation of high denomination notes (HDNs) by the National Democratic Alliance (NDA) government as the “making of a mammoth tragedy”. In his prose, Dr. Singh speaks less as an economist in which capacity he is respected more than as the former Prime Minister, the role which has actually dented his image. Yet it is best to respond to him on economic issues which he has kept away from, not to his political verses. Undisputed facts, not alluring rhetoric, should decide whether demonetisation is a tragedy or a remedy. Is it a monumental mismanagement of the economy as Dr. Singh charges? Or is it a remedy for the accumulated filth as Prime Minister Narendra Modi claims? To know the answer, the story of the Indian economy from 1999 to 2004 under the NDA and from 2004 to 2014 under the United Progressive Alliance (UPA) needs to be recalled.Real versus statisticDuring the NDA rule (1999-2004), real GDP grew by 27.8 per cent, annually 5.5 percentage points. Annual money supply, that fuels inflation, by 15.3 per cent. Prices by 23 per cent, annually 4.6 per cent. Asset prices rose only moderately in those five years. Stocks rose by 32 per cent; gold by 38 per cent. Taking Chennai as an illustration, land prices by 32 per cent. Jobs rose phenomenally, by almost 60 million. The NDA also turned in a surplus of $20 billion in 2002-04 in the external sector, after decades of unending deficits, save in two years in the late 1970s.Now come to the UPA rule under Dr. Singh, the economist Prime Minister. In the first and best six years of the UPA (2004-05 to 2009-10), before it was hit by scams, real GDP grew by 50.8 per cent, annually 8.4 percentage points — one-and-a-half times NDA’s. The world celebrated Dr. Singh. The UPA was intoxicated by the “high growth” story. But how many jobs did UPA’s high growth produce? Believe it or not, just 27 lakhs against 600 lakhs during NDA’s five years, according to NSSO data. UPA achieved one-and-a-half times NDA’s GDP growth, but just 5 per cent of its job growth. Dr. Singh now bemoans that Mr. Modi’s demonetisation will stifle jobs!Move on. In the six years, prices rose by 6.5 per cent (4.6 per cent under NDA). The external sector deficit was $100 billion (against NDA’s $20 billion surplus). Did high petroleum prices force it? No. Zero-rated customs duty-led capital goods imports which topped petroleum imports was the culprit.Asset inflationWhy was the UPA’s high growth jobless? The well-kept secret is that huge asset price inflation, not production, passed off as high growth. In the first six years of the UPA, stock and gold prices jumped by three times — annually by 60 per cent. Property prices doubled every two-three years. In Gurgaon, not on the property map in 1999, land prices rose by 10-20 times. Asset inflation in six years was three times the annual nominal GDP growth. The asset inflation not the result but the cause of the UPA’s “high growth”! How? Modern economics deducts the non-asset price inflation from nominal growth to know the real growth. But it sees asset price rise as wealth and prosperity and adds it to GDP. See how this economics worked for the UPA.Unmonitored Rs.500/1,000 notesEconomics says money, growth, prices and jobs are inter-related. Apply this rule to the NDA and UPA periods. During 2004-10, average money supply grew annually 18 per cent (15.3 per cent under the NDA). But asset prices rose by several multiples of it. The moderate rise in money supply over the NDA’s number does not explain the huge asset inflation. The clue hides in the rising unmonitored HDN cash stock with the public which made black money deals easy. In 1999, the cash with the public was 9.4 per cent of nominal GDP. By 2007-08, instead of falling due to rising bank and digital payments, it jumped to 13 per cent of nominal GDP. Later it began hovering around 12 per cent. More critically, the HDNs with the public more than doubled from 34 per cent in 2004 to 79 per cent in 2010. On November 8, 2016, it was 87 per cent. The average annual rise in HDNs was 51 per cent between 2004 and 2010 and the annual rise was 63 per cent by 2013-14. The Reserve Bank of India noted that two-thirds of the Rs.1,000 notes and one-third of the Rs.500 notes — that is over Rs. 6 lakh crore now — never returned to banks after they were issued. The unmonitored HDNs roaming outside banks began driving up the gold and land prices by black cash and the stock prices through Participatory Notes (PNs) — which are largely hawala transfers out of India — that came back pretending as foreign investment in stocks. The PNs rose from Rs.68,000 crore in 2004 to Rs.3.81 lakh crore in 2007.How did the asset inflation lead to the UPA’s “high growth”? Inflated asset prices to the extent realised by sale got accounted as part of income and included in GDP. Large part of the gains on stock sale got added to GDP with very little tax under Securities Transaction Tax. The spurious wealth effect also led to high-end consumption. The annual private consumption growth averaged 18 per cent till six years to 2009-10 — 80 per cent over the NDA average. The fake wealth effect, powered by HDN cash, scripted the UPA’s “high growth” story. HDNs outside banks took refuge in stocks, gold and land, produced capital gains-led growth and consumption. Had the HDNs circulated through the banking system, it would have multiplied through the fractional reserve model, reduced the inflation and interest, and funded the small-and-medium enterprises starved of organised funding.Catch-22 situationThe curse — asset inflation inspired jobless growth — seems irreversible till unmonitored HDNs roam and fuel fake growth. Dr. Singh had had enough wake-up calls when the share of HDN cash was escalating year after year from 2004. He could have de-escalated the hugely growing cash economy had he remonetised the HDNs by lesser denominations without demonetisation — sparing the people of discomfort and economy of short-term damage. Of course, he would have lost the “high growth” brand that made UPA rule an economic success. To unmask this deception and revive job productive growth, the unmonitored HDNs needed to be brought to account forcibly. By his inaction, undeniably, Dr. Singh had landed the economy in a Catch-22 situation. The Modi government could either opt to continue the status quo of jobless growth or force temporary decline in growth to reinstate real growth and jobs. It opted for the latter. Even an undergraduate student in economics will tell you that it will cause hardship and hit growth in the short run. A Cambridge economist is not needed to write a column on that. It is already late. If the status quo of unmonitored HDNs were to last for another five-six years, the size of HDNs would have become so huge that no government may have been able to act against it — inevitably inviting a huge crisis, both internal and external. Prime Minister Modi has rightly called the demonetisation as “kadak chai” (bitter pill). That HDNs promoted high bribery and helped terror funding through fake HDNs cannot be disputed at all. Far from doing a monumental misappropriation or making a “mammoth tragedy”, Mr. Modi is correcting the monumental mismanagement of the economy by the economist Dr. Singh.- S. Gurumurthy is a political and economic commentator.India grapples with the effects of withdrawing 86% of cash in circulationAuthor: Publication: The EconomistDate: November 26, 2016URL: crackdown on India’s black economy makes life harder for everyoneA NEW strain of trickle-down economics has been spawned by the decision, on November 8th, to withdraw the bulk of India’s banknotes by the end of this year. As holders of now-useless 500-and 1,000-rupee ($15) notes rushed to deposit them or part-exchange them for new notes, an e-commerce site offered helpers, at 90 rupees an hour, to queue outside banks in order to save the well-off the bother.Elsewhere, a chronic shortage of banknotes in a cash-dominated economy has left most trades depressed. Seven out of ten kiranas (family-owned grocers) have suffered a decline in business, according to a survey by Nielsen, a consultancy. Supply chains, in which wholesalers and truckers deal mostly in cash, have fractured. Some 20-40% less farm produce reached markets in the days after the reform. City folk admit to hoarding the 100-rupee note, the largest of the old notes to remain legal tender. Taxi drivers refuse to break the new 2,000-rupee note. Road-tolls have been suspended until at least November 24th, to prevent queues. Beggars have disappeared from parts of Delhi; no one has spare change.India’s prime minister, Narendra Modi, is gambling that this temporary pain will be worth it. His goal is to flush out “black money”, stores of wealth that bypass the tax system, finance election campaigns and grease the wheels of high-level corruption. An enforced swap of high-value notes, say the reform’s boosters, acts as a tax on holders of illicit wealth. The element of surprise is disruptive but without it, there would be time for black-money holders to launder their funds by purchasing gold, foreign currency or property. A tight deadline makes it hard for holders of large stashes of notes to swap or deposit them without alerting the tax authorities.This swiftness comes with a cost. Aside from cases where hyperinflation has rendered a currency worthless, such swaps generally take place over long periods to avoid disrupting commerce. GDP growth might be as much as two percentage points lower this quarter and next before returning to normal as the money stock is replenished, reckons Pranjul Bhandari of HSBC, a bank. Much depends on how quickly new cash can be swapped for old. It has not been a smooth process so far. The Reserve Bank of India (RBI), which issues notes, waited for six days before setting up a task force to ensure ATMs could dispense the new 2,000-rupee note. Only a quarter of ATMs in four big cities were full on November 21st, according to Goldman Sachs.Yet there are signs that the reform is nudging Indians out of cash and into bank deposits and plastic, where money can be tracked. In the fortnight after the announcement, bank deposits were up by 5.1trn rupees, thanks to an influx of old notes and restrictions on withdrawals of new ones. PayTM, a provider of digital wallets, reported a surge in transactions.Despite the distress, and the raucous protests, the reform seems to have widespread support. Bashing the rich is popular even if the poor are inconvenienced. Some may also hope it will bring new state benefits for the poor and make housing more affordable. Indian real estate is so expensive in part because it is a store of illicit funds. In theory, whatever black money cannot be laundered will be worthless, yielding a gain for government’s finances and perhaps ultimately for poorer Indians. But such a boost cannot be relied upon. The RBI has not yet formally said that old notes will be cancelled for good, says Ashish Gupta of Credit Suisse, and it may be loth to do so. No central bank likes to say it no longer stands behind the paper it issues.Besides economy, PM Modi's demonetisation disrupts status quo of polity, societyAuthor: Kumar Shakti ShekharPublication: Indiatoday.inDate: November 24, 2016URL: demonetisation move has created schisms within alliances of the ruling BJP-led NDA government at the Centre and main Opposition Congress in the states.The Narendra Modi government's demonetisation initiative has not just disrupted the status quo of the country's economy but also of polity and social life. This tectonic shift in economy is forcing divisions and realignments within political parties and families.The demonetisation move has created schisms within alliances of the ruling BJP-led NDA government at the Centre and main Opposition Congress in the states.SHIV SENA AND AKALI DALThe Narendra Modi government itself has suffered the jolt of scrapping high denomination currency notes of Rs 500 and Rs 1,000. The NDA's alliance partners in Maharashtra and Punjab - Shiv Sena and Shiromani Akali Dal (SAD) respectively - and at the Centre have taken a stand against demonetisation.On November 16, just eight days after the demonetisation was announced by Prime Minister Narendra Modi in a televised address at 8 pm on November 8, leaders of BJP's two oldest allies - Shiv Sena and SAD - marched to Rashtrapati Bhavan in a delegation led by West Bengal Chief Minister Mamata Banerjee. They petitioned President Pranab Mukherjee against the inconvenience caused to the people due to "mismanaged demonetisation" and demanded "immediate suspension of the dictatorial and draconian step of demonetisation".Shiv Sena has been critical of the BJP-led NDA governments of both Atal Bihari Vajpayee and Narendra Modi. It has criticised both the PMs and also former deputy PM LK Advani for engaging Pakistan, calling it "hobnobbing". It also mocked Narendra Modi after the Uri terror attack saying Pakistan PM Nawaz Sharif had shown his "56-inch chest".However, SAD siding with the Opposition over demonetisation was quite unusual. SAD is one BJP ally which has stood by its side in thick and thin. Hence, the latest development should be a worrying factor for the ruling BJP.CONGRESSAs far as the Opposition is concerned, two voices are being heard in them. In the Congress, its vice president Rahul Gandhi has gone to the extent of calling demonetisation a "scam". However, Punjab Congress president Captain Amarinder Singh has spoken in favour of the notes ban, saying it is in the interest of the country, though he expressed reservations over its implementation.BIHAR'S GRAND ALLIANCEThe Mahagathbandhan (Grand Alliance) in Bihar - comprising Lalu Prasad's RJD, JDU and Congress - is divided over discontinuing Rs 500 and Rs 1,000 currency notes. While Chief Minister Nitish Kumar has surprisingly lent his total support to Narendra Modi, both RJD and Congress are vehemently against the PM's move.JDUNot only the Grand Alliance but also the JDU itself is feeling the strain of the "surgical strike" on black money. As against Nitish Kumar's whole-hearted support to the move, senior party leader and Rajya Sabha MP Sharad Yadav was seen lending his support to Mamata Banerjee's protest event at Jantar Mantar on November 23.BSPBSP too has remained unscathed with those supporting demonestisation. Recently, a senior leader's mike was snatched away just because he was singing paeans on the Narendra Modi government's "bold" demonetisation move in the presence of the party supremo. A BSP Neta praised PM Modi in front of Mayawati in her rally for #DeMonetisationShe got pissed and asked her workers to snatched his mic pic.WQAYNbdW3zRishi Bagree (@rishibagree) November 21, 2016BACHCHANSBesides the political parties, the status quo in several families is also getting disrupted. Demonetisation has divided the opinion in the Bachchan family. While Amitabh Bachchan, his son Abhishek Bachchan and daughter-in-law Aishwarya Rai Bachchan have supported the Narendra Modi government's "war" on black money, his wife and Samajwadi Party's Rajya Sabha MP Jaya Bachchan has taken a diametrically opposite stand. Like Sharad Yadav, she was also seen with Mamata Banerjee at Jantar Mantar.MIDDLE CLASSEven the middle class families are seeing divergent opinions over demonetisation. For instance, Noida resident Tusi Kumar, who is a lawyer, has expressed reservations over the drive. More than scrapping of notes, he has objection to the implementation of demonetisation.Tusi hates standing in queues. But his wife Lily Singh, who works in a private firm, does not mind his standing in queue for a couple of hours to withdraw money from ATM "for the sake of India". As the Narendra Modi government takes more steps to check black money and corruption, this disruption of status quo in political parties and families is likely to intensify in the days to come.India’s golden momentAuthor: Rajiv KumarPublication: The Indian ExpressDate: November 25, 2016URL: is an ethical step. It can help us leave behind culture of illegality, indiscipline, ill-gotten wealth.The public frenzy for getting hold of cash is visibly subsiding. However, the pressure may well be shifting to smaller towns to which currency supply may not have kept pace. Also, the next wage payment for casual workers, who may well comprise nearly 60 per cent of the workforce, is approaching. Therefore, it may be a good time to take stock, draw lessons and initiate steps to prevent short-term pains from resulting in permanent loss of economic activity.For me, the ethical and social aspects of this dramatic move are of utmost importance. The measure represents the draining of a cesspool, created over seven decades. We are all party to its creation, either actively or in our passive acceptance of the growing vulgar ostentatious consumption that threatens to become all pervasive. Demonetisation will surely reverse, to some extent, the brazen flaunting of ill-gotten wealth. It may induce India to turn away from the Latin American model of state, with its extreme inequities and rampaging drug mafias, and hopefully, turn it towards the more equitable and honest East Asian model.We know that black money (currency) is only a small part of the black economy. However, this does not necessarily imply that it is not worthwhile to liquidate stocks of black money without simultaneously attacking other “illegally” acquired assets. The aggregate black economy is estimated at over 30 per cent of the formal economy. Even if black money constitutes 10 per cent of this amount, it represents a cash hoard of nearly Rs 5.5 lakh crore. To try and immobilise that amount or even a substantial part would convey a strong anti-corruption signal.Three types of criticism have been mounted against the measure. First, economic costs would far outweigh any potential benefits. Second, implementation has been badly botched. Third, it has not gone far enough because it only attacks the stock and does nothing to stymie future flows of illegal economic activity. The first and the third arguments are contradictory because the first considers the measure to be harmful, while the third demands more of the same.A major concern has been that all those in the informal sector who have legitimate business, though carried out in cash, will be undeservedly hurt. Some may be hurt mortally and result in their permanent closure resulting in job losses and the slowdown of GDP growth. Some wild estimates see GDP growth plummeting to zero in the next two quarters and not recovering in the foreseeable future.This is surely scare-mongering. All medium, small and even micro production enterprises (production MSMEs as opposed to wholesale or retail traders) surely have some access to formal credit sources. This must be true of MSME export units that are reported to account for 45 per cent of India’s total merchandise exports. The majority of MSMEs deal only partially in cash. Anticipating the onset of GST, many had started to move away from cash transactions as these would not receive any tax credit. Therefore to argue that demonetisation spells doom and disaster for MSMEs is sheer exaggeration.Farmers, it was asserted by Lalu Prasad, are in deep distress and dying. This is hyperbole. Farmers can sell their kharif harvest of sugarcane to mills with receivables being directly credited to their bank accounts as always. Any amount of paddy can be sold to the FCI at the government-declared minimum support price (MSP). Agro-inputs are normally available at 30-60 day credit to virtually all farmers.Rabi sowing is, therefore, reportedly on track, opposition parties’ grandstanding notwithstanding. In his November 16 blog on Modi’s bold move, Kenneth Rogoff, the author of The Cashless Economy, wrote: “The short-run costs are unfolding, but the long-run effects on India may well prove more than worth them, but it is very hard to know for sure at this stage.”It is, therefore, not surprising that the opposition parties find themselves terribly short of public support. Not surprisingly, they have been patently unsuccessful in taking their protests out of Parliament to the streets, where they will be exposed to the strong public support for the PM’s move.The implementation certainly could have been better. Admittedly, the measure was humungous in scale, cloaked in necessary secrecy and complex. The RBI and ministry of finance should own up their responsibility. To their credit, they have been learning on the job, and have been open to suggestions.Three practical questions must be answered for further course correction. First, was the relatively short window of 50 days necessary and could it not be extended? Second, could the domestic security printing press capacity constraint not be overcome by placing orders on foreign printers to produce Rs 100 and Rs 50 notes? Printing additional quantities of these denominations would not have breached secrecy and could have augmented the much needed currency supplies? Third, given the scale and time constraint, could government departments and treasuries not be used as points for dispensing and exchanging currency to overcome the shortage of ATMs that are still being re-calibrated.It is, of course, necessary to take steps to restrict future flow of illegal earnings without which this huge exercise could come to a naught. Some measures are already in place: Greater transparency in governance and roll back of the “inspector raj”, strictures and action against the corrupt in the central government, compulsory linking of Aadhar card with deposits and withdrawals from bank accounts and large purchases of jewellery and real estate, the impending GST, greater surveillance by the CBDT and commercial banks of brokers, developers and jewellers and Jan Dhan accounts, which are the expected conduits for laundering black money. Modi has repeatedly announced that demonetisation is but the beginning and that other steps to curb black money are in the pipeline.Modi has risked the support of the core constituency of the BJP and RSS — traders, middlemen and small entrepreneurs. He has taken this risk because he believes the measure can help India leave behind the culture of illegality, indiscipline and ill-gotten wealth. Every country needs its “golden moment” to transform itself and surge ahead. I suspect Modi feels it in his bones that this might be that moment for India.- The writer is senior fellow, CPR, and founder director, Pahle India FoundationMaximum Black Money Was Generated During 2004-14: Arun JaitleyAuthor: Swarajya StaffPublication: Date: November 24, 2016URL: the demonetisation decision as "correct", Union Finance Minister Arun Jaitley on Thursday said maximum black money was generated during the earlier Congress-led United Progressive Alliance government's rule."The steps this government has taken are right and are being implemented in the right manner," the minister told the media in Parliament House.Lashing out at the Congress, Jaitley said: "We are not surprised when we hear from those who ran the government between 2004 and 2014 that they do not like these steps against black money.""The maximum black money was generated in this country between 2004 and 2014. The biggest corruption scandals pertaining to the Commonwealth Games, the 2G spectrum and the coal blocks took place during this period," he added.Jaitley said people who did not consider these scandals to be blunders were now considering the campaign against black money and corruption to be a blunder.Jaitley was referring to former Prime Minister and Congress's Rajya Sabha member Manmohan Singh describing the post-dmonetisation chaos as "organised plunder", which he apparently mistook as "blunder"."This is the exact rational argument that they will put forward in the debate in Parliament as it takes place. But it's obvious that the opposition is uncomfortable with the debate and are inventing ...a ... manufacturing reason to run away from the debate," the minister said.The Rajya Sabha on Thursday resumed discussion on the government's demonetisation move after facing repeated adjournments for the past five days.However, the opposition again forced adjournment of the house in the post-lunch session over its demand for the presence of Prime Minister Narendra Modi during the debate.With inputs from IANS.To The Point : Montek Singh Ahluwalia Interview On Impact Of Demonetization India Today Published on Nov 22, 2016This episode of 'To The Point' brings to you an exclusive interview of former deputy chairman of the planning commission, Montek Singh Ahluwalia on the demonetization. In this interview, Karan Thapar questions Montek Singh Ahluwalia about the impact of demonetization can have on GDP growth and economic activity. He is also asked whether it is implemented thoughtfully or thinkingly and finally on whether it can effectively tackle black money and counterfeit currency. the point – Bibek Debroy25-11-2016. 9sSangh Joins PM's Black Money ChorusAuthor: Vasudha VenugopalPublication: The Times of IndiaDate: November 24, 2016URL: will make India a “more moral“ country, say top leaders of the Rashtriya Swayamsevak Sangh, and its notables are personally campaigning for the policy .RSS members have also been asked to “assist“ citizens queuing up for cash at ATMs and banks.RSS chief Mohan Bhagwat held a meeting with his top leaders and the saffron outfit is getting the word out on Prime Minister Narendra Modi's radical and much-debated policy move. Bhagwat, senior Sangh leaders said, has been personally monitoring the Sangh's response to the policy, urging leaders and members to explain demonetisation as well as offering “practical guidance“ to those encountering difficulties.RSS Joint General Secretary Dattatreya Hosabale, considered to be number three in the Sangh hierarchy, af ter Bhagwat and Suresh Bhayyaji Joshi, told ET he was “talking to as many people as possible“. He said on some days he's “spoken to a hundred people a day“, arguing the case for demonetisation.“From a barber to a vegetable vendor on the street to industrialists and bankers, every Indian acknowledges that the move is for building an honest country . In nation building whe never a big step is taken for larger interest, there is always suffering. It is unfortunate, but we all have to remember it is for the larger good,“ he said.Manmohan Vaidya, All India Prachar Pramukh (national spokesperson) and considered to be number four in the Sangh hierarchy , told ET that post-demonetisation “anti-national, separatist and terrorist activities in the country seem to have come to a sudden halt, resulting in restoration of normalcy in Kashmir Valley after a long time.“RSS Deputy Prachar Pramukh (media in-charge) J Nandakumar said there were no orders from the leadership to its members on the demonetisation move but Sangh members felt morally responsible to assist people at a time like this.“Many of us are providing tea and water to people standing in queues, helping senior citizens get to the counter fast and assisting people in filling out forms,“ he said.Currency demonetisation: In the hinterland, they groove to PM Modi's moveAuthor: Akhilesh Singh, TNNPublication: The Times of IndiaDate: November 25, 2016URL: may have dampened spirits in the wedding season in many places, but in the hinterland of Punjab, Haryana, Rajasthan and the Bhojpuri speaking regions of eastern Uttar Pradesh, Bihar and Jharkhand, some weddings are resounding to the beat of songs extolling the Prime Minister's move.Several singers have become popular thanks to the high demand of the songs hailing "note-bandi" (scrapping of Rs 500 and Rs 1000 notes). "Kaala dhan je rakhle hoi, laagal baa dil pe chot ho, Modiji hajar paan-saua ke band kaile note ho... Bora mein je bhi bhari ke baa rakhle, rowa ta lot pot ho (People having black money are hit badly and mourning as Modi has banned Rs 500 and Rs 1,000 notes)"-a Bhojpuri song by Chhotu Bhardwaj has rocked eastern Uttar Pradesh, Bihar and Jharkhand, regions with 35% of the country's population."Ratiya mein band kaila paanch sau hajaria, ab kaise kati din raat ho, jaa E Modi, eika kaila hamni amirawan pe ghaat ho (You banned Rs 500, Rs 1,000 notes at midnight. Oh Modi! you have hurt the rich badly!)", is another song sweeping the Bhojpuri regions where DJs are playing them as dance numbers in baraat processions.Some masons and labourers from Bihar, working in a South Delhi locality claim to be using 'note-bandi' songs as wake-up alarms on their mobiles. "We have received the songs from our village friends," says Ram Prasad, a labourer.Demonetisation: Modi risks winning battle, losing warAuthor: Rajdeep SardesaiPublication: Date: November 25, 2016URL: those still surprised by prime minister Narendra Modi’s audacious demonetisation gamble, the past maybe a useful guide. In 2007, just ahead of the Gujarat assembly elections, Mr Modi kickstarted power reforms in the state as chief minister, including a hike in rates and police action against farmers involved in power theft. When an angry RSS-backed farmers delegation met the chief minister, Mr Modi’s response was reportedly defiant: “I will step down as chief minister but not back down. You can always replace me if you wish.” In the elections that followed, Mr Modi won the day and silenced his critics.In a sense, the 2007 power reform battle in Gujarat, much like today’s demonetisation challenge, is typical Modi: he is a leader whose self-belief, bordering or narcissism, leads him to short circuit political systems and reject sectional interests in the confidence that he has the answers to all likely pitfalls. It is both a strength and a weakness: the lack of self-doubt makes him a consummate risk taker, but also someone who can at times act impulsively without due consultation.Is Gujarat a mini-India then, and will Mr Modi triumph yet again? When almost the entire opposition protests against you within and outside parliament, there is reason to believe that demonetisation has provided fresh impetus to a potential grand anti-Modi alliance. When even your own allies like the Shiv Sena speak out and BJP MPs express reservations, then the disquiet has to be taken on board. When rising anger in queues outside banks over a cash crunch can no longer be masked as temporary inconvenience, the political leadership should be worried. Nor can the growing concerns of leading economists and global research groups warning of an economic slowdown and job losses be wished away. Indeed, on the face of it, it appears that the prime minister who has chosen to even stay away from a parliament debate on the issue is being pushed on the defensive: what else explains the rather bizarre ‘app-based’ poll conducted by the PMO, a classic self-simulation exercise designed to sway public opinion.The truth though is that the prime minister has already won round one of the demonetisation battle. Firstly, he has successfully pitched his political opposition as a “coalition of the corrupt’’. A number of his political opponents are tainted by sleaze: can a Mulayam Singh or a Mayawati, both of whom have faced disproportionate assets cases, take the moral high ground on corruption? Can Mamata completely erase the blot of the Saradha chit fund scam or the Congress of the 2 G and coal muddles? The fact that no corruption scandal has yet stuck to Mr Modi gives him the moral edge in his battle with the opposition.Secondly, Mr Modi has mastered the art of shaping the media narrative to his advantage through populist nationalism. By positioning demonetisation as a sharp weapon in the “war” on black money and terror funding, he has created a post-truth dialogue where even an intelligent argument as to why demonetisation will have limited impact on the black economy is lost in the cacophony of treating any dissent as “anti-national”. Any criticism of the prime minister’s move is instantly identified with being an apologist for corrupt forces, thereby preventing any sane debate on the issue.Thirdly, the prime minister has successfully projected himself as an “agent of change”, someone who wants to wipe away decades of sloth and dishonesty in the political system. The spectacular Modi victory in 2014 was predicated on the promise of “achche din”, of dramatic change that would end the Congress era of slow moving governance once and for all. By taking a tough decision, the prime minister has cemented his image as a strong leader with a self-proclaimed “chappan ki chati” (56 inch chest).Finally, Mr Modi has without doubt built a personal connect with millions of Indians who are inclined to trust him. The “jumla” tag may have been used by his critics to brand him as a leader who promises more than he delivers, but on the ground he still enjoys enormous goodwill, especially amongst youth and the urban middle class. For them, Modi still symbolises an aspirational India, one that wants to break free of the status quo. Which is why even amidst lounging public anger over restrictions on withdrawing your own hard-earned money, there is a willingness to give the prime minister the benefit of doubt.The key question is, of course, for how long will Mr Modi ride on individual charisma without ushering in greater legal and institutional reform? If the queues don’t shorten because of a creaking banking system, if the cash crunch extends beyond the 50 day mark, if small and medium enterprises begin to lay off employees, if farmers struggle with rural credit, if a tax bureaucracy becomes oppressively, then public support can easily turn into rage at the being taken for granted by the leadership. Which is why the chest-thumping Modi cheerleaders need to be careful in projecting demonetisation as a magic bullet that will make their leader invincible. In the short run, it is highly likely that Mr Modi has scored a political slam-dunk over his rivals ahead of crucial assembly elections but if an economic slowdown begins to hurt the aam admi, then today’s triumphalism may become tomorrow’s self-goal.Post-script: A senior minister in the Modi government claimed in parliament’s central hall that the pain of demonetisation will last for only two quarters. Now, 180 days may seem a short span in the life of a nation, but for millions dependent on a cash-driven informal sector, six months can seem an eternity. As a cash-strapped fisherman living by Goa’s River Mandovi told me, “in this country, the big fish yet away, the small are always trapped.”Opposition Unites To Pay Modi In Same CoinAuthor: AshutoshPublication: Date: November 24, 2016URL: have been drawn. The future is clear. Demonetisation has created a new fault line between the treasury benches and the opposition. There has never been any empathetic moment between the two, but Modi 's gamble has sharpened the divide. The opposition has seized the moment and Modi is also prepared for assault. It is difficult to predict who will win, but one thing is sure: this battle will define the future and help reshape Indian democracy. In the last 30 months, Modi has had the upper hand and the opposition was defensive. It is the first time that the opposition has smelt blood and the new-found aggression is showing. Inside and outside parliament, Modi has to defend himself.The national election of 2014 threw up a very weak and fractured opposition. The Congress was smashed. Regional players were busy in their own states. A few decided to not to oppose Modi in any way. He is the most powerful Prime Minster since Rajiv Gandhi. He is the only non-Congress Prime Minster who has a majority on his own. And he rode the famous Modi wave like a giant. Since he took charge of the nation, a new narrative has emerged. No voice of dissent is tolerated and disagreement is not welcome. Opposition of any kind is crushed. Government agencies are unleashed on citizens and leaders like mad dogs. A minor hint of opposition can land people in jail. Any diversion from the official line means inviting trouble. An atmosphere of fear and disquiet has enveloped the entire spectrum.The BJP's storm troopers bully people in the physical as well as the digital space. Rule of law is openly manipulated for the benefit of supporters and exploited to silence others. The violent fringe has become the main stream, it has acquired respectability. People are killed on the pretext of their eating habits. Nationalism and patriotism have become one-way streets. Counter arguments and counter culture have no meaning. Even the judiciary has not been spared. Judges are feeling the heat. The media is subjugated. Minorities are living in fear. Civil society is hounded by the government agencies and vocal brigades.In this context, demonetisation has been a God-sent opportunity. On the night of November 8, Modi in one stroke rendered 86% of currency useless. Cash transactions have become impossible. Like the lines of the Great Depression in 1929 in America, the Indian population is standing in queues like beggars to regain their own hard-earned money. This was allegedly done to kill the demon of black money. Standing in queue is the new version of nationalism pitched by the BJP. To die waiting for one's own money is the new martyrdom and the certificate of new nationalism. Society is highly polarised. Two clear camps are waging a war against each other. The poor, lower middle class, daily wagers, rural dwellers, women, senior citizens, small traders and those who transact in cash in their daily life are cursing the state; the well-off, salaried class, white collar population, middle and the upper class, rich credit and debit card holders are singing the praises of Modi.The divide has allowed an unprecedented unity in anti-Modi parties. Rahul Gandhi, Arvind Kejriwal, Mamata Banerjee and the Left have all have been seen on the streets, holding rallies and openly criticising and protesting against Modi for putting citizens in a state-created-misery. For the first time ever, Modi looks nervous. He cried in front of the public and said he could be killed for fighting corruption. The opposition has called for a Bharat Bandh on November 28. In 1967, the opposition for the first time got together in the name of Anti-Congressism and could then defeat the Congress in many states and went on to form governments.Indira Gandhi had seemed invincible after the Bangladesh War. She was hailed as Durga. Much like it is today, her chamchas had said "Indira is India and India is Indira." But a mess bill hike in a Gujarat engineering college triggered a mass movement in the early 70s and turned the same Indira Gandhi into the most hated leader just a few years later. Under the leadership of the legendary JP, all opposition parties merged their identities and formed the Janta Party. The Congress was defeated in 1977 at the centre. Similarly, history was again repeated in 1989. V P Singh was the new leading light. Bofors proved to the the nemesis for Rajiv Gandhi. A united opposition, including Jyoti Basu and L K Advani, successfully trounced the Congress.Will the past be repeated? That is the question which should be asked today. On all three occasions, one leader played a pivotal role, became a glue for the rest and then ideology became redundant. In the 60s, if it was Ram Manohar Lohia's anti-Congressism which united the opposition, then in the 70s and the 80s, JP and V P Singh were the source of inspiration and acted as strategic centres for the rest. Today, it is too early to predict who will serve as the fulcrum. But anti-Congressism has been replaced by anti-BJPism. It is the new buzz word. There is no denying the fact that an institutional framework has not yet been devised to encapsulate the anger of the people, nor is the opposition yet showing a firm resolve to work as one entity, but a certain cohesion is definitely emerging.In 2016, ideological fissures are not as deep as they were in 67, 77 and 89. Then three definite ideological streams - socialist, communist and Hindutva - were competing to replace the Congress system. All three were also fighting with each other in different geographical regions. The ideological divide was so strong that the communists and Hindutva could not see eye to eye. There was no middle ground, but even so, in 1989, the CPM and the BJP supported V P Singh's government from outside. It was the most bizarre political experiment in India's political history.Today, the opposition is definitely fractured but ideological division is not as sharp as it was on earlier occasions. Today, Hindutva is on one side and modern-secular-liberal forces of varying shades are on the other side. Most of the political parties are individual-centric. Mamata Banerjee has already shown willingness to walk the few extra miles with the Left. Lalu and Nitish Kumar are in the same camp. Mulayam and Mayawati are bitter rivals, like Karunanidhi and Jayalalithaa, but these are more ego battles than ideological. has added a new vigour to Indian politics through its agitational methods and anti-corruption genesis.Can they come together and then force the government to retreat is the question. The past offers hope, the future will give the answer. A new framework is on the horizon to save India from turning into a fascist state.- (Ashutosh joined the Aam Aadmi Party in January 2014.)Here’s What These 5 Ex-RBI Governors Have To Say About Modi’sAuthor: Arihant PawariyaPublication: Date: November 25, 2016URL: ) Y.V. Reddy who served as the governor of the Reserve Bank Of India from 2003-2008, when economy saw a massive boom, has endorsed the decision taken by the Modi government. Mr. Reddy termed the timing of the move “perfect” as it comes right before the Goods and Services Tax (GST) is all set to be implemented.It is a historic moment. There is bound to be paradigm shift in the economic and political system. With the GST on the anvil, the system is ripe for a change. However, to take it forward, contract enforcement and judicial processes will have to play active role. It is impossible to have a big change without some inconvenience and some temporary disruptions.The Economic Times2) C. Rangarajan served as governor of the RBI in the post-liberalisation era from 1992-1997. He called the demonetisation move a “standard prescription” that was tried in the past, however, he added, that this time the government was targeting those who accumulated money, who issue fake currency and those financing terrorism. Mr. Rangarajan has also called for measures so that black money doesn’t get generated in future.The government’s move to withdraw Rs 500 and Rs 1,000 notes is a standard prescription in extinguishing unaccounted money. This has been tried in the past. But the government (this time) had three targets: those who accumulated money, who issue fake currency and those financing terrorism, the last two being of different nature. But as far as black money is concerned, this measure is a step towards reducing black money or unaccounted money from the system. It will affect the retail trade as most of the transactions are done using cash. There are some other sectors in the economy like real estate, jewellery where cash has become a major player for transaction. Those will undergo a fundamental change.3) D. Subbarao, who was at the helm at the RBI post 2008 financial crisis, has said that positives of the current demonetization drive outweighed the negatives. However, he cautioned the RBI against treating the money not returned during the current drive as profit and handing over it to the government.If you ride out the short-term pain, the positives will be substantial, be in terms of attracting investments, and also getting people to move from physical cash to electronic transactions. The money being deposited in the banks, as against having it in the pocket, or under the pillow, was good for the economy.Banks will multiply the money when it is with them. It will encourage banks to get lending rates down, even if the RBI does not ease any further…. demonetization will also help improve financial inclusion... banks will be able to give out more credit and all this will have a multiplier effect.Livemint4) Dr. Raghuram Rajan, the previous RBI governor, hasn’t commented on the current drive. But on an earlier occasion, he had raised doubts about the effectiveness of demonetisation as a way of cleaning the financial system of black money. Rajan had suggested that it is better to focus on making improvements in tracking tax data and ramping up tax administration.In the past demonetisation has been thought off as a way of getting black money out of circulation. Because people then have to come and say “how do I have this ten crores in cash sitting in my safe” and they have to explain where they got the money from. It is often cited as a solution. Unfortunately, my sense is the clever find ways around it.They find ways to divide up their hoard in to many smaller pieces. You do find that people who haven’t thought of a way to convert black to white, throw it into the Hundi in some temples. I think there are ways around demonetization. It is not that easy to flush out the black money.The Huffington Post5) Bimal Jalan, served from 1997-2003, overseeing the transition of the RBI from 20th century to 21st. He has termed the demonetisation drive as positive and good “in terms of what the intention is.” When asked whether the scheme will achieve its purpose, Mr Jalan said that ‘it would take three-four months to see how it works.’It is very positive and good for us in terms of what the intention is. And over a period of time as I think he also mentioned that it will be easy to see what else needs to be done to make it available, make it accessible to the people who do not have bank account and let us hope it works out. The most crucial issue at the moment is how to increase the spread in the banking system that is the most crucial issue. The second related most important issue is that in rural areas or in semi-urban area where there are no banks accounts for the poor or for the agriculturists and, then what is to be done with their notes if they do not have a bank account.The Economic TimesUPA government had left a terrible legacy: Arun JaitleyAuthor: TNN & AgenciesPublication: The Times of IndiaDate: November 25, 2016URL: a raging debate on demonetisation, finance minister Arun Jaitley on Friday said that the UPA government had left a terrible legacy.Rejecting former prime minister Manmohan Singh's criticism of demonetisation, Arun Jaitley said the NDA government is trying to transform the previous regime of "loot and plunder" into a more "honest system"."We are trying to transform India's economy where there is a premium on honesty... We switched over from a system which promotes it (corruption, dubious political funding, bribery) into a more ethical system which the developing economies in the world has followed," Jaitley told Times Now."The transformation into a more honest system is being called loot and the kind of regime that we saw between 2004-14 is being called the Indian normal. This hypothesis I completely reject," Jaitley said.Speaking in the Rajya Sabha yesterday, former PM Manmohan Singh+ had termed the implementation of demonetisation as a "monumental management failure" and a case of "organised loot and legalised plunder" and would lead to 2 per cent decline in GDP.Taking a dig at the government's contention that demonetisation would benefit in the long run, the former prime minister recalled a famous quote by economist J M Keynes that "in the long run, we are all dead".Arun Jaitley retorted by saying, "Yes, of course, we will all be dead, but when we get an opportunity to be in government, are we only to think about our own generation? The country will live on even when we are all dead. Therefore, what is the legacy for that country which we are going to leave behind?"The Union Finance Minister hit out at the Congress, stating that they had left behind a "terrible legacy" when they were in power, adding that Prime Minister Narendra Modi does not want to leave behind a status-quo.He regretted that the Congress-led UPA government did not find the 2G spectrum auction, coal auction and the CWG scam, the crony capitalism at its worst as "organised loot and plunder"."The present Prime Minister does not want to leave behind a legacy of a 'do-nothing' approach or a policy paralysis. He has taken a very courageous decision in which he wants to transform India and even in the long run, as I said, and quoting Manmohan Singh from what he said, if we are all dead, the country will live on and are we going to leave behind a better country or are we going to leave behind the status quo, which was the India 'normal,' so much in cash and so much in cheque. Of course, that is a status quo that the PM has sought to reject," said Jaitley.Deposits In Jan Dhan Accounts Rise To Rs. 64,250 Crore, Uttar Pradesh Tops The ChartAuthor: Press Trust of IndiaPublication: Date: November 25, 2016URL: deposits in Jan Dhan accounts have increased to Rs. 64,252.15 crore, with Uttar Pradesh leading the chart with Rs. 10,670.62 crore deposits followed by West Bengal and Rajasthan, the government said today.The Centre also stressed that no public sector banks had given any instructions to their officials to deposit Re 1 or 2 to avoid zero balance in Jan Dhan accounts."As on November 16, 25.58 crore accounts with aggregate deposits of Rs. 64,252.15 crore have been opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) across the country," Minister of State for Finance Santosh Kumar Gangwar said in a written reply to the Lok Sabha.Leading the pack of states, Uttar Pradesh has the highest number of account holders to the tune of 3.79 crore and therefore highest deposits of Rs. 10,670.62 crore. It is followed by West Bengal with 2.44 accounts and deposits of Rs. 7,826.44 crore.Rajasthan comes at the third spot with 1.89 crore accounts and the deposit in these accounts totals to Rs. 5,345.57 crore while Bihar with 2.62 crore accounts have deposits of Rs.4,912.79 crore as of November 16.Out of 25.58 crore accounts, 5.98 crore (23.02 per cent) are zero balance accounts, he said."All public sector banks have denied giving any instructions to deposit Re 1 to 2 in the zero balance accounts," he said."Banks have been asked to ensure linkage of all PMJDY accounts with Aadhaar number in a time-bound manner. PMJDY envisages channelising all government benefits to the beneficiaries to all accounts opened under the Yojana and thus trying to bring down the zero balance in such accounts by transferring Direct Benefit Transfer (DBT)," he said.In reply to a separate question, Minister of State for Finance Arjun Ram Meghwal said the currency in circulation as on November 11 is Rs. 17.87 lakh crore.RBI presses printed 2,119.5 crore pieces of bank notes during 2015-16 as against 2,365.2 crore pieces in the previous fiscal, Mr Meghwal said.During 2015-16, 429.1 crore pieces were Rs. 500 notes and 97.7 crore pieces of Rs. 1,000 were printed as compared to 501.8 crore pieces, 105.2 crore pieces, respectively in the previous fiscal.Replying to another question, Mr Meghwal said introduction of new series of bank notes in various denominations which are distinctly different in terms of look, design, size and colour has already been approved by the government.The new banknotes in denominations of Rs. 2,000 and Rs. 500 are already in circulation and other denomination banknotes will also be circulated in due course, he said.Demonetization Dos and Don’tsAuthor: Gita GopinathPublication: Project-Date: November 24, 2016URL: November 8, at 8:15 in the evening, Indian Prime Minister Narendra Modi’s government announced that, at the stroke of midnight, all 500- and 1,000-rupee notes in circulation would no longer be considered legal tender, and would need to be exchanged for new 500- and 2,000-rupee notes. Modi’s “demonetization” intervention affected 85% of the money in circulation in India. It was an unprecedented move, whether in India or almost anywhere else, and it is by far Modi’s boldest policy intervention to date. The Modi government is targeting the “black money” associated with tax evasion, corruption, and counterfeiting, and thus the drug traffickers, smugglers, and terrorists who engage in those activities. India’s tax-paying salaried classes and even the poor initially welcomed the policy enthusiastically, viewing it as sweet revenge against tax evaders who had stowed away their ill-gotten gains; they reveled in anecdotes of corrupt officials burning bags of cash or throwing money into India’s rivers. Waiting for TrumpAmerica’s president-elect has done little to assuage growing anxiety, both at home and abroad, since his victory. Project Syndicate contributors explain why the fear is justified.But with each passing day, that initial cheer diminishes. Public frustration is now mounting, because the government has failed to meet the demand for new printed notes. Commerce in India – where the cash-to-GDP ratio is 10% – relies heavily on cash transactions, and informal-economy and small-business operations have now ground to a halt, owing to long lines and tight cash-withdrawal limits at banks and shortages at ATMs. The near-term impact will be the equivalent of an “anti-stimulus” policy intervention, and the consequent drag on demand will be significant. Moreover, as real-estate prices decline, so, too, will household wealth. Although lower house prices will make new homes more affordable, the stock of occupied homes will far exceed new purchases in the near term, so the negative-wealth effect will overwhelm the gains. Given these large upfront costs, it is reasonable to ask how effective demonetization is in fighting tax evasion and corruption, and if there is a less costly approach to demonetization. Back in 1976, in an article entitled “How to Make the Mob Miserable,” the American economist James S. Henry addressed the question of effectiveness, prescribing demonetization as a measure to undermine mafia operations. But policymakers did not take his proposal seriously. Henry’s proposal was, in his own words, “dismissed as either administratively impractical or as a one-shot action that would have no long-run impact on criminal behavior.” In a new book, The Curse of Cash, Kenneth Rogoff champions the elimination of high-denomination notes in order to fight tax evasion and criminal activity. Rogoff furnishes extensive evidence that making it costly to hoard cash would deter illegal activities. While tax evaders also store their wealth in non-monetary forms, such as land, art, and jewelry, cash remains a leading vehicle for ill-gotten gains, owing to its inherent liquidity. In other words, questions posed by Modi’s critics about the role of cash in feeding stockpiles of black money are misplaced. That said, Rogoff proposes a different strategy to address the menace of black money – one that would be minimally disruptive and arguably more effective, at least in the long run. That strategy would depart from the Modi government’s intervention in two fundamental ways. First, it would be gradualist, implemented over several years. Second, it would permanently eliminate high-denomination notes. While this gradualist strategy would not punish existing hoarders, who would find creative ways to recycle their cash in the interim, it is more likely to improve tax compliance and reduce corruption over time, as large-denomination notes are permanently taken out of circulation. India’s current policy of replacing 1,000-rupee notes with 2,000-rupee notes undermines the long-term effectiveness of its policy.Moreover, the gradualist approach is administratively practical, minimizes the collateral damage to the real economy and ensures that there is enough time to extend financial services and financial literacy to larger parts of India. Over the last two years, the Modi government has made an impressive push for financial inclusion with its Jan Dhan program, which has facilitated the creation of 220 million new bank accounts. But many people who create accounts do not necessarily use them. A 2015 World Bank study of bank-account usage and dormancy rates across different regions found that only 15% of Indian adults reported using an account to make or receive payments. In this environment, a cash scarcity is economically crippling. Modi’s policy intervention is bold, and the economic principles motivating it are beyond reproach. But a gradualist approach that includes the permanent withdrawal of large notes would have served the cause better, even if it did not generate the same “shock and awe” as the current policy. This will become more apparent as the large costs to the economy emerge over the next several months.- Gita Gopinath is Professor of Economics at Harvard University. She is a visiting scholar at the Federal Reserve Bank of Boston, a research associate with the National Bureau of Economic Research, and a World Economic Forum Young Global Leader.Kerala CM's adviser Gita Gopinath lauds Narendra Modi's move, but with a caveatAuthor: TNNPublication: The Times of IndiaDate: November 26, 2016URL: University professor Gita Gopinath, who is also honorary economic advisor to chief minister Pinarayi Vijayan, described the demonetisation initiative by PM Narendra Modi as his boldest policy intervention to date and said the economic principles behind his decision were beyond reproach.The praise came with a rider as Gopinath cautioned that the near-term impact of the decision would be the equivalent of an "anti-stimulus" policy intervention.On Gopinath's comments, Pinarayi said she had dealt with different aspects of the decision like the crisis faced by the country, protest of the people and alternative suggestions.Economics Of Disruption: Demonetisation Is The Beginning Of Something BigAuthor: Rajeev SrinivasanPublication: Date: November 22, 2016URL: aftershocks of the demonetisation of 8 November are obviously still reverberating, as there is still a lot of pain for the average citizen. Even if you ignore motivated breast-beating from the usual suspects, which can be discounted, it is likely that many at the bottom of the pyramid are suffering from the liquidity crunch. Much activity has been disrupted. But it is still likely that a majority supports the (laudable) aims behind the move, even though the implementation could have been a lot smoother, especially if there had been a focus on Rs 100 notes, rather than the relatively hard-to-handle Rs 2,000 notes.I too have personally dealt with some pain, standing in moderately long lines, and going futilely from shop to shop trying to get change for a Rs 2,000 note. But something that I heard in one of those bank lines startled me. I was chatting with an old neighbour of mine while in line, and I remarked on the hassle, and he said, “But it’s better than war”. He is a highly educated retiree, and has been through every war from 1948 to 1965 to 1971 to Kargil, and so I take him at face value.This is, in a sense, the Moral Equivalent of War. I’m reluctant to say that because when Jimmy Carter used the phrase, he was pilloried for his timidity, and the fact that the acronym is MEOW. But we are at war, and the barbarians are inside, outside, and at the gates.War is just about the only thing that brings fractious and centrifugal Indians together: and then we deliver. I too have seen the fortitude of Indians during the 1971 war and the privations it brought us. We suffer; but we survive; and we are ready to sacrifice for the larger interests of the nation. I was reminded of the story I read about an old soldier, all of whose three sons have been killed in battle, the youngest just last month, and how even in his grief, he didn’t waver in his love for his country.That is how we are, those outside the charmed circles of the blasé Lutyens crowd who have no time for such old-fashioned ideas such as patriotism, but who owe their wealth and their livelihoods to the simple faith of such people. The Lutyens types have cynically fed us a mythology that they, the benevolent, would bring us the Millennium, the City on the Hill, and we have been misled by their siren song. Instead, all they have given us is misgovernance, corruption, and wholesale national failure.But we have tolerated them all these years. This tolerance of the Indian public is a wonder, but it is beginning to come to an end, as a young and aggressive population is beginning to ask why it is that every country is bypassing us. They are finding answers on social media: the Indian #deepstate of the JNU-media-Dynasty-crony capitalism variety is finally being laid bare in all its nakedness: these are thieves, hypocrites, amoral sociopaths.And then comes Prime Minister Narendra Modi with an appeal to the public, going over the heads of the gatekeeper media: he acknowledges that there will be pain. But he asks them to suffer the pain for just 50 days, and by and large, the public is responding. In a way this is like that old imperialist Churchill promising his countrymen nothing but “blood, toil, tears and sweat”. And the Brits responded. Similarly, I get the feeling that Indians are responding to Modi. We’re willing, within limits, to “[take] one for the Gipper”, to use a Reaganesque phrase.This has startled the Western media. Except for the fringe types, even hardened anti-India campaigners such as The Economist and The Financial Times have been circumspect in their coverage. One of them wondered that “there has been no violence”. Yes, in the West there probably would have been blood on the streets, as we saw in London a couple of years ago, and in the US, during the Rodney King protests of a while ago. The journos couldn’t believe that such a radical change had gone without bloodshed. But they mustn’t judge us by their own standards: there is Indian Exceptionalism. We are not like them.The other reason the Westerners were hedging (I read Kenneth Rogoff’s noncommittal comment too) is that this exercise is so mammoth, so unprecedented, so audacious that nobody knows what the outcome will be. It is like a Manhattan Project to make the atomic bomb, or Kennedy’s celebrated ‘Man-on-the-moon’ project. They would not dare try something like this in their economies today. But we can, because complexity is our métier. We can organise an immense exercise like the Kumbha Mela, although we cannot stand in line at a railway counter.And this is not a one-off, whimsical act as some of the polemicists in India claim. There is a context: first, the JAM trinity for financial inclusion: Jan Dhan Yojana, Aadhar, and mobile. Second, the voluntary disclosure scheme for unreported income that ended in September and saw the declaration of some Rs 65,000 crore. Third, demonetisation. And fourth, yet to come, Goods and Service Tax (GST).If you put all these together, it is a revolution, and a disruption, a point of inflexion, the beginning of something big. You have the possibility of bringing out into the open the 25 per cent of the economy that has been under-reported, untaxed and secreted under mattresses. This itself will improve efficiency and circulation as the funds can be recycled by banks (though hopefully not in the way they funded crony capitalists in the good old UPA1 and UPA2 days). Not to mention the increased tax revenues.But more than that, it is a tsunami that should enable India to leapfrog a generation of fintech. With the UPI (Universal Payment Interface) that has been rolled out, it has become possible to move anybody with a smartphone to make e-payments. UPI allows anyone to transfer funds or make merchant payments securely, with 2-factor authentication, without having to reveal their bank routing code or account number, but by simply using an alias such as suresh27@hdfcbank: easy to remember. This is not an e-wallet: transactions are happening in your real bank account, but it’s much easier than registering a payee and so on.If I understand correctly, this is similar to M-Pesa (except that is a mobile wallet) in that it allows for very small transactions (say, Rs 10) with no transaction fee at all, and it can happen 24x7 using the IMPS (Immediate Payment Sevice) interface that already exists.If this can be done seamlessly and with guaranteed security, then India would have leapfrogged from cash directly to e-payments in one fell swoop, avoiding the intermediate stages of cheques and credit cards. Just as we leapt from landline to cellular without laying all the expensive copper wire, this would mean we have suddenly become the largest electronic money economy in the world, as our scale is virtually unmatched. This will have significant benefits in lowered transaction costs as well as an audit trail: it makes large-scale corruption harder to pull off, because you never know what the computer is storing away and when the Enforcement Directorate will come down on you like a tonne of bricks.Now add the next shoe to drop, so to speak, as GST kicks in, and hopefully makes our physical infrastructure also less cumbersome. Suddenly, the mile-long queues at state checkpoints disappear, and it no longer takes a week to ship goods from your factory to the nearest port. Efficiency again.The sum of all this can transform the Indian economy. If it is possible to run the economy electronically (assuming there’s sufficient cybersecurity so that our friendly neighbourhood snoops aren’t sucking all our data out) it then becomes easier to downsize government, remove some of those positions where bureaucrats wield rent-seeking, discretionary powers. Black money generation will diminish.Corruption and black money will never go away entirely. They will be with us always, like death and taxes. But their effect on the real economy can be reduced. And that would also lead to a reduction in the power of politicians to act in arbitrary ways: whatever they do would lead to an audit trail in the money flow. An analogy is the railway reservation system: the moment it was automated, the entire class of intermediary touts disappeared, because frankly, people are scared of what computers may know about them. It deters them.It is a huge disruption, in the normal sense of the term. In terms of Clayton Christensen’s disruptive innovation, “incumbent”, i.e. Lutyens-type babus and netas are being replaced by the “insurgent”. Prime Minister’s ideas that are turning the incumbents’ world upside down. The consumers of their efforts, the public, that had remained quiescent despite the widespread loot of their money by the incumbents, will simply switch to the better offering from the insurgent.Christensen’s idea of the “failure of leading firms” predicts precisely this: the complacent incumbent will be blindsided by the insurgent, who has no customer base to lose, but has a superior product. This happened in the 2014 election, and we all know what happened: the customer base switched to the insurgent.Thus, I believe the Prime Minister can pull this gargantuan effort off, with our support. He has no choice, really: this is one of those things where you can’t make a graceful U-turn; the train is moving, and you can’t stop it or get off it. And given his character, once he makes up his mind, it is unlikely he’ll change it. Thus, like it or not, demonetisation is a reality, and although we will not know the full results for a while, I think it is a tremendous step forward, coupled with the other steps I mentioned. There will be pain: GDP may shrink by as much as a point, says HSBC, but the upside is high.At a time when China is slowing, and many are nervous about Donald Trump’s intentions, this move by India could not be more brave or intrepid. It is a risk-the-mandate bet, and I believe it will work, and that it is the beginning of a new, cleaner, more assertive India.- Rajeev Srinivasan focuses on strategy and innovation, which he worked on at Bell Labs and in Silicon Valley. He has taught innovation at several IIMs. An IIT Madras and Stanford Business School grad, he has also been a conservative columnist for twenty years.Jan Dhan and the north eastern laundries are just a few things FM Arun Jaitley needs to plugAuthor: Sunil JainPublication: The Financial ExpressDate: November 24, 2016URL: how money launderers have deposited over Rs 15,000 crore in various Jan Dhan accounts in several states – and have even withdrawn over Rs 4,500 crore from these accounts – it is not surprising the government is investigating the matter.Given how money launderers have deposited over Rs 15,000 crore in various Jan Dhan accounts in several states – and have even withdrawn over Rs 4,500 crore from these accounts – it is not surprising the government is investigating the matter. As in the case of those who have been exchanging old notes for new notes, those depositing the money could be mules acting on behalf of others with black money – this is why the government came out with the idea of inking depositors’ fingers with indelible ink. It could also be bank managers who were doing this without the account-holders’ knowledge – recall The Indian Express story some months ago on how, to reduce the number of zero-balance JanDhan accounts, bank managers were depositing one-rupee of their own money into these accounts; if they could deposit that money, they could well have deposited this money as well. Though the JanDhan accounts were set up with the noblest of intentions, there are clear loopholes if bank managers can operate the accounts – this applies to all accounts, not just the JanDhan ones – without the knowledge of account holders. The fact that Rs 49,000 can be deposited in bank accounts without a PAN card is another loophole that needs to be plugged.While it was always expected that those with black money would find ways to convert this into white money after the demonetization, the brazen manner of operations has probably taken the government by surprise. Along with JanDhan, the north-east route is turning out to be another favourite, based on the number of seizures of the demonetized notes being flown into the area. According to an analysis in The Times of India, this may have to do with the large number of tax exemptions given to members of various scheduled tribes in the area on their earnings from various sources – in one case of seized money, ToI has reported, the money was handed over by the CISF to the taxmen who returned it to a Naga businessmen who produced an income tax exemption certificate for the funds. The taxmen asking temples and charitable trusts to give them daily accounts of donations is another manifestation of the same problem – these institutions have been given tax exemptions and, not surprisingly, as in the past, enterprising businessmen or their accountants are looking to use them to launder their black money. The taxman, similarly, gives tax-exemption status to agricultural income – while this window has been abused in the past to launder black money, it is reasonably certain that it will be used this time around as well, it is just that reports of large-scale abuse have not surfaced so far. Ditto for educational institutions … the list goes on.Despite talking of removing the plethora of such exemptions for years – especially when the direct taxes code was being discussed – no finance minister has done much so far. This time around, finance minister Arun Jaitley has to take a look at each one of these exemptions and eliminate them – those with illegal incomes will always look to find new ways to launder their funds, such as by showing huge capital gains in penny stocks, but the finance minister needs to start by at least plugging the obvious loopholes. If this is not done, not only will the current attempt to clean up black money be thwarted, there will be enough scope for laundering in the future.Demonetisation DemythifiedAuthor: Bibek DebroyPublication: Date: November 25, 2016URL: white, black and double black WE NEED TO dispose of some preliminaries first. ‘Demonetisation’ means that some kind of currency unit loses its status as legal tender. This is different from a currency being withdrawn from circulation. A currency unit may be withdrawn from circulation, but can continue to remain legal tender. In America, Section 102 of the US Coinage Act of 1965 is a guarantee against any future demonetisation. ‘All coins and currencies of the United States (including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations), regardless of when coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties, and dues.’ It is important to make this point, since there are misinformed reports that the US ‘demonetised’ high-denomination notes in 1969. What was done was withdrawal from circulation, not demonetisation. The European Central Bank’s (ECB’s) decision on the €500 note is no different.In the Indian case, there is legislation that allows for demonetisation. This is the High Denomination Bank Notes (Demonetisation) Act of 1978, passed in March that year, and originally enacted as an ordinance. Its Preamble indicates that it was enacted to address the issue of illicit money transfers. ‘An Act to provide in the public interest for the demonetisation of certain high denomination bank notes and for matters connected therewith or incidental thereto. Whereas the availability of high denomination bank notes facilitates the illicit transfer of money for financing transactions which are harmful to the national economy or which are for illegal purposes and it is therefore necessary in the public interest to demonetise high denomination bank notes.’ High- denomination here ‘means a bank note of the denominational value of one thousand rupees, five thousand rupees or ten thousand rupees’. Among other things, this statute prescribes a process for an individual or enterprise to surrender such bank notes to a bank. One should note that when the equivalent amount is paid to the holder in some other currency unit, this is not necessarily paid into a bank account, not under the 1978 statute. If the individual or enterprise does not have a bank account, once identity has been established, the amount can also be paid in cash.But this doesn’t mean that demonetisation has to be necessarily done through an ordinance or statute. Consider the Reserve Bank of India Act, 1934. Section 24(2) states: ‘The Central Government may, on the recommendation of the Central Board, direct the non-issue or the discontinuance of issue of bank notes of such denominational values as it may specify in this behalf.’ Section 26(2) adds: ‘On recommendation of the Central Board the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender save at such office or agency of the Bank and to such extent as may be specified in the notification.’ Does this cover demonetisation or withdrawal of notes from circulation? Despite the extensive media coverage of demonetisation, I don’t think too many people have focused on this, a difference that is more than pedantic. I don’t know the answer. It can only be interpreted judicially or legally. After Rs 500 and Rs 1,000 notes have been withdrawn from circulation from the midnight of November 8th, would the RBI—not banks, mind you—still have to redeem them at face value at whatever future date, even beyond December 30th, 2016?In 2015, the Institute for Business in the Global Context brought out a study titled, ‘The Cost of Cash in India’. This mentions that in 2012, 87 per cent of transactions in India were cash- based, even though the share of non-cash transactions has been increasing. ‘India’s cash intensity also stands out in contrast to other developing countries. The value of notes and coins in circulation as a percentage of GDP in India is 12.04%, compared to 3.93% in Brazil, 5.32% in Mexico, and 3.72% in South Africa.’ This study also highlights behavioural patterns that drive the demand for cash: ‘Most consumers see three main benefits of cash. Cash confers power on buyers, since they can offer fixed bids for a bundle of goods and services… Two-thirds of the respondents appreciate that cash assures exact payment… We also find that cash-only consumers know far less about credit cards.’ There are costs, as well as perceived benefits, associated with holding cash. Section 40A(3) of the Income Tax Act recognises this, since it disallows deductions on expenditure made in cash but only if the payment is more than Rs 20,000 per day. While a switch to non-cash payments is desirable and there can be incentives to encourage electronic payments, cash payments will not disappear instantaneously. Having said this, one must be careful in hastily citing lack of financial inclusion. As of November 9th, 2016, 255.1 million Pradhan Mantri Jan DhanYojana (PMJDY) accounts have been opened, 156.7 million in rural India. Also, 194.4 million Rupay cards have been issued. I am not discounting the problem of financial inclusion. However, with rapid changes, many more people now have bank accounts, even among the poor. It is a different matter that they don’t necessarily use those accounts, or know that debit cards can be used for transactions and not just for ATM withdrawals. Reactions like “My maid doesn’t have a bank account, my driver doesn’t have a bank account” are probably exaggerated.There is indeed a correlation between the use of cash and the size of the informal economy. The unorganised sector can be estimated either as a share of employment or as a share of GDP.Either way, its proportion in India is large. A 2012 Report of the National Statistical Commission on this sector stated, ‘More than 90 per cent of the workforce and about 50 per cent of the national product are accounted for by the informal economy.’ Most estimates that float around of the black economy’s share in GDP are actually estimates of the size of the informal economy in GDP, and this vital distinction is missed. Any notion of ‘black’ must have an element of illegality associated with it. This is made abundantly clear in a 2012 White Paper brought out by the Ministry of Finance on black money: ‘Black money is a term used in common parlance to refer to money that is not fully legitimate in the hands of the owner. This could be for two possible reasons. The first is that the money may have been generated through illegitimate activities not permissible under the law, like crime, drug trade, terrorism, and corruption, all of which are punishable under the legal framework of the state. The second and perhaps more likely reason is that the wealth may have been generated and accumulated by failing to pay the dues to the public exchequer in one form or other. In this case, the activities undertaken by the perpetrator could be legitimate and otherwise permissible under the law of the land but s/he has failed to report the income so generated, comply with the tax requirements, or pay the dues to the public exchequer, leading to the generation of this wealth.’ I will call the first, where the activity itself is illegal, double black. I will call the second, where the activity isn’t illegal, but taxes haven’t been paid, single black. A black economy has elements of both.The White Paper also made other important points. First, the dividing line between white and black is not cast in stone. One blurs into the other. Second, there is a difference between the stock of black wealth and the creation of future black income. While a lot of attention focuses on the former, the latter is just as important, if not more. The last proper estimate of the black economy in GDP, and not the informal economy in GDP, goes back to the mid-1980s. That study by the National Institute of Public Finance and Policy (NIPFP) got a figure of around 20 per cent of GDP, far lower than the 40 per cent figure that floats around. Because of various measures, the figure today is bound to be lower than 20 per cent. The White Paper identified specific areas for reforms—taxes, the financial sector, real estate, bullion, jewellery, mining, equity trading, the cooperative sector and elections.In 2014, the RBI withdrew some notes—on which the date of printing was not printed—from circulation. However, this wasn’t demonetisation. The first such exercise was done in January 1946, when currency notes with denominations higher than Rs 500 were demonetised. The ostensible reason then was the same as in 1978, the curbing of illicit transactions. Since high-denomination notes (of Rs 1,000, Rs 5,000 and Rs 10,000) were reintroduced in 1954, eight years later, one deduces that this 1946 experiment wasn’t terribly successful. It is sometimes suggested that the 1971 Direct Taxes Enquiry Committee (aka the Wanchoo Committee) recommended demonetisation. Its final report had nothing to say on this matter, although it did endorse the views stated in the Committee’s interim report of 1970. This report had a somewhat inconsistent view on demonetisation. It accepted that the 1946 exercise didn’t work. ‘Demonetisation was not successful then, because only a very small proportion of total notes in circulation were demonetised in 1946 and its worth was Rs. 1,235.93 crore,’ it said and then went on to recommend demonetisation.Madhav Godbole, in his book Unfinished Innings: Recollections and Reflections of a Civil Servant (Orient Longman, 1996), has the following to say about what happened thereafter: ‘In the middle of 1971 the Direct Taxes Enquiry Committee, popularly known as the Wanchoo Committee, submitted an interim report in which, inter alia, it recommended the demonetization of high-value currency notes. As soon as the report was received, it was discussed in a series of meetings in the Finance Minister’s room. By that time Y.B. Chavan had been shifted as Finance Minister. After detailed consideration, it was decided to undertake a series of steps, including demonetization, as recommended by the committee. In view of the sensitive nature of the subject and the need for maintaining utmost secrecy, it was decided that the Finance Minister should speak to the Prime Minister and obtain her approval to the proposed course of action before further steps were initiated. Accordingly the Finance Minister spoke to the Prime Minister. As he told me on his return from the meeting, the conversation was very brief and very crisp. When Y.B. Chavan told her about the proposal for demonetization and his view that it should be accepted and implemented forthwith, she asked Chavan only one question: “Chavanji, are no more elections to be fought by the Congress Party?” Chavan got the message and the recommendation was shelved.’ In other words, anything like demonetisation requires political courage and conviction.Later, in 1978, notes of Rs 1,000, Rs 5,000 and Rs 10,000 were demonetised. What was high-denomination in 1946 or 1978 is not necessarily so in 2016, because inflation erodes the currency’s value. Consequently, the Rs 500 note was re-introduced in 1987 and the Rs 1,000 note in 2001. How many notes were surrendered in 1978? They amounted to around 1 per cent of the total circulation of notes then. A different figure is more pertinent. At that time, the total value of high-denomination notes was Rs 146 crore. Of this, Rs 125 crore was surrendered to the RBI—that is, 85 per cent. We simply don’t know what happened to the remaining Rs 21 crore. Somewhat speculatively, we can state the following: For 15 per cent of those notes’ holders, their stock of black wealth was destroyed, but in the process, 85 per cent of their holders were put through some inconvenience.The NIPFP study mentioned earlier also had specific comments on the 1978 effort. ‘The government has resorted to demonetisation of high-denomination currency notes on two occasions, once in 1946 and again in 1978. A crude index of the penal success of this measure is given by the value of high denomination notes which were not presented for conversion. By this yardstick, neither venture was a success. In 1946 only about Rs 9 crore of high denomination notes, out of a stock of Rs 144 crore in circulation, were presented for conversion. In 1978 the value of unconverted high denomination notes was Rs 20 crore out of a circulation of Rs 145 crore [note that the figures were actually Rs 21 crore and Rs 146 crore]. Quite apart from the relatively paltry results obtained on the two occasions on which it has been tried, there are other good reasons to doubt the efficacy of this measure in combating black income generation. First, the measure is limited to inflicting penalties on those who hold their black wealth in the form of cash at the moment of demonetisation. There is every reason to believe that cash is not an important form for holding black wealth… especially for those who are active participants in black income generation. So the distribution of the penalty is likely to have little correlation with the distribution of black wealth. Second, even for holders of cash, there exist avenues for converting high denomination notes into lower valued ones, at a discount, through intermediaries. Third, and perhaps most importantly, the measure does not address the underlying causes of black income generation. Hence, subsequent generation of such incomes can continue unabated with due precautions for the form in which unspent black incomes are held. The once- and-for-all penalty exacted by demonetisation simply puts everyone on their guard for the future, but does nothing to alter the incentives which spawn the black incomes. Of course, since cash is the principal vehicle for conducting black transactions, there is undoubtedly a temporary dislocation in such activities. The point is that the dislocation is temporary.’Many people who criticise the present demonetisation do not realise that we have been down this route before and every argument being made today has been made earlier.AT THE END of March 2016, the banknotes in circulation were worth Rs 16 lakh crore. A little over Rs 6 lakh crore was in the form of Rs 1,000 notes and almost Rs 8 lakh crore was in the form of Rs 500 notes. There has been a disproportionately high increase in cash holdings with the public, and much of that is in the form of these denominations. We don’t quite know why either has happened. The electoral cycle—including state elections—is not a convincing answer, since this cycle is almost a continuous one. It may well have something to do with the fact that both real estate and capital markets are down and therefore more cash is being held. Of course, the Rs 1,000 note that has just been phased out didn’t exist before 2001, so its share before that was non-existent. On the demand side, the increase in its usage isn’t unusual, considering the inflation since. But there is a supply side, too. In absolute terms, a higher denomination note may cost more to print, but in relative terms it’s cheaper. On an average, a smaller note also lasts for a shorter period. The smallest lasts for about a year, Rs 100 for around 3-4 years and Rs 500 or Rs 1,000 note for 5-7 years. Therefore, there are significant costs associated with moving all transactions to low-denomination notes.Fake Indian currency notes deserve a mention. During 2015-16, by RBI-published data, 632,926 pieces of fake currency notes were detected. (The share in circulation is a function of whether one counts the number of pieces or value.) Single-shot demonetisation doesn’t solve the problem of fake and counterfeit notes in perpetuity. As in other forms of crime, this activity could go on. Technology enables better security features, but criminals also get better at it after some time. Surely, not being able to close the loop eternally isn’t a plausible argument for taking no action against fake currency. Here is a quote from a Finance Ministry press release on November 8th, 2016: ‘Fake Indian Currency Notes (FICN) in circulation in these denominations are… larger as compared to those in other denominations. For a common person, the fake notes look similar to genuine notes. Use of FICN facilitates financing of terrorism and drug trafficking. Use of high denomination notes for storage of unaccounted wealth has been evident from cash recoveries made by law enforcement agencies from time to time. High denomination notes are known to facilitate generation of black money. In this connection, it may be noted that while the total number of bank notes in circulation rose by 40% between 2011 and 2016, the increase in number of notes of Rs. 500/- denomination was 76% and for Rs.1,000/- denomination was 109% during this period. New Series bank notes of Rs.500/- and Rs. 2,000/- denominations will be introduced for circulation from 10th November, 2016. Infusion of Rs. 2,000/- bank notes will be monitored and regulated by RBI. Introduction of new series of banknotes which will be distinctly different from the current ones in terms of look, design, size and colour has been planned.’The demonetisation of November 8th isn’t meant to address creation of new ‘black’ income. For that, the Government has already taken some measures and will take some more. On steps that have already been taken, the Finance Ministry press release has a listing: ‘In the last two years, the Government has taken a number of steps to curb the menace of black money in the economy including setting up of a Special Investigation Team (SIT); enacting a law regarding undisclosed foreign income and assets; amending the Double Taxation Avoidance Agreement between India and Mauritius and India and Cyprus; reaching an understanding with Switzerland for getting information on Bank accounts held by Indians with HSBC; encouraging the use of non-cash and digital payments; amending the Benami Transactions Act; and implementing the Income Declaration Scheme 2016.’In the world of Physics, there is no unified field theory. I wonder why people look for one when the question of black income arises. The Government didn’t claim that. The action of November 8th was meant to address the present stock of it, not its fresh creation.It is only one of various steps, not the only one, and it isn’t meant to resolve all ‘black’ problems under the sun. The stock of ‘black’ wealth isn’t necessarily in the form of cash. It can be in the form of gold, real estate and other property. That kind of non-cash ‘black’ will also be addressed through other measures. As for the stock of ‘black money’ in cash that has become invalid, my guess is as good as yours. Perhaps around Rs 5 lakh crore of those notes is ‘black’ in both the senses combined. The remaining Rs 9 lakh crore is legal cash. Of this, perhaps Rs 7 lakh crore is cash in active use for transactions. When notes are demonetised, this gets drawn out of the system and is replaced by new notes. Sure, this inconveniences people. But as citizens, are we prepared to tolerate this inconvenience, or are we saying we want the Government to do nothing about the Rs 5 lakh crore? Action against that money is also an additional deterrent against the creation of new ‘black’ income.Also, Rs 2 lakh crore was with people, serving no useful purpose and not even earning a return for its holders. This sum now enters the banking system. Banks have more liquidity. The Government could obtain money through the RBI that can be used for public expenditure schemes. In that sense, there can be a transfer of wealth from the relatively rich to the relatively poor. Of the Rs 5 lakh crore that is ‘black’, around Rs 3 lakh crore is perhaps so in the sense of taxes not having been paid, while Rs 2 lakh crore is double black. (Around Rs 1.25 lakh crore of ‘black’ money had already come into the system before November 8th.) For both varieties of ‘black’, there are reports of the old-for-new exchange facility being misused by cash hoarders, through touts. I am told the going rate is Rs 350 for every Rs 1,000 tendered. Alternatively, there are reports of gold being bought at a premium. In either event, there is some destruction of value (even if not 100 per cent) suffered by those with ill-gotten cash.There remains the question of managing the transition. In this process, printing notes is the easier part. These wads of currency have to be taken to banks and then to ATMs. The more one prepares for such a transition, the greater the danger of its news leaking out and defeating the purpose of demonetisation. Since the Finance Ministry and RBI have tweaked the rules, the Government has been accused of not having had a plan and not being prepared. I don’t quite see it in that light. Accepting feedback and modifying rules is a sign of being amenable to constructive inputs and is preferable to perverse rigidity. As of now, we are still in a period of transition, with crowds now easing off at bank branches. Calibrating ATMs will take longer. There has certainly been a short-term shock, concentrated in the third quarter of fiscal 2016-17. The gains will be in the medium term.- (Bibek Debroy writes the A Gnostic’s Notebook column for Open)- Bibek Debroy is an economist and member of the NITI Aayog. He is the author of Mahabharata in 10 volumesBARMER’S POOR WANT TO BE OUT OF THE BPL LISTAuthor: 2016Mukesh MathraniPublication: The Hindustan TimesDate: November 25, 2016URL: as Prime Minister Narendra Modi’s demonetisation move may be, it has succeeded in weeding out a number of people who were taking undue advantage of government schemes meant for the poor.Over the last two weeks, a number of below poverty line (BPL) beneficiaries in Rajasthan’s Barmer district have asked the government to remove them from the category. About eight people approached the sub-divisional officer with requests to this effect between November 23 and 24.This came in the light of the government setting a ceiling of `50,000 on the amount of scrapped currency notes that can be deposited at banks by BPL beneficiaries. Those not belonging to this category are legally allowed to deposit as much as `2.5 rmation made available to HT suggested that the people facing this peculiar problem comprise those who held on to their BPL tag despite having the ability to eke out a living, just so they could enjoy additional benefits. Support from local politicians prevented the government from identifying them.As many as 1.32 lakh people avail of BPL benefits in Barmer.Additional district collector Omprakash Bishnoi said the government was keeping a close eye on people depositing money into their bank accounts. If anybody from the BPL category produces more than `50,000, he would not only lose his government-accorded benefits but also face legal action.Ramesh Kumar, a 42-year-old pharmacist from Balotra block in Barmer, recently approached the area sub-divisional officer with a request that he be removed from the BPL category. “I applied for BPL status years ago, when I will still working at a medical shop. I had heard that the government was giving away homes to those in this category,” he said.However, Kumar claimed that he did not use the scheme to get any undue benefits.Forty-year-old Ghevar Chand said he registered himself in the BPL category 10 years ago, when he was unable to make both ends meet as a daily wage worker. “Now that I have a driver’s job and earn enough to support my family, I have decided to remove my name from the list,” he added.Balotra sub-divisional officer Prabhatilal Jat said five people submitted written applications asking him to remove their names from the BPL list.Narendra Modi takes a great leap backwards. Mao would approveAuthor: Amit VarmaPublication: The Times of IndiaDate: November 22, 2016URL: 1958, Chairman Mao ordered that that all sparrows over China should be put to death. It was hailed as a necessary step by a strong leader. Farmers were suffering because sparrows tended to eat their grain seeds. Thus began The Great Sparrow Campaign. A countless number of sparrows were indeed wiped out — but there were unintended consequences. Sparrows ate locusts, and once the balance in the ecosystem changed, locusts proliferated and destroyed China's crops. There was famine, hunger, starvation: no less than 45 million people died in the three years following Mao's orders. At the start, Mao exhorted them to bear with the inconvenience. But then the pain piled up.Mao's infamous Great Leap Forward included plenty of edicts besides the death warrant to sparrows. They all stemmed from the delusion that the leader of a country could redesign an entire society to conform to a master plan. The 20th century is full of cautionary tales that warn against such delusion, such as the communism of Mao and Stalin, and the fascism of Hitler. Yet, we do not learn.Narendra Modi's demonetisation of old 1000 and 500 rupee notes is one such folly, a blunder in every imaginable way. It doesn't achieve its intended purpose. And its unintended consequences could devastate the lives of the poor, and cripple our economy.Modi claims that this move is an attack against black money and corruption. This is not true, and here are four reasons why. One, as per a recent estimate, only 6% of black money is kept in the form of cash. Two, new 2000 and 500 rupee notes are on the way, and a black market for conversion from old to new is already thriving. Three, as various economists have pointed out, this attacks the stock and not the flow of black money. To strike at black money and corruption, you need to strike at their root causes.Corruption and black money are a consequence of big government, of one set of individuals having discretionary powers over the actions of others. If Modi was serious about tackling black money, he'd bring about institutional changes that would take us towards the minimum government he had promised in his 2014 campaign. Instead, government keeps getting bigger, controlling more and more of our lives. More government = more corruption.The fourth and most compelling reason is this: these aren't really high-denomination notes. Modi has probably not bought anything from a store in 15 years, so he imagines that the poor do not use these notes. Well, consider that the last time demonetisation took place in 1978, a 1,000 rupee note, in terms of purchasing power, could buy goods worth Rs 12,000 today. Rich people did hoard their black money with it, but the poor did not use them. A 500 rupee note today, by contrast, is the equivalent of a 50 rupee note in 1978. These notes constitute 85% of the money in circulation, as opposed to 0.6 in 1978. Over 90% of the transactions in India are cash transactions, and more than 90% of the cash in India is not black money.This is why the consequences of Modi's move are so severe. According to an RBI note from March this year, only 53% of Indians have bank accounts. How do you think the other 600 million store their savings? Over 300 million people have no government ID, and there are crores of people stuck without a way to convert their hard-earned cash. Even if they did have accounts, there are reports that the government will take six months to print enough replacement notes. Every day the death toll goes up, but rural suffering and anger cannot be captured by bare numbers.Apart from all the individual suffering, our economy is being eviscerated. Cash is integral to most of the economy. Farmers are unable to sell perishable produce, to buy grains for the new harvest or to pay labourers. Transporters are unable to transport goods across distances. Commerce has shut down in many places, with small businesses going bust. In some places, the barter system is back, as if we've gone centuries back in time.Even if implementation was perfect, this would be a historic blunder because social engineering never works, and carries moral costs because of its unintended consequences. When people have to queue up to withdraw their own money, on which limits are placed, it is an attack on property rights that is more out of the Communist handbook than any right-wing philosophy. Indeed, Burkean conservatives and Hayekian libertarians alike would be aghast at Modi's actions, as he propels India towards the Soviet Union so admired by Nehru, with its state oppression, artificial shortages and infamous queues. But Chairman Mao would approve.Wealthy wives come out of the closetAuthor: Joeanna Rebello Fernandes, TNNPublication: The Times of IndiaDate: November 20, 2016URL: Kishore was a housewife on dole for decades. A woman who'd never had a salary but an allowance; no bonuses but birthday envelopes. Every month for the last year her husband, who ran a 'cut-piece' cloth shop in Dadar, has been giving her Rs 20,000 in cash to keep the house on its feet. When they married 30 years ago, he ran it himself but after a year of studying his wife's domestic prudence, he handed over to her a sum of Rs 500 in tenners and twenties from his till, telling her laughingly to "keep the change". Three decades later, the 'change' rings in at around Rs 2,50,000. Hard-won from years of hard bargaining at the bazaars, stretching the dough, buying second-hand school books. "I'd just save...for hard times, emergencies, a holiday," she says. Last week, she had to ferret out small stashes from across the house (the hems of old saris, cleaned out talcum powder boxes...) and retrieve what she had salted away at her sister's nearby. Her astonished husband said he would deposit the money in their joint bank account, which was really only nominally shared. "He was surprised to see I'd saved this much," says Kishore, "While he claims he'll withdraw the money whenever I need it, he'll decide if I really need it. I'll have to go back to scratch, saving for money that's mine to keep and use as I want."Women in India have graver reasons for despairing of the demonetization drive- their cash reserves were their runaway funds; their children's higher-education funds; their running-the-house funds; their divorce fees funds; money-for-their-parents funds... Funds they kept out of sight of their husbands for fear of forfeiting it altogether because money is agency, handy in a culture that grants them so little of it. The ones with agency — relatively speaking — are confronted with not so much a cash crisis as a conundrum. How to upcycle it without the Alpha Male knowing, sermonizing, appropriating?"We have a joint bank account and my husband is privy to my expenses. You know what that means..." says Pamela Gomes, a 40-year-old private tutor in Bengaluru bringing in Rs 40,000 a month. What that means is every extravagance by a debit or credit card is tracked and attacked. Her husband, for example, didn't see the wisdom in sinking Rs 4,000 in a jacket. "Who needs the lectures when you're a grown woman earning your living and contributing your share to the house?" she says testily. So she starting secreting a portion of her earnings at home, spending it at will. But last week she had to come clean about her liquid assets of Rs 32,000. "Even if I had taken it to the bank myself, my husband would have noticed the transaction." She was surprised that he wasn't upset she'd kept the money hidden, perhaps happy about the windfall.Stowing away cash is not an intrinsically Indian stratagem, women around the world do it. In fact the Japanese even gave it a name: hesokuri or 'money hidden in the navel'. Last November, The Japan Times cited a survey conducted by a life insurance company, saying the hesokuri or money secretly saved by Japanese wives exceeded the savings of their husbands twofold. The average savings of a woman was Yen 1,268,446 or Rs 7.8 lakh.In her blog on women and finance, South African financial journalist Sasha Planting asks 'What's wrong with a secret stash?' "I think a stash is prudent, and whether or not it's secret is up to you."As everywhere else it's a nest egg, insuring women, particularly those with no independent access to money, against any eventuality. It's also guilt — and censure — free spending money. Unfortunately that's exactly what the demonetisation drive brought home."There was no censure, but plenty of guilt," says Maheep Chowdhury, a freelance event planner from Delhi. The 36-year-old lives in a joint family, where personal indulgences are doubly scrutinized. She'd saved Rs 2 lakh from years of corporate party-planning and while her husband told her to keep her earnings, he didn't expect her to have this much in cash, in addition to the Rs 7 lakh she'd saved in her own bank account. "I guess he never took my work seriously," she grins. When Chowdhury disinterred the cash, it wasn't her husband but her in-laws who had a problem. "A couple should never hide things from one another, especially something as big as this," was her mother-in-law's sage advice, "In any case why do you need this much money?"Not a question she's ever asked her son.Demonetisation: Didi, Left now fight over bandhAuthor: TNNPublication: The Times of India Date: November 26, 2016URL: a desperate attempt to outsmart Mamata Banerjee's efforts to mobilise protests against the Narendra Modi government's demonetisation decision , the Left Front on Friday called a 12-hour bandh in West Bengal on November 28.Mamata reacted sharply, asking people not to support the bandh call. The Left bandh call coincides with Mamata's proposed march against the Modi government."The bandh proposal didn't come at the meeting of the Opposition parties in Delhi. We do not support any bandh. People are suffering, so I appeal to all parties to stand by them at this hour of crisis," Mamata said.In fact, the bandh call didn't figure in the agitation programme announced by Left Front chairman Biman Bose on Thursday. Trinamool's Partha Chatterjee said, "Our protest rally may add to the unease of motorists for two hours. But the Left plans to bring life to a halt for 12 hours. I don't think it will find public support."Slamming the Left move, state BJP president Dilip Ghosh said, "People understand why the Left has given the bandh call. It's a mock fight between Trinamool and CPM for their survival."PM Narendra Modi's Currency Ban Move 'Gamble', Will Set Precedent: Chinese MediaAuthor: Press Trust of IndiaPublication: Date: November 26, 2016URL: Prime Minister Narendra Modi's demonetisation move as "very bold", China's official media today said it was a "gamble" that would create a precedent irrespective of whether it succeeds or fails and China will draw lessons from its impact on corruption."Modi's move is very bold. We cannot imagine what would happen in China if the country bans its 50 and 100 yuan notes," said an editorial in the state-run Global Times titled 'Modi takes a gamble with money reform'. 100 yuan is China's highest currency note."To prevent a leak of information jeopardising the implementation of the demonetisation reform, the roll out of the plan had to be kept confidential. Modi is in a dilemma as the reform aims to render the black money useless but the process goes against the governance principle of winning support of the public before initiating a new policy," the editorial said."As more than 90 per cent of transactions in India are made with cash, banning 85 per cent of the currency in circulation brings a lot of trouble to people's daily life" sparking fierce criticism including from "former Prime Minister Manmohan Singh who termed it as organised loot", it said."Demonetisation can crackdown on corruption and shadow economy but it is obviously unable to solve the deeper social and political issues that help breed the aforementioned problems," the editorial said.However, it stated that as far as the root causes of corruption exist, the problems will always resurface. "In other words, the Modi government wishes to turn a long and arduous reform into a one-off deal," it said."Demonetisation is a gamble for Modi. He bet on both the execution ability of the government and the tolerance level of the Indian society, hoping that the benefits of this reform can outrun the negative social impacts and low morale," the editorial said.It asserted that the "Western-style" democratic system of India allows little room for such bold moves."However, he is really carrying it out, and will create a precedent no matter he succeeds or fails," it said."Reform is always difficult and requires more than just courage. Modi's demonetisation came with good intention but whether it can succeed depends on the efficiency of the system and the cooperation of the entire society. More and more people are growing pessimistic about the ability of Modi's government to control the process," the editorial said.Noting that China's reform and opening-up has been going on for nearly 40 years, the editorial said it had ups and downs but remained largely stable."Its success is based on broad public support," it said."The strong execution capabilities of the Communist Party of China are built on the consensus of the entire country. By observing India's reforms we will draw lessons, which would in turn help us understand our own reforms," it said.Goldman Sachs revises India GDP growth forecast to 6.8% on demonetisationAuthor: PTIPublication: Date: November 23, 2016URL: Sachs revises current fiscal’s GDP growth—earlier projected to be 7.6%—to 6.8% as liquidity shortage is likely to hamper domestic activityGoldman Sachs has forecast a deceleration in India’s GDP growth to 6.8% this fiscal, down from 7.6% last financial year, due to demonetisation of Rs500 and Rs1,000 currency notes. According to the global financial services major, post the ‘dramatic currency reform’ the liquidity shortage would be a significant constraint on domestic activity, which in turn would affect GDP growth. “In the short term, the liquidity shortage appears likely to be a significant constraint on domestic activity, leading us to forecast a deceleration in GDP growth to 6.8% in FY17 (below consensus), down from 7.6% in FY16,” Goldman Sachs said in a research note. Eventually, the currency reform should help to move economic activity into formal channels, accelerate financial inclusion, and increase government revenue, it added. According to the report, the “large, young, lower-income” economies of India, Indonesia, and the Philippines have higher growth potential — in theory. But in practice, much will depend on domestic policy and the pace of economic reform. “In this regard, we continue to see India as the most promising, with a major currency reform providing an emphatic demonstration of the Modi administration’s reform commitment—albeit at the price of serious short-term disruption,” the report added. Moreover India is also relatively more insulated given lower exposures to these external risk factors and a reasonably positive domestic backdrop in the medium term. Other key reforms in 2016 include the approval of goods & services tax (GST) structure, passing of the new bankruptcy code, formation of the Reserve Bank’s monetary policy committee and formalisation of inflation target framework. Apart from these, several “nuts and bolts” reforms have also been carried out including further measures to ease doing business, scrapping outdated laws, boost infrastructure investment, direct transfer of subsidies to bank accounts using the unique Aadhaar ID, easing in FDI restrictions in defence, aviation, retail and ecommerce, among others. “For 2017, we think that the implementation of above reforms—particularly the successful resolution of the demonetisation effort and GST reform—will be the main focus of policymakers,” the report said. Other likely areas of emphasis in 2017 are further progress in ongoing reform in power distribution, a new fiscal policy framework, and ongoing measures to address stressed banking sector balance sheets, it added.Do not oppose notebandi, Nitish Kumar tells allies, partymenAuthor: Madan Kumar | TNNPublication: The Times of India Date: November 26, 2016URL: chief minister Nitish Kumar told legislators of the state's grand alliance (JD-U, RJD and Congress) government on Friday that "demonetisation is not a wrong thing", a statement that can be seen as a snub to leaders in his own party, like Sharad Yadav, and those from the opposition parties who oppose the Centre's move to scrap Rs 500 and Rs 1,000 banknotes."The Centre's 'notebandi' is not a wrong move. You can raise questions on issues pertaining to its execution. But opposing the demonetisation move as a whole will not be proper," Nitish said at a joint meeting of the alliance legislators at the Legislative Council Annexe here.Tejashwi Prasad, Bihar deputy CM and Lalu Prasad's son, and state Congress chief Ashok Choudhary, who have been opposing the Centre's move, were sitting beside the CM when he was addressing the legislators.Before going to the joint meeting, Nitish had said, "The Grand Alliance is only in Bihar and on issues related to Bihar. On issues outside the state, every party is free to put its own viewpoint. There is no confusion or fissure in the coalition."Talking to reporters at his chambers in the Bihar Assembly, Nitish, who is also JD(U) president, dismissed media reports about "confusion" and "a chasm" between the three Grand Alliance partners due to different views on demonetisation being expressed by senior functionaries of the Congress and RJD."If Ashok Choudhary (state Congress president) is expressing different views on demonetisation, there is nothing wrong. Congress has its own stand on demonetization. Ashok Choudhary will talk as per his party's viewpoint. Our alliance is limited to Bihar only," Nitish said. Choudhary was sitting beside him in the CM's chamber."Peruse the speech of former PM Manmohan Singh in Parliament yesterday (Thursday). He didn't criticise the spirit of demonetisation but highlighted mismanagement in carrying it out," Nitish said to drive home his point that almost every party was criticising only the "poor arrangements" in implementation, and not demonetisation itself."Almost every party, even those openly opposed to the Centre's move, and everybody is referring to poor arrangements at banks and ATMs," Nitish said. "How is my stand different from others on the issue?" he asked reporters.Reiterating his demand for action against "benami" properties, Nitish said the attack on black money would show better results if necessary action was taken against holders of "benami" properties and, at the same time, prohibition was implemented across the country.Nitish had been the first Opposition leader to praise the PM's decision to scrap Rs 1,000 and Rs 500 banknotes - just a day after the move had been announced. The Bihar CM had also favoured the move while addressing a "Chetna Sabha" at the start of the second leg of his "Nishchay Yatra" from Madhubani on November 16. And again, on November 21, Nitish had said, "PM Modi is now riding a tiger which could damage his alliances, but there is great sentiment in favour of his move and we should respect that."Interview: Demonetisation move declares all Indians as possible crooks, unless they can establish otherwise, says Amartya SenAuthor: Seema ChishtiPublication: The Indian Express Date: November 26, 2016URL: the government’s demonetisation move, Prof Amartya Sen, in an email interview to The Indian Express says: “Only an authoritarian government can calmly cause such misery to the people."Bharat Ratna and Nobel laureate, Professor Amartya Sen, who is currently Thomas W Lamont University Professor and Professor of Economics and Philosophy at Harvard University spoke to The Indian Express on demonetisation and said, that both, the idea and the way it was implemented, was akin to a “despotic action” and betrayed the “authoritarian nature of the government”.He said: “Telling the public suddenly that the promissory notes you have, do not promise anything with certainty, is a more complex manifestation of authoritarianism, allegedly justified — or so the government claims — because some of these notes, held by some crooked people, involve black money. At one stroke the move declares all Indians — indeed all holders of Indian currency — as possibly crooks, unless they can establish they are not.”Speaking about the difficulties faced by the common Indian in getting their own, white money out of banks, he said: “Only an authoritarian government can calmly cause such misery to the people — with millions of innocent people being deprived of their money and being subjected to suffering, inconvenience and indignity in trying to get their own money back.”Asked if the move could cause any good as the Prime Minister claims, Sen said; “It is hard to see how. This will be as much of a failure as the government’s earlier promise of bringing black money stacked away abroad back to India (and giving all Indians a sudden gift — what an empty promise!). The people who are best equipped to avoid the intended trap of demonetisation are precisely the ones who are seasoned dealers in black money — not the common people and small traders who are undergoing one more misery in addition to all the deprivations and indignities from which they suffer.”Reacting to the government’s claim that pain would result in eventual gain, Prof Sen made it clear that it was wrong to think that all things that are painful, are good. “Good policies sometimes cause pain, but whatever causes pain – no matter how intense – is not necessarily good policy.”It’s permanent revolutionAuthor: Pratap Bhanu MehtaPublication: The Indian Express Date: November 26, 2016URL: does not matter, form does not matter. There will be constant mobilisationJust as a matter of pure political analysis, it has to be said that we are now entering the politics of “permanent revolution.” Gambling on demonetisation commits the government, one way or the other, to come up with new and radical moves with increasing frequency. If demonetisation fails, the government will have to come up with something equally radical to make up for this loss. If by some chance demonetisation is considered a partial success, it will whet the appetite for more gambling. Either way, expect new googlies from the government with increasing frequency, whether it is on expenditure or the taxation side or institutional reform proposals. The government has stepped on the escalator of seemingly radical disruption; it can only now continue on that path. Whether it is for good or for ill, we shall see.These disruptions will have more than passing association with the language of permanent revolution. For Marx, permanent revolution was the thought that the working class pursues its interest without compromise. Except now the state will wear the mantle of a discourse where it will present itself above compromise. And the only way to establish this is disruption, often for the sake of it. This permanent revolution of the state will also have a Trotskyist feel to it. For Trotsky, permanent revolution was about force feeding history. It was about how one could create a socialist revolution where conditions for it did not pre-exist. Similarly, the nature of proposals: Cashless economy, for instance, will be about force feeding the march of history. The whole point of this form of politics is to immobilise those pedantic social questions about whether the preconditions exist for success.Like all revolutionary talk, this doctrine will have nothing but contempt for all bourgeois institutional forms. The fact that there is no governing legislative or statutory provision for rationing money (as opposed to demonetisation of particular series), will not give anyone pause. There is no ordinance, no declaration of a financial emergency. That the RBI’s credibility has been severely decimated will not matter much. It should be truly alarming that a secretary to the government of India, by fiat, can stand up every morning and issue more than a hundred and fifty directives regarding your own money. In the history of independent India, we have not seen this arbitrary a use of state power when it comes to the sanctity of money. The promise on your note “I promise to pay the bearer a sum of X rupees” did not say “only if you keep it in a bank account or only if you withdraw a certain amount a day or spend it in a certain way or in the case of marriage withdrawals give it only to people who you can prove do not have a bank account.” Whatever your substantive moves on demonetisation, the fact that you have rationing without accountability, seems not to bother us. It is not an infringement of liberty or exercise of mad discretion. In the age of permanent revolution, law does not matter, form does not matter. Even the sovereign’s breaking of a promise does not matter; after all, if a sovereign promises, he can also withdraw the promise.Like permanent revolution, there will be constant switch and bait. So, very subtly, the discourse from government is now shifting from unearthing black money to the fantasy of a cashless economy. The language of permanent revolution works by a constant mobilisation. First, it is mobilisation against anti-nationals. Then we had a new move: A seeming revolution in our Pakistan policy, a claim to a new form of surgical strikes. Never mind the fact that it has done nothing to diminish cross-border shelling and killing of both military personnel and civilians. But the revolution moves on to the next big act of total mobilisation. And there will be more to come. The opposition will be foolish to assume that we are now in an era of conventional politics, whether in form or substance. In fact, one of the challenges of permanent revolution is that combating it by the standard repertoire of arguments — the preconditions do not exist, the law might not permit it — comes across as nothing but an apology for the status quo. That is the magical alchemy that permanent revolution produces.There will be a new moral language: Permanent revolution is always Janus-faced about the virtues of the people. On the one hand, the people can overcome the absence of initial conditions for a revolution. On the other hand, those who don’t will be enemies of the revolution, and therefore inherently suspect. We cannot decide whether the act of lining up in queues is an act of civic commitment on the part of citizens, or does it reflect widespread complicity and cheating. The revolution started out by declaring the people as virtuous; government directives then ended up declaring them cheats. Permanent revolution begins by appealing to virtue, it ends up using state power.You hope to god some of this succeeds. For, permanent revolution, as it fails, is usually followed by war of some kind, the last switch and bait. We are a long way from that. But Marx’s warning may not be inappropriate. In the Holy Family he wrote of Napoleon, “Yet at the same time he still regarded the state as an end in itself and civil life only as a treasurer and his subordinate which must have no will of its own. He perfected the terror by substituting permanent war for permanent revolution. He fed the egoism of the French nation to complete satiety but demanded also the sacrifice of bourgeois business, enjoyments, wealth, etc whenever this was required by the political aim of conquest. If he despotically suppressed the liberalism of bourgeois society — the political idealism of its daily practice — he showed no more consideration for its essential material interests, trade and industry, whenever they conflicted with his political interests. His scorn of industrial hommes d’affaires was the complement to his scorn of ideologists. In his home policy, too, he combated bourgeois society as the opponent of the state which in his own person he still held to be an absolute aim in itself.”So far we have only gone as far as declaring that the prime minister can even pronounce on what public opinion is, on his own app, by his own methodology. But soon the drumbeat of mobilisation will demand more. Uma Bharti is quoted as saying that Modi is fulfilling Marx’s ideas. Perhaps there’s more truth in that characterisation than we realised.- The writer is president, CPR Delhi and contributing editor, ‘The Indian Express’Indian Vendors See Empty Stores and Blame a Rupee BanAuthor: Geeta Anand And Hari KumarPublication: The New York TimesDate: November 24, 2016URL: the winding lanes of Chawri Bazar, one of Delhi’s oldest wholesale markets, paper merchants sat slumped in their stores, pondering how to make the transition to the new economic order ushered in by the Indian prime minister two weeks ago.“This is like curse of God on us,” said Gian Prakash Gupta, 60, a soft-spoken paper wholesaler who was crammed into a closet-size office this week with two other men, three hanging statues of Hindu gods and stacks of broadsheet paper.The power was out, despite the garlands of electric wire that hung over streets too narrow for cars, and Mr. Gupta lamented, “We do not know how to use computers, how to do online transactions, how to use card-swiping machines.”The business of traders like Mr. Gupta, whose operations lie partly in the vast informal economy that makes up around 20 percent of India’s gross domestic product and more than 80 percent of its employment, has been virtually paralyzed since Nov. 8, when Prime Minister Narendra Modi announced a surprise ban on the country’s two largest currency notes, the 500-rupee bill (worth about $7.30) and the 1,000-rupee bill.The Modi administration hopes the measure will reduce the vast quantities of untaxed cash that Indians are accustomed to storing away, increasing tax revenues and giving the economy a lift by driving more of the cash into banking, where it can be lent to business to spur growth.But the success of the audacious gamble depends on traders like Mr. Gupta changing their way of doing business, which has traditionally relied mostly on cash. So far, they say, they have no idea how to make the transition from dealing in cash, and without the banned notes, their business has almost completely dried up.Unless Mr. Modi’s government is able to get the informal sector back on its feet, India’s growth will be slowed sharply next year, economists say, counteracting the gains he sought to achieve from the currency ban. While it is still too early to pronounce victory or defeat, the early results are not encouraging.In addition to the traders, retail and real estate industries have been hard hit. With the winter wheat crop in peril, the government was forced to allow farmers to use the old 500-rupee notes to buy seed.Fitch Ratings, in a note Tuesday reaffirming its negative rating on the Indian banking industry in 2017, said the currency ban “has created a cash crunch, and seems to be holding back economic activity.” The longer the disruption continues, the greater the impact on economic growth, Fitch said, adding that it was already revising downward its forecasts to reflect a weak last quarter of the calendar year.Perhaps more ominously, even some of Mr. Modi’s own party leaders are predicting doom. “The industrial sector will get a bashing,” said Subramanian Swamy, the former Harvard University economist and lawmaker from Mr. Modi’s Bharatiya Janata Party.The Modi government, which held off printing most of the new notes to avoid news of the ban slipping out prematurely, is now racing to provide enough new currency to replace the old notes. But on Monday, only about 10 percent of the value of the banned notes had been replaced, Reserve Bank of India figures indicate.Every day since the ban, Mr. Gupta and his fellow traders have been showing up for work in stores devoid of customers hoping something will change. These are the people who supported Mr. Modi in the last election, those who run small businesses and make up the heart and soul of the B.J.P.Last week, members of the Paper Merchant Association huddled behind closed doors to decide how to respond. But even before the meeting started, the office holders of the association were under stress. They did not have enough cash even to pay 2,000 rupees, about $30, for tea and snacks for the 40 members who were coming.Once the meeting got underway, they argued for an hour and a half about how to respond to the cash ban.“No point in going on strike and closing the market,” said one. “From now onwards, we will not be able to do any hanky-panky.”“We have to correct ourselves,” one member could be heard saying. “We need to stop dealing in cash.”The problem for many is they do not know how to do without cash. In the Chawri Bazar, generations of traders have bought and sold paper, from wedding cards to calendars to packing material, mostly in cash. Their customers paid cash, and they used it to pay their suppliers and workers.They paid little in taxes, helping keep costs down in never-ending price wars in which they made razor-thin profits that rarely exceeded a few percentage points. It was impossible for anyone who even briefly contemplated paying their fair share of taxes to compete.Now, the cash in their safes — the millions of rupees just collected from customers or on its way to suppliers — has been stranded, its fate uncertain. As the government struggles to keep up with the demand for new notes, it has put in place strict regulations on how much currency each business can withdraw. Fifty thousand rupees can be taken out a week, about $730, from business accounts.“What do I do with that little money?” asked Gopal Goel, who owns Durga Marketing, a wholesale retailer in packaging paper, as well as a paper mill in the northern state of Jammu and Kashmir.Until Mr. Modi announced his currency ban, Mr. Goel said his business usually brought in at least 400,000 rupees, about $5,800, in cash daily. He withdrew about the same amount from the bank to pay bills. But since the ban, he has struggled to make any deposits or withdrawals because the banks are overrun by long lines of people trying to withdraw new currency and exchange now-banned notes.“This is insulting and humiliating,” Mr. Goel said. “Are we thieves?”Raj Kumar Bindal, 65, whose father started the family’s paper trading business 50 years ago, used to sell three truckloads of paper each week, he says, but now sales are zero. He says he has canceled all of his orders from the paper mill. “How this will be corrected, only God knows,” he said. He is not sure how long he can retain his 25 employees, he said.Perhaps the most despondent trader was Ramanuj Pandey, 66, the manager at Dharmson, which is stocked floor to ceiling with diaries and calendars for 2017. If he fails to sell them by January, they will be useless.By lunchtime on Friday, he had served only two customers, not even 10 percent of normal traffic. “Until money flows again, this market will be without customers,” he said.Gian Prakash Gupta, the president of the paper association, said he and his fellow traders did not know what to do. Even if he wanted to do business without cash, he does not know how to use a computer. He could hire someone who is computer literate, he said, but he was not sure he could squeeze another person into his office, in which broadsheet paper was stacked high.He doubts it will be possible to develop a new business model to move traders to a cashless society in which they pay credit card company commissions, because his business operates on such a small profit margin, he said.“Mr. Modi has taken this gamble,” he said, and nobody knows how it will turn out. But one thing is certain, he said: It has put “Indian industry in crisis.”The war on black money is missing its targets by milesAuthor: Rajesh MahapatraPublication: The Hindustan TimesDate: November 27, 2016URL: his celebrated treatise, the Kautilya Arthashastra, Chanakya has delved at length on why and how a conqueror should go to war. “To neutralise the enemy-in-the-rear, to help an ally or to subdue a small state, and the ultimate objective is to destroy the natural enemy who is an obstacle to the conqueror’s ambition,” he says.Cut to the present, if Prime Minister Narendra Modi is the conqueror with an ambition to build a prosperous and equitable India, the hoarders of illegal wealth are the natural enemy. In running for the office that he occupies , Modi promised a war on black money and that the booty won would be distributed among the poor and the needy. The most dramatic offensive in that war came on November 8, with the scrapping of 500 and 1000-rupee notes in circulation — a move that has since split the nation between those who see this as a game changer for India’s economy and the others who dismiss it as a political gimmick that will inflict more economic pain. It will take several months, or more, to figure out which side wins the argument. But we know a few things about the art of warfare that decide if a war will be won or lost.To take a cue from the Arthashastra again, “planning for battle” is as critical to winning a war as its objective. Three weeks on, it is evident that the government’s offensive on dodgy cash came without adequate planning. The chaos that followed and the frequent changes to the rules relating to the use, exchange and withdrawal of cash — some of which are now being challenged for their legal validity — bear it out. New rules, brought in almost with a daily frequency, have plugged existing loopholes only to create new windows for people with illegal cash to escape. At the last count, more than half of the Rs 14.2 lakh crore held in denominations of 500- and 1000-rupee notes had returned to the banking system. With more than a month to go for the December 30 deadline for depositing banned notes, it would be fair to expect that all but a small proportion of the cash in high denominations will return — termed legal.Such a scenario upsets the government’s initial game plan. It was hoping that a substantial part of the Rs 14.2 lakh crore would not return to the banking system. That would have significantly cut the liability on the books of the RBI, added to its profits and allowed it to boost money supply in a non-inflationary manner by printing new notes against the cash that didn’t return to the system. Interest rates would have softened and economic growth would have accelerated in the longer term, which in turn would have made the short-term pain appear worth taking. Many policy makers are unsure if the script holds as good as it looked earlier.It appears now that the prime minister’s bold initiative runs the risk of getting derailed because the government machinery has failed him. Worse, in their attempt to make up, the authorities charged with the responsibility of executing the plan are creating a new imagery of the enemy. They are training their guns on holders of Jan Dhan accounts , who might have been lured by small-time traders, contractors or local politicians to be a conduit in converting illegal cash into legal. Previously, they came up with the idea of indelible ink to prevent wage earners from exchanging the cash of others for a paltry commission of a few hundred rupees. In this, one has lost sight of the real enemy in the war on black money — the habitual tax offenders, the big loan defaulters who continue to rob our banks, and the rich and mighty who have stashed their wealth away in non-cash assets and tax havens overseas. Instead, the needle of suspicion in this war has moved to the poor and the exploited. To quote Chanakya again, the conqueror must know the enemy’s enemy is an ally and not an enemy.- The author is Chief Content Officer, Hindustan?TimesThe corrupt are our friends: How hatred for Modi changed the discourse around corruptionAuthor: chaiwallahPublication: Date: November 27, 2016URL: up in India, it was not long before I became aware of the monster called “corruption”. We all talked about it, we all shook our heads about it… none of us could do anything about it.The sinister term for the proceeds of corruption was “black money”. From street corner discussions to Bollywood movies, we all heard about how the monster of corruption chews up the common people in this country. In the belly of this monster lies the so called “black money”.And we all understood that the corruption went right to the top. The peons at government offices were corrupt. The cashiers and accountants were corrupt. Their managers were corrupt. The IAS bureaucrats who ruled over them were corrupt. And the ministers those bureaucrats reported to were corrupt.Not surprisingly, every common Indian carries within himself this seething, helpless anger against corruption and black money. And so it happened that when a band of “revolutionaries” arrived at Jantar Mantar in Delhi, early in the summer of 2011, this anger exploded. The language used at that time was fully laced with undertones of violence, showing the depth of our anger and frustration. “Final War against corruption” they would call it:Or they would call it the “Second Battle for Independence”.Note the imagery conveyed by the words. Corruption was the ultimate monster and we have to begin “final war” against it. No sacrifice is too great in this battle. Because this is the second battle for independence. How can we as patriots not be ready to sacrifice everything we have? This is how corruption and black money was visualized:How could we not fight back? Right?We fought, and the UPA government, seen as massively corrupt, was thrown out. A new government under the leadership of Narendra Modi was formed.A few months after taking charge, the new government revealed names of a few people having black money in foreign lands.The liberal echo chamber erupted with laughter. Ha Ha Ha! After so much ado, this is all that Modi sarkar could do to catch the monster? You stupid bhakts… LOL!And this laughter reappeared, every time the government tried to do something that was remotely related to fighting corruption or enabling the poor to get into the system that had kept them out for decades.Ha ha ha! Most of those Jan Dhan accounts are totally empty. You stupid bhakts again.Ha ha ha! The income disclosure scheme unearthed just Rs 65,000 crore. You silly bhakts. Can’t stop laughing.And then at 8 pm on Nov 8, Modi fired a single shot. A single shot that was heard around the world. For black money holders, the world came to an abrupt end.But then a miraculous thing happened. The intellectual echo chamber swiftly shifted the consensus view on what black money was:--------------------------F. POLITICSDemonetisation and Modinomics: Burning down a forest for a few black sheep is flawedHoney I shrank the corruption monster--------------------------Oh look how wonderful! From a ravenous flesh hungry monster, corruption has suddenly become gentle as sheep. What’s wrong with those poor black sheep? They never hurt anybody, did they? Can’t we just live and let live?Here is Firstpost again, telling us that Corruption is all a big yawn:--------------------------FIRSTPOST.Manmohan's speech on note ban proves he's a crafty politian; BJP crying scams getting oldCan’t we forget all those scams because he quoted John Maynard Keynes?--------------------------Yes. Why talk of scams? It’s all too boring and too old. It is not like corruption is a problem, is it?Not just the media, our leaders were not far behind:--------------------------HTMumbai @HTMumbai - Nov 19Do we set house on fire to kill 2 mice? says #RajThackeray on #demonetisation, repoets @faisalmushtaque read.ht/BOlu--------------------------See? Corruption is no man eating monster. Corruption is a teeny tiny mouse.You know, now that I think about it, corruption is a cute little mouse like Jerry. We have all cheered for the lovable Jerry trying to give big bad Tom the slip. Why can’t we cheer for corruption as well?It gets even better :--------------------------Black money helped Indian economy during global recession: Akhilesh Yadav--------------------------Not only is corruption our cute cuddly house pet. How can we forget all the good things that corruption does for us? Black money is our ever faithful friend who stood with us in times of distress and now we want to turn our backs on ing as it is from the current heartthrob of Lutyens Delhi, I expect them to write children’s fables about the friendship between India and black money. When the nation was on a knife edge of disaster, we were saved by our faithful friend : black money.I even learned that we are demeaning our loyal friend through the use of the term “black money”.--------------------------The Indian ExpressTerm ‘black money’ sounds racist to Trinamool, CPM MPsCPI(M) leader Sitaram Yechury underscored that the term black money was "racist" and it should be replaced with some other term.--------------------------And don’t you silly bhakts dare talk about sacrifices for the sake of nationalism now. The fight against corruption no longer needs sacrifices like leaving your job or joining marches and rallies day after day. Even standing in a queue is too much to ask for:--------------------------Rohini Singh @Rohinisgh_ETStanding in queues is now the new patriotism test!Shweta Bhattacharya @spbhattacharyaWhen it's nation whether it's you or i we all should stand for our INDIA. workingbravo/s...7:49 AM - 12 Nov 2016--------------------------So what happened to the imagery of “Final War against Corruption” and “Second Battle for Independence”?All I see today is liberals mocking Narendra Modi and his “bhakts” for telling people to bear some pain for the sake of the nation. Why can’t we talk about patriotism now? NOW suddenly it is silly to talk about soldiers at the border? Who used to talk about the “Second Battle” and “Final War”? What happened? Why did that rhetoric change?Friends, I assure you the day is not far when the echo chamber will sing paeans to black money. Instead of “Tom and Jerry”, there will be cartoons like “Modi and Black Money”, where big bad Modi chases around poor little black money. Bollywood will make movies about how the helpless poor were saved by the generosity of black money holders.When we were growing up, we had to write essays in school about “People who help us”. This would include essays such as “Our friend the postman” and “Our friend the policeman”. Don’t be surprised if one of these days, your child comes back from school with a writing assignment on “Our friends the corrupt”.Note Ban Shock Is Good For India: Nandan Nilekani To NDTV PUBLISHED ON: November 28, 2016 | Duration: 28 min, 30 sec Nilekani, who shaped the world's largest biometric database with India's Aadhaar project, is confident that the government's ban on 500 and 1,000 rupee notes will ensure financial inclusion surges. Mr Nilekani, co-founder of IT giant Infosys, predicated digital transactions will escalate considerably in the next 3-6 months to a rate that would otherwise have taken "3 to 6 years." Mr Nilekani said that any short-term contraction in economic growth will be compensated for very quickly "with digitization."Aadhaar, which assigns a unique identity (UID) to every citizen linked to their biometrics, is key to helping rural india open zero-balance or Jan Dhan bank accounts and to avail of direct cash transfers to the poor through welfare schemes.In 2014, Mr Nilekani ran unsuccessfully for parliament as a Congress candidate from Bengaluru."The credit for creating the Aadhaar system goes to the UPA government, Dr Manmohan Singh," said Mr Nilekani, referring to the former Prime Minister. "At the same time, am grateful to PM Modi because he has taken what was built and applied it to so many schemes...this government took it forward," he said about how the Aadhaar project has been increasingly utilized."A lot will depend on the next three months. If they accelerate digitization... long-term, it will be a very good development," he said.The long journey of getting Indians into formal economy will be accelerated. Short term pain is inevitable but this is a big step for financial inclusion. The slowdown is only for a short term. Economic growth will bounce back. This shock is good for India. The currency ban will give a boost to digital transactions. It has its own set of long-term benefits. India's growth will come from services and digitization. With this decision, India will move from being a data poor-to-data rich country. Digitisation will compensate for the short-term slowdown and adoption of technology will lead to long-term benefits. Unified Payment Interface will benefit the country immensely. The notes ban shock to the financial system will also extend to the political system. The credit for creating the Aadhaar system goes to the UPA government, Dr Manmohan Singh. At the same time, am grateful to PM Modi because he has taken what was built and applied it to so many schemes...this government took it forward.PM Narendra Modi's Notes Ban Neither Intelligent Nor Humane: Amartya Sen To NDTVAuthor: Barkha DuttPublication: Date: November 30, 2016URL: "Despotic and authoritarian" is how Nobel Laureate and Bharat Ratna Amartya Sen describes the decision to abruptly ban 500- and 1000-rupee notes. "The alleged objective of dealing with black money is something all Indians would laud. But we have to ask whether this is the good way to do it? This decision is about minimal achievement and maximal suffering," Dr Sen said, appearing from Harvard University on NDTV's The Buck Stops Here.On November 8, in an unscheduled television address, Prime Minister Narendra Modi announced that just hours later, high-denomination notes would be illegal. 86% of the cash in circulation was benched in one stroke, creating a cash crisis that the PM said would take "50 days" to resolve as he asked people to bear with short-term hardship in the national interest of warring on corruption and tax evasion.Making the case that only a very small percent of black money is held in cash "about six percent and certainly less than ten percent," Dr Sen said that demonetisation is "small fry in terms of achievement but a big disruptor to the Indian economy." Like other critics of the PM's initiative, he said he backs the intent but faults the execution of the reform, "We all want something to be done about black money. But surely, it also has to be intelligent and humane. That has not happened."With new bills in short supply, banks run dry early in the morning. ATMs are still being reconfigured to be able to stock the new notes which are of a larger size. Rural India, cut off from formal banking, is especially short-changed, though many say they support the PM's new scheme.Asked why he used a sweeping adjective like "despotic" to describe an economic policy which is drawing both positive and negative reviews, Dr Sen explained "Despotic in the sense that it breaks down trust in the currency." Making the argument that the rupee is a promissory note, the noted economist said that for the any government to not honour it is to renege on a basic promise. "If suddenly a government says we won't pay you, that is despotic. I am not a fan of capitalism but...trust is key to capitalism; this goes against trust altogether. There is a potential danger of undermining the economy and the very basis of capitalism. Tomorrow the government could do the same with bank accounts and not allow anything above a certain amount unless people prove they are not racketeers."Dr Sen who has been a trenchant critic of Narendra Modi (his most recent run-in with the government has been over its removal of board members like him from the prestigious Nalanda University in Bihar), rubbished the suggestion that his ideological disagreements with the Prime Minister are guiding his criticism of demonetisation. "I would never criticise Modi for wanting to get rid of black money. If he did it successfully, I would be full of admiration and applause. My worry is that with this move, the lives of law-abiding citizens and white money-holding people will be that much harder. My differences with Modi are over our view of India... and I would like to say the BJP does not have license based on 31 percent of the vote to declare some people anti national just because they happen to disagree with the government."Dr Sen was honoured with the Bharat Ratna during the NDA tenure of Atal Bihari Vajapyee.Nobel Laureate Amartya Sen (Econ.) on the Downside of Demonetization Policy of Indian PM N. Modi Published on Nov 30, 2016“It’s (demonetisation) a disaster on economy of trust. In the last 20 years, the country has been growing very fast. But it is all based on acceptance of each other’s word. By taking despotic action and saying we had promised but won’t fulfil our promise, you hit at the root of this,” Prof. Sen said.Noting that capitalism has many successes that have come from having trust in businesses, he said if a government promises in promissory notes and breaks such promise, then it is a despotic act.“I am not a great admirer of capitalism. On the other hand, capitalism has many successes... It’s despotic in the sense that if a government promises in promissory note that when given, we will give you this amount of compensation for it and to break such a promise is a despotic action,” Sen, who is currently Thomas W Lamont University Professor at Harvard University, said.The demonetisation issue has also rocked Parliament as both Houses have been witnessing disruptions and adjournments due to noisy protests by Opposition parties for the past several days. 40sWould’ve resigned if I was asked to implement demonetisation: Chidambaram at Times LitFest 2016Author: TNNPublication: The Times of IndiaDate: November 27, 2016URL: Congress leader P Chidambaram has said if he were the Finance Minister, he would have advised the Prime Minister against demonetisation, and that he would have resigned if his PM had asked him to implement demonetisation.Chidambaram's comments had come at the Times LitFest 2016 in New Delhi+ , where he was part of a panel discussion on the topic 'Debating Modi Sarkar: The Role of the Opposition'. The other panellist was former Indian Foreign Serice officer and JDU MP Pavan Varma. The discussion was moderated by senior journalist Rajdeep Sardesai."This is not note bandhi (shut down), this is note badli (change)," quipped the former Union Finance Minister. "If you take away the livelihood of 45 crore people, is it not wrong? If your decision (demonetisation) is forcing people to beg and borrow, it is an unethical decision," Chidambaram said.Chidambaram brushed off a question from the moderator on whether there is a trust deficit between the government and the Opposition. "I think you are making it up. There are sharp differences, but they don't shun each other," he said.However, his co-panellist, JDU's Pavan Varma, expressed reservation with the disruption of Parliament proceedings over the demonetisation issue. "Opposition's strategy was confused. When the Prime Minister wanted to speak, Opposition should have let him. Instead, they disrupted the session," he said."There is not a single day on which Parliament is not adjourned. Parliament must function for Opposition to put its point across," he added.Varma however decried the narrowing of space for the airing of political differences. "Even though we congratulate the government on the surgical strikes, if we ask any questions we are called anti-national. If we ask questions about the implementation of demonetisation, they say we support black marketeers," he said.Varma urged the Prime Minister not to underestimate the intelligence of an ordinary man.3 lakh defaulters pay Rs 108 crore to Maharashtra state electricity distribution companyAuthor: TNN Publication: The Economic TimesDate: November 27, 2016URL: September, as many as 6.19 lakh defaulters owed Rs 190.79 crore to the power utility in Pune zone.Over 3 lakh consumers from Pune, Pimpri Chinchwad and adjoining rural areas have paid their arrears amounting to Rs 108 crore to Maharashtra State Electricity Distribution Company Limited (MSEDCL) since October.Till September, as many as 6.19 lakh defaulters owed Rs 190.79 crore to the power utility in Pune zone. When the consumers did not clear their dues despite repeated appeals, the company had to start the drive, under which power supply to the defaulters was snapped. “A total of 3 lakh consumers have paid Rs 108 crore to MSEDCL since then,” the power company said.The drive was carried out in the two cities and adjoining rural areas, including Khed, Maval, Junnar, Ambegaon and Mulshi talukas in Pune zone.The consumers can clear their arrears at the bill payment centres as well as the company website mahadiscom.in and its cellphone app. If any consumer is found stealing power, action will be initiated under the Indian Electricity Act 2003, the company said.Meanwhile, MSEDCL has appealed to the consumers to be beware of some marketing people who insist that they should purchase power saving and safety equipment by private companies. MSEDCL has stated that it does not manufacture any equipment or promotes products of any company. It is only co-operating with the union government’s Energy Efficiency Service Limited (EESL) for selling LED bulbs.Rs 100 to criticise Modi- How women protestors exposed the CongressAuthor: Anusha RaviPublication: Date: November 24, 2016URL: accusations came as a severe embarrassment to the Congress that tried to distance itself from it.Women in Belagavi embarrassed the Congress after declaring to media persons that they were hired to be part of a protest on Wednesday. The women created a ruckus at the protest venue as soon as they realised that it was a protest against demonetisation move and Modi government.The Congress leaders including working President Dinesh Gundu Rao and Women's Wing President Laxmi Hebbalkar took part in a protest against demonetisation move by the Modi government. Dozens of Congress members had gathered for the protest in Belagavi but local residents hired from nearby slums created a ruckus post the protest accusing the Congress of misleading them.They promised us each Rs 100 and said that they will issue ration card. Only after we went there we realised that it was a protest against Modi. Why should we shout slogans against him when we support his move against black money?, a woman told a television channel.The accusations came as a severe embarrassment to the Congress that tried to distance itself from it. The women's wing president Laxmi Hebbalkar said “I have no clue what these women are talking about. I didn't hire them to come here. They are speaking of it only now. You should talk to the local MLA”, and rushed off in her car even as the women and journalists continued to question her.Amar Singh praises PM Modi for demonetisationAuthor: PTIPublication: The Times of IndiaDate: November 26, 2016URL: demonetisation decision has received praise from an unexpected quarter, with Samajwadi Party leader Amar Singh terming it as a "courageous" experiment to eliminate black money and corruption and saying that he was "proud" to have Narendra Modi as Prime Minister.Singh, whose party has slammed Modi for demonetisation, claimed the step has reduced the gap between rich and the poor and now people would pay taxes instead of evading them.Though it was implemented without "proper arrangements", the sudden implementation of the move helped prevent "adjustment" of black money and unaccounted cash by hoarders, the Rajya Sabha member said here yesterday.Describing the decision as "courageous" experiment to eliminate black money, corruption and fake currency, Singh said he as "a countryman is proud to have such a Prime Minister who is so dedicated and adamant to root out corruption."According to him, now the black money hoarders are getting "sleepless nights"."The people standing in queues outside banks are saying that the Prime Minister has punished all who have amassed huge wealth, whether they are from his party (BJP) or others," he said.Even people who are facing problems and suffering are saying that they can bear the hardship for some days but will support the Modi-led government's demonetisation scheme to curb corruption, black money and terrorism, Singh said."I am not a BJP spokesperson but a SP Rajya Sabha member, whatever the opinion of my party might be on the issue but I have shared my personal view on it," he said.However, he registered his protest against the "mismanagement" in implementing the demonetisation move, saying he was pained to the see people suffering due to it."I am not against this scheme, but the government's failure in making proper arrangement before implementing the scheme has only brought sufferings in the lives of common people which has pained each one of us," Singh said."What is the purpose of implementing a scheme due to which poor, farmers, small traders and common people have to suffer?" he said.Singh claimed that due to demonetisation many companies have started reducing their staff to cut their cost.Raising questions over the app-based survey by the Modi government over demonetisation, in which allegedly majority people have supported the move, the Rajya Sabha member said there were "doubts" on the survey.Thanks to DeMo, 2019 will be a near-referendum on NaMoAuthor: Swapan DasguptaPublication: The Times of IndiaDate: November 27, 2016URL: an uncharacteristically forthright intervention in the Rajya Sabha, former Prime Minister Manmohan Singh went beyond the familiar complaints of “monumental mismanagement” of the demonetisation exercise and berated the Narendra Modi government for “organized loot and legalized” plunder of the Indian people. These were strong words from a person who, apart from being a consummate politician, has a reputation as an economist.That economists are bewildered by the Prime Minister’s audacity is pretty obvious. There are absolutely no precedents of a step that has led to as much as nearly 86% of the cash currency in circulation being scrapped. The only other demonetisation exercises in recent times — Germany after World War II, Russia after the break-up of the Soviet Union and Libya after the fall of the Gaddafi regime — were undertaken in ravaged economies and after huge political turmoil. India is the only known example of a functioning economy, indeed one experiencing a healthy growth rate, where such an experiment has been attempted. Consequently, while economists may evolve theoretical models of the likely consequences, they are hamstrung by the fact that they have no worthwhile historical precedents to base their forecasts. To a very large extent, the November 8 announcement has reduced economics to plain conjecture.However, economics was only tangentially the rationale behind a move whose ramifications have not yet been fully grasped, nor are likely for six months. That every family in the country has been inconvenienced in different degrees is undeniable. Perhaps no act of government has affected every citizen of India so profoundly as this one. Regardless of what conclusions the collective body of Indians have arrived at — or will arrive at in the near future — Modi has made his credentials as an agent of change known to every Indian, and made them experience it. Unless the impact of demonetisation has been widely overstated, the PM has ensured that the 2019 general election becomes a near-referendum on his leadership. After November 8, the very culture of economic relationships in India has been redefined.Coping with the problem of tax evasion and undeclared incomes is only one part of the challenge. The big leg-up for a cashless economy that demonetisation entails is, of course, calculated to increase the difficulties in the path of businesses to escape the tax net. Read with the GST, it suggests that the scope of the cash-based informal sector may undergo a visible truncation. This will have its own social ramifications. However, the problem of corruption will remain and the ability to reduce it will depend on the extent to which governments show political will. It will also depend on quantum of discretionary powers available to politicians and babudom being sharply reduced — an ongoing project whose importance is considerable.In the past fortnight, and particularly in Parliament, there has been an unwitting celebration of the traditional economy, particularly among the opposition MPs. Veteran politician Sharad Yadav indicated that cash, hundis and barter exchanges have defined economic life in India, and that banks have been unnecessary intrusions. He may have been overstating the importance of a traditional economy that has been steadily losing ground to the organised, particularly after the 1991 liberalisation. But there is no doubt that the shifts have been happening at a modest place of evolution. With Modi’s demonetisation and simultaneous promotion of cashless transactions, many Indians have been thrown into the deep end of the pool. While a few will resist the trend, there is every likelihood that India will probably catapult itself into the higher stages of a tech-based modernity by almost skipping an earlier stage.Anecdotal evidence suggests that the younger generation from traditional trading families have been the ones to make the most dramatic transition to the most modern forms of commerce. There is grumbling among traders today at being told to discard tradition. However, far from killing them, there is every likelihood that the coming years will see the emergence of a new business culture involving the same families now in mourning.What Modi has, in effect, done is to force revolutionary change on a civilization that has got too used to baby steps. He is forcing India to think big and to play for higher stakes. His success will depend on how much he can make Indians stomach short-term inconvenience for a more modern and, hopefully, efficient state. The demand on India is potentially daunting: the country is being asked to think differently. Modi is unique because a lesser leader wouldn’t even have tried.PM Modi's demonetisation move 'very bold': China's Global TimesAuthor: PTIPublication: The Times of IndiaDate: November 26, 2016URL: Prime Minister Narendra Modi's demonetisation move as "very bold", China's official media on Saturday said it was a "gamble" that would create a precedent irrespective of whether it succeeds or fails and China will draw lessons from its impact on corruption. "Modi's move is very bold. We cannot imagine what would happen in China if the country bans its 50 and 100 yuan notes," said an editorial in the state-run Global Times titled 'Modi takes a gamble with money reform'. 100 yuan is China's highest currency note. "To prevent a leak of information jeopardising the implementation of the demonetisation reform, the roll out of the plan had to be kept confidential. Modi is in a dilemma as the reform aims to render the black money useless but the process goes against the governance principle of winning support of the public before initiating a new policy," the editorial said. "As more than 90 per cent of transactions in India are made with cash, banning 85 per cent of the currency in circulation brings a lot of trouble to people's daily life" sparking fierce criticism including from "former Prime Minister Manmohan Singh who termed it as organised loot", it said."Demonetisation can crackdown on corruption and shadow economybut it is obviously unable to solve the deeper social and political issues that help breed the aforementioned problems," the editorial said. However, it stated that as far as the root causes of corruption exist, the problems will always resurface. "In other words, the Modi government wishes to turn a long and arduous reform into a one-off deal," it said. "Demonetisation is a gamble for Modi. He bet on both the execution ability of the government and the tolerance level of the Indian society, hoping that the benefits of this reform can outrun the negative social impacts and low morale," the editorial said. It asserted that the "Western-style" democratic system of India allows little room for such bold moves. "However, he is really carrying it out, and will create a precedent no matter he succeeds or fails," it said. "Reform is always difficult and requires more than just courage. Modi's demonetisation came with good intention but whether it can succeed depends on the efficiency of the system and the cooperation of the entire society. More and more people are growing pessimistic about the ability of Modi's government to control the process," the editorial said. Noting that China's reform and opening-up has been going on for nearly 40 years, the editorial said it had ups and downs but remained largely stable. "Its success is based on broad public support," it said. "The strong execution capabilities of the Communist Party of China are built on the consensus of the entire country. By observing India's reforms we will draw lessons, which would in turn help us understand our own reforms," it said.Queue up for countryAuthor: Sanjaya Baru Publication: The WeekDate: December 4, 2016URL: have always believed that in India, Murphy’s Law acts with a vengeance. If something can go wrong, it will. Prime Minister Narendra Modi has been in office long enough to know that. Was he prepared for the messy implementation of a Himalayan programme? He ought to have been. In the end, the success of the demonetisation exercise will depend on how well it is executed, after all the initial glitches. Will people grant the PM the 50 days he has sought for restoring normalcy? If they do, he’ll have the last laugh.More than a good monetary and economic exercise and much more than a clever political ploy, the decision of Prime Minister Modi to replace and flush out 500- and 1,000-rupee notes may go down as an interesting social initiative. Political journalist Nistula Hebbar of The Hindu quotes a BJP source comparing the PM’s campaign around demonetisation to Lal Bahadur Shastri’s call for giving up one meal a week to save India from the food crisis of the mid-1960s. Shastri used both the drought of 1965-66 and the war with Pakistan to mobilise the entire country to national effort.No gain without pain, the PM said in Goa. The question is, can a national sentiment be generated around the current exercise that makes the citizen accept personal pain for national gain?By focusing the energy of millions of Indians on the simple act of securing cash for daily needs and linking this to a campaign against corruption and black money, Modi has challenged Indians to think of the nation first. Do not complain about your hardship, support me in my fight against anti-social elements. That has been Modi’s simple message. If he succeeds in this endeavour, he would have generated a sense of national purpose not seen in an increasingly divided nation in a long time.India has long lacked such a sense of national purpose. We have had several examples of exemplary social work during earthquakes, tsunami and other natural disasters. By urging and encouraging ordinary citizens to bear the hardship of a temporary shortage of cash and standing in long queues to get cash, Modi has sought to mobilise the altruism of an entire nation. The social media is full of stories of ordinary people willing to be kind, generous and patient in dealing with this hardship imposed on them. How long will long queues feel patriotic?In the era of mass media, when television can generate and multiply public anger, it requires even more political courage to ask people to bear personal pain for national gain. Recall how a couple of hundred angry Delhi-based relatives of passengers on the hijacked Indian Airlines plane IC 814 brought the Atal Bihari Vajpayee government to its knees, forcing the government to surrender to the hijackers and release terrorists who then escaped to Pakistan. The live telecast of the Anna Hazare rally in 2013 forced the Manmohan Singh government to yield on the Lokpal issue.The constant telecasting of such organised anger can create disproportionate pressure on government. Can a government-sponsored national political campaign neutralise such pressure? If it does, the social and political externalities of demonetisation can be many.However, courage alone is not enough when it comes to undertaking national effort. Be it in fighting a war or fighting corruption, one requires both courage and cleverness. Modi has clearly shown courage, one waits to see if he has been adequately clever. Cleverness is required not just in the implementation of a national initiative but also in its messaging.Should the government have been alienating the media on the eve of such a massive campaign? The closure notice to a television channel succeeded in uniting large sections of the media for the first time in years, and that too on the eve of this massive campaign. National campaigns like this require a strategy and cannot be shaped by tactics alone.Raghav Bahl, Bloomberg Quint, and the art of faux-economicsAuthor: Publication: Date: November 26, 2016URL: , sorry. This is a misleading headline.This article, written by Raghav Bahl, the founder of Bloomberg-Quint, “India’s premier multi-platform business and financial news company”, cannot be called even faux-economics. It is just pure mumbo-jumbo. Yup, Bahl, who had been thoroughly “demonetised” here, is back for another spanking.This time, Bahl tries an interesting format, where he gives us what he calls us the ‘Official Spin’, which according to him is the popular narrative, and then proceeds to give ‘The Reality’. Except that the ‘Official spin’ is mostly a figment of his own imagination, and ‘The Reality’ is worse than all of Shirish Kunder’s jokes put together.Let us deconstruct each one:1. The ‘Official Spin’, as per Bahl, here is that the demonetisation scheme has snatched a windfall from the bad-guys, and would give the Government a hefty sum to spend on development.Bahl counters this by using the most asinine logic available on the face of this earth. First, he criticises the scheme because he feels it has aided the crooks in converting their black money into ‘white’. Of course, he coolly forgets the costs attached here: A minimum of 30% of Income Tax, the chances of a penalty ranging from 50% to 200% of the tax, reported amended taxes which could be in the range of 50-60% (funnily, reported on Bloomberg-Quint itself; maybe Raghav Bahl doesn’t read his own website?), Indirect taxes such as VAT or Service Tax catching up, and of course, the lack of any sort of immunity allowing the Income Tax Department to dig up all your past records.Yup, in Bahl’s mind, this demonetisation is just one easy black-to-white window of opportunity with no consequences.This blinkered viewpoint is not a mistake though, because in the 2nd part of his ‘The Reality’, he claims that the Government would not get any money for development schemes since all the money deposited, could easily be withdrawn from banks! It’s difficult to comprehend where to start regarding this:A. Mr. Bahl, the Government was never supposed to use the money deposited in banks for development. Governments can’t do that! The money in the banks is that of the depositors, which the banks can ONLY lend to borrowers, not donate to the Government of the day. Imagine a private bank like HDFC Bank giving away public deposits to the Government. Mr. Bahl, do you have the faintest idea of how the banking system works all around the world? You put forward a stupendously stupid idea, imagine that it is government’s plan, and then go ahead and counter that.B. The money, which the Government is touted to receive, is the tax component on the deposits of black money. Yes, the same tax which you conveniently forgot about in the first limb of your argument. Tax on income = Government’s money, and Income deposited in banks = Public money. Hope that’s clear!Now let’s move to the 2nd point Mr. Bahl makes:2. Here, Bahl says, the ‘Official Spin’ is that the public has given a thumbs up to the move via the positive results for BJP in the latest bye-elections.Bahl’s ‘The Reality’ is that BJP’s margin in Shardol Lok Sabha shrunk, in Lakhimpur Congress gained 8% vote share (although BJP won), and in West Bengal assembly bye-elections BJP lost. This is enough to prove that the public did not support demonetisation.Firstly, it was the media that made the bye-elections a referendum on the demonetisation, and then conveniently back-tracked post results:---------------------------Ankur Singh @iAnkurSinghBefore #Bypolls TheWire- Will Demonetisation decide results?BJP winsTheWire- Results cant be interpreted as Mandate for #Demonetisation pic.WdL9PleafGNovember 22, 2016---------------------------Secondly, Bahl has viewed the results from a myopic angle, so as to get data which suits his final argument. The BJP won in Shardol and Lakhimpur, it also increased its margin in Nepanagar (which Bahl skipped). In Arunachal, BJP wrested the Hayuliang seat from Congress (which Bahl skipped). BJP also won in Assam and in Tripura, its vote-share surged to 20% in the red bastion, relegating Congress to a distant third. In Bengal too, BJP’s vote share has increased. Overall, BJP has increased its tally from 3 to 5 while the Congress is down from 4 to 1.Bye-elections are often influenced by local factors and incumbent governments, but if Bahl wants to make them into a referendum for demonetisation, then the verdict is clear.Finally, the last point:3. The ‘Official Spin’ here is the narrative that public are overwhelmingly in support of the scheme, based on various surveys and polls.Here, Bahl’s spin is basically trashing Huffington Post-C Voter’s survey and also that on the PM’s app. And the trashing itself is juvenile:Was it conducted on the phone? On the internet? In one-on-one field interviews? How large was the sample? On which dates was the poll conducted? Right after November 8, or on November 20? How was the question framed?What Bahl wants to ignore is just the results, which show an overwhelming majority of people in support of the scheme. These results are not just shown in the C-Voter poll or the Narendra Modi App poll, but also on most polls conducted online.And if Bahl wants to trash surveys, then why he didn’t trash this poll posted on Bloomberg-Quint which was only conducted online, that too among just 601 people? Or this poll on Bloomberg-Quint which had a sample size of just 1002 (lower than the C-Voter sample)?The point is such flimsy, shallow remarks can be made about any opinion poll or survey, just because you don’t like them. Of course, if Bahl had spoken out about unscientific polls like this one on demonetisation on Times Of India, which allows multiple votes per person, thus leaving it vulnerable even to a code, then it would a fair criticism.In the end, going by Bahl’s earlier lousy post, and this even lousier post, which claims to profess economics on a business news portal, is basically a joke on the concept of business journalism or rather any kind of journalism in India.Nonetheless, we finally know from where Rajdeep Sardesai got his smarts (for the uninitiated, Raghav Bahl was also the founder of Network18, where Rajdeep worked for most of his TV journalism career).Try harder next time Mr Bahl. Until then, Ciao.The curious link betweenAuthor: Jairam RameshPublication: The National Herald IndiaDate: November 26, 2016URL: Sabha MP Jairam Ramesh: “Urjit Patel is either guilty of misleading the nation about RBI’s preparedness on demonetisation, or has sacrificed the autonomy of the RBI. Either way he should resign”As we all know, the country is in the midst of a financial emergency. Money is being rationed. Citizens are not being allowed to take out their own money from their bank accounts. The economy is on the brink of a collapse. There is growing frustration among citizens over restrictions on access to money. It is important to understand the chain of events that unfolded to this disaster.On November 8, when the Prime Minister decided to render 86% of all currency illegal overnight, he presumably consulted with the Reserve Bank of India (RBI). RBI is the monetary authority of India and is solely responsible for making bank notes available to all residents of India. It is the RBI that has the final responsibility for designing, printing and issuing currency notes in the country. So, it is inconceivable that this decision could have been taken by the Prime Minister without the approval of the RBI.Urjit Patel, as an independent director and chair of the audit committee of GSPC, not only approved GSPC’s excessive borrowings from banks that he now oversees as RBI Governor, but also failed to highlight this obvious conflicted related party relationship between the Minister and GSPC. Saurabh Patel was a close confidante of Narendra ModiIf the RBI headed by Governor Urjit Patel gave its approval to the Prime Minister, then ostensibly the RBI was confident of making currency notes available easily. We all know that is not the case today. There are not enough notes in the system and this shortage can continue for at least a few more weeks, if not months.It is then even more shocking that the RBI Governor has not uttered a word in public in the last two weeks on the situation confronting the nation. How can the head of the RBI that is solely responsible for the current currency crisis not been seen clarifying and assuring the nation amid this grave crisis? The government speaking on the situation is not the same as the RBI speaking, since the central bank is independent and autonomous, as it should be. Or is it?Urjit Patel was appointed as the Governor of the RBI this September by the Narendra Modi government. Urjit Patel was also an independent director and the chairman of the audit committee of the Gujarat State Petroleum Corporation (GSPC) from FY’06 to FY’13. Narendra Modi was the Chief Minister of Gujarat in this period. GSPC is a Gujarat state public sector company, under the Ministry of Petrochemicals & Energy. The Minister was Saurabh Dalal Patel. During this time GSPC’s loans from banks ballooned from ?270 crores to ?14,000 crores.With this background, is it still a surprise that the RBI Governor has maintained a stoic silence through this entire currency crisis of the last two weeks? Would it be a surprise if Urjit Patel has sacrificed the independence of the RBI at the altar of Narendra Modi? The Comptroller & Auditor General of India (CAG) has issued a scathing report on the borrowings of GSPC, which has all been squandered away. GSPC had a joint venture with another company Gujarat Natural Resources Ltd (GNRL) for many of its oil and gas blocks. GNRL, contrary to its misleading name, is a private limited company and not a state enterprise. Saurabh Patel, the Minister overseeing GSPC, is a beneficiary investor in GNRL. This has been revealed by the Indian Express in its investigative report on November 22, 2016. Urjit Patel, as an independent director and chair of the audit committee of GSPC, not only approved GSPC’s excessive borrowings from banks that he now oversees as RBI Governor, but also failed to highlight this obvious conflicted related party relationship between the Minister and GSPC. Saurabh Patel was a close confidante of Narendra Modi.With this background, is it still a surprise that the RBI Governor has maintained a stoic silence through this entire currency crisis of the last two weeks? Would it be a surprise if Urjit Patel has sacrificed the independence of the RBI at the altar of Narendra Modi? Was Urjit Patel honest with his views to the Prime Minister on the whole demonetisation idea? Urjit Patel is either guilty of misleading the nation about the RBI’s preparedness to handle the currency situation, or was complicit with the Prime Minister in plunging the nation into this crisis, sacrificing the autonomy of the nearly 100 year-old RBI. Either way, has he any option but to resign?- Jairam Ramesh is a Congress Rajya Sabha MP and the former Union Minister for Rural Development. He tweets at @Jairam_RameshWhen It’s a Crime to Withdraw Money From Your BankAuthor: Josh Barro @jbarroPublication: The New York TimesDate: June 5, 2015URL: Hastert has not been indicted on a charge of sexual abuse, nor has he been indicted on a charge of paying money he was not legally allowed to pay. The indictment of Mr. Hastert, a former House speaker, released last week, lays out two counts: taking money out of the bank the wrong way, and then lying to the F.B.I. about what he did with the money.Does that make sense? Conor Friedersdorf of The Atlantic, for example, is worried that the indictment constitutes government overreach, punishing Mr. Hastert for concealing payments whose disclosure he may have thought would be damaging to his reputation, but which were not illegal.Federal prosecutors allege Mr. Hastert was paying hush money in exchange for wrongdoing that happened long ago. But Mr. Hastert is charged with structuring: making repeated four-figure cash withdrawals from his bank in order to avoid the generation of cash transaction reports, which banks are required to send the government about every transaction over $10,000. These reports have been required since 1970, with the intention of helping the federal government identify organized criminals and tax evaders.To be clear: It’s not illegal simply to take $8,000 out of the bank repeatedly.“The criminal provisions there do have strong mens rea (criminal intent) requirements: The government has the burden to prove that the defendant knew about the reporting requirement and intended to evade it,” said Jim Copland, who directs the Center for Legal Policy at the Manhattan Institute, a right-of-center think tank. “So this is quite unlike many of the regulatory crimes that can ensnare the unsophisticated.”“Whether a former House Speaker who presided over the Patriot Act’s enactment can show absence of mens rea here, of course, may be doubtful,” he added.Prosecutions for structuring without any charge of an underlying offense with the money are not unusual, said Peter Djinis, a lawyer focusing on laws against money laundering, who until 2002 was executive assistant director for regulatory policy at the Financial Crimes Enforcement Network, the arm of the Treasury Department that enforces these rules.“In many cases, the most attractive route to take when you can’t prove the underlying crime is to go with the activity that’s in front of you,” Mr. Djinis said.Of course, that’s exactly the sort of prosecutorial approach Mr. Friedersdorf is worried about, since it assumes the existence of an underlying crime. As he notes, a person who engages in structuring because of “a simple aversion to being monitored,” despite having no intention of using the money for an illegal purpose, is committing a crime.And over time, the size of the transaction you can make without the government watching has fallen in real terms. The reporting threshold has not been raised since the Bank Secrecy Act was passed in 1970, and $10,000 today is equivalent to just $1,640 in 1970 dollars. Actions by Congress have also tightened the rules around moving cash: Congress banned structuring in 1986, started requiring banks to report smaller-but-still-suspicious transactions in 1992, and added further reporting requirements in the Patriot Act, under Mr. Hastert’s watch.With the reporting threshold having fallen so much in real terms, about 15 million cash transaction reports are filed annually for transactions over $10,000, plus about 1.6 million reports of otherwise suspicious activity, often for cash transactions below $10,000.Still, privacy concerns need to be balanced with the entirely valid purpose of anti-money-laundering laws, that is, disrupting the activities of illegal businesses and tax evaders. Even in this case, there is a tax angle: Large cash transactions that go unnoticed by the government might go unreported to the Internal Revenue Service.Paul Caron, a tax law professor at Pepperdine University, noted that the person who was paid money by Mr. Hastert may have owed income tax on the payments, whether they constituted a settlement, extortion or something else. Yes, even proceeds from extortion are taxable income; there was a Supreme Court case about the matter in 1952.When it can be illegal to withdraw your own moneyAuthor: Zack GuzmanPublication: Date: May 29, 2015URL: 's your money, in your account, but that doesn't mean you can take it out any way you please. Failure to report large cash transactions can often trigger federal investigations, leading to fines or even lengthy prison sentences. It all stems from U.S. law that requires forms to be submitted—both by financial institutions, as well as bank customers—each time a cash transaction in excess of $10,000 occurs. Customers hoping to avoid having to disclose such transactions often seek ways around around the law in a process known as "structuring," which can lead to serious money laundering charges.Federal prosecutors charged former GOP House Speaker Dennis Hastert with structuring on Thursday after he allegedly withdrew over $3 million from 2010 to 2014, according to the indictment. The former Illinois Republican claims he was keeping the cash he withdrew, but the indictment shows the FBI believes Hastert lied about making cash payments to an individual he committed "prior misconduct" against. "You can't lie in those situations," says Jeffery Robinson, author of "The Laundrymen," a book about money laundering. "If he had come clean in the beginning, they would have slapped him on the wrist. Now he could be guilty for money laundering and could face twenty years."Hastert is accused of withdrawing nearly $1 million in small transactions over the course of nearly five years. Why is structuring illegal?Customers can avoid banks automatically filing currency transaction reports, or CTRs, by deliberately withdrawing cash amounts close to but below the $10,000 mark. But the process of structuring these transactions that are just below $10,000 can appear suspicious to both banks and federal authorities, like the Treasury's Financial Crimes Enforcement Network. The process becomes a crime in and of itself once a customer either lies about his or her reasons for the transactions or federal authorities uncover the intent behind them. "Structuring is one of the key components of money laundering," says Robinson. "It often has to do with disguising cash so it cannot be associated with the underlying crime." Banks, which are often forced to over-report to protect themselves, also can also choose to report transactions that they deem suspicious, or any cases of transactions totaling $10,000 annually. Convictions on structuring charges can carry five years of prison time or fines up to triple the amount withdrawn, under the Racketeer Influence and Corrupt Organizations Act.Want to make a big cash withdrawal? Don’t bank on being allowedAuthor: Rupert JonesPublication: The GuardianDate: September 12, 2015URL: case of a Barclays customer denied access to an amount larger than ?1,100 lifts the lid on secret withdrawal rulesIf you had ?12,000 sitting in your current account, and you walked into your local branch to make an over-the-counter cash withdrawal, what’s the maximum you would expect to be able to take out? Would you be surprised to be told that each branch of your bank has its own “secret” no-notice maximum withdrawal? And would you be shocked to discover your branch has opted not to keep much cash on the premises … even though it is, after all, a bank?These are questions some bank customers may wish to ponder after hearing about the experience of retired civil servant Nick Robinson. He has accused Barclays of effectively “denying customers access” to their money after he walked into his local branch to withdraw ?1,570 in cash in order to pay a bill.He produced his debit card and photo ID, but was told that even though there was around ?12,000 in his current account, ?1,570 was too big a sum to have on the spot, and he could only have ?1,170.Robinson, 66, says he was also told that his branch in Oxfordshire carries no ?50 notes and only limited numbers of ?20 notes – so he had to walk out with a big stack of mainly ?10 and ?5 notes.When he complained, he was surprised to be told by Barclays in a letter that cash withdrawal limits “are made at a local level” – but that the bank doesn’t generally disclose to customers what these limits are. He was told that in the case of his branch, in Didcot, the most someone can withdraw without notice is ?2,000, but that on the day he visited the weekly cash run had just taken place, which was why he was only able to have the smaller sum.Guardian Money had not previously encountered such a policy, where a local branch manager apparently has the discretion to decide how much an in-credit account holder can withdraw on any given day, so we decided to ask other banks what their policies were (see panel). Several, including Royal Bank of Scotland/NatWest, HSBC and Lloyds told us there were no limits on the amounts people can access without notice.Robinson, a Barclays customer for 45 years, was also told that if he wanted his money in ?50 notes, the bank would have to order them, because his branch was now expected to have only “a minimum of cash in stock”, and holding ?50 notes “would impact [on] providing a service to the majority of customers”.Robinson, who has taken his complaint to the Financial Ombudsman Service, told Money that a ?2,000 daily limit was unacceptable, as this was arguably now not a huge sum. Someone buying a car or paying a builder may well need to withdraw more than that in one go, he says, adding: “A current account is not a savings account or long-term deposit or ‘notice’ account. To say, as Barclays has, that for reasons of security and efficiency it has opted not to keep much cash in its branches seems bizarre. After all, paying out cash is what banks are supposed to do.” He was also annoyed at the apparent admission that his branch doesn’t routinely hold all four denominations of banknote.A Barclays spokesman told Money that Didcot was a small branch and that “locally, the demand for large cash withdrawals just isn’t present, certainly in ?50 notes”. He says that while more and more customers are using digital banking, fewer customers are requesting large amounts of cash at the counter.The spokesman adds that on the day in question, Robinson was advised he could withdraw the remaining ?400 from ATMs over the next two days, or come in the following day and get it in ?50 notes (Robinson disputes that this latter offer was made).Large cash withdrawals are a thorny issue for banks because of the various scams which have seen some older people conned into handing over large sums of money to fraudsters. On top of that, banks are petrified about falling foul of the regulations on money laundering and financing crime, and being hit with huge fines, so they get twitchy about “unusual account activity”.The British Bankers’ Association told us: “There is a clear tension between providing customers with easy access to their money and protecting them from the threat of a fraud that could have a devastating effect on their finances. If you are planning to make a large withdrawal, we recommend you talk to your bank in advance.”What the banks sayBarclays “In the most part we are able to meet customers’ requests when withdrawing funds. We do not generally highlight what our local [cash withdrawal] limits are for security, and also to protect our customers and the bank … If a large sum of cash is required we will be able to meet a customer’s needs the following day.” It adds: “We would also advise the customer of alternative methods of withdrawing cash – banker’s draft, Chaps, electronic transfer – so they are not carrying around large sums of money.”HSBC “There are no limits on the amount of money a customer can withdraw from their account – as long as there are sufficient funds.” It adds: “For larger withdrawals we do not require advance notice, but we are more likely to be able to meet requests for specific denominations or larger amounts if we are given prior notice. In most incidences we can meet the request the same day. Significantly large requests at smaller branches could take longer.”Lloyds It says “there is no maximum amount” that a current account customer can withdraw in cash without notice, but that it would be dependent on ID and “collateral” presented – ie, a debit card – as well as the amount of cash held in the branch. If there is insufficient cash at the branch, the customer will need to give two days’ notice, assuming they pass the ID and verification checks. “We would add that in order to protect the customer we would promote alternative payment methods such as faster payments, Chaps or banker’s draft.”RBS/NatWest “A customer is able to go into a branch to withdraw any amount of money without the need to give prior notice. However, for large amounts we would advise the customer that the type of notes would be subject to availability. They may want to consider contacting the branch in advance to request specific denominations.”Nationwide The building society says its customers can withdraw up to ?2,000 per account a day. “However, if they want to withdraw more than ?500, it is best to pre-book the amount with the branch to ensure that it has the cash available. If customers want to withdraw more than ?2,000, they would need to pre-book the money. This can be done the day before.” It adds that there is no set maximum that customers can withdraw, but if it is a large amount then it “would look to work with the customer to see if there was another solution for withdrawing their money (ie, Chaps).”Santander The bank says the maximum amount a current account customer can withdraw in cash without notice is ?5,000, “subject to availability of funds”, and assuming that he/she has the cash in their account. “For amounts in excess of ?5,000 we would ask for 48 hours’ notice so we can make special arrangements to meet the customer’s request,” it adds. “Larger branches are able to fulfil customer requests more so than smaller local branches.”Nitish Kumar's Party Prepared To Walk Alone In Support For DemonetisationAuthor: Manish Kumar Publication: Date: November 27, 2016URL: Chief Minister Nitish Kumar today said he has taken a principled stand on the banning of 500 and 1,000 rupee notes as he is convinced that the step will help fight black money while his party hinted it was prepared to stand alone among opposition parties in its support for demonetisation."I support demonetisation as I'm convinced that it will help in the fight against black money," Mr Kumar said addressing a function to mark Prohibition Day here.Mr Kumar's Janata Dal (United) or JD(U) party will also not support Trinamool Congress Chief Mammta Banerjee who is now organising protests in every state capital and coming to Patna next week."Is this the first time that I have taken a principled stand which might be politically different from others on an issue on which I'm convinced?" Mr Kumar, who had reminded the media yesterday that he had supported Pranab Mukherjee for President despite being a member of BJP-led National Democratic Alliance."Will those hoarding black money be able to deposit the entire volume in bank accounts? Reserve Bank could issue new notes against a quantity of black money which would not find way to banks during the current drive," he said expressing views on demonetisation raging in national politics.Mr Kumar, who is also JD(U) National President, laughed at reports which attributed his support to demonetisation to his secret meeting with BJP chief Amit Shah at a farmhouse recently."Had the reporter who gave this news taken me to the farmhouse where I met Amit Shah?" he said and lamented over such "baseless news which hitherto was prevalent only in social media platform".Mr Kumar, who has described the Centre's demonetisation decision as courageous, said in addition to scrapping of higher denomination currencies, attack on benami or proxy-bought properties and prohibition could rid India of black money.Tamil Nadu's handloom industry weaves its way around demonetisation to stay in businessAuthor: Vinita GovindarajanPublication: Scroll.inDate: November 26, 2016URL: have started depositing wages in the bank accounts of sari weavers, but complain of a dip in sales.For the first time in his 50 years as a silk handloom weaver in Kancheepuram, D Parthasarathy collected his wages from the bank. Last week, he took his friend along with him to help him withdraw money from the ATM.“I don’t know how to use the ATM, so I need to ask someone to help me with it,” said Parthasarathy cheerily, while peddling the weave in the front room of his house. “Now that I have to visit the bank regularly to collect wages, I have to learn how to use the different banking facilities.”Parthasarathy is a member of the Arignar Anna Silk Weaver’s Handloom Cooperative Society in Kancheepuram, a town in Tamil Nadu known for its pure silk saris. Till earlier this month, he would receive advance wages in cash from the cooperative materials along with materials for every sari he weaved. However, after the government announced that Rs 500 and Rs 1000 notes were no longer legal tender from November 9, Parthasarathy’s wages for weaving saris are being transferred directly to his bank account.For the past two weeks, him and others weavers of Kancheepuram have had to make trips to the bank to get their wages. But most of them do not seem to mind.“We weavers have hardly any savings anyway,” said Parthasarathy, “So we do not have many notes to exchange. We just need to withdraw the advance we get, use it to eat and then start to work.”Formal banking in placeAt the silk weavers’ capital of Tamil Nadu, around 50 government-run cooperative societies employ thousands of weavers around Kancheepuram. These weavers are given silk along with gold and silver zari, or thread, by the cooperatives. They are also paid in advance for their work on every sari and the rate depends on the intricacy of the weave and the level of work involved. Most weavers work from home, where they have their own handloom, in pairs or trios – usually members of the same family. Weaving one sari usually takes about 15 days, even more if it involves an elaborate design. Parthasarathy gets anywhere between Rs 1,000 to Rs 5,000 for his labour on a sari, which is often sold at double or triple the price in the market. As this study on silk handloom cooperative societies shows, the socio-economic conditions of weavers of Kancheepuram is very poor. “Most of the weaver members involved in silk weaving (in Kancheepuram) are illiterates. As they are uneducated, they face many problems in knowing the modern techniques in weaving, in utilizing the welfare schemes of the Government, in getting financial assistance from banks and other similar funding agencies.” — Asia Pacific Journal of Marketing & Management Review While this is the first time that the weavers are receiving their wages in bank accounts, they are not entirely unfamiliar with banks.“We sometimes receive our yearly bonus in the account,” said NC Rajendran, another weaver. “Also we get loans from government schemes to buy certain weaving equipment parts.”But while the production of sarees may not have been significantly impacted by the demonetisation, there has been a definite downward spike in sales.Drop in salesWith a deft flick of his wrist, a portly salesman at one of the many silk saree shops in Kancheepuram’s Gandhi Road spread a peacock-blue sari with broad gold-embroidered borders before a customer who examined it sceptically.“You will not get this piece anywhere else!” declared the salesman, “This is pure silk weaved on a handloom, with a unique design. Wear this at the next function you attend and all your relatives will admire you!”For the past two weeks, this salesman, as well as many others in Kancheepuram, have been using almost every trick in the book to convince their customers to buy silk saris. Since the government made the surprise announcement on the demonetisation, one of the biggest silk handloom cooperative societies in Kancheepuram, which wished to remain unidentified, has seen a 60% drop in sales in the past two weeks.“About 70% of our sales take place through cash transactions,” said the manager of the cooperative society. “Many people come with cash that they have saved up for a wedding or some other occasion, and buy in bulk. This time though, they are hesitant.”The salesperson at the Salem Silk Weavers Handloom Cooperative Society, V Ravichandran, echoed these troubles. “The month of Karthikay (November 15 to December 15) is a wedding season, so people often visit our shop at this time,” he said. “Customers also buy now for the next wedding season, starting January 15. This is when our sales are supposed to peak, but they have been terribly impacted.”Impact on private businessesPrivate businessmen in the handloom industry had mixed reactions to the demonetisation. A businessman who wished to remain unidentified said that he could not pay his 30-odd employees through cheque or bank transfer as they would end up losing an entire day’s work standing in line at the bank. “Most of them spend what they earn immediately, so they need to be paid in cash,” said the businessman. “Yesterday, I stood in line for three hours to withdraw money to pay them, but after a while, the bank officials said they were out of cash.” The businessman said that he had also not been able to obtain the raw materials – silk from Bengaluur and zari from Surat, because of the cash crunch. “This problem is so interlinked like a chain, it affects each stage and production and our business will spiral downwards.”Murali, who weaves for a private businessmen, also expressed concern about finding the time to go the bank to get his wages.PCK Boopathy, another private wholesaler who supplies to well-known brands such as Nalli, Kumaran Stores and Sundari Silks, said there has been no negative impact of demonetisation on the industry. “We have started paying all our weavers by cheque after the notes were banned,” he said. Handling a business established by his grandfather, Boopathy was proud that he belonged to the Telugu Chettiar community – from which successful people in the handloom industry such as Nalli Kuppuswami Chetti (Nalli Silks) and LG Chengalvaraya Chettiar (of Sri Kumaran Stores) also hail.Boopathy said his business mainly ran on bulk orders to retail stores, so it had not been impacted by the government move. Even individual customers, he said, continued to come as they were loyal to him.“Rich folk may buy expensive saris on whim,” he said. “But most middle-class families plan carefully on where they would like to buy their wedding sarees and they attach a lot of sentiment to it. So customers have bought from us for generations, out of tradition.”Boopathy expressed full support for the move to ban high-denomination notes.“Right from my grandfather’s time, my family has supported the Congress,” he said. “So have I. But if somebody does something good, we have to acknowledge that. There was a lot of corruption during the Congress’s rule. They only took care of themselves. But Modi is not driven by family politics, he has the nation’s interest at heart.” When asked why his loyalties lie with the Congress even when he acknowledges its flaws, Boopathy said that he stuck with the party out of tradition.“After the election, we have to respect whoever comes to power,” said Boopathy. “Like how Obama said after the American election – that they now had to work together as America. Same applies for India. People will suffer for a while, but just like how [Tamil Nadu Chief Minister] Jayalalitha took rest in the hospital for a few months and is now recovering, similarly, India will also recover.”Wrong to call Modi's demonetisation an inconvenience, it's a disasterAuthor: N Jayaram @n_jayaramPublication: Dailyo.inDate: November 26, 2016URL: undermining people's livelihoods, the Modi regime has pushed humanity into a crisis.Although I belong to the privileged middle class, I keep counting and recounting the currency notes in my pocket and making drastic choices. A large tin of shaving foam costs Rs 200. As I need to hold on to whatever Rs 100 notes I have for more essential purposes, I decide to shave twice a day without the foam instead. The arrangement is working somewhat smoothly. (There are always those overlooked patches even while shaving with foam, especially when you run the blade absentmindedly, so what the heck.)My decision causes a microscopic dent in a shopkeeper's earnings and an even tinier one in a manufacturer's. I prefer shopping at the neighbourhood Mom 'n' Pop stores and green grocers on the street with cash and not at the supermarket chains beholden, to the financiers of BJP and Congress, with plastic.It occurred to me that if I could make do with the current arrangement, I might not resume foam purchases at all. And another that I could wait until the hair on my head got too unruly before visiting a barber shop - I usually prefer those in lower-income Dalit-Bahujan localities such as in Kodandaramapuram, near where I live in Bangalore.Most barbers in Bangalore and elsewhere in Karnataka are Telugu-speaking Dalits and delaying a visit would not be fair to them. I shall go to my barber in a couple of days unless the Modi regime zaps us with more shocking reversals of previous declarations - such as banning over-the-counter exchange of old Rs 500 and Rs 1,000 notes from the night of November 24, instead of - as had been promised - increasing the amount that could be exchanged as had been promised on November 8.Yesterday, my reading glasses broke. I went to a shop where I was offered a pair for Rs 400 plus."Will you give me change for the new Rs 2,000 note?""Sorry ..."Try another shop. Am shown a groovy-looking pair costing Rs 400 plus and with spring action to boot, meaning they would be more durable as they would withstand sudden or abrupt removals."Will you give me change...?"No way, José!"Got a cheaper pair?"Am shown a pair costing Rs 130. I buy.If many others are taking or considering similar decisions regarding other goods and services - and there's much evidence of hundreds of millions far less endowed being forced to do so - imagine the effect on the economy as a whole.Last evening, I was at Yeshwantpur market in North Bangalore and found green grocers behind pushcarts shouting in Kannada: "Tomato hatthh rupaayi yerd KG" meaning Rs 10 for TWO kilogrammes. A large cauliflower was going at Rs 10. Mounds of brinjals (aubergines), carrots, radish, capsicums et al - each mound containing perhaps between half-a-kilogramme and one aligned in front of women sitting on the ground - offered at Rs 10 each.What kind of profits can these indigent street vendors be making at such low rates?Decisions made by banks: most ATMs not adjacent to their own respective bank branches have been shut until further notice since NovemberAs of today, ATMs across India need to have a 24/7 security guard cover and these are not bank employees, but hired on contract from security agencies. What it means is that a large number of indigent - meaning Dalit-Bahujan-Adivasi-Muslim - migrant workers have been laid off. Even the ATMs inside or adjacent to bank branches are shut for most part of the day and at night - this in urban agglomerations. Imagine the chaos in rural areas with mostly poorly-staffed bank branches serving large numbers of villages spread over several tens of square kilometres.Writing in Kafila, Gautam Bhan who teaches at the Indian Institute for Human Settlements (), says most insightfully:"Do the math: daily wage workers weigh the opportunity cost of lost wages and risk to continued work (skipping even a day risks not being called back to work with the same contractor) against access to usable cash.This happens for two or three days. Then you need to spend. You borrow, and a new cycle of small debt begins. If in the middle of this, one small other thing happens - just one, say an illness, a puncture in your rickshaw, a sudden off-cycle bribe to the cops for your thela - and you can't use your savings, then the debt cycle worsens, or you forgo other expenditures like food or school fees. This is not "inconvenience." The risk here is that demonetisation will do exactly what illness, accident, eviction, funeral and drought do to poor families. If you think just faulty implementation can't do that, you are ignoring how thin the line between stability and crisis is for too many working people in this country."Perhaps Bhan, writing as he was just a week after the Modi regime's demonetisation announcement, deliberately stopped short of declaring that this was an assault on the right to livelihood and, in fact, on the right to life.A little more than three decades ago, the then Chief Justice YV Chandrachud, writing on behalf of a highly distinguished five-judge bench of the Supreme Court of India in the celebrated 1985 verdict in Olga Tellis & Ors vs Bombay Municipal Corporation &Ors,a verdict that has been celebrated and has been reverberating around court rooms as well as law schools throughout the world, said:"The sweep of the right to life conferred by Article 21 (of the Constitution of India guaranteeing the Right to Life) is wide and far reaching. It does not mean merely that life cannot be extinguished or taken away as, for example, by the imposition and execution of the death sentence, except according to procedure established by law. That is but one aspect of the right to life.An equally important facet of that right is the right to livelihood because no person can live without the means of living, that is, the means of livelihood. If the right to livelihood is not treated as a part of the constitutional right to live, the easiest way of depriving a person of his right to life would be to deprive him of his means of livelihood to the point of abrogation.Such deprivation would not only denude the life of its effective content and meaningfulness but it would make life impossible to live.And yet, such deprivation would not have to be in accordance with the procedure established by law, if the right to livelihood is not regarded as a part of the right to life. That, which alone makes it possible to live, leave aside what makes life liveable, must be deemed to be an integral component of the right to life."Incidentally, the son of the late Chief Justice Chandrachud is now on the Supreme Court bench hearing petitions against the horrific and cynically calculated demonetisation the Modi regime which, having secured its own and its financiers' resources, has mounted a blitz not only on its equally corrupt Congress counterpart but on the moneys held by coalitions of Dalit-Bahujan and minorities - the mostly indigent folk who were waiting in the wings to usher in a modicum of justice in the land that boasts a constitution mainly authored by Dr BR Ambedkar.Justice DY Chandrachud is most likely a human-rights-friendly jurist. But he's faced with a tough choice. Might he and Chief Justice TS Thakur dare rule in favour of the people and against the current cynical regime on December 2? Might he dare rule against a regime that manipulates public opinion as brazenly as through disallowing people to express their real opinions in an obviously pre-fixed opinion poll? Bravo, Fuehrer, Bravo!This is indeed a "master stroke" by the Narendra Modi regime. Thanks to the paucity of real news of hardships facing nearly one billion people reaching them (excluding the couple of hundred million middle and upper class ones with their plastic cash and their plastic lives), as large parts of electronic and print media - mostly bought over by Modi/BJP financiers such as Adani, Ambani et al - is underreporting the extent of hardship caused, it is the Fuehrer's narrative that is prevailing.For now. We shall overcome some day!Lashkar desperate for new notesAuthor: Peerzada AshiqPublication: The HinduDate: November 27, 2016URL: outfit’s logistics and striking capabilities have been hit by demonetisation, say police Almost three weeks after the demonetisation, militants in Kashmir are desperate for new banknotes to pay up their monthly bills, especially those of mobile phones and SIM cards, the police say. The Lashkar-e-Taiba’s attempt to loot the Malpora branch of J&K Bank in Budgam district of Rs. 14 lakh on November 21 is a case in point. “The fact that the conspiracy was hatched by LeT militant Arif Dar, a Pulwama resident, along with foreign terrorists Abu Ali and Abu Ismail, points to the cash crunch hitting the outfit,” Pulwama Senior Superintendent of Police Muhammad Rayeed Bhat told The Hindu.Of the Rs. 14 lakh looted, five LeT sympathisers — who were all arrested — succeeded in getting the new notes for Rs. 3 lakh. “An investigation is underway to find out how Rs. 11 lakh in the old banknotes would have been exchanged by the sympathisers,” a senior police officer said in Budgam. Major expensesAccording to a police assessment, the militants active in the Valley spend a lot every month on cellphones and SIM cards. “A militant commander or the head of a module keeps changing cellphones and SIM cards. At least two SIM cards are bought a month. Similarly, a cellphone is procured every month and discarded,” said a police officer involved in counter-insurgency operations in Srinagar. On an average, Rs.10,000 is spent every month on gadgets and internet. For 100 active militants, a group needs Rs. 10 lakh a month, the assessment reckons.The other major expenses for militants are couriers, fuel charges and overground workers who ferry weapons from the border areas to the mainland and help in their distribution. According to police records, 150-200 are active in the Kashmir Valley this winter against 100 in the same period last year. The police reckon that the demonetisation may have affected the LeT’s logistics and striking capabilities. Meanwhile, the security agencies have failed to identify any account-holder indulging in money-laundering for militants. “Money-launderers are acting smart. It seems the militant outfits are exploiting the large web of overground workers to buy small properties. They are also laundering money in smaller amounts through a chain of sympathisers and their relatives,” said the counter-insurgency officer.When Nitish and Naveen flip the coinAuthor: Nistula HebbarPublication: The HinduDate: November 22, 2016URL: the demonetisation storm rages on the streets and in Parliament and the Shiv Sena, a constituent of the ruling NDA, joined a march to Rashtrapati Bhavan, two Opposition Chief Ministers have quietly lent their support to Prime Minister Narendra Modi’s gambit. Bihar Chief Minister Nitish Kumar and his Odisha counterpart, Naveen Patnaik, have made public statements backing the demonetisation. In fact, Mr. Patnaik managed to wrest a concession for Odisha from Union Finance Minister Arun Jaitley, immediately after demonetisation was announced. “Mr. Patnaik was anxious that funds for welfare schemes, like pension for the aged, widows and physically challenged, should not be affected by the demonetisation. He wrote to Mr. Jaitley stating that 4,400 of Odisha’s 6,238 gram panchayats did not have a bank branch and 47 per cent of the rural population, or 1.65 crore people, did not have access to banking. The Reserve Bank of India quickly despatched Rs. 140 crore in banknotes of smaller denominations for the 35 lakh beneficiaries. It also assured the State that its demand for mobile banking services and temporary bank counters in gram panchayats would be looked into,” said a senior source in the ruling Biju Janata Dal (BJD). With the panchayat elections due soon, Mr. Patnaik is not taking any chance.“We are clear that unless the Centre goes specifically against the interests of the State, we do not oppose its decisions for the sake of opposing,” said the source. This stand has served the party well in the talks with the Centre on issues such as the Mahanadi river dispute, in which the Union Water Resources Ministry is seen as being sympathetic to Odisha’s cause. Mr. Nitish Kumar’s Janata Dal (United) appears to be with the Opposition in Delhi, but not in Bihar.“There is no confusion in the JD(U) about our stand on demonetisation. We are with the decision, and our opposition in Parliament is to highlight the sufferings of the people because of the poor implementation,” JD(U) Bihar president Bashishtha Narayan Singh said. Furthermore, he said, Mr. Kumar had stated at the beginning of his third term as Chief Minister last year that his government would have “zero tolerance for corruption”.Mr. Nitish Kumar’s support for demonetisation, therefore, is also being seen as his attempt to balance a coalition he leads but does not dominate numerically. That is in the hands of Rashtriya Janata Dal chief Lalu Prasad. His blow hot, blow cold approach in his dealings with Prime Minister Narendra Modi — he was made a member of a committee overseeing the centenary year celebrations of former Jan Sangh president Deendayal Upadhyaya — helps to keep allies and opponents insecure.Clueless Opposition does not realise Modi has changed rules of the gameAuthor: Sandip GhosePublication: ABPLive.inDate: November 26, 2016URL: first axiom in analysing any action of Narendra Modi is that he can never do anything right. Once we get that out of the way, the rest is easy. Here are some additional theorems that are on the menu to buttress one’s case. 1. Modi does not take anyone’s advice: This means “People Like Us” (PLUs) who ruled the roost for the last 30 years have not been able to worm our way into his inner circle;2. Modi has no knowledge of history: He has not read Romila Thapar and Ramachandra Guha’s books.3. Modi does not understand economics: Amartya Sen and Jean Dreze do not like Modi’s favourite economists Jagdish Bhagwati and Arvind Panagariya;4. Modi indulges in “Jumla”: He could not come up with smart slogans like “Garibi Hatao” which remains an illusion even after 40 years;5. Modi favours a few big industrialists: Robert Vadra is not on the list;6. Modi has a fake college degree: He was not a Cambridge dropout;7. Modi has never sold tea: Mani Shankar Aiyar’s favourite drink is vodka;8. Modi is inaccessible to media: He has not given any ‘exclusive’ interview in over nine years to Rajdeep Sardesai about his mother-in-law;9. Modi is against cow slaughter: He does not travel ‘cattle class’ on planes anymore;10. Modi did not take part in the freedom movement: His surname is not Gandhi or Nehru;11. Modi lied about his marital status: He does not have a Latina girlfriend;12. Modi’s call for ‘Make in India’ is a sham: Because he has not talked of setting up “aloo ka factory” in Rae Bareli and Amethi.The intriguing bit is that if Modi’s critics were really so intelligent they should have by now figured out that none of these arguments cut ice with Modi’s admirers. They tried every arrow in the quiver before the 2014 election but did not manage to check Modi’s relentless progress.Yet each time Modi’s detractors fail, they come back with even greater vengeance but with the same old time-worn criticisms, as if hoping against hope that they would succeed this time – only to find Modi has managed to outsmart them once again.It is amazing that such a bunch of erudite and accomplished men fail to recognise that here is a leader who has changed the paradigm of Indian politics. Their own formulae and templates are now horribly out of date.Without their realising this man has been quietly changing the rules of the game – whether through Jan Dhan Yojna, Direct Benefit Transfer for social welfare or now increased digitisation of monetary transactions. Much as they might scoff at his Mann Ki Baat or NaMo App, he has managed to go over the mainstream media to establish a direct connect with his constituents.Sure he can make mistakes, falter or fall flat on his face. But, that is a challenge and risk he is willing to take and therein lies the real meaning of his 56-inch chest claim. To beat him, the Opposition will have to reinvent its strategy. More of the same will not do.The only two persons who seem to have understood this are Arvind Kejriwal and Mamata Banerjee, who are attempting their own brand of disruptive politics. Rahul Gandhi was ideally placed to bring about such discontinuous change in the grand old Congress party, but in his shoot-and-scoot style more often than not he ends up shooting himself in the foot.If Priyanka Gandhi is brought in as a reincarnation of Indira Gandhi, that itself will be a retrograde step far from making a quantum leap forward, which the party desperately needs to survive. Seasoned campaigners like Nitish Kumar are, perhaps, beginning to realise this and also the fact that their own sell by date is fast approaching. Therefore, they are seen to be making tentative overtures towards BJP once again.Meanwhile, although there may be many valid economic and humanitarian objections against demonetisation, by its single point agenda to make it fail, the Opposition is missing the woods for the trees. A huge move like this cannot be seen in a one-dimensional and linear fashion. There are various layers and elements to it which have to be viewed holistically against a grander objective.There are two ways of looking at the daily administrative changes being announced by the Government. First, as is being said, it is an evidence of poor planning and preparedness. Another view can be the Government is totally on the ball making nimble course corrections on a need to act basis.Now some mediapersons have discovered that Narendra Modi dropped his first hints about moving towards a “cashless economy” way back in May this year but no one paid attention. The Prime Minister has repeatedly warned demonetisation is only the first step in the war against black money. There is a lot more to come.Taking a blinkered view would leave the opposition exposed to the next salvo from Narendra Modi, which might come sooner than later.- (Author is a writer and popular blogger on current affairs)Demonetisation has little impact on rabi crop planting, acreage jumps over previous weekAuthor: Madhvi SallyPublication: The Economic TimesDate: November 25, 2016URL: , or winter crop, planting increased 36% over the past week, in contrast to expectations in some quarters that the scrapping of high-denomination currency notes would adversely affect sowing. Winter crops were planted on 327.62 lakh hectares as of Friday, compared with 241.73 lakh hectares on November 18, according to data from the agriculture ministry. The acreage planted is 4.62% higher than a year earlier, when crops covered 313.17 lakh hectares. The area under pulses, oilseeds and wheat increased from a year earlier, while planting of coarse cereals and rice fell. The government has set a rabi season crop planting target of 638.09 lakh hectares. Expectations that farmers would run out of cash to buy seeds and fertilisers after the government withdrew 86% of the currency in circulation had fuelled concerns that agricultural productivity would be adversely affected. India had a normal monsoon in 2016 after two years of deficient rainfall, raising prospects for a bumper harvest. Water levels in key reservoirs were higher, improving the prospects of planting crops after the four-month monsoon season ended in September. India’s 91 major reservoirs held 105.2 billion cubic metres of water, or 25% more than at the same time last year, as of Thursday, suggesting better availability for winter crops. However, the level was 3% less than the 10-year average, according to data on the Central Water Commission website.The agriculture ministry said wheat had been sown or transplanted on 127.15 lakh hectares, a 60% increase over the previous week and 8.38% higher than a year ago. Planting was marginally delayed in Haryana, Uttar Pradesh and Gujarat. The area under rice cultivation shrank 25.06% from the previous year to 6.82 lakh hectares. The area under pulses—gram, lentil, field pea, kulthi, urad bean, moong bean and lathyrus—covered 95.09 lakh hectares, an increase of 27.55% over the previous week and 7.92% from a year ago. Planting of oilseeds, predominantly mustard and groundnut, was done on 64.21 lakh hectares, a rise of 14.33% over the previous week and 14.12% over 2015. Planting of coarse cereals – jowar, bajra, ragi and maize – increased 32.2% over the previous week to 34.35 lakh hectares, although it was 18.9% lower than the previous year.Opposition to take note ban battle to streets todayAuthor: TNNPublication: The Times of IndiaDate: November 28, 2016URL: http:// timesofindia.india/Opposition-to-take-note-ban-battle-to-streets-today/articleshow/55656477.cmsOpposition parties, including Congress, are set to hit the streets on Monday against the Modi government's decision to scrap high value currency notes.The JD(U), however, decided not be a part of the proposed all India protest (Jan Aakrosh Diwas) as Bihar chief minister Nitish Kumar has supported the demonetisation move.Trinamool Congress, Left parties including CPM, AAP, Bahujan Samaj Party (BSP) and Samajwadi Party (SP) have declared that they will be part of the protest.Meanwhile, Congress took pains to emphasize that it had not given a call for a bandh on Monday. Accusing BJP of spreading misinformation, Congress said it had not called for a 'Bharat bandh' (shutdown) but only sought to observe 'Jan Aakrosh Diwas' by holding country-wide protests against the move.The clarification came on a day when PM Narendra Modi took a swipe at his opponents by saying that instead of organizing bandhs, they should have joined the fight against black money.Taking a dig at the Modi government, Congress arty spokesman Jairam Ramesh said the country was already shut from November 9, the day after Modi announced the demonetisation move.The bandh call given by CPM units in party-ruled Tripura and Kerala and erstwhile stronghold West Bengal has failed to find support from other parties opposing demonetisation, with West Bengal CM Mamata Banerjee, the leading light of the protest against invalidation of notes, vowing to oppose it.The CPM, however, said it has left it to state units to chalk out the mode of protest in their respective jurisdictions. It said it will protest across the country against the "anarchy demonetisation has caused in the country and the consequent mounting agonies of the vast majority of our people, particularly the poor and the marginalized sections".Even as she attacked CPM for unilaterally giving the bandh call and failed to persuade Nitish to join the anti-demonetization protest she has been spearheading, Mamata Banerjee did not relent on her attack on the Centre.The Trinamool chief reacted sharply to Modi for his advice to people to shift to cashless transactions on Sunday and said 'Mann ki Baat' broadcast was a "misuse" of the government machinery as it has now become 'Modi ki Baat'. "Modiji, you have finished India's economy and growth. We don't trust you or your mismatched wrong technology which you are advertising for. We want technology and progress. But no section of society is to be left out and tortured while doing this (demonetisation)," Banerjee said in a statement.After days of confusion arising from the utterances of its spokespersons and the presence of senior party leader Sharad Yadav in a protest march against demonetisation, JD(U) came out unambiguously in favour of demonetisation. "JD(U) will not be part of any agitation against demonetisation including the dharna by Mamata Banerjee in Patna," party general secretary K C Tyagi said.Leaders standing in bank queues trying to incite common man … general public is in favour of demonetisation: : Mukhtar Abbas NaqviAuthor:Publication: The Times of IndiaDate: November 28, 2016URL: logjam continues in Parliament over the issue of demonetisation with a united opposition trying to corner the NDA government over what it calls shoddy implementation. The government insists all efforts have been mounted to mitigate suffering and to ensure there is no cash crunch across the country. Union Minister of State for Parliamentary Affairs, Mukhtar Abbas Naqvi spoke to Pratigyan Das about the government’s response and why it thinks demonetisation will benefit the poor and the downtrodden:When PM Narendra Modi announced demonetisation it was hailed as a masterstroke. But long queues before ATMs, banks, cash crunch, deaths and lack of proper execution give the impression the move has backfired. Your take.No, i don’t think so. The preparation of our government is perfect. If you go through our records, you will get to know that the first major decision that our government took after assuming office was on curbing black money; setting up of SIT was a step in that direction. PM Modi has had a very clear and transparent vision on weeding out black money. So, this step is a pre-planned move by the PM in the interest of the nation. The move will bring an economic revolution in the country. This decision will change the lives of the poor and downtrodden in real terms, remove political corruption from society and make political funding transparent.How will it help the poor? Please elaborate.Since childhood, we have been hearing that in this country only 5% of people actually have hold over almost 90% of our economy. This means remaining 95% don’t get their due. People had stocked black money, there was hoarding, etc. These things have stopped significantly after demonetisation and that will continue in the future as well. In fact, we are already observing the benefits. And people who are crying foul, their problem is not ‘note bandi’ rather ‘nakebandi’ of black money.What about inconvenience to the common man?Let’s not forget this is a transitional phase. It can’t be denied that during such transformations problems do occur. We are a huge country. Despite having an elaborate banking system, we have to remember it was not prepared for this kind of rush. Government wanted to keep it a top secret so it couldn’t have asked banks to prepare well in advance. The rush that was there initially has started to recede gradually. It takes some time to settle in. For instance, when Aadhaar cards were introduced, we saw similar reactions from the people.Don’t you think it could have been executed in a better way? People are losing patience now.Well, there are inconveniences but i don’t agree people’s patience is wearing out. Many political parties’ leaders are going and standing in queues with the common man, trying to incite them, spreading rumours, etc. Despite all this, the public is still supporting the move. They think those 4-5% people who have been thriving on their wealth will be shown the door.Why is the government not accepting opposition’s demand on PM to respond?Opposition parties, especially Congress, wanted discussion on the issue and we readily agreed. Discussion started in the Rajya Sabha and continued for the whole day. Leaders of major political parties shared their views including BJP. There are still many members who are yet to speak on the issue. However, on second day, their demand changed: they wanted JPC to be set up to probe what they call ‘scam’. Isn’t it laughable? This government is campaigning against black money and curbing it and opposition is talking of scam? When this didn’t go well, they again changed their stance and demanded that PM should attend the proceedings and sit full time in the House to listen to them.Kejriwal’s speech where he says ‘change PM not the note’ has become a hit on social media. Your thoughts.Let’s not forget the country has chosen the PM. He has got the mandate from the people of this country. And the mandate was in favour of curbing black money. In the last two and half years, there’s neither corruption nor any scam. Some people can’t digest it and therefore they are talking like this.Demonetisation and its discontentsAuthor: EditorialPublication: The HinduDate: November 28, 2016URL: seems to have made friends of foes, and foes of friends in the political firmament. If Bihar Chief Minister Nitish Kumar differed from his allies while heaping praise on Prime Minister Narendra Modi for embarking on demonetisation, Shiv Sena chief Uddhav Thackeray was critical of his party’s senior partner in government for “bringing tears in the eyes of the people” who had voted it to power. In West Bengal, Mamata Banerjee and her Trinamool Congress showed a readiness to join hands with arch-rival Left Front to fight the demonetisation drive. While the withdrawal of high-denomination notes can hardly be expected to trigger a political realignment anywhere, political parties seem to be rising above mundane political calculations while reacting to the demonetisation. A cynical view might be that Mr. Kumar is keeping his political options open by building bridges with the BJP, and keeping his politically junior but numerically stronger ally, the Rashtriya Janata Dal, in check. Arguably, he could be trying to recover his assiduously cultivated anti-corruption image, which took a beating following his electoral pact with Lalu Prasad of the RJD. But a simpler explanation cannot be ruled out: that Mr. Kumar saw some merit in the demonetisation drive, even as he recognised the difficulties in implementation. Similarly, the Sena cannot afford to break with the BJP at this juncture. Quite likely, Mr. Thackeray was prompted not by the possibilities of political realignment (of which there is practically none), but by the realities on the ground, in distancing himself and his party from the demonetisation decision. In West Bengal, an alliance between the Trinamool and the Left Front is inconceivable, but that did not stop Ms. Banerjee from reaching out to the CPI(M) in her fight.If political parties have thus reacted unpredictably, it could just be on account of the mixed results seen on the ground. None can afford to be seen as directly opposing measures to clean up black money and weed out counterfeits. However, stories of cashless banks and shuttered ATMs seem to have given some life to opposition parties looking for an issue to pin the government down on. Reports of the BJP having made huge cash deposits in banks in West Bengal, and land deals in Bihar days before the demonetisation, have provided some ammunition to opposition parties that were initially reluctant to criticise the move for fear of being labelled supporters of black money hoarders and counterfeiters. Demonetisation might not have changed political equations, but it has shaken up the political scene. What they cannot oppose in principle, parties have opposed in practice.Partial demonetisation and behavioural changeAuthor: Anil PadmanabhanPublication: Date: November 28, 2016URL: currency notes ban is another step towards breaking the hegemony of crony capitalism, black money accumulation and elite capture of every institution in IndiaIt is three weeks since the Union government undertook the dramatic step to partially demonetise currency notes of the valuation of Rs500 and Rs1,000. In this period we have been witness to some of the most acerbic public debates—in social media, Parliament, drawing rooms and even public spaces. In the ensuing binary discourse, historians and commentators have pontificated as economists and some of the latter (like former Prime Minister Manmohan Singh) have morphed into polemicists to make their arguments. In the process, a key collateral gain is being overlooked: behaviour change. Imagine if you are told one day that your daily newspaper will no longer be delivered as a printed copy, but digitally. Your reading habits and morning rituals are bound to be disrupted; some of us may well stop reading newspapers altogether. A similar disruptive moment has been brought upon us by the decision of the government to withdraw the two denominations, which together account for nearly 90% of the value of the rupee in circulation.Unlike the newspaper example though, this transition from cash to less cash (and eventually digital) is not optional. Which is what makes it tougher and also something many free-spirited citizens believe to be an imposition by the state. And given that it intersects technology, it is not an easy transition to effect (an understatement actually, given the overlay of digital divide and poverty in the country and, of course, the legacy of financial exclusion).Anecdotally though one is hearing of people undertaking this transformation. Naresh Guliani, the kirana store owner in my neighbourhood is an example. Immediately after demonetisation he baulked at the idea of an e-wallet (understandable given that he relies on his two landlines to talk to his clients, preferring to keep his mobile phone switched off); three days ago (after he was duly educated on the virtues of going digital by his teenage daughter) he settled my pending dues through an e-wallet (confession: I too acquired one only after 8 November). Count every such instance and you have a steady accretion of the number of banked in the country. More importantly this is merging the informal economy into the formal economy. Yes, while it makes one accountable (some more than others) it also brings with it attendant benefits. For example, at present, nine out of ten of the 470 million workforce do not avail of social security and workplace benefits—enjoyed by their counterparts in the formal workforce.Demonetisation and the resulting transition to a formal payments regime will only accelerate the trend—formalization of the informal economy—already in place following the adoption of disruptive technologies embedded in the share economy (like Ola, Uber or Airbnb). This can only abet growth.In a recent column in India Today, Nandan Nilekani, the former boss of Infosys Ltd and probably more famously the man who gave us Aadhaar, said as much: “India’s economy is largely informal. But once a taxi driver becomes part of Ola, then in fact he (or she) becomes part of the formal economy. He is able to use data, get a loan, buy a car and start paying taxes. So the formalisation of a few hundred millions of Indians will spur growth.”Sharing such benefits also has one important implicit gain: embracing of a rules-based regime. To avail of payments in a formal set-up you need a bank account/e-wallet and for that you need an identity (Aadhaar, for example). And of course, those in possession of black money cease to get the pass they have got for so long; the clear signal is follow the rules or face the consequences or at the least it raises the cost of generating black money.For most of the last seven decades, India has pursued an exception-based regime, manifesting in crony capitalism, accumulation of black money and elite capture of every institution in the country. The only way to break this hegemony is to adopt a rules-based regime. And hopefully partial demonetisation is another step in that direction.- Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics.Bank deposit surge may end up derailing demonetisationAuthor: Anshuman Tiwari @anshuman1tiwariPublication: Dailyo.inDate: November 27, 2016URL: interest rates slashed, huge accretion of bank deposits is not an outcome to rejoice politically and certainly not economically. Attorney general Mukul Rohatgi may have reportedly claimed in Supreme Court that the government expects to collect Rs 10 lakh crore deposits by demonetisation exercise. However, insofar as facts are concerned, there is no reason to rejoice, instead bulging deposits ring alarm bell for the government.If indeed the attorney general’s estimate comes true, it will derail many assumptions about black money in cash and challenge the entire logic behind this gruesome demonetisation drive, that claims to have wiped off black money at the cost of causing grave trouble to common people and creating multiple banking challenges as the bonus.To understand the logic, let’s go back to RBI data that says India possessed Rs 14 lakh crore cash in high denomination by March 2016.Out of this, around 30 per cent, or nearly 5 lakh crore, was with banks and other government agencies, which is accounted for and so was clean cash.The cash with the public stood at 70 per cent or Rs 9,926 billion (over 9 lakh crore). This cash with the public is the primary target of demonetisation exercise by virtue of the fact that the process of banning certain denominations of currency inflicts penalties on those who hold their unaccounted wealth in the form of cash at the moment of demonetisation.According to government and RBI, banks deposits have already touched Rs 6 lakh crore mark, beginning November 10 till the teller closing November 18, while withdrawals, including the exchange of old notes, came in above Rs 1.35 lakh crore during the same period.Total deposits (Rs 6 lakh crore) account for 60 per cent of total cash (Rs 9.9 lakh crore) with the public. A substantial amount of old currency has also reached petrol pumps, utilities, hospitals and medical stores, which have been further allowed to accept old notes until December 15.The revised RBI data is yet to be made public. However, MoS finance, Santosh Gangwar, has been reportedly said, "A total of Rs 8 lakh crore in scrapped currency notes has been deposited in the banks". Mint Street experts also estimate almost 75 per cent of the total cash with public might have entered or transited through the official channels of banking and exchange system. Now the old notes exchange facility at the banks stands scrapped, experts believe, deposits will keep swelling and collection may touch 9.9 lakh crore till December 30, ie close to the level of cash with public recorded before demonetisation.As the success of the scheme will be measured by the fact that how much cash will come back for exchange and how much of it will disappear from the system, let’s assess the possible scenario on the deposit glut.If the total deposit and exchange figures match with the high denomination cash in circulation data, then:1. There wasn’t enough black money in cash in the first place, but a common man’s small cash savings and consumption expenses which entered the banking system. If original idea was to get this money in the banking system, this could have been done by banning the notes in phased and organised manner.Or,2. Black money hoarders found ways to deposit their dirty wealth with the help of people with low income. The reports of misuse of Jan Dhan and dormant accounts suggest this might be the case.Now, drive against depositsAs deposits glut is leading to ruin the basic purpose of demonetisation, government is now forced to take corrective measures to discourage this trend. Government is rushing to Parliament with an amendment to the Income Tax Act to levy 50 per cent tax on unaccounted deposits and 25 per cent of deposited account would remain locked with government for four years.Those who are caught later will have to pay 60 per cent tax plus 30 percent penalty. The amendment will be tabled in Parliament for approval by next week.In the meanwhile, income tax department also is gearing up for a massive scrutiny drive against millions of accounts to check the whereabouts of the money.As government is desperate to show the success of demonetisation in big numbers, the proposed income tax on bank deposits is coming up with two obvious targets.1. The heavy tax on unaccounted deposits may discourage people to bring their black cash into the banks. This may result in the pile of extinguished cash, which may be claimed as bonanza by the government after the process is over.2. If deposits keep bulging, the withhold money and tax on unaccounted deposits will become a facesaver.Banks in a crazy fixSwelling deposit is not good as this is the consumption expenditure, which has now been locked into bank accounts while the economy is struggling for fresh demand.The banking industry and RBI too cannot celebrate this glut amid tapering demand of credit and rising NPAs. A few banks such as SBI, PNB, ICICI Bank and HDFC Bank have already slashed their deposit rates as they cannot afford to offer interests on huge deposits.The real return of short-term deposit has now turned negative against consumer inflation: that is the depositors will not get any return of these deposits.As currency shortage is acute and cash withdrawal limits are likely to stay longer than expected, banks will have to bear huge service cost on the deposits for the short to medium term, which they are passing on to RBI via reverse repurchase rate.Reverse repo is the rate at which commercial banks lend excess deposits to RBI.Since RBI cannot afford to pay interest to the banks beyond a point, therefore, on Saturday it has allowed banks to appropriate all incremental deposits as additional cash reserve ratio as a temporary measure.However, this will mean that additional deposits with the banks may not be available for lending. This is contrary to the expectations of benign interest rates, post demonetisation.Demonetisation may yield positive returns in the long run but as far as accretion of huge bank deposits is concerned, this is not an outcome to rejoice politically and certainly not economically.In India, Black Money Makes for Bad PolicyAuthor: Kaushik BasuPublication: The New York TimesDate: November 27, 2016URL: Nov. 8, the Indian government announced an immediate ban on two major bills that account for the vast majority of all currency in circulation. Indians would have until the end of the year to change those notes for other bills, including newly minted ones.On Wednesday, the government released via a smartphone app called “Narendra Modi,” named after the prime minister, the results of a survey purporting to show 90 percent support for its so-called demonetization policy.The poll was rightly criticized. In the two weeks after the measure was announced, millions of Indians stricken with small panic rushed out to banks; A.T.M.s and tellers soon ran dry. Some 98 percent of all transactions in India, measured by volume, are conducted in cash.Demonetization was ostensibly implemented to combat corruption, terrorism financing and inflation. But it was poorly designed, with scant attention paid to the laws of the market, and it is likely to fail. So far its effects have been disastrous for the middle- and lower-middle classes, as well as the poor. And the worst may be yet to come.India has a large amount of what is known as “black money,” meaning cash or any other form of wealth that has evaded taxation. According to a 2010 World Bank estimate, the most reliable available, the shadow economy in India makes up one-fifth of the country’s G.D.P. (A 2013 study by McKinsey, the consulting firm, puts the figure at more than one-quarter.)Black money tends to exacerbate inequality because the biggest evasions occur at the top of the income spectrum. It also deprives the government of money to spend on infrastructure and public services like health care and education. According to the World Bank’s most recent estimate, from 2012, India’s tax-to-G.D.P. ratio is about 11 percent, compared with about 14 percent for Brazil, about 26 percent for South Africa and about 35 percent for Denmark.The government’s wish to tackle these problems is laudable, but demonetization is a ham-fisted move that will put only a temporary dent in corruption, if even that, and is likely to rock the entire economy.Many Indians have been scrambling to change their old notes, causing snaking queues in front of banks and desperation among the poor, many of whom have no bank account and live from cash earnings.Anyone seeking to convert more than 250,000 rupees (about $3,650) must explain why they hold so much cash, or failing that, must pay a penalty. The requirement has already spawned a new black market to service people wishing to offload: Large amounts of illicit cash are broken into smaller blocks and deposited by teams of illegal couriers.Demonetization is mostly hurting people who aren’t its intended targets. Because sellers of certain durables, such as jewelry and property, often insist on cash payments, many individuals who have no illegal money build up cash reserves over time. Relatively poor women stash away cash beyond their husbands’ reach, as savings for the children or the household.Small hoarders often fear being questioned about the source of their money — they are accustomed to being harassed by tax collectors, among others — and may choose instead to forgo some of their savings.People have also been skimping in response to the new policy, causing demand for certain basic goods to fall, which has hurt farmers and small producers and could eventually lead them to scale back on their activities.And even more pain is around the corner. With so much money in circulation suddenly ceasing to be legal tender, India’s economic growth is bound to nose-dive. Another risk is that the Indian rupee could depreciate as a result of people and investors moving to more robust currencies.The government’s demonetization dragnet will no doubt catch some illicit cash. Some people will turn in their black money and pay a penalty; others will destroy part of their illegal stashes in order not to draw attention to their businesses. But the overall benefits will be small and fleeting.One reason is that the bulk of black money in India isn’t money at all: It’s held in gold and silver, real estate and overseas bank accounts. Another is that even if demonetization can flush out the black money that is held in cash, with no improvement in catching and punishing tax evaders, people with ill-gotten gains will simply start saving in the new bills currently being issued.When the government announced demonetization, it also justified the measure as a way to curb terrorism financing that relies on counterfeit rupee notes, as well as to dampen inflation.Both these justifications are flawed. Catching fake notes already in circulation neither helps trap the terrorists who minted them nor prevents more such money from being injected into the economy. It simply inconveniences the people who use it as legal tender, the vast majority of whom had no hand in its creation.There also is no evidence that black money actually is more inflationary than white money; nor in theory should it be. Black money is just money held by people instead of the government. It’s an excessive money supply that tends to create inflation; whether that money is white or black makes little difference.Demonetization may have been well-intentioned, but it was a major mistake. The government should reverse it. It could at least declare that 500 rupee notes, which many poorer people frequently use, are legal again.And if the government really does want to limit the amount of black money in circulation, it would do better to move India toward becoming a more cashless society. About 53 percent of adult Indians have a bank account, but many signed up at the government’s initiative and so quite a few of the accounts are dormant. On the other hand, more than one billion people in India have a cellphone, and this could be tapped to encourage more active banking, in the form of mobile banking.India’s push to issue a unique I.D. number to all Indians based on their biometric information is a major step in the right direction. More than one billion people have already been registered, according to the government, potentially enabling them to use an app to collect pensions, for example.Tackling corruption also goes beyond currency, cash or even banking. It requires changing institutions and mind-sets, and carefully crafting policies that acknowledge the complexity of economic and social life. The government could start by increasing penalties for tax evasion and amending India’s outdated anti-graft laws.In a country like India, where the illegal economy is so intimately intertwined with the mainstream economy, one inept government intervention against shadow activities can do a lot of harm to the vast majority, who are just trying to make a legitimate living. - Kaushik Basu, the C. Marks Professor of International Studies and professor of economics at Cornell University, was chief economic adviser to the Indian government in 2009-12 and chief economist of the World Bank in 2012-6.Banks, RBI square off over cash shortagesAuthor: ReutersPublication: The Times of IndiaDate: February 5, 2016URL: Bank of India (RBI) governor Raghuram Rajan and India's bankers are staking out sharply opposing positions ahead of talks on revamping the central bank's management of cash conditions to ease severe liquidity shortages.The talks, which have yet to be scheduled, come after Rajan unexpectedly said on Tuesday he would meet with bankers, and was open to re-examining the process he unveiled in 2013 of providing liquidity to banks mainly via term repos, or cash provided as short-term loans.Bankers say they will press Rajan for a complete overhaul that reduces the focus on these repos and instead favours RBI bond purchases or cutting reserve requirements — the cash holdings lenders must keep with the central bank.But Rajan has already expressed reluctance to take this route, having previously criticised bank lenders as being lazy for preferring to source easy money from the RBI rather than managing their cash needs via money market repos.Such strongly opposed positions could extend a stand-off that has prevented much of the 125 basis points in rate cuts the RBI implemented last year from filtering through to the economy, with banks lowering their lending rates by only 60 bps.India's daily money market cash deficit has stayed well above the RBI's comfort level of 1 trillion rupees ($14.81 billion) since the start of December as the government has pared spending ahead of the end of the fiscal year in March.That has kept short-term interest rates high — sending three month commercial paper above 9 percent for the first time since March.Consequently the RBI has stepped up bond purchases, buying in 200 billion rupees ($2.96 billion) worth since December, and planning to take another 100 billion rupees worth next week.But even after those purchases, the total amount of debt bought since Rajan's appointment in late 2013 would total only 900 billion rupees, significantly less than the 1.5 trillion rupees his predecessor bought in a single year.A senior official with a state-owned bank said the RBI needed to do even more and cut reserve requirements as well but suspected that such a call would be rejected. "We believe that liquidity is at this point of time quite stressed. And there is definitely scope for doing something for it, and they (RBI) do not believe that," said the official.At a small gathering with reporters on Tuesday Rajan said calls for the RBI to increase bond purchases or cutting reserve requirements were "the standard menu" markets always wanted."What we would like to know is this genuinely about liquidity? Or is it about rates they would like to come down?" he said."If it's about liquidity that is something we can fix. If it's about rates being too high that's a market-determined factor." Bankers say they expect Rajan will propose tweaking existing repo structures, unveiling longer debt maturities, or resort to more technical measures. But they say these actions will prove ineffective."I don't think adding duration alone will help," the state-owned bank official said."We can try it out to see how it works. But I am not too sure that it will really resolve the issue."Dry run at ATMs - RBI not supplying enough cash, say banksAuthor: Subhashish Mohanty and Manoj KarPublication: The TelegraphDate: June 12, 2016URL: Kumar Senapati of Kendrapara township travelled eight kilometres, stopping at every ATM in sight, to withdraw money. To his consternation, every ATM he tried had run out of cash.Finally, he had to visit the bank to withdraw money from the counter.This is the experience of many in the state who are making the rounds of ATMs to withdraw cash only to find "no cash" signs stuck outside.The daily requirement of cash in ATMs across the state is around Rs 250 crore. With the Reserve Bank of India (RBI) failing to meet the demands of various banks to supply the required cash, many ATMs have gone dry creating a crisis situation in both urban and rural areas of the state.The situation is likely to worsen with the Raja festival this week when there will be more transactions and the demand for cash from ATMs rises."Last night, I needed cash urgently for a medical emergency. But, to my surprise I found there was no cash in the ATM," said Raja Mohanty, a native of Dandamukundapur in Pipili.Such incidents have become quite regular and harried people making the rounds of ATMs to withdraw cash have become a common sight over the past three months. It's not just customers who are facing problems. Bank officials posted in semi-urban areas, too are bearing the brunt of angry customers despite no fault of their's."We are aware of the situation," said a senior official of the State Bank of India.Nearly 3,000 ATMs are in operation across the state. Of these, SBI has the highest with 2,400 ATMs. But most of these machines have run out of cash."We have reports that at least 10 ATMs are out of the cash at this moment in Cuttack city," said the senior bank official.The problem has cropped up as the RBI, through its 139 currency chests across the state, is failing to meet the day-to-day requirements of the ATMs of various banks. While on an average, Rs 160 crore is transacted through the SBI ATMs daily, another Rs 100 crore is transacted through the ATMs of other banks, including the non-nationalised ones.Chief manager of the SBI main branch at Kendrapara, Pramod Kumar Pradhan, said: "Our bank has been conferred a chest bank status by the RBI. We used to receive cash from the RBI twice every month amounting to more than Rs 200 crore in total. However, cash flow has now turned into a trickle, being as low as Rs 20 crore to Rs 30 crore. Cash deficiency has hit the ATMs worst."In Bhubaneswar, a senior SBI official said: "We write to the RBI almost on a daily basis. But they fail to meet the requirements."Sources said nearly Rs 5,000 crore is transacted every month through ATMs."The banks have to directly deal with the cash requirements of various contractors, mill owners and the government, which runs a slew of schemes. Besides, there many people who directly withdraw cash from the bank rather than from ATMs. This puts a lot of pressure on the banks. The RBI is unable to meet the demand," said an SBI official."Steps are being taken to meet the demands of the banks," said a senior RBI official.Demonetisation, Prohibition, Nitish and the current political equations of BiharAuthor: Rahul RajPublication: Date: November 28, 2016URL: has completed one year of the Mahagatabandhan government. From the State’s Health Minister and Lalu Prasad’s elder son Tej Pratap Yadav prescribing “horse-riding” to curb pollution and to skirt traffic jams to the Chief Minister banning alcohol with stringent rules, within an year Bihar has witnessed multiple pleasant and unpleasant surprises.Recently I was traveling across a few cities of Bihar to attend wedding ceremonies of a close relative. Using this as a good opportunity, I interacted with locals from these places to know their views on political developments in India, in Bihar, and in their localities.Demonetisation is the latest buzz everywhere. So is it in Bihar too. I heard people intensely discussing it at various places – the yellow building of Patna Airport, across the congested narrow streets opposite to Takht Sri Patna Sahib, on the dilapidated semi-functional Mahatma Gandhi Setu, and inside the villages of Siwan, which was once a stronghold of Mohammad Shahabuddin.The opinions were mixed. Since I was there to attend a wedding, I was also getting a first-hand experience of operational problems which people are facing due to cash crunch. Band wallas, decorators and caterers had to manage by taking a mix of cheques, old 500 notes and valid notes. There was inconvenience in the air, but things didn’t stop due to it.I experienced similar atmosphere in the village of Siwan where the wedding was scheduled and where one could hardly find someone using net banking. Not only that, when I enquired some locals of Siwan (a traditional RJD belt), they told me that they are very satisfied with the demonetisation scheme announced by Modi. While many people were hopeful about demonetisation, many were expressing anger due to distress caused by long queues and unavailability of cash needed to pay to daily wage labourers. The ratio, however, was very inclined towards people who are supporting the scheme.It was impressive to notice the penetration of WhatsApp into interiors of Bihar. People showed me WhatsApp messages related to demonetisation – some of which were official communications, some were rumors, some were nationalistic jibes, and most were jokes. One of my relatives read a WhatsApp joke to me which roughly meant: “???? ?? ????? ????? ?? ????? ?? ?? ???? ?? ???? ?? ?? ????? ?? ???? ???? ????? ???? ?????? ???? ??? ???? ??? ?? ?????” (Translation: Don’t trust Modi. Tomorrow he may also announce that railway tracks will be electrified so that people don’t defecate on them.)Another interesting buzz which was going viral in Patna was that Narendra Modi’s official app start playing Modi’s speech when it is exposed to a 2000 rupee note. People were connecting it to the nano chip rumor which went viral after the first news on 2000 rupee note broke-out. Soon I found that some pranksters have created multiple variants of Modi KeyNote Apps which plays his speech.So in essence, Bihar was dealing with demonetisation with overall support, some complaint, some anger, and some fun.On politics inside Bihar, people said that the mahol (ambiance) is not the same as it was after the announcement of assembly election results. The jingles of “Bihar mein Bahaar ho” are no more soothing to their ears. Despite several claims by Nitish Kumar that crime has dipped inside Bihar, people say that crime has gone up. Gundagardi and Rangdaari are back. Only a few days back, a correspondent of Hindi daily Dainik Bhaskar named Dharmender Singh was shot dead outside a roadside tea shop in Sasaram. People are keeping a track of such incidents.As far as prohibition is concerned, Nitish has won the heart of many Biharis by banning liquor inside the state. Contrary to editorials of magazines and newspapers, contrary to outrages on the social media, and contrary to debates on news channels, people, in general, are very happy with ban on liquor. The biggest beneficiaries are women, who are acknowledging decline in the domestic violence due to prohibition. The ban has poorly impacted the “fast food” businesses inside the state, but it has certainly won goodwill for Nitish Kumar.Perhaps one can claim that the sentiments towards demonetisation and prohibition are similar – there is inconvenience, there is negative impact on some businesses, and there are valid criticisms of the moves based on economic or democratic principles, but people are largely in support of these as they feel that the positive outcomes outweigh the negative ones.The popular sentiment in Bihar is that the Mahagatabandhan Sarkar won’t last for long. Nitish, in his recent speeches, has not only praised demonetisation from multiple platforms, but he has also distanced himself from protest organized by his political friends like Mamta Banerjee and Arvind Kejriwal. People in Bihar anticipate political shift in 2017. The national equations will become very interesting if Nitish joins hands with BJP again.Only time will tell which direction will the wind blow.Indira Gandhi, Manmohan Singh, and the rise of Black MoneyAuthor: Ironyman0007 Publication: Date: November 27, 2016URL: snapshot of the 1974’s union budget might give us some hints. During Indira Gandhi’s era in the 1970s, income tax was at an all time high. It appears that the top slab had a tax of 97.75%. Entrepreneurship did not die, it was forced to go into a hibernation of economic death. And who was the saarthi of the Indira Gandhi’s Rath one may wonder?However it’s almost impossible to find a direct article on this issue in major newspapers. It was none other than Dr. Manmohan Singh. 1972 to 1976, Singh was the Chief Economic Adviser in the Ministry of Finance and in 1976 he was Secretary in the Finance Ministry.He couldn’t speak when he was not a PM, he couldn’t speak either after he became one.1974 was the start of the brain drain from the country. The able minds, the honest minds chose to move out than stay. The people started avoiding paying taxes. Small businesses were hit hard. Biggies couldn’t survive. As if this was not enough, it was followed by the great Emergency of 1977.Fundamental rights were suspended. Politicians were jailed. The opposition was detained. Revolutionaries were tortured to death. That was the era of a dictator not of a democratically elected Prime Minister. Apparently quite different from the Baago me bahaar hai Aapaatkaal hai that Mr Ravish Kumar often mentions. Ohh sorry, Ravish Kumars of that era were in jails. In fact, there was virtually no press for 2 long years.When the policy adopted by Indira forced the honest, the loyal to pay more than they could afford, it also paved a way for the corrupt, the crooked to not pay the taxes. Leading to which the birth of the parallel economy which would bear the brunt of 1974 tyranny.Soon there was an exceptional rise in the black money. And our great eminent respected economist Dr. Manamohan could do nothing about it. Okay, he did one thing. He was silent about it.May be liberalisation was more like an act of atonement than an economic achievement. That is also thanks to PV Narasimha Rao. However, Gandhi Parivar made sure he compensates for that one good that he did. He was made a puppet Prime Minister, who made sure the black money and corruption remained as strong as ever.At a time when the media is singing how great Manmohan Singh is, this story needs to be told and shared.Note Ban Shock Is Good For India: Nandan Nilekani To NDTV PUBLISHED ON: November 28, 2016 | Duration: 28 min, 30 sec Nilekani, who shaped the world's largest biometric database with India's Aadhaar project, is confident that the government's ban on 500 and 1,000 rupee notes will ensure financial inclusion surges. Mr Nilekani, co-founder of IT giant Infosys, predicated digital transactions will escalate considerably in the next 3-6 months to a rate that would otherwise have taken "3 to 6 years." Mr Nilekani said that any short-term contraction in economic growth will be compensated for very quickly "with digitization."Aadhaar, which assigns a unique identity (UID) to every citizen linked to their biometrics, is key to helping rural india open zero-balance or Jan Dhan bank accounts and to avail of direct cash transfers to the poor through welfare schemes.In 2014, Mr Nilekani ran unsuccessfully for parliament as a Congress candidate from Bengaluru."The credit for creating the Aadhaar system goes to the UPA government, Dr Manmohan Singh," said Mr Nilekani, referring to the former Prime Minister. "At the same time, am grateful to PM Modi because he has taken what was built and applied it to so many schemes...this government took it forward," he said about how the Aadhaar project has been increasingly utilized."A lot will depend on the next three months. If they accelerate digitization... long-term, it will be a very good development," he said.The long journey of getting Indians into formal economy will be accelerated. Short term pain is inevitable but this is a big step for financial inclusion. The slowdown is only for a short term. Economic growth will bounce back. This shock is good for India. The currency ban will give a boost to digital transactions. It has its own set of long-term benefits. India's growth will come from services and digitization. With this decision, India will move from being a data poor-to-data rich country. Digitisation will compensate for the short-term slowdown and adoption of technology will lead to long-term benefits. Unified Payment Interface will benefit the country immensely. The notes ban shock to the financial system will also extend to the political system. The credit for creating the Aadhaar system goes to the UPA government, Dr Manmohan Singh. At the same time, am grateful to PM Modi because he has taken what was built and applied it to so many schemes...this government took it forward.The Left’s Strike Against Demonetisation Has Crippled Daily Life In Tripura, KeralaAuthor: Swarajya StaffPublication: Date: November, 2016URL: was crippled in Tripura and Kerala today (28 November) due to a Left-called 12-hour shutdown to protest against demonetisation of high-value currency.In Tripura, government and semi-government as well as private offices, banks, educational institutions, shops and business establishments were closed due to the strike. All vehicles, except those of security forces, went off the roads. Train services between Tripura and the rest of the country were affected as Left workers blocked several trains in different locations.The dawn-to-dusk strike in Kerala also came at a price. Shops and hotels remained closed in many places, with buses and taxis largely choosing to stay off the road. Schools and colleges too have remained shut. Government and semi-government institutions saw a very thin attendance today.Demonetisation: Banks get close to Rs 8.45 lakh cr worth of scrapped notes, says RBIAuthor: PTIPublication: The Times of India Date: November 29, 2016URL: have exchanged and deposited about Rs 8.45 lakh crore worth of scrapped Rs 500/1,000 notes at different banks till November 27 following demonetisation of the high value currency, the Reserve Bank of India (RBI) said on Monday.The banks also disbursed over 2.16 lakh crore over the counter and via ATMs between November 10 and November 27, according to an RBI statement.Consequent to the announcement of withdrawal of legal tender status of Rs 500 and Rs 1,000 banknotes from midnight of November 8, 2016, RBI had made arrangements for exchange and/or deposit of such notes.The facility was available at the counters of the Reserve Bank and commercial banks, Regional Rural banks and Urban Cooperative Banks."Banks have since reported that such exchange/deposits effected from November 10, 2016 up to November 27, 2016 amounted to Rs 8,44,982 crore," the central bank said in the statement.Of this, the exchange (of old Rs 500/1000 notes) amounted to Rs 33,948 crore and deposits amounted to Rs 8,11,033 crore.Banks, RBI said, have also reported that the public have withdrawn Rs 2,16,617 crore from their accounts either over the counter or through ATMs.People have been queueing up at ATMs for cash withdrawal.An account holder is allowed to withdraw Rs 24,000 a week, including ATM withdrawals. The daily withdrawal limit for ATM has been set at Rs 2,500 per day.Exclusive Interview With Urjit Patel On Indian Economy After Trump And DemonetisationAuthor: Sanjay PugaliaPublication: Date: November 28, 2016URL: The 18th floor office of the governor of the Reserve Bank of India (RBI) in Mumbai has changed in the last two months. It’s much quieter. There are no armed security guards outside the governor’s office and the office staff is not allowed to hold open the door for the governor when he walks in. Urjit Patel does it himself.Since he took over as governor of RBI, Patel has had to manage two unprecedented events. One global. The election of Donald Trump as U.S. President. The second local. The demonetisation of Rs 500 and Rs 1,000 currency notes in India. With the monetary policy announcement a few days away (December 7) Patel preferred to share the analysis of the economic impact of demonetisation then. In an interview to Quintillion Media’s editorial director Sanjay Pugalia, he spoke about the election of Donald Trump, which he believes will have a far reaching impact on the global economy and he listed steps the RBI is taking to aid citizens short of currency.Q.: While the demonetisation debate is on, one issue that hasn’t been discussed much is the election of Donald Trump as the President of the United States. What is your view on the economic impact of this?A.: The outcome of the U.S. presidential poll is significant in several ways given the pronouncement during the poll campaign. Two things are clear – the U.S. will be less open to trade in goods, services and outsourcing. Indeed, Mr. Trump has indicated that he is against the TPP (Trans-Pacific Partnership treaty).Second, the U.S. federal government is likely to expand its fiscal deficit to fund infrastructure etc. Both these things will play out in the backdrop of monetary policy tightening currently going on. The yield on the U.S. 10-year bond has increased by about 50 basis points since November 8. The overall impact of this is that the U.S. dollar is at its strongest level in the last 13 years and it has appreciated against the currencies of both emerging markets and most developed economies. Emerging markets have also witnessed a global risk off as portfolios get balanced in favour of the U.S., their home country. Q.: How is this going to impact India?A.: India is relatively well positioned to handle the global shock. Our current account deficit continues to be modest. India continues to be a good long-term growth story, and therefore an attractive FDI (foreign direct investment) destination. While the rupee is market determined, we have the means to mitigate any undue volatility.Q.: But now India faces another unexpected scenario post demonetisation. Many stakeholders and economists have said India’s GDP (gross domestic product) will take a significant hit. What according to you is the impact on our economy?A.: This is a pertinent question. We are analysing the impact internally and we will comment on this in next week’s monetary policy – on both the short-term and long-term implications. Q.: This has caused huge disruption as people are still facing a lot of hardship in accessing their own cash. When do you think we will get back to a more normal situation?A.: When RBI interacts with banks, they indicate that at least the situation in metros and other big cities is stabilising and we are all working on reducing the inconvenience to everyone in other parts of the country. Q.: Many see the RBI’s action of a cash reserve ratio (CRR) hike (to suck out liquidity) as punishing banks for no fault of theirs. Why such hasty actions?A.: This is a very temporary measure. We have already indicated to banks that the RBI is going to be lenient with banks. In the initial days of the incremental CRR hike; banks will not be penalised if they fall short in complying for a couple of days. Once the government is ready with market stabilisation scheme bonds, the RBI will immediately review the situation.Q.: How is the effort to make India a predominantly cashless society playing out?A.: In such a transitional stage in a country like India, there are opportunities also to speed up digitalisation, use of debit cards, E-wallets etc quickly. Otherwise things take time. RBI and banks have played their role to catalyse this process by fee waivers and other steps.Both sides of the coin: What top economists think about demonetisationAuthor: Radhika IyengarPublication: The Indian Express Date: November 28, 2016URL: The nation stands divided in its opinion on whether the drastic measure taken by the government was an informed step.It’s been 20 days since Prime Minister Narendra Modi announced the implementation of the note ban. In the wake of demonetisation, there have been multiple debates on whether the “radical” and “bold” step taken by the Central government was a judicious, well-thought out and well-implemented step, and whether it would really eradicate all the existing black money – an argument that sits at the core of the move.The nation, of course, stands divided in its opinion on whether the drastic measure taken by the government – which has plummeted the country (temporarily, the government argues) into a financial paralysis – was an informed step. We have complied a list of what some of the country’s leading economists and experts have to say. Unsurprisingly, the views are divided, but we ask the readers to make their own inferences.Experts and Economists who are against Demonetisation:Amartya Sen: Leading economist; Noble Laureate; recipient of the Bharat RatnaCalls the move authoritarian: In an interview with The Indian Express, Professor Sen said, “Only an authoritarian government can calmly cause such misery to the people — with millions of innocent people being deprived of their money and being subjected to suffering, inconvenience and indignity in trying to get their own money back.”Says that the government claims that unless proven otherwise, all are potential hoarders of black money: “Telling the public suddenly that the promissory notes you have, do not promise anything with certainty, is a more complex manifestation of authoritarianism, allegedly justified — or so the government claims — because some of these notes, held by some crooked people, involve black money. At one stroke the move declares all Indians — indeed all holders of Indian currency — as possibly crooks, unless they can establish they are not,” he told The Indian Express.Move is a failure — the intended targets know how to avoid the trap: “It is hard to see how. This will be as much of a failure as the government’s earlier promise of bringing black money stacked away abroad back to India (and giving all Indians a sudden gift — what an empty promise!). The people who are best equipped to avoid the intended trap of demonetisation are precisely the ones who are seasoned dealers in black money — not the common people and small traders who are undergoing one more misery in addition to all the deprivations and indignities from which they suffer.”Dr. Manmohan Singh: Former Prime Minister; eminent economist; former RBI governorOverall opinion: Speaking at the Rajya Sabha, Dr. Singh has called demonetisation an “organised loot” , a “legalised plunder” and a “monumental mismanagement”. He even said that the National income would fall by 2 per cent, which in his mind was “an underestimate”.Asked why people weren’t allowed to withdraw their own money: “I would like to know from the Prime Minister the names of any countries he may think where people have deposited their money in banks but are not allowed to withdraw their money. This alone, I think, is enough to condemn what has been done in the name of greater good of the people of the country.”Those who’d bear the biggest brunt will be those in the agriculture sector and other informal sectors: “In my opinion, the way the scheme has been implemented will hurt agricultural growth in our country, will hurt small industry, will hurt all those people who are in the informal sectors of the economy. And my own feeling is that the national income, that is the GDP, can decline by about 2 percentage points as a result of what has been done….After all, 90 per cent of our people work in the informal sector, 55 per cent of our workers in agriculture are reeling in distress. The cooperative banking system, which serves large number of people in the rural areas, is non-functional and has been prevented from handling cash… all these measures convince me that the way this scheme has been implemented is a monumental management failure.”Kaushik Basu: Leading economist; Senior Vice-President and Chief Economist at The World BankCannot wipe out black money; hoarders have already found loopholes: “Anyone seeking to convert more than Rs 250,000 must explain why they hold so much cash, or failing that, must pay a penalty,” Basu wrote in The New York Times. This requirement, he wrote, has already spawned a “new black market to service people wishing to offload: Large amounts of illicit cash are broken into smaller blocks and deposited by teams of illegal couriers”.The move is severely hurting its unintended targets: Basu said the move is hurting people who aren’t its intended targets as many individuals who have no illegal money could have build up cash reserves over time. “Relatively poor women stash away cash beyond their husbands’ reach, as savings for the children or the household,” he added in The New York Times.Arun Shourie: Former economist at the World Bank; recipient of the Padma Bhushan and Union MinisterIf the government was planning this for months, how could it be possibly so ill-prepared? In an interview with NDTV, Shourie asked by the government could not anticipate any problems when they finish off 85 percent of the currency value in India. “Small and medium enterprises, transport sector, the entire agricultural sector—I can’t reach them. I can’t reach 6 lakh villages. They did not think about this?”Will demonetisation weed out black money? Not really, because the owners of black money have intelligently converted all that money into tangible and intangible assets: “This is not a strike on black money, and the reason for that is that those who hold this black money or who have black assets, they don’t hold them in cash. One percent of Indians own 53 percent of the total assets in India. 10 percent own 85 percent. Now these are the rich fellows, who would be having an even larger proportion of black money. They are not going to put money under the mattress! They are holding it abroad—and there also it’s not dollars in gunny bags, it’s property! Maybe jewellery, maybe other assets, maybe stock markets.”On “Cashless economy”: While Modi has continuously advertised e-transactions and said that demonetisation will pave a way towards India becoming digitally modern, Shourie said that those most affected were farmers, whose usual transactions are small. “You think in the agricultural sector, daily wages would be paid through debit cards? Or that poor fellow [a farmer] will use a credit card to buy vegetables? He only earns for that day!”Experts and Economists who are for Demonetisation:Arun Jaitley: Current Finance Minister of India; Senior Advocate, Delhi High CourtEventually, the government will be able to invest more money in agriculture and social sector: “A lot of money that operates in the shadow economy will now become a part of the banking structure itself. Banks will have a lot more money to support the economy. Private sector investment, which was so far lacking, will now get back into the economy. The banks which were struggling because of the NPA problem will have a lot more money to lend for agriculture, infrastructure sector, social sector, trade and industry.”Bibek Deb Roy: Leading economist; Member of the Niti Ayog, a policy think-tank for the GOIIn an interview with Karan Thapar, Deb Roy spoke about the note banning and its repercussions.His take on the impact on daily wage laborers and loss of jobs: “What happened on November 8 is part of a broader jigsaw. There are several other measures that have happened. The Indian economy, in certain sectors, is going through a slowdown. If these figures are going to be taken seriously, you have to demonstrate to me…that these job loses are because of 8th of November alone and not because of other things,” he told Karan Thapar.On why the notes are different sizes, which deter quick production and circulation of the notes: There have been several arguments pitched by economists as to why the different denomination notes vary in sizes. The difference in sizes are delaying the printing and therefore taking longer to circulate within the country. Mr. Deb Roy argued that the notes vary in sizes because the sizes inform those who are visually impaired about what denomination they are holding: “You must realize that there are ordinary, sensible people who also happen to be disabled. For them the way to distinguish between currency notes is often in terms of size…Therefore accept that the currency notes have to be different in size!”Note: The argument that the size needs to be different for visually disabled doesn’t hold water. This is because the RBI has introduced two features in the notes which make it easier for the visually impaired to distinguish between the denominations. First, the RBI has introduced the new notes which can be read in Braille. It was a feature the Finance Minister, Arun Jaitley had mentioned in his budget speech in 2014: “The government will print currency notes with Braille-like signs to assist visually challenged people.” Two, the notes also have angular bleed lines, which are elevated markings that appear on the upper right and upper left frame of the notes. The number of bleed lines are unique to each denomination, and are therefore easy to distinguish between. Different sizes therefore, don’t really matter.Arvind Virmani: Leading economist; Former India’s representative at IMF; Former Chief Economic Adviser, GOIUseful method; secrecy was a per-requisite: “This is a useful method of flushing out black money, given that a large percentage of cash holding is in these two denominations. The manner in which it was implemented is not surprising – such actions are always secret till announced, so that insiders do not take advantage of the information at the cost of the outsiders,” he told The Wire.However, he agreed it would have a negative impact on the small businesses: “How it will affect requires a deeper study, but the first thing one knows is when you demonitise such a large proportion of currency, the immediate effect is a collapse of retail trade in goods and services,” Virmani told Business World adding that this effects how quickly you replace the transaction demand. He said the currency needed for everyday transactions have has to be replaced quickly. “The longer that is delayed, the more the negative effect.”Surjit Bhalla: Chairman, Oxus Investments, a Delhi-based economic research/advisory firm; Former Professor at Delhi School of Economics; Previously worked at the World BankCalls it a “bold step” on PM’s part: Bhalla wrote in The Indian Express that, “There should be no question that this BJP policy is bold and courageous. The trading community has long been identified as the BJP’s core constituency and Prime Minister Narendra Modi has gone against this powerful support group. So let us give Modi a considerable amount of credit for taking a bold step for the country — genuinely in the name of the nation.”It’s bigger than the GST: In the same piece he argued, “The fight against corruption and black money in India has just begun. If successful, this will go down as the biggest reform in India, bigger than the GST (though the two are related) and bigger than the industrial policy reform of 1991. But, and there is a but, while the policy is very effective in its attack on past black money, it is silent on the creation of money.”Black money hoarders are suffering: “Most of the spending of this black money is for expenditures on gold, purchase of foreign exchange, and purchase of real estate. Transfer of money abroad into ‘anonymous’ accounts is now a difficult exercise for all the world’s black money residents. Gold purchases and hoarding are also becoming more difficult. So, the prime outlet for big-time black money use is real estate,” he continues.Ban Bandhs: Parties have a right to protest but bandhs will only pile misery for the common manAuthor: EditorialPublication: The Times of IndiaDate: November 29, 2016URL: call for a state-wide bandh in West Bengal, Kerala and Tripura by the Left and allied parties, to highlight the common man’s inconvenience due to demonetisation, was a purposeless one. Long queues outside banks and ATMs which are out of money certainly validate opposition parties’ claims that implementation of the move to demonetise Rs 500 and Rs 1,000 banknotes has been pathetic. But bandhs further pile on the misery and offer no solutions. It’s as if people are buffeted by an economic bandh from the government and political bandhs from the opposition, all at the same time.Political parties certainly have the right to demonstrate and protest peacefully. But this shouldn’t come at the cost of disrupting lives of common people. Parties enforcing bandhs should know that they have no right to come in the way of people who are pursuing their livelihood. Apart from the Left, other opposition parties including Congress observing ‘Aakrosh Divas’ have wisely chosen to protest against the government’s currency ban rather than enforce a Bharat bandh that could have brought normal life to a grinding halt.Though the effect of Monday’s bandh was severe in Kerala and Tripura, parts of Odisha and Bihar, local traders in other states kept their shops open in defiance. The stoppage of a few trains in Bihar is deplorable. Such incidents result in a harrowing time for commuters. In 1998, the Supreme Court had upheld a Kerala high court ruling banning political bandhs. But the tradition of calling for bandhs continues. If people feel strongly about an issue, they will participate willingly enough in protests. No coercion is required for this. Bandhs do little except trample upon fundamental rights of citizens.Demonetisation: How Neo Middle Class Is Redefining The Political LandscapeAuthor: Srinivas Thiruvadanthai Publication: Date: November 28, 2016URL: now everybody is probably sick of another article on demonetisation! Much has been written about the economic ramifications, but the significance of demonetisation transcends mere economics. The palpable populist appeal of demonetisation marks another milestone in rise of the neo middle class. A million mutinies are coalescing into a nationalism of the masses as increasing number of poor transition into the neo middle class. Concomitantly, the spread of middle class values is causing a transformation in the nature of populism – from concrete freebies to abstract notions of anti-corruption, rule of law, and national interest. From this perspective, the symbolism of demonetisation – attacking corruption and protecting national security – far outweighs the risk of economic disruption. And, the Prime Minister, who embodies the hopes of the neo middle class, who was propelled to power by this class, has signaled with demonetisation that he is alive to their aspirations.Liberalisation And Burgeoning Neo Middle ClassEstimates of India’s middle class vary wildly for a variety of reasons. First, there is no universally accepted definition of middle class. The definition of middle class for a multinational company is not going to match that of a small restauranteur in India or that of a private school principal in a mid-tier city. Second, there is no hard data on household income in India. Estimates of household income in India is mostly indirect and subject to significant measurement problems. Third, income alone is an inadequate proxy for complex sociological phenomena called the middle class, especially so in the incredibly diverse Indian context. Thus, you have estimates of middle class ranging from 2 per cent to 55 per cent. We are reminded of the fable of the elephant and six blind men when it comes to the estimate of the size of the middle class.In my mind, the most revealing statistic is that fully 49 per cent of households self-identified as middle class in a 2013 survey conducted by the Lok Foundation and the Center for the Advanced Study of India (CASI) at the University of Pennsylvania. Detailed data from National Council of Applied Economic Research (NCAER) suggests that Indian people are not delusional! The NCAER does an excellent job of slicing household data in a number of ways, which allows analysts to draw their own inference. The following tables are from NCAER:Without belabouring the issue, I think upward of 40 per cent of Indians have made the transition from utter destitution and poverty post liberalisation. Whether you call it middle class or whatever, they certainly feel middle class. This group, classified as ‘aspirers’ by NCAER, has been widely referred to as the neo middle class by analysts and political commentators. Strikingly, the rise of the neo middle class has gone along with an increase in the percentage of nuclear families, who now constitute 70 per cent of households up from 59 per cent a decade ago.Emerging Middle Class And Changing Political DiscourseIn the book, Farewell of Alms, economist Gregory Clark argues that the spread of middle class values was instrumental in pulling Britain out of the Malthusian trap and setting the foundation for the Industrial Revolution in the country. Whether we agree with Clark or not, unquestionably, a rising share of middle class reshapes the political discourse. After all, the French Revolution was not launched by starving peasants but by the newly emergent middle classes who wanted a seat at the table.In India, too, the emergence of the neo middle class is fundamentally altering the political landscape. Issues of survival are being overshadowed by aspirational concerns. The UPA had done a fairly good job of bringing down poverty, but the CASI survey found that the overriding concern of the electorate leading up to the 2014 election was economic growth and that the economy had fallen short of rising aspirations.Cross-border terrorism can no longer be blithely ignored by the government. The UPA was of course seen as inept in this regard, but even the present government may have been induced to undertake “surgical strikes” given the palpable anger in the aftermath of the terrorist attack at Uri. Clearly, the desire for overt demonstration of national resolve is a neo middle class phenomenon, which is causing great discomfiture to the elites. Recall, when a popular journalist condemned the middle class as “army-worshipping, democracy-hating, yearning for machismo, abusing independent women, middle class India is such a drag.”Corruption became a major issue with the enormous popularity of the Indians Against Corruption (IAC) movement, which by all accounts was a middle-class movement. Indeed, that it was seen as a middle-class issue was a key factor behind Arundhati Roy distancing herself, saying that she “would rather not be with Anna” and excoriating the movement for wanting to preserve an unjust order. Today, Roy is losing the battle of ideas but it was not always so. In 1969, the brilliant filmmaker, Mrinal Sen, made a movie that launched the genre called arthouse cinema. The movie, Bhuvan Shome, narrates the ‘corruption' of an upright government employee. As Sen said, “Our intention was to ‘corrupt’ a bureaucrat suffering from Victorian morality.” Sen lays bare the left’s, and therefore Indian intelligentsia’s, utter contempt for middle-class values. As long as the middle class was a miniscule minority, the political establishment could afford to play along with the left. However, the ground has been shifting with the emergence of the neo middle class and politicians, unlike the intelligentsia, have to win elections.Demonetisation And BeyondDemonetisation does not directly affect the flow of black money or corruption. It only affects a small proportion of the stock of undeclared wealth. Yet, cash is a necessary lubricant for all black-market transactions. Unquestionably, demonetisation will have chilling effect on such activity. Meanwhile, the likely massive shift toward electronic payments will make tax evasion more difficult. If the government follows up with actions against benami transactions in property, then it will go a long way in reducing the footprint of black money and establishing respect for the rule of law. Furthermore, a likely dramatic decline in real estate prices will have salutary effects on the economy. Abnormally high real estate prices are an impediment to development. They facilitate rent extraction and divert capital from productive investments that would lift living standards. When rent extracts a significant part of the economic surplus, it encourages speculation and reduces incentives for productive wealth creation. Reducing such rent extraction could turbocharge India’s development.Respect for the rule of law is the foundation of civilised society and that separates developed nations from the rest. Corruption, especially the visible petty corruption that entangles almost every Indian, makes mockery of the rule of law. If the government follows through on demonetisation with other measures that manage to reduce corruption, then India will take a quantum leap in development. Even if the demonetisation move fizzles out, the inexorable rise of the neo middle class will continue to push for changes that are driven by so-called petty bourgeoisie values.Kaushik Basu flays demonetisation, says it is likely to failAuthor:Publication: Date: November 29, 2016URL: Kaushik Basu is supportive of the intent behind the policy, that of dealing with the large black money economy in India, he said the move was ‘ham-fisted’ that will put only a temporary dent in corruption and is likely to rock the entire economy.Former chief economic adviser to the government Kaushik Basu has criticised the Centre’s demonetisation of Rs 500 and Rs 1000 currency notes, saying it was badly implemented and likely to fail.Basu made the comments on Sunday in an article in the New York Times.He is currently the C Marks Professor of International Studies and Professor of Economics at Cornell University in the US. He served as chief economic adviser to the Indian government from 2009 to 2012 and was chief economist of the World Bank from 2012 to 2016.“Demonetisation was ostensibly implemented to combat corruption, terrorism financing and inflation. But it was poorly designed, with scant attention paid to the laws of the market, and it is likely to fail. So far its effects have been disastrous for the middle and lower-middle classes, as well as the poor. And the worst may be yet to come,” Basu wrote.He also criticised the poll conducted on Prime Minister Narendra Modi’s App. While he is supportive of the intent behind the policy, that of dealing with the large black money economy in India, he said the move was ‘ham-fisted’ that will put only a temporary dent in corruption and is likely to rock the entire economy.PM Modi hails BJP win in polls, says 'results show people won't tolerate corruption'Author: PTIPublication: The Times of IndiaDate: November 29, 2016URL: Minister Narendra Modi on Tuesday said the BJP's performance in parliamentary, assembly and local polls across India over the last few days illustrates that people want all-round progress and will not tolerate corruption and misgovernance."Over the last few days we have seen the results of various polls, parliamentary, assembly & local polls across India," Modi tweeted."Be it the Northeast, West Bengal, Madhya Pradesh, Maharashtra, Gujarat ... BJP has performed very well. I thank the people," he added.He said these results across India "illustrate that people want all-round progress of the nation and will not tolerate corruption and misgovernance."BJP won one Lok Sabha seat each in Assam and Madhya Pradesh besides bagging a number of assembly seats in Madhya Pradesh, Gujarat and Arunachal Pradesh.The party also emerged victorious in local bodies polls in Maharashtra and Gujarat.Referring to his home state, the Prime Minister said, "I salute people of Gujarat for continued trust in BJP. BJP's great win in local polls shows people's strong faith in development politics."He congratulated party cadres of the state along with Chief Minister Vijay Rupani and state BJP chief Jitu Vaghani for their hard work across the state.Modi had on Monday hailed the party's performance in local bodies polls in Maharashtra.------------------------Narendra Modi @narendramodiI salute people of Gujarat for continued trust in BJP. BJP's great win in local polls shows people's strong faith in development politics.1:50 PM - 29 Nov 2016------------------------Narendra Modi @narendramodiBe it the Northeast, West Bengal, Madhya Pradesh, Maharashtra, Gujarat...BJP has performed very well. I thank the people.1:52 PM - 29 Nov 2016------------------------BJP sweeps local body elections in GujaratAuthor: Kapil Dave, TNNPublication: The Times of IndiaDate: November 29, 2016URL: a lot of speculations over the possible political impact of demonetisation on BJP's prospects in Gujarat, the party had a clean sweep in two municipalities and one taluka (block) panchayat elections and by-elections in 11 municipalities, seven district panchayats and 15 taluka panchayat seats.BJP won 41 out of 44 seats in Vapi (Valsad district), 27 out of 28 seats in Kanakpur-Kansad (Surat) municipalities.Out of 22 seats in Gondal taluka Panchayat, BJP won 18. The district panchayat by-election results have not upset the party either as five district panchayats out of seven turned saffron.Out of 15 taluka panchayat by-elections, BJP won five while the congress won four. Elections on other seats were postponed due to technical reasons."Over the last few days we have seen the results of various polls, Parliamentary, Assembly & local polls across India. Be it the Northeast, West Bengal, Madhya Pradesh, Maharashtra, Gujarat...BJP has performed very well. I thank the people.These results across India illustrate that people want all-round progress of the nation & will not tolerate corruption & misgovernance," PM Narendra Modi tweeted, hailing the poll results.------------------------Narendra Modi @narendramodiCongratulations to @BJP4Gujarat Karyakartas, CM @vijayrupanibjp & @jitu_vaghani for their hardwork work across the state.1:50 PM - 29 Nov 2016------------------------Thumbs Up For Notes Ban? After Maharashtra, BJP Wins Gujarat: 10 PointsAuthor: Bhanu Priya VyasPublication: Date: November 29, 2016URL: BJP has followed up its success in the Maharashtra civic elections with a sweep of by-elections to local bodies in Gujarat, asserting that the wins signal the people's support for Prime Minister Narendra Modi's ban on 500 and 1,000 rupee notes to combat black money. Here are the 10 latest developments in the story:1. In tweets PM Modi noted that the BJP "has performed very well" in recent elections and said, "These results across India illustrate that people want all-round progress of the nation and will not tolerate corruption and misgovernance."2. In Gujarat, the BJP has today won 109 of 126 municipal and district panchayat seats in 16 districts to which by-elections were held, gaining 40 seats from the Congress, many of which it had relinquished in municipal elections last year under the leadership of then Chief Minister Anandiben Patel.3. The Congress has managed to win only 17 seats. Today's victory is a big boost for the BJP, which has ruled Gujarat for the last two decades, but was seen to be struggling in the face of massive agitations by Patels and Dalits with less than a year to go for assembly elections in the state.4. "People of India back note ban move... Our performance in local polls held across two states present the mood of the nation. We sense they are with us," said Union minister Prakash Javadekar.5. In Maharashtra, the BJP has made big gains in the first phase of key civic elections winning 851 of 3,705 seats across 147 municipal councils and 17 panchayats. BJP candidates have won in 52 councils where council chiefs were elected directly.6. The BJP has made inroads into traditional strongholds of the Congress and NCP, former partners who are contesting the civic elections separately. Two top Congress leaders, Prithiviraj Chauhan and Narayan Rane, both former Maharashtra Chief Ministers, have lost seats in their areas.7. "The Maharashtra result should be a wakeup call for opposition attempting to mislead people on #Demonetisation, a decision in national interest,"tweeted BJP chief Amit Shah, congratulating Mr Fadnavis and party workers for the "excellent performance."8. By-elections held earlier this month in seven states for assembly and parliamentary seats were the first polls since PM Modi announced the notes ban. The BJP said its sweep of the by-polls in three states it rules was evidence of people's support for the ban.9. But West Bengal Chief Minister Mamata Banerjee, at the forefront of opposition protests against the demonetisation, described her big win in her state as a strong people's vote against the notes ban.10. A united opposition has held up parliament accusing the government of causing immense hardship to people who have struggled to get new currency amid a cash crunch after the notes ban. PM Modi has promised that the situation will ease within 50 days.60% demonetised notes already accounted for: RBIAuthor: Mayur Shetty, TNNPublication: The Times of IndiaDate: November 29, 2016URL: 60% of the value of the demonetised notes (Rs 14 lakh crore), has already been accounted for, according to data released by the Reserve Bank of India (RBI) on Monday.While deposits of the demonetised notes in banks since November 9, when the decision kicked in, total Rs 8.11 lakh crore (57% of the total value of demonetised notes), notes worth Rs 33,498 crore (3%) have been exchanged. Even as deposits surge, there have been reports that the printing of Rs 2,000 notes has been stalled, which is said to have resulted in a drop in the legal tender being released by banks.Between November 10 and 18, notes worth Rs 1.36 lakh crore were pumped out by banks, but the value dropped to Rs 1.14 lakh crore between November 18 and 27. It was around a week after the demonetisation kicked in that reports surfaced that the printing of Rs 2,000 notes had been stalled to generate more of the new Rs 500 notes. Unlike the Rs 2,000 notes, which were printed weeks in advance, the RBI had no stockpile of the new Rs 500 notes.The total amount of legal tender released since November 9 amounts to Rs 2,50,115 crore, which is around 18% of the value of the withdrawn notes. Of this, Rs 2,16,617 crore was withdrawn from banks and ATMs.There were expectations in the government that old notes+ worth Rs 3 lakh crore would not return to the banking system. This, it was believed, would result in a fall in the RBI's liabilities and thus translate into windfall gains for the government. However, if the current pace of deposit accretion continues, the value of the old notes coming back would inch up, and the windfall gains may not be realised.Demonetisation leads to highest ever surrender of Maoists in a monthAuthor: Neeraj Chauhan, TNNPublication: The Times of IndiaDate: November 29, 2016URL: policies in left-wing extremism affected states, pressure built up by security forces for past few months and the latest demonetisation decision seem to be making a strong impact in the region, with 564 Maoists and their sympathizers surrendering before the authorities in the last 28 days, the highest number to do so in a month ever.While regular crackdowns by the CRPF and local police forces of Chhattisgarh, Odisha, Andhra Pradesh, Bihar and Madhya Pradesh have been a contributing factor, the demonetisation of old 500 and 1,000 rupee notes has also played a substantial part in the development. Out of 564, officials say that 469 Maoists and their sympathisers have surrendered before the authorities since November 8 alone. More than 70% of the surrenders have happened in Malkangiri district in Odisha, where Andhra Pradesh Greyhounds killed 23 Maoists in an encounter last month.Officials say that if the statistics of surrenders are compared with the previous months and years, such large number of Maoists and their supporters have not given up arms ever in such a short period. Since 2011, till November 15 this year, the total number of Maoist surrender stand at 3,766, according to the home ministry data. In 2016 alone, 1,399 Maoists have surrendered, highest in the last six years.The CRPF officials say that several factors have contributed to the large scale surrenders, including government increasing development activities in the left wing extremism-affected districts and clear message to Maoists and their sympathizers. The latest demonetisation move has thwarted the Maoists as they are not able to launder the old currency stashes to their suppliers with ease, hitting their capacity to procure firearms, ammunition, medicines, commodities of daily use and pay cash to cadres, say officials in local police and CRPF.Home minister Rajnath Singh also hinted on Friday that Maoists are making desperate attempts to survive after the demonetisation. "They are trying to exchange their old notes through local contractors, businessmen and sympathisers," Singh had said in DGs/IGs conference last week.A large number of sympathisers believe that the ideology is not bringing them any benefits, said officials. Director general of CRPF K Durga Prasad told TOI, "Maoists are disturbed. There is no doubt about it that they are running from pillar to post."Digital Dabbawalas: From delivering dabbas to offering click-based servicesAuthor:Publication: The Economic TimesDate: November 29, 2016URL: ’s been more than a decade that the world woke up to the reality that Mumbai’s lunch-dabba system is an act of urban genius.Some called it as the most ingenious food delivery system in the world. The Forbes magazine gave the dabbawalas (lunchbox deliverymen) a Six Sigma performance rating or a 99.99999 percent of precision, which means they make one error in 16 million deliveries! In the last 125 years, there has not been a single instance of a lunchbox that has not been delivered to its destination. Come rain or shine, heavy crowded local trains or Mumbai traffic, the lunch box is picked up from home and delivered. This is the precision of their service – and all this without using any technology.In recent times, with the world and India taking digital leaps, the dabbawala’s too have found the need to embrace technology and offer click-based services.“Most of our staff is semi-literate. We earn around Rs. 10,000 to 12,000 per month and were looking for opportunities to have an additional source of income. Our Prime Minister is working towards Digital India mission, and when we got an opportunity from Anulom Technologies for rental registrations, we too decided to offer digital services,” says Ulhas Muke, President, Mumbai Tiffin Box Suppliers Association.Dabba delivery to digital servicesAround 5,000 dabbawalas travel over 60 to 70 km daily to deliver over 2 lakh lunchboxes across Mumbai, and have earned a reputation for their meticulous operations, integrity and honesty.In October this year, with the launch of , they are now expanding their delivery from just lunch boxes to last-mile delivery of digital services. This is a combined initiative with Anulom Technologies, a government approved rental-agreement registration website.“Today, everyone wants to work with a trusted facilitator for digital services. The first of such services by us has been around online rental agreement registration. Anulom directs our dabbawala to a customer’s doorstep with a laptop and a biometric device where the rental agreement format is shown, thumb impressions are taken with the help of biometric machine and documents collected if needed,” says Jaising Pingle, Treasurer, Mumbai Tiffin Box Suppliers Association, and who is the first trained digital dabbawala.Before launching this service, Anulom handpicked a 15 member team for process and laptop training. Each of these 15 individuals were chosen from different regions in Mumbai and Thane.We were amazed to witness that within two days this group had completely explored most of the laptop features and knew basics like turning it on, logging in and connecting to the net. Post this we held a two day boot camp in the evening for four hours to train them properly, both on the usage of laptops and biometric device working and also around the process of rental registration. We installed an app on their mobile devices. So there is no need to type a single letter. All they need to do is point and click and it is easily understandable. They are exceptionally fast learners,” says Prabodh Navare, CEO, Anulom Technologies.These people initially trained by Anulom have now become the building blocks of the digital movement and are training their fellow dabbawalas. Going ahead, is planning to launch services like making of Aadhaar cards, changing names on documents, marriage registrations or making other government documents.Pay 50% tax on unaccounted deposits, or 85% if caught, says Modi governmentAuthor: ET BureauPublication: The Economic TimesDate: November 29, 2016URL: government is providing yet another opportunity for people with black money to come clean at a total cost of 50% and having a quarter of their unaccounted wealth locked up for four years, warning that they'll be slapped with a penal 85% charge if they don't take advantage of this and get caught subsequently. Income-tax law amendments have been moved to enable the window, which will involve the establishment of the Pradhan Mantri Garib Kalyan Yojana, 2016, and allowing declarants to keep the source of funds deposited in banks from November 10 a secret if they use the option. PM Narendra Modi had announced the demonetisation of Rs 500 and Rs 1,000 notes on November 8 as part of a campaign against black money, counterfeiting, corruption and terror financing. Banks started accepting deposits in old notes from November 10. "Tax department will not ask for the source of funds deposited in banks... if the entire income is declared and 50% taxes paid on it," Revenue Secretary Hasmukh Adhia told reporters on Monday at a briefing. The 50% levy is broken up into 30% tax, a 33% surcharge or cess on that tax and a 10% penalty. The scheme, to be notified after the passage of the Bill in Parliament and Presidential assent, has features almost similar to the recent Income Disclosure Scheme that provided immunity from prosecution as also provided assurance to not reveal identity of depositors. Under the scheme, undisclosed income in the form of both cash and bank deposits can be declared. The move was prompted by a surge in deposits and a perceived ambiguity about applicable taxes."Concerns have been raised that some existing provisions in the income-tax Act could possibly be used for concealing black money," Finance Minister Arun Jaitley said in the statement of objects and reasons for the amendments. "It is, therefore, important that the government amends the Act to plug these loopholes as early as possible to prevent misuse." The 33% surcharge will be called the Pradhan Mantri Garib Kalyan Cess while the 25% deposit will go into the Pradhan Mantri Garib Kalyan Yojana. The money will be used for programmes dealing with irrigation, housing, toilets, infrastructure, primary education, health and livelihood. Rahul Garg, leader-direct tax, PwC, said: "Providing certainty on taxation of deposits in bank accounts post demonetisation is good for voluntary compliance and avoiding litigation." Section 115BBE that deals with taxation and penalty of unexplained credit, investment, cash and other assets is also being made tighter to penalise those who do not come clean. Under the proposed regime, in such cases a flat 60% tax plus a surcharge of 25% on that amount will be levied — making for a total of 75%. But the assessing officer is empowered to add a 10% penalty over and above this in certain situations, taking the total to 85% in such instances. Currently, this Section provides for a flat tax of 30% plus surcharge and cess. For those caught with unaccounted income or assets during search and seizure, existing penalty provisions under Section 271AAB of the income-tax law are proposed to be amended to make them more stringent. In cases where tax evasion is admitted, 60% levy will be charged (30% tax plus 30% penalty). In every other case, the levy will be 90% (30% tax plus 60% penalty). Currently, under this Section, penalty ranges from 10% to 60%.FEARS OF MISUSE OF PENALTY PROVISIONS Tax experts said possible misuse of penalty provisions seems to have prompted the amendments. "There has been much speculation about the abilities of some unscrupulous taxpayers to find a silver lining in the ongoing demonetisation of highdenomination notes to wash black money into white at the standard normal marginal rates of income tax (30% plus surcharges and cess) without attracting any penalties," said Sudhir Kapadia, national tax leader, EY India. "This is now sought to be decisively curbed." General penalty provisions prescribe taxes of 50% for under-reported income and 200% for misreported income. "The concern was that if a taxpayer were to voluntarily declare unaccounted income in the ongoing fiscal year and include such unaccounted income as 'unexplained' income in the tax return for the year, there may not arise any penalties as there would be no question of under-reporting or misreporting," Kapadia said. However, the current general penalty provisions on under-reporting and misreporting will stay on the statute books as these will continue to apply in other situations. The revenue secretary said deterrent provisions were necessary to persuade people to declare their black money. He said the proposed amendment cannot be termed retrospective as the financial year is still on and people have not filed returns. "We have seen that some people were trying to convert black money to black again by using new currency. So we have amended the 75-85% provision," he said. He said search and seizure provisions have been amended to ensure that people don't fear income-tax raids.How long will the coalition of the corrupt stand united against Modi?Author: Minhaz Merchant @minhazmerchantPublication: Dailyo.inDate: November 28, 2016URL: deadlock will eventually be broken by backroom talks in the well-practised Indian art of jugaad.With the exception of the JD(U), the cash-deprived Opposition has come together in what some cruelly call a coalition of the corrupt.Prime Minister Narendra Modi has meanwhile seized the moral high ground in a Them vs. Us binary: you are either corrupt (and oppose demonetisation) or you are clean (and support demonetisation).The message resonates politically. It is as powerful a message as Indira Gandhi's Garibi Hatao slogan in the early-1970s.To avoid losing the long-term political battle, as Mrs Gandhi did in the late-1970s, Modi will now have to win the economic and social argument.First, he will have to quickly - and the timeframe for this is measured in days not weeks - sort out the cash shortage in the unorganised sector where many of the poor work.High denomination notes valued at around Rs 8 lakh crore out of a total corpus of old Rs 500 and Rs. 1,000 notes valued at Rs 15 lakh crore have so far been deposited into the banking system.However, only around Rs 4 lakh crore of new notes have been re-circulated (mostly in unwieldy Rs 2,000 denomination).The resultant cash shortage is causing distress among daily wage labourers, small cash-and-carry retailers and unbanked tribals.Most are stoic. Independent opinion polls show 80 per cent-plus support for Modi's move against black money. The support cuts across age and income demographics.But patience can wear thin. Hence the urgency of printing enough new notes (especially of Rs 500 denomination) to replenish liquidity in the unorganised sector.The Opposition has responded with barely contained fury. Its "bandh" on November 28 disrupted life in cities like Kolkata where Mamata Banerjee's TMC holds sway. It left Mumbai, India's financial capital, unmoved.Notes with benefitsThe economic benefits of demonetisation fall into two categories. First, the value of unclaimed old notes is expected to be nearly Rs 4 lakh crore out of the Rs 15 lakh crore worth of notes rendered illegal tender.This will allow the government to receive a special dividend from the Reserve Bank of India (RBI). The money can be used to recapitalise banks as well as build infrastructure and enhance public investment in education and health.The second economic benefit is the increase in the tax base as a large part of black money turns white. If Finance Minister Arun Jaitley delivers a bold Union Budget on February 1, 2017, the economy could rebound from the April-June 2017 quarter onwards.Armed with a treasury flush with cash, Jaitley can afford deep cuts in personal income tax. This will be politically popular with the middle-class just as the campaign against black money has been popular with the poor.A cut in personal income tax along with the implementation of GST to replace indirect taxes (service, VAT, excise and customs) could drive a consumption-led boom by mid-2017.Economic growth, which in the November 2016-March 2017 period may fall from a pre-demonetisation estimate of 7.70 per cent to around 6.80 per cent, could well spurt to over 8 per cent in 2017-18.This is critical for Modi. If the economy recovers sharply, black transactions reduce, private investment recovers, and consumption through greater digitisation picks up, Modi will be in pole position to win three battles: economic, moral and political.With several state assembly polls looming in 2017-18, and the Lok Sabha election due in 2019, it is a battle the Opposition knows it cannot afford to lose. Hence the coalition of convenience that makes a Mamata Banerjee offer an electoral alliance to a sworn enemy like the CPM.Meanwhile, Parliament remains paralysed. The prime minister will not speak in either House till the debate on demonetisation begins. The Opposition will not begin the debate till he speaks.The deadlock will eventually be broken by backroom talks in the well-practised Indian art of jugaad.Cashless and witless, the Opposition will pray that Modi trips up on executing demonetisation in the next crucial 30 days of December.If he doesn't, they should get used to seven-and-a-half more years of PM Modi.Modi Plunders India’s Cash. Indians Cheer.Author: James CrabtreePublication: Date: November 28, 2016URL: *Democracy%20LabThe prime minister's attack on India’s black market was poorly planned, chaotically implemented — and may turn out to be his biggest political victory yet.Prime Minister Narendra Modi projects a stern, unbending public image. But the strain of leading the most dramatic and disruptive political change introduced in India for a generation seems to be getting even to him.“I know that forces are up against me,” he said, his voice cracking with emotion, in the aftermath of his sudden move on November 8th to junk India’s two largest denomination rupee bills overnight, launching shock therapy for the country’s cash-driven shadow economy. “They may not let me live, they may ruin me,” he added darkly, “because their loot of 70 years is in trouble.”That sounds dramatic, but the scale of Modi’s gamble invites hyperbole. The sudden scrapping of the Rs500 and Rs1000 notes — worth roughly $7 and $15 respectively, and accounting for nearly 90 percent of the value of cash in circulation — has plunged India’s economy into chaos. For two weeks, newspaper front pages have pictured long lines snaking around banks, as rich and poor alike queue up to exchange old notes for new. 80 billion dollars has been deposited so far. The final total will be much higher.Strict limits on cash withdrawals have left hundreds of millions short of funds, and the government has been issuing almost daily clarifications to the replacement process, aiming to help those badly affected, from farmers and hospital patients to brides-to-be, unable to marry for lack of cash to pay wedding bills. Meanwhile, according to economists, the big-time criminals and corrupt businesses who were the ostensible targets of the new policy may be least affected by its fallout.Criticism over haphazard implementation is growing louder. Former Prime Minister Manmohan Singh of the opposition Congress party attacked the move in a rare speech last week, describing it as “a monumental management failure” and “legalized plunder of the common people.”But what’s really remarkable is, despite the chaos, how popular the move has been. Indians are not known for their quiet suffering, often taking to the streets to protest far less sweeping political changes than these. That a measure this intrusive has been met with little more than mild grumbles is unusual, to say the least. Modi trusted his instincts that both the boldness of the move, and perhaps even the pain it introduced, would win him support. Here he has been proved right. India’s anger runs deep over ill-gotten wealth, and the cast of villains who represent it in the public mind: the bribe-taking policeman; the inexplicably wealthy politician; the real estate developer who asks for half the price of a house again in cash.“Psychologically, this is seen as a slap in the face of the all the cronies and the corrupt, which pleases the middle class so much,” explains Rajiv Kumar of the Centre for Policy Research think tank in New Delhi. “For once those who got rich by all the wrongs means have gotten their comeuppance, and people are delighted.”All this speaks to Modi’s finely-tuned populist instincts. After his landslide 2014 election, many analysts hoped the new prime Minister would rejuvenate a struggling economy by pushing structural reforms that were effective but unpopular, such as removing cumbersome labor laws or privatizing sclerotic public sector banks. He proved reluctant to do so, skirting controversial policies in favor of grand symbolic gestures, including a national campaign to sweep up India’s squalid streets.Now, however, he has picked as the defining battle of his premiership a measure of questionable effectiveness but remarkable popularity, especially given the massive inconvenience it is still causing. If that public sentiment holds, Modi’s gutsy (and arguably reckless) move will secure a remarkable political victory.While demonetization came as a shock, the problems of what is widely known India is one of the world’s most cash-dependent nations. as “black money” are only too familiar. India is one of the world’s most cash-dependent nations.India is one of the world’s most cash-dependent nations. Estimates suggest the grey economy accounts for between a fifth and a quarter of gross domestic product. Only a tiny fraction of workers pay income tax. Sectors such as real estate and jewelry retail, not to mention the funding of political parties, rely extensively on illicit cash.Whether Modi’s shock-and-awe effort will clear any of this up is less clear. His backers argue the move will wipe out stockpiles of dirty money, jolting illegal activity back into the formal economy. They claim the difficulties of getting cash will push millions to use digital payments, boosting e-commerce. Further unspecified anti-corruption reforms in future will then stop the same black money problems recurring all over again once new notes are in place.Many economists are doubtful. Serious racketeers and criminals rarely keep large cash holdings, instead parking it in real estate or stashing it in banks abroad. Legitimate traders and small holders — who tend to be strong supporters of Modi — do hold stockpiles, however. “The minor entrepreneur, the shopkeeper, the farmer will be hurt by this,” says Pranjul Bhandari, an economist at HSBC in Mumbai. “And even among the bad guys, the risk is you catch the minnows, but the big fish escape.”Effective or not, the policy is going to force the economy to take a short-run hit. Bhandari thinks output may fall by as much 1 per cent next year. Ambit, a Mumbai-based broker, predicts a more dramatic fall, bringing growth close to zero over the next few quarters. Either way, India risks losing, albeit temporarily, its recently-won position as the world’s fastest growing major economy.“This is by far the most sweeping change in currency policy that has occurred anywhere in the world in decades,” Harvard University’s Larry Summers wrote in a blog post this week. But all that pain, he argued, would deliver little: Corruption will continue, albeit with slightly different arrangements.”“Corruption will continue, albeit with slightly different arrangements.”Corruption will continue, albeit with slightly different arrangements.”Given all this uncertainty, why did Modi do it? India loves a conspiracy theory, and rumors have spread that the prime minister was motivated by narrow electoral calculations. Modi’s Hindu nationalist Bharatiya Janata Party faces a run of vital regional elections over the next six months, including in Uttar Pradesh, the most populous state. All political parties rely on off-the-books money to fund campaigns and pay workers, so the BJP’s campaigns will take a hit. But given its large financial resources, the theory went, it might be better able to absorb the damage than its rivals, giving it an advantage.There is more than a grain of truth to this, but the more important political calculation stems from anxiety over Modi’s previously wishy-washy approach to corruption. Rooting out graft was his signature campaign issue in 2014. A leader of unquestioned personal integrity, he remains seized by the issue. “Did you vote for me to abolish corruption?” he asked rhetorically during his emotional press conference earlier this month. ”If you asked me, should I do it or not?”.Despite that, until now, his record was mixed. The mega scams that besmirched India’s reputation under its previous government have stopped. But Modi has done little to demonstrate that India’s wider plague of routine bribery and endemic rule-bending is being brought under control. Earlier measures, including a black money amnesty, were low profile, and only moderately successful.This created a risk. Rival politicians were unlikely to castigate his government for its failure to introduce disruptive structural reforms, as economists might have hoped. But those same rivals were very likely to attack the BJP for doing too little on black money, as Modi discovered when he was handed a surprise defeat by an anti-corruption party in elections in New Delhi last year. A bold, far-reaching step was needed to ram home his government’s bona fides. Demonetization was perfect.In this, Modi’s approach closely resembled that of his counterpart Chinese President Xi Jinping, whose anti-corruption drive against corrupt officials is widely viewed as questionably effective and politically driven, but is enduringly popular with the public.Whether that support continues in Modi’s case now depends less on whether demonetization actually works, and more on how quickly banks lines shorten and ATMs fill up. If opinion does turn, it will be a serious blow to Modi’s leadership, although not a fatal one. But given the stoic public reaction thus far, it it is more likely that Modi will be rewarded. Finally, India’s public has the Prime Minister they thought they voted for in 2014: a populist strongman taking dramatic measures on corruption. It is clear they like what they see.Nitish Kumar Explains How He Refused Mamata Banerjee On Notes Ban ProtestAuthor: Manish KumarPublication: Date: November 29, 2016URL: Mamata Banerjee phoned Bihar Chief Minister Nitish Kumar about joining her protest against the notes ban in Delhi recently, his response to her was simple. When President Pranab Mukherjee had signed off on Prime Minister Narendra Modi's move, the protest was redundant, he explained to her.This was Mr Kumar's disclosure to a group of legislators in Patna on Tuesday evening. However, they were not members of his party but of the Rashtriya Janata Dal or RJD, headed by Lalu Yadav, who personally invited Mr Kumar to address his group.Mr Kumar's appearance was meant to reassure Lalu's team that despite the Chief Minister's unwavering support to the Prime Minister over demonetisation, he is not about to relinquish his current allies for the BJP, with whom he split acrimoniously in 2013, ending a nearly 20-year-long partnership.Ms Banerjee, who is the chief minister of West Bengal and is demanding the cancellation of demonetisation, arrived on Tuesday evening in Patna. She plans to hold a protest rally there on Wednesday, replicating her demonstration on Tuesday in Lucknow. Ms Banerjee is reportedly irked that unlike Uttar Pradesh Chief Minister Akhilesh Yadav, Mr Kumar did not send a cabinet minister to greet her and has made it clear that no senior leader from his party will join her protest on Wednesday.However, at a meeting on Tuesday evening with Lalu, Ms Banerjee was told that a representative of his party will attend the event. However, sources say that neither of Lalu's sons, who are both ministers in the Bihar government, will join Ms Banerjee.To prove his loyalty to Lalu, Mr Kumar also said at Tuesday evening's meeting that in the future, his legislators will jump to Lalu's defence if he is attacked in the state assembly by the opposition BJP. That is not what happened earlier this week, prompting a phone call of complaint from Lalu to the chief minister.Demonetisation will make India data rich, make it difficult to do 'dishonest things', says Nandan NilekaniAuthor: PTIPublication: Date: November 29, 2016URL: would see a massive activation of digitisation of financial services in the country, although there will be some amount of "short term pain" in the coming weeks, former UIDAI Chairman Nandan Nilekani said.The ex-CEO of Infosys said while the infrastructure has been laid down in the last seven years, the demonetisation drive will accelerate the roll out of digital financial services in India supported by Aadhaar, UPI, USSD and micro ATMs."... what would have taken another 3-6 years to get rolled out, I now believe because of the urgency of the matter, will happen in 3-6 months," Nilekani told NDTV. He added that one would see "massive activation" of digitisation in Indian economy."There will definitely be some amount of short-term pain in the coming weeks. But you will see this acceleration is going to benefit everybody," he said.Nilekani cited the example of feature phone owners, who can transact using USSD channel and said this will bring "everybody into the digital system"."The more important thing is when the economy becomes formal, when everybody's financial transactions are digitised ...India is going to go from data poor to data rich and that will make it more and more difficult for people to do dishonest things or to be outside the system. You will reduce the amount of black money in the system," he said.The contest is onAuthor: EditorialPublication: The Indian ExpressDate: November 30, 2016URL: ’s demonetisation politics signals recognition of opportunity in national Opposition space, her bid to seize it.On Tuesday, Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee was in Lucknow to campaign against the Narendra Modi government’s policy of demonetisation. From there, she heads to Patna, where the ruling Mahagathbandhan allies seem divided over the prime minister’s initiative against black money. Banerjee was the first politician to take opposition to demonetisation to the streets, terming it an assault on workers and traders. Her march to Rashtrapati Bhawan and sharing of the political stage in Delhi with AAP chief and Delhi Chief Minister Arvind Kejriwal were attempts to emerge as the face of the anti-NDA protests. By all accounts, with the Congress reduced to 44 MPs in Lok Sabha and looking far from a revival, Banerjee, who has 34 MPs and consecutive assembly poll wins in West Bengal, senses a vacancy in the Opposition nationally — and an opportunity.Banerjee’s move, seen alongside the decision of Nitish Kumar and Naveen Patnaik — like her, chief ministers leading non-BJP governments in states — to support the Centre’s demonetisation policy, speaks of the ongoing ferment in the space of the national opposition. At the same time, it also mirrors a longer, larger trend of the federalisation of national politics. In making her move towards the Centre to take on the Modi government in this moment, Banerjee may even be said to be taking a cue from Modi’s own spectacular trajectory — from chief ministership of the state to prime ministership of the country. And then, ever since the collapse of Congress dominance at the Centre in the late ‘80s and early ‘90s, and the inauguration of an era of coalition governments in which regional parties and leaders played a key role, the distance between national and regional politics has seemed considerably shortened.Of course, the present conjuncture is different — the ruling party, the BJP, is armed with a decisive mandate, the first in nearly three decades, and it is the Opposition space that seems splintered and fragmented, with no party emerging as its main pole. In fact, demonetisation appears to have further divided the Opposition, with parties breaking ranks and strategising independently. The competition is on, and the curiosity in days to come will not just be about the consequences and outcome of the government’s daring move against black money. It will also be about who makes the more persuasive and more successful bid for leadership of the Opposition space.Nitish & NaveenAuthor: EditorialPublication: The Indian ExpressDate: November 29, 2016URL: stepping out of the Opposition box to support demonetisation is a welcome reminder of political complexity.Parties of the Opposition joined together to observe Monday as the Jan Aakrosh Diwas, a day of protests against the Narendra Modi government’s policy of demonetisation, but the cracks showed through. The Congress, for instance, participated in the protests but did not approve of them taking the form of a bandh, even as the Left had called for a shutdown. Most conspicuously, however, two non-NDA chief ministers not only stayed away from the Opposition’s agitation, but also came out openly in support of the government’s campaign against black money. Bihar Chief Minister Nitish Kumar, who has enjoyed visibly strained relations with the BJP ever since his party walked out of the JD(U)-BJP alliance in Bihar, who has lost no occasion to reiterate his ideological and political differences with the Modi-led BJP ever since, and who has made a bid to project himself as the rallying point for a wider, national-level unity of non-BJP parties, has supported the Modi government’s ban on Rs 500 and Rs 1,000 notes. So has Odisha Chief Minister Naveen Patnaik, whose party was also once allied with the BJP and who most recently raged against the BJP-led Centre because of its alleged bias towards Chhattisgarh and against Odisha on the Mahanadi water dispute. That Patnaik and Kumar have broken ranks with the Opposition now to support a decision of a regime they have opposed prominently brings on an interesting political moment.It could be that their support on demonetisation signals an impending political realignment, that it bodes a rethink on the part of Kumar and Patnaik of the wisdom of estrangement from the party that rules the Centre. It could be that both chief ministers have made the strategic calculation that their opposition to the BJP on this particular policy could end up hurting the anti-corruption credentials they have assiduously courted so far. Or it could be what Kumar and Patnaik say it is: A principled stand. Whatever be the reason, their stepping out of the Opposition box in this instance is a useful reminder of the complexity of India’s political matrix and a note of caution against the tendency to take a too-tidy view of its politics. In a diverse and federal system, the political calculus varies from player to player. And then, for every player, it changes with time, locale and level of politics and government among other variables.The Modi government has often been accused, and deservedly so, of drawing blunt lines and imposing a repressive with-us-against-us division on the political field. By ascribing motives to Kumar and Patnaik’s support to the BJP on demonetisation, or by treating it as scandalous, the Opposition would be doing to itself what it often accuses the government of doing to others.Going aheadAuthor: EditorialPublication: The Indian ExpressDate: November 29, 2016URL: for government: To earn back trust, not brush warnings under black carpet.Former Prime Minister Manmohan Singh reckons that India’s GDP would take at least a two percentage point hit from the NDA government’s decision to scrap high-value notes. He isn’t the only one to sound a warning. A host of rating agencies, brokerages, economists and analysts have cut their growth forecasts for 2016-17, with the decline ranging anywhere from 100 to 350 basis points. At the end of the day, these are matters of detail. What is not in doubt is that the Indian economy is going to register a dip in growth —at least over the current and next quarters — from the cash crunch and it will take some time for liquidity to be restored in the system. And this comes when two of the economy’s growth engines — private investment and exports — were already sputtering. Demonetisation could take the shine off private consumption, the sole bright spark until now. The fact that there are fiscal constraints in the way of revving up the fourth engine — government spending — further increases the challenge for growth returning in the immediate term.Yet, if handled well, the strain may be short-lived. In the last few years, activity in the informal sector or the “shadow economy” — which is estimated to be as high as one-third of India’s formal economy — has helped keep the growth engine humming. It is this sector that is going to be hit the maximum by demonetisation, as the firms in this case deal largely in cash which also helps keep their transactions outside the tax net. With demonetisation and implementation of the goods and services tax, many of them may go out of business. That opens up two possibilities. The first is that firms in the informal sector will choose to function by going increasingly cashless and bringing most of their transactions on board. The potential benefits of such sweeping financial inclusion far outweigh the short-term pain. Alternatively, and this is where the government needs to do a lot more, there will be those who will wind up and cede market share to organised players. Either way, the economy gains as the tax base expands. Right now, we have a very perverse system of a limited number of people and firms shouldering most of the burden of taxes. It results in high tax rates, which, in turn, further encourages evasion and parallel economic activity.Manmohan Singh is right when he points out that the restrictions placed on withdrawal of cash by people from their own bank accounts are unprecedented in any country. Indeed, the way the present demonetisation exercise has been implemented, the way there are announcements and amendments day by day, is a textbook example of a government not having done its homework. As the next phase begins, the government needs to earn that trust. The onus for proving that this was a sacrifice worth it — in terms of giving a decisive push towards a formalised, less cash-oriented and more tax-compliant economy — lies with it. It has its task cut out.In blow to Opposition, Lalu now says he backs note banAuthor: Sanjay Ojha, TNNPublication: The Times of IndiaDate: November 30, 2016URL: chief Lalu Prasad left the anti-demonetisation camp on Tuesday, telling legislators that he only opposed the way the decision was implemented and not the rationale behind it.In his support for the move, Lalu has echoed Bihar CM and alliance partner JD(U)'s chief Nitish Kumar, who has been a votary of the Centre's decision since the beginning. JD(U) and RJD are partners in Bihar's grand alliance government along with Congress.Nitish had visited Lalu at his residence on Tuesday following a war of words between the ruling and Opposition camps in the state legislature earlier in the day. Lalu told his party's legislators at a meeting, and in Nitish's presence, that he supported the note ban but was against its "poor implementation by the Centre". The meeting between the two leaders lasted almost an hour.Talking to TOI after the meeting, RJD MLA Anwar Alam said both Lalu and Nitish spoke in favour of the demonetisation exercise. "Laluji supported demonetisation but was against its poor implementation and the hardship faced by the common man," he said. Alam clarified that Lalu had called up the CM and asked if he would attend the meeting and talk to RJD legislators on various issues."Nitishji accepted his request and attended the meeting," Alam said, adding that the CM patiently heard out the party MLAs and assured them that there was no rift in the Mahagathbandhan. "The CM also informed the legislators that he would soon call a meeting of all ministers on the different issues raised during the meeting," Alam added. He did not reveal what other issues were discussed.Banned notes worth Rs 8.15 crore deposited by DTC: Inquiry reportAuthor: PTIPublication: The Times of IndiaDate: November 29, 2016URL: notes worth Rs 8.15 crore were deposited in banks by Delhi Transport Corporation (DTC) officials between November 8 and 20, an inquiry panel has said in its preliminary report, prompting the Delhi government to refer the matter to ACB for probe.Transport minister Satyendar Jain said some senior DTC officials may be involved in the matter, indicating that either they deposited their "bribe money" in DTC's bank accounts or they did this for earning "commission".On November 19, Jain had ordered the DTC's CMD to conduct a detailed inquiry into allegations that some officers in the DTC are interchanging notes of Rs 500 and Rs 1000 against the smaller-value notes collected from the passengers as fare."The CMD has submitted his preliminary report. It shows that from November 8 to 20, Rs 8,14,85,500 was deposited in banks in the form of demonetised notes. 33,647 notes in denomination of Rs 1000 and 95,677 notes in denomination of Rs 500 were deposited."I have asked the Transport Commissioner to refer the matter to the Anti-Corruption Branch of the Delhi government for further probe and suspend the officials who are suspected to be involved in the matter, immediately," Jain told reporters here.The minister said he was made aware of the issue in a public hearing on November 19.Scrapped Rs 500 and 1,000 notes were deposited by DTC officials in banks despite the state bus agency issuing an order on November 9, asking the conductors not to accept demonetised notes.Jain sought to know how high-value currency notes were deposited in banks by DTC officials if bus conductors did not accept them from passengers."The probe showed that most of the cash deposited was in the form demonetised notes. For instance, Rs 11.65 lakh was deposited in a bank by a bus depot staff of which, surprisingly, 98 per cent was in the form of Rs 500 and Rs 1,000 notes."At depots of West Zone, 16,593 notes of Rs 1,000 and 43,636 notes of Rs 500 were deposited in banks," he said.I-T Act amendments upset calculations of cash hoardersAuthor: Prabhakar Sinha & Pradeep ThakurPublication: The Times of India, TNNDate: November 30, 2016URL: was unusual rush at income tax offices in the capital on Tuesday, soon after a bill was passed by Lok Sabha clearing amendments to the Income Tax (I-T) Act+ which proposed enhanced tax liability of 82.5% of the total unaccounted amount.The anxiety is easy to understand. For, the proposed amendments shut out one attractive option that holders of undeclared income had — of declaring the cash with them as income for the year and get away by paying 35.5% of tax. That most of the declarations under the Income Disclosure Scheme+ (IDS), which closed in September, were about assets rather than cash only enhanced the appeal of the option which will be extinguished when the amendments enter the statute book. Not surprisingly, the last few days have seen many turning up at I-T offices across the country to persuade tax officials to let their hitherto undeclared income be included among their declaration under the IDS.The tax department, it is learnt, refused to entertain such requests. The amendments passed on Tuesday will shut out the room for the exercise of discretion. According to a chartered accountant, one among the several bookkeepers who had been queuing up at the I-T office in the wake of the demonetisation decision on November 8, people did not declare their cash under IDS because they did not suspect that the government could change the I-T Act immediately after closure of the IDS.As cash is a movable asset, holders have the leeway to declare the undeclared amount as windfall income in the current financial year, said chartered accountant Vivek Jain when approached by TOI to explain why the amendments might not be welcomed by those with undeclared cash. Disclosure of unaccounted income, under Section 115BBE of the unamended I-T Act, as sudden surge income during the year would have invited a flat tax rate of 30%. With cess and surcharge, the total liability would have come to a maximum of 35.54% of the total disclosed amount.In fact, Jain said many hoarders of cash, clueless about PM Modi's November 8 bombshell, had planned to pay advance tax in December on their hoard. Even after being forced by demonetisation to bring out their cash, they had hoped to get away by paying 35.5%. The amendments have put paid to the plan. For, the changes in Section 115BBE of I-T Act for such disclosure of cash would now invite a total tax of 82.5% — a flat tax of 60% in addition to surcharge of 25% of tax i.e. 15% of such income. So, the total tax on such cash disclosure would be 75%.In addition, the new amendment, according to the press statement issued by the government, provides for a penalty of 10% of this 75% tax. Thus, the total tax outgo would be 82.5%. As the window of Section 115BBE has now become hugely punishing, the only option available to hoarders of black money is to opt for the PM's 'Garib Kalyan Yojana', under which a flat 49.9% tax is paid upfront and 25% of all such deposits go into the PM's welfare fund for the poor. In case the hoarders try to under-report or misreport, their tax liability will go up to 50.54% and 95.54% respectively, if caught in assessment.The penalty on uncovered income also increased to upward of 60.90% up to 95.54% from 40.9% earlier.6 Chief Ministers To Assist Centre After Notes Ban, But Not Nitish KumarAuthor: Manish KumarPublication: Date: November 30, 2016URL: Naidu will head a team of 13 Chief Ministers assigned to assess the impact of the centre's shock move to ban 500 and 1,000-rupee notes. The committee will look at how to aggressively introduce and promote digital payments, particularly in rural areas.Mr Naidu heads Andhra Pradesh and his party is a member of Prime Minister Narendra Modi's coalition government. BJP leader and Maharashtra Chief Minister Devendra Fadnavis is on the committee. Opposition leaders include Chief Minister Naveen Patnaik of Odisha and V Narayanasamy from Puducherry.Missing from the team is Bihar Chief Minister Nitish Kumar, who was phoned by Finance Minister Arun Jaitley to serve on the committee. Mr Kumar is the only prominent opposition leader who has enthusiastically backed the PM's notes ban, which has irked his allies. Sources said joining the committee might have forged too sharp a fault-line in his coalition government.On November 8, PM Modi announced that within hours, high-denomination notes would be illegal for transaction and must be deposited in banks by the end of the year. Nearly 90 billion dollars have been turned in already. But the replacement of the banned notes with new bills has been inadequate, resulting in gridlocked bans that run out of cash well before the day is over. Nearly half the country's ATMs are still being fitted with the larger trays needed to stock the new 500 and 2,000-rupee notes. Rural India, where most of the population has no access to formal banking, has been reeling from a cash crunch.Even so, there appears to be wide backing for the PM's intent in unearthing and punishing black money holders.Included on the new committee, which has 13 members in all, are Amitabh Kant, the CEO of the PM's policy commission or Niti Aayog, and Nandan Nilekani, who led the massive Aadhar project which assigned a unique ID to each Indian linked to biometrics.Yesterday, Mr Nilekani, who ran as a Congress candidate for parliament in 2014 and was defeated, praised PM Modi's reform to NDTV, saying "the note ban shock is good for India."On Notes Ban, Firm Warning From West Bengal To Centre: GST Now At RiskAuthor: Barkha DuttPublication: Date: November 30, 2016URL: biggest tax reform in decades - the national Goods and Services Tax or GST - has been thoroughly jeopardized by the centre's abrupt demonetization drive, said Amit Mitra today. As the Finance Minister of West Bengal, Mr Mitra is on the GST Council, which is drafting the rate and scope of the tax. He told NDTV that the April rollout of the tax seems unfeasible now and he will talk to other Finance Ministers about revisiting support for a reform seen as crucial for economic growth."After demonetization, GST has become a double whammy for states," said Mr Mitra to NDTV. The GST replaces a patchwork of central and state tariffs, creating a single market across the country. States are to be compensated for the next five years by the centre for the money they will lose from their taxes being removed.However, Mr Mitra said, the abrupt banning on November 8 of 500 and 1,000-rupee notes has already created an economic slowdown, so states are losing more money and sooner than planned."The government needs to redo its arithmetic," he said, suggesting that the government's April deadline for introducing GST now seems doubtful. He said the centre "should do GST at a time when it's feasible," adding, "I don't see that at this time, as a student of economics."Mr Mitra's party boss, Mamata Banerjee, has demanded the rollback of the notes ban, which the government has flatly ruled out. Mr Mitra served earlier as the head of a special committee that fleshed out the contours of the GST. Now, the details of the tax are being worked out by the GST Council which brings together Finance Minister Arun Jaitley with his counterparts from states. It has resolved some key issues on how the sales tax would work and has approved draft rules for its collection.Economists including former Prime Minister Manmohan Singh have said that economic growth is likely to shrink by at least 2 per cent on account of the notes ban.Trashing the notes ban as a "tectonic" hit, Mr Mitra said, "I'm deeply concerned about timing of the GST. People are talking about a recession. A 2 per cent fall in GDP is serious, (so) can GST happen?" He said he will reach out to Finance Ministers of other states to collate concerns about how their revenue is being affected.The GST would do away with levies charged when goods cross state lines, a boon for manufacturers and transporters. The Finance Ministry has proposed four tax slabs, with the highest at 28 per cent for about 20-25 per cent of taxable items. Other slabs included 12 per cent for food and fast-moving consumer goods (FMCG), and 6 per cent for precious metals like gold and for essential items.To meet its April deadline, the government has been keen on parliament clearing key GST laws in this session which would formalize the tax rate and divide tax assessment powers between the centre and states.A BIG SALUTE FOR A VIRTUOUS INDIAMohanlal (An actor from Kerala)(English translation of a blog in Malayalee)Right now, I am in a location namely Suratgarh which is over 500 kms from Jaipur. I am here to play a role in a new film directed by Major Ravi. Shooting is progressing in a place which is more or less like a desert. Villages are spread sparingly; Indian border can be seen at a distance. Sights and experiences entirely dissimilar from the serene greenery and contentment of Kerala. We get the feel of the real pulse of India when we live in these villages. I came across with the news about the demonetisation sitting in this backdrop. I listened to the speech made by the Prime Minister at that night. In fact, that speech and the events unfolded later were a genuine surgical strike. I believe that the speech bore imprints of a much closer study on India. He made the Proud Indian step forward before everyone, although he is poor. The Prime Minister quoted example of a poor auto driver who goes on in search of the unknown passenger who left money or jewellery in his vehicle – his truthfulness and his tolerance. Crores of such people! Similarly, a parallel financial world too exist here which erupts with its black money and counterfeit notes. It parades before the poor Indian mocking his integrity and laughing at his face. I listened to our Prime Minister who said his surgical strike was to bring this to an end and against the terrorism that make assaults under the cover of corruption. I never worship a certain person; it is not about individuals but I worship ideas – sincere and compassionate ideas; ideas that do have a face of commitment. I view this decision too in that same class. Beyond all sudden inconveniences, I understand that this as with a better goal. Please do not take this as an opinion of a financial expert. This is just a perception of an ordinary individual without any pre-conceived notions. The principle ‘End justifies the means” helped me to arrive at decision such as this. Corruption is more than an individual’s crime in our country; it is the decay of our system. When it is inescapable to pay bribe to get things done even in a village office or panchayat office, a major chunk of people just opt for that way. Knowingly or unknowingly, they become a part of that system; only a few brave hearts overcome the system. It is quite often we see that they are alienated in our society. In many instances, they end up mocked. Such state of affairs should be rooted out. Therefore, I welcome this move forgetting the troubles of this means. I stand closer to that as much as I can. Criticism from different corners points out that this decision caused inconvenience to the general public in many ways. Long queues are formed in ATMs and banks; people get exhausted standing in queues. This is done not without considering the great deal of inconveniences that would follow such a decision. I can understand the hardship of standing in a long queue. My take on this is that it is alright try to stand in a queue for some time for a good cause as we spend time in queues without complaining in front of beverage shops, film theatres and various religious places of worship. When I write this, I hear people raising the counter question, “What you know about the hardship of standing in queues?” Whenever an occasion demands, I stand in queues for various purposes whether it is in Kerala, outside Kerala or in foreign countries. Like all strata in the society, demonetisation has affected us too as we have travelled far away from Kerala to shoot the film. It will reflect in the film industry sector which runs on huge budgets. But we simply live with that. We are striving to overcome it with a combined effort. This financial reform will badly impact many sectors individually associated with me. I personally endure it that too. As far as I am concerned, all of these are not only in the capacity of a citizen who stands for the good cause of the country but also as an individual who is able to think sensibly.Life is not that one passes through at one same pace, rhythm and colours. Sometimes it may slow down and its glittering colours may fade away. Yes, it is very difficult to encounter such situations. However, if it is for anything that we love, such hardships will not seem to be troubles. In such instances, even distress will be felt sweet. As I am recognizing that this demonetisation is for a better and truthful India, I salute this move sitting in the desert in this Indian border. “Jai Hind”With all love,MohanlalTime is not right for GST rollout: Amit MitraAuthor: Remya Nair, Nidheesh M.K.Publication: Date: December 1, 2016URL: will be a double whammy after demonetisation, says West Bengal finance minister Amit MitraThere is a question mark over the rollout of the goods and services tax (GST) from 1 April after West Bengal finance minister Amit Mitra said on Wednesday the timing is not right for its implementation, given the impact on state finances because of the partial demonetisation. Coming against the backdrop of vehement opposition by many states to demonetisation, this may be seen as a kind of political payback.Pointing out that the government’s decision to demonetise high-value banknotes has already impacted state finances, Mitra said India’s federal structure may not be prepared for a ‘double whammy’ as implementation of GST could further hurt state finances. “We must do GST but do it at a time when it is feasible, successful, when states’ revenues do not decline significantly, Centre is able to compensate the states and federal polity of India is preserved. I do not see that at this time,” Mitra, who is also chairman of the empowered committee of state finance ministers, said in an interview to television channel NDTV. “We expected a huge destabilization of the fiscal architecture of the country with GST. State taxes will fall significantly, and that is why we sought that the centre should compensate us for five years,” Mitra said. “We all supported GST under the premise that this would be the only destabilization factor. We did not know that there will be a much bigger destabilization in the form of demonetisation that will be let loose on the country.”Mitra pointed out that states are reporting a huge fall in revenues as demonetisation hits tax collections from sectors like hotels, transportation and small manufacturers.He said he will take up this issue with other state finance ministers.Mitra’s comments come ahead of the crucial GST council meeting on 2 and 3 December that is scheduled to debate the draft GST laws and the bill on compensation.The council’s nod to these bills will be crucial for the centre to table them in the winter session of Parliament. “There is deep concern that GST will not come to the Parliament in a democratic manner. If it comes, it will come as a money bill... In every sphere, democratic spirit is being violated by the Union government,” Mitra said.Mitra also found support in Kerala finance minister Thomas Isaac.When asked whether he agrees with the argument that after demonetisation it may not be the right time for implementation of GST, Isaac said, “Yes. It has now opened up a whole lot of issues. The state’s revenues are suffering. I don’t want to be seen as opposing GST but there is a lot of merit in what he said. We will take a common stand through consideration.”Prime Minister Narendra Modi cancelled the legal tender of the old Rs500 and Rs1,000 notes with effect from 9 November. The government’s decision has been strongly opposed by many opposition parties, including Mitra’s Trinamool Congress, the Congress party and the Communist parties.RBI hikes cash supply by 4 times, banks still cash-starvedAuthor: Surojit Gupta, Mayur Shetty & Rachel Chitra, TNNPublication: The Times of IndiaDate: December 1, 2016URL: hikes cash supply by 4 times, banks still cash-starvedWith the cash crunch at bank branches expected to persist on Thursday, the government has moved to further scale up the printing of Rs 500 notes, hoping that the new stock of the elusive currency will ease the situation in the next few days. Banks across the country continued to face cash shortages and most of them ran out of money early in the morning on Wednesday.Private banks had a tough time dealing with cash shortage and industry data showed the supply was sharply reduced. Sources said the four currency printing presses, two owned by RBI at Mysuru and Salboni, and two government-owned ones at Nashik and Devas, which were operating two shifts, have now started working three shifts. The focus now is on augmenting the supply of Rs 500 notes, the sources said.Sources acknowledged that cash remained scarce on Wednesday leading to return of long queues and dry ATMs, but said the problem will go. The effort over the last couple of days had been to stock the state-run banks with cash where government employees have accounts and salary is paid on the 1st or 2nd of the month. Besides, there is a huge number of private companies with accounts with state-run banks."Supply to other banks will definitely improve. We are air-lifting 500-rupee notes. There will be some pressure initially but in the next few days it will ease," said a government source. With the RBI increasing supply of cash to nearly four times of what banks have been receiving in the last week, the position in bank branches and ATMs of large lenders is expected to improve substantially on Thursday. Banks will be using the money to make available funds in centres where they have large number of salary accounts.Private banks have been making arrangements to distribute funds in companies which have a salary account with them through mobile devices. "For several years now, bulk of salary withdrawals are happening through ATMs. To take care of salary demand, we have filled our ATMs with Rs 2,000 notes," said an official with a public sector bank.Many bank branches wore a deserted look on Wednesday as they ran out of cash. Branches of smaller banks did not receive any cash while larger banks with currency chests got a fourth of their requirement. In Mumbai, several branches were functioning with half shutters down to send a message that they were out of cash."More than 90% of those visiting branches are for cash withdrawal. Almost all personal loan activity has come to a standstill," said a private bank official. A leading private bank received only Rs 5 crore for Delhi on Tuesday out of its requirement of about Rs 125 crore. The situation was similar for other banks as cash shortage persisted. But by Wednesday evening, fresh supplies arrived but not enough to service those who had thronged the branches.Sources said there were reports that cash at private banks was being rationed to "service their big clients". At least two private sector banks are under the scanner, with finance ministry sources saying that one of them is clearly in the breach. This also worsened the cash shortage.Banks moved to ease the shortage with HDFC Bank signing a deal with Federation of Retail Traders' Welfare Association to provide cash at point of sale machines to cardholders. Following this, some marquee outlets will be allowing customers to swipe cards for cash."We have deployed PoS machines at the stores to help customers withdraw cash using their debit cards. This initiative will help the masses easily withdraw cash and reduce inconvenience," said Parag Rao, head, card payment products, merchant acquiring services and marketing, HDFC Bank.Over 11 Lakh Crore Is Already Back In Banks, Possibly Exceeding Government ExpectationAuthor: Swarajya StaffPublication: Date: December 1, 2016URL: was expecting Rs 10 lakh crore to come back into the banking system, as per the Attorney General’s submission to the Supreme Court, after the withdrawal of higher value currency notes.Turning old Rs 500 and Rs 1,000 notes illegal tender from 9 November onwards, the government estimated a clean up of Rs 14 lakh crore.However, the money deposited in the banks, as of 30 November, has already exceeded the Rs 10 lakh crore figure, as reported by Sapna Das for CNBC-TV18.The news channel tweeted:---------------------------CNBC-TV18 @CNBCTV18LiveSources say over Rs 11 lakh crore back in banking system already, money deposited in banks till November 30 pic.rtZoBAt4AUDecember 1, 2016---------------------------The last day for depositing illegal currency in banks is 30 December. The government will be closely watching the deposit registers to see how much more money comes into the system.The dire consequences of India’s demonetisation initiativeAuthor:Publication: The EconomistDate: December 3, 2016URL: 86% by value of the cash in circulation in India was a bad idea, badly executedSUPPOSE that one day the government of a large and fast-growing economy became convinced that its highest priority was to purge the country of black-economy millionaires hoarding piles of illicit cash. Seeking popular approval, it sent the printing presses into overdrive, hoping to inflate away the value of these secret piles of wealth. It worked: rising prices struck a blow against the undeserving rich, and by egging on others to deposit their money in banks (where it could at least earn interest), the shadow economy shrank. The government could plough the newly created money into tax breaks and public-works schemes.Critics, rightly, would stand aghast. Inflation would affect everyone who held cash, law-abiding or not. Much of the wealth of those enriched by the black economy would be insulated, because lots of their lucre is held not in cash but in property, gold or jewellery. Such heavy-handed measures could undermine the credibility of important government institutions. Fear that they might be used again in future could weaken confidence in the currency as a store of value—paving the way for some broader institutional failure, like hyperinflation. Long-run trust in the judgment of the state might be threatened.On November 8th India’s prime minister, Narendra Modi, announced a course of action just as radical as that described above, if the converse of it. He declared that all 500- and 1,000-rupee notes—making up 86% of the cash in circulation in India—could no longer be used in shops. More financially mature economies than India would struggle to cope with such a scheme, but this one floundered at once. Though Indians have until the end of the year to swap their defunct bills, the roll-out of new ones has been bungled. A broad cash crunch and broken supply chains threaten a sharp economic slowdown—albeit one that will abate, at least in part, as the cash squeeze is alleviated. India’s “demonetisation” is a cautionary tale of the reckless misuse of one of the most potent of policy tools: control over an economy’s money.Unlike most currency reforms, designed to boost confidence in the currency, Mr Modi’s motivation is different. The primary aim of demonetisation is reasonable enough: the government hopes to improve the functioning of the economy and boost its tax take by cracking down on the shadow economy. The vast majority of transactions in India take place in cash; many escape book-keepers’ notice. Economists reckon that India’s black economy accounts for at least 20% of GDP. Such off-the-books activity shields fortunes from taxation and allows corruption to flourish. Past efforts to attract black money into the light—using tax amnesties, for example—have had little effect.Demonetisation forces the issue. Indians can swap their hoards of useless bills for useful ones, but those that cannot present paperwork accounting for their cash piles will receive unwanted attention, and tax bills, from the government. Demonetisation also increases use of electronic and bank-based payment systems, which will make record-keeping easier and more common, allowing government better to track and tax the proceeds.Yet the government also reckons it can profit from bills that are not turned in. In economic textbooks, money is considered a liability of the central bank—a debt. In most modern economies that debt sits on its balance-sheet, and is offset, on the asset side, by holdings of securities like government bonds. The old and unreturned notes, if they are recognised as cancelled liabilities, would therefore create a huge positive asset position on the central bank’s balance-sheet. The Reserve Bank of India could, if it chose, create new currency liabilities (that is, print money) and transfer that money to the government to spend. Some economists hope the money will be recycled back into the economy through a fiscal stimulus, which might help soothe some of the pain caused by demonetisation.The status of this would-be windfall is uncertain. If the government allows Indians to redeem dead notes for live ones indefinitely, it is not clear when or if the RBI might recognise cancelled liabilities on its balance-sheet. So far, Indians are depositing their money in the banking system with impressive haste. Of the 14trn rupees ($207bn) invalidated by demonetisation, an estimated 8.5trn has already been deposited. Still, as much as 3trn rupees could remain in the wild as a potential government windfall, reckons a recent analysis by Credit Suisse, a bank.The other rupee dropsHowever clever the plan looked on paper, it is both extraordinarily blunt and risky. Demonetisation will probably make only limited strides in shrinking the black economy while affecting all of India’s 1.3bn citizens, the poorest most of all.In much of the Indian economy, and especially outside big cities, where cash transactions are most common and financial infrastructure least developed, the sudden invalidation of a vast amount of outstanding currency represents a significant monetary shock. Not all of India’s shadow economy—which provides real employment and income, if not real tax revenues—can migrate quickly and easily above board. Whatever cannot easily be shifted represents a potential loss of economic activity, and a drag on broader Indian economic growth. Similarly, if a cash crunch forces small firms without access to credit to shut down, the eventual alleviation of the cash shortage might not lead to an immediate and complete revival of economic activity.Managing an economy’s money is among the most important tasks of the government. Clumsy use of monetary instruments comes with high risk. John Maynard Keynes, an economist, was echoing Lenin when he wrote in 1919: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.” Trust is fragile, and precious.Modi’s attempt to crush the black economy is hurting the poorAuthor:Publication: The EconomistDate: December 3, 2016 URL: cash, Indians are strugglingFOR the Nuxalbari Estate in the lush hills of India’s north-east, relief came in the nick of time. With winter pruning of its tea plantations at hand, 600 workers were threatening to strike. They could scarcely be blamed: the estate had not paid them in mid-November and now owed another fortnight’s wages. This was not for lack of funds. Nuxalbari’s account showed a healthy balance. But day after day its bank repeated the same refrain: yes, the government says it has a plan to help tea estates, but our local branch has no rupees. At his wits’ end, the estate manager marched into the branch, along with bosses of trade unions and a tea planters’ group, even as Nuxalbari’s owners barraged the bank’s headquarters with pleas. The bank at last relented, dispatching a courier weighted with sacks of cash from its vault on a night flight from Kolkata. The workers got their money in the morning.Nuxalbari is lucky. Its owners enjoy sound finances and influence. As India enters its fourth week since Narendra Modi, the prime minister, abruptly voided 86% of the country’s paper currency, many of its 1.3bn people have had no such luck. The Reserve Bank of India (RBI), the central bank, has been unable to print money anywhere near fast enough to replace the $207bn in 500- and 1,000-rupee notes that were outlawed overnight on November 8th. Unless India’s four existing money presses can be speeded up, or bills quickly imported, experts reckon it could take five or six months before the money removed from circulation is fully replaced.According to J.P. Morgan, an investment bank, Indians were making do at the end of November with a little more than a quarter of the cash that had been in circulation at the beginning of the month—and this in a country where cash represented 98% of all transactions by volume and 68% by value. The RBI has in effect been forced to ration new cash, most in the form of 2,000-rupee notes that are, owing to the lack of 1,000s and 500s, exceedingly difficult to break for change.In such a vast country, the impact has naturally been variable. Employees of the finance ministry in Delhi, the capital, received a plump advance on their November salaries in crisp new bills, whereas the state governments of Kerala in the south and Bengal in the east say they have only a small fraction of the cash needed to pay bureaucrats’ wages. Cheques won’t do because banks do not have enough money either: reports in the Indian press reveal that whereas banks in the centre of Mumbai, the country’s financial capital, are getting as much as three-quarters of the cash they need to meet demand, branches in the city’s suburbs are getting less than half. Scroll, an online news site, reports that for one country branch in Bihar, a poor northern state, the ratio is more like a fifth.Such was the case with Nuxalbari’s local branch; it could meet some needs but not those of big planters. “Thanks to this so-called business-friendly government we are being made beggars for our own money,” storms one of the estate’s owners. “I feel like I’m in the middle of some Soviet-era nightmare.”The parched branches of big banks are still fortunate. For unexplained reasons the RBI has supplied almost no new cash at all to India’s hundreds of smaller rural co-operative banks or to its 93,000 agricultural credit unions, so keeping millions of farmers from deposits that total some $46bn. It has also banned these institutions from competing with “pukkah” banks in exchanging old bills for new. With no cash flowing, farmers cannot even seek help from informal networks that in normal times account for more credit in rural areas than formal institutions. And although India’s 641,000 villages house two-thirds of its people, they contain fewer than a fifth of its ATMs. These are being slowly modified to supply the new notes, which unhelpfully are smaller than old ones; for now most stand idle.Starved of cash, India’s rural economy is seizing up. A study by two economists at Delhi’s Indira Gandhi Institute of Development Research found that in the second week of the drought, deliveries of rice to rural wholesale markets were 61% below prior levels. Soyabeans were 77% down and maize 29%. Prices have also collapsed. In Bihar, Scroll’s reporters found desperate farmers selling cauliflower for 1 rupee ($0.01) a kilo, a twelfth of the prior price.It is not only farm incomes that are pinched. An investigation by Business Standard, a financial daily, found that virtually none of the estimated 8m piece workers who hand-roll bidis, a kind of cigarette, has been paid since the cash ban. Another Indian daily, the Hindu, reports that more than half of the 600-odd ceramics factories in the town of Morbi, a centre of the tile industry in the state of Gujarat, with a combined output worth some $3.5bn a year, have temporarily closed because they cannot pay workers. In Agra, the hub of Indian shoemaking, some firms are paying workers with supermarket coupons to keep them on the job.India’s wealthy few have servants to take their place in the still dismally long queues snaking outside banks, but the pain reaches even to the top. A dentist in a posh part of Delhi is shocked by a 70% fall in trade since the cash ban. “All my patients can pay with plastic so I assumed I was safe, but I guess people are just being careful about spending in general.” This does seem to be the case. A brokerage that surveys consumer-goods firms says November sales have fallen by 20-30% across the board. Property sales, which traditionally are made wholly or partly in cash, have plummeted even more.Small wonder that Fitch, a ratings agency, on November 29th cut its forecast for India’s GDP growth for the year to March 2017 from 7.4% to 6.9%. That is in line with most financial institutions’ trimmed estimates, although some economists think the damage could be even worse. “There will be no or negative growth for the next two quarters,” predicts one Delhi economist who prefers anonymity. “Consumer spending was the one thing really driving this economy, and now we are looking at a negative wealth-effect where people feel poorer and spend less.”Perhaps more embarrassingly for Mr Modi’s government, there are few signs that its harsh economic medicine is achieving the declared goal of flushing out vast hoards of undeclared wealth or “black” money. Officials had predicted that perhaps 20% of the pre-ban cash would not be deposited in banks, for fear of disclosure to the taxman. Yet within three weeks of the “demonetisation”—well before the deadline to dispose of old bills, December 30th—about two-thirds of the money had already found its way into “white” channels. Some of this is doubtless illicit: inspectors of Delhi’s bus system have found that the bulk of daily takings now mysteriously appears in the form of the banned bills, which public-sector firms can still deposit, rather than the usual small change. Reports from Maharashtra, in the centre of the country, suggest that brokers are offering to buy old notes with a face value of 10m rupees for 8.4m, suggesting that they have found ways of laundering them.India’s economy will eventually recover and may even gain strength: the forced priming of bank accounts and the switch to electronic payments will mobilise more money for lending and taxes. But there may be lasting damage to institutions, most notably the RBI itself. It failed, among other things, to warn the impatient Mr Modi that there were not enough new notes to replace old ones. It has issued a bewildering blitz of complex and sometimes contradictory instructions to banks. Its governor, Urjit Patel, has been perplexingly silent. Its reputation for probity, competence and independence is in tatters.In another country, such a fiasco would spell disaster for the government in power. Particularly so, one would think, for a party that sailed into office on promises to boost growth, provide jobs and encourage investment. Mr Modi’s opponents have blasted his policy as obtuse, destructive and downright criminal; some insinuate that his Bharatiya Janata Party (BJP) was tipped off about the ban. Opposition parties have held rallies and marches across the country and brought India’s parliament to a standstill with demands for a vote on the ban, and for Mr Modi himself to debate its merits, to no avail so far.Mr Modi has painted his critics as whiny profiteers who are running scared of his crusade. In stark contrast to the fissiparous opposition, which lacks any leader who combines charisma with national stature, the BJP has maintained rigid discipline. Mr Modi has also shifted the goalposts, notes Mihir Sharma, a writer and business columnist: “What started as a ‘surgical strike’ on black money is now called the dawn of a cashless society.” In local elections in two states at the end of November his party even gained ground.Some analysts in Delhi predict that once enough cash is printed to get the economy moving again, Mr Modi’s government may simply insert cash into some bank accounts, such as those created under a government programme to bring banking to the poor, and declare this to be revenue from the black-money sweep. After all, pivotal elections in India’s largest state, Uttar Pradesh, loom early next year. But if more cash does not soon appear, Mr Modi’s future may look very different.India’s currency reform was botched in executionAuthor:Publication: The EconomistDate: December 3, 2016 URL: Modi needs to take measures to mitigate the damage his rupee reform has doneINDIA is not the first country to introduce abrupt, drastic reform of its currency. But the precedents—including Burma in 1987, the former Soviet Union in 1991 and North Korea in 2009—are not encouraging. Burma erupted in revolt, the Soviet Union disintegrated and North Koreans went hungry. All the more reason for Narendra Modi, India’s prime minister, to prepare the ground before the surprise announcement on November 8th that he would withdraw the two highest-denomination banknotes (the 500-rupee and 1,000-rupee, worth about $7.30 and $14.60). Yet he did not and the result is a bungle that, even if it does achieve its stated aims, will cause unnecessary harm.Shops stopped accepting the old notes at once. Holders have until the end of the year to deposit them in banks or swap them, either for smaller-denomination notes or for new 500- and 2,000-rupee ones. That 86.4% by value of the cash in circulation is suddenly no longer legal tender has already caused predictable and needless hardship. It is too late—and politically unthinkable—to start again (ses article), but Mr Modi should do more to limit the damage; and he should abandon the flawed leadership style that caused the mess.Not the way to do itThe plan has laudable aims. Its initial popularity was based on the idea that the greedy rich, with their ill-gotten “black money” stored in stacks of banknotes, will get their comeuppance. Those who cannot justify the sources of their wealth will face punitive taxes. It also accords with Mr Modi’s manifesto pledge to normalise India’s black economy, estimated by the World Bank in 2010 to be worth about one-fifth of official GDP. The idea is that India will become more efficient, as more people and more money enter the banking system; counterfeit currency will become worthless; India’s woefully low tax base will expand; and government coffers will enjoy a windfall of cash expropriated from the corrupt.It is a pity, then, that Mr Modi’s scheme to achieve these aims is so flawed. Banknotes are not just a way for the rich to store their wealth; they are also how the unbanked survive. As so often, the burden of this reform has fallen most heavily on the poor (see article). Over four-fifths of India’s workers are in the “informal” sector, paid in cash. Untold numbers have been laid off because their employers cannot pay them. Tens of millions have queued for hours at cash machines and bank branches, to get rid of the useless notes and get hold of some spending money. A new business has sprung up in laundering cash for a fee for those without the time or inclination to queue, or with more notes than they can account for.Cash is used for 98% by volume of all consumer transactions in India. With factories idle, small shops struggling and a shortage of cash to pay farmers for their produce, the economy is stuttering. There are reports that sales of farm staples have fallen by half and those of consumer durables by 70%. Guesses at the effect on national output vary wildly, but the rupee withdrawal could shave two percentage points off annual GDP growth (running at 7.1% in the three months to September).With a bit of forethought, much of the mayhem could have been avoided. It turns out that the new notes are smaller and require all the country’s ATMs to be reconfigured, which takes 45 days. Some 22bn notes are affected, but printing capacity is said by the previous finance minister to amount to only 3bn a month. So even if fewer notes are needed, because more money will be in banks, printing them will take some time. The banks were ill-prepared to handle about 8.5trn rupees in new deposits in the three weeks after demonetisation. After they used the deposits to buy bonds, lowering interest rates, the central bank had to order them to park the new money with it, in zero-interest accounts.If Mr Modi’s plea for patience for a 50-day period until the end of the year looks optimistic, so does the promise of “the India of your dreams”, purged of the corrupt and their loot. In India’s black economy of undeclared, untaxed income, all sorts of transactions, from medical bills to house purchases, are sometimes settled with suitcase-loads of banknotes. Yet even if the hoarders will be wary of another confiscation in the future, they will be tempted to make use of the new 2,000-rupee note just as they used the old 1,000-rupee one.Moreover, Mr Modi was wrong when he said that the rich now need sleeping pills, while the poor sleep peacefully. In past seizures of illegal wealth, only between 3.75% and 7.3% was found to be kept in cash. The sleepless are those who need cash to get by; the truly rich are laughing all the way to their flats in London. The punitive taxes levied on black money that is deposited will feel like flea-bites. As for the counterfeiters, most estimates of the value of fake rupees are in the tens of millions of dollars, out of $250bn in circulation.Both for the sake of Indians and for his premiership, Mr Modi needs to mitigate some of the harm he has caused. He should find ways of printing the new money more quickly. More important, he should also lengthen the period over which notes may be exchanged or deposited and allow the old notes to remain valid as payments for a range of goods and services (tax payments, say, would seem logical).Somewhat too sensationalMuch in India needs reform—abolishing restrictive labour rules, for example. In the past such reform has often been stymied by a system that favours government by committee. Mr Modi has lurched to the other extreme. The perceived need for secrecy (to take cash-hoarders by surprise) fed into the innate sense he has of his own infallibility and his misplaced faith in his technocratic skills. By designing a scheme that was needlessly callous and which is becoming increasingly unpopular, he has squandered political capital. In future he needs to consult more widely, centralise less decision-making in his own hands and acknowledge that not all criticism is partisan or special pleading from the corrupt rich. India, fortunately, is not North Korea, and is aware that leaders are fallible. Its federal, democratic system will give voters plenty of chances to let it be known how badly Mr Modi has messed up his rupee rescue.Finance Ministry’s poorly drafted clarification, aided by media spin, leads to rumours of “surgical strike” on GoldAuthor:Publication: Date: December 1, 2016URL: and by extension the Indian Government has earned a reputation of snatching defeat from the jaws of victory on umpteen occasions all thanks to its woeful communication. And today, in the midst of demonetisation, it has done it once again. Worse, this is not a victory yet, and is already being converted into a defeat.Ever since the scheme of scrapping old notes was announced, social media was rife with all sorts of rumours. We at had to conduct multiple “surgical strikes” on these rumours to kill any chance of a flare-up. One such rumour was the purported move of the Government to soon target gold held by households, after it went after cash. There were various variations of this rumour but the in short, all tried to create panic among the average citizen about his or her gold.So the Government of India, through its Ministry of Finance, tried to lay to rest one such rumour, but managed to start an even worse rumour. ANI News, tweeted out the following information, which was soon latched on to by many media houses:---------------------------------ANI @ANI_news -2hJewellery/gold purchased out of disclosed income or exempted income or reasonable household saving not chargeable to tax: Finance Ministry---------------------------------ANI @ANI_news -2hJewellery/gold legally inherited & acqurired out of explained sources, is also not chargeable to tax: Finance Ministry---------------------------------ANI @ANI_news -2hNo seizure of gold jewellery to extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male: Finance Ministry---------------------------------The most problematic part of the above was the last tweet, which reported the restrictions on the amount of Gold which would not be seized. Soon we had news items like the below:---------------------------------?? ?? @aajtak ?? ????? ?? ??????? ????????, ????? ?? ?? ?? ?? ??? ???? ?? ?????, ???????? ??????? ?? 500 ????? ?? ???? ???? ?? ??? pic.9qHKb7o3piDecember 1, 2016---------------------------------So was this the truth? Obviously not. Most media reports missed out on stating that these limits for seizure were applicable ONLY in case of Income Tax raids. This was itself clear in the Finance Ministry’s press release, based on which the media had reported the above. But was this a new rule which the Ministry had announced? Not really. These limits were in fact from an instruction which dated back to 1994. And there in lies the entire problem.The Finance Ministry was only trying to quell rumours that there was no new provision regarding chargeability of tax on jewellery in the Taxation Laws (Second Amendment) Bill, 2016 passed this week in the Lok Sabha. The clarification went on to reiterate the changes proposed which are already well know. Till here it was all hunky dory.After this, the clarification went on to reiterate existing laws and rules relating to Gold and from here it went downhill. Unnecessarily, this old law which is relevant only in case of Income Tax raids, was mentioned. The clarification did mention that it was applicable only in case of raids, but there was absolutely no need to mention this in a press release going out to the entire country.Income Tax Raids are generally a very rare phenomenon and definitely do not concern 99.99% of the population. Worse, it revealed that rules made with the sensibilities of 1994 in mind, were being applied in 2016.Once the Government had opened the gates, the media entered and made a hash of the entire clarification and reported a completely different picture. Self Goal: Scorer media, assisted and created by Finance Ministry.Update: The Finance Ministry has released another communication which now clearly states that “there is no limit on holding of gold jewellery or ornaments by anybody provided it is acquired from explained sources of income including inheritance” and that the limits pertain to only cases of Income Tax raids.The Three Goof-Ups That Modi Government Could Have Avoided In DemonetisationAuthor: R JagannathanPublication: Date: December 1, 2016URL: Singh called the implementation of demonetisation “monumental mismanagement”. He was at least half-right, since an end to the cash crunch is nowhere in sight three weeks after the announcement on 8 November. One can debate whether the use of the word “monumental” was political hyperbole or not by 30 December, but mismanagement cannot be disputed.While mismanagement is inherent in any scheme pushed from the top down (consider the zero-balance accounts in Jan Dhan, the mini-scams in UPA’s NREGA and farm loan waivers, etc), there are at least three areas where the NDA government could have done better, even granting the need for utter secrecy before the announcement.First, assuming the idea didn’t just pop into the Prime Minister’s head on the morning of 8 November, the government could easily have launched a major campaign for digital payments, since the UPI (unified payments interface) mobile app and other facilities were available as early as August. No secret would have been let out of the bag, as the push could have been conveniently packaged as part of Digital India.Second, the launch of the Rs 2,000 note was known months ahead of 8 November. The new Reserve Bank of India Governor took charge in early September. If his signature was what was stopping the printing of the new note, surely the entire order of 350 crore pieces of the new note could have been ready and printed by 8 November? By sourcing half the number from abroad and printing the other half at home, Rs 7 lakh crore of new currency would have been ready by 8 November for dispatch. Outsourcing the printing could easily have been explained through the absence of enough printing capacity for the new note which had more security features.Third, the Income Disclosure Scheme was wound up on 30 September, by which time the PM at least would have known his intentions on demonetisation. What stopped him from advising Finance Minister Arun Jaitley to be ready with Version 2 of it by 1 November, with features like the hastily introduced Income Tax (2nd Amendment) Bill 2016 to tax unexplained deposits and incomes post 8 November at 50 per cent? In fact, a version of the scheme should be available for a one-month window for the next two years, but each time with rising levels of taxation so that there is a premium on disclosures in advance.Narendra Modi may still escape opprobrium if he gets the situation fixed by 30 December, and his period of agnipariksha begins now, with the salary week already leading to chaos, and some rural areas reporting violence due to cash shortage. Irate farmers were reported to have locked up a fund-short bank in Dharwad (Karnataka), and in Uttar Pradesh, people blocked traffic and hurled stones when a nationalised bank ran out of cash, The Times of India reported today (1 December).This week may well be the tensest part of demonetisation.JD(U) hits back at Mamata, says Bengal is base of scamstersAuthor: TNNPublication: The Times of IndiaDate: December 2, 2016URL: Bengal CM Mamata Banerjee's equations with her Bihar counterpart Nitish Kumar continue to deteriorate with the latter's JD (U) taking strong exception to her attack on their leader and hitting back by raising the alleged complicity of Trinamool leaders in several scams.Reacting to Banerjee's "betrayer" barb, something which has been almost unanimously seen as aimed at Nitish, JD(U) MP Harivansh said the Bengal government had failed to crack down on those behind chit fund scams, who plundered thousands of crores belonging to people in the state as well as the entire eastern region. He also talked about the complicity of Trinamool leaders in the scams."Bengal continues to be the base of the scamsters who have perpetrated huge chit fund frauds to plunder thousands of crores belonging to poor people not just of the state, but also of Jharkhand, Bihar, Assam, Odisha and Tripura. The unfortunate fact is that Trinamool leaders have also been linked to the swindles," Harivansh told TOI.Speaking in Patna on Wednesday, Banerjee had labelled as "betrayers" those who were not part of the campaign against demonetisation. She did not take names, but the remark was seen as aimed at Nitish who spurned her proposal to launch a countrywide campaign against demonetisation.‘Daily wagers, small businesses and farmers worst affected by disorganised, unprepared transition phase of demonetisation’Author:Publication: The Times of IndiaDate: December 2, 2016URL: Vadra is a businessman and son-in-law of Congress president Sonia Gandhi. He spoke exclusively to Nalin Mehta and Sanjeev Singh on the impact of demonetisation, demands for Priyanka Vadra to take a bigger role in UP, allegations against him and his own future plans:Q.: The whole country is debating demonetisation. What are your views?A.: I hope that the purported objectives of demonetisation are realistic and will be achieved but i have my doubts. The chaos caused by its implementation will hurt especially those from rural areas for whom access to banks and bank accounts is hard. Those who survive on daily wages, run small businesses and farmers are the worst affected by this disorganised and unprepared transition phase. I don’t think the pain of poor is being highlighted clearly in the media.Q.: Do you think it will help curb black money once cash liquidity is resolved?A.: Most economists are predicting a blow to the economy due to this move. I am no economist so i can only say that i hope all the pressure and pain caused to the public, especially the poor, will have been worth it or they would have suffered needlessly.Q.: Are opposition parties united enough and doing enough to get their message to the public?A.: I think the real question is whether the distress of the common man is reaching the government and if it is, then whether it is being heard and addressed or not.Q.: How will this impact upcoming assembly polls in states like Punjab and UP?A.: People already have many hardships; to take on more stresses usually makes the public react strongly but it remains to be seen how these policies eventually effect their decisions.Q.: There have been renewed demands for Priyanka Vadra to take a more direct political role before UP assembly elections. Are we likely to see that?A.: I can’t speak for Priyanka. I would be happy for her to make whichever choices she wishes to and support her fully either way.Q.: Do you think Rahul Gandhi should assume the Congress presidency soon?A.: My best wishes are with Rahul, whatever he chooses to do. This is really something for the Congress party and him to work out between them. I would not like to comment on it.Q.: Justice SN Dhingra, assigned by BJP’s Haryana government to study 250 land deals struck during Congress regime, reportedly took your name in his report as well, regarding a 2.701 acre plot of land in Gurugram. Your response to allegations of wrongdoing?A.: I have never been summoned by the commission. I was asked for some information which i furnished. My lawyers have already stated publicly that i am happy to cooperate. I cannot comment on the findings of the commission as i have not seen them and they are yet to be made public. I have always followed the law and conducted my businesses ethically. I have faith that the truth about the politically motivated accusations and allegations made about me will eventually prevail.Q.: Any chances of you joining politics soon?A.: I have had the privilege of travelling around India and meeting people from different backgrounds over the years of my being part of this family. I do whatever i can in my personal capacity to help those in need without being in politics. However, no one can tell the future and i cannot say what it holds for me. I think each individual can and should contribute to the welfare of others in whichever capacity they can.Q.: You’re not a politician but your actions have political consequences. How do you deal with being constantly under public glare?A.: I have always remained private and kept away from public life. I see myself as an ordinary person, not as a celebrity. Because of the allegations and media stories about me over the last few years, people do recognise me a lot. I feel they have their own good sense and judgment. I cannot say that i have ever encountered any negativity. Their kindness towards me is overwhelming. It has been hard for me to face the political witch-hunt that has lasted almost five years but it has also made me stronger and i have been able to learn and grow from these experiences.Q.: You are quite a fitness buff: how central is physical fitness to you?A.: I totally vouch for time spent on keeping fit. Fitness of the mind and body cannot be given to you as a gift; it has to be earned. I try to encourage all those i meet to believe in themselves and stay strong despite all odds. My determination towards my own physical ability has helped me overcome the pressures and difficulties i have faced.Imposed only reasonable restrictions, govt. tells SCAuthor: Krishnadas RajagopalPublication: The HinduDate: December 1, 2016URL: in SC denies any lack of preparedness in implementing the demonetisation policy Curb on money transactions, including withdrawals and wedding expenses, are “only reasonable restrictions” imposed on the rights of the public for a limited time, the government said in its latest affidavit.“Cancellation of legal tender of Rs. 500 and Rs. 1,000 notes is only a reasonable restriction and regulatory in nature. Merely because there is a restriction on the public to use the old high denomination notes, the regulation cannot be held to be illegal or unreasonable restriction as there is no infringement of the fundamental rights of citizens,” the affidavit said.Major court hearingFiled on Thursday on the eve of a major court hearing before a Bench led by Chief Justice of India T.S. Thakur, the affidavit justified that multiple notifications issued post demonetisation had not deprived the public of their money.“They can still use their money by use of cheques, e-transfer, etc,” the affidavit said.In a bid to quieten criticism that the checks on withdrawals is a violation of the fundamental rights under the Constitution, the government said the demonetisation notifications were “reasonable restraints imposed in the interests of the general public for the greater good of the public at large.”The government said it was incorrect to say that the present banking architecture was inadequate to deal with 1.2 billion population. The Centre claimed that the system had been “functioning very well over the years.”Reminding the court of the enormity of the demonetisation policy, the government said it had the pooled resources of 1,32,834 bank branches, 1,54,939 post office branches, 1,26,495 banking correspondents to distribute cash. Besides, the total number of outstanding debit and credit cards is 73,88,44,727.Recalibration of ATMsIt said 1.69 lakh ATMs had been recalibrated as on November 28. “By December 2, it is expected that 1.96 lakh ATMs will be recalibrated. It is noteworthy that around 8,000 ATMs are being recalibrated on a daily basis,” the government reeled out the figures.The government denied any lack of preparedness in implementing the demonetisation policy. It said the Central Board of the RBI had recommended to the government to cancel the legal tender of Rs. 500 and Rs. 1000 with effect from November 8, which it did.Every day is a new negotiation: Demonetisation is a cruel joke on IndiaAuthor: Kaveree Bamzai @KavereebPublication: dailyo.inDate: December 2, 2016URL: has extended that to the daily lives of citizens in an unnecessary and undeclared emergency."Aapka paisa surakshit hai," says a beaming Prime Minister Narendra Modi from big billboards all over the capital.Equally happy citizens beam back at him. They may soon be the only ones with smiles on their faces.Yes, we’ve heard the stories and talked to enough people who are delighted that Modiji ne sabko ek jaisa bana diya hai, but when your 74-year-old mother has to stand in a queue for two hours to withdraw her own money from the post office; when you get your salary on the first of the month but are unable to pay those who work for you; and when ATM-after-ATM you go to has run out of cash, demonetisation seems like a cruel joke.But yes a joke it is. Every day, we are given new directions in what has become "Permissionistan". The economic reforms of 1991 didn’t dismantle the licence permit raj in the state’s control over natural resources.Well, demonetisation has extended that to the daily lives of citizens in an unnecessary and undeclared emergency.We are living in an age where discretionary powers of the government have expanded to our private lives. Amartya Sen has spoken of the breakdown of trust between the state and citizen. What’s worse is it’s become a daily erosion.Refer to the table below on the number of notifications that have been issued since November 8. Every day is a new day in the complex negotiations an honest, tax-paying, hard working citizen has to undertake to withdraw his/her money to pay staff salaries, to pay for groceries, to pay for daily needs.So if on November 9, we were told that we could not withdraw more than Rs 2,000 from ATMs till November 18 and Rs 4,000 after that, on November 13, we were told that the cash withdrawal at ATMs had risen to RS 2,500 per day in the recalibrated ATMs (and good luck to you in locating those).Finance minister Arun Jaitley had earlier said that the administration would not bother to make inquiry into small deposits of Rs 1.5-2 lakh in Jan Dhan accounts. On November 15, the finance ministry set an upper limit of Rs 50,000 for deposits into these accounts.Similarly for withdrawals for weddings. On November 17, RBI issued a circular to let people withdraw Rs 2.5 lakh for weddings with the caveat that the amount could be withdrawn only if the date of marriage is on or before December 30. On November 21, the RBI imposed stiff conditions for withdrawal of up to Rs 2.5 lakh in cash from bank accounts for marriages, saying the money can be withdrawn only from the credit balance as on November 8, the day demonetisation was announced.The cash withdrawn should be used only to make payment to those persons who do not have bank accounts and the names of such recipients should be mentioned while applying for withdrawal of the cash. A day later, on November 22, citizens could make withdrawals of Rs 2.5 lakh from their own accounts by making declaration for payments beyond Rs 10,000 only.The list goes on, with toll payments, exchanging old notes. In the Age of Modi, we are all expected to unquestioningly and unblinkingly surrender our own agency and our own selves to the larger cause of nation building.Glad to do so, but aren’t we, the taxpayers, doing that already? Financing the Dear Leader’s glory-building foreign trips, his fabulous wardrobe (complete with kani pashminas and Louis Vuitton loafers), and his schmoozing with pop stars and presidents? The democratically leader of the world’s biggest democracy doesn’t need our permission to look good for us. Do we need his permission to eat, live, breathe?Yes, we are told the pain will ease. The queues will cease. It will force everyone to go cashless, open bank accounts, spend with debit/credit cards, value money. Eventually. Ultimately. In the long run (and we all know what happens to all of us in the long run).The prime minister and his party know the country has little choice when it comes to political parties. The grand old party is on a mission to self destruct — so much that when Rahul Gandhi’s official Twitter account starts to abuse his own family, it doesn’t even raise an eyebrow.Those are thoughts, though in perhaps altogether more colourful language, that every voting citizen has had at some point about the Gandhis as they are now.The Aam Aadmi Party has also concentrated power on one man to the detriment of the original ideal. The other parties are a mix of venal and vapid, and sometimes both.But patience can wear thin, silence (even though Amit Malviya has cautioned those who dare to speak out with the example of Gauri Lankesh) can be broken, and sacrifice for the larger cause can seem a waste when friends of the BJP indulge in lavish weddings and members of the BJP are caught with unaccounted-for cash.For in the Age of Permissionistan, if the citizens need permission to spend their own money, they will demand accountability for every rupee the government spends. Schools, colleges, hospitals, clinics, roads, highways, efficient welfare services that reach out to the poorest of poor?If citizens of this nation are to be dragged kicking, screaming, queuing into the new digital world, they would like to see the laws applying to all, equally, to those in power, and to those without.Special arrangements for MPs in Parliament ATMs? Scrap that. Rs 10,000 in cash to government servants. Scrap that too. If we are to become a more humane and more equal society, who don’t mind investing our privileged todays for the sake of better tomorrows for all, then please remember, charity begins at home. Justice has not only to be done, but to be seen to be done.DateGovernment notifications since notebandiNovember 8, 2016Demonetisation announced by governmentNovember 8, 2016Not more than Rs 2,000 a day per card from ATMs till Nov 18, Rs 4,000 after that; withdrawals from bank accounts will be limited to Rs 10,000 a day and Rs 20,000 a week; can deposit old notes at banks, post offices till Dec 31; new Rs 500 and Rs 2,000 notes from Nov10November 8, 2016Demonetised currency notes will remain valid for transactions like booking of air tickets, railway and government bus journeys, crematoria-burial grounds, milk booths, petrol pumps and hospitals till midnight of November 11 and 12November 9, 2016Monitoring of all cash deposits of over Rs 10 lakh made till the end of the year and impose a penalty of up to 200 per cent in case the funds did not tally with an individual's tax returns. At the same time, it promised that housewives, small businesses and workers depositing Rs 1.5-2 lakh in their accounts would face no harassmentNovember 13, 2016Increased cash withdrawal limit at ATMs from Rs 2000 to Rs 2500 per day in the recalibrated ATMsNovember 15, 2016Government asked banks to start tagging with indelible ink or voter’s ink those exchanging old Rs 500 and Rs 1,000 notes to prevent “unscrupulous elements” from sending people to exchange money multiple times at different branchesNovember 17, 2016Debit cards can be swiped at petrol stations run by staterun oil companies and you will get Rs 2,000November 17, 2016RBI issued a circular to let people withdraw Rs 2.5 lakh for weddings - the amount can be withdrawn only if the date of marriage is on or before December 30November 17, 2016Measures for farmers which includes permission to withdraw up to Rs 25,000 per week from their bank accounts; similarly, agri-traders registered with such marketing committees, can withdraw up to Rs 50,000 per week from their designated bank accountsNovember 17, 2016Amount of money that an individual can exchange from banks by handing over the old Rs 500 and Rs 1,000 notes has been lowered to Rs 2,000 from Rs 4,500 with effect from Nov 18 2016November 17, 2016Central government employees, up to Group C, can draw their salary in advance up to Rs 10,000 in cash, economic affairs secretary Shaktikanta Das said. This will be adjusted against their November salariesNovember 22, 2016Service tax will not be levied on tickets booked through the IRCTC website from Nov 23 to Dec 31, said a senior railway ministry official. Rs 20 is levied as service tax on sleeper and Rs 40 on AC classes for booking tickets through IRCTCNovember 22, 2016RBI increased the monthly wallet like Paytm's limit for users to Rs 20,000 from the earlier Rs 10,000.November 22, 2016Weddings - RBI relaxed one of several conditions for withdrawal of Rs 2.5 lakh from their own accounts by making declaration for payments beyond Rs 10,000 onlyNovember 23, 2016Government allowed NABARD to disburse Rs 21,000 crore to cash-starved farmers, helping them sow winter crops like wheat ahead of the sowing seasonNovember 24, 2016Over-the-counter exchange of high value notes, which were scrapped earlier this month, will stop from Nov 25 but can be deposited in personal accounts, the government announced on Nov 24. However, it also extended use of the Rs 500 note for some specific purposes up to Dec 15November 24, 2016No toll on national highways till Dec 2, old Rs 500 notes will accepted at toll booths till Dec 31November 26, 2016Government has devised a two-track approach towards disclosure of unaccounted cash in excess of the Rs 2.5 lakh threshold announced by the PM by setting a moderate penalty for voluntary action but imposing stiff fines on tax evaders caught trying to beat demonetisation - those who come forward with disclosures will be asked to pay a penalty of 60 per cent of the amountNovember 28, 2016Centre introduced a Bill in the Lok Sabha that gives tax defaulters an opportunity to come clean by paying tax and penalties. The key feature of the proposed amendment to the Income-Tax Act is a proposal to impose 50 per cent tax on undeclared income that is voluntarily disclosed till December 30, following which 82.5 per cent (75 per cent tax and 10 per cent of such tax as penalty) could be levied on undeclared income detected by authoritiesNovember 29, 2016Lok Sabha passed amendments to tax black money deposits at 50 per cent and set up a special fund for welfare schemeNovember 30 , 2016To protect farmers and rural Jan Dhan account holders - RBI has issued a notification saying these account holders will be alllowed to withdraw only Rs 10,000 a month, as a temporary measure. This notification applies to Know Your Customer (KYC) compliant Pradhan Mantri Jan Dhan Yojana (PMJDY) plus accounts funded through deposits of new bank notes after Nov 9, 2016 DateGovernment notifications since notebandiNovember 8, 2016Demonetisation announced by governmentNovember 8, 2016Not more than Rs 2,000 a day per card from ATMs till Nov 18, Rs 4,000 after that; withdrawals from bank accounts will be limited to Rs 10,000 a day and Rs 20,000 a week; can deposit old notes at banks, post offices till Dec 31; new Rs 500 and Rs 2,000 notes from Nov10November 8, 2016Demonetised currency notes will remain valid for transactions like booking of air tickets, railway and government bus journeys, crematoria-burial grounds, milk booths, petrol pumps and hospitals till midnight of November 11 and 12November 9, 2016Monitoring of all cash deposits of over Rs 10 lakh made till the end of the year and impose a penalty of up to 200 per cent in case the funds did not tally with an individual's tax returns. At the same time, it promised that housewives, small businesses and workers depositing Rs 1.5-2 lakh in their accounts would face no harassmentNovember 13, 2016Increased cash withdrawal limit at ATMs from Rs 2000 to Rs 2500 per day in the recalibrated ATMsNovember 15, 2016Government asked banks to start tagging with indelible ink or voter’s ink those exchanging old Rs 500 and Rs 1,000 notes to prevent “unscrupulous elements” from sending people to exchange money multiple times at different branchesNovember 17, 2016Debit cards can be swiped at petrol stations run by staterun oil companies and you will get Rs 2,000November 17, 2016RBI issued a circular to let people withdraw Rs 2.5 lakh for weddings - the amount can be withdrawn only if the date of marriage is on or before December 30November 17, 2016Measures for farmers which includes permission to withdraw up to Rs 25,000 per week from their bank accounts; similarly, agri-traders registered with such marketing committees, can withdraw up to Rs 50,000 per week from their designated bank accountsNovember 17, 2016Amount of money that an individual can exchange from banks by handing over the old Rs 500 and Rs 1,000 notes has been lowered to Rs 2,000 from Rs 4,500 with effect from Nov 18 2016November 17, 2016Central government employees, up to Group C, can draw their salary in advance up to Rs 10,000 in cash, economic affairs secretary Shaktikanta Das said. This will be adjusted against their November salariesNovember 22, 2016Service tax will not be levied on tickets booked through the IRCTC website from Nov 23 to Dec 31, said a senior railway ministry official. Rs 20 is levied as service tax on sleeper and Rs 40 on AC classes for booking tickets through IRCTCNovember 22, 2016RBI increased the monthly wallet like Paytm's limit for users to Rs 20,000 from the earlier Rs 10,000.November 22, 2016Weddings - RBI relaxed one of several conditions for withdrawal of Rs 2.5 lakh from their own accounts by making declaration for payments beyond Rs 10,000 onlyNovember 23, 2016Government allowed NABARD to disburse Rs 21,000 crore to cash-starved farmers, helping them sow winter crops like wheat ahead of the sowing seasonNovember 24, 2016Over-the-counter exchange of high value notes, which were scrapped earlier this month, will stop from Nov 25 but can be deposited in personal accounts, the government announced on Nov 24. However, it also extended use of the Rs 500 note for some specific purposes up to Dec 15November 24, 2016No toll on national highways till Dec 2, old Rs 500 notes will accepted at toll booths till Dec 31November 26, 2016Government has devised a two-track approach towards disclosure of unaccounted cash in excess of the Rs 2.5 lakh threshold announced by the PM by setting a moderate penalty for voluntary action but imposing stiff fines on tax evaders caught trying to beat demonetisation - those who come forward with disclosures will be asked to pay a penalty of 60 per cent of the amountNovember 28, 2016Centre introduced a Bill in the Lok Sabha that gives tax defaulters an opportunity to come clean by paying tax and penalties. The key feature of the proposed amendment to the Income-Tax Act is a proposal to impose 50 per cent tax on undeclared income that is voluntarily disclosed till December 30, following which 82.5 per cent (75 per cent tax and 10 per cent of such tax as penalty) could be levied on undeclared income detected by authoritiesNovember 29, 2016Lok Sabha passed amendments to tax black money deposits at 50 per cent and set up a special fund for welfare schemeNovember 30 , 2016To protect farmers and rural Jan Dhan account holders - RBI has issued a notification saying these account holders will be alllowed to withdraw only Rs 10,000 a month, as a temporary measure. This notification applies to Know Your Customer (KYC) compliant Pradhan Mantri Jan Dhan Yojana (PMJDY) plus accounts funded through deposits of new bank notes after Nov 9, 2016 How pathetic is Congress for not being able to corner BJP over demonetisationAuthor: Vrinda Gopinath @vrinda_gopinathPublication: dailyo.inDate: December 1, 2016URL: 's time the Grand Old Party took to the streets.Can the lethargic Congress leadership kick itself out of the comfy Lutyens' zone of the capital and hit the districts, streets and mohallas of the country?The demonetisation bomb has given the floundering Congress yet another opportunity to strike out and revitalise and renew itself, but all the party can do is to get its miniscule number of MPs to get into a huddle in the forecourt of Parliament to protest, or hold press briefings to a weary and disinterested media, even as Opposition leaders like West Bengal chief minister Mamata Bannerjee and Delhi CM Arvind Kejriwal make a show of strength at street demonstrations in Kolkata and Delhi.The party may be recharged by the surprise presence and consistent participation of vice-president Rahul Gandhi in the protests, interventions and disruptions inside and outside Parliament but do the people outside Lutyens' zone know what the Congress stands for on the demonetisation issue, what are its allegations against Prime Minister Narendra Modi and his NDA government?Is it any surprise that the Bharat Bandh, called by the Opposition two days ago, withered in the face of the Congress’ abstracted stand, first on the bandh, then on the demonetisation issue itself? Opposition leaders like Bannerjee and Kejriwal may have the unreal but clear-cut demand of a rollback, but the Congress has confounded everybody with its list of demands and offers.Not surprisingly, the questions agitating the lakhs of people queuing outside banks and ATMs to withdraw their money are not about the dishonesty and corruption of Modi and the BJP leadership, alleged by the Congress from day one, but about their own fear, discomfort and confusion over the future. Yet, the Congress has raised valid questions and allegations, which have forced a nervous reaction from PM Modi himself.Consider this: Congress Leader of the Opposition in the Lok Sabha, Mallikarjun Kharge, accused Modi of “selective leakage” of the demonetisation move to his party members, who promptly transferred their black money into property, gold and other commodities.It prompted the PM to tweet that “the problem of those criticising the recent decision against black money and corruption is that the government did not give them time to prepare”. Congress chief spokesperson Randeep Surjewala called demonetisation the BJP’s “biggest scam” and demanded the PM make BJP accounts public with details of all property purchased by BJP leaders over the last one arrely, Modi swiftly ordered that all BJP MPs and MLAs declare their bank accounts post-demonetisation, that is from November 8, to date. It naturally invited smirks and barbs of why the PM was shying away from asking them to give details of a few months before the announcement to expose the news had indeed been among BJP leaders.Now, how can Rahul and the Congress remove their accusations out of the Parliament sound room and blaze it all over the country?First, step out of the cozy, familiar mindset of Lutyens’ Delhi and unleash the army of Congress state and district leadership and party workers out on the streets, taking on the RSS-Hindutva-BJP foot soldiers who now dominate the landscape.As reports go, the Hindutva brigade has positioned their recruits even in bank and ATM queues to counter any complaints with the mantra of the PM’s noble act to boot out corruption. Similarly, shouldn’t Congress workers be disrupting queues with their version of demonetisation?Isn’t it time the Congress swayed a movement in the heartland taking on the RSS-BJP’s murderous gau rakshaks, love jihadists and communal agenda; apart from student movements, Dalit uprising, tribal displacement and other grassroots mobilisations?For too long, the Congress has been seen as the party of Lutyens’ elite, the intoxicating world of networkers and schmoozers, deal makers and power brokers, fat cat politicians and billionaires who stuff their pockets while taking away industry and jobs, welfare and education, security and communities. The string of corruption cases during UPA-II - from corporate bank defaults of a staggering Rs 8.6 lakh crore even as farmers committed suicide for being unable to pay a Rs 1 lakh loan, to coal, power and telecom scams - was paid for by the stunning and humiliating defeat of the Congress. Does the party have the courage to take on its own greed?It’s not just good enough for Rahul to mouth poverty slogans and spare a thought for the poor and deprived - there has to be action on the ground led by the army of Congress workers at every street corner, who must listen, connect and act.Empowerment of the people is key, as the Congress once knew, and which a Kejriwal, Nitish Kumar or Mayawati has used to good success. Perhaps, in the demonetisation case the Congress should go all out to the mandis, farmer cooperatives, commodity trading hubs to investigate, inform, gather data and mobilise the agricultural sector to take on the Modi government.It’s no use of Congress crying that it has a hostile national media - the only way to smash the media status quo is to expose, chase, parade, broadcast the Modi government’s corruption, fraud, hoaxes, jumlas, and the media will be forced to take it seriously.Unlike the time the Congress was in power and let off its most important adversaries in the 2002 Gujarat riots; the fake encounter killings and multi-billion corruption cases in the state, even the Snoopgate case which had embroiled Modi.At the same time, it must propel social media to dominate and set the agenda, a tall call in the face of the well-greased Hindutva info highway, but not impossible to do.It’s also time the Congress leadership spelt out clearly what its stand is on secularism, inclusiveness, freedom of media, thought, food, dress, economic reform. The time has come once again for the Congress to realise that, as someone once said, the majority in this country agree with the liberal position, we just need a liberal leadership to make it happen.Desperately seeking: an Opposition that can oppose our most gifted PMAuthor: Aakar PatelPublication: The Times of IndiaDate: December 4, 2016URL: is hard to imagine a time when there was such a shortage of talent on India’s opposition benches. This has allowed the government more space and freedom to execute policies which needed better engagement from the other side.The quality of argument and the standard of debate in this, our 16th Lok Sabha, are poor, and lack focus and concentration. Parliament of course has long been unwatchable in India because of the overuse of the tactic of disruption. And also, if one is to be cruel but honest, the absence of any real oratorical talent. We have occasionally some rustic humour, yes, but if one is conscious of quality then the offering is poor.Our lower house does not resemble that of, say, the United Kingdom, which we call the mother of parliaments and whose structure we have tried to copy. In London, the working day in parliament is marked by short and sharp interventions by both sides. In Delhi, it is either walkout or storm the well.One would think that facing a government with a secure majority in the Lok Sabha, the opposition would pack at least the Rajya Sabha with intellectual firepower. This would help it hobble a ruling party which is rash in its decision-making because its leadership is charismatic and centralised. But that for some reason has been avoided, and the usual discredited suspects are peddling the usual arguments.In the Lok Sabha, the Congress is now insignificant, with less than four dozen MPs. Even here, because the government seeks to ensure smooth functioning for the passage of bills, critical interventions can provide the opposition with energy and direction. Unfortunately, the Congress party is being led by its two worst speakers in history. The trajectory from Nehru to Indira to Rajiv to Sonia and Rahul is one of decay in many ways, but the most visible one is the decline of oratory and the ability to convince and move the masses.And, in this same time, the ruling party has been blessed in having the most convincing speaker in Indian politics. Narendra Modi is the most talented politician of our time and one reason for this is his persuasiveness. His ability to frame the argument on his terms, with precision and in the language of the people, is of a very high order. I do not think anyone other than perhaps Gandhi, who was very good himself with the coinage of new terms, is in the same class as Modi in this sense.And so we have in Indian politics, simultaneously, a most gifted prime minister and an opposition totally lacking in the ability to oppose. It is true that there are some in that space who are not lacking in quality. One is Arvind Kejriwal, the chief minister of Delhi. His talent at opposition is as good as, if not better than his talent at governing. The Bharatiya Janata Party recognises this, which is why Kejriwal is constantly kept on the run by the Union government. I suspect that at least some of the extraordinary hatred against him on the internet is the doing of the BJP because it sees in him a long-term problem.Elsewhere, Mamata Banerjee is talented as a mobiliser but suffers from not knowing Hindi well. Nitish Kumar is good at governance but not particularly good at opposition. In any case, his recent obsession with morality has neutralised him as a threat to the central government. Nitish says India can become China if it imposes prohibition. Pakistan has had prohibition since the 1970s but it has not become China.Anyway, even if there was more talent available in the opposition around the country it would not really help because ultimately, in this Lok Sabha at least, it is the Congress that has to provide the intellectual heft to battle the government. Even those who vote for it must acknowledge that this Sonia and Rahul Gandhi have failed to do. It is not because they have not been handed an opportunity. Having the nation line up in a queue for its own money through an unplanned and casual act could not have been a better opportunity for them.Knowing Narendra Modi personally I can tell you that if Manmohan Singh had ordered this half-baked and barely planned demonetisation, Modi would have torn the government justification to ribbons. Deliberately inconveniencing hundreds of millions of people daily (killing some!) while also damaging the economy is the sort of gift opposition parties around the world would dream of. But here is the uninspiring Congress, bumbling along, unsure of what its demands are. And all this, unfortunately for all of us including BJP voters, happening at a time when quality, meaningful and thoughtful opposition is needed most.Have black money hoarders fooled government in spite of demonetisation?Author: Arindam De @arindamde01Publication: dailyo.inDate: December 1, 2016URL: 's the calculation.Before you cry sacrilege, let me clarify that I am all for weeding out black money from the economy. This would lead to better revenues and foster growth in the long run, even if it is causing us some initial hardships.Those hardships have got more to do with the failure of our banking system and inadequacy of the cash logistics system rather than a government decision.Demonetisation targets illegal hoarding of cash, which is, admittedly, rampant in India. Not all of it is black money as such, but the economy is heavily cash-driven. And like any cash-driven economy, it provides ample scope to unscrupulous people to tuck their money away from the government and taxmen. The system is abused for aiding corruption and more alarmingly for bankrolling terrorism and criminal activities.Economists were predicting anything between Rs 3-5 lakh crore as "black money" circulating in the economy. On November 29, amid the din in the Rajya Sabha, the MoS for finance said there were 1716.5 crore pieces of Rs 500 notes and 685.8 pieces of Rs 1,000 notes in circulation on November 8 - the day PM Narendra Modi announced demonetisation.So the cash available that day in India was around Rs 15.44 lakh crore. This can be further broken down into Rs 6.86 lakh crore in Rs 1,000 notes and Rs 8.58 lakh crore in Rs 500 notes.A day before the minister spoke in the Upper House, the RBI said Rs 8.54 lakh crore in the form of banned currency notes had been deposited back into the banks. Now banks have cash-in-hand for day-to-day business and the RBI maintains a cash reserve ratio (CRR) that is directly proportional to the cash the banks hold.According to the cash with banks on November 8, the CRR should had been around Rs 4 lakh crore. So already some Rs 12.54 lakh crore is already with the banks. If you add another odd Rs 50,000 crore as the amount banks hold for day-to-day transactions, a figure of Rs 13 lakh crore can be reached.This is a very interesting figure. It implies that only about Rs 2.5 lakh crore worth of demonetised currency exists in the system that is yet to come to the banks. Even if you make allowances for smaller denomination notes, the amount of money in demonetised notes should not be more than, say Rs 3-3.25 lakh crore.That leaves us with a pertinent question - where is the windfall for the government on black money?We are left with only a few conclusions - one, black money is not in large denomination notes or two, black money launderers have successfully managed to plough such money back into the banking system - and there may be a third option, that black money is being ploughed back into heads like agricultural income, land or bullion. Take your pick.The Debate Over PM Modi's Demonetisation Move Is No Longer About Economic ReformAuthor: Sandip RoyPublication: Huffingtonpost.inDate: November 30, 2016URL: 's about the perception, stupid.It's only to be expected that the BJP would tout its success in municipal elections in Gujarat as a referendum on demonetisation."The writing on the wall is clear after the Maharashtra and Gujarat elections. It's a clear yes for Modi's policies and a rejection of the Congress' and the Opposition's tactics," said parliamentary affairs minister Ananth Kumar. "The Opposition should allow the House to discuss (demonetisation)."The reaction is predictable. If the BJP had suffered a setback, it would have been spun as a local election about local issues which had nothing to do with demonetisation.Meanwhile economists have been offering a decidedly mixed view on demonetisation. Arun Kumar, author of The Black Economy in India, says, "Black money is only one percent of your black wealth. So suppose you are completely successful in eliminating three lakh crore, you are only eliminating 1 percent of your black wealth and three percent of your black income."“It's not about whether it will root out black money or end terrorist financing. Neither of those are deliverables that can really be checked and verified by ordinary people.Kaushik Basu, chief economist to the World Bank from 2012-16 and former chief economic advisor to the Indian government, writes "Demonetization is a ham-fisted move that will put only a temporary dent in corruption, if even that, and is likely to rock the entire economy." Even worse, he says, while it will capture some illicit cash, it will hurt those it does not intend to, for example poor women who stash away cash beyond their husbands' reach.Bibek Debroy, member of Niti Ayog disagrees, saying "There is a short-term disruption in production but the gains are long term and helps cash lying around people's houses back into the system."Some pessimistic economic forecasts say growth could plunge from 6.8% to 3.5% in the year ending March 2017. Others say the disruption will be short-lived and not more than a 1% decline in GDP. Economist Jean Drèze says it's like shooting the tires of a racing car, while Ajit Ranade of the Aditya Birla Group says it's "more like deflating the tire pressure somewhat".But this not really about economics right now. It's not about whether it will root out black money or end terrorist financing. Neither of those are deliverables that can really be checked and verified by ordinary people. It's a battle about perceptions and that was clear when it was introduced as a "surgical strike", a term bursting with patriotic bravado. Narendra Modi wants to seize the pro-poor mantle. That is more important for the BJP than whether the demonetisation ploy will deliver its stated objectives in the long run. Modi had promised to bring back black money stashed overseas. This will not achieve that purpose, but it does not matter as long as the perception is that the prime minister is taking a drastic measure against black money on behalf of India's poor."The political ideology is that I will be the hero of the poor, that I have eliminated the black economy that was affecting the poor," says economist Arun Kumar. Not long ago the prime minister had exhorted the rich and the middle-class to give up LPG subsidies for the sake of the poor. Now demonetisation is being spun as the next step in a nation-building exercise, imbued with a patina of morality. "This single step had countered the charge that the Modi government was for the rich," a party leader tells The Week.“The perception that some corrupt bureaucrat with a stash of notes received as bribes hidden away in his home is now sweating is wonderful to imagine.Of course, there is nothing to indicate that the truly rich are panicking. As has been pointed out over and over again, most of the black money is not parked in ?500 and ?1,000 notes anyway. But again, the perception that some corrupt bureaucrat with a stash of notes received as bribes hidden away in his home is now sweating is wonderful to imagine. As long as that perception sticks, it's advantage Modi.Thus to argue about its economic efficacy, shooting tires or deflating tires, somewhat misses the point. It does not matter because, in the long run, as Manmohan Singh reminded us, we are all dead anyway. Narendra Modi built his prime ministerial campaign around the story of personal sacrifice. It's no coincidence that in his emotional speech about demonetisation he evoked the chaiwallah narrative again. A gird-your-loins, tighten-your-belt austerity measure would have been much harder for silver-spoon-in-the-mouth scion like Rahul Gandhi to sell than a Narendra Modi -- and Modi knows this. He is cleverly using his personal life-story, his reputation, to sell economic demonetisation.“Only the most na?ve imagine that any major political party in India has clean hands when it comes to black money. Only the very foolish would balloon their own accounts and draw attention to themselves.Now, in the latest salvo in this battle of perceptions, Modi has declared that BJP MPs and MLAs need to give their bank transaction details post 8 November to Amit Shah. That's fairly meaningless, since money could be parked in the accounts of proxies and family members. There are stories of politicians (and not necessarily BJP politicians) asking businessmen and industrialists to hold on to some of their money for awhile. Only the most na?ve imagine that any major political party in India has clean hands when it comes to black money. Only the very foolish would balloon their own accounts and draw attention to themselves. But again, this is about creating the perception that for the BJP the battle for corruption starts at home, that it is setting its own house in order.In that battle, Narendra Modi still has the upper hand. During Bill Clinton's successful 1992 campaign, his slogan was "The economy, stupid". In India nowadays we think demonetisation is about the economy. But it's really about the perception, stupid.Demonetising politics of pandemoniumAuthor: Vinay SahasrabuddhePublication: Date: December 2, 2016URL: politics of pandemonium comes in handy to create a false impression of pseudo unrestIn the pre-Mahatma Gandhi era, Lokmanya Tilak used to be rightly described by many as the Father of Indian Unrest. He was a great leader with unmatched organizational skills. He used to travel extensively and mobilize people, educate them and make them realize the injustice meted out to them. He had a great ability to motivate people for collective action to protest against British rulers. Today, many of those claiming to be leaders of the opposition hardly take pains to mobilize people or voice their dissatisfaction, if any. Instead, they use shortcuts like resorting to creating pandemonium in Parliament and legislatures, thereby securing much coverage in the media. The month-long winter session of Parliament began on 16 November. While on the first day, Rajya Sabha witnessed a fairly good debate on demonetisation, from day two, ruckus and pandemonium resurfaced and important parliamentary business has remained unattended. It is hard to understand why the opposition is bent upon not allowing the Rajya Sabha to function when on the first day they were agreeable to allow a discussion in which many opposition leaders spoke.Was it an afterthought? Or was it a case of late realization of the false presumption that the greater noise one makes, the better it is for occupying media spaces? Or was it frustration at the grassroots level being given vent in the Houses?Undoubtedly, it is very natural that Parliament resonates with all that dominates contemporary discourse and the deliberations mirror all the agonies and aspirations of the people. If that doesn’t happen, many understandably believe that Parliament will be reduced to a mere debating society. True, contemporary issues need to be raised in Parliament, but like all other democratic forums, Parliament is also prone to a kind of abuse, eventually reducing the prestige of the institution. This obviously serves a severe blow to the basics of parliamentary democracy. For all true democrats, it is essential to guard Parliament from any kind of abuse. It is essential in this backdrop to remember that all issues raised via ruckus in Parliament may not genuinely reflect popular apprehensions. This is mainly because of two reasons.First, many believe that unless some ruckus is created and Parliament is stalled, the gravity of the issue under discussion is not duly manifested. As compared to developing skills for using the right kind of parliamentary devices, it is always easy to create noise and indulge in illusion-mongering! Besides, the media too plays a big role in either downplaying an issue discussed or magnifying a subject raised. Many believe that ruckus and pandemonium in Parliament attracts greater media attention, eventually ensuring headlines in print media and prime-time discussion spaces on TV channels. Many veteran parliamentarians have rued the fact that orderly behaviour of studious members hardly attracts media attention, while chest-thumping and noise creation alone is mostly looked at as voicing of so called genuine grievances. This creates a false impression, giving a fillip to the politics of pandemonium.Second, the changing character of political parties too has contributed to the tendencies of abusing parliamentary forums. For a political party to mobilize popular unrest—as and when it is there—it takes a huge amount of groundwork involving educating people and making them aware of the injustices that they might be facing. This requires organizational network and motivated cadres connected to the masses. Major political parties in India that are essentially of a dynastic character have reduced themselves to mere election-contesting machines. They lack in a well-articulated ideology and hence fail in convincing and motivating, let alone people, even their own rank and file. Understandably, they don’t have any grassroots-level live-wire organizations and hence for them, even when there is genuine popular unrest, mobilizing masses always remains a challenge. Recently, when the Delhi chief minister tried to mobilize people on the subject of demonetisation, the public hooted him out.Sadly, the politics of pandemonium comes in handy for them to create a false impression of pseudo unrest. Many in the media make their task easier by allowing such machinations to grab disproportionately large spaces in the media. It is beyond doubt that the larger subject of demonetisation deserves adequate attention and discussion in the public as well as Parliament. However, it is also true that society and media must deprive ruckus-mongers and demonetize the politics of pandemonium. There seems to be a firm belief that pandemonium has performance value, some premium, and perhaps prestige as well. Doing away with this belief is demonetizing the politics of pandemonium.Perhaps governments can do precious little in taking this style of politics out of currency. It is for the media and society together to ensure that the politics of pandemonium is totally rejected, devalued, in that sense demonetized and finally driven away, lock stock and barrel. If parties are allowed to continue using parliamentary forums for creating a false impression of manufactured unrest and thereby grabbing headlines, the real damage will be to those who have genuine grievances but no access to either Parliament or the media.Should this different and far too difficult demonetisation not happen, the credibility of a key democratic institution will continue to face severe damage. In the cacophony over the effects of currency demonetisation, this larger demonetisation should not miss our attention.- Vinay Sahasrabuddhe is the national vice-president of the BJP and a member of Parliament, Rajya Sabha.Banerjee Is A Non-Entity Beyond Bengal’s BordersAuthor: Jaideep Mazumdar Publication: Date: December 1, 2016URL: Banerjee’s vitriolic opposition to demonetisation has set her off on a Bharat yatra of sorts. The yatra has been fuelled by her dream of becoming the prime minister of India!Banerjee firmly believes that there is a lot of opposition to demonetisation and people of the country have turned against Prime Minister Narendra Modi. She feels that by positioning herself as the most trenchant critic of Modi and demonetisation, she can become a hero(ine) in the eyes of the people of the country. And, after the Lok Sabha polls in 2019, she would thus emerge as the person with the strongest credentials to become the prime minister of the country.Banerjee is also of the firm belief that not only will the BJP-led NDA not get even a simply majority in the 2019 elections, the Congress will also fall far short of a majority. She will, she predicts, win nearly all the 43 Lok Sabha seats from Bengal, and with other parties like the Samajwadi Party, the NCP, the DMK, the RJD and the National Conference, can cobble together a coalition that will get outside support from the Congress to keep the NDA out of power. Since her Trinamool Congress will be the largest constituent of this coalition, that she dreams of, she will be the strongest contender for prime ministership!The Trinamool chief does not have to wait till 2019 to find out that her presumptions and calculations are all completely flawed. She ought to have, by now, received enough indications about it. The first would have been on 17 November when she went to Delhi’s Azadpuri Mandi to address traders and daily wage earners. Not many turned up to hear her and after she spoke, many of those who heard her disputed her contentions and stand against demonetisation, as this report illustrates.Her next public rant against demonetisation was at Jantar Mantar on 23 November. There too, as this video clip shows, the crowds were sparse. And no senior leader of any party joined her at Jantar Mantar. The day before she ventured to Azadpuri Mandi, Banerjee had marched to Rashtrapati Bhawan to tell President Pranab Mukherjee about the hardships she imagined people of India were being put through by demonetisation. No major politician joined her in that march, save for former J&K chief minister Omar Abdullah, who would have perhaps had nothing better to do that weekday afternoon in Delhi.More evidence that she counts for little beyond the boundaries of Bengal should have hit Banerjee hard on Tuesday. Barely a thousand people, all Samajwadi Party workers deputed by Uttar Pradesh Chief Minister Akhilesh Yadav, attended the rally at Lucknow’s Gomti Nagar. Though Akhilesh Yadav had received her on her arrival at Lucknow’s Chaudhury Charan Singh International Airport, he gave Tuesday’s rally a total miss and deputed three ministers, who put in a brief appearance at her rally.Banerjee’s speech, in heavily accented and highly-flawed Hindi, cut no ice with those who listened to her. She kept the crowds waiting for an hour – she was said to be trying to cajole Akhilesh Yadav till the last moment to join her rally – and when they ultimately learnt that he would not address the rally, most of them left without even bothering to listen to her, as this report from Lucknow elaborates.Banerjee was supposed to head for Varanasi and address another public rally there on Wednesday. But perhaps judging by the indifferent response she received from the people of Lucknow on Tuesday, Banerjee may have realised she would receive a bigger snub by Prime Minister Modi’s electorate at Varanasi. And so she dropped her Varanasi plans and headed for Patna on Tuesday evening to address another rally on Wednesday.No minister or politician received her at Patna’s Jay Prakash Narayan International Airport on Tuesday evening. Even Lalu Prasad Yadav, who she counts among her friends, didn’t deem it necessary to depute any party functionary to receive her. Chief Minister Nitish Kumar, who supports demonetisation, turned down her request to join her rally on Wednesday. Even though Banerjee, who was accorded state guest status, was put up at the state guest house just across the road from Nitish Kumar’s bungalow, he didn’t bother to go and meet her.A desperate Banerjee went to Lalu Prasad Yadav’s residence on Tuesday evening and beseeched him to join her rally. For the benefit of camerapersons, she even hugged Rabri Devi. But behind closed doors, Lalu regretted his inability to attend her rally, saying he would however depute a senior party functionary to her rally on Wednesday. Lalu also told her he had decided to support demonetisation after a meeting with Nitish Kumar where the latter explained the benefits of Modi’s move to him.Banerjee’s rally at Patna’s Gardanibagh was, as expected, a damp squib with barely a few hundred people attending it. RJD vice-president Raghuvansh Prasad Singh was the only senior non-Trinamool politician on stage. A frustrated Banerjee went on to vent her ire not only on Modi, but also on Nitish Kumar, who she called a traitor, thus exposing her strong streak of intolerance towards those who disagree with her. Probably to hide her embarrassment, divert attention from her spectacular failure in Patna and gain some public sympathy, she commissioned a trusted aide to level juvenile allegations about a plot to kill Banerjee by the BJP.The Trinamool chief also has plans to visit Punjab, Gujarat, Maharashtra and Goa to address rallies in those states against demonetisation. There, too, her rallies will be total flop shows. The Trinamool does not have any organisation worth the name in all those states. And the politicians she thinks are her potential allies in those states will protect their own turfs and will not concede an inch to her.For instance, she would assume that the Aam Aadmi Party (AAP) would commandeer a decent crowd at a rally she hopes to address in Punjab. But there is no reason why the AAP would expend its energy or resources for her in a state in which it is a serious contender for power. That is why in Bihar, Nitish Kumar or Lalu Yadav did not attend her rallies and allow her to gain political mileage in their state. They, too, have prime ministerial ambitions.Similarly, Banerjee, too, would not be very keen on helping a chief minister of another state address a rally in West Bengal. Leaders of parties she considers her allies also know about her strong dictatorial streak and how she has poached MLAs from other parties like the Congress despite having a huge majority in the state Assembly. “This poaching of MLAs from the Congress and the Left have exposed Mamata and proved that she does not believe in giving space to any other party. So why should other parties give her space in their turfs?” said Congress MP Pradeep Bhattacharya.There are other reasons, too, for Banerjee’s acceptability not transcending the boundaries of Bengal. People of the country know that what she is demanding – a rollback of demonetisation – is an impossible demand. Everyone realises that Modi is no Manmohan Singh that he will succumb to any sort of pressure. While other politicians are criticising the implementation of the demonetisation scheme, she has tried to go one up on them by demanding that the entire scheme be scrapped. Her attempt at oneupmanship has only exposed her foolishness and political immaturity.Banerjee is also seen as a tainted politician. Many in the rest of the country believe she and her party benefitted from the Saradha scam. People believe senior Trinamool leaders accepted huge sums of money collected by Saradha and other chit funds from poor people of Bengal and some neighbouring states. Those leaders continue to be her close aides and, hence, she is also held to be guilty by association with them. Hence, her voluble campaign against corruption is seen as hypocritical.Banerjee has, thanks to her own actions in the past, acquired the image of an irresponsible and undependable politician. Her frequent tantrums as minister in the Atal Behari Vajpayee and Manmohan Singh governments, her issuing threats and deadlines to those prime ministers and her frequent resignation dramas did immense harm to her image and established her as a flippant and mercurial politician.Banerjee is also seen to be a poor administrator – as railway minister, she did little for the Indian Railways, and her tenures as coal, human resource and development, youth affairs and sports and women and child development minister are quite forgettable. She failed miserably to utilise her time in the Union government to prove to the people of the country that she possesses even the minimum governance skills. Instead, as Union minister, her attention was always focused on Bengal and she did absolutely no justice to the portfolios she held.She is perceived to be dictatorial and intolerant of contrary opinions or dissent. Her propensity to fly off the handle even in public is well known to the people of India. Episodes like her branding of a poor farmer who question her government’s farm policies at a public rally as a ‘Maoist’ and getting him arrested is fresh in people’s minds. As is the ugly episode of she walking away from an interview on an English TV channel after being asked uncomfortable questions by students at Kolkata’s Town Hall. Or the arrest of a Jadavpur University Professor who shared some innocuous cartoons poking fun at Banerjee and her senior colleagues on Facebook.All these make her an eminently unsuitable candidate for prime ministership. Also, politicians like Nitish Kumar, Mulayam Singh Yaday, Lalu Prasad Yadav, Nitish Kumar, Sharad Pawar and others are far too politically mature, savvy and intelligent than Banerjee and have been major and successful players at the national level, unlike her. She is totally out of her depth at the national level.So her assumption that they would make her the prime minister in the event of the Congress or the BJP failing to win a majority anytime in future is completely naive. They also know that the mercurial Mamata with her zero governance skills would make a mess of everything if she were to ever become the prime minister, and the blame for that would then fall on those who put her on that post. So why take the blame for her failings and misdeeds? She does not inspire any trust at all.It is, thus, high time Banerjee realises that she is chasing a pipe dream. Instead, she should concentrate on Bengal and pull the state out of the morass she, and her two predecessors – Jyoti Basu and Buddhadeb Bhattacharjee – have thrown it into. But that would, again, be expecting too much of her.Innovation Nation: The Indian Right’s Real Idea Is Disruptive InnovationAuthor: Rajeev SrinivasanPublication: Date: December 1, 201URL: Aatish Taseer wrote an opinion piece in the New York Times titled “Does the Indian Right have any ideas?. This goes to the heart of the matter: the Left believes it has all the ideas and all the answers. Taseer is not an extreme Leftist as many others in India are, so he doesn’t quite qualify for the #SJW and #AltLeft rubrics that they deserve, but he does deserve a response.Especially since Taseer’s perspective was in the context of the India Ideas Conclave 2016, which I attended, and since he quoted my Swarajya column there on ‘good’ dissent and ‘bad’ dissent, I feel entitled to retort.The old bromide about the Left having all the answers (or even any of the answers) is hogwash. Even though I believe the imported terms ‘Left’ and ‘Right’ are not meaningful in the Indian context, I’ll use them anyway for the sake of continuity.Let me begin by referring to a book I bought in the 1990s while living in the San Francisco Bay Area: Kerala: Radical Reform as Development in an Indian State by the Food First Institute, also of San Francisco. It is a slim, well-written 1994 volume, based on first-hand field research, with lots of tables and earnest arguments leading to the conclusion that Kerala’s famous Quality of Life Index is due to Leftist land reform and ration shops.It is also almost totally, comprehensively, devastatingly and tragically wrong.I know this, as a native son born and brought up in Kerala. After my years in California, I have now been living in Kerala for a long time. In fact, Kerala’s quality of life indices were always better than those of the rest of the country, for two inter-twined reasons: maritime trade, and the monsoons. This well-watered land is blessed with topography, climate and native plant species that made it the source of many spices, especially the coveted black Tellicherry pepper. The trade in that, plus cloves, nutmeg, cinnamon and so on made Kerala rich, and the Roman Pliny the Elder bemoaned that his nation’s coffers were empty because they had to pay in gold for these spices. Evidence lies in the riches, including Roman gold coins, in the Sree Padmanabha Swamy temple’s cellars.No, it was not Marxism, but three other Ms - matriliny, maharajahs and a monk - that led to development in Kerala. Matriliny among many in the numerically strong Hindu jatis, Ezhavas and Nairs, meant women controlled the family property, naturally empowering them.The maharajahs of Travancore devised an ingenious system whereby they ruled only as regents of the presiding deity, Sree Anantha-Padmanabha Swamy, and their successors were their nephews by matriliny: this led to a certain humility and lack of greed. They also paid attention to education, so that literacy was always higher than in the rest of India. In addition to government schools, they also allowed Christian missionaries to set up schools.The third was the reform-minded Saivite monk Sree Narayana Guru. He was the one who created a sense of egalitarianism in Kerala, which was once marred by jati-based oppression. Taking his advice to heart, the subaltern lower-jatis, in particular the Ezhavas, bettered themselves through self-help, education and organisation.It is these things that led to the rise of Left sentiment and equality, not vice versa. A literate population is susceptible to the siren-song of the Left, as can be seen in college campuses all over the world. And radical egalitarianism is also ripe soil for Leftism. Thus Communists came to power in Kerala in the 1950s.The story has been bleak since then: there ceased to be development in Kerala. The once-thriving agricultural sector in one of the greatest rice-growing areas of the world has ceased to exist, because well-meaning but oppressively high minimum wages made paddy cultivation unviable. The only sector that survives is plantation crops, where powerful vested interests prey on workers and manipulate price support by the government.There is no industry worth speaking of; the major export is of unskilled labour to toil in the 50 degree C construction sites of West Asia; of skilled labour such as nurses to staff hospitals in the rich world; and professionals such as engineers and doctors to various parts of the world. From being a productive earner of foreign exchange, Kerala has now become a money-order economy. When Arabs run out of oil, Kerala will starve (I am not exaggerating: Kerala, as of 2014, gets 84 per cent of its staple rice from other states). That is the reality of Amartya Sen’s much-ballyhooed “Kerala model”.But I brought up the book not only to point out how badly wrong it got its logic, but also to suggest that radical reform as development is a Right (in Taseer’s phraseology) practice as well, and it is ending up in Disruptive Innovation. One part of radical reform is what we’re now seeing in practice: demonetisation and a less-cash economy that will, along with GST, lead to smaller government as bureaucrats and politicians lose their ability to use discretionary power for rent-seeking behaviour. And the taxman has a pretty good idea of all transactions as well.The next shock will be the proposed assault on black wealth in real-estate by scrutinising proxy (benami) ownership. If, at the same time, land records are migrated online (even to a block-chain-based trusted distributed ledger system) one of the biggest reasons for poverty will go away. As Hernando deSoto has suggested, lack of verifiable property rights and thus the inability to use land as collateral is the bane of poor people everywhere.These reforms are a disruptive innovation. In the theory of the failure of leading firms, as proposed by Clayton Christensen, an incumbent is meeting the needs of the mainstream customer population. Ignored by that incumbent, an insurgent comes into the market with a product that may have less performance than the incumbent’s, and may satisfy a less demanding customer segment.The paradox is that the low-end insurgent may then steadily move up the performance curve, and at some point may meet the needs of the mainstream. At that point, the mainstream simply switches wholesale to the insurgent, leaving the incumbent without a customer base, and it fails.Something along these lines has happened with the Patanjali brand in FMCG. I’m not implying that Patanjali products appeal only to less demanding customers (that is not true), but their meteoric rise shows that a) customers are willing to switch wholesale, b) the value proposition is more than the product itself, but includes the attached emotive message. Marketing works, in case anybody doubted it.This simple model of disruptive innovation, as seen in the diagram, is applicable in politics as well as in business. This is precisely what the Right is doing.Consider the Left and in particular the Congress as the incumbent, providing a ‘product’, which is its vision of the future of the country. That vision has held the voter base in thrall for several decades, partly because we were brainwashed into believing there is no alternative, through control of the media and education. It was a negative vision of same-old-same-old-tired-slogans, banana-republic, dynasty, mai-baap sarkar.But the insurgent BJP, and especially Narendra Modi, was able to appeal to a small but growing voter group, and this became the mainstream in 2014, thus leading to the landslide victory. Modi’s innovation: he gave them that most precious of things – hope. Hope that governance can lead to prosperity. Hope for a better future for their children.Here is a graph showing the BJP’s vote share in percentage in general elections. That massive switch between 2009 and 2014 shows the point of inflexion, where the customer abandons the incumbent and moves on to the insurgent. What has happened is that the stranglehold of the Alt-Left SJW types on media has been challenged by social media, where an uncensored plethora of ideas (some admittedly extreme) make for Freedom of Expression.I predicted five years ago in a column in DNA “India is finally seeing the birth of alternative journalism” that such a thing would come to pass: the eclipse of biased and motivated journalism. I was delighted, in passing, that Bollywood superstar Amitabh Bachchan praised that piece on his blog! But anyway, the net result of the beginning of free-thinking is that the Right has gained momentum.And it is not only in votes, either. Three massive shocks to the standard-bearers of so-called ‘liberalism’ - the Modi, Brexit and Trump elections - have showed us that their comfortable echo-chambers do not reflect reality. In fact the very word is now, deservedly, a term of abuse, as I said recently on Swarajya “Let’s retire the word ‘liberal’ and use ‘Alt-left’ or #SJW instead’.The alleged ‘ideas’ from the Left have been shown to be largely hollow. The Left have committed a crime against humanity by preventing 500 million Indians from clawing their way out of poverty. We stood by as spectators while every other Asian nation passed us by.As Nassim Nicholas Taleb, the celebrated author of Black Swan commented, many of the Left elites’ certainties are demonstrably false: medical dogma on fat and cholesterol has been reversed; almost half of psychological research is unreplicable; micro and macro economics have less than the predictive power of astrology; and a large percentage of clinical trials are not replicable.Thus, don’t cry for the Left because their ‘ideas’ are largely bogus. The Right’s ideas are innovative, disruptive and are overturning the status quo. In the fullness of time, new disruptive innovators will overturn the currently ascendant Right’s ideas well. That would be proper, creative destruction, as predicted by Joseph Schumpeter.New Notes Worth Rs 4.7 Crore Seized In I-T Raid On CM Siddaramaiah’s Aides in BengaluruAuthor: Swarajya StaffPublication: Date: December 2, 2016URL: from the Income Tax Department’s Karnataka and Goa region operations seized Rs 6 crore in unaccounted cash, including Rs 4.7 crore worth of new Rs 2,000 notes on Thursday as they undertook a search-and-raid operation on the houses of two government officials in Bengaluru. This is the biggest seizure of new currency notes after demonetisation was announced on 8 November.The engineers are close to chief minister Siddaramaiah, Times of India has said in its report today (2 December). According to the daily, Income Tax officials also recovered 7kg of bullion, 7kg of jewellery and high-end luxury cars and bikes owned by family members of the two of engineers. Local news outlets, including BTv News, have confirmed the report.---------------------------Shishir Bajpai @sbajpai2806IT raids on Karnataka CM's close aide 2 chief engineers, Old currency notes worth Rs.50 crore cash found pic.dMgkG0WXJa@rajeev_mpDecember 1, 2016---------------------------According to The New Indian Express, officials whose residences were raided are, state highway development project chief planning officer S C Jayachandra and Cauvery Neeravari Nigam Limited managing director T N Chikkarayappa. One of the two engineers has once been suspended for misappropriating Bruhat Bengaluru Mahanagar Palike (BBMP) funds.India's WhatsApp Moment in ReformsAuthor: Srivatsa Krishna Publication: Businesstoday.inDate: December 18, 2016URL: 't wish for elephants unless you own a zoo, 'cause wishes have a way of coming true, said the Muppet Bab-ies. Let's not also forget that wishes do come true, but not for free. It is astonishing to see how intellectuals, semi-literate economists, sundry Page 3 types, Lutyens' former elite including many civil servants, LLMs (Left-liberal media), and politicians of every hue and colour, kept wringing their hands - and rightly so - at the absence of 'Big Bang' reforms. And when big bang happens, they again wring their hands and bemoan and attribute all kinds of causation, correlation and catastrophe to it. Much of it is simply untrue and unfounded. Economics is largely an accurate science and, thankfully, doesn't always react to the hand-wringing of losers. Fact remains, no one, including many inside the government, imagined that the Prime Minister would walk the talk, something which perhaps only Modi could do.Demonetisation is Narendra Modi's WhatsApp moment in economic reforms. The government has made an honest attempt at realigning economic incentives to drastically change human behaviour and make it easier for those who wish to be honest and incredibly tough for the dishonest. It will hit at the roots of untaxed, undeclared, taxable income.There is no precedent in the world of such a bold hit on the black economy, and there is no playbook for it. Thus, surprise was a key element of the entire scheme. Even inside the Prime Minister's Office, only five officials were in the know. Indeed, this is not demonisation of cash but hard demonetisation, which has left many bankrupt - financially and intellectually. Cash is used more to conceal than for purchase in India. Money stock of new notes has grown by 40 per cent in the past three to four years. Most of the notes are in fact of the new series. India needs cash proportionate to our GDP and per capita income. The country has too much cash relative to the size of its economy. Why are people suddenly paying up huge amounts for municipal tax and utility bills in Hyderabad and other places? Why is there a mysterious influx of Rs 21,000 crore in the first few days itself in Jan Dhan acco-unts? Why are professors in colleges in Tamil Nadu finding large deposits of cash in their accounts that are then suddenly withdrawn? Does all this benefit the poor, or does it show the absence of large sums of unaccounted cash in Indias economy?Now, to berate the objective of bringing in more and more people into the banking system (and a less-cash economy) and calling a cashless economy 'foolishly utopian' is false and mischievous. For many of our politicians who are trying to give the short-term pain the colour of long- term catastrophe, it is simply the result of being caught with one's hand in the jar. It was meant to hurt their black wealth and it has hurt their black wealth. Period.The World Bank in 2010 estimated the black economy as 21 per cent of our GDP and the recent voluntary disclosure raked in about Rs 65,000 crore. What about the rest? Let us assume only 5-10 per cent of it is kept in cash hoards outside the tax system. Even so, isn't that a significant enough sum to go after? One is talking about $200,000,000,000 or $200 billion. The 1978 demonetisation led to about 25 per cent of cash in circulation not coming back, which was extinguished. Something similar may happen now and it is expected roughly Rs 3 lakh crore of cash will get permanently extinguished. Is that not good enough to go after, and either force it back into the formal economy and earn taxes or extinguish it permanently?In early October, India's banking system crossed Rs 100 lakh crore in deposits. Of the Rs 17 lakh crore currency in circulation, Rs 15 lakh crore is in 500 and 1,000-rupee notes. About Rs 6 lakh crore came back into bank accounts within two weeks of the announcement, and may reach Rs 10 lakh crore by December 30. India has about 250 million households that on an average spend Rs 10,000 per month each in cash, as per research done by Spark Capital. Assume India needs about Rs 10 lakh crore of currency in circulation, using a money multiplier effect of 4X. Of the incremental Rs 5 lakh crore, about Rs 3 lakh crore is unlikely to come back, which is about the approximate size of the cash component of the black economy. The balance of about Rs 2 lakh crore will flow back into bank accounts due to the force of this reform, with all attendant multiplier effects.Just 5.5 per cent of Indian earners pay income tax, and nearly 85 per cent of the economy is outside the tax net. Whatever comes back will lead to the tax base becoming bigger than before. This will lead to future tax buoyancy and, with it, the white economy will expand. Also, collateral or mortgages can be given out from this since it is now part of the formal banking system. Further, it appears to have immobilised terror and Left-wing extremist funding (Rs 30,000 crore of black money with the latter as per intelligence reports) and has of course dealt a death knell to counterfeit funding. Not good enough?There is a lot of talk of second order effects - that Tirupur and Surat, major economic clusters, are closing down. But why? Because the corporates there were not depositing employee provident fund and other mandatory social security taxes. They are worried if they start paying by cheque now, the taxman will come after them for past sins. They will now have to make their peace with the law, which is a good, and not a bad thing. Indeed, the whole idea is to bring economic activity into the formal fold, and this demonstrates the big bang is working brilliantly.Then, the question of why the new Rs 2,000 note, which works against Harvard University's Peter Sands' theories to extinguish high-value bills and Ken Rogoff's curse of cash. Take it akin to a temporary pain-killer for the economy. A post-surgery balm, which ought to be phased out once the new notes of lower denomination are in place. Indeed, the government could have perhaps done better by violating the rule of relative sizes of notes. In India, larger denominations are made in larger sizes to help the illiterate and the blind identify currency easily. In this case, perhaps the government could have, in the interests of replacing currency inside ATMs faster with no recalibration, made the Rs 2,000 note the size of the old Rs 1,000 note.15.7 billion notes of one denomination and 6.3 billion notes of another denomination were in circulation. The printing capacity is 3 billion notes per month. For notes with the same value denomination, it would take seven months to replace, of which three months of printing are already done. But with the Rs 2,000 denomination, it will take half the time to replace similar value notes, so another two-three months of printing will bring back the same value of notes as currently in circulation. In future, high-denomination notes will be kept to a limited proportion of money supply. Conversations with bank managers on the ground point to the fact that long-lost NPAs of many years ago are now being paid back by promoters! Isn't it a fantastic outcome, quite apart from interest rates coming down?What next? What demonetisation will do is hit the stock of black money, but to attack the flows, much more needs to be done. There should be a limit for cash holdings and cash transactions. The former because it will then prevent sacks of cash, which are shown as 'old incomes' coming out of the closet only now. Stamp duty should be brought down gradually to less than 3 per cent, and the differences between circle and market rate will disappear. Benami Property Act should be implemented with full vigour and force to confiscate benami assets.Changing human behaviour is incredibly tough, especially given India's psyche of cash transactions, which for smaller value are almost 100 per cent in cash. Indeed, there will be some temporary deflation, which will be offset by buoyancy in growth and tax revenues. Narendra Modi has designed and delivered a reform as big as the 1991 reforms, which would have hurt many in his own party and biradari. It takes guts to do right by taking on one's own - compliments to him and the government for showing the courage of conviction to do so. - The writer is an IAS officer. Views are personal.Big gains to comeAuthor: Rana KapoorPublication: The Indian ExpressDate: December 2, 2016URL: short-term disruptions, the benefits of demonetisation will be immense.The government’s bold decision to demonetise Rs 500 and Rs 1,000 notes to curb black money has set in motion a tectonic shift. The move, in a single stroke, aims to annihilate the omnipresent shadow economy, while paving the way for safer and superior “cash-less” way of transacting. The prelude to the announcement can be traced to a series of complementing stepping stones laid out systematically over the last 2.5 years by the government in the form of the Jan Dhan Yojana, DTAA amendment with Mauritius and Cyprus and the most recent Income Disclosure Scheme.From an impact perspective, there is no doubt that the process of “demonetisation to remonetisation” would involve some short-term pain as economic agents struggle to cope with the sudden liquidity shortage. Some sectors will face deeper challenges, but these should be viewed as teething troubles. The multitude of benefits I expect the economy to accrue in the medium-to-long term, will far outweigh the near term consequences of the demonetisation drive. As such, I expect the Indian economy to follow a “tick-mark” shaped recovery over FY17-18 characterised by a 1-2 quarter slowdown, followed by the attainment of an inflection point or local minima, to be chased by exponential growth in quick succession.The first long-term gain will be a swelling of the deposit and savings base. Global agencies have pegged the size of the parallel economy in India at close to 23 per cent as of 2007. Unaccounted cash in the economy is estimated to at Rs 4,500 billion of which a certain proportion will make its way to the banks. Banks’ deposit base will receive a fillip of 0.5-1.4 per cent of the GDP. Savings will rise by a similar proportion, due to a switch from unproductive physical assets to financial assets.Second, there will be an improvement in monetary transmission accompanied by reduced lending rates. A rise in the deposit base will allow banks to lower the blended cost of funds as higher CASA deposits help to replace the high cost of borrowing and lower the overall cost of funds. I expect banks to reduce deposit rates by 75-100 bps over the next six months. The new regime of MCLR will immediately take into account the lower cost and will thereby lead to a decline in lending rates, which will boost economic activity in the medium term.The demonetisation move will also provide a fillip to Jan Dhan accounts and financial inclusion. Over the last two years, while the number of Jan Dhan accounts has recorded a stellar growth, the share of these accounts in the total deposit base of the banking system has remained under one per cent. The demonetisation drive should give a push to cash deposits in Jan Dhan accounts, of which close to 43 per cent have remained dormant. In addition, the move will help to inculcate banking habits among the large unbanked population.Finally, with some part of unaccounted money making its way into the formal channel the government stands to benefit from higher income tax collections. This should help cushion the government’s FY17 fiscal deficit target, especially post the shortfall in anticipated spectrum revenues. Demonetisation will move the economy from the unorganised to organised sector, dovetailing into GST architecture that is expected to come on board next year. This will stand to enhance the government’s ability to tax commercial transactions.With 85.2 per cent of the currency in circulation as Rs 500 and Rs 1,000 notes ceasing to be a legal tender, currency for transactional purpose has plunged in the economy. Some of the sectors are which are cash-intensive — such as real estate, retail trade, gold, hotels, transport and communication — are likely to witness short-term disruptions. In addition, the demand for both consumer durables and non-durables will see a pullback owing to liquidity constraints. Cumulatively, GDP growth for FY17 could see a downside to the tune of 40-50 bps. Having said so, I believe that in the process of building long-term benefits, the economy will have to endure a few near term pain points. In fact, demonetisation offers a unique opportunity to reform the way business is done in India in many sectors. For instance, microfinance institutions that have been struggling to inculcate the habit of cashless transactions could well use this window to hasten the move towards electronic mode. Likewise, banks and business correspondents in rural areas could encourage opening of fresh accounts under the Jan Dhan to further financial inclusion.Taking forward the words of outgoing US President Barack Obama that “change is never easy, but always possible”, I believe that change can be made easier, if we all strive towards it. In this context, government’s efforts over the last one week to continuously assess the progress of implementation and announce incremental measures to ease the operational burden on citizens is heartening. Importantly, the role being played by my banker colleagues also deserves a special mention, for the national service they are rendering to actualise the government’s vision.As responsible economic stakeholders, we must prepare ourselves to endure the short-term pain, for long run positive externalities of demonetisation. The positive spillovers for growth will be immense, with a sustainable 8 per cent GDP growth now seeming more of a reality than an aspiration.- The writer is MD & CEO, Yes Bank, and chairman, Yes InstituteQueuing up for changeAuthor: Sheela BhattPublication: The Indian ExpressDate: December 1, 2016URL: at the suffering of the dishonest, poor voters support the Modi government’s demonetisation move. But this enthusiasm is emotional, not political.In May 2014, when Narendra Modi became prime minister, it was expected that boosted by anti-incumbency against the Congress, personal charisma that inspired people to believe in promises of acche din, and a strong Hindutva undercurrent, Modi would change the narrative of Indian politics and confidently lead his party to 2019’s election.But Modi has proved more ambitious than any other leader in recent history. Exactly halfway into his tenure, Modi gave an astonishing jolt to the nation on November 8 by touching on a raw nerve — money. This has created a new class divide out of which Modi wants to earn electoral profit. The great gambler has put everything on the table.There are no two opinions on people suffering hardships they didn’t deserve. As old notes pour into banks, it seems the government’s calculations have gone haywire. A lack of preparation and inefficient implementation add hardships. Yet, there are contradictory emotions around demonetisation.When you talk to poor people, you realise that they think Modi has actually unleashed the promise of acche din plus. Now, it won’t be easy to bracket the BJP as a “Brahmin-bania” party. That’s bad news for its opponents. This explains Nitish Kumar, Chandrashekhara Rao and Naveen Patnaik supporting the move. The victories of the BJP in local body polls after November 8 also proves that people have been patient, so far.Traders are angry as the Modi government wants them to put their cash in the banking system, slash profits and pay taxes. They hate exposing their dealings via Aadhaar, etc. They see demonetisation as Modi’s “undemocratic” way of “imposing” change. Traders in Surat told me that just as China bulldozed people and displaced them from their land to rebuild Shanghai and Beijing, Modi is pushing a digital economy into India. They claimed the government is bullying dhobis, cobblers and daily wagers to open bank accounts, for meagre earnings of Rs 20 a day, which shows an insensitive disconnect from Indian reality.But many of these poor people are singing a different tune. In Delhi, Sanjay, who cleans Mercedes SUVs costing over 50 lakh and gets paid Rs 350 a month, has a smirk on his face. He says, “Saab ko zaroor takleef hoga. Bahut maal kamaya hai.”(The car owner will feel the pinch, he’s earned a lot.)Modi has touched upon this idea amongst the poor that “others” have earned too much and hoard lakhs of unaccounted money in dark corners of their homes. For Sanjay, the rich, flashy people he serves affect him profoundly. He supports Modi, who gives him the feeling that he’s punished a Mercedes owner in some way.With demonetisation, Modi has brought a sharp divide on to the national platform. Normally, the poor are resilient simply to survive — that famed Indian resilience is working for the Modi government now. People are suffering but staying patient, thinking, “Acche din will come after the cleaning is done.” The AAP has strong support among poor voters, but in Delhi the street situation is under control. This shows Modi has once again touched a chord with the aspirational Indian.Those carrying shopping bags belonging to their “madams” in malls, those paid low wages but carrying the physical burden of growth, those whose income is only “salary-after-tax-deduction-at-source” feel “this will bring good results for the country in the long run”. This narrative is not backed by economic logic; it works on the worldly wisdom of ordinary Indians. Today, the idea of attacking injustice assures order.I spoke with poor workers, salaried professionals, unscrupulous builders and devious traders across Delhi, Mumbai, Vadodara and Ahmedabad. A conversation with Mahesh, an unemployed youth in Delhi, was revealing. When I asked, “What do you think about notebandi?”, he replied, “It’s trauma. But the pain is only for a few weeks. We can do without subzi temporarily. Lekin bhavishya ke bina kya hai zindagi main? (Without a good future, what’s there in life?)” Mahesh added, “My friends who go to college and seek jobs think that after December 30, everything will be affordable. Cereals will become cheaper. We’ll have more money. Today, rich men are weeping. Corrupt people are howling. This has happened for the first time.”In Vadodara, Mrugesh runs a taxi service. His business is down to 20 per cent but he supports notebandi, saying, “My father was raided in 1987 by the tax department. We lost our jewelry business. Taxmen harassed us for bribes. We sold flats, bought with black money, to pay our customers, whose gold the tax department confiscated. I now pay taxes and sleep well.” In South Delhi, a two-bedroom flat was on sale. The week before demonetisation, the deal was finalised at Rs 1.60 crore. But it got delayed. After demonetisation, the flat is being purchased for Rs 1.32 crore, the full payment in cheque. Someone’s hard-earned 28 lakh is saved because of a feeling that real estate prices will crash by one-third. That’s bad new for builders — but good news for honest buyers.As India enters December in amazement, what will happen to those supporting the government? Enthusiasm is on shaky ground; the poor have no cash in hand and fear a loss of jobs. Ground sentiment suggests supporters will lose faith if people find the exercise hasn’t stopped conversion of black money into white. People’s enthusiasm will ebb if the banks end up with deposits around Rs 14.18 lakh crore (money withdrawn from the system as 2,203 crore notes of Rs 500 and Rs 1,000 denominations turned illegal tender). Now, the government’s hasty move to amend the IT law, after it found tax-cheats successfully trying to convert black money into white, created doubts. People could ask if the government is failing somewhere in its target. Any move that allows tax evaders to keep a substantial amount of their black money won’t go well with Sanjay, Mahesh or Mrugesh. Their support is emotional, not political; it can’t be taken for granted.HTLS 2016: Demonetisation gains uncertain, says Nobel laureate Paul KrugmanAuthor: Prashant JhaPublication: The Hindustan TimesDate: December 2, 2016URL: laureate and economist Paul Krugman has termed India’s demonetisation move as “unusual”, saying while there are “significant to low costs“, it is hard to see “significant gains” from the decision.Krugman, however, emphasised he saw India as a high prospect economy.Speaking at the 14th HT Leadership Summit, the 63-year-old economist said there was a good case to be made that high denomination banknotes didn’t serve a legitimate purpose. “But that did not happen here. High-value notes are not being eliminated. This seems like a one-off attempt to flush out illicit cash,” Krugman said of the government’s decision to scrap Rs 500 and Rs 1,000 notes.While he could understand the motivation, the move was “highly disruptive”.But could such an exogenous shock transform behaviour? “I would be happy to be proven wrong. There could be some permanent change in behaviour. People will be more careful and sophisticated in laundering their money in the future,” he said.Krugman said Indian economy, to him, looked like “China with a 15-20 year-old lag”.“It has reserves of entrepreneurial rigour, reserves of educated people, wide use of English, and unlike China, it has not hit the demographic wall. It has a lot of potential.”He said countries such as China and India would now have to help “hold the international system” created after the Second World War, given the political and economic churning in the US and Europe. “The US is neither big enough nor emotionally inclined enough to be the benevolent hegemon anymore. There is almost a competition between US and Europe on who can go off the rails first. Now big developing countries will have to hold the system. No more free-riding on US hegemony.”Krugman argued that the current situation of “secular stagnation” in the global economy could well be the “new normal”. Flagging concerns about China, Krugman said it had an unsustainably high investment rate and moving away from it without catalysing a recession would be a big challenge.Though a harsh Donald Trump critic, Krugman said he did not anticipate a macroeconomic crisis in the US. “In the next few years, US would not be a drag on the world economy, but China may.”There's some math behind Mamata Banerjee spearheading campaign against note banAuthor: Saugata Roy, TNNPublication: The Times of IndiaDate: December 2, 2016URL: single stroke by Prime Minister Narendra Modi has soured his "personal chemistry" with West Bengal chief minister Mamata Banerjee. Mercurial Mamata is on a "do-or-die" mission against Modi's cash clean-up bid.Such is her determination that she was ready to shake hands with her arch rival CPM against Modi. Although the Marxists did not reciprocate, that didn't faze her. Nor did the refusal of Bihar chief minister Nitish Kumar — she had moved closer towards him in the last few months — to join her, dampen the antidemonetisation ardour of the Trinamool boss. Didi immediately hit out at the 'gaddar'— widely seen as a reference to Nitish — and reached out to RJD supremo Lalu Prasad. She even put aside her anger against Samajwadi Party for betraying her to back Pranab Mukherjee for the post of President, to enlist UP CM Akhilesh Yadav in her campaign.And she has been raising the pitch constantly, demanding a roll-back of the entire exercise when other opposition parties have restricted their criticism to the manner in which demonetisation is being implemented.So what makes Mamata so angry? Social media is flooded with posts saying it's a desperate bid by her to protect her ilk that has been hit hard by the cash clean-up. But, even if one doesn't discount the view, the argument applies to all political parties, including the ruling BJP. Then why is she alone being so edgy?It would be too early to jump to conclusions, because both Modi and Banerjee are moving by perceptions.Fact is, people across Bengal, from auto-rickshaw drivers to the salaried middle-class, hailed Modi's move the day it was announced.They saw it as a sincere attempt to book the crooks, politicians, real estate developers, a section of bureaucrats and professionals, who've been looting their hard earned money with impunity. Even people standing in long queues were ready to bear the short-term pain for the long-term clean-up. The public mood began swinging a week later, when the liquidity crunch hit households.Sales in kirana shops and local bazaars dropped, making households cut their expenditure and go for credit purchases. In villages, small farmers, at the end of the supply chain, have never had enough muscle to keep this credit business going for more than a week.The result has been a shift of business from local markets to malls. It hit the informal supply chain at a time when a large chunk of people in Bengal ekes out a living from this sector. Harvesting has got delayed by a week in Bengal's villages and sowing of the potato tuber has also suffered. Mamata is hoping to tap into this frustration and anger.Moreover, she seems to have got a sanction from a wide range of economists, including Nobel laureate Amartya Sen. Even a working paper prepared by the Tax Research Group of the National Institute of Public Finance and Policy (NIPFP) under the Union finance ministry shared some concerns.Mamata is thus playing a gamble to find for herself space in national politics, when other opposition parties are not too confident of the outcome in the 2019 Lok Sabha polls. Nitish already has problems with his ally Lalu Prasad; and, the Yadav family feud in UP has spilled out into the open. Congress too doesn't have the numbers to command the opposition course.Mamata is far better placed. She has decimated the Left, and BJP, though a rising force in Bengal, is still a distant second. Confident of winning at least 40 of the 42 Lok Sabha seats in the 2019 general elections, the Trinamool chief is now banking on the growing public impatience among the farmer, the petty trader and the salaried class to turn the tables on Modi. It's not without reason that Mamata reached out to the city's biggest trading hub at Burrabazar the other day to talk to traders, many of whom voted for BJP in the national and assembly polls.Finally, Mamata sees BJP as her next opposition in Bengal — reason enough for her to up the ante against Modi. Both the leaders, it seems, are looking at a new polarisation in Bengal, and Mamata is doing it her way.Modi Holds The Trump Card Show Recent Election ResultsAuthor: Chandan MitraPublication: Date: December 2, 2016URL: recent civic polls and by-election results in Maharashtra and Gujarat reaffirm that the Prime Minister's support has not been dented by the cash crunch and the opposition has erred badly in reading the public mood.BJP has emerged with flying colours from the first electoral test since Prime Minister Modi's demonetization drive was launched on November 8 this year. In civic elections in Maharashtra, which BJP and Shiv Sena, (partners in the state's ruling alliance) fought separately, BJP won 51 mayorships, Shiv Sena came second with 25, followed by Congress with 23 and Sharad Pawar's NCP got only 18. In Gujarat, BJP swept the civic elections yet again winning 107 out of 123 councils. The results have obviously dampened the spirits of opposition parties in the two western States as they had hoped the travails of "note bandi" or cash crunch in the wake of the ban on Rs. 1,000 and Rs. 500 currency notes would antagonize voters against Mr Modi's party.Significantly, the BJP also scored big in by-elections in West Bengal and Madhya Pradesh. In the latter, it retained its seats albeit with a reduced majority in the Shahdol Lok Sabha constituency. In West Bengal, where the party's influence is rather limited, it registered a huge jump in the Cooch Behar parliamentary seat, securing 28 percent of the total votes, up from 12 percent that it got in 2014. Quite clearly, queues outside bank branches and ATM counters, difficulties being faced by ordinary people - from farmers' inability to buy seeds in the sowing season to arranging weddings in the family - have not metamorphosed into electoral anger. From all accounts, Narendra Modi's popularity not only remains undiminished but may have even gone up by a few percentage points.On a personal note, in the last fortnight, I travelled to three places in the country far removed from one another well after the cash crunch hit us. My experience suggests there is a big disconnect between Delhi and other urban/suburban centres in the response to the "note bandi". In Lucknow and its surrounding areas, I found people shrugging off its effects. Indeed there were no long queues outside bank branches. Talking to farmers on the city's outskirts, I found them largely indifferent, their only complaint being that wholesale dealers were still paying them in old notes which had become difficult to exchange. In Kolkata and neighbouring Hooghly (from where I had contested the 2014 Lok Sabha election), the indifference was even more palpable. Middle-class Bengali society usually makes a virtue of frugality. Most people I encountered said Rs. 10,000 was enough to last a month and that much they had successfully drawn from their bank accounts. There was also some disregard for the note ban. Small traders could be seen routinely conducting business with old 500-rupee notes, confident they would successfully deposit their non-legal tender in banks at least till December 30. My most recent visit was to the Army's War College in Mhow, some 50 km outside Indore in Madhya Pradesh. Army officers may not really be representative of the average common man, but they too have to run households. The universal response even from army wives was that although cash was at a premium these days, they had not been particularly discomfited.In all three places, there was overwhelming support for demonetization. It was vocally argued that the war launched by the Prime Minister on black money was long overdue and it would help restore the nation's moral values. The move has also reinforced Narendra Modi's image as a "doer", especially as it comes in the wake of the cross-LoC surgical strikes on Pakistan-sponsored terror camps. As a result of the growing respect for the Prime Minister's leadership, the inconvenience faced by the middle class in urban and suburban centres is being brushed aside by comments like "No gain without pain". It is here that the opposition miscalculated badly while mounting a frenzied campaign to highlight "people's suffering". As the civic poll and by-election results show, the electorate is ready to endure the suffering in the confidence that economic prosperity will soon be on its way. Characteristically, the Prime Minister has turned the tables on the Opposition by forcefully arguing that those opposed to demonetization are, in effect, supporting the cause of black money holders, hoarders and other economic offenders. The fact that some regional party leaders are alleged to have procured large quantities of illicit funds over the years has added grist to Mr Modi's mill.But having said this, it must also be contended that the longer the currency crunch continues, public opinion may start turning against the move. The biggest problem is the inadequacy of funds with banks and the continuing difficulty of withdrawing cash. Since an estimated 70 percent of economic transactions in India take place with cash (60 percent of the population still lacks bank accounts, the Jan Dhan drive notwithstanding); the severe shortage of currency notes has hit daily wage earners, petty shopkeepers and marginal farmers. The government's initiative to promote digital transactions through bank transfers, debit cards and e-wallets is laudable, but the transition to a cashless economy will take a long time. Even in mature Western economies, the widespread use of plastic money, supplanting paper currency as the main medium of transaction took more than two decades. Given the size of India's economy and its largely semi-literate population, this is a humungous challenge.As of now, the Prime Minister holds an unchallenged upper hand over the Opposition. In fact, the more his rivals block parliament's functioning or hold street protests, the more Mr Modi's cause gets stronger. The only negative impact of demonetization will be easily overcome if the government now pushes the mints to print new currency, especially Rs. 500 notes (since the Rs. 2,000 note has proved highly unpopular), and all ATMs are recalibrated on a war footing. In fact this is an imperative and the exercise must be completed in good time before the crucial assembly elections in Uttar Pradesh and Punjab are held, presumably in March 2017. Meanwhile the opposition would do well to recalibrate its strategy of blind opposition. Its cohesion is, in any case, cracking with Nitish Kumar breaking ranks, and Naveen Patnaik and Chandrababu Naidu, among others, coming out strongly in favour of the war on black money. Typically, the Congress is in a quandary. It cannot bring itself to accept that public opinion is with Mr Modi in his drive against black money. Some hours spent outside banks and ATMs won't move people to vote against the Prime Minister's policy. Clearly today, Narendra Modi holds the trump card.- (Dr. Chandan Mitra is a journalist, currently Editor of The Pioneer Group of Publications. He is also former BJP MP, Rajya Sabha.)Conspiracy politicAuthor: EditorialPublication: The Indian ExpressDate: December 3, 2016URL: Banerjee makes herself, rather than demonetisation, the issueTrinamool Congress chief and West Bengal Chief Minister Mamata Banerjee has alleged the Centre is conspiring against her on land and in the air. On Thursday, an IndiGo plane she was on was made to hover over Kolkata “despite being low on fuel”, her party alleged. Having landed in Kolkata, the CM saw something sinister in the presence of army personnel at toll plazas, including near the state secretariat Nabanna — a “bid to create a civil war-like situation in the country”, claimed Banerjee. The airline and the army have officially clarified since that both events were routine. But one thing can be said for sure: This is not the end of the matter. The alarm bells set clanging in Kolkata by Banerjee will not be calmed by facts or muted with clarifications. What makes them ring, what will keep them ringing, is a politics that thrives on overstatement and excess and, most of all, on the personification of the issue.Banerjee has done this before. In her long and arduous struggle against entrenched Left dominance in West Bengal, she often resorted to a theatrical style meant to keep the spotlight on her, even if it meant relegating the issue. Even after she wrested power from the Left, and became chief minister, she has seemed to be spoiling for a fight, preferably on the streets. For Banerjee, the Modi government’s bold gambit of demonetisation may be the perfect opportunity she was looking for — it gives her another formidable opponent and a nation-wide arena. With the national Opposition fragmented and the Congress in decline, it could be the launchpad for a larger leadership role on the national stage. And it is not just Banerjee. Today, the theatrical style of politics that keeps the personality at the centre, this way or that, is also practised with great glee and enthusiasm by another ambitious chief minister of a non-BJP state. Delhi Chief Minister and AAP chief Arvind Kejriwal is masterful in his ability to attract headlines and steal them from his political opponent. And in this, it could be said that both Banerjee and Kejriwal may have taken some tips from another chief minister who is now prime minister — as reflected in the demonetisation move, PM Modi has honed the art of putting himself at the centre of his own policy.At a time when a strong government has made a consequential move, the problem with Banerjee’s politics is this: Keeping herself in focus will detract from the task of addressing the very real people’s concerns triggered by the policy of demonetisation or the manner of its implementation. The government has played its hand. By all accounts, and if Banerjee is any indication, the Opposition is still to come up with its own.Electing a new peopleAuthor: Aakash JoshiPublication: The Indian ExpressDate: December 3, 2016URL: battle over demonetisation will reveal if the Indian citizen has changed.The abrupt extraction of a bulk of the currency in circulation by the Narendra Modi government is not a utilitarian project. Most economists of repute — including Amartya Sen (IE, November 26) and Kaushik Basu (The New York Times, November 27) — not directly employed by the government of India have said that removing over 85 per cent of cash from a reasonably robust economy isn’t great policy. The other objective of the government was to end funding to terrorist and militant groups. A cursory glance at headlines from Kashmir — from frequent attacks to stories of militants being caught with bundles of the new Rs 2,000 notes — will illustrate that the goal remains distant.As people stand in queues that have already become cliché, there are stories of anger and frustration and tragedy. The anger, of course, can be understood — overnight, people were thrown into a crisis which was not of their own making. But it also seems from reports from the ground, there are a large number of people who support Prime Minister Narendra Modi’s “fight against black money”. What is it that makes people support the move? There are the simple answers: A sense of schadenfreude among the poor and middle classes at the invisible rich weeping over their piles of now useless black money. Or that they genuinely believe, as an act of prophetic self-interest, that this move will benefit them and that the jumla-esque Rs 15 lakh will come into every account now that the kala dhan is being whitened and the coffers of the state are filling up.These explanations rely on the incomplete and perhaps even obsolete understanding, ignoring a fundamental change that has been in the making since the 2014 general election. For this government, its own definitive majority — a first for the BJP — is a millennial moment. It ended the bara sau saal ki ghulami that presumably included everyone from Akbar to Nehru to Manmohan Singh. It is the culmination of a project that began with the RSS in 1925. The RSS has always described itself as a “cultural organisation”— political power is the means to an ideological end. This is most visible in its interest in the education system and syllabus. The human resources and culture ministry, after all, holds the key to changing thought and society.It is in the pursuit of that new society, which began with the inauguration of the current government, that demonetisation has taken place — not for some rational, economic end. The best illustration of the government’s sense of purpose comes from an article by Union Minister for Information and Broadcasting, M. Venkaiah Naidu (‘The new cultural revolution’ IE, November 29).Like Mao Zedong’s original, this “new cultural revolution”, led by demonetisation, is meant to “usher in a behavioural change at levels of society” where citizens will do everything from “attending office on time” to bringing about “cleanliness of thought and action”. It is this idea of creating a new kind of citizen to fit a new society that is an ideological one: The people must change and sacrifice for an utopia propagated by the state in its moral certainty. Their interests as individuals do not matter. The act of standing in line, of suffering hardships for a deferred idea of justice, is not the response to a democratic demand, but rather, a moral test for the people of India. If you do not support the move, you are against the order that has been set up to bring about a better world or venal or quite simply, “anti-national”.This notion is neither new nor complicated. However, in democracies, it is rarely employed in times of peace and can be externalised during times of war.What is unique about the demonetisation drive is that it has occurred in a functioning democracy, brought about by a government which expresses the will of the people. And it is here that the danger lies. What has been attacked through demonetisation, or at least its implementation, is not a vague idea of diversity or even secularism but our most basic of possessions — money and time. The expectactions of the people from their representatives — if they do indeed stand by the government as it claims — are no longer what it used to be. Their suffering for the “nation”, which is the only tangible outcome of the exercise so far, has become a virtue and provides a sense of purpose and, perhaps, even unity. Ideas of safety, prosperity and peace are not something to be gained rationally in the immediate term, but in a future which may not come. That is what is truly at test in the political battle over demonetisation — whether or not the 2014 general election represented a fundamental ideological change not just in the orientation of the government of India, but in its people. If that is the case, the government will not need a “new cultural revolution” to change the Indian people and the idea of India. It has already succeeded.Voters will punish BJP for demonetisation, says UP?CM Akhilesh YadavAuthor: Srinand JhaPublication: The Hindustan TimesDate: December 2, 2016URL: government’s decision to junk 500-and 1,000-rupee notes has caused “huge suffering” to the common people who will vent their anger in the upcoming elections, Uttar Pradesh chief minister Akhilesh Yadav said on Friday.Speaking on the first day of the 14th Hindustan Times Leadership Summit, Yadav said the surprise decision to recall high-value bills had bolstered the Samajwadi Party ahead of state polls early next year.“When you make common people suffer, they will vent their anger… because of the currency shortage, leaders of all parties will have to resort to the bicycle (the SP’s election symbol),” Yadav said to applause and laughter from the audience.“Governments should work for people’s welfare by encouraging spending. But the BJP government has caused such difficulties to the common man. People are breaking down their “Gullak” (piggy banks) to meet daily needs,” Yadav said.He rejected government claims that the currency switch will stamp out illegal cash, pointing to media reports about fake variants of even the new currency bills. “Fake debit and credit cards are also available in the market,” he added.The 43-year-old leader said he had apprised the prime minister of the difficulties of ordinary people and that Narendra Modi had assured him that things will be brought under control.“He told me that citizens should be encouraged to absorb technology,” Yadav said.The UP chief minister has been one of the most vocal critics of the so-called demonetization three weeks ago. He has alleged that farmers, poor and small traders have been the hardest hit by what he said was an ill-planned rollout of the move.Countering claims of BJP leaders that only the rich and corrupt were opposed to the demonetisation move, Yadav said he had not seen a single rich man standing in the queue outside banks or ATMs.“It is common knowledge that bank officials visit homes of their valued customers to solve their issues”, he added.Speaking about his initiatives to distribute laptops and smartphones, Akhilesh said his government had been the first to grasp the need to use IT tools.In a veiled reference to Congress vice-president Rahul Gandhi, the chief Minister quipped, “Only some politicians have stood in the queue to draw money from the ATM”!The Deposit Figure Of Over Rs 11 Lakh Crore Is Incorrect. Here’s What The RBI Data Says.Author: Alok BhattPublication: Date: December 2, 2016URL: Indian Express ran a story titled ‘Demonetisation’s rude shock: There may not be any black money’ recently. The report, attributed to IANS, was carried by many other news portals as well. Quoting from the Rajya Sabha reply of the Minister of State for Finance, Arjun Ram Meghwal, the report said the high-denomination currency circulating in the system on the day of Prime Minister Narendra Modi’s historic announcement was Rs 15.44 lakh crore.Quoting the Reserve Bank of India (RBI), the report said Rs 8.45 lakh crore (in old Rs 500 and Rs 1,000 currency notes) was already mopped up by the banks from its depositors.The report also went on to claim that the total cash reserve ratio (amounting to Rs 4.06 lakh crore) as on 8 November was the amount already held by banks and, thus, part of the total currency in circulation.Then, it dropped a bombshell, questioning the demonetisation drive in view of the total value of Rs 12.50 lakh crore already finding its way into the banking system.However, the figures from the report are incorrect.Every Friday, the RBI releases its Weekly Statistical Supplement (WSS) report, detailing its weekly operations under 14 tabulated reports. The most recent report available in the public domain is that from 25 November 2016, and the report for the current week is due today. These reports capture the data for the week prior to the release of the report.Now, refer to Table 7 in the report. It captures the information on reserve money (M0), its components and sources. Reserve money (M0) is the ‘base money’ and the highly liquid component of money stock in the economy. It plays the most crucial role in the determination of other monetary aggregates of the economy.At any given point in time, the reserve money (M0) equation (its components) is as follows:Reserve money = Notes in circulation + Bankers’ deposits with the RBI + Other deposits with the RBINotes in circulation represent the currency in circulation in the form of notes and coins, while bankers’ deposits with the RBI represent balances maintained by banks in the current account with the RBI, mainly for maintaining the CRR and as working funds for clearing adjustments.The final component of reserve money is other deposits with the RBI and this includes deposits from foreign central banks, multilateral institutions, financial institutions and sundry deposits net of IMF Account No 1.A tabulated compilation of movement in reserve money (M0) per WSS bulletins of the RBI is as below:From the table, it can be seen that the total currency in circulation as on 18 November was Rs 14.27 lakh crore - a decline of Rs 3.70 lakh crore (20.61 per cent) over the figures from 4 November.Another significant takeaway from the tabulated data is that bankers’ deposits with the RBI for CRR (as claimed in the IANS report) as the currency already in circulation is not counted as currency in circulation and is in fact a separate line item.If one were to take into account the RBI figure of Rs 8.45 lakh crore as mopped up by banks till 28 November as the old notes tendered for cancellation, almost Rs 6.99 lakh crore (45.27 per cent of total) is yet to be deposited.In view of this explanation, it is important to stress on the need to form opinions only on the basis of RBI bulletins and press releases. There are far too many people who would want to write the obituary of demonetisation. Believing motivated reports would be playing into their hands.I did it for commission, says Gujarat businessman who disclosed Rs 13,860 crore black moneyAuthor: Ashish Chauhan, TNNPublication: The Times of IndiaDate: December 3, 2016URL: Shah, the Gujarat businessman who had gone missing after he disclosed Rs 13,860 crore under Centre's Income Disclosure Scheme, appeared before media on Saturday and claimed that he had made the disclosure at behest of some people in the greed for commission. "I will disclose the names of the people before specific I-T officers," Shah said. Mahesh Shah appeared in the office of a local TV channel. Later police and I-T officials arrived at the channel's office and detained him. "I was not running away anywhere but for some reasons I stayed away from media," the businessman said. "Those whose money was disclosed under IDS backed out at the last moment so I could not pay the first instalment of tax," he said, and claimed, "I will expose everything soon. Those whose money was disclosed are businessmen and politicians." "I have committed a mistake but I will reveal everything very soon. Truth will prevail in the entire matter," he said. Police officials said they will interrogate to find out the truth behind his claims. Income tax department sleuths carried out searches at Shah's residence and his chartered account Tehmul Sethna's office and residence from November 29 to December 1 after he failed to pay the tax on the disclosed black money. "The last time I talked to Shah was on November 29 in the presence of I-T officials. Ever since, he is inaccessible," Sethna, a partner in the 90-year-old CA firm Appaji Amin & Co, said on Friday. Shah, a big-ticket land dealer with business interests in Gujarat, Mumbai and Pune, had declared his income on September 30 -the last date for disclosures under IDS. The first instalment of Rs 1,560 crore, 25% of the 45% tax imposed on his declared income, was to be paid on November 30. However, Shah's declaration form was cancelled by the I-T department on November 28.India’s leadership has got guts – if only Hong Kong could have some of itAuthor: Yonden LhatooPublication: Date: December 1, 2016URL: Lhatoo sees bold and decisive leadership behind India’s controversial demonetisation drive, and can’t help contrasting it with Hong Kong’s situationI still vividly remember the last time I was forced to pay a blatant bribe in India. It was quite a few years ago, at the cargo handling facility of New Delhi’s international airport, right under a big anti-bribery warning sign.I was picking up a parcel that I had earlier arranged to be sent by cargo flight from Hong Kong when I realised I was being deliberately given the runaround, from counter to counter, unless I paid the ubiquitous “tea money”. So I did.That was long before Narendra Modi became prime minister. I was in India again for a holiday last month, and returned to Hong Kong just a day before the shock and awe of his demonetisation drive. It was by chance that I missed the immediate panic it triggered.In one fell swoop, on the evening of November 8, Modi declared all 500-rupee (HK$56) and 1,000-rupee notes invalid, effective from midnight. We’re talking about India’s two biggest currency denominations, accounting for 86 per cent of all the money in circulation. In a country where 90 per cent of the transactions use cash. You can imagine the impact. India is not quite ready to be a cashless society, with electronic payment still in its infancy.Modi’s move is a declaration of war against black money – only 2 to 3 per cent of some 1.3 billion Indians pay any income tax at all, which means ridiculously huge amounts of cash are hidden away and used under the table in a shadow economy that is estimated to account for up to 20 per cent of gross domestic product. All that dirty money can now be deposited in banks, but it’s taxable beyond a limited amount.Whether he’s right or wrong to do it depends on who you’re talking to, three weeks after that apocalyptic announcement.Much of that talk is about the inconvenience to millions forced to wait in snaking queues to withdraw banknotes with lower or new denominations – and there aren’t enough of them to go around. Only those standing in line should have the right to dismiss it as an inconvenience for the greater good.More serious is the chatter about the impact on GDP, as the cash crunch takes a toll on consumer spending, businesses falter from the grass-roots level up, and agriculture is hit as farmers are unable to buy seeds and fertiliser.The counter-narrative is that this is all exaggerated, most of it by powerful opposition parties with vested interests. It’s time for elections, and demonetisation means there’s suddenly no off-the-books cash to finance them.Far be it from me in my Hong Kong high tower to judge what is really happening there but I will say what Modi has done takes a lot of guts, conviction and political will. He is apparently ready to put his money where his mouth is about tackling corruption on this scale. It’s been a while since India has been led by someone with this kind of vision and conviction. Whether it will end up destroying him politically or build him a stronger mandate, respect is due to the man for his decisive leadership.You can forget about that kind of leadership here in Hong Kong, with the chief executive election just a few months away. Of course, we don’t have corruption problems on the scale that India has to tackle, but we could certainly use a similar brand of daring governance and willingness to rock the boat to right some of the wrongs in this city.Not one of the names for possible candidates being bandied around sound inspiring in that regard, I regret to say. When pro-Beijing lawmaker Regina Ip Lau Suk-yee as good as announced her intention this week to run for the city’s top job, I saw someone respond immediately with the hashtag #prayforhongkong.Talk about feeling so low that we have to look up at down.- Yonden Lhatoo is a senior editor at the PostPiyush Goyal Lambasts Eminent Economists, Says Demonetisation Will Push GDP GrowthAuthor: Swarajya StaffPublication: Date: December 3, 2016URL: economists' prediction that demonetisation would hit the country's Gross Domestic Product (GDP) growth, Union Minister Piyush Goyal today said demonetisation will help increase the GDP."I don't understand the logic of some eminent economists who have been mentioning that GDP would take a hit by the demonetisation," he said. "If you are moving the informal economy into the formal economy and if the transactions which for years were never reported as part of GDP are now transacted through banking channels, it will only add to the GDP, not reduce it," he added.Criticising the former Prime Minister Manmohan Singh's comment in Parliament on demonetisation, he said: "I don't know whether Rs 1,86,000 crore lost in the coal scam was disorganised loot or not." He further said: "I thought an illustrated economist would have recognised when an informal economy goes formal, when transactions which for years were never reported have to move through the banking channel, it will give the leg up to the GDP growth, rather than fall by 2 per cent."Goyal also criticised American Nobel laureate and economist Paul Krugman for describing India's recent demonetisation move as being "unusual"."In fact, he (Paul Krugman) missed points far too often in the last decade. He always felt that Obama bail out in 2008 was inadequate and it was wrong to fund the private sector. He also felt that trying to protect job through bail-out was not good. Well, facts are before the whole world," Goyal said. "I do not think the Nobel institution gives you a certificate that everything you say is always right," he added.How Modi Has Sold Demonetisation To PeopleAuthor: IP BajpaiPublication: Date: December 3, 2016URL: never was going to be any roll back on demonetisation. This is not a Prime Minister who is into roll backs; Narendra Modi, having a taken a stand, does not easily move from his position. And on something like this, which was clearly his decision, a decision that he trumpeted as the cleansing of black money, demanding the people stand by this national endeavor, a decision that he saw as clearly meeting the one promise he wanted to keep to the electorate, there was no going back.To understand how strongly Mr Modi feels about what he has done is to understand that this is a decision that went against that core BJP constituency of traders and business people. These people have been the party's constant source of support, both political and financial, since pre-independence India, backing the right-wing Hindu movement through its various bodies and avataars: Mahasabhsa/RSS/Jana Sangh and now the BJP. These are the people who don't pay or at least avoid taxes, and always have cash in hand. So to have strangled their way of doing business, Mr Modi has risked losing this core element of support in search of something much bigger, capturing the minds of the vast mass of poor and middle class India who feel they have been gypped by these very traders and money lenders for generations. And if the equanimity with which, so far, the average Indian has reacted, he seems to have judged the pulse of the nation very well. So having stretched and stuck his neck out, he was never going to release the guillotine of a rollback.The closest similarity to this move was Indira Gandhi's nationalisation of banks and abolition of the privy purses under the clarion call of Garibi Hatao. Whatever the demerits of these moves, it gave her the political fuel to smash the opposition, collect an awesome victory and position herself as the Goddess of the deprived. It is this pro-poor image of the Congress since then that has kept the Grand Old Party hobbling along as a political force in India, even after they strayed into liberalisation and the opening of the economy. And this is the mantle that Mr Modi wants to grab and wear; it is the mantle that would convert the BJP from a right-wing Hindu party into a pro-poor, pro-development one, albeit one with a Hindu nationalist flavour. Mr Modi knows that once you capture the imagination of the pro-poor, it is easy to blame failure of any objective on anti-nationalism; something that Indira did brilliantly throughout her "reign".The Prime Minister had in the 2014 election campaign harped on the Congress (UPA's) corruption and the vast amounts of black money that was floating both within and outside India. He had promised to bring the black back, and use the money for each and every Indian. And this search to get back the black has remained a key constituent of the BJP's policies. Unfortunately, both attempts get the public to surrender their black money, both abroad and here, have been signal failures. The last one in September managed to garner a measly 65,000-odd crores, which, when compared to the 1997 scheme which collected more than 33,000 crores (at that time, which is like 1,13,000 crores if corrected for inflation), was another slap in the face of the government. Mr Modi does not like failure, so failing twice to get his core constituents to pay up was probably enough to push him into this, instigating the sudden step to demonetisation.In the way that he has sold demonetisation to the average Indian, of a surgical strike at a small minority of people who hoard and exploit the rest with their black economy, he has hit upon the very psyche of exploitation that most Indians hold: that of the fat lala sitting in shop with wads of notes under his mat, charging whatever he feels like for provisions or loans. Every less privileged Indian has seen this image, and even those better off come across the shopkeepers who refuse to give you a bill, who refused credit cards by pretending they never had a swipe machine (suddenly these popped out after November 8), or the jeweler your bought ornaments from without being sure of the actual good content. It was an easy sell, and he has sold it well.The Prime Minister and the government's rhetoric has followed a consistent line in the face of all criticism, that this is a revolutionary step in eliminating black money, all Indians must stand together and take the pain of this, all those against this are anti-national and don't want to eliminate black money. Which is why more rational arguments about how little black there was in currency notes (varying estimates from 1-5% of all currency), so this would not do much, to others on the possibility of the country going into recession, haven't cut much ice. It is a monumental political gamble and having taken it, there is no step back.The policy announcements that have followed have tried to address the concern that this single shot would not stop the world of black money, only temporarily derail it. Offering a second bite (at a more costly rate) to declare black holdings is the major step towards that. Alongside is the implicit threat of scrutiny and raids. More importantly, there is a promise that more will follow post December 30. Even looking at the world of campaign financing does not seem to be out of the realm of reforms; many believe that much will follow, in January and in the budget.The problem that remains is that has the mindset of the those in the black market really changed? Yes, the fishmonger is getting a swipe machine or an e-payment gateway, others who did not give bills are making them, but will this continue beyond December? The seizure of 4!crores, and that too in new notes in Bengaluru, shows how deep the corrupt practices in this country our. Firstly, where, without the connivance of bank officials would anyone be able to get hold of such a large sum of Rs 2,000 notes? Secondly, the government engineers who were raised seem to have no qualms about collecting money for favours done. And by all accounts, the ubiquitous bootlegger is back in circulation, offering deferred payment for whatever takes your fancy. Corruption is so wide spread that the cures are going to be difficult to find. How is the government going to address this? Where is the transparency in government going to come from to stop the politician-engineer-contractor nexus? How are tax rates going to be rationalised so that it makes no sense to avoid them? The current multi-layered GST rates are an example of where people try to avoid or fiddle, with the connivance of the tax officer, the category that products fall into. These GST rates are a political compromise, but in that are the seeds of its corruption. Nothing in this country works, unless it is this or that. Too many choices means too much room to manoeuvre. Similalry, the effort to make us cashless, is not simple or short. Getting card machines into a shop takes more than two weeks if not a month. It needs documentation, scrutiny and even a visit to the establishment before a machine appears. And since these machines are imported, they will take time for delivery, even with the lower duty. More smart phone type of attachments also perform these tasks, but again need time to reach the market. The servers in the system have already been hanging with the increased volume of digital transactions and need to be upgraded. Other phone-based payment systems are great, but involve a level of literacy higher than swipe card machines. And finally, the shopkeeper does not want to pay the charges ranging from 0.6% to 2.5% on usage of the card. Neither does the buyer. So how do you incentivize them?Despite all these and many other concerns, Modi has climbed onto the tiger, and isn't getting off. He will exploit his policies against black-marketeering to the hilt and is likely to succeed politically, at least in the short run, just as Indira did, until inflation and the failing economy allowed Jai Prakash to lead a successful movement against her. The recent municipal victories in Maharashtra and Gujarat show support for him. And if he continues to politically succeed, he will have changed the political game in India completely. - (Ishwari Bajpai is Senior Advisor at NDTV)Greek Embassy slams The Hindu for misquoting their minister in an anti-demonetization articleAuthor: OpIndia StaffPublication: Date: December 4, 2016URL: demonetization, many media persons thronged to get on the ground reactions from Indian citizens, politicians and anyone and everyone. Suhasini Haider, the deputy resident editor and diplomatic affairs editor of The Hindu decided to take it a step further by going international with her reporting and interviewed Greece’s alternate foreign minister Mr George Katrougalos of the ruling Syriza party.Syriza essentially translates into ‘Coalition of the Radical Left’ and whose political ideologies include, Democratic socialism, Left-wing populism, Anti-capitalism and Alter-globalization. It in some ways is a U-turn party, after it came to power promising an end to the stringent austerity measures and ended up heaping even more stringent ones instead. In a report on 26th November co-written by her, in the story headline Mr Katrougalos was portrayed as calling Demonetization as a “Draconian move”.On face value the Greek Minister calling it a draconian move was hypocritical to say the least as his party itself as part of the austerity measures had imposed a weekly withdrawal cap of 420 Euros or roughly Rs 30,000 which is much less considering the higher cost of living.Soon after the piece was published many talked about the veracity of a visiting foreign minister criticizing the internal policies of the guest country.------------------------------Rupa Subramanya @rupasubramanyaGreek minister on official visit & criticizes domestic Indian policy. No other govt would put up with this. @PMOIndia kick him out. #WTF …10:43 AM - 26 Nov 2016------------------------------Some commented about her strange choice for an interview------------------------------Spamnath Bharti @attomeybhartiHope @suhasinih also interviews finance ministers of Zimbabwe and Venezuela to tell us why demonetization is bad for the economy. …11:10 AM - 26 Nov 2016------------------------------On 3rd of December, The Hindu published this clarification put out by Panos Kalogeropoulos the Ambassador of the Greek Embassy in New DelhiWith reference to excerpts of the Greek Alternate Foreign Minister’s interview to The Hindu (“‘Demonetization is a draconian move’,” Nov.26), the Embassy of Greece wishes to declare that some comments by the Alternate Minister concerning recent monetary measures by the Indian government have been presented out of context and thus led to an oversimplification of their meaning.The Minister was referring to European practices and has explicitly stated that he does not want to make judgment on internal affairs of which he does not have in-depth knowledge.The clarification is nothing but an indictment of the style of reporting of Suhasini Haider and The Hindu. As was made evident by the Greek authorities, they were anguished by the fact that the report misquoted the Minister which led to an extreme oversimplification of what he wanted to actually say and stated that he did not with to make any judgement based on a country’s internal policies of which he has no knowledge of.The fact that The Hindu, which originally reported the news, had to carry this clarification which in itself slammed The Hindu, gives us a hint as to the amount of criticism and pressure they must have been under, from the Greek embassy and officials. It is very likely that they felt extremely upset that their foreign minister was used as a pawn by Suhasini Haider, to settle domestic scores in India.After the clarification people were quick to react:---------------------------S. Sudhir Kumar @ssudhirkumarGreece is very unhappy at the "oversimplification" resorted to by @suhasinih and @the_hindu .9:11 AM - 4 Dec 2016------------------------------Rupa Subramanya @rupasubramanyaGreek minister on official visit & criticizes domestic Indian policy. No other govt would put up with this. @PMOIndia kick him out. #WTF …Rupa Subramanya @rupasubramanyaTurns out not only was I right about protocol but Greek embassy denies Minister weighed in on Indian internal issues. @suhasinih over to you pic.KELgpwveep10:18 AM - 4 Dec 2016------------------------------as a response Suhasini Haidar tweeted that------------------------------Rupa Subramanya @rupasubramanyaTurns out not only was I right about protocol but Greek embassy denies Minister weighed in on Indian internal issues. @suhasinih over to you pic.KELgpwveepSuhasini Haidar @suhasinih@rupasubramanya BTW, hope you were equally outraged by US praising demonetisation, and weighing in on "internal issues"10:30 AM - 4 Dec 2016------------------------------Diplomacy might constitute praising the host country whether one means it or not but it certainly may not constitute criticizing a country and its internal issues especially when one has little or no knowledge of the same.Are opposition parties headed for a self-goal in Parliament?Author: DK SinghPublication: Hindustan Times Date: December 5, 2016URL: could be an element of truth in parliamentary affairs minister Ananth Kumar’s assertion that the opposition parties are shifting goalposts to disrupt Parliament.The two Houses were not allowed to function for the 13th consecutive day last Friday.The opposition started a debate on demonetisation in the Rajya Sabha at the start of the winter session, but took the disruption route the very next day. Their varied demands crop up after intervals — Prime Minister Narendra Modi’s presence, his response to the debate, his apology for allegedly calling opposition parties supporters of black money, probe by a joint parliamentary committee, and discussion in the Lok Sabha under a motion that entails voting. It’s debatable which of these demands, if met, will bring immediate succour to the people.Congress leaders offer different versions of their parliamentary tactics. One version describes it as an after-thought on the part of the Congress leadership — to not allow West Bengal chief minister Mamata Banerjee to take a lead role in opposing the government. Another pins the blame on a Floor leader in the Rajya Sabha who unilaterally agreed to the government’s offer of a debate at a meeting with the presiding officer of the House.The Congress has since taken the lead in stalling Parliament proceedings. So much has been its commitment to demonetisation victims — real or imagined — that the party let the government off the hook for a train accident that claimed 147 lives last month.The opposition party didn’t go beyond perfunctory statements on the killing of seven officers and jawans in a terrorist attack on the Nagrota army camp on the outskirts of Jammu on November 29, exactly two months after the much-hyped surgical strikes on terror launch pads across the de facto border in Pakistan-occupied Kashmir in retaliation if a terror attack on Uri army base.Asked about the impact of the surgical strikes in the context of the Nagrota attack at the HT Leadership Summit on Friday, defence minister Manohar Parrikar’s reply was quixotic: “It introduced a degree of uncertainty (across the border).” Really! It’s a courageous stand post-Nagrota and incidents of mutilation of jawans’ bodies. The Congress and other opposition parties, however, don’t seem inclined to question the government on these issues.However sanctimonious and outraged NDA ministers might sound in their criticism of the opposition over its disruptive tactics, BJP strategists are gloating. So must Parrikar and Suresh Prabhu. A senior minister drew an analogy between the dilemma of the Congress in Parliament and that of a horse-riding, sword-wielding warrior without scabbard and stirrups.Where does the Congress go from here? It can keep disrupting Parliament till the last day of the winter session on December 16, a strategy that the NDA might not mind. After the ruling side conceded to the opposition’s demand for Modi’s intervention in the debate, the opposition’s justification for continuing the disruptions does not hold much water.Their current strategy of disruption — instead of exposing what former Prime Minister Manmohan Singh called monumental mismanagement post-demonetisation — might not earn them many political brownies from the already harried people standing in queues.‘At least Rs.2.5 lakh crore won’t return to banking system’Author: Special CorrespondentPublication: The Hindu Date: December 4, 2016URL: less than four weeks to go for the December 30 deadline for depositing the withdrawn high-denomination currency, a State Bank of India research report estimates that about Rs.13 lakh crore of the Rs.15.4 lakh crore of such notes in circulation will return to banks, leaving at least Rs.2.5 lakh crore outside the system.The Centre’s surprise November 8 decision to withdraw legal tender status to Rs.1,000 and old Rs.500 notes as a step aimed at striking at the circulation of ‘counterfeits’ and ‘black money’ has triggered much speculation on exactly how much money is likely to return to banks – a parameter that may determine the relative success of the demonetisation.The government, in an affidavit submitted to the Supreme Court last month, had projected that about Rs.10 lakh crore was expected to come back into the banking system. In a written statement to Parliament, Minister of State for Finance Arjun Ram Mehgwal had submitted that 17,165 million pieces of Rs.500 notes and 6,858 million of Rs.1,000 notes were in circulation as on November 8. That meant the combined value of the withdrawn notes was Rs.15.44 lakh crore.The Reseve Bank of India on November 28 reported that old notes deposited (including exchange) in banks as on November 27 amounted to Rs.8.45 lakh crore. That figure, however, did not include a figure for the amount of withdrawn notes deposited at post offices across the country.SBI — the country’s largest lender that controls about 17 per cent of the deposit market and has been publishing daily data on deposits of the old notes received by it — has said Rs.2.31 lakh crore had been deposited at its branches till December 3.“If we closely look at the data, the daily working day average deposited/exchanged at banks has declined significantly from Rs.60,500 crore (Nov. 10-18) to Rs.50,100 crore (Nov. 19-27), i.e. a decline of 17 per cent,” Group Chief Economic Adviser Soumya Kanti Ghosh wrote in the report. Based on the daily average trends, which show a decline, the report estimates that Rs.9.8 lakh crore would have returned to the banking system by November 30.All banks have been directed by the RBI to furnish information on old notes received in a particular form which the bank branches need to fill up and share with the regulator on a daily basis. The forms need to have have details like the name of branch, and the code for branch – known as Indian Financial System Code (IFSC) in banking parlance.Referring to the Centre’s latest income declaration scheme, the report projected that of the Rs.2.5 lakh crore that may fail to return before the December 30 deadline, about Rs.1 lakh crore would likely be disclosed under the self declaration of the undisclosed income scheme and would attract a tax of 50 per cent.“We conservatively assume that Rs 1.5 lakh crore will not be disclosed by the individuals and this will purely be a extinguished currency liability,” the report said. The “immediate short term benefit to the Government will be Rs.50,000 crore,” the report added.Fixing the plumbing—of our political economyAuthor: Vivek DehejiaPublication: Date: December 5, 2016URL: Modi government’s reforms initiatives, which have all involved a progressive ratcheting up of steps to modernize the Indian economy and governanceThe Indian commentary scene, whatever else may be right or wrong with it, is replete with unselfconscious irony. For two and a half years, a chorus of well-known observers in the domestic and foreign media has cried hoarse that Prime Minister Narendra Modi and the Bharatiya Janata Party- (BJP-) led government have failed to seize the nettle of politically difficult economic reforms. They have been timid gradualists, tinkering incrementalists at best, and not bold, visionary reformers, of the likes of Margaret Thatcher or Ronald Reagan: so went the refrain. Now, however, that the Narendra Modi government has unleashed its biggest and boldest move yet, fraught with great political risk for the BJP while holding out the possibility of fundamentally transforming the Indian economy for the better, these same voices have pivoted to decry the reform. They claim that it has caused undue hardship, will be detrimental to the growth rate of gross domestic product (GDP) for the next couple of quarters and therefore, more broadly, represents a major economic and political blunder. The naysayers evidently have forgotten, if they ever knew to begin with, that the essence of politically difficult economic reform involves managing distributional conflict: between gainers and losers today, between losses today and gains tomorrow, or some combination of intra-temporal and inter-temporal distributional impacts. This is the first law of political economy. On this score, the Modi government’s currency swap (let us henceforth banish the misnomer, demonetization) represents a classic political economy trade-off: costs today as a temporary liquidity crunch squeezes cash-based transactions and dents GDP growth in the short run as a consequence must be weighed against medium- and long-term gains as unaccounted cash is flushed out of the economy and as the formalization and digitization of India’s economy is jump-started.While it has been widely argued, including by this author, that without allied reforms, for instance, of electoral finance and regulatory and tax reform more broadly, the tax on unaccounted wealth and income is a one-shot affair, I am increasingly of the view that the long-term changes wrought by the shock of the currency swap may be far deeper and more fundamental than this conventional logic suggests.Thus, the movement of some or many of the unbanked into the formal financial sector and the movement of firms from the informal to the formal economy (or, equivalently, the process of “creative destruction” whereby new formal sector firms replace defunct informal sector firms) has a permanent and positive impact on the economy, even though the gains from taxing black money via the currency swap is putatively one time only. Economists, borrowing from physics, call these “hysteresis” effects. In simpler terms, once someone is banked, or a firm enters the formal economy and its activity falls within the net of tax authorities, there is no going back to the old way of operating, even when the cash crunch eases, as it will shortly.The astute observer will also notice an arc in the Modi government’s reforms initiatives, which have all involved a progressive ratcheting up of steps to modernize the Indian economy and governance of the Indian state. In that sense, then, the currency swap and what it entails is a logical follow-on from the “JAM trinity” (Jan-Dhan Yojana-Aadhaar-Mobile), which aims to link entitlement claims to a unique identification number, a bank account, and a mobile phone, and eliminate leaky and corruption-prone physical distributional channels. Such reforms are all of a piece. Expect more to come.Misguided critics who failed to see the ghost of Thatcher or Reagan lurking over Modi’s shoulder and saw only Congress-style policies dressed up in new garb remained trapped in a dated left/right binary which falsely pitted Congress-style socialism against a putatively libertarian party of economic reform, something like the short-lived Swatantra Party. What they have failed to see is that Modi’s BJP is the party of modernization and empowerment, a credo which transcends conventional ideological dividing lines.What, after all, is either left or right in making government function better and better serve its people? What is left or right in ensuring that all Indians, including the poorest, have bank accounts and that every business firm must be registered, pay taxes, and observe the law of the land? What is left or right in making sure that everyone, whether rich or poor, who owns a piece of land holds a legitimate title to it, allowing them to use it as collateral when they go to take out a loan?Fixing the plumbing and ensuring that the foundation is secure may seem an unglamorous job, but it is a necessary first step before erecting new stories. Fail to do it properly and the whole structure may collapse. This is true of the economics and of the politics, and crucially when the two are intertwined: in other words, the political economy of governance and development. Modi understands this; many of his critics don’t.The biggest blunder may well be by the ill-informed critics, who assume that with the currency swap, the Modi government has committed a self-goal. It might turn out, instead, to be the golden goal that catapults Modi and the BJP to a thundering re-election victory in 2019.Economists speak up on demonetisationAuthor:Publication: The Tribune IndiaDate: December 5, 2016URL: are summary views, solicited by The Tribune, on the government’s demonetisation move from nine economists of impeccable credentials, differing ages, a spectrum of ideological persuasions, and a variety of locations. We encounter amidst this diversity of backgrounds a profound sameness of opinion, as reflected in unanimous denunciation of the government’s action in sentiments and assessments such as: “essentially political move,...insensitive,…,gratuitous,..,appalling”; “firing cannonballs to kill mosquitoes”; “arrogance and insensitivity”; “an exercise in Manichean economics”; “authoritarian quackery”; “heavy cost to the economy”; “frightening abandonment of reason”; “throwing the baby out while retaining the bathwater”; and “a cavalier or even cynical political calculation”Here’s a cross-section of scholarly opinion.Essentially political moveVenkatesh Athreya (retired Professor of Economics, Bharatidasan University, Tiruchi) The demonetisation measure of the Government of India may, at best, disable a portion of black wealth held in the form of currency notes that have ceased to be legal tender. The stock of black wealth held in currency form has been generally estimated at around 5 to 6 per cent of the total. A portion of this stash has already been laundered. Current estimates of black money trapped through demonetisation do not exceed three lakh crore. The claim that the demonetisation was aimed at immobilising counterfeit currency is lacking in credibility, with such currency estimated to value no more than Rs 400 crore, a very small proportion of the value of the high-denomination notes that were in circulation. The current measure does not address the continued generation of black money through tax evasion. Demonetisation as a weapon against terrorism is a claim bordering on the ridiculous. Corruption is not a one-time activity to be put an end to through this measure. The move seems essentially political. The Prime Minister’s statement that the opposition parties are unhappy because they were not “prepared” can be construed to imply that the ruling party at the Centre was prepared. The mounting criticism of the government on its failure to bring back black wealth stashed abroad as promised in the Lok Sabha polls, agrarian distress, industrial stagnation, rising unemployment, intolerance of alternate points of view, and the perception that this government is anti-Dalit and anti-Muslim, could all have been seen as negative in the context of the impending elections in some major states. Demonetisation may have been seen as a “big-bang” measure that would enhance the regime’s credibility in fighting black money and divert attention from its perceived failures. The informal economy accounts for 80 per cent or more of the workforce and nearly a half of total output. It has been grievously stricken by the government’s woefully inadequate preparation and complete failure to anticipate the impact of the move it has unleashed. This has been the inevitable consequence of the massive reduction in liquidity visited on an economy that conducts nearly 90 per cent of its transactions in cash. It has not only meant a great deal of avoidable distress, including deaths, for the mass of the people but also a devastation of the economy in the short and medium terms, with no guarantees for a revival subsequently. The advice to ordinary people to go digital in a context of poor bank and internet penetration is not only insensitive and gratuitous, but positively appalling.Huge collateral damageMaitreesh Ghatak (Professor, The London School of Economics and Political Science, London) The demonetisation policy, at best, is a one-time tax on black money that is stored in the form of cash. But only around 5-6 per cent of undisclosed income is held in cash. Therefore, even if all of it gets targeted by this measure, it will not be an effective way to go at the existing stock of black money. Moreover, black money generation is a continuing process that involves evading taxes and regulations, and engaging in corrupt and criminal activities. These cannot be tackled with a one-time measure. They will continue unabated with the new currency notes. Ironically, this reform may even increase the stock of black money held in cash in the future by facilitating hoarding in currency notes of a higher denomination (the Rs 2000 notes). Even if the effectiveness of the policy in curbing black money will be minimal, the cost will be very high. Other than the direct cost of printing new notes, given that the affected currency notes constituted 86 per cent of the total volume of cash in the country, this policy effectively led to a much higher drop in liquidity than even the drop in the money supply (about 30 per cent ) that the US Fed is criticised for doing during the Great Depression. The informal sector is largely cash-dependent and alone accounts for 40 per cent of the GDP and employs 80 per cent of the workforce. It, along with the rest of the economy, is suffering perhaps the biggest policy-induced recessionary shock in post-Independence India. Add to it the physical hardship imposed on ordinary citizens in terms of standing in line, and strain on the capacity of the banking sector, which have resulted in deaths. This may go down in recent history as the biggest example of firing cannonballs to kill mosquitoes (granted that these were causing the malaria of corruption), with huge collateral damage. Breathtaking insensitivityJayati Ghosh (Professor, Jawaharlal Nehru University, New Delhi) The declared motivation of this drastic demonetisation keeps changing: from stopping “black money” to combating terrorist funding through counterfeit notes, to moving to a cashless society. But the welfare of ordinary citizens clearly forms no part of the government’s agenda. The flawed design suggests a basic lack of knowledge of the nature of the black economy, and an unwillingness to address the processes that allow parallel untaxed incomes. To deal with counterfeit notes a more gradual withdrawal of old notes would have been possible. Instead, the blanket ban on the bulk of notes in circulation has abruptly denied liquidity to the bulk of the economy’s transactions, without providing a sufficient supply of new notes to replace them. The ensuing chaos has gone well beyond causing mere “inconvenience”, to immense and continuing personal hardship and even deaths among the worst affected; destruction of livelihoods in informal and formal sectors; terrible effects on farmers caught between harvesting and sowing seasons; contracting demand that impacts the macroeconomy. Constantly changing implementation rules point to more than inefficiency and lack of preparedness. They suggest that the government essentially has no trust in the citizenry. Therefore, the need for secrecy and the sudden strike; the constraints put on the exchange of old notes; the suspicion of deposits put into Jan Dhan bank accounts; the denial of exchange facilities to cooperative banks and other institutions run by state governments. The underlying premise is that anyone who is the holder of the now-delegitimised currency notes is either a criminal or acting on behalf of criminals. Effectively, only those using plastic or electronic money are “honest”. In this whole episode, the government’s arrogance and insensitivity have been breathtaking. But as the mess continues and the material damage grows, its ability to hoodwink the population cannot last for too long. Save economy from slumpParikshit Ghosh (Associate Professor, The Delhi School of Economics, Delhi) The sudden demonetisation of 86 per cent of the country’s currency stock, ostensibly to fight black money, counterfeiting and terrorist funding, is an exercise in Manichean economics. The decision seems propelled by a desire to project an epic battle against evil rather than any pragmatic weighing of costs against benefits. Replacing one currency by another will not prevent the kind of cash transactions the parallel economy thrives on. Demonetisation will wipe out only a small fraction of the stock of wealth accumulated through illegal means, since most of it is held in gold, land and real estate. Fake notes are rare and the new ones do not seem to have vastly superior security features. The massive liquidity shock has predictably dealt a big blow to production and trade in a primarily cash-based economy. The agriculture and construction sectors, and textile hubs in places like Tirupur, Banaras and Ludhiana, are badly hit, as are day labourers, craftsmen, hawkers, migrants and 80 per cent of workers who earn a living in the shadow economy. The greater the delay in infusing liquidity, the more lasting will be the damage. Although banks are now flush with new deposits, a large part of it comes from the informal sector’s transaction money, which will flow out as soon as withdrawal restrictions ease. It is, at any rate, egregious to recapitalise banks by raiding the cash reserves of the poor, while the informal lenders and microfinance organisations who actually lend to them are crippled by demonetisation. This should not be a magic pill for the Non-Performing Assets (NPA) in banks caused by corporate defaulters. Nor can it be justified as shock therapy for promoting financial inclusion and a cashless economy. Those are worthy goals better pursued with gradualism than paternalism. The government’s immediate priority should be to restore liquidity and save the economy from a deep slump.Authoritarian quackeryArjun Jayadev (Associate Professor, Azim Premji University, Bengaluru) Until November 8, 2016 independent India had by and large avoided financial melodrama. Certainly there have been foreign exchange crises and some credit bubbles that broke nastily, but there has never been the sort of widespread debacle and panic that have been experienced in other developing economies. This makes the demonetisation decree all that more puzzling. Demonetisations are really unheard of in the absence of a hyperinflation or a situation of war. It is perhaps the most explicit recognition of a failed state of affairs, an acknowledgement that the most basic universal dealings of human beings between each other have broken down and that the society needs a reset. Let us, for a moment, think of what has been shaken to the core. It is not “black money” or illegality. It is not a rearrangement of affairs in favour of cashlessness. It is the belief in the integrity of the monetary system—that legal tender will be widely accepted, that our “pay community” is meaningfully solid and not subject to the whims, however well-intentioned, of a small group of people. It’s important to think about what the rupee note has represented to people. Like very few of our social contrivances, it is universally accepted. The denomination, written in all the major languages, allows citizens of all creeds and backgrounds to make binding commitments to each other. A rural labourer with that note in his pocket can interact, coordinate and cooperate with people who might otherwise have nothing to do with him. It is this very basic trust that is in question. Already, rumours abound that the new Rs 2000 notes will be demonetised soon enough. If demonetisation is to work as an attack on black money, it will only work if it is done repeatedly to any means of settlement that is used for illegal activities, and illegality is of course, not limited to cash transactions. No form of settlement is then safe from the arbitrary fancies of those in power. This is far from either a “surgical strike” or a “dose of strong medicine”. It is quackery. Worse, it is authoritarian quackery that cannot help but do deep damage to the basic institutional understandings that underpin our society. Will impose cost on economyArun Kumar (Retired Professor of Economics, Jawaharlal Nehru University, New Delhi; and author of The Black Economy in India, Penguin (India). The withdrawal of high- denomination currency notes from circulation is seen as a move to curb the black economy. Questions are being asked about its effectiveness and its economic costs. The immediate impact has been adverse and large. The current size of the black economy is 62 per cent of the GDP, or about Rs 90 lakh crore, and what may be held in cash would be only a few per cent, say Rs 2 to 3 lakh crore. Reports are that businessmen have found ways of converting their cash into new currency so that hardly any black money hoard may be demobilised. Thus, the expected bonanza to the government may be marginal. Most of those who generate substantial black incomes may be untouched by demonetisation. Further, generation of black incomes in different sectors is untouched by demonetisation and will continue. The heavy cost to the economy is becoming apparent. Households, farmers and businesses are being adversely affected as transactions have become difficult. A large part of the economy does not use plastic money or cheques. A black market has emerged for exchange of currency and there is a premium for gold and foreign currency, which will lead to loss of savings. Hoarding of currency is aggravating shortage of liquidity. Discretionary expenditure has dropped and this may persist, leading to demand shortage and dislocation of commerce and industry. This could aggravate NPA, and sickness in industry and unemployment, resulting in irreversible changes and hardship to the citizens even though most of them are not responsible for generating black incomes. Thus, while demonetisation will hardly impact the black economy, it will impose huge costs on the economy especially on the marginalised. The way out is to restore liquidity in the markets by allowing the older notes to continue in circulation till enough new notes are printed.Abandonment of reasonPrabhat Patnaik (Professor Emeritus, Jawaharlal Nehru University, New Delhi) For a government to demonetise overnight 86 percent of the currency, when nearly half the economy runs entirely on the basis of currency transactions and gets crippled thereby, makes no sense. When it transpires that this was done when no new currency had been printed, against which the old could be exchanged, then this move betrays an abandonment of reason that is truly frightening. This impression is not lessened one bit by the arguments advanced for the move. The first states that it attacks “black money”. But since the ratio of currency holdings to the volume of business in the “black economy” is extremely small, the profitability of engaging in “black activities” will be hardly affected by demonetisation, especially since only a fraction of the demonetised currency will be disabled anyway (the rest getting converted into new legal tender through a mushrooming of new “black avenues”). And since the “black economy” would continue, it would suck out the cash it needs, but which has been disabled by demonetisation, from the “white economy”, to the longer-term detriment of the informal sector. The second argument talks of moving to a cashless economy. Even if the need for it is accepted for argument’s sake, sudden demonetisation as a means towards it is like holding a gun to people’s heads to force them towards cashless modes of transacting. It is authoritarian and unacceptable. The third argument concerns counterfeit currency which terrorists apparently have injected into the economy. But getting rid of counterfeit currency does not require sudden demonetisation. Even if the old notes were replaced in a phased manner, as has happened occasionally in the past, counterfeit currency would still have been eliminated.Whether the people accept the hardships induced by demonetisation is immaterial; a government imposing such hardships betrays astounding irrationality.Neither necessary nor sufficientM. Govinda Rao (Former Member, 14th Finance Commission; & Professor Emeritus , National Institute of Public Finance and Policy, New Delhi) The Prime Minister’s announcement invalidated 86 per cent of the currency with a sleight of hand, which has plunged the economy into a tailspin. In an economy in which over 96 per cent of the transactions are carried out in cash, such a chaos is inevitable. While nobody can find fault with the objective of curbing black economy, or ending terror financing or nullifying the counterfeit notes, the important questions are: first, whether this is the appropriate policy choice to justify the pain inflicted on the people and second, does the banking system have the capacity for implementing it to achieve normalcy within a reasonable time? As regards the policy mix, clearly demonetisation of the type undertaken is neither necessary nor sufficient. First, the policy will not impact the incentives for, nor deter, the earning of illegal incomes and evasion of taxes. The principal sources of the black economy in activities like political funding and election expenses, real-estate transactions, construction, tax evasion and bureaucratic corruption will continue. Second, the stock of black economy does not get affected much for, only a small portion of black money is held in currency. Much of it is stashed abroad or held in real estate, and gold and foreign currency. It is obvious that the shock therapy of such a magnitude cannot be implemented by the banking system. Over 30 per cent of the people employed in India are casual labourers who receive their wages and pay for their purchases in cash, and they have been put to severe hardships. With trade, tourism and construction activity coming to a standstill and with agricultural sectors requiring but unable to get cash for purchasing seeds and fertilisers at a time when rabi sowing is on, the GDP in the economy will decelerate significantly. This is a typical case of throwing the baby out while retaining the bathwater!Avoidable human costSanjay G Reddy (Associate Professor, The New School of Social Sciences, New York) The government’s decision to scrap existing currency notes which make up a large proportion of those in use in transactions is an ill-thought out action which has little economic justification, and acts as a smoke-screen for the failure of the government to act in more fundamental ways to address people’s justified anger at ill-gotten wealth and ongoing corruption. However, better alternatives existed to what the Supreme Court has rightly referred to as “carpet bombing” and not a surgical strike, including the gradual replacement of targeted notes. The action has rightly been referred to as expropriation as it will lead to loss of wealth of many citizens who had trustingly stored their wealth in this form, either permanently or transiently, including the poor, thus also affecting economic activity. At the same time, those supposedly targeted have very likely avoided serious damage through a variety of evasive techniques. The question of whether the human cost is acceptable would be hard enough to answer if the move were somehow successful in addressing its supposed aims. In fact, there is every reason to believe that it will be unsuccessful, which makes the avoidable human cost a tragic consequence of a cavalier or even cynical political calculation, or of poor economic ideas compounded by incompetence. The loss of trust in the currency and in the ability of the government to manage the economy has, ironically, also dealt a blow to the confidence of the domestic and foreign private investors whom the government is otherwise keen to please. Despite its debacle, the government and its faithful, some pliant economists among them, will likely assert that it has advanced its aims, as it can always claim that things would have been still worse. In such a case, there is no better recourse than common sense.Black cash in IndiaAuthor: Surjit S BhallaPublication: The Indian Express Date: December 6, 2016URL: of even a 1 percentage point decline in GDP growth for 2016/17 are vastly exaggerated, have no basis in logic or fact.By now, everybody, but everybody, has commented on the bad implementation of the demonetisation (DM) policy announced by Prime Minister Narendra Modi on November 8. In simple terms, Rs 15.4 trillion (or lakh crores, hereafter referred to as T) were taken out of circulation on 8/11. Less than 3.5 T of new currency notes entered the system. Even by the end of December 2016, there will only be Rs 6 T of the new notes. Won’t this shortage of Rs 7 trillion severely crimp transactions, diminish GDP growth and future tax revenues? These are important questions. Most reputable economists (both domestic and international) have opined that this radical demonetisation policy, while well-intentioned, was inappropriate and very costly.In this discussion, we will take it as given that the implementation of the policy has been terrible. But we differ with most on the expected short-run benefits, that is benefits without future policy changes. The latter, we think, are critical to the long-run success of demonetisation. At the same time, we think that fear mongering about the short-run costs needs to be discussed in a dispassionate manner.First some broad “facts” to place the policy in perspective. GDP in 2016/17 was expected to be Rs 150 T; Rs 15.4 T of cash in circulation was withdrawn on November 8 (in the form of Rs 500 and Rs 1,000 notes) . As of November 27, Rs 8.5 T had been deposited/exchanged with the banks, and unofficial rumours are by November end, almost Rs 11 T of old notes were deposited.Currency with the public forms part of the transactions demand for money. While the demand for money question has been researched extensively by monetary economists, the demand for currency question has received only limited attention. The reason is obvious — typically, currency forms about 45 per cent of the sum of cash and demand deposits (M1) in emerging markets, that is not big enough compared to demand deposits. In fiscal year 2014/15, cash in India was 62 per cent of M1, a number that places it among the top 25 per cent of emerging markets (EMs). (In 2000, the EM average was 36 per cent, and India 45 per cent). This is our first crude estimate of black cash (BC) in India — about 17 per cent of M1 (difference between India and EMs: 62 minus 45), which, as of end October 2016, was Rs 28 T, that is BC on November 8 was Rs 4.8 T.A more rigorous estimation of the demand for currency for purposes of consumption in EMs for the period 1980-2015 (with urbanisation, size of the agricultural economy, per capita income etc being part of the determinants) yields the following result — the demand for excess cash in India is the tenth highest among 60 EMs. Excess cash is defined to be the excess over that predicted by the currency demand model.On an average, black cash is a negligible proportion of household consumption in the region excluding India and Nepal — actually, a negative 0.7 per cent. The tenth most black cash economy in EMs is India (9.2 percent), and Nepal is eleventh at 7.8 per cent. Interestingly, Thailand has more black cash than India, 10.3 per cent of consumption; and Pakistan, considerably lower, at 2.7 per cent.Household consumption is estimated to be around Rs 89 T in 2016, so black cash on November 8 in India was close to Rs 8 T. We feel that this is a very robust estimate — and several policy implications follow this analysis.The “belief” among “experts” is that black cash is only about six per cent of the black economy. The black economy is variously estimated to be 25 per cent of GDP or around Rs 40 T; the “popular” estimate of six per cent would place BC in India to be Rs 2.4 T (what is the basis of the “six per cent of cash is black” conclusion?).In an article, Monumental Mismanagement (IE, December 4, 2016), former finance minister, P. Chidambaram, vehemently argues that DM is a monumental failure. His reasoning: GDP will conservatively drop by one per cent this fiscal year, and at least 90 per cent of currency notes will return to the system, leaving the economy with zero benefits from DM (GDP is Rs 150 T, and notebandi cash is Rs 15.4 T).How accurate is Chidambaram’s calculation likely to be? First, on GDP decline by at least one per cent. Since all comparisons are with respect to FY15/16, what we do know is that agricultural GDP will be at least five per cent higher this year. The kharif crop was over by the time of demonetisation, and the rabi acreage, despite dire forecasts, is proceeding at a five per cent faster pace than last year. Industrial growth in November (PMI data) was also expanding in November. The one sector definitely affected by DM is the most important sector of the economy — services (60 per cent of the GDP). Like Chidambaram, assume conservatively that services consumption for the remaining five months of the year (November through March) of the fiscal year declines by five per cent, with most of this decline coming in November-December. The service sector for five months (November through March) was expected to be Rs 38 T. A decline of five per cent is a loss of Rs 2 T. Some of this (around Rs 1 T) will be made up by five per cent growth in agriculture, yielding a net loss of around Rs 1 T.So it does appear that the Chidambaram calculation is about right — that is the costs of DM are about equal to the benefits. But let us get back to our earlier calculations — Rs 8 T is black cash, not black income stashed away in real estate, gold, foreign currency etc. Assume for a moment that black cash is the average of the two estimates — Rs 2 T (“theirs”, the six per cent formula) and Rs 8 T (ours, based on estimation of excess demand).If Rs 5 T is returned to banks with a tax penalty of 50 per cent, then that is a tax gain in 2016/17 of Rs 2.5 T. At a lower 30 per cent tax rate in the future, this is an extra Rs 1.5 T in perpetuity because these individuals will now be permanently in the tax net with a higher level of income than before. At a five per cent discount rate, Rs 1.5 T in perpetuity is Rs 30 T. This is under the assumption that black cash has a low shelf life because smart money doesn’t keep black income in cash.So a proper static benefit cost analysis of the DM policy is as follows. In 2016/17, costs are Rs 1.5 T and benefits are Rs 1.5 T + 2.5 T or Rs 4 T. Just a one year calculation shows a more than 200 per cent return on investment! But future gains, through higher direct tax revenue collection of Rs 1.5 T means a very, very large return on the investment. This result is predicated on the assumption that two-thirds of notebandi reflected legitimate income or savings, and only one-third was illegal. One can change various assumptions (amount of legitimate returns, discount rate etc), the result will not be changed. Even on a static no-future-policy-change base, the demonetisation policy will likely be a huge success.But, if other policy measures to reform India are not forthcoming (decline in personal income tax rates to discourage tax evasion, elimination of stamp duty and long-term tax rates on property, a clampdown on the extortion power of tax officials, and reform of election funding), then history will view demonetisation as a colossal failure of thought and reform. It would be so unlike PM Modi to stop here, and I am not betting that he will.- The writer is contributing editor, Indian Express, and senior India analyst at Observatory Group, a New York-based macro policy advisory group. Views are personal.Beating demonetisation demon: Microfinance companies unscathed by cash crunchAuthor: Atmadip Ray, ET BureauPublication: The Economic Times Date: December 6, 2016URL: 's cash-dominated microfinance sector may have been stung the most by the government's demonetisation move, but sector leaders like Ujjivan Financial Services and Bharat Financial Inclusion are all out to prove that all is well. But, industry leaders are not too optimistic of the sector matching the 84% growth the NBFC-MFI sector recorded last year. This is because MFIs are now lending only to existing borrowers and limiting the number of new borrowers.While Ujjivan on Monday announced a repayment rate of 91% in November, Bharat Financial informed the BSE it had a collection efficiency of 97% in the two weeks post demonetisation. Ujjivan disburses about Rs 20 crore per day. These lenders have ensured that it is business as usual by recycling cash collected from borrowers as repayments. "The ground-level situation has shown sharp improvement from the initial few weeks of November. Borrowers have shown good repayment discipline," said R Baskar Babu, chief executive of Suryoday Micro Finance and president of Microfinance Institutions Network, an industry lobby.Ujjivan share price rose 0.54% to Rs 346.10 on BSE after the repayment announcement. Its price was around Rs 439 on November 9. Poll-bound Uttar Pradesh lagged behind with a 79-80% repayment rate, Ujjivan chief financial officer Sudha Suresh told ET. Several borrowers in Uttar Pradesh, Madhya Pradesh and Maharasthra had stopped repaying as there were rumours about loan waivers. The microfinance industry had to seek the help of state governments to quell these rumours. Ujjivan, the fourth financial institution to receive the final small finance bank licence from the Reserve Bank of India, said it disbursed loans worth Rs553 crore in November, of which 65% was in cash. Suresh said Ujjivan disburses around Rs 600 crore a month during the October to December period, but a fall in new business led to a decline in disbursal this November. The Bengaluru-based entity had initially deferred its repayment from November 9 to November 13. Meanwhile, Bharat Financial declared a repayment moratorium on November 11 at 92% of its branches. "Bharat Fin's disclosures show impressive resilience in collections, with cumulative 89% of instalments due since demonetisation announcements being collected," Credit Suisse said in a note last week.Swipe machine is the new mantra among Vashi APMC tradersAuthor: Amit SrivastavaPublication: DNA India Date: December 5, 2016URL: 300 traders at the onion-potato market in agriculture produce market committee (APMC), Vashi has applied for swipe machines from banks to carry out day-to-day transactions following demonetization of Rs 500 and Rs1000 currency notes. They have requested banks to provide them the machine so that they can take payments from whole sellers as well as semi-retailers.In order to tide over short supply of low as well as high denomination currency, traders at wholesale markets have decided to go cashless and start electronic payment. “As almost all traders including semi-retailers have bank accounts and they use cards, payment through swipe machines can be done,” said Bharat Shah, potato trader at APMC, Vashi.Interestingly, apart from the hiccups in the first couple of days following demonetization, business has been as usual at the wholesale market. Shivaji Pahinkar, secretary of APMC, Vashi said: “There has not been much impact at the market following the ban in circulation of the currency. And, the credit goes to electronic mode of payment that traders at the market have been doing for a long time.” He added that traders who buy apples from Kashmir or Himachal Pradesh do not make payment in cash. All such payments are made either through RTGS or any other electronic mode of payment.“There was a problem in the vegetable and fruit market where spoilage was reported but that was negligible,” said Pahinkar. He added these two markets witness small retailer and they make payment mostly in cash. However, he added that most of the trade take place at APMC between two traders and there is very low involvement of retailers.According to APMC administration, reputation, credit and electronic payment are major factors that saved the wholesale market from collapsing following the demonetization. The market has yearly turnover is over Rs10,000 crore and major parts of the transaction is done electronically.However, fruit and vegetables traders have a different version on the issue. Sanjay Pansare, former fruit market director, said: “Business is around 40% down after demonetiation.” However, he accepts that the situation is getting normal.Cabinet Secretariat & PMO held video conferences with all stakeholders to address issues after note banAuthor: Aman Sharma & Vasudha Venugopal, ET BureauPublication: The Economic Times Date: December 6, 2016URL: post demonetisation on November 8 has been tough for everyone in the country. On top of it, there were frequent policy changes as far as restrictions on financial transactions were concerned, exposing people to a lot of confusion and, of course, inconvenience. But according to top bureaucrats, all decisions were taken on the basis of the feedback coming from the ground. According to a top government official, the Prime Minister's Office (PMO) and Cabinet Secretariat regularly held video-conferencing with chief secretaries of all states, bank heads and even Intelligence Bureau officers to assess the situation after demonetisation announcement.“These meetings of PMO Additional Principal Secretary PK Mishra and Cabinet Secretary PK Sinha were almost on the scale of the National Crisis Management Committee reviews. All state chief secretaries and bank chiefs participated in the video-conferencing along with secretaries in the ministry of finance. IB Director Dineshwar Sharma and RBI deputy governor R Gandhi were also present in some meetings to provide inputs. All this was done to assess the day-to-day inconveniences being faced by the people and take prompt action for that,” the top government official told ET, adding that PM Narendra Modi was briefed thereafter on the deliberations. According to the official, many ideas, such as separate queues for women and senior citizens at banks and opening banks on weekends, emerged from the feedback received at these meetings. “All amendments to rules issued on various days were based on the feedback received in these meetings that were convened for crisis management,” he said, pointing out that it was estimated that the problems faced by people would reduce substantially after December 3 when 21 days of printing get over.The Centre was also briefed that while almost all newspaper Op-eds and editorials were supporting the demonetisation, ground reports suggested that people faced a great deal of inconvenience, the official said, adding that the efforts of bank officials after November 8 were appreciated and a monetary compensation could be announced for them for putting in long hours.“Inputs largely indicated that most people were happy with the government's decision. There were no major report of any law-andorder problems, and these inputs were tallied with what the IB director said,” another senior official told ET, stressing that there were discussions on the use of wallets, mobile netbanking, points of sale and even ways to popularise them. Many a time, a few knotty issues were also resolved. For example, SBI Chief Arundhati Bhattacharya is believed to have pointed at one of these meetings that one of her bank’s branches had surplus cash and she needed to transfer it to another branch. And it was done immediately. “On another occasion, PK Mishra asked for small currency to be rushed to a particular place after trucks had stranded. Officials from Mother Dairy, gas agencies, and vegetable mandi officials were also asked to join the video-conferencing to clarify issues. The PM went through most reports from these meetings, and even asked for details for several of the problems cited,” an official said, adding that videos of upset people doing rounds on social media were added to the feedback dossier.Spinning a changeAuthor: Pratim Ranjan BosePublication: The Hindu Business LineDate: December 5, 2016URL: a month after Prime Minister Narendra Modi announced the demonetisation move, BusinessLine finds out how some of the traditional businesses are coping. It surely is not easy Javed Nissar, 48, is happy. “Achha hua” (It is good), he said of the recent demonetisation move. A second generation employee in Fort William Jute Mill in Howrah, 10km from the heart of Kolkata, Nissar opened a Jan Dhan account last year. But he had rarely used it till a week ago, when for the first time his ?5,000 fortnightly wage was transferred to the account, instead of being handed over in cash. Nissar is one among the 1,300 of the 1,800 workers in Fort William Jute Mill, who already had bank accounts and got fortnightly wages (jute industry pays salaries every fortnight) as per schedule. The mill managers have tied up with a local bank to help those who didn’t have accounts to open one. According to Raghavendra Gupta, Chairman of Indian Jute Mills Association (IJMA), 90 per cent of the labourers across the industry got their wages through bank transfers. This is a dramatic turn for the industry. Till November 8, when Prime Minister Narendra Modi announced demonetisation, just five mills - Hukumchand, Cheviot, Naihati, Ganges and Caledonian – were paying salaries partly or fully through banks. The rest were handing over cash. India has a little over 80 jute mills employing nearly 3.7 lakh people. Three-fourth of the mills are in West Bengal (the rest are distributed over seven other states including Assam, Bihar and Andhra Pradesh), mostly in the suburban Kolkata, where banks and ATMs are not difficult to find. The change has spread to the neighbourhood tea industry, which employs 17 lakh workers in West Bengal and Assam. Beginning December, salaries to tea workers, both permanent and temporary, would be paid through banks. Assam Chief Minister Sarbananda Sonowal is on a mission mode to ensure payment to the workers. Banks were given a deadline of December 5, to open accounts of the estimated 60 per cent workers who are still without an account. . From December 15, salary transfers are expected to be online. State-owned telecom service provider BSNL has been asked to strengthen connectivity to the 792 tea estates in the state. This includes ensuring internet connectivity to nearly 25 per cent estates living outside the periphery of digital India. Executives from the industry are working in tandem with their counterparts at the banks to change payment schedules of workers and to ease the delivery of cash through micro ATMs. Some of the tea gardens have already got full-fledged ATMs after the demonetisation announcement. “We expect majority of the gardens to move over to the new regime in December. For some, the bank transfers may be delayed till January,” said Sandip Ghosh, Secretary, Assam Branch Indian Tea Association. Legacy issues In both the sectors labour costs are high— 30 per cent of the total expenses in jute, and 70 per cent in tea. Cash payments and lack of uniformity in wages (sometimes there can be four different wage structures in a jute mill), gave ample scope for those siphoning funds through cost gold-plating. While the jute industry blamed the workers for the poor performance in financial inclusion, others put the onus back on the businessmen and the business-politics nexus. For the tea industry, spread over far flung areas, safety was also an issue, especially when it came to handling cash because of its history with extremism. Albeit the reasons, the consequences were borne by labourers. Both the sectors show high on the list of defaulters when it comes to paying their workers. Though the IJMA, which has 31 mills on its roll, says there have been no fresh cases of default for seven years, this is an industry where workers’ grievances are perpetual. Many see bank transfer as one of the steps to bring transparency in operations. Concerned that they might face the ire of workers for non-payment of wages, jute mill owners now want to transfer salaries through bank. Nissar, the jute mill worker, welcomes the change but admits that those who didn’t have the account faced problems in getting wages. Fatima Bibi, 40, of Hukumchand had to open an account to get wages. And, she is irritated about the delay. But her colleague, Shahzad Ali (52) convinced her that getting salaries through the bank will benefit her. Ali had opened an account four months ago, nearly two years after the mill became among the first in Naihati to opt for bank transfer to pay salaries. “If you get cash, you tend to blow it up,” he said. Ali has saved ?1,200 over last four months.Jute workers to get paid via bank transferAuthor: Arkamoy Dutta MajumdarPublication: Date: November 24, 2016URL: almost two years, the union textile ministry has been pressuring mills to pay wages through bank transfer of funds, but they did not pay heedDemonetisation has killed one of jute industry’s shady legacy practices. More than 275,000 jute workers have made peace with mill owners and have agreed to wait beyond payday for their wages to be credited into bank accounts, ending the practice of settling wages in cash. Until the government withdrew old Rs500 and Rs1,000 notes earlier this month, all but five jute mills used to pay wages in cash. For almost two years, the union textile ministry has been pressuring mills to pay wages through bank transfer of funds, but they did not pay heed.Because the industry had too many temporary workers and at least one in five did not have bank accounts, there was no alternative to paying them in cash, mill owners used to say. But following the 8 November announcement of demonetisation, the jute mills had to fall in line.New bank accounts have been opened and more are being opened, and the settlement of fortnightly wages due on 21-22 November is to be concluded within a week, said Raghavendra Gupta, chairman, Indian Jute Mills Association, or Ijma—a lobby group.Workers have grudgingly agreed to wait, and have not disrupted production, mill owners said.“How will a worker make ends meet if wages aren’t paid on time?” asked Ganesh Sarkar, general secretary of the National Union of Jute Workers. For workers who didn’t have the documents required to open a bank account with them, things are even worse.Migrant workers had to have documents sent from home in Uttar Pradesh and Bihar to start new bank accounts, said Sarkar, adding that even after their wages are eventually paid, they will have to stand in a queue for several hours to withdraw money. “Who will compensate if in the process a worker loses a day’s wage?” he asked.The other key concern in the wake of demonetisation was replenishment of raw jute stocks at mills. Because farmers receive payment only in cash, mills had to suspend buying raw jute. But a bumper crop this year appears to have helped.Only about 10 mills are running thin on stocks, which will last 10 days or so, but others have enough raw jute to keep producing at 100% capacity for at least a month, according to Ijma’s Gupta.In view of the bumper yield this year, the union textile ministry had in September asked mill owners to build a large inventory of raw jute, said a key official, asking not to be identified. The aim was to make sure that the price of raw jute didn’t tank. Only a handful of jute mills didn’t follow the directive, this person said, adding that the others who did will tide over the current cash crunch.Alongside, Jute Corp. of India (JCI) has stepped in and has started to buy raw jute from farmers. It is estimated to have built an inventory of 150,000 quintals already, according to the textile ministry official. So supply of raw jute is unlikely to face any immediate disruption, he added.Ijma’s Gupta, too, said that the industry is trying to figure out the logistics of procuring raw jute through JCI until the cash crunch blows over. The state government of West Bengal is keeping a close tab, and will review the situation early next month.Expect all demonetised money to come back to system: Revenue Secretary Hasmukh AdhiaAuthor: Khushboo NarayanPublication: The Indian ExpressDate: December 8, 2016URL: over cost of exercise; will tax black money hoarders, says AdhiaThe government expects the entire money in circulation in the form of currency notes of Rs 500 and Rs 1,000 which have been scrapped to come back to the banking system so that the tax authority can trace the transactions and tax black money hoarders, Revenue Secretary, Hasmukh Adhia said on Tuesday. This, effectively, undermines the prospect of any windfall gains accruing to the government arising out of part of the demonetised currency remaining outside the banking system.Soon after the government had announced the note cancellation, some experts had projected that a part of the demonetised currency notes — of a value of Rs 14.17 lakh crore at the end of March 2016 — would not return to the banking system.In a report, the SBI estimated that Rs 2.5 lakh crore may not return to the system. Based on such calculations, reports emerged that this would lead to substantial gains to the government considering that this would lower the liabilities of the RBI. This, in turn, it was argued could transfer a higher surplus to the sovereign, opening up the prospect of spending on infrastructure, or capitalisation of banks.An estimated Rs 11 lakh crore has been deposited in banks so far and if the all the high-value notes in circulation comes back to the banking system as the Revenue Secretary indicated today, more questions are bound to be raised as to the cost and impact of the exercise of demonetisation spread over 50 days.That’s because the Centre for Monitoring the Indian Economy or CMIE, an economic forecasting agency, has pegged the cost of demonetisation for 50 days from November 8 to Dec 30 at Rs 1,28,000 crore which includes loss of business or sales, cost to households, the expenses for printing fresh currency notes to the government and the RBI besides for banks. The onus will be on the government to show that the gains, including in the form of stiff penalties on those found violating rules, negate the cost of the exercise.“Do you think that by simply depositing money in the bank account makes black money into white? It doesn’t. It will become white when we charge taxes, when the Income Tax department can reach up to them by issuing a notice and questioning them…The expectation is that the entire money which is in circulation has to come to the banking channel so that we can trace the transactions and trace the entire money, who does it belong to and has tax been paid on it. This being the idea, some money has come back in the banking system and we still have time to go,” said Adhia on the sidelines of a conference in Mumbai.“No black money hoarder will be spared. If someone has deposited Rs 50,000 in the accounts of 500 people each, he will also be caught,” said Adhia.At the end of November 27, Rs 8.44 lakh crore in abolished notes have already come back to the banking system.Adhia said that government agencies will also take action against bankers and others who are colluding with black money hoarders to illegally convert the abolished currency into legal tender. On the ongoing investigations into the Panama Papers leaks, Adhia said all BRICS countries are finding it difficult to source information from certain advanced countries that house the bank accounts of companies registered in Panama.“The problem that each country is facing that while the registration of entities are in Panama, most of these entities are not having their bank accounts or their business enterprises in Panama. Most of the bank accounts of these entities are in some other advanced countries, so all of us are trying to get information from those countries. We are invoking the information exchange agreements. In some cases the response is quite good and in some other cases…there is a time lag in the response of some countries. That is the difficulty that we all are facing,” said Adhia.Clarifications & corrections:In response to the December 7 front page report “Expect all demonetised money to come back to system: Revenue Secy”, Dr Hasmukh Adhia, Revenue Secretary, Ministry of Finance, said:It is very strange that only Indian Express has reported this statement in the headlines while no other newspersons who were present there have reported this.I would like to emphasise that I did not make any such prediction that the Government expects all demonitised money to come back to the system. The question asked was that ‘what happens if all the money is coming back to the banks’. In response, I said that ‘merely bringing money to banking channels does not make it white until tax is paid on the same’. I, therefore, mentioned that even if all the old money comes to the banking channels, Income Tax Department would be able to see the trail of money coming from various individuals and we would be able to recover tax on the same along with penalty, wherever applicable.While all other newspapers, including PTI, have reported this as the main substance of my reply, only Indian Express seems to have drawn a different conclusion of this reply and has put this in form of a headline as if the Government has already concluded that the entire money is going to come back. I may like to point out that it is not possible for me to make such a prediction and there is no reason why I should make such prediction prematurely.Our Correspondent replies:The report was based on Revenue Secretary Hasmukh Adhia’s response to a reference by a journalist to media reports that the entire demonetised money would come back to the system. Adhia told journalists on the sidelines of a conference in Mumbai: “Do you think that by simply depositing money in the bank account makes black money into white? It doesn’t. It will become white when we charge taxes, when the Income Tax department can reach up to them by issuing a notice and questioning them… The expectation is that the entire money which is in circulation has to come to the banking channel so that we can trace the transactions and trace the entire money, who does it belong to and has tax been paid on it. This being the idea, some money has come back in the banking system and we still have time to go.” This quote was accurately reproduced in the news report. Adhia had also said, “We can only know the final position when the scheme closes on December 30.”No Windfall For Government From Undeposited Old Notes, Says RBI Chief Urjit PatelAuthor: Surajit DasguptaPublication: Date: December 7, 2016URL: speculation has been based on the premise that the RBI's liability from notes that do not return to the banking system will be extinguished.Urjit Patel, Reserve Bank of India Governor, on Wednesday debunked speculation that the central bank will pay a big dividend to the government in terms of old notes that are not deposited into the banking system.The speculation has been based on the premise that the RBI's liability from notes that do not return to the banking system will be extinguished. And that it could transfer the benefit from that to the government.Dr Patel however said today that even if the banned notes that do not return are taken out of circulation, "they still carry the liability of the RBI as long as only the legal tender characteristic status is withdrawn." "Actually, the withdrawal of legal tender characteristic status does not extinguish any of the RBI's balance sheet and therefore there is no implication on the balance sheet as of now. So that question does not arise as of now - not just by withdrawal of legal tender character (of notes)," Dr Patel said at a press conference after RBI kept the repo rate or key lending rate unchanged today.Madan Sabnavis, chief economist at CARE Ratings, said this basically means that instead of the RBI printing new money in place of the currency not returned and transferring that amount to the government, the central bank could keep it as special reserve to meet a possible future liability. "The notes will be on the RBI balance sheet without the status of legal tender and more likely will reside in the reserves of the central bank," he said.A deadline for depositing 500 and 1000 notes, banned by the government last month in an attempt to unearth black or untaxed money, ends on December 30.The RBI today disclosed that banks have so far received roughly Rs 11.5 lakh crore in banned notes as deposits. When the government withdrew legal tender status last month from 500 and 1000 rupee notes, it removed 86 per cent or Rs 15.5 lakh crore of the currency in circulation.The Economic Research Department of SBI in a note last week estimated that Rs 1.5 lakh crore of old notes might not be deposited in the banking system.The RBI chief today said the decision to remove old Rs 500 and Rs 1,000 bank notes from the system was not taken in haste. There had to be a high level of secrecy surrounding this decision, he said.Demonetisation a well deliberated decision: RBIAuthor: TNNPublication: The Times of IndiaDate: December 7, 2016URL: Bank of India's Deputy Governor R Gandhi on Wednesday claimed that the decision to demonetising Rs 500 and Rs 1,000 notes was taken after detailed deliberations and not in haste, while about Rs 12 lakh crore of the new notes have been deposited. To ease the cash crunch, the RBI also assured the steady supply of new notes into the system."The demonetisation decision was not taken in haste. 19 billion new notes have been given to public, more than what we have supplied to public in the last 3 years, RBI's deputy Governor R Gandhi said while addressing a press meet following the central bank's bi-monthly monetary policy review.While responding to a query regarding the review of last date of demonetisation drive, Gandhi said, "About the date, it is a continuous review. The programme is as of now December 30."To counter cash crunch, he said, "We are trying to provide adequate cash. We advise people to not panic or hoard cash. They should also consider adopting more digital payments as there are many available options.""RBI's note printing presses are working at full capacity and as on December 5, notes worth 4 lakh crore have been supplied to the banks," he added.Gandhi while stressing that there is no shortage of cash said, "As far now about 12 lakh crore demonetised Rs 500 and Rs 1,000 notes have been deposited in the banks and new notes are continuously being supplied to ease the pressure .Asked whether the RBI is planning to re-introduce new Rs 1,000 notes, Gandhi said: "Choice of denomination as I have mentioned is based on the requirements of the public. It will be determined as time goes on. Whether Rs 1,000 notes will be coming or not, yes, down the line there can be a decision relating to that. As of now, we have not determined anything about it."On November 8, Prime Minister Narendra Modi left the nation stunned after announcing that the Rs 500 and Rs 1,000 notes, the two big currency denominations that account for 86 per cent of the money in circulation, invalid.Wake up and smell the moneyAuthor: Anil BaluniPublication: The Indian ExpressDate: December 8, 2016URL: must realise that the poor have supported demonetisation. They must stop spreading rumours to discredit the move.It has been a month since Prime Minister Narendra Modi announced the cancellation of legal tender to Rs 500 and Rs 1,000 notes. Since then, a lot of water has flown in the Ganga, and a lot of notes too! India has also seen an exponential rise in the number of economists since November 8. Our opposition today seems to have more economists in their fold than the total number of their MPs in Parliament.After the initial days inertia, the opposition has been very active in coming up with the parameters for the success of the currency ban. Unfortunately for them, their allegations, criticism and propaganda are becoming blunt quickly. While they are clearly aware of their lack of goal scoring abilities, the opposition has been pretty creative with creating new goal posts every passing day to try and portray this step as a failure.The opposition’s allegations against the government have ranged from hollow to humorous. From inventing Keshav Prasad Maurya’s non-existent daughter holding bundles of cash, to blaming the death of thieves on demonetisation, from the West Bengal BJP’s deposit in the bank to the BJP buying land in different states, the opposition has tried and failed with all its allegations.A prominent criticism of the government has been that rules are being revised too often. This is not an outcome of inadequate preparation or lack of imagination, but a sign that the government is thinking clearly on its feet. Those criticising the government’s rapid calibrations know, in their hearts, that they neither had the gumption, nor were capable of implementing such a move. There is no global precedent for this step and no best practices exist. There is only a limit till which you can predict human behaviour. But the government has established a robust system to get ground feedback and calibrate its strategy accordingly. It has employed the triad of direct feedback, constant communication and technology. IAS officers were sent to different parts of the country to get feedback and there was constant communication with banks. The prime minister also conducted a survey on his app, in which a record million people participated. While it may be an easy target for the critics, the responsive adjustments have gone a long way in reducing inconvenience.We were initially told that taking such a large fraction of currency out of circulation would cause such acute distress that people would revolt on the streets. There were warnings and speculation that this move could also provoke riots. That such a massive step could be taken, affecting 125 crore Indians without even a whimper anywhere in the country was unimaginable for a large section of people. There have been also attempts at rumour-mongering about the scarcity of essential items and looting happening at places. In spite of the rumours and the inconvenience, people have kept calm and displayed unflinching trust in the government. In this age of instant Twitter outrage and fake Whatsapp news, people’s support is a clear demonstration of the unparalleled trust 125 crore Indians place in this step taken by PM Modi.A lot of our leaders suddenly had new-found love for the poor and their livelihoods after demonetisation. We welcome their belated concern. But the fact remains that it is the poor who are the happiest at this move. In spite of the inconvenience, the poor recognise the disruptive potential of this move on their lives. A recent article by academics at the Indian School of Business also comprehensively demolishes the exaggerations by our so-called pro-poor politicians on the difficulties faced by the poor. A recent report also says that total sown area has increased by nine per cent compared to last year, despite the problems farmers may have faced in securing credit. This clearly suggests that our relations-based support systems are thriving in this period.The next bastion of propaganda is that the government over-estimated the quantum of black money, with the amount of money being deposited. They also allege that once the money goes into the banking system it gets converted into white. Nothing can be farther from the truth. Money being deposited in the banks has multiple benefits. Real incomes and the trend of incomes start getting established. Incomes start getting properly taxed. There is a stiff penalty for all those who have unaccounted money. A large fraction of the unaccounted money will be used for the poor through the PM’s Garib Kalyan Yojana. Most importantly, with the money coming into banks, there will be an expansion of the tax net and tax evasion will become increasingly difficult. Make no mistake, a significant amount of illegitimate wealth will also not return to the banks and go out of circulation forever.The last and current bastion is a Luddite fear-mongering about digital transactions. There is a scary trend of digital illiteracy among a lot of our intellectual elite. Those indulging in these scare tactics sadly underestimate the intelligence and learning potential of the average Indian. If the poor can connect with their friends on Whatsapp, there is no reason why they cannot conduct their transactions through mobile phones. India is rapidly transitioning to a cashless society through digital transactions and the next few months would be an eye-opener to the naysayers.The opposition needs to wake up and smell the coffee. India has welcomed this historic move with open arms. The poor won’t be mislead and it is time it stops the theatrics, fear-mongering and propaganda.- The writer is spokesperson, BJPOpposition running away from debate, says ModiAuthor: Special CorrespondentPublication: The HinduDate: December 8, 2016URL: Minister Narendra Modi said here on Wednesday that the government had the people’s support for the decision to demonetise Rs. 500 and Rs. 1,000 notes, and attacked the Opposition for not debating the issue in Parliament.Mr. Modi was speaking at a meeting of the BJP parliamentary party, which passed a resolution condemning “the disruption of the House” by the Opposition. Home Minister Rajnath Singh moved the resolution and Finance Minister Arun Jaitley seconded it.‘People with govt.’Briefing presspersons after the meeting, Parliamentary Affairs Minister Ananth Kumar said the Prime Minister told the MPs that “Janshakti (people’s support) is with the government on demonetisation. What some Opposition parties are doing is undemocratic and the issue should be debated in Parliament.”He said Parliament, in the past, had debated a number of government decisions that had caused tensions and social conflict, but it was now deadlocked by rival parties over a “constructive decision” such as that of demonetisation.“Asserting that India is moving towards a less-cash and digital economy, Prime Minister Modi also asked MPs to spread awareness of it in a similar manner as they do about EVMs and voters’ lists during elections,” Mr. Kumar said.Union Minister of State for Petroleum and Natural Gas Dharmendra Pradhan made a presentation during the meeting about his Ministry’s work to move towards “less-cash” dealings and digital transactions. Defence Minister Manohar Parrikar spoke about how the Goa government was working to ensure that 60 per cent of transactions in the State were cashless. The meeting condoled the death of several luminaries, including Tamil Nadu Chief Minister Jayalalithaa, journalist and commentator Cho Ramaswamy, and RSS functionary and former Governor Bhai Mahavir.Pranab Mukherjee blasts a disrupted Parliament: 'For God's sake, do your job'Author: TNNPublication: The Times of IndiaDate: December 8, 2016URL: Pranab Mukherjee on Thursday ripped into Parliamentarians over the continued logjam in both Houses and said "For God's sake, do your job."Ever since the winter session of Parliament began on November 16, both the Lok Sabha and the Rajya Sabha have been repeatedly adjourned, as both ruling and opposition MPs have squabbled over PM Narendra Modi's November 8 decision to scrap high value currency notes.The President is having none of it."For God's sake, do your job. You are meant to transact business in Parliament. Disruption of Parliament is not acceptable at all," Pranab Mukherjee said.Delivering the Defence Estate Day Lecture 2016 on "Reforms for a stronger Democracy", the President said people send their representatives to Parliament to work for the country and not to agitate.He said he was concerned that disruption of parliamentary work has become a "practice"."Dharnas can be organised anywhere else," he said, and urged MPs to debate and discuss issues of public importance in Parliament.Just yesterday, BJP stalwart LK Advani, too, criticised MPs for holding up Pariamentary proceedings.Proceedings in the Lok Sabha were disrupted for the 15th consecutive day today as the Opposition continued to engage in sloganeering demanding a debate on demonetisation under a rule that entails voting.As soon as the House assembled, the leader of the Congress in the Lok Sabha Mallikarjun Kharge wanted to raise an issue but Speaker Sumitra Mahajan did not allow him to and started Question Hour.This prompted members belonging to the Congress, Trinamool Congress and theLeft parties to rush into the Well demanding a discussion on the scrapping of Rs 1,000 and Rs 500 notes.As Mahajan refused to concede to the demand, Opposition members raised slogans. As the din refused to die down, an upset Speaker warned the protesting MPs to not disturb the entire House through their protests. Members belonging to Samajwadi Party and the NCP extended their support to their opposition counterparts by standing in the aisles along their seats."What is this? I am warning you. Please, please, I am repeatedly telling you if you want to debate, debate. But don't disturb the whole House," she said.Amid the continued din, the Speaker took up five questions before adjourning the House for nearly 20 minutes till noon.With both the Lok Sabha and the Rajya Sabha adjourned for the day without transacting any significant business, the logjam therefore continued.Indian economy will take Rs 4.7 lakh crore hit on demonetisation: Amit MitraAuthor: IANSPublication: The Economic TimesDate: December 8, 2016URL: demonetisation "a big magnum-sized tsunami", West Bengal Finance Minister Amit Mitra on Thursday said India's gross domestic product (GDP) in the current fiscal (2016-17) will take a huge hit on account of demonestisation. "In the best case scenario, the GDP for the current fiscal could go down to 5.5 per cent from the 7.5 per cent it had touched in 2015-16," Mitra told India Today news channel. "From an estimate that I have, the growth rate in aggregate will fall over 3 per cent and arrive at 4.3 per cent," he said."This means a loss of Rs 4.7 lakh crore of GDP, this will be extinguished. This is in the worst case scenario...the best case scenario is loss of Rs 3 lakh crore," Mitra added. Who knew? How PM Modi kept note ban a closely guarded secretAuthor: ReutersPublication: The Times of IndiaDate: December 9, 2016URL: Minister Narendra Modi handpicked a trusted bureaucrat, little known outside India's financial circles, to spearhead a radical move to abolish 86 per cent 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 Modi's New Delhi residence, as he plotted his boldest reform since coming to power in 2014.When announced, the abolition of high-value banknotes of Rs 500 and Rs 1,000 rupees came as a bolt from the blue.The secrecy was aimed at outflanking those who might profit from prior knowledge, by pouring cash into gold, property and other assets and hide illicit wealth.Previously unreported details of Modi's handling of the so-called "demonetisation" open a window onto the hands-on role he played in implementing a key policy, and how he was willing to act quickly even when the risks were high.While some advocates say the scrapping of the banknotes will bring more money into the banking system and raise tax revenues, many Indians are furious at having to queue for hours outside banks to exchange or deposit their old money.Moreover, not enough replacement notes were printed in preparation for the upheaval, and it could take months for things to return to normal.With Uttar Pradesh, India's most populous state, holding an election in early 2017 that could decide Modi's chances of a second term in office, there is little time for the hoped-for benefits of his cash swap to outweigh short-term pain.Modi has staked his reputation and popularity on the move."I have done all the research and, if it fails, then I am to blame," Modi told a cabinet meeting on November 8 shortly before the move was announced, according to three ministers who attended.Direct line to ModiOverseeing the campaign, with support from the backroom team camped out at Modi's sprawling bungalow in the capital, was Adhia, a top finance ministry official.The 58-year-old served as principal secretary to Modi from 2003-06 when he was the chief minister of Gujarat, establishing a relationship of trust with his boss and introducing him to yoga.Colleagues interviewed by Reuters said he had a reputation for integrity and discretion.Adhia was named revenue secretary in September 2015, reporting formally to finance minister Arun Jaitley. In reality, he had a direct line to Modi and they would speak in their native Gujarati when they met to discuss issues in depth.In the world's largest democracy the demonetisation was revolutionary: it called into question the state's promise to "pay the bearer" the face value on every banknote.At a stroke, Modi scrapped money worth 15.4 trillion rupees ($220 billion), equal to 86 percent of cash in Asia's third-largest economy.The idea is backed by some economists, although the speed of its implementation is widely seen as radical."One is never ready for this kind of disruption - but it is a constructive disruption," said Narendra Jadhav, a 31-year veteran and former chief economist of India's central bank who now represents BJP in the Rajya Sabha.Modi, in his TV address to the nation, cautioned that people could face temporary hardship as replacement 500 and 2,000 rupee notes were introduced. Calling for an act of collective sacrifice, he promised steps to soften the blow for the nine in 10 Indians who live in the cash economy."Biggest, boldest step"Immediately after the address, Adhia sent a tweet: "This is the biggest and the boldest step by the government for containing black money."The boast harked back to Modi's election vow to recover black money from abroad that had resonated with voters fed up with the corruption scandals that plagued the last Congress government. Yet in office, he struggled to keep his promise.Over more than a year, Modi commissioned research from officials at the finance ministry, the central bank and think-tanks on how to advance his fight against black money, a close aide said.He demanded answers to questions such as: How quickly India could print new banknotes; how to distribute them; would state banks benefit if they received a rush of new deposits; and who would gain from demonetisation?The topics were broken up to prevent anyone from joining the dots and concluding that a cash swap was in the offing."We didn't want to let the cat out of the bag," said a senior official directly involved. "Had people got a whiff of the decision, the whole exercise would have been meaningless."Under Adhia's oversight, the team of researchers assembled and modeled the findings in what was, for it, a theoretical exercise.It was made up of young experts in data and financial analysis; some ran Modi's social media accounts and a smartphone app that he used to solicit public feedback.Yet for all the planning, Modi and Adhia knew they could not foresee every eventuality, and were willing to move swiftly.The announcement caused chaos, with huge queues forming at banks when they reopened after a short holiday.New 2,000 rupee notes were hard to come by and barely any new 500 rupee notes had been printed. India's 200,000 cash dispensers could not handle the new, smaller, notes and it would take weeks to reconfigure them.Filling ATMs with the 8 trillion rupees ($117 billion) in new banknotes that the finance ministry reckons are needed to restore liquidity to the economy is even trickier.In a best-case scenario, in which India's four banknote presses churned out new 500 and 2,000 rupee notes designed to replace the abolished ones, it would take at least three months to hit that target.Secrecy paramountSecrecy was paramount, but clues had been left.Back in April, analysts at State Bank of India said that demonetisation of large-denomination notes was possible.The Reserve Bank of India, the central bank, also disclosed in May that it was making preparations for a new series of banknotes that were confirmed in August when it announced it had approved a design for a new 2,000 rupee note.The printing presses had only just started turning when the media finally started to run with the story in late October."The plan was to introduce it around November 18, but there was a clear sign that it could get leaked," said one person with direct knowledge who, like others interviewed by Reuters, asked not to be named due to the sensitivity of the matter.Some officials in the finance ministry had expressed doubts about scrapping high-value notes when the idea came up for discussion. They now feel resentment at the secrecy in which Adhia rammed through the plan on Modi's orders.They also say the plan was flawed because of a failure to ramp up printing of new notes ahead of time.Other critics say the Adhia team fell prey to a form of "group think" that ignored outside advice.In the words of one former top official who has worked at the finance ministry and central bank: "They don't know what's happening in the real world."Demonetisation: Corrupt Deal Disrupted Printing of Rs 500 NotesAuthor: Chandan NandyPublication: The QuintDate: December 6, 2016URL: very slow printing of the new Rs 500 note at the Bank Note Press (BNP) in Dewas, Madhya Pradesh, could be attributed to an old, but expensive machine supplied by a Swiss-British joint venture company that was allowed to violate significant tender norms, according to confidential documents in possession of The Quint.The documents, which reveal in great detail the improprieties involved in selecting the company, the Lausanne-based KBA-Giori, which collaborated with the UK-based Thomas De La Rue to form De La Rue Giori, show that a four-set “finishing machine” procured for Rs 400 crore “did not meet tender specifications” and yet was purchased after suspected kickbacks were paid to top Indian government functionaries in 2009.The machine, which was installed in 2010-11, continues to be operated at the Dewas BNP and is said to have slowed the printing/production of the new Rs 500 notes which are in extreme short supply.SPMCIL-KBA-Giori DealSecurity Printing and Minting Corporation of India Ltd (SPMCIL), which is under the Finance Ministry, struck a deal with KBA-Giori in 2009, when Pranab Mukherjee was the finance minister, for the supply of the finishing machine whose production speed for churning out currency notes was far below tender specifications.The alleged beneficiary of the scam was the then SPMCIL Chairman and Managing Director M S Rana who was close to the personal secretary of a top UPA cabinet minister. A chargesheeted official, Rana was removed as SPMCIL chief in July this year, following a series of enquiries into several cases of alleged corruption and misuse of office.There are two other cases of irregularities against Rana, investigated by the CBI, which are related to the procurement of the KBA-Giori-supplied machine and the use of an Arabian security thread in the production of Rs 10 notes. While the CBI held Rana guilty, he was let off with warnings by present Finance Minister Arun Jaitley.SPMCIL’s Requirements Not MetWhile SPMCIL’s requirement was for a machine unit that would “function automatically with a minimum production speed of 470 bundles per hour or 2.68 million pieces per shift from 36 UP notes/sheets”, KBA-Giori supplied a machine that churned out only 378 bundles an hour, according to a 22 June, 2015 document of the Currency and Coinage division of the Finance Ministry.The document reveals that KBA-Giori made “contradictory statements” in its offer, saying the company “is pleased to be able to offer SPMCIL our ‘state-of-the-art’ Super Series of printing presses and auxiliaries using today’s latest technology which fully complies with the tender document and is compatible with the existing equipment” at Dewas BNP.Low Output SpeedBut the results were startling. Once the machines were installed and production of Rs 100, Rs 50 and Rs 20 notes began, it was found that “the output/speed calculated based on the formula are below required minimum output of 470 bundles per hour or 2.68 million pieces per shift…The firm was not meeting the technical requirement…Thus the firm, by giving misleading and inconsistent statement in response to production speed and output of the finishing machine, created false impression of meeting the specification.”Despite these shortcomings, an SPMCIL technical evaluation team’s report said “nothing adverse regarding fulfilment of production speed by the finishing machine by M/s KBA has been mentioned.” Even more surprisingly, the “unit level material management committee or the tender evaluation committee “recommended the offer of M/s KBA for finishing machine as technically suitable.”KBA-Giori’s Contradictions OverlookedA Finance Ministry vigilance department document says that “It is clear that the contradictions given by M/s KBA were overlooked by the unit level committee…The unit level committee has erred in evaluation of technical offer of M/s KBA by not taking cognisance of the formula.” The document adds: “It was the responsibility of the UNIT LEVEL COMMITTEE to evaluate the offer for any inconsistency and contradiction. But, the committee has not given due diligence to the responsibility entrusted to them.”While “communications” were sent to KBA-Giori regarding deficiency of not meeting the stipulated production rate, the Swiss firm “counter-replied” although “the matter pertaining to contract management part is still under process.”Non-Functional MachinesEven more damning was the Currency and Coinage department’s finding that while KBA-Giori supplied the automatic feeder machine, it was “not functional” at the Dewas BNP. The machine functions automatically right from the point where sequentially number-printed sheet piles are kept where from 100 sheets with sequential numbering are fed automatically into the machine up to wrap shrink pack system and delivery.Eliminating A Japanese CompetitorDocuments supplied to the Central Vigilance Commission further reveal that KBA-Giori was “shown undue favours” at the cost of a Japanese company, Komori Corporation. While it was specifically stated in the tender documents the offers of only those bidders would be opened whose techno-commercial bids were evaluated and accepted in all respects,” changes were subsequently made to the tender conditions and “change in specification was communicated as technical clarification to M/s KBA-Giori by BNP, Dewas.This resulted in elimination of one of the prospective bidders, Komori Corporation, from competing in all five items constituting one line and thereby favouring M/s KBA-Giori in the procurement process.”Besides, Finance Ministry investigations found that:i) The tender conditions were not formulated properly as there were ambiguities;ii) The price bid of M/s Komori Corporation was opened intentionally against the provisions of the tender conditions to justify the rates offered by M/s KBA-Giori; andiii) No justification was available on record for opening the price bid of M/s Komori Corporation knowing fully well that this company could never be L1.SPMCIL Officials’ InvolvementFive SPMCIL officials, including Rana, are alleged to have bent rules to favour KBA-Giori, so much so that they allegedly “refused to carry out further negotiations with M/s KBA-Giori despite recommendations by the then Finance Ministry Joint Secretary/Financial Adviser M Deenadayalam.In complaints against the SPMCIL officials it is alleged that an SPMCIL vigilance officer’s report “confirms criminal conspiracy” to eliminate Komori Corporation and favour KBA-Giori instead.Demonetization: Detailed Drama of How Modi Checkmated Pakistan’s Devastating AssaultAuthor:Publication: Date: November 28, 2016URL: the chairpersons and MDs of India’s top banks were meeting at Reserve Bank of India’s headquarters on the 15th floor of the Mint Street office in a special session that started at 7 pm. In Delhi, on the other hand, the top Cabinet ministers of the Modi government were meeting over an agenda regarding MoUs between India and Japan. None of the top bank chiefs or the ministers of the government were aware of what was to happen. #Demonetization: Detailed Drama of How Modi Checkmated Pakistan’s Devastating Assault Click To Tweet.The Cabinet meeting ended at 7.30 pm and the PM went to meet the President to inform him about the plan. The ministers were instructed to remain in the meeting hall. The bankers on the other hand, were discussing the situation from the Non-Performing Assets (NPAs) in the economy. Just before 8 PM, the TV sets were switched on to listen to the PM, with the understanding that the meeting would continue after the PM address. Of course, the announcement from the PM was going to be earth-shattering for most bankers who had to rush back to their offices to handle the situation arising from the ban of Rs 500 and Rs 1000! The story of demonitization starts way back in at least 2010 with a company named De La Rue and its role in fake currency in India. Sometime during 2009-10, the CBI had raided around 70-odd Indian bank branches along the India-Nepal border and found counterfeit currency with them.That sent shock signals all over the intelligent community. Upon investigation, however, the intelligence officials found something even more scary! The branches had received the currency not from some smugglers, but RBI itself! RBI was sending counterfeit notes to the bank branches around the country! When the CBI raided the RBI, it found the same counterfeit currency in the RBI vaults in Rs 500 and Rs 1000 notes. The Central Bank of the country had been compromised beyond anyone’s imagination!The counterfeit and fake currency which Pakistan was pushing into India was being collected and distributed by none other than the Reserve Bank of India! Almost like real… In a little known case involving counterfeit currency caught in UP and Bihar, the defending lawyer rather nonchalantly argued that what was the proof that it was fake? When the currency was sent to the Indian government labs, they indeed confirmed that the currency nabbed from the ISI agents was actually real! When sent to foreign labs, it was found out that the currency was so close to real that it was extremely difficult to prove it being counterfeit. In fact, the small difference that helped them prove it was not real was probably inserted on purpose! Such was the confidence and arrogance of the counterfeiters! It was found by the CBI on further investigation that the mischief was happening at the end of De La Rue, a company from whom RBI imports 95% of its currency paper.In fact, RBI’s buy accounts for over 30% of De La Rue’s profits. At that time, De La Rue was blacklisted by the government and the company came to the point of bankruptcy with 2000 metric tonnes of paper lying unused! At that time, the De La Rue CEO James Hussey – godson of Queen Mother herself – resigned over what was called “paper quality issues”, which sounded fishy to begin with! “We don’t know whether the paper disintegrates under a drop of rain or whether there is just a fly in a roll of paper somewhere,” said one source. “The statement is so full of holes that is has created further suspicion.” De La Rue said the irregularities were of a “serious nature” but that it was “confident that neither the physical security nor the security features incorporated in the paper have been compromised for any customer and that the irregularities referred to relate only to testing of paper specifications at the relevant facility”.Meanwhile, in 2010 another serious security lapse was exposed! Outsourcing of Currency Printing by Government: Height of Betrayal The government had, unbeknownst to anyone, had outsourced the printing of currency notes to US, UK and Germany – amounting to Rs 1 lakh crores!! The entire economic sovereignty of India was at stake! The RBI had in 1997-98 outsourced printing of 2,000 million pieces of Rs 100 notes and 1,600 million pieces of Rs 500 notes to US, UK and Germany amounting to Rs 1 lakh crore. The committee, after questioning central bank officials, said the reasons provided were far from convincing. RBI had said the soilage factor and bad condition of notes resulted in the decision.The panel observed that RBI’s system of assessment with respect to demands and supply of bank notes in the country was off the mark resulting in a gap. (source) The three companies to whom the Indian currency was outsourced were American Banknote Company (USA), Thomas De La Rue (UK) and Giesecke and Devrient Consortium (Germany). On November 3, 2011 a complaint was received by the Central Vigilance Commission (CVC) signed by “unnamed officers of the Ministry of Finance” – who said that the security was compromised not just by De La Reu, but also other companies – French firm Arjo Wiggins, Crane AB of USA and Louisenthal, Germany! What is most disturbing is that the information of compromise in security features of the paper for currency had at different times been withheld from the Home and Finance Ministry of India.Following the quality breach by De La Rue, in September-October 2010, the government tested samples of currency paper supplied by other companies as well. On November 3, 2010, BRBNMPL ( Bharatiya Reserve Bank Note Mudran Private Ltd) — which signs currency note contracts on behalf of the RBI — wrote to the Directorate of Currency, Ministry of Finance, that currency paper supplied by Crane AB of USA and Louisenthal, Germany, had failed tests in Hoshangabad as well but cleared re-tests at the suppliers’ foreign laboratories.The complaint notes, “BRBNMPL in their letter of 3rd November 2010, concealed the failure of paper supplied by Arjo Wiggins (a French company) from the Ministry of Finance as detected in the tests conducted on Arjo Wiggins paper at Hoshangabad”. In 2015, after Modi sought help in investigations in the fake currency notes from the US, it came out that the German company Louisenthal was also selling raw notes to Pakistan, resulting in a ban on the company. The Home Ministry has barred a German company, Louisenthal, from selling bank note paper to the Reserve Bank of India (RBI) after it discovered that the firm was also selling raw notes to Pakistan, according to a senior official. “We are only keeping our interests in mind,” the official told The Indian Express. “We have proof that high-quality fake Indian currency notes are being produced in Pakistan and pushed into India through Bangladesh, Nepal, Sri Lanka and Vietnam. The availability of a common supplier could be one of the reasons behind such high-quality fake notes.” This is how the Indian currency was compromised at every point – RBI, Home Ministry, Finance ministry, and the Indian and Foreign printing presses.Worse of all, our entire currency production was outsourced to unscrupulous forces who were merrily sharing the real stuff with Pakistan who was happily and arrogantly snubbing us and creating a havoc with our economy! How Pakistan was Check-mated? The free flow of Indian currency paper to Pakistan encouraged its government to set up 5 printing presses to print fake currency notes. These were smuggled to Nepal and Bangladesh (often on PIA flights). The currency entered India via UP and Bihar (Nepal border), via Malda in West Bengal (from Bangladesh), via Rajasthan border, Punjab border and via Chennai and Mangalore through the Indian expats from Gulf. Routes of Fake Currency to India Routes of Fake Currency to India (Courtesy IndiaToday) Pakistan used to pump in money to fund student bodies (like in JNU and Jadhavpur), media and journalists and also political parties to completely influence the elections.The “Imminent” Assault Given the aggression with which the Modi government has acted against Pakistan and given its options against Indian – specifically the Surgical Strikes and the heavy bombardment such that Pakistan had to beg India to stop beating them up! – Pakistan wanted another front for a major strike! As per General GD Bakshi, a prominent security and defense analyst, India has some Rs 16 trillion of Rs 500 and Rs 1000 in circulation (which is 96% of the entire money supply).Pakistan was already printing Rs 15 trillion (Rs 500 / Rs 1000) with a view to push them in India to completely “unhinge” the Indian economy in what Gen Bakshi calls an “Economic Pearl Harbour”! This would have led to unprecedented terror strikes and runaway inflation and steep price rise, which would have spelt doom for India in many ways. On the night of Nov 8th, when the Cabinet Ministers and the top bankers were caught unawares by the announcement of the Indian PM Modi on the ban on the notes – an act in extreme secrecy; all efforts to save Pakistan and its network were thwarted. Pakistan was checkmated. All those whom you see now coming together to fight demonitization know exactly what was being planned and what led to all this. If they still choose to fight this act by the Modi government, you should know exactly from which team they are fighting this existential war of India’s futurePaid tweets: Twitter users offered money to praise demonetisationAuthor:Publication: Date: December 9, 2016URL: BJP government has faced a fair bit of flak and bad press on the evils and demerits of demonetisation ever since Prime Minister Narendra Modi carried out his “surgical strike” on black money on November 8. To seemingly counter the bad publicity, social media influencers have received an ‘offer’ to make the hashtag #IndiaDefeatsBlackMoney trend on Twitter, FactorDaily has learnt from one prominent Twitter influencer who has over 30,000 followers on the platform.Who the offer came from could not be immediately ascertained, but there is clearly a Maharashtra angle to it. The influencers have been asked to tag @narendramodi @arunjaitley @Dev_Fadnavis in the tweets — the Twitter handles of PM Modi, Finance Minister Arun Jaitley, and Maharashtra Chief Minister and BJP leader Devendra Fadnavis. The bundling of the Maharashtra CM with the Prime Minister and the Finance Minister does stick out.The brief to the influencers is “Our job is to share positive effects of demonetization”.The sample tweets range from talking about how the demonetisation move “has brought Kashmir unrest to a halt” to how it will give a fillip to the economy.While there have been some speaking in favour of the Modi government’s decision to pull out Rs 500 and Rs 1,000 notes from circulation overnight with the purported intent of curbing black money in the economy, most have spoken out against it — whether it’s on social media or in the press.The source who did not wish to be named, said the directive to make the hashtag trend has been doing the rounds among influencers. There is a whole paid-to-tweet industry whose job is to make hashtags trend, there are even agencies and internet marketing servicing firms that take up projects from clients whether it is corporates or political parties to get a hashtag to trend.The communication to make the hashtag #IndiaDefeatsBlackMoney trend comes with detailed instructions, as is the case with most such directives. It comes with a complete timetable and a warning to not “spam”. It also urges the influencer to modify the sample tweets shared in the communication.We are trying to find out the sum offered to the influencers and will update the story once we know. Typically it’s a two-digit sum for every tweet.UPDATE: Twitter user ‘SamSays’ started searching for fake tweets using the hashtag mentioned in this story, and unearthed a minefield of tweets using the same language, including the same typos.---------------------------------SamSays @samjawed65BJP SM team: Go tweet “Jan dhan accounts are FULLED with money…” Bhakts: Next? (1/n) pic.SxScCXMkvpDecember 9, 2016---------------------------------SamSays @samjawed65More details can be found in this article. I tried to verify its claims & hit upon a minefield of fake tweets. (8/8) 9, 2016---------------------------------HuffPost-BW-CVoter Demonetisation Tracker: The Sentiment Is Beginning To SwingAuthor: Rukmini SPublication: Huffingtonpost.inDate: December 9, 2016URL: half of rural respondents are now saying the measure hurts the poor the most.Is it time to sound the alarm bells? Public support for the Narendra Modi-led NDA government's demonetisation scheme may be waning, new data from a Huffpost-BW-CVoter opinion poll indicates.The poll was conducted for HuffPost India and Business World by CVoter on 8 December, as part of its regular tracking poll covering 1,203 randomly selected respondents in 261 Parliamentary constituencies across 26 States in 11 languages. The data was weighted to the known population profile, and the margin of error was +/- 3% at the national level and +/- 5% at the regional level. The previous rounds were conducted on November 21 and November 28-29.The proportion of people who said that the pain of demonetisation was worth the stated aim of curbing black money continued to fall for the third straight week, while in semi-urban and urban India, support that was growing might now be reversing. Support fell the fastest among the poor and the middle class, and fell slower among the rich.The share of people saying that the impact of demonetisation in their own lives was either disastrous or huge and difficult to manage grew across rural and semi-urban groups and remained the same among urban respondents. The numbers indicate that people's experiences might have improved between the first and second weeks, but as ATMs and banks continue to struggle to give people enough money, the impact on people's lives is deteriorating.The share of respondents who thought that the implementation of the process was good or "ok" also fell in semi-urban and urban areas and rose only slightly in rural areas. Most worryingly for the government, nearly half of rural respondents feel that demonetisation is hurting the poor most, However, PM Modi's political messaging and personal popularity remain unshaken, the survey indicates. A majority across groups felt that demonetisation was beneficial in the long run and said that they would continue to support it even if the problems did not subside soon. A majority - though just barely so in rural areas - said the Modi's popularity had only risen since the announcement.Former IAS officer pens a hard hitting letter to Modi about demonetisationAuthor: Publication: Dailyo.inDate: December 12, 2016URL: Sharma wants the PM to investigate this display of lavishness by his own ministers and party members.Prime Minister Narendra Modi told a jan sabha in Gujarat on Saturday: “Days of looting poor, exploiting middleclass will soon be history”. Perhaps, he was attempting a self-deprecating joke. The NDA government’s demonetisation drive, intended to fight black money and bring its hoarders down to their knees, has been nothing but the exploitation of the poor.While ordinary citizens stand in serpentine queues, struggle to get their hands on their own hard earned money, and even die (thanks to the drive), we have the uber-rich one per cent who seem to be doing everything in their power to mock the other 99, with a toxic display of wealth and grandeur, as the nation recently witnessed with the wedding of former BJP minister in Karnataka, Gali Janardhan Reddy’s daughter, which reportedly cost close to Rs 100 crore. As if that weren't enough, on the one-month anniversary of the demonetisation drive, Union minister for transport and highways Nitin Gadkari too indulged in an extravagant display of wealth on the occasion of his daughter’s wedding reception. According to reports, Gadkari had chartered 50 private aircraft to ferry the guests to Nagpur for the wedding whose guest list included the who’s who of Indian politics. There were an estimated 10,000 guests at the event. In the aftermath of the demonetisation drive, at least 80 Indians have lost their lives, and several weddings cancelled - it is but obvious that this peacock feather display of one’s wealth will not only garner criticism, but also questions and, hopefully, even an official investigation. And that is exactly what former IAS officer and an ex-advisor in the Planning Commission, EAS Sharma has attempted.In his letter to Modi, Sharma urges the PM to investigate such flagrant display of lavishness by his own ministers and party members.He has also served the prime minister an ultimatum: “If you do not act quickly and firmly on these letters of mine, I will be constrained to seek judicial intervention, as every citizen in this country has the right to question the basics of governance.”Here's the full text of his letter:ToShri Narendra ModiPrime MinisterDear Shri Narendra Modiji,I enclose two news reports, one that appeared today in Hindustan Times on “50 chartered planes to ferry VVIPs to Nagpur for Gadkari’s daughter’s wedding”, and the second in today's Times of India, “Weddings put off as families struggle to tide over crash crunch”.Apparently, there is one set of rules and standards for NDA ministers (please see my letter addressed to the enforcement directorate, forwarded here on a similar wedding equally lavishly celebrated last week by your minister Mahesh Sharma) and another set of rules and standards for the common man on the street.As a result of the prevailing cash crisis, many families have put off their scheduled weddings. Many other weddings have broken down. But, Gali Janardhana Reddy, Mahesh Sharma and Gadkari feel no crisis whatsoever, as they seem to have the blessings of bigwigs from both BJP and the NDA. While your ministers are indulging in such unhealthy extravagance, is it not ironic that you yourself should exhort the common man to stand in queues to uphold your grandiose mission to fight against black money?Those that stand in the queues like me feel that your intentions are great and temporary inconveniences should be ignored. At the same time, we feel perplexed to find no Janardhana Reddy's, Mahesh Sharma's and Gadkari's in the queues. Adding insult to injury, they flaunt their wealth and mock at the public at large. Are we living in a civilised society, Mr Modi?I am asking the enforcement directorate to investigate the source of every rupee that these super-citizens have spent and the cash component of every expense they have incurred. I am not sure whether the enforcement director has the authority or an inclination to carry out an impartial investigation, as the numerous cases of overseas accounts standing in the names of some of your chief ministers brought to their notice by me, are yet to be investigated by the central investigation agencies till now.I do not think that any marriage in the West can boast of 50 chartered flights being arranged as it seems to be the case with Gadkari.Are these chartered flights paid for by the corporate houses? Who are those corporate houses? Are there quid pro quos involved? How many five-star rooms have been booked on behalf of Gadkari at Nagpur? How many air-conditioned cars are deployed to ferry the VIPs to and fro? Who has paid for the same? What was the expenditure incurred on the wedding celebrations?Have Gadkari and his associates withdrawn cash from banks at the expense of all those languishing for days in long serpentine queues in front of banks and ATMs?Have the local senior Income-Tax officials already compromised their position by attending the wedding reception as honoured guests?Who are the NDA, RSS and BJP bigwigs who attended the wedding and endorsed the extravagance? This calls for a full-fledged investigation, Mr Modi.I am marking a copy of this letter to Hasmukh Adhia, the union revenue secretary so that he may feel that he too has the obligation to order an investigation into this conspicuously celebrated Gadakari wedding, especially at a time when his department is harassing small jewellers and petty contractors in the name of "tightening" the noose around the necks of "black marketeers".I believe that in a democracy like ours, we need an explanation on this questionable wedding from the highest level in your government. I believe that the CBDT and the enforcement directorate should investigate and report on this. The public at large have not yet fully digested the initial "clean" certificate provided by the Income-Tax Department on the details of Gali Janaradhana Reddy's spending on his daughter's wedding. This has certainly eroded the credibility of your government in regard to the demonetisation measures.If you do not act quickly and firmly on these letters of mine, I will be constrained to seek judicial intervention, as every citizen in this country has the right to question the basics of governance.I am circulating this letter widely to generate a public discussion and a debate on NDA's true stance on profligacy and conspicuous expenditure in the context of demonetisation.Regards,Yours sincerely,EAS SarmaJust days after the extravagant wedding organised by Reddy, evidence of his dubious dealings have emerged. KC Ramesh, the driver of a state official, allegedly committed suicide by consuming poison, but not before leaving a suicide note linking Reddy to black money laundering.In his note, Ramesh has claimed he helped the mining baron convert ?100 crore of his black money into white. The money was to be used for Reddy's daughter's wedding.A formal investigation is, of course, necessary - considering the involvement of a former BJP minister. But as was pointed out by Sharma in his letter to Modi: ”Have the local senior Income-Tax officials already compromised their position by attending the wedding reception as honoured guests?”Opposition on notebandi: Sound and fury signifying nothingAuthor: Swapan DasguptaPublication: The Times of IndiaDate: December 11, 2016URL: the history of the world’s largest demonetisation programme comes to be written, the primary sources may well be somewhat limited. There will, of course, be the various official reports, the records of media (both print and electronic) rancour and even the social media chatter. However, unless a miracle happens between November 14 and 16, there will be a gaping hole.History will record that the parliamentary debate on such a consequential subject was either perfunctory or non-existent. Apart from an encouraging start to the discussions on November 16 and another 50 minutes of discussions on November 24 in the Rajya Sabha, India’s most representative body failed to discharge its responsibilities. Both Houses of Parliament were unendingly disrupted by boisterous Opposition MPs determined to express their displeasure by stalling proceedings. A venerable leader such as former Prime Minister Manmohan Singh who was heard in absolute silence when he made his brief but uncharacteristically forthright intervention, sat expressionless as party colleagues indulged in an orgy of slogan shouting. Even the conventional courtesy of allowing the leader of the House to have his say was unceremoniously discarded.It can well be argued that the Congress and the Trinamool Congress MPs were merely repaying the BJP for its unruliness during the UPA government. Finance minister Arun Jaitley has experienced his own unfortunate defence of disruption as a legitimate parliamentary weapon being thrown back at him.That two wrongs don’t necessarily make a right is well understood. In private, the political class make two admissions. First, that debate is always desirable; and second, that the disruption isn’t a spontaneous expression of outrage but a command performance. Those with political memory will recall the scene inside the Uttar Pradesh assembly in 1997 when open warfare broke out and many MLAs were injured. It was disgraceful but also carefully orchestrated to provoke a Constitutional crisis. The bid failed, but the lessons of that outrage have been insufficiently learnt.The question naturally arises: why do political leaders believe that mindless disruption — as opposed to quaint tactics such as filibustering — serve a political purpose? It is one thing to stage a symbolic protest, even stage a walkout and then go on a fast in front of the nearest statue of Mahatma Gandhi. But when an entire parliamentary session is disrupted and a subject of immense national importance that has touched the lives of every Indian is left un-debated in Parliament, does it not imply an abdication of responsible conduct?This is not to suggest that in India Parliament is the be-all and end-all of politics, as it is in some western democracies. During the furore over demonetisation, parties opposed to the measure have periodically staged street protests. There was even a call for a Bharat bandh that failed to have any noticeable impact. In addition, the media too has made the long queues and stories of hardship and inconvenience their big headline story since November 8. These have been accompanied by debates and interviews where everyone from Amartya Sen and Nandan Nilekani to Arvind Kejriwal and Mamata Banerjee — the two poles of the proverbial shrillometer — have had their say. The Prime Minister, having sat grim-faced through the parliamentary bedlam, has also answered his critics with characteristic combativeness at public rallies. Indeed, it would be fair to say that after a month most people have made up their minds on demonetisation, even as experts are divided on its long-term impact.STIRRING THE POT: Parliament is not the only platform of protest, so what does disruption achieve?In such a situation, when Parliament is just one of the multiple platforms of discussion, what does disruption achieve?The most noticeable feature of the demonetisation and the associated cash rationing is that every Indian has been inconvenienced in varying degrees. Yet, the interesting fact is that popular grumbling has not been accompanied by the ‘riots’ that the Chief Justice of India so injudiciously feared. Indeed, apart from stray incidents, the quantum of genuine rage has been non-existent, despite attempts to suggest that nearly a hundred people have become ATM ‘martyrs’. Nor have fantastic stories of a military takeover and a ‘conspiracy’ in the skies been greeted with anything but amusement.The past month has seen a spectacular display of popular resilience that has broken the stereotype of an excitable India. The only place this extraordinary show of national determination has not been in evidence is Parliament, where civility and decorum have been put on hold. The tragic mismatch between how the electors and the elected conduct themselves is intriguing. Or is it?Murmurs of troubleAuthor: Tavleen SinghPublication: The Indian ExpressDate: December 11, 2016URL: his digital dreams Mr Modi sees a billion Indians becoming enthusiastic participants in a cashless economy in the near future.A month has gone by since the Prime Minister rendered more than eighty per cent of our currency useless and so far, millions of the poorest of our citizens have waited patiently in long queues to collect their rationed money. Many have waited hours and days without food and water only to find when they got to the top of the queue that the bank had run out of money. The lives of our neediest citizens have been disrupted unimaginably and many small businesses have simply died. Despite this, the riots predicted by learned judges of the Supreme Court have not happened.Last week, I heard the first murmurs of protest. I was in Goa and as usual, got talking to my taxi driver. He was a BJP supporter and said he hoped that the BJP would win again in elections due next year. Then he said he was no longer sure of this. When I asked him why, he said people were really suffering because of having to waste whole days queuing up instead of working. “In my case, when I finally got to the top of the queue, they gave me one note of Rs 2,000 and they may just as well have not because I cannot cash it anywhere. Why are there not enough Rs 500 notes? What is the point of us having to suffer like this when trucks filled with new notes are being caught by the police?” The day before this conversation, Goa police had impounded a truck filled with more than Rs 1 crore in new currency.Similar seizures have been made in other parts of the country, causing people to believe that they are the only ones who are paying the price for Narendra Modi’s grand scheme to purify the Indian economy. He has used religious words like ‘yagna’ to defend his decision but appears not to have noticed that it is not corrupt officials and businessmen who are being purified by fire but ordinary people who have never earned enough to pay taxes, leave alone stash away black money.What is done cannot now be undone but perhaps those who advised the Prime Minister to do what he did failed to anticipate the consequences. Did they tell him for instance that Internet services in India were not world standard and so online banking could be tricky? In his digital dreams Mr Modi sees a billion Indians becoming enthusiastic participants in a cashless economy in the near future. But if he understood our creaky banking system better, he would have seen the flaws in these dreams. From different parts of the country, I heard terrible stories last week of very poor people putting their meagre savings into bank accounts only to see the money vanish. The standard response of bank officials is, “Sorry, there was a mistake.”It is the Prime Minister’s good fortune that the Opposition parties foolishly decided to waste a whole session of Parliament with silly protests, black bands and infantile slogans. At the end of this carnival, Rahul Gandhi announced flamboyantly that if he was allowed to speak in Parliament, his words would cause an earthquake. Such a shame that it was his party that made Parliament non-functional. Had the Opposition parties combined to question the government in both Houses, they would have played a more useful role.As someone who speaks as a layman and not an economist, I have to admit that I am unable to see how the Prime Minister or the Indian economy has benefited. When this question has been put to Mr Modi or his ministers, the standard operating response has been that there will be “long-term gain” from this short-term pain. The Prime Minister himself in recent public meetings has urged people to understand that a cashless economy will be less vulnerable to corrupt practices and this is why he did what he did.The problem is that when almost every day now we hear of trucks filled with new currency being apprehended in cities across the country, this claim is hard to believe. If stories of these cash-filled trucks were not already damaging the Prime Minister’s ambitious project enough, the suicide note of Janardhana Reddy’s driver became the black icing on the cake. If there is any truth in the charge that Reddy laundered crores of old notes to marry his daughter off in royal style, then it indicates that black money and black methods to conceal it will be hard to erase. It does not help that this mining billionaire from Bellary was once a celebrated supporter of the BJP and a protégé of Sushma Swaraj. The truth is that decades of bad policies and corrupt taxmen have made Indians very wily when it comes to black money. This is why whatever happens, the real criminals will remain uncaught.Asking the right questionsAuthor: Bibek DebroyPublication: The HinduDate: December 12, 2016URL: as non-cash shouldn’t mandatorily be imposed, neither should cash. Why has this not figured on a reform agenda between 2004 and 2014, or much earlier? “The road to hell is paved with good intentions”, mentioned Dr. Manmohan Singh in his article, “Making of a mammoth tragedy”, published on December 9 in this newspaper. If we don’t go back to Virgil, but treat this as a proverb, there is an alternative version too: “Hell is full of good meanings, but heaven is full of good works.” Some people, at least those who are economists and policymakers, are familiar with the 1971 Direct Taxes Enquiry Committee (Wanchoo Committee). This recommended demonetisation, and in Madhav Godbole’s autobiography, Unfinished Innings: Recollections and Reflections of a Civil Servant, there is an anecdote about what transpired when Y.B. Chavan took the idea to Prime Minister Indira Gandhi. She asked, “Chavanji, are no more elections to be fought by the Congress Party?” Eventually, in 1978, the Janata Party government, not a Congress one, demonetised Rs.1,000, Rs.5,000 and Rs.10,000 notes. There may have been “good meanings” in what the then Congress Party intended, but it wasn’t “good works”. When demonetisation was implemented in 1978, the then Finance Secretary must have approved of the decision to declare some high denomination notes illegal overnight. The then Finance Secretary did not think it was a mammoth tragedy. Circumstances and contexts may have changed, but what was logical in 1978 should continue to be logical in 2016.Bank account penetrationHave circumstances and contexts truly changed? In two doses, banks were nationalised in 1969 and 1980. Policymakers and economists within the government supported the idea. Bank nationalisation was meant to spread banking services. Is it true that more than 600 million Indians live in a town or a village with no bank? Forty-seven years after 1969, that can’t be right. We have had responsible people as Chief Economic Advisers; Finance Secretaries; Reserve Bank of India Governors; Deputy Chairmen, Planning Commission; Finance Ministers; and Prime Ministers. They must have ensured that the good intention behind bank nationalisation wasn’t a road leading to hell. I prefer to believe the country’s Prime Minister. “Just 10 years back only three out of every 10 households in our villages were benefiting from banking services. Today more than half of the rural households get the benefit of bank accounts. It will be our endeavour to ensure that all households benefit from bank accounts in the next two years.” This is from the then Prime Minister’s Independence Day speech in 2012. The speech doesn’t mention towns because there was no need to. All towns have bank branches. Financial inclusion, if interpreted as opening bank accounts, is primarily a rural problem. In 2012, the then Prime Minister told us more than half of rural households have bank accounts and the rest would have bank accounts in the next two years, that is, by 2014.Even if there was some slip up, this is 2016, not 2014. There has been the Pradhan Mantri Jan-Dhan Yojana initiative, with 257.8 million accounts, 139.5 million of them Aadhaar seeded. Though I mentioned bank nationalisation, some things have changed since then. To spread banking services, you don’t necessarily need branches. There is the Bank Mitra infrastructure, which caters to almost four times the number of sub-service areas addressed by bank branches. Thus we have the PRICE (People Research on India’s Consumer Economy) survey in August 2016, with more than 3,00,000 households. This shows 98.7 per cent of households have bank accounts (98.9 per cent urban, 98.6 per cent rural), a fact worth remembering when citing dated data on households with bank accounts, such as from Census 2011. Incidentally, if one has financial inclusion in mind, total population is irrelevant. After all, below an age threshold, one can’t open independent bank accounts (more than 40 per cent of the population is less than 18.)I do not recall anyone in government having said anything about black money being only in the form of cash. That’s the reason the Benami Transactions (Prohibition) Amendment Act of 2016, covering both moveable and immoveable property, was notified from November 1. To refresh our memories, this was introduced in Lok Sabha in May 2015. To refresh our memories again, the Benami Transactions (Prohibition) Act was passed in 1988. But successive governments, presumably because they did not want to tread a road paved with good intentions, didn’t frame rules. Only one logical conclusion is possible. To fight elections, you need black money, irrespective of whether it is held in the form of cash or property.Cash and non-cash modesNor do I recall anyone in government having said all cash is black money. However, there are inefficiencies associated with using cash, which is not the same thing as saying that cash should become illegal. 86.6 per cent of transactions (this is a 2012 figure) in India are cash-based, correlated with the informal or unorganised nature of the economy. Such a share of notes and coins to GDP is excessively high, not in comparison with developed countries alone, but also with developing economies, including a few in South Asia. There have been disincentives against using non-cash modes. Even if one forgets incentives, did earlier governments do anything to remove disincentives? I read speeches by former Prime Ministers and couldn’t find a mention of this issue anywhere. Indeed, that is the real tragedy: talking about the poor is not the same as doing something for the poor. It has been that way since the stroke of the midnight hour on August 15, 1947. If people voluntarily use cash, there is no issue. But just as non-cash shouldn’t mandatorily be imposed, neither should cash. There is a piece of legislation known as Payment of Wages Act, 1936. Unless an employee voluntarily opts out, Section 6 of this mandatorily requires wages to be paid in coin or currency notes. If compulsion is bad, why has this not figured on a reform agenda between 2004 and 2014, or much earlier?Yes, questions should be asked. But I am not sure of whom.THIS is why so many money launderers are getting caught. And it will only get worseAuthor:Publication: Date: December 11, 2016URL: past one month has seen people discuss the impact of demonetisation threadbare. Right from the positives, to the negatives to the fake rumours, all have been debated in media and social media. The latest thing catching the eye of the public are the frequent reports of major raids in some or the other part of the country where-in huge stashes of gold, old demonetised cash, or new currency have been seized by the tax authorities.The country-wide total of seizures till date is staggering:Update: As a benchmark, one can see the figures of assets seized in raids in earlier periods. For example, as per this report, the first seven months of 2015 saw Income Tax raids seize assets worth about Rs 102.50 crores. The same figure for the same seven months of 2016 was about Rs 330 crores. We are just 4 weeks into demonetisation, and the raids have started just 2-3 weeks back. In this short span, the value of assets seized has easily surpassed the 7-months figure of 2015 and is all set to overtake even the 7-months figure of 2016.What explains this sudden spurt in successful raids? How are the authorities getting information about such huge hoards of cash? Is it due to the rumoured “GPS chip” in the new Rs 2000 notes?The most likely reasons are these:Firstly, the tax authorities are liasoning with various other intelligence authorities like CBI etc. Such swoops based on the information available only to the tax department are not so common. This kind of targeted attacking works best when information is shared among various agencies.Secondly, there has to be a clear-cut instruction from above. And it has to come from the very top, i.e. the Prime Minister, flowing to the Finance Minister, and then all the agencies. The instruction is most probably to aggressively chase such money launderers. It is even possible that the IT sleuths have been given targets, failing which they are answerable to their higher-ups.Thirdly, there is one key feature regarding demonetisation which ensures that information flows rather easily: Whether you are getting rid of old notes or getting new notes, you eventually have to go to a bank. Sure, you might unload your old wealth with some other launderer but the final point in this chain has to approach a bank. So also, the source of any new currency has to be a bank.And that is where everyone leads a trail.The entire chain of launderers is only as strong as its weakest link. The tax authorities have to crack only one of the agents in the chain, and a quick look into his communication records like phone, sms or email would reveal all the people he has been dealing with.There are multiple ways to get to such people. All data of bank transactions is on record and is reported to tax authorities. Any spike or high value transaction in a normally defunct account can be traced easily using data analytics tools. From there on it is just a matter of tracing the branch, the account holder, and using the branches surveillance systems to catch any more accomplices.Even if the entire exercise has been done via the connivance of the bank branch manager, he will still leave some or the other trail in the bank’s system to account for the sudden disappearance of a huge stash of cash received from the RBI. The RBI maintains a record of cash supplied to each and every branch and will obviously check the outflow of such cash too, to see that it reconciles with the inflow. And that can be enough to probe deeper and reveal more leads. As has been seen in many raids, even when the bank manager was hand in glove, the IT sleuths have caught up with him and the launderers.And this is just the beginning.We are right now in a dynamic situation since the window till 30th December to deposit old notes is still open. Banks are still accepting old notes and data is being generated even as we speak. Come January or February, all this data will be frozen and will be a gold-mine for analysts.Any dormant account suddenly being triggered (egs: shell or dormant companies being used to launder cash) or any account which usually has lower volumes, or any newly opened accounts showing sudden increase, or any accounts showing a deposit and an instant transfer or withdrawal, all these anomalies will be crystal clear from the data of the banks. It would be only a matter of time before sleuths begin identifying and investigating the parties concerned.This is as far as hard cash is concerned. How do they tackle any other forms of conversions? One of the popular modes could be the real estate sector. Deals could have been struck to sell properties at lower than fair values, with the difference being paid in old cash, basically the purchaser off-loading his cash onto the seller. The seller obviously has to get the cash to a bank, but there is another way they can get caught.For the past few years, sub-registrar offices have been insisting on PANs of the parties involved in real-estate transactions. This data is then passed on to the Income Tax authorities. Till now such data was only used by the Income Tax Department in scrutiny assessments or in case of major mis-matches in tax returns and their data. But going forward, one wouldn’t be surprised if they start using this data more actively.One possible move in the future could be opening up all the cases where properties were transferred from 9th November 2016 till 30th December 2016. Auto-generated notices can be sent to the concerned persons and where satisfactory replies are not received, or where some other parameters are inconsistent, further details can be asked for.The fact is in today’s digital world, much more data is available and one needs only the will and skill to parse through all the data to catch the crooks. Hence it is only a matter of time rather than anything else, even though the party seems to have begun. And if you think this is the end, wait till GST comes. Once GST is implemented, the data at hand of the tax authorities will make tax evasion much harder.Modi's come across as the winner in Parliament logjam, Congress the loserAuthor: Anand Kochukudy @AnandKochukudyPublication: Dailyo.inDate: December 11, 2016URL: lack of imagination and prowess is usually laid at Rahul Gandhi’s door by commentators.After the Lok Sabha got adjourned for the day on December 8, BJP veteran LK Advani sat ruminating on his seat alone in the House for a good 15 minutes before he finally trudged his way out.Just the previous day, the BJP patriarch had lost his cool briefly when he put the onus on running the House on Speaker Sumitra Mahajan and parliamentary affairs minister Ananth Kumar after an adjournment.The same day, President Pranab Mukherjee expressed his exasperation at the logjam in parliamentary proceedings in both Houses and sought to fix the blame more on the Opposition than the ruling alliance with his comment that Parliament wasn’t the place to stage a “dharna” or hold demonstrations.Both Mukherjee and Advani go back a long way as parliamentarians and both were incidentally the Leader of the House and the Leader of the Opposition in the Rajya Sabha, respectively, in 1980.And it wasn’t surprising that Mukherjee and Advani were bipartisan in their utterances. Being part of an earlier era, when such scenes of disruptions would be virtually unheard of, the bedlam in the last few days must have distressed the duo deeply.The Winter session has been scheduled from November 16 to December 16 with 22 working days. But 16 of the 18 days till this weekend have been completely washed out. This session was all the more crucial in the wake of Prime Minister Narendra Modi’s demonetisation announcement on November 8 and the resultant chaos across the country.After a debate got underway on the first day, a week of disruptions followed. One finally hoped to hear a full-fledged debate in the Rajya Sabha when a discussion was initiated on November 24. Former PM Manmohan Singh made an immediate impact with a seven-minute intervention that was clinical yet hard-hitting.The Treasury benches seemed visibly shaken and stirred and Modi chose not to return post-interval - which resulted in yet another adjournment after a debate that spanned 50 minutes.My aim is not to ascertain who is to blame for the current impasse as much as who benefits from this logjam this session.While the Opposition had a legitimate demand that the PM speak on the noteban issue, even after assurances were given that he would, the Opposition hasn’t relented. The goalposts have been shifted thereafter and Arun Jaitley’s argument of disruption being a legitimate parliamentary tool has since been flung back at the government.It seems the Opposition has been derailed from within due to lack of unity and consensus among parties and the inability to devise a collective strategy. It was Mamata Banerjee of Trinamool Congress who was the first to react to the demonetisation move, even as the other parties were making up their minds on the response.The Congress initially chose to support the government on the noteban drive with caveats, but has since recalibrated its strategy to make its opposition clear. Despite the opening provided by Manmohan Singh himself, the party has failed to spread the message across the nook and corner of the country.That there is no village in the country where you won’t find a Congressman - is a standard argument dished out by most Congress supporters when they are asked to comment on their losing streak. This is their rationale on why they are still the pre-eminent party in the country and why they would make a comeback sooner than later.But what has the party done to communicate its stand on demonetisation across the country, apart from disrupting the Parliament?This lack of imagination and prowess is usually laid at Rahul Gandhi’s door by commentators. It has to be admitted that he is more visible and vociferous in Delhi this Parliament session. Having been restricted to the four walls of Parliament as it is in session, there has been no visible strategy to utilise the platform or to dominate the airwaves. More importantly, apart from a one-liner here or there, there has been nothing that has occupied some mindspace.Author of 24, Akbar Road, Rasheed Kidwai, attributes the blame in part to the current command structure of the Congress as Sonia Gandhi is no more a hands-on president while Rahul hasn’t formally taken over.In sharp contrast, Modi hasn’t been restricted by the Parliament disruptions as he is seen campaigning in various parts of the country and communicating his views directly to the people. The speeches are well-calculated and precise but delivered in the common man’s language.Moreover, he uses his Mann ki baat platform to influence public opinion. The government propaganda machinery has done its job well despite having their backs to the wall on the issue of demonetisation.The Congress, on the other hand, hasn’t been able to articulate clearly to the common man if it is against demonetisation or not. There is a communication gap as it is not explicit to the people whether the party is opposed to the policy or implementation or both, and the reasons for the opposition. In such a scenario, Modi’s voice keeps reverberating across the airwaves.It looks as if the Congress has forgotten the impact of grassroots communication and has instead gone on an overdrive online, trying to emulate urban-centric parties like the AAP. Other opposition parties too have not fared differently, despite the call for a Bharat Bandh and its variations on November 28.Mamata's aggressive attempts to dominate the discourse with conspiracy theories of a coup and sabotage in the air have also not gone down well with the public.Many people have wondered why there has been no social unrest across the country post November 8 despite the obvious distress and more than a 100 deaths. The government has cleverly managed to spin the debate towards a moral sense of duty to the nation and the common man seems to have bought the argument despite all difficulties.The resilience of Indians is unparalleled as they move from famines and floods in successive years under a system that lets them down consistently. But when this disaster of a policy has been sold to them as their chance to participate in nation-building, they are more than happy to do their bit.The common man has also been led to believe that the rich man has taken a bigger hit, despite raids unearthing black money in new currency to the tune of Rs 200 crore across the country.It is not yet clear whether the remaining three days of the Winter session would see some debate or be completely washed out like the Winter session of 2010, when the 2G scandal had broken out. Unlike then, it would now entirely be the Opposition’s loss, with the Congress being the biggest-loser.A warning to fellow Indians: On dangers of plastic money and demonetisationAuthor: Valson ThampuPublication: Dailyo.inDate: December 11, 2016URL: takes no time for your credit or debit cards to be compromised.Dear sisters and brothers,This is our dhan ki baat. It is my duty as a fellow citizen to tell you what I believe to be true, with the caveat that I am not an economist.I endorse no party. Some parties hate me. The rest regard me to be too insignificant to notice, which is altogether true. Either way it matters little. What matters is the duty to think.Through this letter I seek to draw your attention to a current concern about which it is dangerous to be confused. I won’t be able to forgive myself if I, for fear of risks, hold back the following facts from you.What is the problem with moving into the jazzy, mystical world of plastic money? To understand this we need to have a bird’s eye view of the way humankind has traversed so far in the mohalla of money.Think of the barter system. The scope for deceit, treachery and corruption was virtually zero. The margin for external control, or your life being manipulated from a distance, simply did not exist. You were safe.Then we entered the brave new world of money: coins and currencies. The result?- External control over us, and extortion, increased many fold. We did not have any role in determining the value of the coins or notes we handled. Somebody else dictated it, and we simply followed.- The danger of our wealth being stolen or taken away from us in a variety of ways increased several fold.- The cat of corruption sprang out of the bag and, having become a tiger, has been mauling us ever since.- Human degradation aggravated. Under the cash system, prostitution and bribing reached unprecedented levels. Imagine prostitution under the barter system? Prostitution did exist, but it was localised and limited. Humankind was safe, for that reason, from crippling infections. (Globalisation, you’d have noticed, globalised both epidemics and terror).- Extortion increased. Historically, the tax system, as we know it, came into being only in the wake of the invention of money. Taxing in material terms has its limits, whereas taxing via money has no limits. What will a king do with a billion bottles of milk or a million kilos of meat?- Prior to the invention of money, national wealth could not have been taken out of the country in humungous quantities to overseas tax-free destinations. Imagine the affluent thieves of our country running away with a billion cows, a trillion chickens, a million camels and so on! And the ships reaching London, Geneva etc. laden with animal excreta! And the VVIPs of Panama Papers fame emerging from that Everest of stink looking pretty prehistoric!Instances can be multiplied, but is not necessary. The point to note, dear friends, is that with increasing rarefication of wealth, the scope for corruption, exploitation and manipulation increased exponentially. It has never been the other way. There is absolutely no reason to believe the present instance to be an exception.The invention of money is a development that - economists will damn me for saying this - worked quite against the grain of our humanity. (The episode of Judas Iscariot selling his master, Jesus Christ, for 30 silver coins is a case in point. Could he have struck a deal under the barter system?) I would refer you to Tolstoy’s classic work on the subject titled What Shall We Do? (Readily available, free, on the internet).Now we are on the brink of a worse change. We are told that plastic and virtual avatars of money - an innovation that further rarefies our wealth a hundred fold - is the one-shot remedy for all economic ills.Really?Going by the logic we have traced in the shift from the barter system to cash economy, this change should aggravate our problems further.Consider this one thing. Nothing is a problem for the economic and ruling elite. They know how to circumvent everything. The entire system is at their beck and call. Do you really think black money hoarders and bandits of corruption have been even marginally inconvenienced, much less bridled, through demonetisation?Already they are back at work. Black money is back with a bang. Corruption has returned with a vengeance. More corruption has happened in the last one month of demonetisation than in the whole year preceding it.Oh no, we must get this right. We have to be excessively stupid to imagine that any measure that is likely to undermine the interests of the elite will even be thought of, much less implemented with shock and awe as the present demonetisation "surgical strike" has been.The metaphor used by the BJP, my friends, is an honest one. The military "surgical strike" that preceded this economic "surgical strike" is a lesson not only for Pakistan but also for all of us, though in a different sense. The "surgical strike" across LoC involved soldiers drawn from the poorest sections of our society attacking the soldiers drawn, again, from the poorest sections of the Pakistani society.Both sides appear to have too many poor lives to sacrifice.The military or political elite on neither side suffered. The case of the ensuing economic "surgical strike" is similar. Mind you, I am not the one who called it a surgical strike! I am only unpacking the claim made by those who authored this script.Even as this nation - 35 per cent citizens still illiterate, vast majority of our people still in unbanked rural and tribal areas - is decoyed into the world of plastic and virtual money, the vulnerability of our financial predicament will increase many fold.It takes no time for your credit or debit cards to be compromised. Lakhs of credit/debit cards have been compromised in quick time in the recent past. Banks in developed countries make up for the losses their customers suffer, in case of any cybercrime and misuse. Our banks will not; for they are already bled to death by our NPA leeches. It is difficult to assume that the ingenuity of the corrupt and the venal will not improvise a thousand means to blow holes in the plastic system and enlarge the scale of their present economic crimes with greater ease and immunity.And corruption? Why would plastic money eradicate corruption? Do you think corruption sleeps in the metal or paper that is turned into money? No! It lurks in human character, in the covetousness that drives life today. You think plastic is a panacea for depravity in character? Surely, you know better than that!Black money overseas? If anything, it will continue unabated. It was not because of the cash economy that money fled abroad. It was because of ruthlessness in bleeding this country on the part of our easygoing patriots. Plastic will not change that. It will make it, if anything, easier and less scent-free.Remember the general principle: with each step we take away from the concrete and the tangible, our helplessness increases. We end up exploited, manipulated, pushed about and rendered more and more helpless. It is not a cashless economy that we need. What we need is:- An honest society and a healthy nation.- A national character free from hypocrisy and venality.- A culture of governance that cares for the people. Wealth without welfare is evil.- A sense of reverence for life and relationships and, in particular, a healthy work culture.- A way of life free from violence. Ahimsa must become our national creed. Even monetisation was implemented with violence.Plastic money and digital wallet have nothing to do with any of these.I have told you what’s what. My duty ends here. My conscience is clear. Don’t say a few months from now, well no one told me! Now you have no excuse.Yours sincerely,Valson- The writer is former principal of St Stephen's College, Delhi and former member of the National Commission for Minority Educational Institutions (NCMEI).Cash chaos shows India's women need financial system they can bank onAuthor: Sarah GammagePublication: The GuardianDate: December 12, 2016URL: the country’s most widely used notes has hit poor women hardest, as they often do not have bank accounts or access to financial servicesLong queues. Days off work. Loss of assets. Not the effects of an economic crash, but rather what has happened in recent weeks after India’s prime minister, Narendra Modi, announced a policy of “demonetisation”, which banned with immediate effect the two notes most widely used throughout the Indian economy.Modi said demonetisation was necessary for several reasons, among them: combating corruption and terrorism financing; promoting formal savings; and ensuring transactions could be properly taxed. To comply with this policy, Indians must wait in long queues at banks with strict deposit limits to swap their old notes for new ones. This policy has had a profound effect, as estimates indicate as many as 98% of all transactions throughout the country are handled in cash.The result has been chaos. Some men and women must now take their life savings in cash and convert them into new notes, the supply of which is insufficient, requiring them to queue at banks for days, if not weeks. Further, there have been stories of people needing urgent medical care being denied transport to clinics because they didn’t have the new currency notes. These anecdotes are shocking and illustrate the stark reality of the immediate effects of this policy, but they are only the tip of the iceberg, as those who are already vulnerable and disadvantaged will continue to suffer disproportionately.While policies like Modi’s are enacted in the name of security, they are frequently implemented without any understanding of those they affect the most: people who are poor, rural and female, and are far less likely to have bank accounts and more likely to operate in a cash economy.In India, as in many lower- and middle-income economies, it is less usual for women to have bank accounts or access to financial services and they will often save cash in their own homes. Women are less likely to use banks because they often lack the identity documents required to open accounts, and are rarely financially literate. Additionally, women may distrust formal financial services, have lower earnings, be seen as less-valuable clients by financial institutions and face more mobility restrictions in travelling to banks and ATMs. They are also far less likely to have access to formal credit. This means more difficulty in using financial services, such as insurance, and more limited opportunities to invest in and grow their businesses.For many women, most of whom are not working or are in the informal sector, keeping cash squirrelled away at home provides a cushion for their future, and their financial and physical wellbeing. Women are much more likely than men to hold small amounts of cash so that they can meet expenditures for health, their children’s education and even weddings and dowries.With this new policy, women are likely to be disproportionately affected, particularly if they do not have bank accounts. Relying on male family members to act as financial intermediaries can mean reduced autonomy over financial and household decision-making and the inability to save individually. This dependence may also leave women’s savings exposed to a greater risk of being used by others in the family. In the event that the male family member dies or the woman is divorced, this could leave her without life savings and assets.El Salvador provides another example of how changes in monetary policy can affect women and the poor disproportionately. In 2001, the country adopted the US dollar in an effort to stabilise currency and reduce inflation. When prices went up as a result of this “dollarisation” and wages did not, the poor, and those who disproportionately used cash, many of whom were women, were unable to purchase necessary goods and services.These types of measures, when implemented swiftly, overnight and without warning – as was the case in India – and which require people to deposit cash in existing bank accounts or open new ones, will continue to have an outsized, negative effect on women.Before implementing policies like these, governments must undertake far greater efforts to ensure women have bank accounts, which should include determining that they have the necessary legal documents (such as identification) needed to open them, investing in financial literacy, and expanding access to digital payments and mobile banking. Governments must also focus on women’s financial inclusion more generally using social benefits, cash transfers and pensions systems or mandate that banks open accounts with no transaction costs for clients with small amounts of cash and savings.Including financial literacy in the national school curriculum is another way to effectively reduce barriers to accessing financial services. Offering postal services has also proved particularly effective in giving hard-to-reach populations banking access.Getting more women and poorer people to use banks is not rocket science, it just requires a concerted effort on the part of governments and financial institutions to make sure that the services provided meet the needs of the populations they are trying to reach. By leaving out the gendered dimensions of banking, policies like those in India and El Salvador will do little more than further widen the gap between women’s and men’s economic empowerment, and will hinder efforts to truly tackle poverty.- Sarah Gammage is director of gender, economic empowerment and livelihoods at the International Center for Research on Women‘Who buys fish with a credit card here?’ Traders scoff at Goa’s bid to ditch cashAuthor: Vidhi Doshi Publication: The GuardianDate: December 11, 2016URL: the state about to be a test bed for India’s drive to digital payments, alarm bells are ringing in the city of PanjimIt’s 11 o’clock, and Laxman Chauhan still hasn’t sold any fish. His stall in the central market in the west Indian city of Panjim has been open for three hours, but none of his usual clients have come today. He checks his watch, and then takes a walk to see if other vendors have had any customers. “Sold anything yet?” he asks Ramila Pujjar, who has set her stall up with a glistening display of the morning’s catch. She hasn’t either.“I’m losing 2,000-3,000 rupees (?23-?35) a day,” says Chauhan. “I’m throwing fish away every day.”The low footfall at Panjim’s fish market is unusual; fish is a staple in Goan cuisine but, for the past month, since the prime minister, Narendra Modi, abolished the 500 and 1,000 rupee notes, business has suffered. “I’m losing money because of the government,” says Pujjar. “The government only takes care of the rich, the poor will always be poor.”Modi’s surprise announcement wiped out 86% of the nation’s currency overnight, leaving the vendors at Panjim’s fish market to suffer heavy losses. “Nobody has cash, so they’re not buying fish.”Panjim is no different to the rest of India. Long queues wind around banks and ATMs in every city as people scramble to exchange their high-value banknotes. The cash crisis has hit millions of traders, as people tighten purse strings and save up precious banknotes.But now, this sleepy tourist town is going to become the laboratory for a radical new experiment. From January, Goa’s government has announced that the city will go “cashless”, meaning every street vendor, rickshaw driver and shopkeeper must offer their customers the option to pay using a debit card or mobile phone. The cash-free drive will attempt to close down India’s thriving parallel economy of untaxed cash transactions.A government circular at the beginning of the month instructed traders: “Goa is likely to become the state in India to go for cashless transactions from 31 December. Even though cash transactions are not being banned, it is in the interest of the government to encourage cashless transactions.”The policy, announced by India’s defence minister, Manohar Parrikar, is in line with Modi’s vision for a cash-free India. Last week, the finance minister, Arun Jaitley, announced a series of discounts on digital transactions for petrol, railway tickets and insurance policies. Modi has urged young people to support his “less cash” economy in a radio broadcast: “I need the help of young people in India … There are many people in your families or neighbourhoods who may not know how to use technologies such as e-wallets and payments through mobiles. I urge you to spend some time … to teach this technology to at least 10 families who may not know it,” he said.For the last two years, Modi has been encouraging digital transactions through his flagship digital India and smart cities schemes, but the de-monetisation fumble has resulted in a new emphasis on card and mobile payments, as government mints fail to keep pace with demand for new currency. Digital payments, he says, will prevent the use of illegal, untaxed “black money”, which fuels crime, corruption and terror.In the last 50 years, since debit-card transactions were first introduced by banks, they have overtaken cash in much of the western world. But digital payments are also spreading in unexpected places, such as in Kenya, where 25% of its gross national product flows through a mobile payment service called M-Pesa, and Zimbabwe, where debit-card machines are increasingly ubiquitous after devastating hyperinflation made banknotes worthless.Speaking to the Observer, Siddharth Kuncolienkar, a member of Goa’s legislative assembly and the incumbent Bhartiya Janata party, said the move towards a cash-free Goa would have long-term benefits for its citizens: “This is bold move by the government. Goa will be a model state and now we are all working in the direction to make that happen. No society can be 100% cashless, but what we want is that the facility to make cashless payments should be provided by every single vendor.”The push to make Goa go digital comes before state elections, which will be held early next year. Government officials said last week that Goa was well equipped to be India’s first cashless state because the majority of Goans had bank accounts. But in the city’s central market, where most traders only accept cash, this seems a faraway dream. “I don’t have a mobile phone,” says Pujjar. “There are eight people in my family, and we have one phone between us. It is not a smartphone. How am I going to take payments? They want me to use a card machine?” she says, making a swiping gesture with her hands, signalling the absurdity of the idea. “I don’t know how to do all that. Who buys fish with a credit card?”Chauhan says: “We are poor people. I am not educated, I don’t know how to use all these machines. Tomorrow, if the government says you have to use this card reader, I’m going to be fooled. Someone else who knows how to use the machine will punch in the wrong amount for the transaction. How will I know whether they’ve paid me the right amount?”To help Goa go cashless, state-wide programmes are being rolled out to help people learn to use digital systems. “Groups of people are learning how to use card readers and mobile payments in classrooms,” said Revati Mazumdar, chief executive of Goa Electronics, who is overseeing the drive. “Government officials are going with bank employees to all the main places in the city to teach people how to make digital payments. Already we have set up 40 kiosks,” she said.Last week, the government’s plan to go cash free hit a roadblock, after Aires Rodrigues, an anti-corruption activist and lawyer, filed a petition with the state’s human rights commission saying the move was unconstitutional. “The state government does not have the jurisdiction to do this. They cannot tell vendors they have to accept digital payments. And Goa does not have the infrastructure to make digital transactions work. Power failures are routine, and phone signal is very weak in many places. You can’t make debit card payments without signal.”Rodrigues argues the vague wording on the government’s circular indicates that officials will be able to penalise vendors who do not offer digital payments. “Our defence minister has crazy ideas and this is one of his crazy ideas. Cashless is impossible in India. It can never happen,” he said.Goa’s chief minister, Laxmikant Parsekar, said that vendors would not face penalties if they failed to offer digital payments, and that the 31 December deadline might be extended. But Kuncolienkar said that the government was still pressing on with its cash-free policy by the new year deadline, and that officials would make spot checks in markets to ensure vendors were offering cashless payments to their clients.“Why not?” he said. “Cashless is better for everyone. We have already done training with the auto-rickshaw union and the motor pilot association.”But Faiz Ahmed, the head of Panjim’s motor pilot association, said no training had been given to his union members yet. Kuncolienkar has promised that by January people will be able to buy fish with a debit card. The vendors at Panjim market are less certain. “It’s impossible,” says Chauhan. “Look, I’m with the government. I support Modi. I want what’s best for our country. But I can’t use those machines. I just can’t.”Mobile based financial services have lifted Kenyans out of extreme poverty: StudyAuthor: tech2 News StaffPublication: Date: December 12, 2016URL: long running study by Massachusetts Institute of Technology (MIT) has shown that using digital wallets has lead to significant reduction in poverty in Kenya, particularly among households lead by women. The digital wallets available on mobile phones allow Kenyans to save more money, as well as be better equipped to handle times of financial crisis. The study, conducted since 2008, has showed that two per cent of Kenyan Households have since been lifted out of extreme poverty. Mobile financial services have helped 185,000 women start their own businesses, and move on from farming related occupations.Tavneet Suri, an associate professor at the MIT Sloan School of Management says “Previously, we’ve shown mobile money helps you with financial resilience. But no one has understood, if you improve resilience, what happens over the longer term. This is the first study that looks at long-term poverty reduction and at gender.”The study focussed on one commonly used mobile transaction service, m-pesa. In Kenya, m-pesa was launched in 2007, a year before the study began. In India, m-pesa has been available since 2014. The study shows that digital wallets have a positive impact on the livelihoods of people. Mobile based financial services have allowed farmers who were only growing crops, to go to the market and sell them, and become merchants.The research saw in increase in spending by households that had a high density of m-pesa agents near them. M-pesa agents handle deposits and withdrawals of the money. The researchers don’t yet know exactly why digital wallets boosts per capita consumption and shifts occupations. Some theories the researchers have include that the wallets increase financial security, allows women to manage finances and save better, as well as extends the network of available support when there are periods of financial bad weather. The research was published in Science, and the economists are going to study Tanzania, Pakistan and Uganda next.What Kenya Gained By Going CashlessAuthor: Amiya Kane? Publication: Date: November 28, 2016URL:?? ’s how the Kenyan economy reaped the benefits of a mobile payment systemIndian markets have recently been flooded with mobile-banking systems and applications, moving from a cash based economy to cashless transactions. The Indian population has found the change from cash to cashless rather a radical one, trying to make many transactions using mobile- wallets, debit/credit cards or banking services such as UPI.In that a lesson or two can be learnt from Kenya, which has already achieved a full functioning cashless sector in the economy through the mobile payment system called M-PESA, in partnership with Vodafone’s local operator Safaricom.This system has increased the level of productivity in the Kenyan economy. It has reduced the amount of time used in making multiple trips to the bank by simply giving the user options of transfering funds with a click of a button.How does it work?One has to simply sign up with M-PESA, where the system will open the user’s M-PESA account:* Money can be credited into the account by approaching a local corner shop Safaricom agent who will then transfer money into the user’s account via the user’s mobile.* Withdrawal of money is possible in a similar manner, where the user will go to the agent, sufficient balance will be checked and amount will be debited from the person’s account.Services offered:M-PESA was introduced as a developmental initiative for the purpose of microfinancing payments. As it observed a rise in popularity with over 21 million users as of the year 2016, it now provides services such as:* Deposit and withdrawal of funds* Transfer of money to users and non-users* Payment of bills* Gateway to loans* Transfer money between services and bank accounts* Purchasing AirtimeThe system has also overcome loopholes by adding a cap of $500 which would prevent money-laundering and transfer of large amounts of money.Cashless transactions have positively affected the household sector in Kenya which showed an increase of 5-30 per cent in income due to lessened travel time. The system has also financed multiple start-up businesses with business transfers achieved through mobile payments from buyer to seller smoothly. It has also integrated the traditionally un-banked population as over 80 per cent of the population use mobile phones as of 2016.Cashless transactions have gained popularity in India, and with the increase in debit/credit card penetration in the economy along with a rise in mobile-payment systems, India too can hope and aim for similar benefits of going ernment 'stings' corrupt bank officials: ReportsAuthor: TNNPublication: The Times of IndiaDate: December 13, 2016URL: government has reportedly carried out sting operations at several banks to expose corrupt officials who are helping black money hoarders.According to reports, CDs of these sting operations have been prepared and submitted to the concerned authorities.Reports say sting operations have been carried out at nearly 625 branches of various banks. In at least 425 branches, corrupt bank officials, businessmen and hawala operators have reportedly been caught on tape trying to convert black money into white.The secret operation has been carried out not just in the Metros but also at several branches in small towns.The reports of sting operation come in the backdrop of repeated warnings by Prime Minister Narendra Modi that those indulging in corrupt practices to derail the demonetisation exercise won't be spared.Addressing a rally in Gujarat's Deesa on December 10, PM Modi had said that black money hoarders and those breeding corruption would not be forgiven.At another rally in UP's Bahraich, the Prime Minister had said senior bank officials have been nabbed during the crackdown against black money and added his government is "of the poor and for the poor and whosoever troubles the poor will not be spared."In the last few days, income tax officials and policemen have seized crores of rupees in new notes during raids across the country.The bulk seizure of new notes has pointed to complicity of bank officials.Authorities feel corrupt bank officials have added to the severity of the cash crunch being faced by the people.War on black money: Demonetisation is a courageous reform that will bring substantive benefitsAuthor: Jagdish Bhagwati, Pravin Krishna, Suresh SundaresanPublication: The Times of IndiaDate: December 13, 2016URL: November 8 Prime Minister Narendra Modi delivered a surprise reform to the nation: the government declared that the high-denomination 500 and 1000 rupee notes, which constituted more than 85% of currency outstanding in value, would be invalid as legal tender and could only be deposited into bank accounts until the end of the year.This is a courageous and substantive economic reform that, despite the significant transition costs, has the potential to generate large future benefits.India is largely a cash-driven economy, though a rapidly growing percentage of the population is becoming tech savvy. A shadow economy reliant on cash transactions and evading taxes, especially on high value transactions such as real estate purchases, gold, and intrinsically illegal activity, has taken deep and highly persistent root. Counterfeiting of Indian rupee notes and their subsequent use in funding of terrorist activities has also been an important concern.While the pernicious effects of a large black economy and tax avoidance have been well recognised, no tangible policy action has been taken until now. Modi’s radical move to invalidate the high denomination notes, in which the black economy primarily transacts, is a daring step.Economically and politically powerful constituencies with considerable stake in the shadow economy have been upended. Undertaking this reform has required the political courage to impose predictable transition costs on the economy to lay the foundation for sustained future benefits – the converse of what one normally expects from one’s politicians.Some economists have advanced a criticism that this initiative is an abrogation of contract and trust in the currency. This is incorrect, as the policy allows for the exchange of old notes for new notes. Although the process is inconvenient, and subjects many households to hardships, it forces the cash from the black economy to be deposited into the banking system, potentially increasing transparency and expanding the tax base and revenues to the government from taxes and surcharges.Inevitably, the Indian economy will move towards digitisation of economic transactions, with cash currency playing a relatively minor role. The argument that the policy is anti-poor is suspect as a significant fraction of the taxes and surcharges that will be collected from the reform initiative is to be allocated to social programmes.Finally, it has been argued that the action is despotic. On the contrary, this action has been taken by duly elected officials within the framework of a democracy. To be effective, the policy required an element of surprise. Given this surprise factor and the magnitude of the reform, the rollout of the policy has generated predictable hardships.The shortage of new currency notes and limits on withdrawals has led to considerable anxiety about wage and pension payments, and cash financing of even routine household expenditures. The frequent changes in rules during the past month, over how money deposited into accounts will be taxed, how much money may be withdrawn and which exemptions would apply, for instance, have led to unnecessary confusion.Nevertheless, there has been an impressive level of support at the grass roots level for this reform, as evidenced by the absence of any rioting, looting or acts of mass protest. But the policy makers must manage this transition process efficiently and with empathy, to ensure sustained support from the common man.As per the Income Tax Amendment Act of November 28, 2016, the government will tax unaccounted income deposits at 50% and will only prosecute those who, upon investigation, are found to have engaged in illegal or criminal activity. This move is hoped to motivate the transfer of wealth from the black economy to the banks.Several recent developments suggest that the demonetisation drive may well yield significant benefits.First, around 80% of the currency in higher denominations has now been deposited back into bank accounts. Since individual deposits will now be matched with their tax returns and unaccounted deposits will be taxed, this will yield a windfall for the government permitting large increases in social expenditures.Second, we already see an impressive switch into digital transactions. Thus, this one-time demonetisation itself could have long-term beneficial impact by nudging reluctant consumers into e-payments, whose transparency will ensure greater tax compliance and a higher permanent tax base.Third, the government’s action taken will put a major dent in counterfeiting. With the new notes being much less prone to counterfeiting, social benefits will be earned immediately.In any other time, one would have to be unreasonably idealistic to expect, from politicians, a major economic reform, which offers substantive benefits in the future, but comes with significant political costs in the transition period immediately following the reform.India, however, seems to have voted in a prime minister who is prepared to take on political risk in his efforts to fulfill his commitment to root out corruption – and has promised even more. We await his next steps.- Jagdish Bhagwati is University Professor at Columbia University. Pravin Krishna is Professor of International Economics at Johns Hopkins University. Suresh Sundaresan is Professor of Finance at Columbia Business SchoolUK firm De La Rue refutes allegations over printing banknotes in IndiaAuthor: PTIPublication: The Economic TimesDate: December 9, 2016URL: UK-headquartered banknote manufacturer today refuted as "defamatory and malicious" allegations that it was involved in printing new Indian currency notes and warned of "appropriate steps" to protect its reputation. Richard Hird, the chief commercial officer of the firm, said the firm will take "appropriate steps" in India to protect its reputation. "De La Rue categorically refutes the defamatory and malicious allegations about its business published in Indian media," Hird said in a statement here. The statement followed allegations from Aam Aadmi Party yesterday that De La Rue was printing currency for the Indian government at Mysuru Reserve Bank Press and that it was blacklisted under the previous UPA government. "De La Rue is not supplying paper for printing of Indian currency and we are not associated with printing of currency in India at present in any form. De La Rue has received no notice nor are we aware that we are blacklisted in India," Hird said. "De La Rue does not supply currency paper and is not printing currency for Pakistan and would never supply currency paper manufactured for one country to another," he added. Describing De La Rue as the world's leading commercial banknote printer supporting 140 countries, which is listed on the London Stock Exchange, Hird said: "The company is a founder member of the Banknote Ethics Initiative and operates to the highest ethical standards. De La Rue will take appropriate steps in India to protect its reputation as the trusted currency printer around the world."RBI Official, Casino Owner Among Bengaluru Arrests Over Money LaunderingAuthor: Tanima Biswas, Edited by Deepshikha GhoshPublication: Date: December 13, 2016URL: senior Reserve Bank of India (RBI) official, a politician who owns casinos and a government engineer's brother are among 10 people arrested in Bengaluru for their alleged money laundering.The arrests have followed multiple raids in which Rs 5.7 crore and Rs 93 lakh were found in brand new Rs 2,000 notes.K Micheal, a senior special assistant with the RBI, was arrested by the CBI this morning. He was reportedly caught helping convert more than Rs 1.50 crore.KC Veerendra, a politician linked to the Janata Dal Secular, was arrested on Saturday after raids at 15 places including his home and a casino in Goa. Officials found Rs 5.7 crore in Rs 2,000 notes from his home.Mr Veerendra is a businessman whose name has allegedly also come up in the cricket betting racket in the past.More arrests in Bengaluru were made after Enforcement Directorate officials, posing as customers, caught eight alleged middlemen who used to take a hefty commission - up to 35 per cent - for helping exchange black or untaxed money for new notes. Rs 93 lakh in new notes was seized from them.One of the arrested men is the relative of government engineer SC Jayachandra, who was suspended recently after raids at his home revealed massive unexplained cash and wealth.On December 2, Mr Jayachandra and another engineer, TN Chikkarayappa, were raided. Investigators found Rs 5.7 crore in 2000-rupee notes besides a Lamborghini, Volvo, MV Agusta, Ducati 749, multiple luxury apartments and a huge amount of gold.While endless queues at banks and ATMs reflect a nationwide cash crunch and less than adequate Rs 500 and 2,000 notes for people, crores in new notes have been found in raids across the country.The two highest currency notes, which formed 86 per cent of the cash in circulation, were banned on November 8 by the government to choke tax evaders.This Maharashtra village is going cashless to tackle demonetisationAuthor: Abhiram GhadyalpatilPublication: Date: December 13, 2016URL: , in the process, Dhasai village in Thane district of Maharashtra has become a template for a cashless economy in rural IndiaWhen teenager Geeta Shinde of Dhasai village in Maharashtra swiped a pre-loaded bank card last Tuesday to buy Rs5 worth of wild berries from the village fruit vendor, she took a radical step toward financial literacy—one that involved bankers, villagers and even her school teacher. As Geeta swiped her Bank of Baroda (BoB) gift debit card, Vijay Singh, the bank’s chief manager for South Mumbai zone, received a transaction alert in Mumbai. To him it was no ordinary alert.“This is a great step towards financial literacy and inclusion. We want students like Geeta to learn this so that they go home and tell their parents about it. Why use cash when money is available in other forms,” says Singh. The fruit vendor proudly displays the Electronic Data Capture (EDC) machine, popularly known as card swipe machine, that BoB gave him free of charge on 1 December. The village of Dhasai in Thane district is learning a lesson in cash as a result of the demonetisation drive. It’s not as if Dhasai has gone cashless—small cash still changes hands at some shops. Rather villagers are learning that money isn’t all about cash.Towns and cities learnt this long back, without a currency crisis to teach them. But the rural folk of Dhasai, 140 km from Mumbai, are learning about forms of money after demonetisation hit them. It’s becoming a “less cash” village. BoB has given 50 EDC machines free of charge to shops, including a couple of meat sellers and a tea vendor. Navtej Singh, the bank’s general manager, Mumbai division, says while the immediate aim is to cover all 100 shops in Dhasai, the long-term goals are financial literacy and inclusion. For villagers like Geeta, these EDC machines are proving to be a great substitute for cash. Geeta is keen to tell her father Shivram Shinde, a farmer who does not yet have a debit card, to get one. How does Geeta, a class 10 student, know all this? Ranjit Savarkar, chairman of Maharashtra Military School near Dhasai and the main facilitator of this move, and Geeta’s teachers, gave her the basic know-how. “You need to protect your password. You must not share it with anybody,” Savarkar told the students, mostly girls.The socio-economic profile of Dhasal is similar to many other Maharashtra villages— of its 679 households, 370 belong to scheduled tribes and 150 to scheduled castes. Swapnil Patkar, president of Dhasai Merchants Association, says the two main economic activities are paddy farming and small trade. Of the two banks in Dhasai— the Thane District Central Co-operative Bank (TDCCB) and Vijaya Bank—the former has a larger customer base—27,000 savings accounts, as it caters to farmers, says Kailash Kor, branch manager.“Of these, only 5% would have ATM cards. We have been encouraging farmers to apply for Rupay cards since it is free of charge. But a very small number of farmers actually use their ATM cards,” Kor says. On 10 November, Savarkar, during one of his visits to Dhasai, saw long queues in front of Vijaya Bank and TDCCB. “It was a queue more for withdrawing cash than depositing old notes. I called people I knew at BoB and asked if they could provide machines to retailers. They agreed,” Savarkar says. Navtej Singh says BoB normally charges Rs 10,000 as a security deposit and Rs450 as monthly rent for each EDC machine. “We started opening accounts of retailers with us and waived off the charges,” he says.This move towards cashless transactions not only provided Dhasai villagers an alternative to cash but also saw a spike in business. Patkar, who runs a grocery shop, said his sales dropped 30% immediately after demonetisation—from Rs 5,000 per day to Rs 3,500. “But after I installed the machine, sales have gone up to Rs 6,000-7,000, he says showing EDC transaction slips worth more than Rs 15,000 for 5 December. Salman Sayyad, who runs a meat shop, saw sales rise by 15%. Ramesh Vekhande of Konkan Krushi Seva Kendra on 6 December sold seeds and fertilizers worth Rs 5,500 to farmers who used their debit cards. The Dhasai experiment is catching up in Murbad tehsil, Thane district’s tribal backyard. Before 8 November, only one shop in Murbad village had an EDC machine. Now there are eight, Savarkar says. He is facilitating the expansion in around 60 small villages in the district. Most of these villages are tribal hamlets, some of them with only 20 homes.India Hobbles Through a Cash Crisis, and Electronic Payments BoomAuthor: Geeta Anand and Hari KumarPublication: The New York TimesDate: December 13, 2016URL: a year, Ashish Kumar Mandal scratched out a living selling dumplings on the streets of New Delhi for a bit less than 50 cents a plate, until the government banned most of the country’s currency bills last month, crushing his all-cash business. In desperation, the 32-year-old took a step he had never even contemplated before: He offered his customers the option of paying electronically.Mr. Mandal is among millions of Indians — snack vendors and rickshaw drivers, cobblers and coconut-water sellers — who are moving swiftly toward a cashless economy, fulfilling what Prime Minister Narendra Modi now says was one of his objectives in banning 500- and 1,000-rupee notes, worth about $7.40 and $14.80.India is experiencing an acute shortage of bills to replace the large-denomination notes that were banned as of Nov. 9, and which made up 86 percent of the country’s currency. There have been numerous reports of people waiting in line for hours at banks or A.T.M.s, only to find that the machines are out of cash.As the public struggles with too few bills in circulation, business has fallen in many sectors to a small fraction of what it was before the ban. Economists warn that India’s growth of 7.3 percent in the most recent quarter, among the fastest of any large economy, could take a hit if the cash shortage continues.“After the currency ban, my sales came down sharply,” said Mr. Mandal, who sells dumplings from a handcart in a market in the New Ashok Nagar neighborhood. “Providing change was a big problem.”After a customer suggested that he take electronic payments, he downloaded software that allows him to accept such transactions on his phone. Forty percent of his sales are now conducted electronically, he says.Even merchants who do not have smartphones are contemplating buying one. “If people are flying in planes, how long we can ride on bullock cart?” asked Sunil Jaiswal, who charges less than $2 to repair watches in an alley near Connaught Place.The large-currency ban was originally presented as a move to curb corruption, counterfeiting and so-called black money, the unaccounted-for cash on which tax is not paid that is estimated to make up as much as one-third of business transactions in India.To be effective, the move had to be a closely guarded secret until the last minute, to prevent those holding black money from unloading it before the ban went into effect — the morning after the decision was announced. As a result, the government did not print enough replacement cash in time for the change, and it continues to struggle to do so fast enough, creating a cash shortage that has strangled large sectors of the economy.But Indians are switching to electronic payments more rapidly than many experts had predicted, and in speaking of the recent currency moves, Mr. Modi has begun emphasizing the benefits of a cashless economy over the anticorruption fight.Across the country, about 70,000 merchants a day are signing up for India’s best-selling mobile payments platform, Paytm, about 14 times as many as the daily average before the currency decision, said Vijay Shekhar Sharma, founder and chief executive of Paytm and One97 Communications, the start-up behind it.Since the large-currency ban, the number of daily transactions on Paytm has grown to nearly six million, an increase of 350 percent, and the service is adding half a million users each day, Mr. Sharma said.“Earlier, we were the innovator, now we are the mainstream,” he said. “This is the start of the golden age for financial technology companies.”More than 230 million people in India use electronic wallets, the finance minister, Arun Jaitley, said, representing nearly one-fifth of the country’s population.At the same time, the government has tasked banks in the country with adding one million machines in stores to process credit and debit card transactions by March 2017, a two-thirds increase from the 1.5 million available today.The number of credit and debit card machines that have been added since the large-currency ban was put in place is not yet available. But Icici Bank, one of India’s biggest private lenders, says it has detected a sharp increase in demand from merchants processing debit and credit card charges. A spokeswoman for Icici said that the bank had installed six times as many machines last week as it did, on average, before the limit on high-denomination bills.Still, A. P. Hota, managing director and chief executive of the National Payments Corporation of India, an umbrella group for sellers of retail payment systems, said that he was skeptical the government could achieve its goal of adding one million new credit and debit card machines in a few months, calling it “a gigantic task.” The infrastructure is not yet in place to process the paperwork involved and to teach merchants how to use the machines, he said.“A merchant will have several legitimate queries, like how to reconcile the payments, how to get money, if there is a problem, whom to contact,” Mr. Hota said. “There has to be an infrastructure to handle these queries.”In part because of increased demand from small and midsize merchants, as well as from government departments, the number of credit and debit card transactions has soared to 10 million a day, more than three times as many as before November, said Deepak Chandnani, managing director for South Asia and the Middle East of Worldline India Private Limited, a division of the French company Atos. Worldline produces about a third of the machines used to process these charges in India.One97, the owner of Paytm, has hired 3,500 employees in the last month, 50 percent more than it had hired in the previous two years, the company’s founder, Mr. Sharma, said. Unable to meet demand from merchants seeking help setting up the systems, the company ran newspaper advertisements with instructions to help business owners do it themselves. The ads also serve as posters for merchants to advertise that they use Paytm.Saurabh Porwal, 31, who sells onions on the roadside in Harola Market in Noida, a city near Delhi, downloaded the Paytm app after seeing the newspaper advertisement, which he then posted on his stall. “If you deal in less cash, it is less of a problem,” he says.Moving toward a cashless economy would carry benefits for the government, ensuring that more taxes are paid and providing banks with more reserves to extend loans. About 78 percent of transactions in India last year were made in cash, compared with 20 percent in the United States, a joint study by Google India and Boston Consulting Group found.Still, those adopting cashless technology are a minority. At Janpath Cloth Market in Delhi, where vendors shout out discounted prices to passers-by, only one of more than 100 open-air shops advertised a cashless system.Amit Maheshwari, who sells men’s pants, displays a white piece of paper on his stall saying, in bold type, “Paytm Accepted Here.”After the currency change, sales at the shop fell to about 10 percent of what they were before, he said. Then a customer who was browsing said he would buy some pants if he could use Paytm. “We had no idea what this was,” Mr. Maheshwari said. “He taught us how to use it.”Since adopting Paytm, sales have risen to 50 percent of what they were before the currency change, he said. “Everybody should use it. Anybody can use it,” he said.But many vendors around India are still resistant. Mustkeem Ahemad, 38, who sells chicken in Harola Market, says that electronic payment systems are too complex for him.“How can you pay on a phone? Only an educated person can do it,” he said. “I am illiterate, so I just can’t do it.”Chidambaram Says No Major Economist Supports Demonetisation. Well, Here Are Seven Who Do.Author: Swarajya Staff Publication: Date: December 13, 2016URL: “This is an absurd, thoughtless move, and no one in the world has a good word for it. Every major newspaper and economist has condemned it,” the Indian Express quoted former finance minister Palaniappan Chidambaram as saying today. He said the government should have at least consulted Yashwant Sinha or Manmohan Singh before going through with the move.Chidambaram is of course trying to be too clever by half. Sinha is not an economist and it was under Singh that proliferation of the high denomination currency took place. During the 10 years of the United Progressive Alliance government, the country also saw the effect of the policies of Singh the economist.As always, Chidambaram is being economical with the truth when he says “every major economist has condemned” the demonetisation move. There are, in fact, many qualified economists who have supported the move and listed various long-term benefits such as a fall in interest rates, better tax compliance, lakhs of crores of windfall for the government as informal transactions become part of the formal economy and a boost to the much-needed recapitalisation of banks battered by non-performing assets.These are, however, long-term benefits, and Chidambaram’s former boss believes, in the words of British economist John Maynard Keynes, “in the long run we are all dead”. Policymakers, however eminent, who can’t see beyond short-term gains must probably not be consulted for a move like this.Here are some of the top economists and commentators who have supported Prime Minister Narendra Modi’s demonetisation drive:1) Jagdish BhagwatiAn eminent economist who is a professor at Columbia University, Bhagwati co-authored a piece for the Times of India (13 December) with Pravin Krishna, Professor of International Economics at Johns Hopkins University, and Suresh Sundaresan, Professor of Finance at Columbia Business School, advocating the withdrawal of specific currency notes. Here’s what they wrote:“This is a courageous and substantive economic reform that, despite the significant transition costs, has the potential to generate large future benefits.India is largely a cash-driven economy, though a rapidly growing percentage of the population is becoming tech savvy. A shadow economy reliant on cash transactions and evading taxes, especially on high value transactions such as real estate purchases, gold, and intrinsically illegal activity, has taken deep and highly persistent root. Counterfeiting of Indian rupee notes and their subsequent use in funding of terrorist activities has also been an important concern.While the pernicious effects of a large black economy and tax avoidance have been well recognised, no tangible policy action has been taken until now. Modi’s radical move to invalidate the high denomination notes, in which the black economy primarily transacts, is a daring step.The Times of India2) Bibek DebroyA renowned economist with degrees from Delhi School of Economics and Trinity College, Cambridge, Debroy is currently a member of NITI Aayog, central government’s policy think tank. Hitting out at economists criticising the demonetisation step, Debroy said in an interview:“Economists base their understanding essentially on reading English newspapers. Otherwise, how would they know? English language newspapers understood many things wrongly. Where does Dr Kaushik Basu work now? He is based in US. I have a great deal of respect for him… Someone who is away from India may not necessarily be aware what is happening in India. Basu will probably react to things like financial inclusion on the basis of data that is three years old. He does not know what happened as a result of Pradhan Mantri Jan Dhan Yojana (PMJDY).India Today3) Surjit BhallaHe is chairman of Oxus Investments, a Delhi-based economic research and advisory firm. He was a professor at Delhi School of Economics, and has worked at the World Bank. Bhalla has called demonetisation a bold step and a bigger reform than the goods and services tax, or the GST.“The fight against corruption and black money in India has just begun. If successful, this will go down as the biggest reform in India, bigger than the GST (though the two are related) and bigger than the industrial policy reform of 1991. But, and there is a but, while the policy is very effective in its attack on past black money, it is silent on the creation of money.The Indian ExpressHowever, Bhalla said the demonetisation move would be called an utter failure if other reforms did not follow it.“But, if other policy measures to reform India are not forthcoming (decline in personal income tax rates to discourage tax evasion, elimination of stamp duty and long-term tax rates on property, a clampdown on the extortion power of tax officials, and reform of election funding), then history will view demonetisation as a colossal failure of thought and reform. It would be so unlike PM Modi to stop here, and I am not betting that he will.The Indian Express4) Arvind VirmaniA leading economist, former India representative at the International Monetary Fund and former Chief Economic Adviser to then Prime Minister Manmohan Singh, Virmani has also served as Principal Adviser in the now-defunct Planning Commission.Though Virmani admitted the step will hurt small businesses, he said it was a “useful method of flushing out black money”.“This is a useful method of flushing out black money, given that a large percentage of cash holding is in these two denominations. The manner in which it was implemented is not surprising – such actions are always secret till announced, so that insiders do not take advantage of the information at the cost of the outsiders.The Indian Express5) V Anantha NageswaranNageswaran is a noted economist and public policy commentator based in Singapore. He has made several insightful interventions on the dangers of judging the government’s move to withdraw Rs 500 and Rs 1,000 currency notes based on short-term implementation challenges.In his thoughtful cover piece written for Swarajya’s December print edition, Nageswaran highlighted the risk taken by the prime minister and said the move had to succeed as it could transform both our economy and society.“The short-term costs of inconvenience and hardship are visible and there could be costs in terms of economic growth for the next few quarters. But the benefits to the economy would be several and would accrue over several years and even decades. It might even be infeasible to identify the benefits to this particular decision. For example, the government’s shock therapy on high-denomination notes might not just nudge but shove many self-employed professionals to earn their incomes officially through bank payments and declare them, rather than run the risk of them being confiscated or declared illegal. Such changes and turnarounds in behaviour would be hard to track and the magnitudes of the sums involved would be virtually impossible to estimate. Therefore, it is relatively easy to calculate the net present value of the decision as being overwhelmingly negative. Costs are being incurred by the poor here and now, and benefits would remain invisible for quite some time. So, it is all too easy to come up with a negative scorecard.Swarajya6) Niranjan RajadhyakshaThe executive editor of business newspaper Mint and a celebrated economics commentator, Rajadhyaksha wrote that the government’s move was “a rare, and perhaps unprecedented, natural experiment whose deeper effects will be known well after the dust settles down.” He called the currency reform a game-changer.“The point is that the currency reform is a game-changer in the true sense of the word. It is quite clear that the immediate impact on the economy will be negative. However, the massive expansion of bank deposits will bloat the contribution of financial services to the increase in gross domestic product in the third quarter, a statistical illusion that could downplay the real impact on economic growth.The real puzzle is what this means in the long run. Much depends on whether this exogenous shock alters citizen behaviour—in terms of whether less cash will be used in the future, whether the tax base will expand as more transactions are done through the formal financial system and if other policy measures restrict the creation of fresh black money. Mint7) Vivek DehejiaDehejia is a professor of economics at Carleton University in Canada and a resident senior fellow at IDFC Institute in Mumbai. He earned his PhD in economics from Columbia University under the supervision of Jagdish Bhagwati. He specialises in international trade, economic development and international macroeconomics.He had this to say about Modi’s demonetisation drive:“Demonetisation is likely to have some good effects, and its bad effects are overhyped by critics, who either do not understand monetary economics or perhaps have a vested interest in seeing the laudable efforts of the government to crack down on black money fail. Let us give this a chance.Here’s Why We Should Give Demonetisation Push A Fair ChanceThis is just a short list of economists in India who support the demonetisation drive. If this doesn’t satisfy Chidambaram, he can proceed to read the views of four former Reserve Bank of India governors here, some of whom were nominated by and served under his party.4 bank officials helped Karnataka's casino owner who hid Rs 5.7 crore in secret bathroom safe, says CBI FIRAuthor: PTIPublication: The Times of IndiaDate: December 13, 2016URL: leader and casino owner KC Veerendra, who was arrested after recovery of Rs 5.70 crore of new currency from a secret chamber in his bathroom+ , was helped by as many as four bank officials besides two middlemen.On December 10, the Income Tax department had seized 5.70 crore in new notes, 32kg of gold biscuits and jewellery and Rs 90 lakh worth old notes stashed inside the bathroom tiles of Veerendra in the far-flung town of Challakere in Karnataka."We have arrested KC Veerendra. He was arrested in Hubballi on December 10 and brought to Bengaluru the following day and produced before the CBI court. He is in our custody for six days," a top CBI official said on Tuesday.Besides Veerendra, midddlemen Thipeswamy and Venkatesh, residents of Chitradurga districts of Karnataka, and unknown officials of four banks State Bank of India, State Bank of Mysore, ICICI Bank and Kotak Mahindra have also been named in the FIR in this case.The bank officials in a criminal conspiracy with Veerendra exchanged Rs 5.76 crore of demonetised notes+ with the new currency of Rs 2000 and Rs 500 denomination during November and Decemeber 2016, the CBI FIR alleged.The FIR alleged that the agency received a source information that officials of SBI, SBM, ICICI, Kotak Mahindra and other banks in and around Challekere in Chitradurga district had entered into criminal conspiracy with Veerendra, Thipeswamy and Venkatesh and other middlemen to "dishonestly and fraudulently" facilitate exchange of Rs 5.76 crore of old currency notes which ceased to be legal tender on November 8.It was alleged that the bank officials falsified the accounts of their bank on the basis of forged and fabricated documents of identity and address proof in the names of several individuals to misrepresent that the new currency notes have been exchanged with the general public through the bank counters and and ATMs of the banks.Note ban likely to fetch government Rs 2.5 lakh crore: KV KamathAuthor: MC Govardhana RanganPublication: The Economic TimesDate: December 13, 2016URL: possible Rs 2.5 lakh crore windfall for the government, a lower interest rate regime for a prolonged period, better tax compliance, and recapitalisation of battered state-run banks are among the benefits that Prime Minister Narendra Modi’s demonetisation move will deliver, former ICICI Bank chairman KV Kamath said. Moving to digital transactions will help the government track the flow of funds through big data analytics and the amount of currency in circulation would be compressed substantially, the Brics bank chief told ET in an interview. "This move was needed to address the issue of corruption in the country… To me, other issues in terms of counterfeit money are important but secondary," said Kamath, the winner of ET’s Lifetime Achievement Award for this year. "If the game is also to compress the amount of currency in circulation, and move things digitally, I think the government ends up holding a lot of cards in its hands." Interest rates should decline by as much as 100 basis points over a six-month period, he said. A basis point is 0.01percentage point. "There will be an impact on interest rate and inflation. Ultimately that is what drives the economy," Kamath said. "I believe that if we have the patient in good condition after this exercise, the patient should be doing well for a long period of time," Kamath said. He disputed the widely held notion that the demonetisation exercise would be judged a failure if all or most of the estimated Rs 15 lakh crore — the value of all the now-cancelled Rs 500 and Rs 1,000 notes — returned to the banking system. Many would be inclined to deposit cash because of the recent amnesty scheme under which those holding undisclosed cash would have to pay 50% tax. As much as Rs 2.5 lakh crore might come into government coffers by way of taxes, he said. Kamath, 69, who was nominated in 2015 as the first chairman of the Shanghaibased New Development Bank — a joint venture of the Brics nations — said the shock therapy would also strengthen lenders. The flood of liquidity would result in lower rates and that should lead to gains in banks’ bond portfolios running into lakhs of crores of rupees. Bond prices and yields move in opposite directions. "There was 100,000 crore profit that happened in the last quarter with treasuries moving down by around 70 basis points," said Kamath. "We are talking of a number that I have not seen before in my career. That should once and for all put an end to the question of where will the capital required to recapitalise banks come from. The answer — it comes from within due to this salutary impact in the system." Going forward, profits due to treasury gains could be as much as Rs 1.5 lakh crore. The government should not be blamed for lack of preparedness because the demonetisation decision needed to be kept secret and hence only a small number of people were involved. Only a courageous leader could have taken such a step, he said. "It takes enormous courage and a bias towards action to do this," Kamath said. "That courage our prime minister has got." He joins bankers such as Romesh Sobti of IndusInd Bank and industrialists like Adi Godrej in backing the initiative that has led to economic dislocation and long queues as banks and cash machines have run out of money. Industry leaders say there will be short-term pain, but the move lays the foundations for a better future.India Just Flew Past Us in the Race to E-CashAuthor: Lauren RazaviPublication: Date: December 14, 2016URL: rules have made it harder for Indians to get cash. The result? Mobile payment apps are booming.Surrounded by bottles of soda and boxes of cigarettes, Sandeep Malhotra sits crosslegged on the counter of his roadside stall, staring intently at his smartphone. A group of customers gestures impatiently, as Malhotra makes it through his first-ever mobile checkout process. He confirms the transaction details, angling his handset to receive optimum 4G. Finally, the green tick appears on his screen: success.Until last month, Malhotra has always dealt in cash. The ritual of neatly stacking up the notes and then locking them in his battered tin lockbox was a pillar of his daily routine for years. As customers came and went, the pile of notes would grow until at last it was tall enough for him to close for the night. But finance has changed in India over the past few weeks—not only in Delhi, where Malhotra runs his stall, but throughout the entire country.In November, India’s Prime Minister Narendra Modi announced a ban on 500 and 1,000 rupee notes (a little over $7 and $14, in American dollars) in a bid to curtail corruption. In India, the banned rupee notes are common currency, accounting for roughly 86 percent of all money in circulation in the country. Yet the relatively large-denominations bills were frequently counterfeited and proved challenging for tax offices to track as they flowed through India’s enormous informal economy.India is a cash-driven country—just under half of the population lives without a bank account—and physical rupee notes are the only currency that hundreds of millions of Indians have ever known. The changeover has been laden with obstacles, with millions of citizens waiting in hours-long lines to exchange rupees. Yet it’s also created an unexpected progression: a burgeoning cashless economy. In the face of demonetization, merchants and consumers are adopting mobile payment.Before last month, Paytm, a mobile app that allows users to pay for everything from pizza to utility bills, saw steady business—it was processing between 2.5 and 3 million transactions a day. Now, usage of the app has close to doubled. 6 million transactions a day is common; 5 million is considered a bad day.Paytm is already India’s biggest financial technology platform, having raised $890 million since it launched six years ago. But now the company stands to benefit from a rethinking of how India’s payment system works. Rather than being forced to idle away time in excruciatingly long lines, “people are proactively exploring other ways to settle payments besides cash,” says Deepak Abbot, senior vice president at Paytm. “Now people are realizing they don’t need to really line up, because merchants are starting to accept other forms of payment.”As part of the drive against black money, cash withdrawals from banks or ATMs are now limited to 2,500 rupees ($37) a day, or 24,000 rupees ($355) a week. These limits, however, don’t apply to online transactions, so Indian consumers are free to move their money as they please—as long as they do it digitally.All of this has created a newfound system that practically incentives mobile payment. With so many people queuing up at banks every day?—?and a lot of Indian bureaucracy to wade through in order to open a traditional bank account or line of credit —the appeal of more convenient digital alternatives is easy to understand. According to a report in the Hindu Business Line, as many as 233 million unbanked people in India are skipping plastic and moving straight to digital transactions.“Cash has lost its credibility and payments are no longer perceived in the same way,” says Upasana Taku, the cofounder of Indian mobile wallet company MobiKwik, which reported a 40 percent increase in downloads and a 7,000 percent increase in bank transfers since demonetization. “There’s chaos at the moment but also relief that India will now be an improved economy,” she says.Taku sees the transition to a cashless society as imminent. Which leaves India with another challenge: Now South Asia’s largest economy has to leapfrog a population that just discovered banking straight into the 21st century.In countries where having a bank account is commonplace?—?such as the US, Canada, and most of Europe?—?adopting mobile payment systems has been slow. The movement is a transition from cash to paper checks to debit and credit cards, finally (theoretically) to e-payments.India, however, is taking a different route. Unlike its Western competitors, India doesn’t have a personal finance system in place. The country is building the rules for e-payments and mobile wallets in tandem with a formalized economy. Before demonetization was announced, for instance, India introduced a national plan to provide broadband connections in rural areas. Now the country expects to add 300 million more internet users by 2020, marking it out as the fastest-growing digital economy in the world.“As a country, we have more digital literacy than alphabetic literacy,” explains Ritesh Malik, a Delhi-based angel investor and the founder of startup accelerator Innov8. “We have over 330 million mobile internet users, which is larger than the US population. People may not know how to read a book, but they know how to upgrade their mobile phone.”Through these rapid developments, India offers a look at how the US might develop in the future. With Amazon having just rolled out its first automated grocery store, Amazon Go, in Seattle, the states could be stepping away from card-based payments. But because the US already has a formal personal financial system in place, concerns about data security have arisen along with digital payments. As many as 70 percent of San Francisco’s public transit riders, for example, said they don’t trust the city to keep their credit card data secure (though 19 percent of those surveyed said they preferred to pay using mobile).Regardless of how established a country’s financial system is, there are still barriers to adopting mobile payments. “The primary risk in accelerated, widespread adoption of [financial technology]?—?wherever you are in the world?—?is that multiple systems and vendors are all trying to take a piece of the market at the same time,” says Vinay Venkatraman, CEO of Leapcraft, a big data consultancy in Copenhagen. “Security-wise it’s always the weakest link in the chain that’s the issue. In this context, these various solutions [are] competing and interacting, which is going to lead to errors, which will inevitably result in security breaches.”Still, in India officials are hoping that e-payments will help minimize tax laundering and evasion, and all but eliminate petty theft. That means citizens must accept the watchful eye of of state surveillance?—?from their own country or another—in exchange for any perceived benefits.In India, this issue has already proven controversial for Paytm. The unexpected surge in popularity led to a media backlash, criticizing the company’s close ties with the Chinese e-commerce giant Alibaba Group, which owns 40 percent of Paytm’s parent company. No one knows who has access to data of Indian citizens who use the service, or what the national security risks might be given a fraught relationship between the two governments.Despite the challenges, demonetization has triggered a radical shift toward reimagining India’s enormous informal economy as a data-driven digital marketplace. With little warning, the country has propelled its citizens and developers into a mobile payment race with the world’s most developed nations. But whether mobile commerce can usher in a golden age of transparency and fairness remains to be seen—in the US and Europe, just as much as in India.Rs 5,000 crore put into Maharashtra cooperative banks in just 4 daysAuthor: Bhavika Jain,TNNPublication: The Times of IndiaDate: December 15, 2016URL: credit cooperative (DCC) banks in Maharashtra received Rs 5,000 crore in old notes of Rs 500 and Rs 1,000 denomination in just four days, from November 10 to 14, when they were allowed to accept demonetised currency.As most accounts in these banks are held by farmers, Nabard (National Bank for Agriculture and Rural Development), the apex bank for all these institutions, has now begun scrutiny of the accounts to check for any cases of "suspicious deposits" or financial mismanagement.Officials say there have been complaints that some accounts have been used to deposit unaccounted cash. Most of the 31 DCC banks in the state are controlled by local politicians and have been hauled up for financial mismanagement in the past. RBI had allowed DCC banks in the state to deposit demonetised notes for only four days in November, during which period their 3,800-plus branches received the huge deposits.The RBI, though, has neither allowed exchange of banknotes nor any more deposits after that; it has only permitted cash withdrawals of up to Rs 24,000 a week."While initially only accounts with more than Rs 2 lakh deposits will be scrutinised, other accounts will come under the scanner too," said a senior official of the state cooperation department.Nabard officials said the average balance in many of the accounts and past transaction history cannot explain the sudden deposits. Even if the account holder has deposited just Rs 1 lakh, if the past transactions and balance history is in a few thousands, how can the deposit be explained?" asked an official.He said branches of Sangli DCC bank in Islampur, Shirala and Tasgaon were scrutinised last week. The Sangli DCC bank had collected approximately Rs 320 crore in old notes.The Pune DCC bank received cash deposits of Rs 600 crore.Officials pointed out that the cash crunch post-demonetisation has seen the weekly withdrawal limit of Rs 24,000 not being met with at most branches. This has led to a huge cascading effect on the rural economy . DCC banks have a wide network and heavy presen ce in rural areas; they have close to 85-90 lakh accounts. A DCC bank is also a key institution in that it disburses farm loans. Considering their reach and cash-rich status, politicians have always vied for cont rol of these banks; most DCC banks in Maharashtra are controlled by NCP and Congress politicians. And instances of fiscal mismanagement have been so frequent that the banks have often been referred to as "piggy banks" of netas.Despite all this, the clamour for allowing DCC banks to transact is growing, with the argument being put forth that farmers are suffering. Recently, CM Devendra Fadnavis along with politicians who run these banks met finance minister Arun Jaitley demanding that DCC banks be allowed to carry out transactions.DCC banks have been saddled with old notes totalling Rs 5,000 crore. We have demanded that the RBI take the money from us because we have to pay interest to depositors, which works out to Rs 55 lakh a day across these banks. There is no reason why RBI should impose restrictions on us. There are only a few accounts with more than Rs 2 lakh deposits," said a senior politician who is also director of a DCC bank.From IT capital to I-T raids hub: 20% of all cash seized in KarnatakaAuthor: S Seethalakshmi & Chethan Kumar, TNNPublication: The Times of IndiaDate: December 15, 2016URL: has earned the distinction of topping the list of states identifying unaccounted money and seizing new currency notes worth crores since demonetisation was announced.Of the 3,000 crore unaccounted money recovered by the income tax department across the country, 20% has been seized in Karnataka alone. Of 48 cases referred by the I-T department to the Enforcement Directorate for investigation, 23 have been registered in Karnataka.Senior income tax officials said they had prepared a list of people with undisclosed income much before the central government announced the Income Declaration Scheme (IDS) early this year.Though the IDS delayed the raids for some time, it took off soon after and the time also coincided with demonetisation, a senior tax department official said, requesting anonymity.The proactive investigation wing of the Karnataka directorate recently prepared a standard operating procedure (SOP) for institutions which were not deducting tax on big transactions at source, including cooperative societies where large amounts of unaccounted money were deposited in the past few months. The SOP became a role model for other directorates to emulate and keep a hawk's eye on suspicious deals.The Karnataka and Goa region of the department carried out a nationwide analysis, which found that the technological capital of the country - Bengaluru - tops the country in terms of the total amount/value of suspicious high value deals.Bengaluru accounted for 2,47,002 crore worth of high value transactions during 2010-16, where PAN numbers were not quoted as required under the law."We took a serious note of this and warned sub-registrars at local revenue offices against conniving with big builders in the state and registering properties without mentioning the PAN number. Black money was big in real estate, so we had to focus on this sector," said an income tax commissioner, who preferred anonymity."As result, the directorate has managed to seize Rs 29.86 crore in cash including Rs 20.22 crore worth of new Rs2,000 notes, 41.6 kg of bullion and 14 kg jewellery since November 9, 2016," he said.India Hobbles Through a Cash Crisis, and Electronic Payments BoomAuthor: Geeta Anand And Hari KumarPublication: The New York TimesDate: December 15, 2016URL: a year, Ashish Kumar Mandal scratched out a living selling dumplings on the streets of New Delhi for a bit less than 50 cents a plate, until the government banned most of the country’s currency bills last month, crushing his all-cash business. In desperation, the 32-year-old took a step he had never even contemplated before: He offered his customers the option of paying electronically.Mr. Mandal is among millions of Indians — snack vendors and rickshaw drivers, cobblers and coconut-water sellers — who are moving swiftly toward a cashless economy, fulfilling what Prime Minister Narendra Modi now says was one of his objectives in banning 500- and 1,000-rupee notes, worth about $7.40 and $14.80.India is experiencing an acute shortage of bills to replace the large-denomination notes that were banned as of Nov. 9, and which made up 86 percent of the country’s currency. There have been numerous reports of people waiting in line for hours at banks or A.T.M.s, only to find that the machines are out of cash.As the public struggles with too few bills in circulation, business has fallen in many sectors to a small fraction of what it was before the ban. Economists warn that India’s growth of 7.3 percent in the most recent quarter, among the fastest of any large economy, could take a hit if the cash shortage continues.“After the currency ban, my sales came down sharply,” said Mr. Mandal, who sells dumplings from a handcart in a market in the New Ashok Nagar neighborhood. “Providing change was a big problem.”After a customer suggested that he take electronic payments, he downloaded software that allows him to accept such transactions on his phone. Forty percent of his sales are now conducted electronically, he says.Even merchants who do not have smartphones are contemplating buying one. “If people are flying in planes, how long we can ride on bullock cart?” asked Sunil Jaiswal, who charges less than $2 to repair watches in an alley near Connaught Place.The large-currency ban was originally presented as a move to curb corruption, counterfeiting and so-called black money, the unaccounted-for cash on which tax is not paid that is estimated to make up as much as one-third of business transactions in India.To be effective, the move had to be a closely guarded secret until the last minute, to prevent those holding black money from unloading it before the ban went into effect — the morning after the decision was announced. As a result, the government did not print enough replacement cash in time for the change, and it continues to struggle to do so fast enough, creating a cash shortage that has strangled large sectors of the economy.But Indians are switching to electronic payments more rapidly than many experts had predicted, and in speaking of the recent currency moves, Mr. Modi has begun emphasizing the benefits of a cashless economy over the anticorruption fight.Across the country, about 70,000 merchants a day are signing up for India’s best-selling mobile payments platform, Paytm, about 14 times as many as the daily average before the currency decision, said Vijay Shekhar Sharma, founder and chief executive of Paytm and One97 Communications, the start-up behind it.Since the large-currency ban, the number of daily transactions on Paytm has grown to nearly six million, an increase of 350 percent, and the service is adding half a million users each day, Mr. Sharma said.“Earlier, we were the innovator, now we are the mainstream,” he said. “This is the start of the golden age for financial technology companies.”More than 230 million people in India use electronic wallets, the finance minister, Arun Jaitley, said, representing nearly one-fifth of the country’s population.At the same time, the government has tasked banks in the country with adding one million machines in stores to process credit and debit card transactions by March 2017, a two-thirds increase from the 1.5 million available today.The number of credit and debit card machines that have been added since the large-currency ban was put in place is not yet available. But Icici Bank, one of India’s biggest private lenders, says it has detected a sharp increase in demand from merchants processing debit and credit card charges. A spokeswoman for Icici said that the bank had installed six times as many machines last week as it did, on average, before the limit on high-denomination bills.Still, A. P. Hota, managing director and chief executive of the National Payments Corporation of India, an umbrella group for sellers of retail payment systems, said that he was skeptical the government could achieve its goal of adding one million new credit and debit card machines in a few months, calling it “a gigantic task.” The infrastructure is not yet in place to process the paperwork involved and to teach merchants how to use the machines, he said.“A merchant will have several legitimate queries, like how to reconcile the payments, how to get money, if there is a problem, whom to contact,” Mr. Hota said. “There has to be an infrastructure to handle these queries.”In part because of increased demand from small and midsize merchants, as well as from government departments, the number of credit and debit card transactions has soared to 10 million a day, more than three times as many as before November, said Deepak Chandnani, managing director for South Asia and the Middle East of Worldline India Private Limited, a division of the French company Atos. Worldline produces about a third of the machines used to process these charges in India.One97, the owner of Paytm, has hired 3,500 employees in the last month, 50 percent more than it had hired in the previous two years, the company’s founder, Mr. Sharma, said. Unable to meet demand from merchants seeking help setting up the systems, the company ran newspaper advertisements with instructions to help business owners do it themselves. The ads also serve as posters for merchants to advertise that they use Paytm.Saurabh Porwal, 31, who sells onions on the roadside in Harola Market in Noida, a city near Delhi, downloaded the Paytm app after seeing the newspaper advertisement, which he then posted on his stall. “If you deal in less cash, it is less of a problem,” he says.Moving toward a cashless economy would carry benefits for the government, ensuring that more taxes are paid and providing banks with more reserves to extend loans. About 78 percent of transactions in India last year were made in cash, compared with 20 percent in the United States, a joint study by Google India and Boston Consulting Group found.Still, those adopting cashless technology are a minority. At Janpath Cloth Market in Delhi, where vendors shout out discounted prices to passers-by, only one of more than 100 open-air shops advertised a cashless system.Amit Maheshwari, who sells men’s pants, displays a white piece of paper on his stall saying, in bold type, “Paytm Accepted Here.”After the currency change, sales at the shop fell to about 10 percent of what they were before, he said. Then a customer who was browsing said he would buy some pants if he could use Paytm. “We had no idea what this was,” Mr. Maheshwari said. “He taught us how to use it.”Since adopting Paytm, sales have risen to 50 percent of what they were before the currency change, he said. “Everybody should use it. Anybody can use it,” he said.But many vendors around India are still resistant. Mustkeem Ahemad, 38, who sells chicken in Harola Market, says that electronic payment systems are too complex for him.“How can you pay on a phone? Only an educated person can do it,” he said. “I am illiterate, so I just can’t do it.”Demonetisation’s impact by the numbersAuthor:Publication: Date: December 15, 2016URL: are a set of numbers to help you understand how the demonetisation exercise is affecting the Indian economyMore than a month after the Narendra Modi government announced its decision to demonetise Rs500 and Rs1,000 currency notes, the numbers and data coming from various sectors of the economy reveal a mixed impact. Here are a set of numbers to help you understand how the Narendra Modi government’s to demonetise high-value currency notes is panning out/impacting the Indian economy:? 1.9% – the overall industrial output contracted by 1.9%, as revealed by the Industrial production data for October 2016, the last point before demonetisation. Since the cash crunch impact is widely expected to persist for two quarters, there is little chance that industrial growth will improve in the second half of 2016-17.? 2.11% – food inflation in November softened to 2.11% from 3.32% a month ago, according to data released by the Central Statistics Office.? 3.63% – is India’s retail inflation which softened for the fourth consecutive months in November from 4.2% a month ago as a squeeze in cash availability impacted prices of perishable commodities. Reserve Bank of India (RBI) is targeting to keep retail inflation under 5% in the fourth quarter and 4% within a band of 2% on either side in the medium term.? 7% – is the Asian Development Bank’s (ADB) projected gross domestic product (GDP) growth rate for India for this fiscal. The multilateral regional bank revised it to 7% from the previously forecast 7.4%. A slowdown in India made the ADB revise regional growth outlook to 5.6%, below its previous projection of 5.7% for 2016.? 7.8% – the ADB has retained India’s GDP growth rate for the next fiscal saying that the impact of demonetisation would be temporary.? 10.8% – The ratio of currency to GDP in 2015-16. It averaged 8.4% during 1975-2000, crossed 10% for the first time in 2002-03 and has remained above this level since then.? 58% – the volume of the reserved railways tickets booked through cashless modes of payment like net banking, cards and e-wallets on the Indian Railway Catering and Tourism Corporation (IRCTC) website.? 5% – the discount the Railways will give on online payment for services such as e-catering and booking of retiring rooms. ? 0.5% – the discount the Railways will give on season tickets purchased digitally with effect from 1 January 2017 to encourage people to use cashless modes of payment.? 91% – of urban households have their Aadhaar card linked to their bank accounts, the ICE 360° survey shows.? 99% – of households in both rural and urban India have at least one member with a bank account, the ICE 360° survey shows.? 465 – The number of points of sale machines deployed by the Railways at 217 locations across India to promote digital payments. Additionally, the Railways aims to install 10,000 PoS machines at all the passengers reservation centres, major parcel offices and suburban stations in order to facilitate cashless payment by 31 December.? Rs5.70 crore – the amount of cash in new currency notes of Rs2,000 denomination seized by the Central Bureau of Investigation (CBI) from an alleged hawala operator K. V. Veerendra’s premises in Karanataka.? Rs61,000 crore – the volume by which the bank credit has shrunk during the fortnight to 25 November, shows the RBI data.? Rs66,000 crore – the amount paid back to banks during the fortnight to 25 November by borrowers, including some default accounts. ? Rs4 trillion – the banks have released back into the system as on 5 December. ? Rs12.4 trillion – is the amount the banks have received as deposits till 10 December since demoentisation, showed the RBI data. The banks had collected Rs11.55 trillion as on 6 December and Rs8.44 trillion as on 27 November.? Rs14.2 trillion – worth currency notes of Rs 500 and Rs1,000 denominations were in circulation as on 31 March 2016, as per the RBI data.? Rs72.92 trillion – the outstanding credit of banking system. ? 19.71 – was the number of ATMs per 100,000 adults in India in 2015, as per the Financial Access Survey conducted by the International Monetary Fund (IMF). This number stood at 8.85 at the end of 2011 and at 17.80 at the end of 2014.? 61.88 – ATMs per 1,000 sq km in India, which is higher than Brazil (21.82), Russia (12.67) and South Africa (22.21). China has 92.32 ATMs per 1,000 sq km.No ‘Poriborton’ Here: Muslim Cleric Calls For Stoning Of Bengal BJP Chief, Mamata Stays SilentAuthor: Jaideep MazumdarPublication: Date: December 14, 2016URL: fatwa issued by a prominent Muslim cleric of Kolkata against Bengal BJP president Dilip Ghosh has not only evoked no adverse reaction from the state authorities, they have instead launched a witch-hunt against Ghosh.It started with Ghosh delivering an angry speech against Bengal Chief Minister Mamata Banerjee at a rally of the party’s youth wing in Jhargram on Sunday. He reportedly said that Banerjee had “lost her mind” and was frustrated after failing to receive any response at her protest rallies (against demonetisation) in Delhi, Lucknow and Patna. Ghosh reportedly said that Delhi police, which was under the Union Home Ministry, could have been instructed to “drag Banerjee by her hair and throw her out of Delhi, but the BJP at the Centre refrained from doing so”.Ghosh’s speech caused an immediate uproar, with Trinamool leaders terming Ghosh’s remarks "abusive and goonda-like". Ghosh’s exact comments were: “Mamata Banerjee has lost her mind after the demonetisation drive. That’s why she visited Delhi and Patna. And failing to achieve anything, she is sitting in Nabanna (state secretariat). We had thought that she would ultimately jump in the Ganga… this person (Banerjee) has lost her mind. The state’s people have realised their mistake of bringing in change in West Bengal”.Trinamool leaders, including education minister Partha Chatterjee and Rajya Sabha MP Derek O’Brien lashed out at Ghosh and the BJP, saying that “after failing to fight Banerjee on her stand on demonetisation, the BJP has started issuing dangerous personal threats to the Bengal Chief Minister”.“The BJP cannot fight Mamata Banerjee on policy, good governance and her principled stand on demonetisation on behalf of millions who are affected,” the TMC said in a statement. “BJP is desperate to silence the voice of the opposition. The Bengal BJP president spews deeply dangerous, threatening, abusive and completely false personal statements against her. A new low in politics,” it said.But what Ghosh said about Banerjee is matched or bettered by her diatribes against Prime Minister Narendra Modi. She has a history of abusing not only her political opponents, but even allies when they don’t do her bidding. She mocked and mimicked Manmohan Singh when he was the prime minister (see this YouTube clip). In the runup to the 2014 Lok Sabha elections, she called Modi a “donkey” and a “danga-babu”. She went further and said she would drag Modi to jail with a rope tied around his waist if she were in power in Delhi (read this report).Not only did the Trinamool leaders conveniently forget all the intemperate and condemnable remarks their leader had made against other politicians, including the present and former prime ministers, they also got a prominent Muslim cleric, Maulana Nurur Rahman Barkati, the Shahi Imam of Kolkata’s historic Tipu Sultan masjid to issue a fatwa against Ghosh.The highly objectionable and patently illegal fatwa issued by the controversial Barkati calls upon Muslims to “stone the badtameez Dilip Ghosh and drive him out of Bengal”. This is what Barkati, with Trinamool MP Idris Ali by his side, told media persons in Kolkata on Monday:“I have issued a fatwa against that badtameez (ill-mannered) Dilip Ghosh. How can anyone use words like that against a leader of Hindustan and that too, the Chief Minister of Bengal? Mera fatwa hai ki usko pathar marke Bangal se nikalna chahiye (My fatwa is that he should be pelted with stones and thrown out of Bengal)”.Idris Ali, too, supported the fatwa.The Trinamool has completely overlooked the fact that a fatwa has no place in India and Barkati’s open incitement to violence through the means of a regressive, medieval and archaic practice has absolutely no legal sanction and amounts to violating the law of the land. “The fatwa issued by the cleric (Barkati) violates several laws and he can be charged under various sections of the Indian Penal Code (IPC). It is a non-bailable offence, and attracts stiff punishment. Not only Barkati, even the Trinamool MP can be charged with abetment and co-conspiracy,” said prominent criminal lawyer Surinder Singh of Calcutta High Court.Barkati is no stranger to controversies. In 2011, he led special prayers for terror mastermind Osama bin Laden. In July last year, he again conducted Ghaibana Namaz-e-Janaza (funeral prayers in absentia) for 1993 Mumbai blasts accused Yakub Memon. In an interview to an English daily, before the 2014 polls, Barkati made offensive comments against Hindus. As analysed here, Barkati violated the law by saying then that “We (Muslims) ruled Hindustan for 1,000 years but never made Hindus slaves here, like the British did”. He went on to warn that “if the BJP comes to power and implements the RSS agenda like uniform civil code….the Muslim clergy and scholars will discuss it and even proclaim jihad”. This was a direct warning of waging a war against the country and, hence, violated many provisions of the IPC.Barkati has openly dabbled in politics. He was a long-time supporter of the Left and when the winds of change started blowing through Bengal in the later part of the last decade, he also changed his political affiliations. He has been urging Banerjee to oppose the BJP and, at Monday’s press meet, said that the Trinamool chief should get her cadres to “thrash RSS cadres and throw them out of West Bengal”. He said that the Muslim community, which was firmly behind Banerjee, would support her in this.But in the name of minority appeasement, Banerjee has not only turned a blind eye to the various illegal acts of Barkati and his open violation of the Indian Constitution and the law of the land, but also got her police to lodge a frivolous case against Dilip Ghosh. A former president of the local unit of the BJP’s youth wing, one Suman Sahoo, was made to file a complaint against Ghosh. Sahoo, who was expelled for anti-party activities and suspected corruption, said in his complaint that Ghosh had threatened to kill him. “This is purely to harass me. But if Mamata Banerjee thinks she can beat me into submission, like she has done with many spineless Congress leaders by getting her servile police force to lodge false cases against them, she is mistaken,” Ghosh said on Tuesday.Thus, Banerjee and her men can hardly cry foul against Ghosh. She has shown the way long ago by her shrill abuse of rival politicians in intemperate and often unparliamentary language. And by remaining silent on Barkati’s fatwa, she has once again indulged in the shameless appeasement of a Muslim cleric who has repeatedly violated the law of the land.Stand up against demonetisation, rather than falling silent: Mamata Banerjee told RBI Governor Urjit PatelAuthor: FE Bureau Publication: The Financial ExpressDate: December 15, 2016URL: Bengal chief minister Mamata Banerjee on Thursday urged Reserve Bank of India governor Urjit Patel to "stand up against the demonetisation onslaught" against the common people, rather than 'falling silent and remaining opaque'.West Bengal chief minister Mamata Banerjee on Thursday urged Reserve Bank of India governor Urjit Patel to “stand up against the demonetisation onslaught” against the common people, rather than ‘falling silent and remaining opaque’. “Why they are silent (on demonetisation issue)? I told him on behalf of the common people that they (RBI) should find a solution to the prevailing cash crisis, which has been created by them,” Banerjee told mediapersons after holding an hour-long meeting with Patel at the state secretariat here. Patel met Banerjee and state finance minister Amit Mitra after RBI’s central board meet in Kolkata. This was the first meeting between the RBI governor and Banerjee, who has been vehemently opposing the Narendra Modi government’s move to demonetise high-value currency notes.“As the governor of the Reserve Bank of India, an autonomous institution with a great history,… we expect you to stand up against this demonetisation onslaught against the common people of the nation at this moment of crisis, rather than falling silent and remaining opaque,” Banerjee told Patel in her letter.She has been criticising RBI on the way demonetisation is being implemented. She also criticised Patel’s ‘silence’ on the issue.You may also like to watch this------------------------------ANI @ANI_news#WATCH: Congress workers protest against RBI Governor Urjit Patel at Kolkata Airport,show black flags pic.mxEwUdTbmGDecember 15, 2016------------------------------In the five-page letter, which is made available to the media, the Trinamool Congress chief sought to know the “nature of allocation of new currency” to each state. “We would also like to know from you the nature of allocation of new currency to each of the states in a spirit of transparency and accountability, since there are serious concerns of political discrimination amongst states,” she said.“It (RBI) is a big institution. It should not be used or misused,” Banerjee told reporters on Thursday. Earlier, she raised the issue of RBI’s ‘discrimination’ in disbursing new currency notes to West Bengal.You may also like to watch thisBanerjee, in her letter, also said the country has been going through an unprecedented misery and suffering due to “cruel misadventure of demonetisation” which has not been seen in any modern democracy.“You are perhaps aware that already five crore of workers across the country and across the sectors are facing unemployment and hunger. Unorganised sector of the country which provides two-third jobs in the country has literally collapsed,” she said. “The tea workers of West Bengal are dying due to non-payment of wages over a fortnight. The jute workers of our state have lost their jobs,” she added.It is customary for an RBI governor to meet the chief minister when he visits a state for a board meeting. Banerjee, however, had not met former RBI governor Raghuram Rajan on the last few occasions.Let people use old notes for necessities, says Supreme CourtAuthor: TNNPublication: The Times of IndiaDate: December 16, 2016URL: Supreme Court questioned the Centre on Thursday on the way it had handled the aftermath of demonetisation and asked why there was unequal distribution of new currency notes among people.Indirectly pointing towards recent raids in which people were caught with stash of new notes, a bench of Chief Justice T S Thakur and Justices A M Khanwilkar and D Y Chandrachud said that demonetisation had resulted in a "problem of extreme", with a few people managing to get plenty of notes while others struggled to get a single one.The court was also of the view that scrapped currency notes should be allowed to be used by people to access basic necessities of life. It said the old notes should be accepted in government hospital so that people could avail medical facilities. "What is your apprehension if government hospitals are allowed to accept scrapped notes? Why should people suffer if you are not able to supply new notes to them?" the bench asked and reserved its order.Attorney general Mukul Rohatgi said that the inconvenience faced by people would soon be over and the court should not pass an interim order for use of scrapped currency.He said that the government had decided that Rs 8,000 crore which was collected by district cooperative banks between November 11 and 14 would be accepted by RBI, and banks could exchange the scrapped notes.The AG said black money and unaccounted cash would come back into circulation if the court allowed use of scrapped notes. He said huge sums of black money were converted into white when scrapped notes were allowed at petrol pumps and for railway reservation and there were chances that it would be repeated.Rohatgi said that the government had taken a bold decision which no other dispensation took during the last 70 years and the situation would soon become normal."We have only 14 days left. The idea behind demonetisation was to root out black money and the government has been able to achieve its target. This country is witnessing a revolution. No other government dared to do so earlier. The government has taken a decision and its answerable to Parliament," he said.The bench, however, drew the AG's attention to the problems faced by common people and indicated that it may pass an interim order to reduce their inconvenience. The court asked how huge amounts in new notes were recovered from bank officials and asked the AG about the government policy on supplying new currency notes to different bank branchesDemonetisation: 8 Bengaluru cops arrested, fired for swapping old notesAuthor: Anusha RaviPublication: Date: December 15, 2016URL: erring cops were dismissed without inquiry under article 311 (2)(b) of police actEight policemen were dismissed from service without inquiry in Bengaluru. All eight have been accused of robbery in the guise of exchanging legal tender with old currency notes post demonetisation.The erring cops were dismissed without inquiry under article 311 (2)(b) of police act. All eight are accused of being involved in robbery of lakhs of rupees meant for exchange with demonetised currency notes. The cops are accused in 3 cases of robbery of Rs 35.5 lakh, Rs 8 lakh and Rs 22.3 lakh in various police stations.One police sub-inspector, N C Mallikarjuna, one head constable, Mayura, six police constables Manjunath Moggad, L K Girish, Chandrashekhar, Anantharaju, Raghava Kumar and B Shesha, attached to Girinagar, Magadi road and Kalasipalya police stations have been dismissed. Out of the eight men, five are attached to the Kalasipalya police station.The move is being looked at as a way to clean up the department that had come under severe criticism following allegations of policemen being involved in financial crimes post demonetisation.I-T department nets Rs 2,900 crore in 586 searchesAuthor: TNNPublication: The Times of IndiaDate: December 16, 2016URL: a little over a month after the announcement of demonetisation on November 8, the income tax department carried out a record 586 searches across the country which yielded more than Rs 300 crore in cash seizures, Rs 79 crore in new currency notes of Rs 2,000, and unaccounted income of Rs 2,600 crore.The highest seizure has been from Tamil Nadu where the tax department recovered more than Rs 100 crore in cash in one single search in Chennai. The total cash seizure from Tamil Nadu has been in excess of Rs 140 crore besides gold seizure worth Rs 52 crore.Similarly, a lawyer's premises in Delhi was recently searched which led to recovery of about Rs 14 crore in cash. The same lawyer had declared unaccounted income of Rs 125 crore in October. Two weeks ago, tax officials had visited his bank and seized around Rs 19 crore in his accounts believed to be unaccounted.I-T raids on Wednesday on Bank of Maharashtra in Pune revealed that 15 lockers were acquired by one person in August at the bank's Parvati branch. The 15 lockers yielded Rs 9.85 crore in cash - Rs 8 crore in new Rs 2,000 notes and the rest in Rs 100 notes. Related searches by I-T officials in the city yielded another Rs 94.50 lakh of which Rs 80 lakh was in new currency notes. The total seizure from the Pune operation was Rs 10.80 crore, out of which Rs 8.8 crore was in new currency notes.I-T officials said two lockers were operated 12 times each post-demonetisation on different dates in November and December by a single person who was the authorised signatory. The department has checked bank records and CCTV footage for the last one month, which showed big bags being freely carried in and out of the bank by the accused. Bank officials are likely to be questioned.A Bank of Maharashtra official on Wednesday said that it allowed the company only two transactions of Rs 50,000 each since November 8. It is not clear if the company has more accounts in other banks and what the source of this massive stash was.The tax department has cracked one source from where the conversion is believed to have happened. Sources said that not all the notes were in series and most are believed to have been siphoned off when exchange of up to Rs 4,500 was allowed.Another tax official said, "The company's representative had all the locker keys and he admitted it belonged to the firm and they were converting." The firm's officials could not be reached and emails to two of its US-based directors went unanswered.RBI Governor Urjit Patel manhandled by Congress workers at Kolkata airportAuthor: Dianne NongrumPublication: Indiatoday.inDate: December 15, 2016 |URL: had earlier met with West Bengal Chief Minister Mamata Banerjee, who reminded him of his duty as head of an autonomous institution.Reserve Bank of India Governor Urjit Patel was shown black flags and manhandled by alleged Congress workers at the NSC Bose airport in Kolkata today.Chanting slogans like "Urjit Patel go back" and "Urjit Patel hai, hai", over a dozen protesters tried to block his way when he stepped out of a car at the airport on his way back to Mumbai.Policemen accompanying him were seen pushing away the agitators and securing the way for the RBI governor, who earlier in the day attended a meeting of RBI board at the central bank's office where TMC and CPI-M staged demonstrations. Patel had earlier in the day met with West Bengal Chief Minister Mamata Banerjee, who reminded him of his duty as head of an "autonomous" institution.While both Patel and Mamata termed the meeting "positive", the later submitted a memorandum to the RBI chief listing the state's grievances over the central bank's handling of the cash crunch in detail.How dirty cash may have dodged government: We have picked up some ideasAuthor: Pratik Bhakta & Sangita MehtaPublication: The Times of IndiaDate: December 16, 2016URL: the past few weeks, the income-tax department has made seizures of new currency notes worth lakhs in several raids across the country even as ATMs continue to remain out of cash and bank withdrawals are still capped at Rs 24,000 a week. While investigating agencies are yet to identify the exact points of such cash leakages, ET looks at potential points from where cash could have slipped out...1. Leakage Likely When Cash is in Transit* From RBI to currency chest* From currency chest to branches* From currency chest to offsite ATMs* Illegal exchange of cash at any of these points* Employees of cash logistics companies could be involved* Pressed for time, cash transportation job given to private firms without running proper background checks2. Loss of Cash at Branches* Note exchange: Lack of clarity allowed people to exchange Rs 4,000 at bank counters of multiple branches of different banks.* Benami accounts: Unscrupulous elements deposited unaccounted cash in such accounts and then withdrew cash, converting black money into white.* Dormant accounts: Bankers, in few cases, connived with money hoarders to use dormant accounts for money laundering.3. Jan Dhan Accounts* Such accounts of poor uneducated farmers and labourers were used by hoarders to deposit Rs 49,999 without * PAN card and then withdraw Rs 24,000 in two instalments over 2 weeks.* It is estimated that Rs 27,000 crore was deposited post scrapping of old notes.4. Weddings.* Lack of clarity regarding formalities required for withdrawing cash for weddings gave scope to moneylaunderers to issue false wedding invitation cards and undertakings to withdraw Rs 2.5 lakh after depositing their black money into banks.5. Current Accounts* Small businessmen who may not have really needed Rs 50,000 (limit for these accounts) may have withdrawn large sums on a weekly basis as a conduit for those having unaccounted money.Printing of Rs 500 notes significantly stepped up, says governmentAuthor: TNNPublication: The Times of IndiaDate: December 16, 2016URL: affairs secretary Shaktikanta Das said on Thursday the government was confident that the currency supply would considerably improve in 2-3 weeks as the printing of Rs 500 notes has been stepped up."The government, the finance ministry, the RBI, the enforcement agencies and of course the banks, everybody is working in tandem to ensure that the situation eases out," Das said."And I can say with confidence that the situation has considerably improved," he said. Das said that the central bank had already injected Rs 5 lakh crore worth of Rs 500 and Rs 2,000 notes and by end of the month 50% of the Rs 15 lakh crore worth of notes scrapped would be supplied into the system.Das said that the printing of Rs 500 notes has been significantly stepped up and it was being supplied to the market. "Supply of Rs 500 notes in bigger numbers is expected and the Rs 2,000 notes that people are holding in their wallets or elsewhere will come back into circulation," he said.He said that the process of distribution has also been further streamlined and now each printing press had been linked to areas around it in order to stop criss-cross movement of notes."Airlifting is continuing to be done wherever necessary," he said. Asked about the amount of scrapped notes which have come into the system, Das said the central bank and various banks have been asked to counter check the figures to ensure there is no double counting. The RBI had said that Rs 12.4 lakh crore had been deposited as of December 10."So a process of correction, checking, counter checking of the figure, due diligence is being done to see there is no double counting of figure.... We think there is scope for double counting and therefore the scope for verification of those figures are going on," Das said.He said that 2 lakh ATMs out of the 2.2 lakh had been recalibrated and banks have been advised that they should continue to replenish cash in these machines and not to starve the ATMs. Das said that the design of the new notes had been done in the country and they were much more secure.Drunks Using Cards, Why Aren't You, Andhra Chief Minister Scolds OfficersAuthor: Uma Sudhir, Edited by Indroneil B BiswasPublication: Date: December 16, 2016URL: was a distinct lack of activity when Andhra Pradesh Chief Minister Chandrababu Naidu asked for a show of hands on how many top government officials have begun using cards instead of cash."Not even 25 per cent of you are making cashless transactions. How will the country reform if you are like this? It will not," Mr Naidu scolded nearly 200 ministers and bureaucrats at the government's headquarter."That is the biggest challenge - Mindset. Your mindset has to change," the Chief Minister said, though he then exercised an odd example of the behavioral shift he's seeking."A drunkard's mind will not work if he doesn't drink by evening. That (drinking) gives him the kick, so he has learned to make cashless transactions," said Mr Naidu, highlighting that liquor shops have been quick adapters to the demonetization drive by adding point-of-sales or swipe machines to ensure they don't lose customers on account of the current cash crunch.Mr Naidu's party is a member of Prime Minister Narendra Modi's coalition government; he has been appointed head of a committee with 13 members, including five other Chief Ministers tasked with promoting digital transactions across the country.BJP Makes Gains In Traditional Congress, NCP Strongholds In Second Phase of Maharashtra Civic PollsAuthor: Anant Zanane, Edited by Indroneil B Biswas Publication: Date: December 15, 2016URL: what the BJP will see as another thumbs up for the notes ban, the party has followed up its wins in the first phase of the Maharashtra civic elections with more gains in the second today, continuing to make inroads into traditional strongholds of the Congress and Sharad Pawar's Nationalist Congress Party - this time, Pune and Latur.BJP nominees have won five of 14 direct contests for municipal chiefs, while the NCP and Congress have won two apiece and the Shiv Sena and three local alliances have won one each, there is one independent winner.The NCP leads this phase in terms of number of seats, winning 93 of 324, but has ceded ground to the BJP, which is close behind with 81. The Congress and Shiv Sena trail at 45 and 23. The trend of Independent candidates winning big continues from the first phase - they have won 82 seats in this round.Elections for 212 municipal bodies are being held in four rounds. In the first and biggest round late last month, elections were held in 147 municipal councils and 17 nagar panchayats across 25 districts in the state.The BJP had won 51 municipal chief posts, followed by the Shiv Sena with 25, Congress 23 and NCP with 18 posts. The BJP had also won the highest number of seats at 893, out of the total 3,727 seats and its chief Amit Shah had called it a wake-up call for parties like the Congress which are campaigning against Prime Minister Narendra Modi's notes ban, aimed at combating corruption and black or undeclared money.In both phases, the BJP has made gains at the cost of the Congress and NCP which have contested these elections separately. Five years ago, they were partners and had dominated the municipal elections.But since then, the BJP - for years the Shiv Sena's junior partner - has stormed to the front, winning the most seats from the state in the national elections in 2014 and then months later, in the assembly elections.Credit for the party's performance so far in this year's civic polls has also been given to Chief Minister Devendra Fadnavis, who has sought to extend his party's influence in the rural areas where the Congress and NCP have had an upper hand for years.PM Modi had called the first phase "a win for pro-poor & development politics of BJP." A day later the party had won civic elections in Gujarat, and said both wins signalled the people's support for the notes ban, which opposition parties have attacked for the hardship caused to people by a massive cash crunch that has followed.PM Modi has promised that the situation will ease soon and that the demonetisation will bring long-term benefits for the poor.Centre disputes RBI’s deposit countAuthor: Special CorrespondentPublication: The Hindu Date: December 15, 2016URL: Das says Rs. 12.44 lakh crore in invalid notes may not have come back to banks The Finance Ministry on Thursday said the Rs. 12.44 lakh crore figure reported by the Reserve Bank of India as the amount having been deposited in banks since the November 8 demonetisation announcement could be inflated due to double-counting.Department of Economic Affairs Secretary Shaktikanta Das said the RBI had infused three times the annual figure of low denomination notes in the five weeks since demonetisation, adding that the supply of Rs. 100 notes was increased by 50 per cent in that period.“Regarding the figures in the media, and even the RBI has released some figures, on the notes that have come back, there are a lot of areas where we feel there could be double counting,” Mr. Das said at a press conference. “We have identified those areas and asked the RBI and the banks to again check. So the process of checking and counting is happening.”Three times“The total quantum of low denomination notes which the RBI normally supplies in a year, three times of that has been supplied in the last five weeks,” Mr. Das said. “To take the example of Rs. 100 notes, about Rs. 1.6 lakh crore were in circulation on November 8. Between November 8 and now, more than Rs. 80,000 crore in value has been supplied to the market. Similarly for Rs. 10, Rs. 20 and Rs. 50 notes.”He said that roughly about 50 per cent of the notes that became demonetised would be back in supply by the end of the month. While more than Rs. 15 lakh crore of notes were demonetised on November 8, so far more than Rs. 5 lakh crore had been put back in circulation.Recalibration of ATMsStressing that two lakh ATMs had been recalibrated, Mr. Das rubbished reports that a much smaller number were in fact functional. “Some banks prefer to give cash through their branches than in ATMs so that they can cater to their own customers,” he said.Mr. Das said the new notes seized by the enforcement agencies were being put back in circulation as soon as possible.Crop loansEmphasis was on supplying cash to district cooperative banks so that crop loans could be given. The Rabi sowing this year was almost on a par with that seen last year.Mr. Das remained non-committal on the rules that would apply at banks, including the withdrawal limit of Rs. 24,000 a week per account, after December 31.“What the government will do after December 31, I will not be able to say now,” Mr. Das said. “You will know it on December 30. I do not foresee the situation worsening after December 31.”Made in IndiaMr. Das also highlighted the fact that the new Rs. 500 and Rs. 2,000 notes and their security features were entirely designed in India. “To that extent, they are much more secure and the opportunity to counterfeit them is far lower than in the earlier notes,” he said.While the government and the RBI had earlier decided to focus on the release of Rs. 2,000 notes so that the value of the currency that was removed from the system could be quickly matched, the emphasis had now shifted to Rs. 500 notes.“The supply of Rs. 500 notes will ensure that Rs. 2,000 notes being hoarded will come back into circulation,” Mr. Das said. “The focus is on printing Rs. 500 notes. The distribution process is being further streamlined and each printing press is being linked to the areas around it to prevent the criss-crossing of supply lines. Airlifting is continuing wherever necessary.”Rahul-Modi meet breaks Opposition unity as some parties skip march to PresidentAuthor: Javed Ansari Publication: India Today Date: December 16, 2016URL: in Opposition, several non-Congress parties boycott march to meet President.Cracks have developed within the Opposition over a Congress delegation meeting Prime Minister Narendra Modi separately on Friday. Miffed with the development, several non-Congress Opposition parties boycotted the march to Rashtrapati Bhavan today.A delegation of Congress led by party vice-president Rahul Gandhi called on the Prime Minister before the last day of Parliament started business. They apprised Modi of the hardships being faced by the farmers. Among other demands, they requested him to increase the minimum support price (MSP) of crops.Rahul was accompanied by Mallikarjun Kharge, Ghulam Nabi Azad, Jyotiraditya Scindia, Capt Amarinder Singh and Anand Sharma among others.The other Opposition parties such as Samajwadi Party, Bahujan Samajwadi Party, Nationalist Congress Party, DMK and the Left have taken strong exception to the Congress delegation's separate meeting with the Prime Minister. They boycotted the Opposition's meeting with President Pranab Mukherjee over disruptions in Parliament.Meanwhile, former Prime Minister HD Deve Gowda has questioned unity in the Opposition's ranks, alleging that parties move forward according to their convenience.--------------------------------------ANIIs there any unity in the opposition? Parties move forward according to their convenience: HD Deve Gowda,former PM1:26 PM - 16 Dec 2016--------------------------------------Sources said Ghulam Nabi Azad and CPM leader Sitaram Yechury tried hard to persuade the sulking leaders of these Opposition parties. However, leaders of these parties could not be mollified. The Congress leaders went and met Mukherjee without the representation of several Opposition parties.Indira Gandhi Ignored Advice To Demonetise, Sold Out India: PM Narendra ModiAuthor: Abhishek Chakraborty Publication: Date: December 16, 2016URL: Prime Minister Narendra Modi today levelled charges against two former premiers, his predecessor Dr Manmohan Singh and Indira Gandhi, of ignoring basic steps to fight corruption. Obvious and recommended methods include demonetisation, he told his party's parliamentarians this morning, at a time when his government is being asked to explain the vast cash crunch forged by its sudden cancellation of 500-and 1,000-rupee notes a little over a month ago. The Prime Minister's address to his party lawmakers were made on the last day of this session of Parliament which accomplished close to nothing because of daily disruptions over the demonetisation drive. Here are the top 10 developments in this big story:1. PM Modi said that Dr Manomhan Singh kept stating the need to erase black money and check corruption but "did nothing during his 10 years" in power as the head of the Congress-led coalition government.2. The Prime Minister also referred to Indira Gandhi, stating that a report in 1971 strongly urged demonetisation - to which, he said, her response was: "Are there no more elections to be fought by the Congress party?"3. The Prime Minister said, "had this (demonetisation) been implemented then, the country would not have been destroyed."4. BJP chief Amit Shah ordered all national lawmakers to spend a week in their constituencies propagating the benefits of the decision to cancel high-denomination notes.5. The comments from PM Modi and the BJP President come as some within their party have reportedly shared concerns over how the cash crunch that is being felt across the country, especially in rural India, could impact the BJP in the approaching elections early next year in Uttar Pradesh and Punjab.6. The opposition, which had forged a rare unity to attack the government over causing what it describes as an economic crisis, showed signs of unravelling today after Congress vice-president Rahul Gandhi, along with other leaders from his party, met with Prime Minister Modi.7. The session was held for Mr Gandhi to present the concerns of farmers in Uttar Pradesh, who he met during a month-long tour of the state in September.8. Angry about the Congress breaking ranks at a time when the opposition has been coordinating a combined strategy, at least four parties including the Left dropped out of a protest that had been planned for today culminating in a meeting with President Pranab Mukherjee.9. The notes that were cancelled on November 8 amounted to 86 per cent of the currency in circulation. Nearly 90 per cent of the money has been returned to banks; with days to go before the deadline of December 30 to submit old notes, experts say virtually all the money that was outlawed will be returned, wiping out the government's claim that it would accrue about Rs. 5 lakh crore or 73.5 billion dollars of undeclared money.10. The Prime Minister's reform has been widely praised for its intent, but faulted for execution, with the new currency being introduced nowhere near fast enough to ease the long lines at banks and ATMs.Modi Is Right. Wanchoo Committee Recommended Demonetisation To Indira. She Refused. Here’s WhyAuthor: Swarajya StaffPublication: Date: December 16, 2016URL: Minister Narendra Modi in a BJP meet today (16 December) is believed to have said that Wanchoo committee had recommended demonetisation of higher denomination currency to the then Prime Minister Indira Gandhi but she refused.----------------------------ANI @ANI_newsPM said in meeting that Wanchoo committee had given recommendation of #Demonitization to Indira Gandhi ji,but she snubbed the report:SourcesDecember 16, 2016----------------------------PM Modi is right.In 1971, the Wanchoo Committee had submitted an interim report in which it had recommended, among other reforms, the demonetisation of high-value currency notes. Y B Chavan was then finance minister. Retired civil servant, Madhav Godbole, in his book Unfinished Innings: Recollections and Reflections of a Civil Servant book tells us that after many deliberations over the matter, demonetisation was accepted along with other reforms suggested by the committee.However, “in view of the sensitive nature of the subject and the need for maintaining utmost secrecy”, the prime minister’s approval was needed. So Chavan went to meet Indira. And this is what he told Godbole about his meeting with Indira on the issue.“When Y.B. Chavan told Indira Gandhi about the proposal for demonetization and his view that it should be accepted and implemented forthwith, she asked Chavan only one question: “Chavanji, are no more elections to be fought by the Congress Party?” Chavan got the message and the recommendation was shelved.Open MagazineThis anecdote also busts the narrative that Modi is similar to Indira. Hundreds of pages can be written about how radically different the two leaders are in every sense. Perhaps, a whole book is waiting to be written. But, for now, this one anecdote will suffice.Protests, looting in Venezuela as most-used banknote is demonetisedAuthor: APPublication: The Hindustan TimesDate: December 17, 2016URL: became a country mostly without cash on Friday, sparking scattered protests and looting around the country as people fumed at having their already limited purchasing power cut off almost entirely.As the nation’s most widely used banknote went out of circulation, the higher-denomination bills that were supposed to replace the 100-bolivar note had not yet arrived at banks or ATMs. That forced people to rely on credit cards and bank transfers or to try to make purchases with bundles of hard-to-find smaller bills often worth less than a penny each.Indignation at having to deal with an economy even more paralysed than usual sparked social unrest. Police put down looting near a bank building in the large western city of Maracaibo with several arrests. Young men marched down the street after growing tired of waiting outside the bank to turn in their money. They waved their 100-bolivar bills in the air and chanted “they’re useless,” then turned and ran as police in full riot gear began firing tear gas canisters.Mobs looted several businesses in the remote eastern state of Bolivar. In total, authorities said there were protests and looting in six cities, leading to 32 people being detained and one injured.In Caracas, some people passed the day banging on pots and cursing the government’s apparent lack of planning. There was no cash to be seen changing hands on the street or inside shops, and no sign that the new bills were on their way.President Nicolas Maduro made a surprise announcement Sunday that the 100-bolivar note would go out of circulation by the week’s end amid the world’s highest inflation. He also temporarily closed the border with Colombia and Brazil, and then on Thursday night extended the border closure for another 72 hours.Maduro said the closure was needed to thwart “mafias” who hoard bolivars. Critics mocked the notion that gangsters would choose to keep their wealth in the world’s fastest-devaluing currency. The 100-bolivar bill - until now the country’s largest denomination - is worth little more than 2 cents, down from 10 cents at the start of the year.The embattled president held up a new 500-bolivar bill on his television show Thursday, promising the new banknotes would soon be in wide circulation and offering to temporarily cut sales tax for credit card transactions. But on Friday, ATMs were still issuing only the now-worthless 100-bolivar notes.Maduro also said the government has begun to circulate new 100- 50- and 10-bolivar coins, but few seem to have reached the public.On Friday, Maduro said the ploy to undermine the criminals had worked.“We’ve burned the mafia’s hands,” he said. “That there were some difficulties, and that there may be some difficulties going forward was inevitable.”Venezuelans waited in lines hundreds of people long all week to deposit their cash. On Thursday, shopkeepers put up signs saying 100-bolivar bills would no longer be accepted. That meant many people looking to buy groceries or take taxis were out of luck, as banks had run out of lower-denomination bills like 50- and 20-bolivar notes during the week, and had not yet received the higher-denomination replacements.Amid the currency chaos, the US cautioned citizens against visiting the economically spiraling South American country.“Political rallies and demonstrations occur with little notice, and are expected to occur with greater frequency in the coming months,” the State Department said in a travel warning. “If security climate worsens, US citizens should note they’re responsible for arranging their own travel out of Venezuela.”But there was little sign of political activity of any kind Friday, as people scrambled to figure out how to exchange bolivars for goods and services in an economy essentially operating without paper money.Looting and protests on streets of Venezuela as residents fume over cash chaosAuthor: Hannah DreierPublication: IndependentDate: December 17, 2016URL: the nation's most widely used banknote went out of circulation, the higher-denomination bills that were supposed to replace the 100-bolivar note have yet to arrive at banks cash machinesVenezuela has become a country mostly without cash, sparking protests and looting around the country as people fumed at having their already limited purchasing power cut off almost entirely. As the nation's most widely used banknote went out of circulation, the higher-denomination bills that were supposed to replace the 100-bolivar note had not yet arrived at banks or cash machines. That forced people to rely on credit cards and bank transfers or to try to make purchases with bundles of hard-to-find smaller bills often worth less than a penny each. Indignation at having to deal with an economy even more paralysed than usual sparked social unrest on Friday. Police put down looting near a bank building in the large western city of Maracaibo with several arrests. Young men marched down the street after growing tired of waiting outside the bank to turn in their money. They shouted and waved their useless 100-bolivar bills in the air, then turned and ran as police in full riot gear began firing tear gas canisters.Mobs looted several businesses in the remote eastern state of Bolivar. In total, authorities said there were protests and looting in six cities, leading to 32 people being detained and one injured. In Caracas, some people passed the day banging on pots and cursing the government's apparent lack of planning. There was no cash to be seen changing hands on the street or inside shops, and no sign that the new bills were on there way. President Nicolas Maduro made a surprise announcement Sunday that the 100-bolivar note would go out of circulation by the week's end amid the world's highest inflation. He also temporarily closed the border with Colombia and Brazil, and then on Thursday night extended the border closure for another 72 hours. Mr Maduro said the closure was needed to thwart “mafias” who hoard bolivars. Critics mocked the notion that gangsters would choose to keep their wealth in the world's fastest-devaluing currency. The 100-bolivar bill — until now the country's largest denomination — is worth little more than 2 cents (0.015p), down from 10 cents at the start of the year.The embattled president held up a new 500 bolivar bill on his television show on Thursday, promising the new banknotes would soon be in wide circulation and offering to temporarily cut sales tax for credit card transactions. But on Friday, ATMs were still issuing only the now-worthless 100-bolivar notes. Mr Maduro also said the government has begun to circulate new 100- 50- and 10-bolivar coins, but few seem to have reached the public. Venezuelans waited in lines hundreds of people long all week to deposit their cash. On Thursday, shopkeepers put up signs saying 100-bolivar bills would no longer be accepted. That meant many people looking to buy food or take taxis were out of luck, as banks had run out of lower-denomination bills like 50 and 20-bolivar notes during the week, and had not yet received the higher-denomination replacements. Amid the currency chaos, the US cautioned citizens against visiting the economically spiralling South American country. “Political rallies and demonstrations occur with little notice, and are expected to occur with greater frequency in the coming months,” the State Department said in a travel warning. “If security climate worsens, US citizens should note they're responsible for arranging their own travel out of Venezuela.” But there was little sign of political activity of any kind Friday, as people scrambled to figure out how to exchange bolivars for goods and services in an economy essentially operating without paper money.Amid unrest, riots and looting,Maduro delays demonetisationAuthor: AFPPublication: The HinduDate: December 19, 2016URL: protests rocking his unpopular government, embattled President Nicolas Maduro delayed until January 2 taking Venezuela’s highest denomination bill out of circulation.The 100-bolivar bills would temporarily remain legal tender, Mr. Maduro said on Saturday, but the borders with Colombia and Brazil will remain closed to hit what he claims are “mafias” hoarding Venezuelan cash abroad in a U.S.-backed plot to destabilise the country.77% of cash“You can calmly continue to use the 100 bill for your purchases and your activities,” Mr. Maduro said at a meeting with officials broadcast on state television. The bill is worth about 15 U.S. cents at the highest official rate, and until recently accounted for 77 per cent of the cash in circulation in Venezuela.Venezuela has the world’s highest inflation rate, set to hit 475 per cent this year according to the International Monetary Fund (IMF). The government is trying to introduce new bills in denominations up to 200 times higher than the old ones, but the plan derailed when Mr. Maduro banned the 100-bolivar note before the new bills arrived.Four airplanes with the new currency set to arrive from abroad were delayed by international sabotage, Mr. Maduro said. He did not say where the money was coming from, or what type of sabotage. Venezuelans stood in long lines at banks all week to meet a Friday deadline to exchange their currency. When the deadline extension was announced people queued up again on Saturday.In a country with one of the highest rates of violent crime in the world, shoppers must carry unwieldy wads of bills to pay for their purchases.Retirees had complained for months that their pensions were paid in unmanageable 50- and 20-bolivar denominations. Rioting and angry protests erupted in several Venezuelan cities as the chaotic reform left people without cash to buy food or Christmas presents.Opposition politicians said on Saturday that four people were killed in rioting in the capital of the southern State of Bolivar, though officials have not confirmed those figures. Unrest however was such that the Ciudad Bolivar Mayor ordered a curfew banning “motorcycles, pedestrians and private vehicles” until late Monday. The pro-Maduro state Governor, Francisco Rangel Gomez, said on Twitter that 135 people were arrested for looting, and that soldiers were deployed “to re-establish order”.In Guasdalito, in the central-western State of Apure, three state bank offices were torched, an incident Mr. Maduro late Friday blamed on unnamed Opposition politicians.Why you need sackfuls of banknotes to shop in VenezuelaAuthor: MagazinePublication: Date: December 18, 2016URL: week Venezuela announced it would withdraw its highest-denomination banknote from circulation. Long queues formed outside banks as people scrambled to change theirs before they became redundant. The withdrawal of the 100-bolivar note has now been delayed until the start of January, but ordinary people must still grapple with spiralling prices and increasingly worthless notes, as Gideon Long reports."Have you changed money yet?", my friends asked me on my first evening in Caracas. I hadn't. "Well, don't," they said. "Not at the official rate. Give us your dollars and we'll change them for you." So I handed over a single US $100 (?80) note. The next day, I received two huge stacks of bank notes in return - and I mean huge. A thousand notes in each stack, 200,000 bolivars in total. I felt like I'd won the lottery.Except, of course, this is no lottery and there are very few winners. Find us on FacebookThe losers are ordinary Venezuelans, whose salaries are losing value by the minute, and who have to queue for hours to buy basic foodstuffs that they can scarcely afford.All this in an oil-rich country whose citizens were once famous for their international shopping sprees. It doesn't add up. To understand the mathematics of the situation, you'll have to bear with me - it gets complicated.There are in fact three exchange rates in Venezuela. If you're importing essential goods like staple foods and medicine, and you happen to know the right people in government, you can buy a US dollar for the state-controlled price of just 10 bolivars - a bargain! Everyone else is supposed to change at the second government-controlled rate, currently 670 bolivars. But there's also a real-world, black-market rate, which has gone through the roof in recent weeks. In October, there were 1,500 bolivars to the dollar. By late November there were well over 4,000. The Venezuelan currency has strengthened since then but, even so, it's lost half its value on the black market in just a couple of months. My two towering stacks of bank notes were worth $100 when I entered the country. When I left two weeks later they were worth $50.The 100-bolivar note, the biggest in circulation, is worth just two US cents. So when heading out for a coffee or a bite to eat, you had to take a sack of cash with you.The central bank is now issuing bigger denomination-notes and new coins to make life easier, but that's causing its own problems. With bank notes so worthless, cash machines can't cope - they can only dispense a few dollars' worth of money at a time. I never saw an ATM in Venezuela without a line of people in front of it - unless, of course, it was out of order. "I come here every day," said Ramiro, a young man in a white T-shirt and red baseball cap, as he waited to withdraw a wad of virtually worthless notes from an ATM. "We're all wasting hours of our lives looking for cash."Even if you do have cash, you can't always buy what you want. Some staple foods - rice, flour, cooking oil - are sold at government-controlled prices. That makes them relatively affordable, but supplies are extremely limited, and you can only buy them on certain days, determined by the number on your national ID card. "Monday is my day," said my taxi driver Alexander, a big man with an uncanny resemblance to Venezuela's late president Hugo Chavez. "I go to the supermarket every Monday. But even then, there's often nothing to buy."Find out moreFrom Our Own Correspondent has insight and analysis from BBC journalists, correspondents and writers from around the worldListen on iPlayer, get the podcast or listen on the BBC World Service or on Radio 4 on Thursdays at 11:00 BST and Saturdays at 11:30 BSTNo one even knows what the true inflation rate is in Venezuela. The government doesn't publish the figures any more. Last year, it was 180%. This year, the IMF expects it to hit 500%, and for GDP to fall by 10%. It's difficult to see how any economy can survive that. The government blames lower oil prices and a US-led conspiracy to undermine the economy. This week, President Nicolas Maduro blamed the mafia in neighbouring Colombia for fuelling Venezuelan inflation with big, cross-border money deals. But the truth is that Venezuela is suffering from its own chronic mismanagement. Zimbabwe, Argentina, the Weimar Republic - history shows us that when countries start printing money to prop up their economies, it seldom ends well.The festive lights are now on in Caracas. The reindeers, the snowmen, the sleds - all look very incongruous amid the city's luxuriant, tropical vegetation. But this will be a difficult Christmas for thousands of impoverished Venezuelan families, some of whom are now facing genuine hunger in what used to be one of the wealthiest countries in South America.As I sat in Caracas airport waiting to leave, I opened a local newspaper and found a cartoon. It showed a puzzled Santa, reading through a long Christmas wish-list. "But this is all food!" Santa is saying to an elf. The elf - grim-faced - looks back at Santa. "It's the Venezuelan list," he says.No proof required: Demonetisation dispassionately demystifiedAuthor: Surjit S BhallaPublication: The Indian ExpressDate: December 14, 2016URL: : Politicians shouting shrill about demonetisation augur well for the prospects of a new demonetised India. It indicates that the initiative is workingThere has been much political noise, both inside and outside Parliament, about the likely success or failure of demonetisation (hereafter DM). We analyse some of the burning questions related to the prospects of the success of DM.Economists don’t support DM: Several economists, including Nobel laureates, have opined that largescale demonetisation for a “normal” economy like India was an idea they would not recommend. Indeed, I have not met a single economist (including self) who would have ex-ante approved. This should not come as a surprise to anybody since economists are trained to never, ever, think out-of-the-box. This training, and this practice, is the determinant of an economist’s success.The first thing that a good economist does is that she begins to look at the data; where has this been done before, what happened, what were the determinants of success or failure, and then she makes a policy brief to the “decision-maker”. If she cannot defend herself with evidence, she shouldn’t make the recommendation for an action for which there is no precedence.Soon after November 8, many wannabe economists pointed out that demonetisation had indeed been “practiced” before, and then with the help of Google, pointed out that Russia had done it, and so had Ghana, and so had North Korea. Voila, there was plenty of evidence that demonetisation had not worked (how they got to that conclusion is the mark of a BWE — bad wannabe economist), and therefore it was doomed to failure in India. What the BWE failed to note was that there was no example of largescale demonetisation in a “normal” country like India.The fact that no good economist would approve of DM ex-ante, does not necessarily mean that the same economists would not approve of it ex-post, like self. Thinking out of the box is not demanded of economists, but is certainly demanded of courageous political leaders. There are very few, and indeed I can think of only two, leaders in the last 150 years, who boldly went against their core political base while formulating policies — Lyndon Johnson in 1964 (the Civil Rights Act) and Nelson Mandela (Truth and Reconciliation policy, 1995). So while passing premature judgements on Modi’s demonetisation policy, let us give him some credit for boldly going against his own core political support base — a path where very few political leaders have gone before.Changing DM goalposts: There has been a lot of good discussion about the definition of what constitutes black money. But the politicians have twisted the “tail” to conform to their own irrational prejudices. For example, Rahul Gandhi made the extraordinary statement that “all cash is not black money and all black money is not cash”. This was picked up by both former PM Manmohan Singh and Pritish Nandy: “Who says that all unaccounted money is black? Farmers keep cash, their life savings in jute bags, because they may not trust banks. All this shows Modi’s distance from social realities.” This sounds like the beginning of a well-planned attack on DM.But whoever said that all cash is black? Or that all unaccounted money was black? Search far and wide, no one has stated this extraordinary lie. What some have stated (like self, ‘Black cash in India,’ IE, December 6) is that a significant fraction of high-valued currency notes might be black — in my case that estimate was around Rs 8 lakh crore (trillion). I recognised that even the critics of demonetisation believed that this number was at least Rs 2 trillion. Given that anywhere between 13 per cent and 51 per cent of cash might be black does not translate, in any language (except that of an unsuccessful politician), as saying that all cash is black.The courageous step in the project “Transforming India” has been taken, all cash is not white; yet the important question remains: Will DM project be successful? The naysayers said the project will fail if all the Rs 15.4 trillion of DM notes came back into the system. They were pointed out that there should be decent tax gains of unaccounted income newly entering the tax stream (my estimate was an additional Rs 2.5 trillion this year, and around Rs 1.5 trillion onwards from next year).But we are reminded that the IT department is woefully short of staff — there are about 20,000 staff members missing in action (vacancies) against a sanctioned staff strength of 75,000. Several questions arise. First, how come there were so many vacancies before D-day, November 8? One very good explanation is that because of the I-T revolution (information technology, I-T new) not income tax (I-T old), the government does not need the original sanctioned strength. One IT-new person can do the work of a 1, 000 I-T old individuals. For this good reason, the UPA government did not fill these I-T old vacancies; why should the BJP go centuries backward to hire new I-T old staff?But how will good governance identify the possibly millions of individuals who have deposited tonnes of cash and not declared it as unaccounted income? With just 50,000 I-T old individuals (many of them traditionally suspected of being black themselves), how will the system catch the smarter bribers in the system? Because this question has been asked so many times on TV and social media, let me make the following suggestion (I don’t mean to be rude or condescending). It is suggested that the following simple procedure be followed by the I-T old department (I am not assuming that this simple procedure is not being followed). First, no need to recruit new I-T old officers, though some reason to recruit I-T new officials, and trained statisticians. Second, provide short-term employment to people who will log into the computer system of every bank, four pieces of information for every old cash deposit: Name, date of deposit, identity number (Aadhar or PAN or whatever) and amount of deposit. This computer list is then sent to the RBI, who then sends it to the I-T new office in Delhi. A few computer codes later, the history of income, and income tax, and cash deposits, of each individual will be available.Anybody with cash deposits above 25 per cent or 50 per cent of last year’s income is then flagged for scrutiny. This list is sent to the district staff of I-T old to investigate and report to the Delhi head office. Note that the local tax official knows that the head office has all the information and so will be hard-pressed to reach a deal with the local income tax evader. There will be some cases of very legitimate hoarding of cash (especially by women distrustful of their husbands) and these can easily be allowed by the I-T new system. The tax evader is then given an option to come clean or face prosecution and penalties.Tell me— how difficult is this enterprise likely to be and how likely that it will not work? It will work — which is why the “bad” politicians are already shouting “tax terrorism”. Let me see — to hoard black money, cheat the system, bribe willing tax officials is okay because that is individual freedom sanctioned by the Constitution, but if an honest computer driven tax officer asks for details as to how you have amassed so much wealth, that is encroaching on your freedom via terrorism? That is so so much like the I-T old; welcome to the brave new world of I-T new.The shrillness of the politicians objecting to some home truths about the likely success of demonetisation is very reassuring — the greater the nonsense contained in the shouting, the better the prospects of a new demonetised India.- The writer is contributing editor,’The Indian Express’, and senior India analyst at Observatory Group, a New York-based macro policy advisory group. Views are personal. Good message black money won’t be tolerated. But why now, without notice: Bimal JalanAuthor: P Vaidyanathan IyerPublication: The Indian ExpressDate: December 14, 2016URL: an elaborate interview with Indian Express, former RBI governor Bimal Jalan discusses the demonetisation decision of the NDA-II government.It was during Dr Bimal Jalan’s time as RBI Governor that India weathered the Asian crisis. His tenure (November 1997 to September 2003), in fact, more or less coincided with the NDA-I term. In an elaborate interview with P Vaidyanathan Iyer, Jalan discusses the demonetisation decision of the NDA-II government. Excerpts:Q.: When do countries opt for demonetisation? Was there a pressing need for it in India?A.: Now, in demonetisation, there are two sides to a coin. What demonetisation does is to give, as it were, a message to people that this will not be tolerated. Black money hoarders are depositing money, trying to put it in real estate, gold, etc. So, it will certainly reduce the stock of black money. But this is stock. Now, the question is of flow.The second part, which is equally relevant is, why now? Why take a measure which has a substantial impact particularly in rural areas, semi-urban areas, where the availability of Rs 500 notes is relatively limited at the moment, and similarly the high denomination notes are generally not for transactions, and they require cash.Why now? It could be done in a way where people are prepared. Telling people that we are concerned about black money is also about giving them a notice. Supposing it was announced that the old Rs 500 and 1,000 notes will be demonetised, and replaced with new notes. What would have happened? It’s possible that black money holders would have deposited their money in banks. But this is precisely what black money hoarders are doing (with decision being kept secret), maybe not to the same extent. But a notice would have been given. So ‘why now’ is not clear. Also, not everybody is a black money holder. 90-95 per cent of the people don’t hold black money. This is where we need to strike a balance, doing something with a notice and doing it in a way where the majority of the people are not hurt.Q.: So would you say there was perhaps no need to keep it such a secret?A.: There is no reason to my mind to be secretive, unless there is an emergency. I want to do it in three weeks, or two weeks or one week … you follow, if it is about a surgical strike. But this is not the same. On that, there can’t be two views.Q.: Will we see an adverse impact of demonetisation on the economy?A.: No, not because of this particular event. But this does not eliminate black money per se. What is black money? If you don’t pay the tax, the money that is not declared as income, you can say so, it is black money. What I am trying to get to you is that there can be no two opinions, that a message should be given and the other part of it is to implement it in a way that the general population should not be adversely impacted by the action we take, that too without notice.Q.: So, not giving notice was a critical missing part…A.: To my mind, yes. What prevents my government from taking cognisance of what is well known i.e., how much currency can it print. It is coming in the newspapers. What is the advantage if I cannot print it within a limited period of making a very large proportion or multiple of that as illegal tender. How does that the ordinary person handle it? You have to take action such that it doesn’t affect the small and medium businesses. This SME class has been worst affected because it deals in cash. Grocery shops on the road, etc. The core point is if the impact of that on the people is negative then you have to try and find the means to see what can be done. For example, we said, new old 500 notes will not be legal tender after 5-6 months, so deposit them or use them till then.Q.: This push to digitise the economy, it also seems to be happening in a hurry?A.: But digitisation, nobody can disagree. Most positive step that has been taken is direct benefit transfer to the poor. Secondly, Jan-Dhan Yojana to transfer money is a very effective step. There can be no doubt. But one has to take into account the fact that the poor go to the ration shop, they are dealing with the shop owner, they are not dealing mobile-to-mobile. You cannot make it mandatory in our situation. Nobody can disagree that we should digitise, there should be much more cashless transaction… But this has to take time, not months, but years. If you are illiterate, you can use your mobile phone to talk, but you cannot transact. Because transaction would mean you would write. It’s a lot about illiteracy.Q.: Demonetisation takes care of the stock, not the flow. So will it stop corruption or generation of black money?A.: Part of the money has been deposited, part of it used to buy jewellery, real estate, etc. You have to wait and see how much of the black money has actually remained… You see the end is fine, you have to carefully choose the means to achieve this end. When you are talking about corruption, you have to bear the fact that it is also difficult to get government permission to build a house … You can’t stop it … citizens will pay bribes if it’s difficult to get things done. Some good things have been done — DBT, Jan-Dhan. The only way corruption can be tackled is by strengthening ease of doing business. By providing electronic access to services, allowing use of instruments which don’t require waiting in a queue, by making tax systems much simpler. When GST comes into effect, it will have a positive impact across the country.Q.: Couldn’t the government have imported currency to better manage the demand?A.: Of course. The one thing to keep it secret is that black money holders will then transfer it. What you are seeing in the picture is people are doing something. So the stock part, the other side — the flow would also reduce because people will not be able to hold cash. So there are two sides — personally, what I would like to ask is the large majority of the people in our country are not black money holders. because the level of incomes are not high. there are tax exemptions. so we could take measures in a way by giving notice.Q.: There have been questions on RBI autonomy as well…A.: The RBI and the government have to work in consonance. The word autonomy means various things. You are an autonomous writer, but you can’t defame. So you have to discuss, and hopefully what you do in the RBI will be consistent with what is good for the economy, and for the people.Q.: Will inflation and interest rate come down as some experts point out?A.: Let’s wait and watch. One can’t say it now.Cash crunch till January, says govt.Author: Special CorrespondentPublication: The Hindu Date: December 17, 2016URL: cash crunch being faced by people due to the demonetisation of high-value currency notes could be resolved by the middle or end of January 2017, with about Rs. 12 lakh crore in cash returning to the system by then, NITI Aayog CEO Amitabh Kant said on Friday.Cess mootedMr. Kant also mooted an eventual move by the government to a transaction ecosystem where there is no cost associated with digital transactions and cash holdings could attract a cess.Digital payments by debit or credit cards, for instance, attract a Merchant Discount Rate of 0.75 per cent to 1 per cent that has been waived as a temporary reprieve for cash-starved citizens.“Around Rs. 3.5 trillion of the Rs. 17 trillion in circulation before demonetisation was pure black money and the increase in digital transactions will reduce the need for cash by about Rs. 2 trillion,” he said.“So the economy needs Rs. 11-12 trillion in cash to finance normal transactions. This will be back in the system by mid-January or maybe the end of January.”Separately, the government is working towards linking more and more bank accounts to Aadhaar as it looks to push UID-based payment systems, Electronics, Information Technology, Law and Justice Minister Ravi Shankar Prasad said.Aadhaar to be pivot of payments“We are going to promote an Aadhaar-enabled payment system (AEPS) in coordination with the Finance Ministry. About 40 crore bank accounts have been linked to Aadhaar,” Electronics, Information Technology, Law and Justice Minister Ravi Shankar Prasad said here on Friday.Mr. Prasad said 99 per cent of the adult population had Aadhaar numbers at present, and moves were afoot to connect the rest of the bank accounts with the Aadhaar numbers.Must requirementThe Minister said AEPS was required because around 30 crore people still did not have mobile/smartphones and could not do online transactions or use mobile wallets or e-wallets at any point in time. India had the digitisation infrastructure required to leverage the Jan Dhan-Aadhaar-Mobile (JAM) trinity, NITI Aayog CEO Amitabh Kant said in an address to the annual general meeting of industry body FICCI, stressing that if the country was to aspire to grow to a $10 trillion economy, it would have to be prepared for disruption.Biggest disruptor“Aadhaar-enabled payments are the biggest disruption in India,” Mr. Kant said.“Nearly 30 crore people in India without mobile connections can use Aadhaar and thumb impression or iris scans for digital payments. In the next 6-7 months, every smartphone user will be able to make Aadhaar-based payments and even will allow each phone to act as an ATM using a device that can attach to the phone and scan fingerprints,” he said.Aamir Khan calls for supporting Narendra Modi’s demonetisation initiativeAuthor: PTIPublication: The HinduDate: December 17, 2016URL: Aamir Khan says demonetisation is a good move by the government to curb black money and hence all citizens should support the initiative taken by Prime Minister Narendra Modi.He however was sad for the common man who has felt the pinch of the cash crunch the most.“I haven’t faced any problems due to demonetisation as I don’t have back money at all. I pay taxes. Those who have black money will face problems. I make use of card be it debit or credit card whenever we buy something,” Aamir said at an event in Mumbai on Friday evening.“I know common people are facing problem and I feel sad about it. Our Prime Minister has taken a good initiative and we must support him,” he said.The government is encouraging people to switch to a digital regime and go cashless to rein in corruption.On a question to whether going cashless will help, Aamir replied, “I am not an economist. If someone is doing some good work we should help them. I am into films… I can talk about that and not economy.”On work front, the 51-year-old will be seen next as wrestler Mahavir Singh Phogat in “Dangal”. Then he has a special appearance in “Secret Superstar” and Aditya Chopra produced film “Thugs of Hindostan” with megastar Amitabh Bachchan.Political parties and ‘income tax’ on donations – all you need to knowAuthor: MuglikarPublication: Date: December 17, 2016URL: and the conduct of the legislature in India is governed under the Representation of the People Act, 1951, which empowers the Election Commission of India (ECI) to form rules for elections and political parties.As per current rules, political parties in India are barred from undertaking any commercial activity and thus they are not deemed to be engaged in acts that make them liable to pay any income tax. But it doesn’t mean that parties are not under the radar of the tax authorities.Yesterday, this misleading tweet by news agency Reuters created a lot of confusion on social media (the agency then tweeted a rejoinder to make things clearer):----------------------Reuters India @ReutersIndiaPolitical parties can deposit old notes in banks only if they had taken donations in cash up to 20,000 rupees from individuals before Nov. 8December 16, 2016---------------------- To help you understand things better, here are a list of issues – in FAQs format- that you should know:Q1. Were political parties always exempted from paying income tax?Ans: Yes. Under Section 13A of the IT Act, political parties are exempt from paying Income Tax. But they are required to file their Income Tax Returns (ITR). This is a very old provision.Q2. So we can know from where their income i.e. their donations are coming from?Ans: Technically yes, but there is one loophole.Q3. What is that loophole?Ans: Donations below 20,000 rupees are not required to be reported to ECI (Sec 29C sub section 3) but they have to be reported in the ITR. Political parties are essentially not required to disclose details of those donating below 20,000 rupees.Q4. How is it misused?Ans: Simple study of IT returns of any political party will show that maximum donations to them are from such ‘unknown’ sources.Q5. Does it mean that Income Tax Department cannot scrutinise political parties?Ans: Not really. Parties are exempted from income tax, but they still have to: a. maintain books of accounts, b. file returns, c. be open to scrutiny, even raids, etc.Q6. Have political parties ever been raided or questioned over their source of funds?Ans: I haven’t come across cases of raids. However, their returns are scrutinised just like any other assesses, and Income Tax department takes note of complaints against them too. Only last year Congress and AAP had received notices from the department. Question here is how far the department will go in pursuing such cases.Q7. Can I access the ITR of these political parties? If yes, how?Ans: Yes you can do so. Although most parties are disputing the ruling, they are deemed to be under the RTI act. Thus you can file an RTI and get information like their balance sheet, income statement and even the donors list (information in donors list can be incomplete based on record keeping of the party and because of that aforementioned loophole). You can either file an RTI inquiry with the party (if you are an optimist), or file that with the ECI.Q8. Can donation details given in ITR be different number from donation report submitted to the ECI?Ans: Donations given in ITR is the sum of total donations received (including below 20k threshold) by the party, while the donations report submitted to the EC are those of above Rs. 20,000, listing the details of the donors, their addresses and their mode of payments; so information contained in both will be different.Q9. Can a Party convert black money to white?Ans: Technically, yes. Parties can take money and show them as donations below 20k rupees (making backdated entries showing that donations were taken before demonetisation was announced) and try to convert it into white money for a ‘cut’. But do remember that they have to furnish expenditure details to the ECI too, thus there is always a way to catch this scam. Strong political willpower will be needed to nail such parties.Q10. Do you think Narendra Modi will do it?Ans: I hope he does! I am sure he knows about this possibility. Wasn’t that the reason he asked all his MPs to submit their bank statements by 31st December? I hope he will check bank statements of not only the BJP but of all political parties.Q11. Are you sure political parties are indulging in such scam?Ans: Believe me it’s not that easy. If caught, it can jeopardise the whole party and their recognition can be cancelled by the ECI. Surely a party should think twice before indulging in such deeds.Q12. What should be the way forward?Ans: There should be more transparency in political funding. Donations below 20k should have the same rules as applicable to donations above 20k i.e. Name, Address, PAN number of donors must be recorded, and finally the ITR details should be made public. This will need an amendment to Representation of Peoples act and IT act.Indians like to pay cash. The government is now forcing them to swipe cards.Author: Rama LakshmiPublication: The Washington PostDate: December 17, 2016URL: India’s surprise decision to scrap high-value currency last month triggered widespread cash shortages, people in the large village cluster of Patoda got by as best they could. They postponed family weddings, asked for credit and bartered services.But as the money crunch extended into its second month, officials from the State Bank of India arrived with a rescue plan of sorts, which included new card swipe machines for small businesses.At Raj Purohit’s sweet store one recent afternoon, curious onlookers gathered around one of the unfamiliar machines, which he had painted with a stripe of auspicious red vermilion powder.“Don’t waste time standing in bank lines. Don’t carry cash everywhere like you used to,” Purohit told those around him.One customer said he didn’t understand how swiping worked. Another said he wouldn’t trust it. Purohit tried five times to swipe a young customer’s debit card. By the time it went through, everybody knew the secret personal identification number.But the government isn’t giving up.Even as banks scramble to replace bills for angry people in long lines, officials say the crisis is an opportunity to bring a grand cultural shift in Asia’s third-largest economy and move citizens toward cashless transactions involving cards, e-wallets and digital payment banks.When Prime Minister Narendra Modi announced the removal of 80 percent of the currency from circulation last month, he called it a decisive strike against corruption and counterfeiting. But he also has exhorted citizens to take advantage of the change. He asked India’s younger generation to teach their parents, neighbors and even the corner vegetable vendor how to go cash-free.“You have a leadership role to play in taking India toward an increasingly digital economy,” he told them.It will be a long road. Nearly 80 percent of Indian transactions are conducted with cash. Tax-evading Indians typically hide their undisclosed wealth in cash, real estate, jewelry or in tax havens abroad. Undisclosed wealth, called black money here, accounts for over a fifth of the national output, according to estimates.But Modi’s ambitious decision to replace bills worth more than $207 billion was derailed by shoddy implementation and slow printing of replacement bills, leaving Indians of all income levels without cash overnight.Amartya Sen, a Harvard University economist and Nobel laureate, called it a “despotic action.” Former prime minister Manmohan Singh, an economist, said the move can have “ripple effects” on economic growth and job creation in the coming months. As the chaos continued, Goldman Sachs downgraded its outlook for India’s growth in the coming year — twice. The estimate now stands at 6.3 percent.Officials say the switch-over will make it easier for the government to track transactions and boost tax revenue. The government announced a series of incentives for people making online payments last week, and ordered banks to install 1 million new swipe machines across India by March — up from 1.4 million today.“What I had expected would have taken three to six years will now take three to six months,” said Nandan Nilekani, the tech czar who created India’s biometric-based identity program. One billion people in the country now have unique biometric identification numbers, more than 1 billion have cellphones and at least half a billion have bank accounts, he noted, which will help the transition.But India’s digital infrastructure is not ready to carry a billion people yet.Even though electronic bank transfers grew fivefold in the past five years, 73 percent of Indians have no access to the Internet. Mobile-phone banking transactions have tripled since 2012, but only 15 percent of phones have broadband, and speeds are slower than they are in Bangladesh, Sri Lanka and China, reported India Spend, a data website.A panel of government-appointed experts recommended major changes last week to ease digital payments, including updated regulations, cash refunds and other incentives to spur change.“Digital payment is disruptive, with tech start-ups moving many times faster than mammoth banks. The current regulations, anchored in the brick-and-mortar era, need to catch up,” said Prasanto K. Roy, a senior member of Nasscom, a technology trade body that was part of the panel.“The government has to convince people who are deeply entrenched in and comfortable with cash about the benefits of making digital transactions,” Roy said.The government just launched a TV channel to train Indians to make cashless payments and will soon open a toll-free helpline.Downloads of digital payment applications have increased exponentially since the government’s move.“When you take the air out of the system, something has to hold the economy together. Digital payment systems will help India leapfrog into a first world-like economy,” said Vijay Shekhar Sharma, the founder of India’s largest mobile wallet company, Paytm, which is reporting 6.5 million transactions daily, a major increase since Nov. 8.But for now, the cash crunch continues to take a toll.Manufacturing has slowed, car sales have declined and malls are reporting less traffic. Tourists are struggling to obtain new currency when they arrive. International tennis players Roger Federer and Serena Williams recently canceled tournament appearances in India because of the “prevailing economic climate.”In Patoda, many farmers have piles of unsold cotton and soybeans. And in many villages, the wages of desperate laborers have been cut in half.Last week, the State Bank of India held a training session for about 300 college students in Patoda to change their payment behavior.“Your mobile e-wallet app is just like hard cash in your purse,” Suresh Gulve, a regional manager of the bank, told the students. “You can buy train and bus tickets, pay your bills and send money to relatives.”But only one-third of the teenagers had smartphones. And even they could not easily download the app because the network was weak at their school.Many traders at the weekly village market said that going cashless is not a realistic option for them.“I sit in a different village market every day. I sell fish on the street. Swipe machines are not for people like me,” said Momin Shafiq, 38, at the decades-old market. He uses a basic cellphone and is functionally illiterate.But the word is spreading slowly. A dozen store owners asked the bank for new swipe machines last week.“We have no choice. Either we face business loss or adapt,” said Satish Vikram Garge, 28, who runs a kitchen store. “We have to move with the times, if India has to become modern.”No more dry banks as RBI sends enough cashAuthor: TNNPublication: The Times of IndiaDate: December 18, 2016URL: confirmed on Saturday that they had received the highest cash amount from RBI since November 9. Most banks, that have been reeling under cash shortage and facing the wrath of people for the past 37 days, have confirmed adequate cash in their reserves to be able to disburse from next week. A senior manager of a leading government bank told TOI, "Out of all the 14 centres in India, Lucknow circle has received the highest cash amount from RBI this week. All our bank branches in UP would have a total of Rs 2,000 crore to disburse among people from Monday, which is a good sign considering banks were facing 30-40% cash shortfall every day." Another government bank's manager confirmed receiving adequate cash from the currency chest on Saturday. "Today, withdrawals were smooth as people got cash within a few minutes in queue. For the first time since demonetisation, banks have operated smoothly as no one returned without cash today." Private banks have also received heavy cash amounts, mostly in Rs 500 notes. A private bank's employee said, "Because of excess of Rs 500 notes, distribution has become easier for us. Distributing notes of Rs 100 to everyone is practically difficult. Earlier, people refused to take Rs 2,000 because of change issues and there was already a shortage of Rs 100 notes. New notes of Rs 500 would solve the problem."Government's U-turn on political donations; says parties cannot accept old notes as donationAuthor: Himanshu MishraPublication: Indiatoday.inDate: December 17, 2016URL: severe criticism for allowing political parties to accept donations in old currency notes, the government has now said that political donations don't have any additional relaxation after demonetisation.The government has clarified that post-demonetisation, no political parties can accept the discontinued currency notes of Rs 500 and Rs 1,000.The clarification came from the finance ministry. Earlier on Friday, Finance Secretary Ashok Lavasa had said that political parties were allowed under Income Tax Act to deposit discontinued currency notes in their bank accounts.This had led to vociferous opposition from several quarters including political parties like AAP and TMC.Delhi Chief Minister Arvind Kejriwal and West Bengal Chief Minister Mamata Banerjee targeted Prime Minister Narendra Modi saying his move benefited the ERNMENT CLARIFIES, ALSO BLAMES MEDIAAs the Opposition's attack sharpened, the finance ministry clarified that "exemption from income tax given to only registered political parties subject to conditions mentioned in Section13A of IT Act."The feeling within the government is that "a slanderous campaign with respect to political parties, donations and demonetisation is going on. As always media got it wrong, perhaps intentionally."The ministry also said that the parties were required to maintain books of accounts and other documents for an examination by the relevant authorities.In respect of voluntary contribution in excess of Rs 20,000 a political party will have to maintain record of such contributions. The political party has to submit a report to Election Commission about donations received within prescribed time frame.NO EXEMPTION FOR POLITICAL PARTIESAn informed source in the government said, "Post-demonetisation, no political party can accept donations in 500 and 1000 rupee notes since they were rendered illegal tenders. Any party doing so would be in violation of law.""Should the political parties deposit anything in excess of Rs 2.5 lakh in old currency post-November 8, they are as liable to be questioned by the Income Tax authorities as is anyone else. They enjoy no immunity whatsoever," the source emphasized.Over Rs 9000 crore deposited in district cooperative banks in 5 days after demonetisationAuthor: TNNPublication: The Times of IndiaDate: DecemberURL: totalling over Rs 9,000 crore were made in select district central cooperative banks (DCCBs) across 17 states between November 10 and 15. The government's demonetisation+ decision kicked in on November 9.Perennially ailing with accumulated losses and large non-performing assets, DCCBs suddenly mopped up over Rs 147 crore in the demonetised Rs 500 and Rs 1,000 notes.Once the flow of deposits into the politically controlled outfits was noticed, policymakers at North Block and the RBI barred DCCBs from accepting any more deposits of the scrapped notes+ . However, according to experts, the five-day window clearly proved enough for those with connections in DCCBs to convert their unaccounted for wealth into the new notes."For many years, DCCBs have been hunting grounds for politicians who open accounts in the name of farmers and use them for money laundering,'' former NABARD managing director Dr K G Karmakar said.Officials have particularly expressed surprise about the deposits of over Rs 1,800 crore in Kerala, where agriculture is on the brink of collapse."The DCCBs in Kerala mostly serve marginal farmers and small businesses. It is worth investigating how these loan-dependent depositors deposited Rs 1,810 crore in a matter of five days," a top bureaucrat told TOI.Ditto in Punjab, whose 20-plus DCCBs recorded deposits of Rs 1,268 crore. Maharashtra, which has seen a steady decline in the cooperative movement and politicisation of district-level banks, ranked third highest, with deposits of Rs 1,128 crore between November 10 and 14."Farmers in Maharashtra are consuming pesticide as they are unable to repay loan sharks... The deposits reveal how the institution of the DCCB has once again been exploited by political overlords," a top official from the state agriculture department said.Speaking of the RBI's decision to ban DCCBs from depositing or exchanging the demonetised notes, a decision that has sparked protests and also been challenged in court+ , Karmakar added, "This was the best decision RBI could take as it not only curbed money laundering, but also the circulation of counterfeit notes. Many of these small banks do not have the facilities to identify counterfeit bills, which hikes the fraudulent activities further."Lutyens moles work to damage PM ModiAuthor: Madhav NalapatPublication: Sunday Guardian LiveDate: December 18, 2016URL: ‘Out of 11 senior bureaucrats who were involved in the planning of the currency switch’, two are still ‘one hundred per cent loyal to the Lutyens Zone’.India’s “Lutyens Zone” (analogous to the “Washington Beltway”) went into overdrive from 16 May 2014 to ensure that Narendra Modi becomes a single-term Prime Minister or even be forced to quit his office in between, as took place during 1979 in the case of the other PM from Gujarat, Morarji Desai. This strategy cannot be dismissed as impossible to implement. Although Rahul Gandhi has often been dismissed as an intellectual lightweight by several of his peers, according to a credible strategist working in the interests of the Lutyens Zone, the fact is that the vice-president of the All India Congress Committee “has been working to a plan to derail Modi from the start”. According to this source and another highly placed individual who has served as a core planner for the Lutyens Zone (LZ) leadership since the 1980s, the contra-Modi plan was “accelerated to take-off speed after he (Rahul) took effective charge of the Congress in November 2015”. The duo outlined the LZ “plan of action” since the shock collapse of the Congress in the 2014 polls. “We never expected the BJP to get a majority on its own, nor the Congress tally to go below 110”, the two significant sources said, adding that “it took about 19 months after 16 May 2014 before we were able to work out a plan capable of ensuring that the NDA would not return to power in 2019”. Both said that Rahul Gandhi “embraced the strategy fully, unlike those in his party who had been in leadership positions during the Manmohan decade”. These wanted to “continue with the past policy of cutting private deals with the BJP and putting on only a mock defiance of the new government”. From the start of mid-2015, when his grip over the rudder strengthened at the expense of the old guard of the AICC, Congress vice-president Rahul Gandhi “accepted our (dominant Lutyens Zone) view that with Narendra Modi in the Prime Minister’s chair, it had to be total war”, although sometimes cloaked in the language of conciliation. “Rahul understood that India would change fundamentally were Modi to win a second term or to have an unobstructed run in his present term”, the insider claimed, adding that “over the opposition of leadership elements in the Congress, Rahul insisted on a policy of complete opposition to the Modi government” so as to ensure that key measures such as the Land Bill or GST would not get passed early or preferably ever in the term of the Modi-led NDA.According to them, “part of the strategy was to give misleading signals during Parliamentary sessions to those in the BJP who had been interlocutors with the Congress in the past”. These were informed that compromise was around the corner, when it was actually out of the question. As a consequence, the NDA government hardened its legislative position, especially on GST, in the expectation that “Congress would follow the UPA-period BJP strategy of opposing, but not obstructing” key legislative and other measures. The Lutyens Zone strategy was also to “create an international image at variance with the global picture of (PM) Modi as a reformer and as an individual who could get things done”. Simultaneously, contacts in media, civil society and governments in key countries were briefed extensively in a manner designed to give the impression of a government where minorities and the underprivileged were unsafe, and where crony capitalists were indulged. According to these sources, “the campaign has been successful, as can be seen from the proliferation of negative reports about the Modi government in the international media”. Whether because of a continuation of the “Vajpayee line” (of backroom compromise with the Congress while verbal pyrotechnics abounded in public), or “because (PM) Modi was advised by some key associates friendly to the Lutyens Zone that he should not appear vindictive, but statesmanlike”, the NDA government has thus far done almost nothing to enforce accountability on those UPA-era central heavyweights perceived as having made billions through stock exchange frauds, foreign currency manipulations and through tweaks in government policy. Additionally, senior bureaucrats who had acted as facilitators for senior UPA leaders during 2004-14, were allowed by the NDA government to continue in their posts and were often promoted to still more sensitive positions, as Prime Minister Modi sought to distance himself from any perception of bias or vindictiveness. Needless to say, such adherence to what may be termed a Prithviraj Chauhan strategy has not lessened the overt and covert campaign to hobble him in office and if possible to drive him out even before the 2019 polls.According to the Lutyens duo, “out of 11 senior bureaucrats who were involved for 17 weeks prior to 8 November in the planning of the currency switch”, two are still “100% loyal to the Lutyens Zone” and therefore gave the government “advice that will boomerang on the government”. An example was the decision to replace the Rs 1,000 denomination note with a Rs 2,000 substitute. This “went against the logic of the metric system, where the deferred number mathematical theory points to 1, 2, 5 and 10”. It was pointed out by the strategists that throughout the globe, 1, 2, 5 and 10 (i.e. 10, 20, 50 and 100 or 100, 200, 500, 1000) are used to fix the value of currency. “By arbitrarily fixing 2000 and 100 as the two effective bands, the first has become useless in several transactions, while the latter is being hoarded”, a Lutyens Zone strategist pointed out, adding that the particular civil servant who recommended the Rs 2,000 note and withdrawal of the Rs 1,000 note “would get a Governorship when we take office by mid-2019 latest”. It was pointed out that the Rs 100, Rs 500 and Rs 2,000 bands are too far apart for ease of everyday transactions and would impact these even should currency supply normalise after ten months. The Lutyens strategist added that they “have been helped by the fact that a few officials are given wide discretionary power in the current administration, so much so that their recommendations are seldom re-examined before being implemented”. Another googly embedded in the policy, according to the sources, was the “hyper-high penalties for concealed income, which ensured that the grey market, rather than the exchequer got the benefit”. The source claimed that “our people in the system have consistently argued for high penalties so as to ensure the failure of disclosure schemes”. However, such claims of internal sabotage through toxic policies are impossible to verify, as the officials concerned would not implicate themselves by admitting to any role other than that of civil servants loyal to the government of the day. The two civil servants named as Lutyens moles by the strategists talked to are known for their efficiency and thus far, the absence of serious controversy.The calculation of the anti-Modi brigade is that the manner in which the 8 November currency policy that was accepted by Prime Minister Modi after being strongly recommended by no less than 11 key officials and advisers, “will lower tax collections by stunting growth”. Consequently, “raids will rise and summary assessments multiply” as the government seeks to lower its deficit through squeezing taxpayers. This is expected to anger the middle class and the trading community, both of whom were significant parts of the Modi coalition in 2014. The expectation within the Lutyens Zone is that the present currency shortage will continue well past mid-2017 and result in lower growth for several quarters, perhaps even for years, thereby allowing the opposition to claim that Modi failed to generate growth and employment during his term in office.They say that their supporters in the government have told them that there are several known bottlenecks in the process of printing of currency, “such as that there is only a single intaglio machine” at each printing centre, thereby slowing down considerably the output of fresh notes with even low grade security systems embedded in them. “All this was known (to the officials consulted in the matter), but not revealed to the Prime Minister”, these sources claimed, adding that “a highly-placed mole convinced the PMO that universalisation of digital modes of payment in a short time-span was possible, when in fact it is impossible”. He pointed out that e-wallets are less than 4% of GDP, and as for overall black money, “our estimate is that the total is around 18% of GDP” or around Rs 27 lakh crore. This includes cash, assets and foreign holdings routed through banks and hawala. Cash in Indian currency forms the smallest component. Hence the overall effect on black money of the 8 November measure would not be substantial. About the official who persuaded the government that cash equals black money and hence needed to be 85% drained out of the system in a single blow, “He will be given a constitutional position when we take office”, the source said with a smile. As for counterfeit currency, even when added to terror funding, the total comes to less than 1% of the currency value withdrawn on the midnight of 8 November 2016. Although it is impossible to verify whether Lutyens Zone moles were deliberately ensuring the sabotage through distortions in detail of Prime Minister Modi’s hugely consequential scheme, it seems clear that unpardonable errors have been made in both the conceptualisation as well as the operationalisation of the details of the swap of Rs 500 and Rs 1,000 notes for new Rs 500 and Rs 2,000 notes, as well as in calculating its after-effects.As daily cash hauls testify, more than the wealthy it is the common man who has been hit hard by the 8 November move. Should daily consumption fall by 30% (the present situation, according to field reports), GDP will fall by even more than the 2% calculated by former Prime Minister Manmohan Singh, who must be a happy man these days, in that errors made during his years in office have now been forgotten in the flood of reactions to the 8 November extinguishing of 86% of India’s currency. As for the unorganised sector, which accounts for more than 90% of the total of jobs in India, that has been severely affected by a brilliant decision implemented in a less than satisfactory manner, although it is impossible to verify the claims made by Lutyens Zone strategists that several of the errors were deliberate and aimed at sabotaging Modi’s bold plans. Rules and restrictions have been changed nearly 40 times, while tax rates and penalties have been altered at jet speed. Overall, the impact of 8 November on trust and credibility in the banking system as a reliable store of value, and in the Reserve Bank of India as its guarantor, seems to be long-lasting.If there is even a 15% chance that the two Lutyens Zone strategists are speaking the truth about moles in the present dispensation, the necessity is for a comprehensive investigation into who and how key decisions on operationalising the Prime Minister’s move were made that have subsequently turned out to be problematic. Those responsible for making recommendations that have subsequently become toxic, need to be checked out. More than any outside force, it is those on the inside who have the highest potential for inflicting damage on the Modi administration, and this may nowhere be clearer than in the manner in which the 8 November decision approved by Prime Minister Narendra Damodardas Modi has been implemented thus far, although knowing his strong personality, Prime Minister Modi is likely to continue to stand by his entire team despite increasing political fallout from the manner in which his 8 November 2016 announcement has been tweaked and implemented.Modi’s attempt to crush the black economy is hurting the poorAuthor:Publication: The EconomistDate: December 18, 2016URL: cash, Indians are strugglingFOR the Nuxalbari Estate in the lush hills of India’s north-east, relief came in the nick of time. With winter pruning of its tea plantations at hand, 600 workers were threatening to strike. They could scarcely be blamed: the estate had not paid them in mid-November and now owed another fortnight’s wages. This was not for lack of funds. Nuxalbari’s account showed a healthy balance. But day after day its bank repeated the same refrain: yes, the government says it has a plan to help tea estates, but our local branch has no rupees. At his wits’ end, the estate manager marched into the branch, along with bosses of trade unions and a tea planters’ group, even as Nuxalbari’s owners barraged the bank’s headquarters with pleas. The bank at last relented, dispatching a courier weighted with sacks of cash from its vault on a night flight from Kolkata. The workers got their money in the morning.Nuxalbari is lucky. Its owners enjoy sound finances and influence. As India enters its fourth week since Narendra Modi, the prime minister, abruptly voided 86% of the country’s paper currency, many of its 1.3bn people have had no such luck. The Reserve Bank of India (RBI), the central bank, has been unable to print money anywhere near fast enough to replace the $207bn in 500- and 1,000-rupee notes that were outlawed overnight on November 8th. Unless India’s four existing money presses can be speeded up, or bills quickly imported, experts reckon it could take five or six months before the money removed from circulation is fully replaced.According to J.P. Morgan, an investment bank, Indians were making do at the end of November with a little more than a quarter of the cash that had been in circulation at the beginning of the month—and this in a country where cash represented 98% of all transactions by volume and 68% by value. The RBI has in effect been forced to ration new cash, most in the form of 2,000-rupee notes that are, owing to the lack of 1,000s and 500s, exceedingly difficult to break for change.In such a vast country, the impact has naturally been variable. Employees of the finance ministry in Delhi, the capital, received a plump advance on their November salaries in crisp new bills, whereas the state governments of Kerala in the south and Bengal in the east say they have only a small fraction of the cash needed to pay bureaucrats’ wages. Cheques won’t do because banks do not have enough money either: reports in the Indian press reveal that whereas banks in the centre of Mumbai, the country’s financial capital, are getting as much as three-quarters of the cash they need to meet demand, branches in the city’s suburbs are getting less than half. Scroll, an online news site, reports that for one country branch in Bihar, a poor northern state, the ratio is more like a fifth.Such was the case with Nuxalbari’s local branch; it could meet some needs but not those of big planters. “Thanks to this so-called business-friendly government we are being made beggars for our own money,” storms one of the estate’s owners. “I feel like I’m in the middle of some Soviet-era nightmare.”The parched branches of big banks are still fortunate. For unexplained reasons the RBI has supplied almost no new cash at all to India’s hundreds of smaller rural co-operative banks or to its 93,000 agricultural credit unions, so keeping millions of farmers from deposits that total some $46bn. It has also banned these institutions from competing with “pukkah” banks in exchanging old bills for new. With no cash flowing, farmers cannot even seek help from informal networks that in normal times account for more credit in rural areas than formal institutions. And although India’s 641,000 villages house two-thirds of its people, they contain fewer than a fifth of its ATMs. These are being slowly modified to supply the new notes, which unhelpfully are smaller than old ones; for now most stand idle.Starved of cash, India’s rural economy is seizing up. A study by two economists at Delhi’s Indira Gandhi Institute of Development Research found that in the second week of the drought, deliveries of rice to rural wholesale markets were 61% below prior levels. Soyabeans were 77% down and maize 29%. Prices have also collapsed. In Bihar, Scroll’s reporters found desperate farmers selling cauliflower for 1 rupee ($0.01) a kilo, a twelfth of the prior price.It is not only farm incomes that are pinched. An investigation by Business Standard, a financial daily, found that virtually none of the estimated 8m piece workers who hand-roll bidis, a kind of cigarette, has been paid since the cash ban. Another Indian daily, the Hindu, reports that more than half of the 600-odd ceramics factories in the town of Morbi, a centre of the tile industry in the state of Gujarat, with a combined output worth some $3.5bn a year, have temporarily closed because they cannot pay workers. In Agra, the hub of Indian shoemaking, some firms are paying workers with supermarket coupons to keep them on the job.India’s wealthy few have servants to take their place in the still dismally long queues snaking outside banks, but the pain reaches even to the top. A dentist in a posh part of Delhi is shocked by a 70% fall in trade since the cash ban. “All my patients can pay with plastic so I assumed I was safe, but I guess people are just being careful about spending in general.” This does seem to be the case. A brokerage that surveys consumer-goods firms says November sales have fallen by 20-30% across the board. Property sales, which traditionally are made wholly or partly in cash, have plummeted even more.Small wonder that Fitch, a ratings agency, on November 29th cut its forecast for India’s GDP growth for the year to March 2017 from 7.4% to 6.9%. That is in line with most financial institutions’ trimmed estimates, although some economists think the damage could be even worse. “There will be no or negative growth for the next two quarters,” predicts one Delhi economist who prefers anonymity. “Consumer spending was the one thing really driving this economy, and now we are looking at a negative wealth-effect where people feel poorer and spend less.”Perhaps more embarrassingly for Mr Modi’s government, there are few signs that its harsh economic medicine is achieving the declared goal of flushing out vast hoards of undeclared wealth or “black” money. Officials had predicted that perhaps 20% of the pre-ban cash would not be deposited in banks, for fear of disclosure to the taxman. Yet within three weeks of the “demonetisation”—well before the deadline to dispose of old bills, December 30th—about two-thirds of the money had already found its way into “white” channels. Some of this is doubtless illicit: inspectors of Delhi’s bus system have found that the bulk of daily takings now mysteriously appears in the form of the banned bills, which public-sector firms can still deposit, rather than the usual small change. Reports from Maharashtra, in the centre of the country, suggest that brokers are offering to buy old notes with a face value of 10m rupees for 8.4m, suggesting that they have found ways of laundering them.India’s economy will eventually recover and may even gain strength: the forced priming of bank accounts and the switch to electronic payments will mobilise more money for lending and taxes. But there may be lasting damage to institutions, most notably the RBI itself. It failed, among other things, to warn the impatient Mr Modi that there were not enough new notes to replace old ones. It has issued a bewildering blitz of complex and sometimes contradictory instructions to banks. Its governor, Urjit Patel, has been perplexingly silent. Its reputation for probity, competence and independence is in tatters.In another country, such a fiasco would spell disaster for the government in power. Particularly so, one would think, for a party that sailed into office on promises to boost growth, provide jobs and encourage investment. Mr Modi’s opponents have blasted his policy as obtuse, destructive and downright criminal; some insinuate that his Bharatiya Janata Party (BJP) was tipped off about the ban. Opposition parties have held rallies and marches across the country and brought India’s parliament to a standstill with demands for a vote on the ban, and for Mr Modi himself to debate its merits, to no avail so far.Mr Modi has painted his critics as whiny profiteers who are running scared of his crusade. In stark contrast to the fissiparous opposition, which lacks any leader who combines charisma with national stature, the BJP has maintained rigid discipline. Mr Modi has also shifted the goalposts, notes Mihir Sharma, a writer and business columnist: “What started as a ‘surgical strike’ on black money is now called the dawn of a cashless society.” In local elections in two states at the end of November his party even gained ground.Some analysts in Delhi predict that once enough cash is printed to get the economy moving again, Mr Modi’s government may simply insert cash into some bank accounts, such as those created under a government programme to bring banking to the poor, and declare this to be revenue from the black-money sweep. After all, pivotal elections in India’s largest state, Uttar Pradesh, loom early next year. But if more cash does not soon appear, Mr Modi’s future may look very different.Explained: The Printing And Circulation Of Currency, And How Much Will ReturnAuthor: Swarajya StaffPublication: Date: December 18, 2016URL: since 9 November, the day after Prime Minister Narendra Modi made his shock demonetisation announcement, there has been furious debate about how much cash is in circulation, how much will come out of bank lockers into bank accounts and how much will never come back and will just become worthless bits of paper.But how does the Reserve Bank of India (RBI) know how much cash is there floating around, being spent or locked up in lockers? What exactly happens to notes that are not deposited or exchanged after 31 December? Here’s an attempt to answer some questions puzzling people.Who prints currency notes, and who decides how much to print?The responsibility of managing the nation’s currency rests with the RBI. Every year, around March or April, the central bank works out the volume and value (the various denominations) of currency to be printed. This is done on the basis of a forecasting model which takes into account, among other things, expected growth in gross domestic product (GDP), likely inflation, seasonal factors, currency lying in its vaults, replacement demand (old notes that come back) and growth of non-cash payments (cheques, card and electronic payments).An indent is then placed for printing (minting in the case of coins). The currency first goes to the RBI’s vaults across the country, from where they are sent to banks. For areas where the RBI does not have vaults, the currency goes directly from the press/mint to around 4,422 currency chests. These currency chests are set up by banks to store notes and coins on behalf of the RBI. Each currency chest has a certain number of bank branches assigned to it and to whom it distributes the cash.Records are kept of the value and volume of notes printed or minted, what is sent out to the vaults or currency chests and from there to banks and further to the public.The notes kept in the RBI vaults is not currency – it has no value. But the notes that go out to banks and then the public is a liability, which the RBI has to honour. That is, if someone presents a note, he has to get the value of the amount indicated on it under the RBI Act. As long as a note does not come back to the RBI, it continues to be a liability.Is currency in circulation equal to all money in the system?No. There are different kinds of money – reserve money, broad money, narrow money.The currency in circulation (which is a component of reserve money) comprises the notes and coins with the public as well as the cash in hand with banks. The RBI has a record of how much currency has gone to the public and the banks and how much comes back to it (usually soiled and damaged coins). It reissues those that it considers fit for circulation and destroys the rest and this amount is netted out.As of 9 November, the high-denomination notes with the public was Rs 15.44 lakh crore. According to this article in Mint by Niranjan Rajadhyaksha, as of 11 November, the currency in circulation was 80 per cent of reserve money, and 86 per cent of this was in denominations of Rs 500 and Rs 1,000.How much of these high-denomination notes have been returned, and why is there so much noise about that?Various estimates are floating around, but the exact figures will be known only in January, since the last date for deposit of old notes with banks ends on 30 December. Then the RBI will have to take stock of what has been deposited with it by banks and other agencies where the notes are being deposited. The response to the second income declaration scheme announced by the government will also have to be seen and factored in.Meanwhile, there is a storm raging over two issues.Double counting: The State Bank of India’s economic research division has pointed out that old notes are being collected by banks, post offices as well as urban and rural co-operatives. Post offices and co-operatives deposit the cash lying with them with banks. In the course of the current exercise, it is quite possible that they are individually reporting to the RBI the cash returned to them. But the banks in which they deposit the cash are also reporting it. Hence, it is argued, the likelihood of double counting of high-value notes returned. The finance ministry has also taken note of these concerns and has said it will keep this in mind.How much money will come back into the system: Some economists said it would be safe to assume that 20 per cent of the Rs 15.44 lakh crore is black money. This money (which works out to Rs 3 lakh crore), they said, would never be returned to banks because the people holding them would not want to come on to the radar of tax authorities.This means, these economists argue, the liabilities of the RBI would shrink by Rs 3 lakh crore (since it would not have to honour the notes that have not been returned). When the liabilities shrink, the share of assets on the RBI’s balance sheet will increase, and this will enable it to pay a higher dividend to the government. This is the windfall to the government that was being spoken about.However, RBI governor Urjit Patel clarified at the press conference after the monetary policy on 7 December that the central bank’s liability will not reduce just because notes do not come back into the system. “The withdrawal of legal tender status does not extinguish anything from the RBI’s balance sheet. There is no question of special dividend just by withdrawal of legal tender character.”In any case, one will have to wait till January to know how much of the high-denomination notes that were in circulation as of 9 November do get returned.But do not forget that while depositing of old Rs 500 and Rs 1,000 notes in banks ends on 30 December, these can still be deposited at offices of the RBI till 31 March. The RBI will continue to honour these notes; that is, exchange it for new notes. So its liability will not get reduced, unless the government expressly says the old notes cannot be redeemed any more. It is then that the currency will be actually demonetised. Right now, going strictly by the rule book, it has only been de-legalised.But, yes, someone with a huge hoard of old notes is clearly not going to take it to the RBI’s counters. The taxman will have to be dealt with.According to Datta Kale, retired chief general manager of the RBI, it is only after 31 March that the government and the RBI will have to take stock of how much of the old notes have returned, by how much has the RBI’s liability reduced, work out the costs involved in the demonetisation exercise and then decide about the dividend to be paid by the RBI.If all the money comes back into the system via banks, does that mean there was no black money in the first place?Well, the black money doesn’t become white merely by being deposited in bank accounts. Yes, it is true that those holding black money have found ways to launder it – depositing it in small amounts in bank accounts of different people, using Jan Dhan Yojana accounts, buying large-value goods and so on. But large deposits that arouse the taxman’s suspicion will still have to be explained. If the explanations fail to satisfy the taxman, penalty will have to be paid.But even if the explanation is found to be satisfactory, tax will still have to be paid. And since black money is really money on which tax has not been paid, this does serve the purpose. It’s just that black money holders who have been smart in laundering their money will get away with just, say, 30 per cent tax, while the ones who had just too much to launder may have to pay a hefty penalty.10000 accounts in Assam on tax radarAuthor: Avishek SenguptaPublication: The Telegraph IndiaDate: December 17, 2016URL: income tax department will submit a list of over 10,000 bank accounts in Assam, which have seen a sudden surge in deposits post-demonetisation, to the Enforcement Directorate and the CBI before December 30."Post-demonetisation, several bank accounts which used to have minimal or small amount transactions have seen a sudden surge in deposits indicating that illegal money is being parked there. The income tax department has made a list of 10,000 such accounts which will be handed over to the Enforcement Directorate (ED) and the CBI for further inquiry," a source in the department said today.Of the 10,000 accounts, around 300 are that of high-profile account holders, the source said."The accounts are identified through the money trail method and comparing the deposit withc the income tax amount paid by the account holder, the department identifies if the money is illegal or not. At least 300 of those accounts belong to high-profile people. The lowest transaction in the shortlisted accounts is Rs 25 lakh," the source said.Post-demonetisation, the Reserve Bank of India had instructed the Financial Intelligence Unit (FIU) to monitor bank accounts for suspicious transactions and report it to central investigative agencies. The IT source said this procedure involves several departments. The police, FIU, income tax and other departments will prepare their lists separately and submit it to the central agencies which will then filter the reports and take action accordingly."The instruction was given to the police, FIU, IT and other departments engaged in flushing out black money and preventing illegal hoarding of new currency. Our department is accordingly preparing the list," the source said."Once the lists are deposited by all the departments, they will be filtered by the kind of offence committed. Those who have evaded income tax or shown deposits not proportionate to their income statement will be raided and investigated by the income tax department. Offenders already on ED and CBI radars, if present on the list, will be grilled by the departments. The FIU will also take action against financial institutes (such as banks and insurance agencies) for any irregularities in their transactions,"The income tax department is also working on preparing a similar list for the other northeastern states but the work is taking time as the department has a shortage of manpower and they also have to take into account tax exemption for people from Scheduled Tribe communities.According to Section 10 (26) of the Income Tax Act, 1961, members of Scheduled Tribes in the Northeast, permanently residing in any area in the states of Nagaland, Manipur, Tripura, Arunachal Pradesh and Mizoram and in certain areas of Assam and Meghalaya (district councils or regional councils created under the Sixth Schedule such as North Cachar Hills, Karbi Anglong and Bodo Territorial Council in Assam and Garo hills, Jaintia hills and Khasi hills in Meghalaya) and generating income from within their respective states are exempted from paying income tax."Hence, without an income statement, it is not possible to verify if the deposits are disproportionate. Our department is looking into the source of income in the doubtful accounts to find out if they are illegally earned or not," the source said.In the meantime, an employees' association of the income tax department has written to Prime Minister Narendra Modi seeking more workforce for speedy recovery of money."At present, the department has 30-35 per cent posts lying vacant in almost all the supervisory positions. The vacancy at staff level is more severe, around 40 per cent, subjecting them all to unbearable extra workload," said the letter submitted by the Joint Council of Action, comprising Income Tax Employees Federation and Income Tax Gazetted Officers Association.Money launderingIncome tax sleuths tonight raided the business establishment of a Bongaigaon resident, Halal Kar, suspecting him to have parked huge amounts of money in his employees' accounts in connivance with bank staff."It has come to the notice of the department that 28 employees working under Kar opened accounts in the bank post-demonetisation and Rs 49,000 was deposited in each of these accounts at regular intervals," a source in the income tax department said. An amount of Rs 49,000 was probably deposited as people depositing Rs 50,000 and more have to furnish PAN cards, he added.The sleuths have sealed the bank accounts and are questioning Kar. "During interrogation, we found that he also deposited money in the accounts of a few people of the Garo community at Tura in Meghalaya, who are exempted from paying income tax," he said."We suspect that the bank employees are involved as it was not possible to open so many accounts when the rush was at its peak because of demonetisation and then deposit such amounts of money at regular intervals without being noticed," the source said.'We have shown we can also use cards': A Maharashtra village takes the cashless routeAuthor: Bhavya DorePublication: Scroll.inDate: December 18, 2016URL: Dhasai, card payments are accepted for a range of goods, from vada pav to meat to clothes.Sagar Nichite flicked through his wallet to pay for the vada pav he had bought, but all he had was a Rs 2,000 note. He pulled out his bank card. “I’ll pay with this,” he said, handing it over to the older man frying the golden brown fritters for the snack. Vijay Suroshe wiped his palms clean, took the proffered card and swiped it through his brand new machine. The screen lit up. “That’s Rs 85,” he told Nichite.Suroshe punched into the machine, but flummoxed, went over to the shop next door for help. Nichite called out his personal identification number, or PIN, within earshot of everyone around. “That’s no problem,” the 24-year-old said, laughing. “They are our people.” Five minutes later, Suroshe had figured out how to use the machine and the transaction was done.Dhasai village in Maharashtra’s Thane district, 100 km from Mumbai, has embraced digital payments in the wake of the November 8 demonetisation of high-value bank notes. This has prompted the government to hold up this hamlet of 3,053 people as one of the first in India to make a serious effort to go cashless.In his dimly-lit vada pav shop that Saturday, 47-year-old Suroshe had conducted five transactions on his card swipe machine till 1pm. He estimated that of the Rs 3,000 to Rs 4,000 he made daily, about Rs 500 came through cashless exchanges. “It will pick up slowly,” he said.In another shop in the neighbourhood, Salman Sayyad, 23, sliced up big hunks of meat. At least a third of his dealings are now cashless, he claimed. “This is ekdum best,” he said, pointing to his card swipe machine. “This will help us dream bigger.”---------------------Devendra Fadnavis @Dev_FadnavisMaharashtra's first step towards becoming cashless economy.Dhasai village (Thane) goes #cashless as appealed by Hon @narendramodi ji. 3, 2016---------------------Piyush Goyal @PiyushGoyalVillages adapting the cashless culture after demonetisation. #IndiaDefeatsBlackMoney pic.IkpIdjUvFEDecember 8, 2016---------------------The road to digital Behind this digital push is social activist Ranjit Savarkar, who floated the initiative, and the Dhasai Shahar Vyapari Association, which supported it with the aim of simplifying the lives of villagers after demonetisation resulted in a severe cash crunch and all-night queues outside the solitary ATM in the village.The main road in Dhasai is the seat of this experiment. On December 1, 39 vendors inaugurated their swipe machines amid much fanfare. Many more have applied to get theirs. The Bank of Baroda is supplying the devices, waiving off routine charges. State Finance Minister Sudhir Mungantiwar attended the launch, though the initiative is not government-driven.“I thought it was my duty to do something,” said Savarkar, who is based in Mumbai but runs a school here. “I didn’t want to involve local leaders or the gram panchayat.” And so, with the help of the traders’ body, the plan was hatched.“This should have started in cities, but a village is showing the way,” said Swapnil Patkar, head of the trade association. “We have shown that we can also use cards.” He added, “People felt they couldn’t use their own money even though it was in the bank.”Sridhar Rao, deputy general manager for the Bank of Baroda’s Mumbai Metro South Region, said he was in the process of going through 45 applications for card machines from Dhasai and neighbouring Tokawade village, and expected another 30 in the coming week. “The moment we called a meeting of traders, they spoke in one voice,” he said. “We have been seeing a lot of machine transactions.”Many residents said that after demonetisation made cash scarce and change even harder to come by, most transactions were on credit as people here trust each other. However, they added that they were now glad to be part of the digital drive.Apart from kirana stores, a range of goods in Dhasai are being bought and sold this way: beer, clothes, utensils, medicines among others.“Business had gone down 50%, so we applied for a machine,” said Yashwant Gholap, 25, who along with his father sells fruit from a cart. The hope is that with the cash-free option, business will pick up.Down the road, Gajanand Sande, 37, who runs a medical store, also said he had got a machine after his business dived. “And with the Rs 2,000 note, change was a problem,” he added. “Also, how much can we give on credit?”Shalini Anande, 37, who runs a beauty parlour for women, said she was waiting for her point of sale device to arrive.Breaking out of old habitsWhile Dhasai has wholeheartedly embraced the move to cashless payments, Ranjit Savarkar admitted that educating customers and changing old habits remained “a big challenge”. He said that while customers have the right to choose how they wish to pay for their goods, the move to going cashless wan’t that difficult. “If you can use a mobile, using a card is no big deal,” said the activist, who is currently spending some part of his time educating children on the benefits of using cards.Shopkeepers acknowledged that it was early days yet for this experiment, and the bulk of their business still ran on cash. Moreover, since Dhasai is a nodal point for neighbouring villages, not everyone who comes to shop here has a card or even an interest in using one.Among those who come to Dhasai to make their purchases are Adivasis from adjoining hamlets. Many of them admitted they were not comfortable using plastic. “I haven’t used my card since I got it a year ago,” said Kundalik Shiddh. The 40-year-old also said that he was yet to receive his wages for the past few months, so the question of depositing or withdrawing money did not arise. Still, he supported demonetisation. “The system is good but there have been problems,” he said.At Vijaya Bank, the main bank in the area, about 10,500 people have accounts – this includes residents of Dhasai and neighbouring villages. But only 3,000 have debit cards. “It is a rural area, so people are less aware,” said DL Sutar, the bank’s manager. “It is a new idea, so it will take time.”Some do not even use their accounts, let alone transact with cards. “The prime minister said open an account, so I opened it,” said Eknath Pardhi, 45. “But I have not used it.”Others are trying to get their de-activated cards working again. Among them is 20-year-old Deepak Pardhi, from a village 10 km from Dhasai. He visited the bank on Tuesday but failed to get the job done as a result of the long queues. “I hadn’t used it for more than a year,” he said, “But now I will.”Traders’ association head Swapnil Patkar said, “Many cards have become inactive and we have asked the bank to help reactivate them.” But he admitted that with the load demonetisation has placed on banks, this could take awhile.Elsewhere, others grumbled and worried about going digital. “This is no use to us,” said Ganpat Gholap, 59, a guard at a primary health centre. “We are troubled. We don’t know how to operate like this.”For the elderly, especially, e-payments are still a thing of mystery. “The shopkeepers know how to use it, but what about the customers?” asked Suresh Babu Mhadse as he bought medicines at a neighbourhood shop. “The idea is good but they need to educate us more.”Sande, the chemist, smiled and nodded. “In every household, there will be someone who is educated and who knows,” he said. “It will happen slowly over time.”Government will earn Rs 2-3 lakh crore in taxes: Parrikar on demonetisationAuthor: IANSPublication: The Hindustan TimesDate: December 18, 2016URL: to Prime Minister Narendra Modi’s demonetisation move, the Central government will earn at least Rs 2 lakh crore to Rs 3 lakh crore in taxes, Defence Minister Manohar Parrikar said on Sunday.“A minimum of Rs 2 lakh to Rs 3 lakh crore in taxes will be collected and once this tax comes to the government, it will help fulfil the needs of the common people and the poor. The Central government will utilise the money to give financial strength to these sections,” Parrikar told a BJP party meeting at Quepem assembly constituency, in South Goa.Parrikar also said that one of the key aims of the demonetisation move was to strengthen the Indian economy and that the decision had also resulted in huge caches of black money being unearthed.“But the manner in which black money is coming out, even in trucks, is something else. Until now, Rs 700 to Rs 800 crore of black money was caught in currency notes. I do not have to say how many people who have deposited money in banks are going to be taxed,” Parrikar said.At the same time, Parrikar also conceded that some amount of hardship had been caused to people, especially in areas where there were fewer bank branches in operation.“We can understand there was hardship. There was some hardship in Goa, but outside Goa, where there are lesser banks, some people may have been troubled more,” he said.Note ban breaks the backbone of Rs20 trillion trafficking industryAuthor: Shaswati DasPublication: Date: December 19, 2016URL: is one of India’s biggest organized crime racketsDemonetisation has brought the trafficking of women and girls for sex work—a Rs20 trillion industry—to a grinding halt, studies and rescue workers said. Rescue workers on the field said the process of trafficking of women is usually completed by November, after which trafficked women and girls are transported to various parts of the country to be sold to brothels, placement agencies and as child brides. With Rs500 and Rs1,000 currency notes withdrawn since the 8 November demonetisation announcement and new currency notes in short supply, the trade has hit a dead end, they said.“Trafficking has stopped completely. Girls are usually trafficked from Guwahati in Assam and Jharkhand in the north and Chennai, Bengaluru and Hyderabad in the south. Over the last one month, not a single girl has been trafficked. This is primarily because there is no liquidity left. All transactions used to happen in cash and now employers have no money to pay the middlemen. All the money that changed hands till now is useless,” said Rakesh Senger, a child rights activist with Bachpan Bachao Andolan, an NGO.In what is one of India’s biggest organized crime rackets, traffickers usually peg the “cost” of a woman or girl at Rs2.5 lakh, made up of the cost of transporting her, paying off local politicians, authorities and police officials and the ultimate cost of grooming her.However, the actual cost incurred stands at around Rs20,000. The remaining Rs2.3 lakh is pocketed by the trafficker, rescue workers said.A study by Global March against Child Labour, a network of trade unions, teachers and civil society organisations, pegs the annual figure in India at a little over Rs18.6 trillion.The study said that there are multiple figures that are involved in the trade whose earnings have taken a hit—traffickers, brothel owners, money lenders, law enforcement officials,and members of the judiciary. “The movement of money is quick and creates a mirage for all players involved. Whenever possible individuals peripherally attached to the business, such as law enforcement, judiciary, doctors, and money lenders capitalize on the illegality of the trade.”“A 10-12 year old girl costs Rs5 lakh, while girls between the groups of 13 and 15 cost Rs4 lakh. These transactions are all done in cash, in black money. The brothel owners are now caught in a bind because they can’t convert this cash at the banks. Because the new currency is not readily available, clients have stopped going to brothels and the brothel owners have no money to pay the traffickers,” Nobel Peace Prize winner Kailash Satyarthi said.Senior Delhi Police officers said, on condition of anonymity, random checks on trains bound for Delhi from Bengal, Assam and Bihar, failed to unearth trafficked girls. “Black money is the backbone of the trafficking industry in India. At the moment that structure has been fractured by demonetisation. It is a matter of time before the new currency is back in the system and the trade picks up. We have approached the PM and informed him of this situation as well,” Satyarthi added.The many canards surrounding currency swapAuthor: Vivek DehejiaPublication: Date: December 19, 2016URL: commentators should be clear on the monetary economics of the policy. Unfortunately, there has been more obfuscation than enlightenmentIn this space a fortnight ago (Fixing The Plumbing—Of Our Political Economy, 5 December), I had argued that the Narendra Modi-led government’s currency swap (popularly, but misleadingly, referred to as “demonetisation”) constitutes a classic political economy trade-off: between the short-term costs of the policy and its medium- to long-term benefits. These putative gains and losses may be construed both economically and politically. Last time, I explored both of these, laying stress on the latter, arguing that Modi’s method may be understood as trying to “fix the plumbing” of the economy, the currency swap being but one element of this. While political commentators may disagree on whether the currency swap will be a winner for Modi politically—my stated view is that I believe it likely will be—economic commentators, at a minimum, should be clear on the monetary economics of the policy. Unfortunately, as is often the case in politically contentious economic policy debates, there has been more obfuscation than enlightenment from many of the usual suspects.Consider the canard that the currency swap must be considered a failure because a large quantum—of the order of 80% or so—of the old, denotified high-denomination notes have re-entered the formal monetary system either by being exchanged for new notes (a small proportion) or being deposited (a large proportion). The reasoning is that the government supposedly touted a “fiscal bonanza” to be realized by a bonfire of the old notes representing black money, which, therefore, presumably could not be converted or deposited without attracting the attention of the tax authorities, and that this has come a cropper.There are many fallacies here.First, one would be hard-pressed to find an explicit, official assertion by the government that a fiscal gain could be realized by cancelling the liabilities associated with old notes that were not turned in by a certain date. This seems to be a claim propagated by the overzealous, that somehow become accepted as gospel truth.Second, most sensible observers expected that only some fraction of the old notes, representing a portion of black money, would fail to make it into the system—most back-of-the-envelope estimates were around 20%. Well, that is about the percentage we are at now, so, by this metric, that portion of the stock of old notes has effectively been taxed at a 100% rate.As a corollary, the current situation is one, thus, of a shortage of cash, not of money, and this may be a nudge for the behavioural change towards less cash and more digitization that Modi is seeking.Third, let us assume that some chunk of the 80% of old notes that have entered the formal financial system represents black money that holders are attempting to launder into white money through one or more of many well-known mechanisms, such as using intermediaries. On the one hand, such holders of black money have paid an implicit tax—some anecdotal accounts suggest that the discount on old notes in the illegal, secondary conversation market is up to 50%. While it is true that the proceeds do not benefit the treasury, they certainly represent a tax on the holders.On the other hand, it is not correct to assume that black money deposited into bank accounts, and thus supposedly laundered into white, will escape scrutiny. Unusually large or suspicious deposits would be audited, and, if irregularities are found, be potentially subject to penalties or confiscation. This process will not be perfect, to be sure, but the use of modern data analysis (“big data”) could be put to use to sift through the many deposits that have been made since the currency swap went into effect to ferret out such suspicious transactions.Fourth, those who have argued for, and against, a fiscal bonanza from note cancellation are making a fundamental conceptual error, by conflating the fiscal benefit from bringing black money under the tax net, as discussed above, with the putative fiscal gain to be reaped from part of the currency stock going up in smoke.The reason is twofold. First, it is mistaken to assume that notes not turned in cease to be a liability on the books of the central bank, unless they are explicitly and legally demonetized—which has not been done thus far.Second, even if this happens, and as I argued about a month ago (“demonetisation: Fact And Fiction”, 14 November), it is always possible for the Reserve Bank of India to “sterilize” the monetary effects of a portion of the currency stock being destroyed. The latter is a form of negative helicopter drop—call it a “vacuum cleaner”—in other words, a one-shot reduction in the stock of high-powered money.This can always be reversed, in principle, by an equivalent and offsetting helicopter drop, through conventional open market operations, or even through unconventional monetary policy such as the purchase of non-traditional assets. Depending on the method employed, the composition of the stock of broad money may change, but any effect on its level can be fully offset.Whether the Reserve Bank of India does so will depend on whether they expect more than merely a transitory deflationary impact. I think it unlikely, based on their rationale for keeping the repo rate unchanged on 7 December.No rush to deposit, says FM; Why haven’t you done so, says RBIAuthor: TNNPublication: The Times of IndiaDate: December 20, 2016URL: government and RBI on Monday unveiled fresh restrictions on deposit of old 500 and 1,000 rupee notes, saying anyone depositing above Rs 5,000 will be questioned "on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier" and only after a "satisfactory explanation" will the money be deposited. This flies in the face of the government repeatedly urging the public that since the deadline for making deposits of old notes was December 30, they had ample time and should not rush to bank branches and add to queues.The new notification also says that deposits exceeding Rs 5,000 in old 500 and 1,000 notes will have to be made in one go during the remaining period till December 30. If smaller deposits add up to more than Rs 5,000, the procedure of bank officials seeking explanations may still be followed."The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS (core banking solution) to that effect so that no more tenders are allowed," the RBI said."The banks have been advised to conduct due diligence regarding the reasons for not depositing these notes earlier," said a finance ministry statement.The central bank said deposits above Rs 5,000 will be credited to only know your customer (KYC) compliant accounts and if the accounts are not KYC-compliant, credits may be restricted up to Rs 50,000 subject to rules covering such accounts.The above restrictions will not apply to those depositing old notes under the taxation and investment regime for the Pradhan Mantri Garib Kalyan Yojana, the RBI said.The finance ministry said the decision has been taken to reduce queues in banks and after an assessment that by now, most of people would have deposited old notes in their possession. The government announced its stunning decision to scrap 500 and 1,000 rupee notes on November 8 giving people time until December 30 to exchange and deposit the scrapped ernment officials defended the latest measure, saying these were aimed at preventing those who might still try and use the deposit window using cash mules to convert their black money into white. "This is not aimed at targeting honest taxpayers," the officials said. "Their money is safe."The RBI has also clarified that banks must accept even pre-2005 notes which had been withdrawn from circulation since January 2014. Earlier these notes were allowed to be exchanged at only RBI offices. Although the notes were withdrawn from circulation, they continued to be legal tender. The RBI has clarified that while exchange will take place only at RBI branches, banks can still accept them for crediting to customer accounts.The finance ministry said that a notification would be issued allowing district cooperative central banks (DCCBs) to deposit the old Rs 500 and Rs 1000 notes that had been collected by them between November 10 and November 14, 2016.NABARD, which supervises the DCCBs, will audit the KYC documents of the individual customers who have deposited these notes or of the members of the Primary Agricultural Credit Society (PACS) who have deposited these currencies. The details will be notified by RBI, the ministry said.Times ViewThe government and RBI have constantly shifted the goalposts in the demonetisation drive, chopping and changing rules at a confusing pace.But this latest notification hits a new high in whimsicality. The government had clearly announced that old notes could be deposited with banks till Dec 30. The finance minister had appealed to people not to rush to banks in the early days and add to the queues. And yet, we now have the government and RBI saying anybody depositing over Rs 5,000 in old notes will be questioned by bank officials and must give a "satisfactory explanation" for why they haven't done so earlier.As it is, honest, hard-working citizens who pay their taxes are being denied access to their own money - forget the weekly limits, six weeks after they were told things would be okay in two-three weeks, they are returning from ATMs and bank branches empty-handed after standing in line for hours. What's more, public utilities have stopped accepting the old notes. Now, to add insult to injury, they are being told that for as little as Rs 5,000, they will be treated as suspects merely because they decided to wait till the crowds at banks thinned - as advised by senior ministers and government officials themselves. This is just not acceptable.Let's say you're asked by bank officials why you waited till now to deposit your money, and you tell them it's because the rules very clearly allowed you to - and they say, that's not a satisfactory response.What then? This is plain harassment.BJP-SAD alliance sweeps Chandigarh municipal corporation pollAuthor: PTIPublication: The Times of IndiaDate: December 20, 2016URL: BJP-Shiromani Akali Dal alliance today attained clear majority in the Chandigarh Municipal Corporation polls winning 21 out of the 26 wards.BJP won in 20 wards, SAD in one, rival Congress 4 and Independent one, an election office spokesman said here.Prominent among those who won were BJP Mayor Arun Sood, and Congress stalwart Devinder Singh Babla.The overall polling percentage in the Chandigarh Municipal Corporation election was 59.54 per cent.Election to 26 wards of the Municipal Corporation were seen as a litmus test for BJP and Congress post demonetisation.Total 122 candidates, including 67 Independents, contested the polls. The total number of voters were 5,07,627, including 2,37,374 women voters.Both Congress and BJP contested all 26 wards, while BSP had also put up candidates in the fray from 17 wards.The Municipal Corporation has 36 members, of which 26 are elected councillors, nine are nominated councillors and one is an MP (ex-officio member of the House).In the last House, BJP has 15 councillors, Congress has nine, BSP has one and one is Independent.Congress had made demonetisation a major issue in the polls, with its city unit leaders saying the move was implemented without any "application of mind" and had put the public to "great hardships".India's War On Cash Needed A Very Different Approach: Foreign MediaAuthor: Andy MukherjeePublication: Date: December 20, 2016URL: than 10 percent of Indians have ever used any kind of non-cash payment instrument. Less than 3 percent of the value transacted in the year ending March 2014 used cards.As India continues its scorched-earth campaign against cash, the question baffling many analysts is why a country so unfamiliar with digital payments would outlaw 86 percent of its currency, the most-favored method of settling transactions.Sample the following three factoids from a study led by Tufts University researchers:Fewer than 10 percent of Indians have ever used any kind of non-cash payment instrument. Less than 3 percent of the value transacted in the year ending March 2014 used cards. Fewer than 2 percent of Indians had used a mobile phone to receive a payment, compared with over 60 percent of Kenyans. Beyond showing the enormity of the challenge facing Prime Minister Narendra Modi, these statistics are of little relevance now. What's done is done. With PM Modi asking people to embrace electronic payments as a way of life, investors want to know what shape these digital networks will take, and who'll own them: banks, or non-banks such as telcos and e-wallet apps? Either party's dominance will be wholly artificial.Indians who have used a mobile phone to receive a paymentLess than 2%The Tufts researchers see it differently. India, they say, has erred in choosing a bank-led model over a telecoms-led one. "Consumers have been left unaware of how they might use mobile phones for services other than communications, texting, or Facebook."It's true that India doesn't have anything like China's Tenpay, controlled by Tencent Holdings Ltd., which runs the WeChat social network, or its larger rival Alipay, owned by Alibaba Group Holding Ltd.'s banking and payments affiliate, Ant Financial. Paytm, the most popular Indian wallet, is tiny versus Ant, which services 450 million customers in China and was valued by CLSA at $75 billion in September.Although the Indian startup has witnessed explosive growth since the government's Nov. 8 currency ban, tapping opportunities isn't proving to be easy. Paytm launched an in-store payment app last month, only to withdraw it amid security concerns.Paypal-style wallets, which customers fill from their bank accounts, won't pose too serious a challenge to traditional lenders. But Paytm, as well as mobile operators Bharti Airtel Ltd. and Reliance Industries Ltd., are close to establishing so-called payment banks that can accept customer deposits so long as they only invest in government bonds and don't make loans.These newer payment systems could have an edge over ATMs and cards from commercial lenders. The latter are simply too smug. Even basic maintenance of infrastructure -- like switching ATMs out of Windows XP, which is no longer supported by Microsoft Corp. -- is a cost that full-service banks in India avoid incurring, blithely ignoring the security risks.But with both banks and telcos suffering from a deficit of trust and access, neither should be the No. 1 choice for replacing cash. The only institution whose balance sheet people actually want is the one they've always used to settle transactions: the Reserve Bank of India.That's not such a bad thing. The government could still meet its goal of a "less-cash" society if physical money were to be gradually replaced by a national digital currency, whose lawful use would be certified by a network of distributed ledgers. It would be an official bitcoin, or BharatCoin, as some commentators have called it.The central bank's balance sheet is already available to the butcher, the baker and the candlestick maker, but only via cash. RBI has no idea who owns its currency. With BharatCoin, it would know the identity of owners, though transactions would be scrambled for privacy. As Gadfly's Tim Culpan and Christopher Langner have noted, the goal of a national digital currency is to take "the banking out of cash."Even at the Bank of England, the idea is still just a research project. If PM Modi had embraced it, the pain of demonetization would have become unnecessary. Given people's preferences, it's still not too late to consider.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.- To contact the author of this story: Andy Mukherjee in Singapore at amukherjee@ To contact the editor responsible for this story: Katrina Nicholas at knicholas2@Robert Vadra hits out, says government experimenting with demonetisationAuthor: NewsX Bureau Publication: Date: December 20, 2016URL: of the Congress party president Sonia Gandhi, Robert Vadra on Tuesday took on the Centre over its demonetisation move and blamed it for constantly coming up with new rules. In a post published on his Facebook account, Robert Vadra questioned the government over its note ban issue and said, “For how long and how much more will the government experiment on us, to try and prove itself correct?" Raising questions on recent changes made by the government where it gave a last chance to the people to deposit money above Rs 5000 only for once before December 30, Vadra said, “Now, deposits of more than Rs. 5,000 of demonetised currency note, will be allowed only once, till December 30 and that too with an explanation. This has turned financial institutes to interrogation offices. It’s sad to see people suffering due to whims and fancies of the government.” “I feel for the people and their difficulties they have n are facing,” Vadra added. The government announced scrapping of old Rs 500/1000 currency notes on November 8 and replaced them with new Rs 500 and Rs 2000 notes. Ever since this move by the government, it has been criticised by the opposition over its poor implementation of the scheme. However, the scheme received a mixed reaction from the citizens of the country. Hitting back at the opposition, Union Minister Venkaiah Naidu said, “Congress party attacking as PM Modi struck at the very roots of black-money holders; these people half-heartedly welcomed move the earlier.”Infusing nationalism in politics is putting India at riskAuthor: Mohit Daga @mohitdaga05Publication: Dailyo.inDate: December 20, 2016URL: major sale point of a scheme like demonetisation was based on nationalism.Nationalism and enthusiasm for the nation are no doubt great for the development of a country; it can be a huge factor in motivating people across the spectrum, from the marginalised to the rich, leading to a high dividend for the society at large.But when an elected leader tries to convince the people about his policies in the name of nationalism, in the name of the sacrifice of soldiers, in the name of religious identity, it becomes very troublesome.Any government has 'n' number of strong vested powers. For example, a government can force a public company like ONGC (because the government has a major share in it) to acquire another debt-ridden public company, GSPC.And the misdeeds of GSPC happened under the watch of a leader who is the Prime Minister of the world's largest democracy. Interestingly, to my and everybody's surprise, "nobody's questioning it."Why? Primarily because of three reasons. Firstly, the government is within its right to act such, causing small trouble to poor shareholders of ONGC, but who thinks about them? Second, the leader in question has developed his image in the name of nationalism, in the name of pseudo-religious identity. And lastly, anybody questioning this leader is anti-national.Similarly, the government can make a number of executive decisions to waive off corporate loans and environment fines, allow the use of government figures for private advertisement, sell government assets to private companies. All these may be executive decisions and are not a scam but have benefited some or the other private company.But it's so silly, these nationalist leaders think people are naive and do not understand. It is very clear when one government fines a private company to the tune of scores of crores for violating environment guidelines, and some other government waives off the same fine. LAUGH! LAUGH! And sadly nobody questions!The same government can spend on self-advertisement, self-promotion, in celebration of a second anniversary and end up spending more than Rs 1,000 crore. That figure put in perspective is more than the campaign budget of any of the candidates of the US presidential race.It will only be shock for people to find the sum of money spent once the general elections are announced. In legal terms, the government will again not be doing anything wrong in spending that much money irresponsibly. And again in legal terms, there is no scam involved in this. And sadly nobody can question; because he/she who questions it, is afraid of the "presstitute" tag.Because here we have a leader who is a synonym for nationalism and anybody opposing him is anti-national. And if it means that 70 per cent of the people in this country who did not vote for him or his party during the last general elections are anti-national, then so be it.A populous nationalist image is a curse for public discourse of policies. The major sale point of a scheme like demonetisation was based on nationalism. A scheme of flawed implementation, a scheme which has claimed a huge number of lives, a scheme whose implementation if opposed can give you an anti-national tag for life.A scheme which has wasted millions of man-hours, a scheme which might lead to negative GDP growth, a scheme which was expected to remove black money and a scheme which led to the issuance of nearly 100 notifications by the government ends up in finding that 90 per cent of the demonetised currency is back into the system with close to 10 days still left.But hey, anybody questioning all that is anti-national or anybody raising the issues of farmers hit by demonetisation is also anti-national. Or anybody who questions the effect of it on the unorganised informal sector is anti-national. Or anybody who questions the loss incurred by the government due to the drive is anti-national.A nationalism-based popular image can turn out to be very dangerous. Because it may propel followers to a level where the question of right and wrong is mostly forgotten and the only question that resonates is about nationalism.Just a matter of thought: a peaceful and cordial resolution of say the Kashmir issue is only of interest to people of both countries but not the leaders with this farce nationalist image. Isn't it true? Because if there is no Kashmir tussle, there is no space to play with the sentiments of the people of this country, and more importantly, the defence minister cannot then project his boss and himself as some or other mythological figure which are very dear to people.I hope we wake up and more importantly, these so-called nationalist leaders look into the mirror.Digital push to help small traders save up to 46% in tax: GovtAuthor: Press Trust of IndiaPublication: Business StandardDate: December 21, 2016 URL: from making tax saving, small traders would be able to build their books which may help them get loans easily, said FMGovernment on Tuesday said small traders will be able to save up to 46 per cent in tax by migrating from cash to digital transaction mode, as the decision to tweak the presumptive income norms would reduce tax liability.“Apart from making tax saving of up to 46 per cent by migrating to digital mode, small traders would be able to build their books which may help them get loans easily,” finance ministry said in a statement.Also, if transactions are carried out through banking channels, then anybody having annual turnover of up to Rs 66 lakhs will have zero tax liability after availing the benefit of Section 80C, after amendment of the rate structure, it said.Earlier in the day, Finance Minister Arun Jaitley said “The object is if you do transactions using digital mode then you can pay less tax. It is a tax incentive to support digitisation of the economy. Some traders would get more than 30 per cent tax advantage if they make transactions through digital route.”Under the existing Section 44AD of the Income-Tax Act, 1961 — an individual, Hindu undivided family or a partnership firm other than limited liability partnership — carrying on any business, having a turnover of Rs 2 crore or less, the profit is deemed to be 8 per cent of the total turnover for taxation. He said in the Budget for 2016-17, small traders and businessmen, with turnover of up to Rs 2 crore who did not maintain proper accounts, were presumed to have earned 8 per cent income or profit for tax purposes. But if they use digital mode of payments, their income will now be presumed to be 6 per cent of the turnover and not 8 per cent.Following decision to demonetise old Rs 500/1,000 notes, the government has taken several measures to encourage digital payments to promote less cash economy.Citing example, the statement said, if a trader makes his transactions in cash on a turnover of Rs 2 crore, then his income under the presumptive scheme will then be presumed to be Rs 16 lakhs at the rate of 8 per cent of turnover.After availing of Rs 1.5 lakh of deduction under Section 80C, his total tax liability will be Rs 2,67,800.However, if he shifts to 100 per cent digital transactions under the new announcement made, his profit will be presumed to be at Rs 12 lakh at the rate of 6 per cent of turnover, and after availing of Rs 1.5 lakh under Section 80C, his tax liability now will be only Rs 1,44,200.Over 70% rural citizens have adopted e-wallets: IT MinistryAuthor: PTIPublication: The Indian ExpressDate: December 21, 2016URL: "The speed and scale at which digital transformation in taking place in India is paving the way for a digitally empowered, participative and inclusive society," MeitY Secretary Aruna Sundararajan said.More than 70 per cent of rural citizens have adopted the methods of e-wallets followed by Unified Payment Interface (UPI) payment option, the Electronics and IT Ministry said on Tuesday. “An overview of the current data available with the Ministry of Electronics & IT (MeitY) shows that more than 70 per cent rural citizens have adopted the methods of e-wallets, 16 per cent opted for Unified Payment Interface (UPI),” the ministry said in a release.Rest of the people looked at Unstructured Supplementary Service Data (USSD), Adhaar Enabled Payment System (AEPS) & Cards or Point of Sale(PoS). Similarly, more than 85 per cent of the merchants have adopted the e-Wallet system and 13 per cent have opted for UPI, the statement said. “The speed and scale at which digital transformation in taking place in India is paving the way for a digitally empowered, participative and inclusive society,” MeitY Secretary Aruna Sundararajan said.Under its Digital Payments awareness and training programme, the Ministry said that Common Service Centre (CSC) network, which provides government service in rural area, has enrolled over 25 lakh rural citizens for digital payments. “Achieving the 25 lakh mark in such a short time is an indication of the pace at which digital adoption is gaining momentum among rural citizens,” Sundararajan said. Over 55,000 merchants have started offering digital payment options to rural customers across various districts and blocks in India,” the statement said.The DigiDhan Abhiyan aims to reach over 1 crore rural citizens through this massive outreach programme. The campaign aims to cover 2 lakh Common Service Centres (CSC) in rural and semi-urban areas and also reach out to 2.5 lakh Gram panchayats across the country. The centres will cover one member from each household and will cater to 40 households in a catchment area.Probe reveals how bank officials are renting out bank accounts to black money hoardersAuthor: Syed Masroor Hasan, Md Hizbullah, Sushant Pathak, Jamshed Adil KhanPublication: Indiatoday.inDate: December 20, 2016URL: Today's probe discovered how some bank employees were themselves partly contributing to the crippling shortages of money supplies to legitimate clients.As millions of taxpayers remain squeezed by the persistent cash crisis more than a month after the November 8 demonetisation order, an India Today investigation has found how corrupt bank officials from some of the country's leading lenders are diverting money supplies to tax thieves.India Today's special investigation team also found them doubling up as touts renting out random bank accounts to the hoarders of black economy. For many ordinary citizens, chaos, confusion, anger has become a routine since November 8 as they spend hours in queues outside banks and cash points to withdraw their small, daily quotas of cash. India Today's probe discovered how some bank employees were themselves partly contributing to the crippling shortages of money supplies to legitimate clients.Here's how the investigation panned out:1. As part of its series of investigations unearthing a range of black-money platforms, the network's special team went undercover to dredge up the suspected rot in the financial sector this time. 2. The probe began at the Punjab National Bank, a 121-year-old state-run lender that boasts of a vast network of 6,809 branches and 9,669 ATMs across the country. India Today's' investigative reporters visited its Civil Lines branch in Delhi for a meeting with one of its managers, Rubal Khanna.3. As the undercover crew arrived in the facility, Khanna stepped out quietly and took them to an adjacent alley. When the conversation progressed, the PNB manager promised Rs 50 lakh in new currency in exchange for the defunct. His candid plan explained where wads of banknotes might be disappearing after reaching banks -- perhaps back into the suitcases of evaders.4. "There won't be any problem. No issues with the old ones - be it 500 or 1,000 (bills),for around 50 lakh" Khanna said. "It will be done 'hand-to-hand'," he added. Khanna demanded a commission of 20 percent on the original value of void currency.5. The bank official next offered various accounts of his branch to the investigative team to park their fictitious black money in.6. He set Rs 20 lakh as the limit for deposits into those third-party accounts. "Those accounts will be known to you. Right, Sir?" asked the reporter. "Yes, yes. ...there won't be any setback. Don't worry," he replied.7. Another glaring example of how some bank officials were peddling accounts to hoarders came up when India Today's special team investigated HDFC, a private-sector bank that recorded a total income of around Rs 80,000 crore last fiscal.8. Amar Pal Singh, a home-loan counsellor at HDFC Sales, advised stashing tax loot in accounts of some of his colleagues and clients. "I have many colleagues who have many accounts in HDFC. Besides colleagues, there are other people, who we helped open accounts. There were opened directly or indirectly," he told the India Today reporters during their meeting at Ghaziabad.9. "It's not necessary to withdraw money from one branch. It can be withdrawn wherever cash is available," Singh explained as he sought a 30 percent cut for the organizing transfers. "The commission will be 30 percent. ...Insiders in the bank will be set up for 20. Overall, we'll do it at 30," he said.10. The HDFC employee was ready to inter change up to Rs 10 lakh in a single day. "How much amount in void 500/1,000 bills can you exchange in new currency?" asked the reporter. "It will be immediate," he claimed. "Do you mean old currency will be exchanged with new currency 'hand-to-hand'?" probed the journalist. "I can do Rs 10 lakh," Singh claimed.11. Next, India Today's investigative journalists found out how several officials of reputed banks have turned money brokers advising underhanded tactics to potential clients looking for cash hideouts.12. At a Meerut branch of ICICI, India's largest private-sector bank with an asset value of $109 billion, the reporters met its sales officer, Abhishek Rohilla. The staff suggested a range of options for concealing black money, with third-party and dummy accounts topping his list.13. "You should open 8-10 accounts at least and deposit from Rs 2 lakh to Rs 2.5 lakh. By this, you'll be able to dispose of Rs 10-15 lakh," he said. "People have done that. We have helped people open 8-8 accounts each. We went to villages and opened 10-10 accounts (per person). For a number of individuals, we opened 20-20 accounts each. All their money is stashed. We'll work out some alternative (for you too)."14. He insisted he had helped clients "adjust" up to Rs 4.5 crore in total since Nov 8. "Old currents accounts have all been sold off," he added.15. India Today's team next probed a nondescript lender, the South Indian Bank. Headquartered in Kerala, this lender has the third-largest branch network among private-sector banks in the country, with all its 839 branches linked to core banking.16. At the Meerut branch of the South Indian Bank, the reporters met Deepak, an assistant manager. Sitting at his desk, the official claimed his relative had legal old tender to broker a possible exchange for up to Rs 20 lakh. "There's a relative who has old notes. What if he exchanges your currency with them...," Deepak suggested.17. "Okay, old notes of 100?" asked the reporter. "Yes," the assistant manager replied. "Up to Rs 20 lakh (can be managed)," he said.As BJP's winning streak continues in polls held post demonetisation, Congress wants to wait till Budget SessionAuthor: Kumar Shakti ShekharPublication: Indiatoday.inDate: December 20, 2016URL: civic body poll results are being viewed from the prism of demonetisation because the Opposition's campaign in all these elections largely hovered around the Narendra Modi government's biggest economic initiative so far.In the results announced today for municipal elections held in Chandigarh, the ruling BJP-Akali Dal combine registered an impressive victory, winning on 21 of the municipal seats. Except for the third phase of Maharashtra municipal elections, the BJP has maintained its winning streak. Whether they be the municipal elections or the bye-elections held in other states after Prime Minister Narendra Modi had announced demonetisation initiative, the BJP has won them handsomely.The results are being viewed from the prism of demonetisation because the Opposition's campaign in all these elections largely hovered around the Narendra Modi government's biggest economic initiative so far. Demonetisation has affected the lives of each and every Indian family and the Opposition hoped to cash in on the hardships being faced particularly by the common man.However, if there is any major discontentment against the Narendra Modi government over demonetisation, the Opposition has failed to turn the tide in its favour. They hope to see a favourable result after some time.CONGRESSResponding to the Chandigarh results, Congress' senior national spokesperson Shakeel Ahmed told India Today that the people were still giving a benefit of doubt to PM Modi. "Modi has calibrated that demonetisation has been implemented in national interest. He has also sought time of 50 days, which expires in December. The discontentment against the Modi government is slowly and gradually growing," he said.Ahmed claimed that very soon, people will get disillusioned. "Demonetisation's major impact will be felt when unemployment starts rising at an alarming rate. This will be visible after the Budget Session. As soon as the people realise that Modi has taken this step to benefit his own people, they will give a return gift by dumping him," he said.BJPHowever, the BJP has an entirely different take on the recent election results. Thanking the people of Chandigarh for supporting BJP, party president Amit Shah said every election win after November 8 proves that they support the demonetisation move.Thank people of Chandigarh for supporting BJP, every election win after Nov 8 shows that they approve of #DeMonetisation decision: Amit Shah pic.60Jrb7pxwd?€” ANI (@ANI_news) December 20, 2016BJP's national spokesperson Syed Shahnawaz Hussain told India Today that it was the Opposition which made demonetisation the main plank in every election held after November 8. "The people have rejected the Opposition's raves and rants over demonetisation. They have supported demonetisation," he said.Hussain further said had the BJP lost all these elections, the same Opposition would have termed them a referendum on demonetisation. "The BJP will win all other future elections, Assembly or otherwise," he added.CHANDIGARHIn the elections held on 26 seats for the Union Territory, BJP won 20 while its alliance partner Akali Dal was victorious on just one seat. The BJP-Akali Dal combine has been in power in Punjab for almost ten years. The BJP is upbeat over the results because the state goes to polls in early 2017. The alliance is facing a double anti-incumbency and Delhi Chief Minister Arvind Kejriwal's Aam Aadmi Party (AAP) has emerged as a strong contender besides Congress. AAP won four seats in the 2014 Lok Sabha elections. The BJP feels relieved with the Chandigarh municipal election results.MAHARASHTRABJP was way ahead of Congress in the first two phases of municipal elections. It won 51 of the 147 president council posts that went to polls on November 27, just 19 days after PM Narendra Modi had announced the demonetisation initiative. BJP emerged as the single largest party. It maintained its numero uno position even in the second phase, winning five of the 14 president council posts. However, in the third phase, Congress won more corporator seats than the BJP, and an equal number of president council posts.But in toto, BJP won more number of posts than it did the last time. Its tally rose from 25 corporator seats in the previous election to 119 now. Congress, which had won 150 corporator seats last time, managed to take a lead on 126 seats, thus ceding ground to rival BJP.GUJARATBJP captured two municipalities and one taluka panchayat in local bodies elections, the results of which were declared on November 29. BJP also maintained its lead on 23 out of 31 other seats of various municipalities, taluka and district panchayats, where by-polls were held.RAJASTHANOut of the 37 seats on which local bodies by-elections were held in Rajasthan on November 29, ruling BJP won 19 seats while Congress was victorious on 14 seats. In fact, the two parties gained one seat each in the by-polls held for Panchayat and municipal seats in the state.LOK SABHA & ASSEMBLY BYE-ELECTIONSBye-elections to four Lok Sabha and eight Assembly constituencies in six states and one Union Territory were held on November 19, 11 days after PM Narendra Modi announced the demonetisation move. In the results which were announced on November 22, BJP and Trinamool Congress won two Lok Sabha seats each. In the Assembly by-polls, BJP and AIADMK won three seats each, CPI(M) got two while Congress and Trinamool bagged one seat each.OPPOSITION'S STANDEver since the demonetisation initiative was announced, Opposition leaders like Congress vice-president Rahul Gandhi, and Delhi and West Bengal Chief Ministers Arvind Kejriwal and Mamata Banerjee respectively are up in arms against the Centre. They have termed the decision a "scam". Kejriwal and Banerjee have demanded its complete rollback. The two CMs had even talked about people revolting against demonetisation.Both Houses of Parliament failed to transact any meaningful business in the recently-concluded Winter Session, largely because of the ruckus created by the Opposition parties. While demonetisation has failed to adversely impact BJP electorally so far, the final test would be the forthcoming Assembly elections in Uttar Pradesh, Punjab and Goa scheduled for early 2017.India's small businesses facing 'apocalypse' amid biggest financial experiment in historyAuthor: Michael SafiPublication: The GurdianDate: December 21, 2016URL: revolution hits firms and workers as cash runs out, but now they are braced for the next stage – making all salary payments digitalDown one of the hundreds of dusty lanes that make up Gandhi Nagar market, Delhi’s largest textile bazaar, the small factory where Neeraj Sharma produces girls’ jeans is quiet.“Normally you couldn’t walk in here,” he says, ambling across the concrete shop floor, past dormant sewing machines and piles of unfinished denim.Sharma estimates around 80% of his workforce have left Delhi for their villages in the past month. “It’s good that they left,” he adds. “Because of this demonetisation problem, there’s no work for us either.”India’s vast informal economy has been reeling since 8 November, the morning after India’s prime minister, Narendra Modi, announced the sudden voiding of the country’s two most-used bank notes.It is the largest-scale financial experiment in Indian history: gutting 14 trillion rupees – 86% of the currency in circulation – from the most cash-dependent major economy in the world.More than a month on, India’s Reserve Bank has issued around 1.7 billion new notes, with less than one-third the value of what was removed. The sixth-largest economy in the world is running on 60% less currency than before. Lines outside banks continue to stretch, and India’s small business lobby says its members are facing an “apocalypse”. But Modi insists he isn’t done.Initially intended to flush out the “black money” said to be hoarded by elites and criminals, the government now frames demonetisation as the first step in a “cashless” revolution to shift the billions of transactions undertaken each day in India online – and onto the radar of tax authorities.This week, labour minister Bandaru Dattatreya announced it would soon be mandatory for employers to pay their staff into bank accounts, a hugely ambitious step in a country where as many as 90% of workers are paid in cash.Already struggling, businessmen such as Sharma are dreading the prospect of more enforced digital migration.“How do you think I can pay the workers with a cheque if they don’t have a bank account?” he asks, in a tiny office thick with incense smoke. “And it takes three days to clear a cheque. What will they eat during those days?”His reasons are not just altruistic. Apart from potentially raising his tax bill – in a country where just 1% pay income tax – paying salaries electronically would mean giving staff Delhi’s mandated minimum wage, currently 9,724 rupees (?114) per month for unskilled workers.“Right now no one pays the minimum wage that the government decides,” Sharma says. “It will only make things expensive: we will charge the customer.”Outside his workers’ earshot, he adds: “If someone is doing the work of Rs.2000, why should we pay them Rs.15,000?”But workers too are wary of the big push online. Tens of millions of Indians have been given zero-deposit bank accounts in the past two years under a government scheme to boost financial inclusion. But even after demonetisation prompted a rush of new deposits, 23% of the accounts still lie empty.Asha Devi sits spread-legged on the Sharma factory’s floor, using fine scissors to cut loose threads from piles of jeans. A migrant labourer from Bihar state, she has a bank account, but has not been able to access her money since early November.“I’ve been standing in [bank] queues from 7am until 5.30 in the evening,” she says. “I still cannot withdraw money, and I lose a day of work each time.”The experience has heightened her scepticism about being paid online. “I am a daily wage worker and I’m not sure if I’ll have a job tomorrow,” she says. “If I get [the cash] in hand, I know I have the money.”Cash has a cold, hard certainty that still matters to itinerant workers. “There are many factory owners who will make these daily wage workers into fools,” Devi adds. “They’ll tell them they have deposited the money when they haven’t.”“In theory, it’s a great idea to actually ensure that workers actually get the wage they’ve been promised,” says Aparna, the president of the Indian Federation of Trade Unions, who like many Indians uses only one name.“The downside is: we can’t do it. It’s a bit like say the government has announced the end to all poverty by tomorrow. It’s not taking into account any of the obvious constraints that even a child in India could see.”Around one in three Indians still don’t have bank accounts, she says, many of them put off by the need to navigate banking bureaucracy. “For people who don’t have matching identity cards – say, if somebody made a mistake typing their name – then it’s a nightmare,” she says.Nagendra Sarkar, another of Sharma’s employees, has been trying to open an account in Delhi, but keeps running into an obstacle: he has no fixed address. “The bank people are asking for papers to prove that it’s my account,” he says.It is one of many points at which the digital salary plan, and the entire “cashless” vision, butt up against the stubborn reality of Indian working life.“Take an example of rickshaw puller who transfers goods from my shop to the factories,” says Pyarlal, a lace factory owner in Gandhi Nagar.“For one trip I pay him 100 rupees. Does the government expect me to give him a cheque? I mean, how do I pay him?”Such a major reform, even one that might benefit workers, can’t be enforced overnight, Aparna says. “You have to do it gradually, let the system be put in place, create the infrastructure first.”Mihir Sharma, a senior fellow at the Delhi-based Observer Research Foundation, agrees. “The law might well be passed,” he says. “But it would likely be widely ignored, which is the fare of most labour regulation in India.”Digital payments might be novel, but the ambitious plan is “an old Indian pathology”, he says. “The belief that if you legislate something, it happens.”Economic 'shock' from Indian cash ban to last until March - Bibek DebroyAuthor: Tommy Wilkes and Douglas BusvinePublication: Date: December 21, 2016URL: negative shock from India's ban on high-value banknotes will last until the end of March but improved growth next year should fully compensate for the loss, a top economic adviser to Prime Minister Narendra Modi told Reuters.Bibek Debroy, a member of the government's main policy think tank, said on Wednesday the "demonetisation" drive would improve the fiscal position and urged the government to spend any extra revenue on public investment.By outlawing all 500 and 1,000 rupee notes in the surprise Nov. 8 announcement, the government hoped people would deposit illicit or untaxed income into banks, boosting tax collection and incentivising the millions operating in the "shadow" economy to enter the formal economy.The decision sucked 86 percent of cash out of circulation, forcing millions of people to cut outlays and clog banks in search of money, and leaving businesses struggling to pay wages."There is certainly going to be a negative shock in Q3 and Q4 of 16/17, which should be compensated by a positive impact in 17/18," Debroy said in an interview, referring to the Indian fiscal year that runs until March."A whole lot that was informal will become formal and a bit more organised," he added. "That is a positive externality in the slightly longer term."PAIN, THEN GAINMost economists predict a short-term hit to economic growth from demonetisation, while the Reserve Bank of India has trimmed its growth forecast for the current fiscal year by half a percentage point to 7.1 percent.Debroy, however, said it was impossible to quantify the impact, because the government does not yet know how much cash will come back into the system and what it would do with any extra tax revenue. Some economists have called for emergency fiscal stimulus to stave off a sharp slowdown, but Debroy said the government should instead focus on public investment. "I don't like the word fiscal stimulus – even before Nov. 8 there was an issue about increasing investments, both private and public," he said."What we are talking about is greater public investments in the form of creating assets. That requirement existed before Nov. 8."Debroy said the political fallout from demonetisation meant the government was now unlikely to meet an April 1 deadline to finalise its crucial nationwide Goods and Services Tax - the largest taxation overhaul in independent India. He said Sept. 1 was a more reasonable target.Modi needs to clinch a deal with India's 29 states on the tax, but the last parliamentary session was a washout as the opposition and government squabbled over the impact of his cash crackdown. Debroy expects the next session, set to begin before the government presents its federal budget in early February, to be more productive, narrowing the risk that GST is further delayed. "We are all suffering from a bit of myopia because the last parliamentary session was a bit of a mess. It might well be that the budget session would be a bit more productive," he said.Listen pleaseAuthor: EditorialPublication: The Indian ExpressDate: December 22, 2016URL: should pay heed when accounts of demonetisation discomfort start coming in from allies.The Reserve Bank of India has partially rolled back an arbitrary order restricting deposits over Rs 5,000, which could be made only once, requiring the presence of two bank officials and a “satisfactory explanation”. This is the first time that the RBI and the government have visibly reacted to public distress, as the 50-day grace period requested of the people to manage the collateral damage of the bold and well-intentioned demonetisation exercise runs out. Now, the government must prepare to deal with friendly fire even from staunch allies, who are having to face public anger in their own constituencies. Andhra Pradesh Chief Minister Chandrababu Naidu had taken first mover advantage the day after demonetisation was announced, putting his weight behind the move and alluding to his own prior demands for scrapping high-value notes. His Telugu Desam Party is an NDA ally, and he heads the central committee appointed to look into the demonetisation issue. This lends special significance to his apparent change of stance now.On Tuesday, as Naidu spoke at a workshop for party MPs, MLAs and MLCs at Vijayawada, he accused the managers of the demonetisation exercise of ineptitude, and spoke of the unfairness of thrusting a digital economy upon the banking sector, whose infrastructure is unprepared for it. His account sounds more authentic than the vocal support of banking chieftains, for whom demonetisation may be an opportunity to achieve critical mass in the payments sector. Naidu’s illustration of the Centre’s poor management has been biting — his government had tackled a bigger crisis with greater speed in Cyclone Hudhud, he had said earlier. His party had dealt with an internal coup in the 1980s in 30 days, he pointed out on Tuesday.In response to the uproar over inadequate preparations for demonetisation, the government had argued that the need for secrecy was imperative. This was true at the time, but that argument no longer holds. Now, the government should keep its ear to the ground if it is to achieve the stated objectives of demonetisation. It should pay special heed to proponents of demonetisation like Naidu, who now says that he is “breaking his head” every day in search of a solution to the cash shortage. Leaders on the ground cannot afford to ignore the distress of their constituents. Neither can the Centre, in truth. It must listen when accounts of unease come in even from supporters.How Kejriwal would have dealt with demonetisation to emerge as a heroAuthor: RevieweroPublication: Date: December 20, 2016URL: anything carries the grave risk of criticism and failure. This is one reason why “do-nothing” has been the bedrock belief of Indian politics for 70 years. Do-nothing, fail at nothing. But doing nothing needs a cloak.For 70 years, Indian politicians have perfected that cloak; that cloak is – find someone to blame for doing nothing as the consequence of you doing nothing, but present it as the reason for you doing nothing. From “opposition ki saazish” to “foreign hand“, the template has been perfected by Indian politicians on blaming someone for doing nothing.Or not perfected, really; send a Lalu Prasad to IIT and the end product is bound make his own contribution to the process no matter how perfect you thought it was.Enter Kejriwal, from the days of IAC to this day, he has been working tirelessly on the art of blaming to avoid doing anything. It was UPA then, it was Modi later, it was Jung after that, then it was Delhi police, and then bureaucracy.Modi’s demonetisation has been a let down on the implementation front. Its timing and maybe even the idea itself can be questioned, and Modi is and will be facing tough questions and heat over demonetisation. But surprisingly, instead of the tried and tested “pass the buck and blame someone else” tactic, Modi has chosen to take blame upon himself if demonetisation fails.It is a ridiculous strategy for me as an avid Kejriwal admirer. First, Modi actually did something, and then to make it worse, he is accepting responsibility for the consequence! With this mammoth change in expected behavior, Modi has brought shame to the art of political blame-game.To sort this mess, I tried imagining how the post demonetisation scene would look like if Shri Kejriwal ji were our Prime Minister. What would he do once things don’t go the way originally thought? What would neutral-er-than-Helium journalists like Barkha Dutt do?I hope Mr. Modi reads it and course corrects to standard Indian political tactics before he does permanent damage to our political system by introducing the concepts of accountability and responsibility.1. This is how Kejriwal ji would react on Twitter when media wakes up to deaths in queues, if it ever does under his regime.First pass of the buck to subordinates:-------------------------------Arvinder @arvindkejriwalTOI reported 85 deaths in bank queues.Sisodia, this is not acceptable.2:48 PM - 11 Dec 2016-------------------------------2. Sisodia would waste no time in picking the buck and passing it on, even more masterfully to babus:-------------------------------Maninder Sisodia @manishsisodiaVery unfortunate that when AAP is trying to root out black money with demonetization but BJP appointed Babus are making sure it fails.2:48 PM - 6 May 2015-------------------------------3. Media would feel a sudden moment of validation; action or not, they will be happy Kejriwal ji read their headline. The ‘why the deaths happened’, the ‘what action has been taken part’ part will be scheduled to be asked on another day – or life, preferably. Everything will be fine again.-------------------------------Times of Indiander @toinewsBREKING: PM @arvinkejriwal thanks TOI for bring to light deaths in queues.Action taken immediately.2:48 PM - 6 May 2015-------------------------------4. But there is Zee News. They will get mischievous and post news articles about cash crunch. In response, AAP and their ace set designers and cinematographers would spring into action and click perfect pics for Finance Minister Sisodia to post on social media, pics that show everything is fine in the world, again. The good media will lap up the pics with retweets and cross posts screaming “KUDOS for the great work Manish! Congrats!”-------------------------------Maninder Sisodia @manishsisodiaSections of media reporting cash crunch with agenda, there is no cash crunch - see these carefully taken pics of 8 ppl with lots of cash2:48 PM - 6 May 2015-------------------------------5. But no rebuttal will be complete without AAP’s tribute to Goebbels and Photoshop, so this guy, the most hardworking in this do-nothing chain will tweet this:-------------------------------Ankit Lal @ankitlalAAP gov has printed 25L cr of 10L cr suked out of system but cash reaching ATM because RBI governor's great grandfather was BJP MP2:48 PM - 6 May 2015-------------------------------6. Meanwhile, Kejriwal will dig new escape tunnels in case the others fail. Pointing a problem that can’t be verified and then going with an impossiblesolution will make sure nothing gets done in the safest way:-------------------------------Arvinder @arvindkejriwalI have ordered cash printing machines to print money but they are working slow on Modi's orders, AAP will setup its own currency printing.2:48 PM - 6 May 2015-------------------------------7. Ashutosh will distract everyone saying something that will make everyone’s mind numb for weeks. Before they figure what struck them, the whole game is over or we would have found bigger villains to blame:-------------------------------Asutosh @ashutosh83bCurrency evlablitti is as objective as cash printing is subjective, all objectivity is subjectivity. Demonetization best, banker BJP dalals2:48 PM - 6 May 2015-------------------------------8. Then it’d be the chance of the babus to catch the buck. First they will be forbidden from talking to media and then lambs would be sacrificed in a sacred ceremony:-------------------------------Maninder Sisodia @manindersisodiaShameful. BJP gov had appointed the most incompetent, useless and insensitive IAS officer as the Finance Secretary2:48 PM - 6 May 2015-------------------------------9. Impossible to meet requests will be sent to highest authorities that can beundermined. The best part about ridiculous demands is that you’ll know they can’t be met. Then you can do-nothing by blaming someone else in authority:-------------------------------Arvind kejriwal @arvindkejriwalAAP has written to President to sack Fin sec and RBI governor who are BJP agents trying to fail AAP's demonetization.2:48 PM - 6 May 2015-------------------------------10. Now that we have established villains (who have no swords to fight back), it’s time to drop your sword (since you know it’s safe as the villains don’t have a sword) and be the victim. The gallery loves a martyr:-------------------------------Arvind kejriwal @arvindkejriwalCBI director bik gaya hai Modi ke hath! I'm asking CBI to raid new currency hoarders but he is not doing only. I AM LEFT POWERLESS.2:48 PM - 6 May 2015-------------------------------11. Almost there, let’s get people involved in the drama. It’s not over till people forget their problem and your problem IS their problem, it’s not over till they say Bhagwan mere Arvind ko salamat rakhna:-------------------------------Arvind kejriwal @arvindkejriwalEntire bureaucracy is working against me because I'm Am aadmi. Request AAP volunteers to go to ppl n tell how bureaucracy wants to kill me2:48 PM - 6 May 2015-------------------------------12. But then out of nowhere Babus will spring a surprise and flash a toothpick thinking it’s a sword:-------------------------------Ani News @aninewsIAS association pass resolution against politicians for unfair treatment and humiliation meted out by politicians.2:48 PM - 6 May 2015-------------------------------13. The climax is coming, in a battle of doing-nothing, the one who does absolutely anything loses and the babus will end up doing something:-------------------------------Ani News @aninewsPM Kejriwal and bureaucracy on war path. Bureaucracy and Bankers go on strike against PM Kejriwal for politicization of bureaucracy2:48 PM - 6 May 2015-------------------------------14. But there will be a jury, and the jury as unbiased as ever, will invalidate the use of brutal toothpicks against an armed opponent-------------------------------TOI @toiBravest PM ever shri Kejriwal takes on corrupt bureacracy: Tells them fix cash crunch ina day or face the axe.2:48 PM - 6 May 2015-------------------------------15. The final battle will begin. Our hero will make the final call to the people, the villain will be surrounded by all sides, it’ll have nowhere to run:-------------------------------PM Arvider @arvindkejriwalCome to street and protest against bureaucracy. Reach Jantarmantar by 6 P.M today where I expose bureaucracy.Revolution has begun.2:48 PM - 6 May 2015-------------------------------16. And that is when our Queen will step out of her throne, call on our hero after having won the battle against the bad guys, knight him and thank him for saving the kingdom, one more time by doing-nothing.-------------------------------Barkha Dutt @barkhaduttI write for @Washingtonpost that is increasing clear that inefficient bureaucracy led to failure of PM kejriwal's bold note ban move.2:48 PM - 6 May 2015-------------------------------And that’s how an ugly situation for our hero would turn into a fairy tale. And everyone lives happily ever after. Except that none of the problems actually go way, but that is beside the point, a fairy tale is supposed to distract you, and this one will distract the plebeians just fine.So the moot question still is, why is Mr. Narendra Modi taking blame for the demonetisation failure, if it happens, on himself when he can easily be a do-nothing and blame someone who can’t defend themselves? Maybe blame your team, and still be the knight in the shining armour?Is it true that Modi suffers from a disease worse than accountability and responsibility? Something that can inflict even greater damage to our political system? Is he trying to introduce another alien concept in our political system called leadership?Shocking if true.Opposition's protest is like Pakistan army's cover-fire to militants: PM on note banAuthor: Shailaja NeelakantanPublication: The Times of IndiaDate: December 22, 2016URL: who are against demonetisation "are like Pakistan", said Prime Minister Narendra Modi today, slamming the opposition for criticizing the ban on high-value notes."The commotion created in Parliament is like the 'cover fire' that Pakistan uses to ensure terrorists infiltrate into India. Similarly, the ruckus in Parliament lets cheats get away," the PM said at an event in Varanasi. He added that he never imagined politicians would "stand with the corrupt".The PM was referring to Parliament's just-concluded winter session which barely functioned as most opposition parties wanted to discuss the ban on high-value notes and ruling party MPs didn't want to."I never imagined that some politicians would stand by the corrupt," the PM said.PM Modi also criticized the opposition for "protesting everything.""Our army makes us proud but some people have questions even on their bravery. Is it good to view institutions like this?," he said referring to some politicians questioning whether the surgical strikes+ in September on Pakistan Occupied Kashmir did occur.He also exhorted citizens, especially the youth, to move to online banking and added that technology is what will lift India from poverty."(Congress) PM Manmohan Singh said that 'In a country where 50% of people are poor what can things like technology do?' Now tell me, was he giving his own report card or mine? Whose legacy is this 50% poverty," Modi asked.The PM also said there are a lot of capable human resources in India and exhorted the youth to show the way forward, especially in India going digital."Your mobile phones can be your banks and wallets," he said.PM ridicules Rahul GandhiPrime Minister Modi also ridiculed the Congress Party's Rahul Gandhi and his statements about a "political earthquake," and - without naming him - said his joy "has had no bounds since he learned how to give speeches.""There are some young political leaders. There is a young political leader. He's learning how to speak and since he learned to speak my joy has no bounds. They are learning how to give speeches. I'm glad that they have has started speaking, (but) I'm happy that we did not have an 'earthquake' ," PM Modi said, referring to the Congress vice president, who yesterday said the PM received kickbacks as chief minister of Gujarat from a corporate house.Gandhi was referring to documents recovered by the I-T department during raids on the Sahara Group and the Aditya Birla Group, which allegedly list huge payoffs to several high profile politicians.The Congress leader last week promised to come out with revelations "about the personal corruption" of the PM, revelations that he said will create "a political earthquake."Chandigarh surprise leaves everyone scratching their headsAuthor: Renuka BishtPublication: The Times of IndiaDate: December 21, 2016URL: of the assembly election in which the BJP-Shiromani Akali Dal alliance is expected to take a big hit on account of anti-incumbency, corruption and a botched demonetization, it has won a surprising 21 out of 26 seats in the Chandigarh municipal elections. BJP scored as many as 20 seats and increased its vote share to 42.98% from 28.16% in 2011. This was the outcome of a record voter turnout.Not surprisingly Chandigarh BJP MP Kirron Kher is crowing big, claiming this is just a foretaste of things to come. Amit Shah has also claimed that the win is a stamp of approval for Prime Minister Narendra Modi’s demonetization drive. Ultimately the party analysis has been Modi-centric as if somehow the vote came down to being a mandate on Modi. The problem is there is no good reason for this being the case in a very local election.And as The Tribune editorial argues, “It is very common for people to go with the ruling party in civic elections, as most benefits to fund-starved bodies have to come from the government. Chandigarh has a BJP MP.”Congress which won only 4 seats, is now facing doubts about how much fine-tuning its overall strategy and its campaign against demonetization need. Its vote share of 33.57% was down from 34.11% in 2011, when it had won 11 seats.Party spokesperson Randeep Surjewala argued, “Anger against demonetization and the sins committed will not get washed away by claiming lame-duck victories.” It’s reasonable to hope that people’s anger against demonetization will grow when any gains from it prove elusive, but what are the reasons for his own party’s lame-duck defeat?Congress MLA Kuljit Nagra has offered this self-comforting explanation: “It appears that people in Chandigarh, who comprise mostly middle class, did not have much of an issue with demonetization. That is not the case in Punjab.”SAD of course isn’t in the same sweet spot as its ally, having lost 4 of the 5 seats it contested to Congress. And come assembly elections, AAP will be helping tip its pot of woes over.Benefits of demonetization.Anil RajwadeMany have criticised demonetisation,especially its implementation. Economists like Amartya Sen calledDemonetisation as a despotic step .He argues that it bypasses the RBI's promise of payment.However it is incorrect as the banks exchange any kind ofpromissory notes with notes which is being done even todayafter the Demonetisation .In Venezuela , which is a much smaller economy, demonetisationcreated chaos, street riots and the economy collapsed. Nothinglike this happened in India. On the contrary ,Demonetisation hasbecome a 'Game Changer' of India. It is a major ' Pro Poor' step.The adage is "Kill Two Birds In One Stone". But Demonetisationhas killed many birds in India .1) Demonetisation has crippled terrorist/ Maoists activities byinvalidating foreign printed fake notes. 2) Demonetisation has provided fiscal stimulation by simplifyingthe recapitalisation of banks and revitalised the banks due to hugeinflux of low cost deposits.3) Demonetisation will bring down the ratio of "Cash : GDP".At present it is 10.6% compared to the Chinese ratio of 9%.In Brazil this ratio is just 3%.4) Demonetisation is a blow to the parallel economy which willincrease the Tax revenue and help to lower the corporate andindividual income tax by 15 to 20%.5) Demonetisation, according to Mr. Neelankani, designer of"Adhar " said that India will be the most Digitalised? countryof the world in just 3 to 6 months as against earlier estimatesof 6 yrs.6) According to Mr. Jagdish Bhagwati the well-knownprofessor of economics from Columbia University Demonetisation is a major ' Pro Poor' step. It has reducedthe disparity between the Rich and poor by about 30% .7) Demonetisation has improved the liquidity of banks whichwill open the path for faster Industrial and infrastructural growth.Demonetisation is politically risky. But it can prove to be a "Master Stroke".Fake currency racket: NIA arrests mastermind Abdul Salam deported from Saudi ArabiaAuthor: Express News ServicePublication: The Indian ExpressDate: December 23, 2016URL: has filed chargesheet in the case in which accused had been found to be collaborating with Dawood henchman to transport fake currency from Pakistan into India via Gulf.A FAKE currency racketeer, who collaborated with members of Dawood Ibrahim’s gang, was on Thursday deported from Saudi Arabia and arrested by NIA on arrival at the IGI Airport.Abdul Salam alias Podi Salam, a resident of Malappuram district in Kerala, was wanted by the NIA in a 2014 case of fake currency seizure worth over Rs 9 lakh at Nedumbassery airport in Kerala.The NIA has filed a chargesheet in the case in which the accused had been found to be collaborating with Dawood henchman, Aftab Batki, to transport fake currency from Pakistan into India via Gulf.The case was first registered by Kerala Police in January 2013 after customs officials apprehended one Abid Chullikulavan Hassan at Nedumbasserry International Airport with fake currency on January 26. The NIA took over the investigation in July 2014.“Abdul Salam was part of the criminal conspiracy to smuggle high quality counterfeit Indian currency notes to India from UAE and had facilitated smuggling of the contraband through Abid Chullikulavan Hassan. The case is pending trial before the NIA special court at Ernakulum, Kerala,” an NIA statement said.One of the accused in the case had come in contact with Aftab Batki through an inmate while he was lodged in Mumbai’s Arthur Road jail on charges of narcotics smuggling. Batki drafted him for smuggling of fake currency after he came out of jail.Interestingly, it was the same accused who had tipped off Customs about the consignment of fake currency but was arrested by NIA as he had an active involvement in the racket.Small borrower, big problemAuthor: Saibal PaulPublication: The Indian ExpressDate: December 23, 2016URL: has hit the microfinance sector hard, pushing the poor out of financial inclusion and towards usurious debt.Microfinance is a set of financial products including micro-savings, credit, remittances, pensions, etc, crafted for the poor and serviced with affordable costs. As per the Bharat Microfinance Report 2016, microfinance institutions (MFIs) are now reaching 40 million clients with 70,000 crore rupees of portfolios; additionally, 60 million clients are being reached by SHGs (self-help groups) for credit. This sector consumes about 46,000 crore rupees of MUDRA. The microfinance sector constitutes NBFCMFIs, societies, trusts, cooperatives and other entities.But the significance of microfinance is the type of clients being served, over and above the quantum of the portfolio. About 60 per cent of Indian adults did not have access to formal financial institutions. The account opening drive through the Prime Minister’s Jan Dhan Yojana was a welcome initiative; however, most of these accounts were dormant. As fieldwork shows, little has happened in the formal financial sector to actually reach the poor. In this situation, the microfinance sector has seen a growth of upto 60 per cent per annum. But microfinance loans are collateral-free and unsecured in nature, presenting huge potential risks for MFIs. Customers served by MFIs are essentially very poor and usually ostracised by the traditional banking system. Yet, apart from RBI-permissible micro loans per client upto Rs 1 lakh from two sources, MFIs also provision microinsurance and other financial instruments to such customers.In most cases, MFIs are the only source for credit and financial instruments for the poorest families trying to manage financial needs and unseen instabilities. The predominant microfinance model is a joint liability group, where members of women’s affinity groups take loans from microfinance institutions (MFIs) with shared liabilities for repayment; MFIs source these loans from lending agencies, mostly banks, both public and private. So, the term loans provided by the banks are distributed amongst the clients and the repayment of the clients is repaid to the lenders within an agreed schedule. On the basis of different parameters, including timely repayments, the MFIs get subsequent term loans. Hence, the repayment of term loans to the banks is instrumental in order to ensure the inflow of credit to the clients.Currently, demonetisation has been having a significantly negative impact on the microfinance sector and its clients; the poorer segments of the population are the worst hit. For security purposes, most of the loan transfers, from MFIs to clients, happen through the national electronic funds transfer (NEFT). However, repayment from them is by liquid currency. This is primarily because the poor use cash and do not use technology for daily chores. Even if they wanted to, the overarching architecture for a cashless economy is yet to be put in place and these people need to be educated to use it.In a post-demonetisation scenario, despite being the source of lending term loans to MFIs, the banks are refusing to take discontinued currencies. Due to the sudden shift, clients are unable to exchange the discontinued currencies — which they had saved for repayment.MFIs are unable to accept discontinued currencies as the banks are refusing to accept these. The situation is very gloomy. Repayment has cascaded down to 30 per cent and in some places, it is reported to be as low as 20 per cent.The regular portfolio at risk of the microfinance sector is less than half a per cent; this is much lower than the banking industry. As discussed, timely repayment propels the subsequent leg of term loans to MFIs; non-repayment presumably blocks the process and eventually, this will translate to unavailability of financial support for these clients. In the past, it has been seen that once the MFI source is dried up, the clients take refuge with loan sharks.In order to manage the situation, the Reserve Bank of India has notified all regulated entities on new prudential norms on income recognition, asset classification and provisioning pertaining to advances for the banks. It is to give small borrowers some more leeway to repay their loan dues because of the challenging time that is emanating from the withdrawal of the legal tender status of the old 500 and 1,000 notes.But the situation is getting even more complex with these new prudential norms as the political class is trying to take advantage of the situation in certain places. In some districts of Maharashtra, Uttar Pradesh and Madhya Pradesh, local political leaders, in search of some instant, cheap publicity, have been cajoling clients by interpreting this notification as a waiver. Political leaders, using their local heft, affiliations and the ignorance of poor people, are in fact spoiling the sector. They are conducting rallies and demonstrations and igniting clients and their families not to repay loans and even, to chase out field workers of the MFIs. In certain areas, repayment has almost stopped.The microfinance sector is going through substantial challenges. The RBI, in order to protect the market and clients, has propagated strict regulation which covers significant portions of the sector. However, as experienced till now, demonetisation has posed challenges to both clients and the entire sector. It is affecting the credit culture of poor people, who are undergoing stress and falling prey to unscrupulous political leaders, who try to make them ignore repayment, and thereby face greater financial stress.This entire act will again push the poor out of financial inclusion. Secondly, substantial non-repayment will hinder the flow of term loans from the lenders and gradually, the sector will dry up. The efficient channel for MUDRA loans will also get diluted. Deep-pocket big MFIs can manage for some time; however, the small MFIs will soon face real trouble. The credit need is inevitable especially for the economically deprived. But if MFIs are not in the position to cater to them, such clients will have to seek refuge with loan sharks, which will make them even poorer and unable to emerge from such binding poverty. A life of dignity and real aspirations could forever be wiped off their horizons.- The writer is associate director, Sa-Dhan, The Association of Community Development Finance Institutions. Views are personalDon’t Shoot The RBI Governor; His Record Is Better Than That Of US Fed Or ECBAuthor: R JagannathanPublication: Date: December 22, 2016URL: Finance Ministry and the Reserve Bank of India (RBI), the two parties at the vortex of the demonetisation drive, deserve every bit of criticism for the arbitrary way in which they have been micro-managing the daily-rulebook for people trying to deposit old money or taking new currency out. The latest fiasco is the RBI’s decision (since reversed) to ask bank customers making deposits of more than Rs 5,000 to explain why they are doing so – making a mockery of the initial promise of Prime Minister Narendra Modi that everyone had time till 30 December to deposit their old cash. It has left red faces all around.Daily rule changes do nothing to improve the image of the RBI, even though its actual reputation and track record is – arguably – much better than that of some first-world central banks.These flip-flops have led to suggestions that the RBI has lost credibility, but this judgment is a bit over-the-top for the reality is that no central bank – or finance ministry anywhere – has had past experience in handling a mammoth exercise like the demonetisation of 85 per cent of the currency outstanding with the public. So, while the flip-flops are worth critiquing, the reality is that both the Finance Ministry and the RBI had to do a lot of learning on the job, having thrown themselves at the deep end of the pool without a life jacket. So, one can question the original decision to demonetise without enough preparation, but not the efforts of the central bank to fine-tune and adjust to changing realities by the day.It is also wrong to judge a responsible central bank by its mistakes in dealing with an unprecedented event. It is equally wrong to lay the blame on the new Governor, Urjit Patel, for allegedly kowtowing to the government. One can claim that former governor Raghuram Rajan would have done better, but the steep losses in the banking system are a holdover from his era, too. So the claim that Rajan would have done better cannot be verified, especially when it is the same RBI bureaucracy running the demonetisation desk.In fact, by refusing to cut interest rates in the December policy, when they seemed warranted, Patel showed that the RBI was not swayed by political pressures to tweak his anti-inflation policy. Patel also made it clear that the RBI was not about to hand over a revenue bonanza to the government in case a big chunk of the demonetised Rs 500 and Rs 1,000 notes did not return to the banking system by 30 December.In his core areas of monetary policy, Patel has proved he is his own man, of course aided by the Monetary Policy Committee. His problem is that demonetisation is a political and executive decision, and he has to cope with it as best he can. He did not come to the job with the expectation that he would have to handle the fallout.The RBI cannot thus be judged purely on how it has handled this one event. In my opinion, more than almost any other central bank, including the US Fed, the European Central Bank (ECB) or the Bank of Japan, the RBI has greater credibility. But we blithely assume that since the former three are more powerful, they must somehow be more competent. We also assume that since the dollar is strong, the Fed must have done something right, whereas the dollar, as the world’s primary reserve currency, has strengths independent of what the US central bank delivers. Luck has also played a larger role in how the dollar fared post-2008 than the Fed’s actions.On the other hand, in the last decade or so, it is a fact that the world was plunged into near deflation due to the failures of the top three central banks, especially the Fed and the ECB.The US Fed under Alan Greenspan allowed an asset bubble to develop, setting the stage for the crash of 2008. His successor Ben Bernanke, by keeping interest rates near zero and following up with quantitative easing, ensured that the very people who benefited the most from the asset bubble (Wall Street) were again allowed to create another bond and stock bubble, this time based on zero-cost credit. Wall Street gained from the asset inflation, not Main Street.The ECB, by doing the same, destroyed value in most of its banking system. Today, most big private sector banks in India (HDFC Bank, Kotak Mahindra Bank, etc) are worth more than most European banks. Not for nothing did John Cryan, Deutsche Bank chief executive, wail a few months back that the European Central Bank’s zero-rate policy would have “fatal consequences” for savers and pension plans. He emphasised that “monetary policy is now running counter to the aims of strengthening the economy and making the European banking system safer.”As for the Bank of Japan, the less said the better. Despite operating zero and negative rates for nearly two decades, Japan is nowhere near reviving itself.And let’s not forget, the RBI’s brief is much wider than that of the US Fed or the ECB, which mainly focus on managing inflation and rates.If this is the record of the world’s biggest central bankers, where bankruptcy of thought has led to asset inflation and a diminution of the banking system, one wonders why Indians think that it is our RBI that is losing credibility. Whether it is D Subbarao, or Raghuram Rajan or, now Urjit Patel, the RBI as an institution has delivered a much better track record than some of its western counterparts.The only quibble we should have is the RBI’s tendency to micro-manage and micro-regulate. This is the main reason why it has had to flip-flop every other day. But the problem of micro-regulation predates demonetisation. Demonetisation has merely brought out this fact in bold relief. Time to change this approach.What India Has Done To Its Money Is Sickening And ImmoralAuthor: Steve ForbesPublication: Date: December 22, 2016URL: NOVEMBER India's government perpetrated an unprecedented act that is not only damaging its economy and threatening destitution to countless millions of its already poor citizens but also breathtaking in its immorality. Without any warning India abruptly scrapped 85% of its currency. That's right: Most of the country's cash ceased to be legal tender. Shocked citizens were given only a few weeks' notice to take their cash and turn it in at a bank for new bills.The economic turmoil has been compounded by the fact that the government didn't print a sufficient amount of the new bills, lest word leak out as to what was about to take place. The new bills are also a different size than the old ones, creating a huge problem with ATMs. Even though India is a high-tech powerhouse, hundreds of millions of its people live in dire poverty. Many workers are leaving the cities to go back to their villages because so many businesses are closing. Countless companies are having difficulty meeting payroll, as they can't get the cash to do so. The real estate market has tanked.India's economy is based mostly on cash. Moreover, much of it operates informally because of excessive rules and taxes. The government bureaucracy is notorious for its red tape, lethargy and corruption, forcing people to get by on their wits.The World Bank's annual survey, Doing Business, measures how difficult it is to start and manage a business in 190 countries, using such metrics as what it takes to set up a legal business, obtain construction permits and get electricity. India ranks among the worst in the world in these areas.Not since India's short-lived forced-sterilization program in the 1970s--this bout of Nazi-like eugenics was instituted to deal with the country's "overpopulation"--has the government engaged in something so immoral. It claims the move will fight corruption and tax evasion by allegedly flushing out illegal cash, crippling criminal enterprises and terrorists and force-marching India into a digitized credit system.News flash: Human nature hasn't changed since we began roaming this planet. People will always find ways to engage in wrongdoing. Terrorists aren't about to quit their evil acts because of a currency change. As for the digitization of money, it will happen in its own good time if free markets are permitted. And the best cure for tax evasion is a flat tax or, at the least, a simple, low-rate tax system that renders tax evasion hardly worth the effort. Make it easy to do business legally and most people will do just that.India is the most extreme and destructive example of the anticash fad currently sweeping governments and the economics profession. Countries are moving to ban high-denomination bills, citing the rationales trotted out by New Delhi. But there's no misunderstanding what this is truly about: attacking your privacy and inflicting more government control over your life.India's awful act underscores another piece of immorality. Money represents what people produce in the real world. It is a claim on products and services, just as a coat-check ticket is a claim for a coat left at the coat check in a restaurant or a ticket is for a seat at an event. Governments don't create resources, people do. What India has done is commit a massive theft of people's property without even the pretense of due process--a shocking move for a democratically elected government. (One expects such things in places like Venezuela.) Not surprisingly, the government is downplaying the fact that this move will give India a onetime windfall of perhaps tens of billions of mentOne does wonder what motivates persons like the author to use language and tone as one sees in this article.? First, on the question of facts, clearly he is unaware of the mood of the people.? And, he is unaware of the reactions to what the usual suspects of ‘liberals’ (his reference group) has written.? Secondly, the language itself probably indicates a level of frustration in the Western world of those characterized as ‘coastal liberal latte-sipping politically-correct out-of-touch folks’ (in the words of President Obama).? To my mind it also indicates a hatred of the Hindus who have decided to stop listening to those who are so characterised.Demonetisation is gamble by Modi, but Forbes calling it ‘immoral’ is unjustifiedAuthor: Dinesh UnnikrishnanPublication: Date: December 23, 2016URL: demonetisation, prime minister Narendra Modi’s grand economic experiment, nears the 50-day deadline, public and expert opinion is sharply divided on the currency ban. Some have praised the bold move, while others have made a scathing attack on the Modi government for gambling with not just an economic idea but the lives of millions of people who predominantly live in cash economy (around 70 percent of transactions in India are done in cash). In his column on Thursday, Steve Forbes, editor-in-chief of the Forbes magazine, calls demonetisation as a “sickening and immoral” act by the Modi government. Forbes doesn’t mince his words while criticising the move.“India's awful act underscores another piece of immorality. Money represents what people produce in the real world. It is a claim on products and services, just as a coat-check ticket is a claim for a coat left at the coat check in a restaurant or a ticket is for a seat at an event. Governments don't create resources, people do,” Forbes writes. “What India has done is commit a massive theft of people's property without even the pretense of due process--a shocking move for a democratically elected government. (One expects such things in places like Venezuela.),” Forbes says.Forbes tells the Modi government, instead of harming its people by “stealing property, further impoverishing the least fortunate among its population and undermining social trust, thereby poisoning politics and hurting future investment,” the government should think of ways to simplify structure, make rupee strong and undertake infrastructure projects with a long-term vision.In other words, Forbes, who campaigned for Republican nomination for the US Presidency is advising the Modi dispensation to do away with the Indian ‘jugaad’ to change things and look for time-tested methods for growth that is slow, but sustainable for a longer time.Quite evidently, in the weeks after the demonetisation, the economic activities have taken a hit and consumer ability to spend has come close to a halt. This is evident from various sets of numbers — trade figures, auto sales, industrial and service sector growth trends and back-to-back downward revisions in full-year GDP forecasts by official and private agencies. Clearly, there was a lack of planning and coordination between different authorities on how to go about the demonetisation rollout.There are reasons to believe that the Reserve Bank of India (RBI) wasn’t taken into confidence. Even at this stage, there is, of course, an element of uncertainty and worry for policymakers, industry and common public how the demonetisation impact will play out in the long term. There is also a social impact element of demonetisation, the pain being forced on the poor, that isn’t quite quantifiable.Nevertheless, the economic experiment, an unprecedented one, deserves the benefit of doubt and time. The well-intentioned move could work in certain areas and may not work in some other. It could turn out to be an economic disaster but could also turn out to be a success in rebooting the economy. But the end result will come into play only after a lag. Considering the nature of the experiment, it is illogical to call it early. That demonetisation is well-intentioned idea implemented badly is widely agreed theory. In this context, Forbes writing off demonetisation at this stage is bit of a stretch.Having said that, Forbes is absolutely bang on offering the right solutions to take the economy to a higher growth orbit. Certainly, the Indian ‘jugaad’ isn’t the way ahead. In fact, India has been progressing , albeit slow, on these parameters. Sans the demonetisation shocker, the economy would have grown close to 8 percent this year. This is what makes PM Modi’s experiment a big gamble and heightens the risk element in the move—from a state of sure, steady growth the economy is now on a shaky path from where it can either take a giant leap or fall a few notches behind.Over the last few years, there has been efforts to cleanse the banking system initiated by the RBI under Raghuram Rajan, the fiscal deficit numbers have improved, inflation has been brought under control, much emphasis is given to build infrastructure, India is almost close to a new indirect tax regime (goods and services tax) and there is focus on including the poor and deprived into the main stream through creating a social security network, education push and minimum wage programme. Despite the political differences, there is a pattern for development, New Delhi has followed over years. This progress might take time to show results but directionally the country is on a progressive path, faring better than many of its peers in emerging economy.But, it is critical for the Modi government not to look for short-cuts and twist numbers to make the economy look better and the growth quicker than they actually are. Such a course will break the trust and prompt international investors to look at India with an element of suspicion. It is not easy to rebuild a battered image. A case in hand is China, whose economic fundamentals still remain a mystery for the rest of the world. A Reuters report, which claims to have accessed correspondence between the finance ministry and US-based global rating agency, Moody’s, says that the Modi government pushed aggressively for a rating upgrade questioning the methodology of the rater but failed to convince the agency.A Moody's team visited North Block on 21 September for a discussion on a ratings review and “the atmosphere at the meeting with Economic Affairs Secretary Shaktikanta Das, one of the ministry's most senior officials, and his team was tense, according to an Indian official present,” the Reuters report said.Moody's, on 16 November affirmed the 'Baa3' issuer rating for India, while maintaining a positive outlook, saying the government's efforts had not yet achieved conditions that would support an upgrade.The Reuters report quotes Arvind Mayaram, a former finance ministry official, citing the Modi government’s approach "completely unusual". "There was no way pressure could be put on rating agencies," Mayaram told Reuters. "It's not done." Any government has the right to make a case for better credit rating under its regime, but if the lobbying with independent raters take the nature of bullying and pressure tactics for short-term political benefits, this can backfire badly internationally.It wouldn’t be an exaggeration to say that the end-results of demonetisation can be a make or break in Prime Minister Narendra Modi’s political life. Without doubt, the PM has staked his hard-won political capital to push an economic gamble. His surprise decision to abruptly pull out 86 percent of currency on the midnight of 8 November, and the cash-crunch that followed, has shaken the economy and has impacted the lives of 125 crore Indians in some or other way. Such a move, which was launched with the idea of killing black money and fake currency, has no parallel in world.Modi’s immediate challenge is to resolve a severe cash crunch that persists even after one and half months of demonetisation announcement and get the economy back on track. How soon he can do that, coupled with the fact that at the end of the exercise, when the tremors come to a stop, which way Asia’s third largest economy will take a turn, will prove decisive to Modi’s political fortunes.Steve Forbes’ Fact-Free Foray Into The Demonetisation DebateAuthor: Rupa SubramanyaPublication: Date: December 24, 2016URL: The swap of old high-denomination currency notes for new ones, announced by Prime Minister Narendra Modi on 8 November, has created the interesting byproduct of poorly-written and argued, over-the-top, opinion-based and largely fact-free commentary by a who's who of well-known economists and commentators.Luminaries who've weighed in have included Harvard economist and former United States Treasury Secretary Lawrence Summers, Harvard economist and former International Monetary Fund chief economist Kenneth Rogoff, India's former chief economic adviser Kaushik Basu and failed economy Greece's "alternate" foreign minister who happened to be visiting India, among others.To his credit, Nobel prize-winning economist Paul Krugman confessed on a visit to India that he didn't know much about the country and, therefore, was hesitant to comment definitively on the ongoing currency exchange.So, it appears the only well-known people who haven't commented at this point are Pope Francis and Kim Kardashian, but we shouldn't rule out that one or both will weigh in soon.Even when those weighing in are well-known economists, such as some I've mentioned, they don't always get it right, substituting hearsay and opinion for fact and argument. Earlier, I had debunked a poorly-argued piece by Summers and a co-author, which in a country with a sensible discourse would have debunked itself. But this is India.The latest unfortunate entry in this starry list of uninformed people using the currency swap as a vehicle to trot out their own pet theories and biases is millionaire, failed presidential candidate and magazine publisher Steve Forbes.The over-the-top headline gives the show away, claiming that India's swap of old notes for new is "sickening and immoral". Without a shred of evidence, Forbes asserts that the economy is being damaged and that "millions" are threatened with "destitution".He trots out some of the well-known and well-rehearsed glitches in implementation, including delays in printing the new notes and restocking ATMs. What he misses, however, is that there is simply no precedent for anything like the scale of the operation being undertaken in India. Indeed, when you consider the scale, what's remarkable is that despite the many well-known glitches, the operation has proceeded fairly quickly with already 80 per cent or more of the old notes exchanged or deposited with no major incidents of violence or unrest breaking out. That is a pretty remarkable achievement which critics such as Forbes simply ignore.What Forbes and others fail to acknowledge is that Modi's move was so bold and radical that it simply wasn't on the radar screen of well-known economists and policy analysts I've spoken to before it actually happened. So, serious analysts are now grappling with analysing and interpreting the many different effects of the currency exchange, and any sensible and honest analyst will say that we don't fully understand the consequences. Of course, that doesn't stop the flow of ill-informed and agenda-driven, fact- and argument-free assertions.Forbes then takes a bizarre detour into the World Bank's ease of Doing Business survey where India ranks poorly. What this has to do with the currency swap is anyone's guess. But Forbes' next point is the topper, where he compares the currency swap with, wait for it, Indira Gandhi's forced sterilisation drive in the 1970s. I'm surprised he didn't compare it to the Holocaust itself.But Forbes really gives away where he's coming from when, as part of his "critique" of the government's move, he argues "the best cure for tax evasion is a flat tax".Forbes is well-known as an advocate for the US moving to a flat tax, a proposal which does have support among some mainstream Republicans but has never seriously been in contention to replace the current progressive income tax structure in the country. The truth is that for many dyed-in-the-wool American libertarians, the utopia is a world with zero or very low tax, and a flat tax is a stepping stone on the road to utopia.Now, I went through my Ayn Rand phase too, but that was when I was 16. The reality is that textbook libertarianism is on the fringe even in the US, and in India, with its long history of government intervention in the economy, is not even in the ball park.And if you don't believe me that Forbes’ core libertarian beliefs is where he's coming from and not from any real analysis or understanding of the currency exchange, note that he describes the government's move as attacking "privacy", and "inflicting more government control over your life".This brings us to another of Forbes' cherished beliefs, which is that fiat currency is immoral and we must return to some version of the gold standard where currencies have real value in terms of commodities. Indeed back in 2011, he predicted that in five years, the US would move to a gold standard. So, unless something dramatic happens in the next few days, he will have been proved wrong.The age-old debate about fixed versus flexible exchange rates and a return to the gold standard is an interesting debate in its own right, but obviously is at right angles to discussing the pros and cons of the currency swap in a country such as India, which has a fiat paper currency just like the US. It's a bit like bringing in a debate over quantum mechanics or string theory if you're trying to calibrate your bathroom scale.After the comparison to forced sterilisation comes Forbes’ unbacked assertion that the Indian government has committed "a massive theft of people's property". Perhaps Forbes is unaware that people have the right to deposit or exchange the old notes. So, where is the theft? And the fact that holders of the unaccounted money that has been turned in are subject to taxation just means that India levies taxes, and everyone is obliged to pay what they owe.Of course, for a libertarian who believes that taxation is theft, perhaps Forbes condones the fact that holders of black money were able to evade taxation and not pay what they owed?Thankfully, this mercifully short piece wraps up with Forbes trotting out his standard formula for fixing the economy, which is cutting income and business taxes and simplifying the tax structure, along with deregulation and improving the business climate.For the record, all of these are well-known policy prescriptions which I and many others support: but what exactly does this have to do with the currency swap? Nothing. If anything, as I've argued many times, the temporary liquidity crunch caused by the currency swap will force the hand of the government in pushing ahead with all of these much-needed reforms.------------------------Rupa Subramanya @rupasubramanyaCurrency swap has exposed basic weaknesses:faulty payment systems,dumb regulations/taxes/laws.If not reformed,long term gains much less.10:02 AM - 17 Dec 2016------------------------The real irony is that the folks who lapped up and widely shared Forbes' piece with glee because it slammed the Modi government are India's Alt-Left intelligentsia who most certainly don't share his beliefs in low taxes, small government and a return to the gold standard. But what's the point of intellectual coherence and honesty when you're trying to score a cheap political point by piggy-backing on an ill-informed celebrity commentator?Now that's what's really immoral.D for Demonetisation. W for Why?Author: Barkha Dutt Publication: The Hindustan TimesDate: December 17, 2016URL: Donald Trump; D-for Demonetisation and D for Disruption. The Alphabet of the year 2016 self-selected itself; as did the word. Disruptive ideas defined the year gone by, throwing up an unexpected American President and back home a decision that one politician (who wants to remain unnamed) calls the “single most dramatic change in our part of the world since Partition.”As hyperbolic as that claim may be, the truth is that very few of us can predict the scale and depth of change -- and havoc -- ‘Notebandi’ may bring. For the past month, like millions of Indians who have no special expertise in economics, I have tried to wrap my head around the currency purge. These are the commonsensical questions I have -- yes, you may even say D -- for Dumb -- that I have still found no good or convincing answers to.? Was chocking black money the main goal of this demonetisation? While the government has continuously shifted goal posts on the actual aim of wiping out 86% of India’s currency -- and is now emphasizing digital payments more than netting the big sharks -- at least initially the decision was pitched as a “surgical strike on corruption.” However, given that only an estimated 6% of India’s black money -- certainly less than 10% is the consensus -- is in cash, why is this pain worth the gain? If most tainted or hoarded money has already been channeled into gold, real estate, swiss banks and other tax havens, isn’t the primary hardship to those who in fact do pay their taxes or don’t even earn enough to qualify as the real targets of an anti-corruption program?? If there is greater chance of black money being hoarded in higher currency notes -- the logic for targeting the 500 and 1000 notes -- then why print the 2000 rupee note? By your own stated logic, wouldn’t the higher denomination notes restart the same cycle all over again -- as is already evident in the series of cash seizures where much of the money hoarded has been found in new notes? RSS ideologue S. Gurumurthy, believed to be in the inside loop on all demonetisation decisions, has already said his personal view is that even 2000 rupee notes should be phased out, arguing that they are an interim arrangement to meet the demand-supply mismatch.? Hasn’t Demonetization created an elaborate opportunity for money laundering -- and enabled more corruption instead of less? Either that or the government grossly miscalculated the black money in circulation in 500 and 1000 rupee notes. Take a look at the latest numbers. The RBI confirms that 12. 44 lakh crores (of nearly 15 lakh crores which is the monetary value of the now-banned notes) is already back in bank deposits since the November 8th announcement. In other words, the government’s hope of a black money windfall that could have been transferred to welfare schemes has been belied. And if all of this money is not ‘white’ and depositers have conned the system, is the taxman now going to scrutinize every single transaction to scan for discrepancies? Similarly, a gigantic 37,000 crores surge in Jan Dhan accounts since the notes ban declaration underlines how many of India’s poor are probably being used as vehicles by their employers or by other touts -- to take a commission -- and whitewash the rest of the money with colours of legitimacy. Economists like Jagdish Bhagwati have contentiously argued that this should be seen as a “redistribution” of wealth which will have an “expansionary” impact; the Prime Minister himself has in a RobinHood-esque manner urged the poor to keep the money that is being funneled through them. But this militates against the bombastic claim of ending corruption; in fact it’s just another de-facto amnesty for those who have evaded taxes while leaving law abiding citizens standing in serpentine ATM queues.? Finally, what happened to the Modi motto of ‘Minimum Government; Maximum Governance’? Those who argued that the 2014 victory would usher in a modern right of center economics must concede they were wrong. Not just is the Prime Minister not a privatizer (focusing instead on increasing efficiency of public sector units), his demonetisation decision has given the State overweening powers of the kind not seen in years. In some ways, this phase could well be the return of ‘Raid Raj’; where an Income Tax officer will now prowl about in your bedroom and bank locker to determine whether you -- as an unmarried, single woman -- have more gold than you should! Philosophically what disturbs me about demonetisation is the State having so much say in how tax-paying citizens access their own money. Yes, our strata of upper-middle class Indians can survive on plastic and are not suffering like those who earn (legitimately by the way) in cash -- the flower seller, the daily wage labourer, the railway coolie; the farm tiller; the bindi-maker; the neighbourhood plumber; the golgappa man down the road -- but even we have the right to worry about what sweeping powers to the tax authorities may mean for an India that was meant to minimise the intrusion of the State in our daily lives.Another D often used to prefix the political style of Narendra Modi is Dynamism. His supporters point to Demonetisation as another instance of his audacious capacity for risk-taking. The political consequences of his decision are as yet unknown. Cleverly positioned as a moment of rare enforced quality when the rich had to line up with the poor, the move initially appeared to draw widespread approval. But the entrenched inequities were never really going to be impacted by Notebandi. When a mining baron spends 100 crores on a wedding and a driver’s suicide note claims the money was laundered and you contrast that with a municipal corporation worker who queues up for his rationed quota of 2.5 lakh to marry his daughter -- you wonder -- Demonetisation - To what end? And at what cost?- Barkha Dutt is consulting editor, NDTV, and founding member, Ideas Collective.Bank got Rs 169 crore in old notes in five daysAuthor: TNNPublication: The Times of IndiaDate: December 23, 2016URL: CBI team which conducted a surprise inspection at Malabar District Co-operative Bank (MDCB) in Malappuram on Wednesday found that the bank received deposits of scrapped currency notes worth Rs 169 crore during the first five days after demonetisaton of high-value notes came into force on November 8.The agency has asked the bank to produce all documents related to depositors, though the bank's authorities already seem to be partly washing their hands off by citing ambiguities in RBI guidelines related to sharing of KYC details of deposits from primary cooperative societies as opposed to the cooperative bank's own branches.The investigation team found Rs 169 crore was deposited between November 10 and 14 in 54 branches and 296 cooperative societies including 140 co-operative banks which function under MDCB.The branches deposited a total of Rs 84 crore and societies deposited currency worth Rs 85 crore in the bank during the five days.CBI also sought clarification regarding the Rs 97 crore balance in the bank on November 10. The raid was conducted as part of the ongoing drive to check whether accounts operated in district cooperative banks have been used since demonetisation to launder money.Bank authorities denied reports that money laundering was involved and clarified that all branches of the bank have followed KYC norms while receiving deposits."It is not our responsibility to check the source of the money deposited by each person in bank branches. But, as we followed KYC norms, we can share the details of customers with the investigation agency," said Pradeep Menon, vice-president of MDCB.At the same time, he added that as there was no direction from RBI to follow KYC norms while receiving deposits through cooperative societies, the bank had limitations in sharing details of such investors with CBI.I-T lens on 68 lakh non-filers who made high-value transactionsAuthor: TNNPublication: The Times of IndiaDate: December 23, 2016URL: income tax department has identified an additional 67.54 lakh non-filers who carried out high-value transactions in the 2014-15 financial year, but did not file tax returns for 2015-16.The I-T department is set to initiate action against these people soon.The information was collected from banks and other financial institutions.Data analysis carried out by the Central Board of Direct Taxes (CBDT) identifies non-filers about whom specific information is available in transaction reports received in its databases from various sources. The analysis is carried out as part of the I-T department's Non-filers Monitoring System (NMS) which is meant to identify non-filers with potential tax liabilities.A CBDT press release said that the I-T department had identified the 67.54 lakh people by conducting its fifth cycle of data matching.The department is in the process of sending notices to these non-filers to now account for their transactions and pay taxes as applicable.The non-filers can access details of their transactions when they log on to the e-filing portal with their PAN, the CBDT said.The PAN holder will be able to respond electronically and retain a copy of the submitted response.The CBDT urged all tax payers to disclose their true income and pay taxes accordingly to escape scrutiny. It said the I-T department would continue to pursue non-filers vigorously.In more than 760 search and seizure operations after demonetisation of Rs 500 and Rs 1,000 notes on November 8, the I-T department has unearthed at least Rs 3,590 crore in unaccounted income. The department has issued 3,589 notices since November 8 to various entities for alleged tax evasion and hawala dealings.More than Rs 500 crore has been seized in cash and jewellery during this period, including Rs 93 crore in new currency notes. The I-T department has also referred at least 215 cases to the Enforcement Directorate and 185 to the CBI to further investigation in the matters.CBDT identifies 67.54 lakh income tax non-filers for FY15Author: Press Trust of IndiaPublication: Business StandardDate: December 22, 2016URL: holder will be able to respond electronically and retain a copy of submitted responseThe Income Tax Department has identified an additional 67.54 lakh potential non-filers who carried out high value transactions in 2014-15 but did not file return of income. The Non-Filers Monitoring System (NMS) was initiated by CBDT, the policy making body of I-T Department, for identification of non-filers with potential tax liabilities. "The Income Tax Department has conducted the fifth cycle of data matching which has identified an additional 67.54 lakh potential non-filers who have carried out high value transactions in the financial year 2014-15 but did not file return of income for the relevant assessment year i.E. AY 2015-16," CBDT said in a statement. Non-filers have been identified based on data analytics carried out by the Systems Directorate of Central Board of Direct Taxes (CBDT) about whom specific information is available in the Annual Information Return (AIR), Central Information Branch (CIB) and TDS/TCS databases. "While the government urges all tax payers to disclose their true income and pay taxes accordingly, the Department would continue to pursue the non-filers vigorously till all the high potential non-filers are covered," the statement said.CBDT has made available in the 'Compliance Module' on the e-filing portal of the Income Tax Department the information relating to the identified non-filers. The information will be visible only to the specific PAN holder when they log into the e-filing portal at https.//.In. "The PAN holder will be able to respond electronically and retain a copy of the submitted response for record purpose," CBDT added.Good for me, very bad for you- A ‘Liberal’s’ guide to cashless societyAuthor: Mayuresh DidolkarPublication: Date: December 19, 2016URL: my good friend Sanjeev Sanyal once mentioned “what passes for financial journalism today is mostly a triumph or English over Economics.” Ever since Narendra Modi’s NDA government banned the 500 and 1000 rupee notes, this is proving to be true nearly on a daily basis. Reading Amit Varma’s op-ed in today’s TOI it seems English has triumphed not only over Economics but also common sense and logic.The author opens with a reminder of how Mahatma Gandhi in spite of his poor opinions of railways, hospitals and lawyers, never once suggested a ban on them and then goes on to relate how a ban on cash is as absurd as a ban on these three.To start with, this is false equivalency. If you ban hospitals or lawyers, you will be leaving people with no intermediaries to get healthcare or justice. On the other hand, banning one form of currency and replacing it with another is merely like banning one form of treatment and legitimizing another. In 1980s lawyers took a regular bachelors’ degree and then went on to do law. Today, students can take admission to a law course directly after 12th standard. How did that affect us as their clients?Next Mr. Varma goes on to enumerate three of the worst reasons why cashless society would be a disaster. Let’s take a look at them.One, a fully cashless society would mean the end of privacy. There would be a digital trail of every action you take through your purchases and transfers. If you buy AIDS medication or a porn magazine or book a hotel room for a romantic alliance, this information can be accessed by the government — or any hacker with the requisite skills.Let me start with AIDS medication bit as I have a twofold objection to that. It is clear the author does not understand (nor did he bother to research, like I did today morning after reading his piece) how the treatment of AIDS works. To start with, unlike alcoholism (or stupidity), AIDS is not a self –diagnosed disease. If a patient comes with symptoms that suggest HIV infection, he/she is sent to do a test called ELISA. If that comes back positive, usually he/she is asked to do a confirmatory test called Western Blot test. If the unfortunate person is indeed found positive, then the subsequent treatment is done with drugs prescribed by a registered medical professional. There are no over the counter medications for treating AIDS. Can’t stress that enough. Every pathology laboratory in the country today has a fully automated system of record-keeping. Every hospital that has the ability to treat a HIV positive person will have a similar, extensive system of record keeping. Thinking that no digital footprint can be created in lab or hospitals, and only way an AIDS patient’s data can be accessed by a non-cash payment is truly idiotic.The larger issue with this however is the blithe way in which Mr. Varma legitimizes the stigma associated with AIDS patients in society today. The argument that AIDS patients should be able to make cash payments in order to hide their condition is like asking them to live with the stigma. A columnist in a major newspaper subscribing to these views is beyond repulsive.The argument about porn is equally hollow. Let me ask you this- how much of non- digital porn is available today? If you are a consumer of pornography, chances are you will be consuming it online. And whether you are paying for it or not, everything you do on the net leaves a footprint. So unless Mr. Varma knows about some method of porn that ordinary people like me have never experienced, I don’t understand his squeamishness about online/cashless society from this view point.Ditto with romantic alliances in a hotel. Sure you can pay by cash, but in this age of terrorism, good luck finding a hotel that would let you and your partner check in without showing a valid proof of identity.Next Mr. Varma pulls out the favourite trick of liberals to hit anything they don’t agree with the same phrase, i.e. stifling dissent.Two, a fully cashless society could mean the end of dissent. The government can use any data it gathers against you. What’s more, they could make any opponent a pauper with one keystroke, freezing your bank account while they investigate alleged misdeeds. Just the fact that they have this power could have a chilling effect on dissent. This paragraph seems to be taken straight out of the working script of Die Hard 4. To start with, nearly every democracy has enough safeguards against an elected government turning tyrannical on its own people. That is why you have judiciary enjoying independence from the executive in most countries, and that is why unelected upper houses are still maintained in India and UK.And even if you dismiss my faith in checks and balances with a condescending laugh, tell me this- if the government indeed turns tyrannical, and with one key-stroke freezes your bank account, how much additional time the money you have on your person can buy you? Remember, cashless or not, even today, if you owe money to the government they can freeze your account without informing you (as a banker I have seen it happen), so the independence your cash gives you will be equal to the money you have on your person when the big bad government decides to come down on you with both feet. Oh, and usually they won’t give you an advance notice.If a state wishes to turn tyrannical, it will encourage cash usage as government has far bigger control over cash than they have over technology. If the critics claim that demonetisation has wreaked havoc in itself should be proof of the state’s power through cash. The critics should be the first one to push for less cash, not more.Here is a tip folks- any fear that sounds similar to the plot of a Bruce Willis or Sandra Bullock movie, is usually silly.Mr. Varma then proceeds to caution us that cashless society endangers freedom.Cash is empowerment: ask the young wife who saves spare cash from her alcoholic husband; or the old mother who stuffs spare notes under her mattress for years because it gives her a sense of autonomy. Indeed, in a misogynist country like India, cashlessness would hit women the hardest.Accusing your opponent’s position will hit women the hardest is usually the most sure shot way of shutting down an argument these days. So I am not surprised by this argument. My experience as an investment advisor who has seen the family dynamics up close for nearly two decades, however, does not bear the above out.If Mr. Varma had actually known a few lower middle class or poor families where husbands beating up wives for alcohol money is sadly too common, he would have known that the last thing those poor victims want on them is cash. In fact cash and gold are two things an alcoholic’s wife will almost never keep on her. The reason for the same should be obvious. To put it simply, in a lower middle class or poor household, there are only so many places physical money can be hidden. If you are aware of your inability to protect your money, you would not want it lying around. A bank FD is harder for an alcoholic husband to get to than cash hidden under mattress. I am not sure what part of this is hard to understand.And while I agree that it is a myth that an advanced society must necessarily be cashless (the writer gives Germany as an example), the implication that the converse might also be true, i.e. cash usage is a sign of an advanced society, is simply absurd. I also find it interesting that in this context the writer leaves the following facts out: 1. German shopkeepers routinely refuse to accept higher denomination notes. This is part of travel advisory to Germany. 2. In European Union, Germany is an exception, not the rule as far as preference to cash is concerned. 3. Apart from Germany, nearly every country in EU has limits on cash transactions.In old days, whenever people resisted a change (nuclear power/ automobiles/ building dams at the cost of ecological balance etc), the most common feature of this resistance was that their leaders were the first to denounce use of the technology/system they were protesting against. The resistance to cashless transactions and digital reforms stands starkly in contrast. Very often, the biggest sceptics of online payments, and of increased use of technology are also its most savvy users. I don’t know the writer personally, but I am going to go out on a limb and guess that he has an amazon (or similar online retailer) account, he pays his utility bills online and he has paid a restaurant bill or two using his credit card. And I will go double or nothing that the data pack the writer used to mail this piece to the editors at Times was not purchased with unmarked 100 rupee notes.And therein lies my biggest unease over this whole ‘cashless is bad’ thing. It stinks of “I use it because I can, but you better stay away from it, “elitist ring to it. And perhaps it is time we divert some of the cynicism that we are using for demonetisation and ask why so many ‘perfumed elites’ are demanding that we turn the clocks back and embrace cash?One of the reason why mainstream journalists almost universally detest social media is, it took the power that they thought they had monopolized for decades, and distributed it freely. In a way, capability to do cashless transactions represents another power, small but significant. If a user of this power is cautioning others against, his motives need to be examined.The writer opens the piece by expressing his admiration for Mahatma Gandhi. I find it curious that the great man’s “be the change you wish to see” failed to make any impression on him.RBI Probably Changes Rules More Frequently Than You Visit The ATMAuthor: Mayank Jain @Mayank1029 Publication: Date: December 21, 2016URL: change in regulations on withdrawals, exchange, and deposits of currency once every three days. That’s the average run rate the Reserve Bank of India (RBI) has maintained since Narendra Modi, announced the demonetisation scheme just under six weeks back.Some may argue that most of these took place in November, but the sheer number of flip-flops in regulations, has left a lot of people confused.The latest change has come just 10 days before the deadline for depositing old Rs 500 and Rs 1000 notes in banks. On Wednesday, the central bank reversed its order passed two days ago and provide relaxation for fully KYC compliant account holders. The RBI said that these accounts will no longer be required to provide a “satisfactory explanation” to two bank officials if one has to deposit more than Rs 5,000 in scrapped notes from till December 30.Here’s a list of just how many times, and how many new rules have been brought in since November 8.November 8: Prime Minister Modi announces that Rs 500 and Rs 1,000 notes are scrapped.You were told that you could exchange these for Rs 4,000 at bank branches.November 10: Withdrawal limit set at Rs 10,000 per day, and Rs 20,000 per week.November 11: RBI assures you that you have enough time to exchange your old notes.The Reserve Bank appeals to members of public to be patient and urges them to exchange their old notes at their convenience, any time before December 30, 2016.RBI’s November 11 Notification November 12: The RBI once again calls for calm.November 13: Exchange limit raised to Rs 4,500 per day.Daily ATM withdrawal limit increased to Rs 2,500 per day from Rs 2,000 in recalibrated ATMs.Withdrawal limit from branches increased to Rs 24,000 a week; daily limit removed.November 14: District Central Cooperative bank customers can withdraw Rs 24,000 per week, but cannot exchange old notes for new ones, or deposit old notes.Current account holders can withdraw Rs 50,000 per week.November 15: At this point customers may have got inked. Banks started using indelible ink to identify people queuing up to exchange old notes.November 17: Exchange limit changed for the third time, reduced to Rs 2,000 per day.November 18: Cash withdrawal through point-of-sale systems across all cities made uniform at Rs 2,000 per day per account.November 21: If you were getting married, you were allowed a maximum of Rs 2,50,000 to be withdrawn from a single account. But one had to provide a whole host of reasons to prove that you needed the cash for your wedding.Current, overdraft and cash-credit accounts, which were operational for three months or more, allowed to withdraw up to Rs 50,000 in cash per week.November 23: RBI said scrapped notes would not be accepted as deposits in small savings accounts.November 24: RBI changes exchange norms for the fourth time, scraps the facility altogether at bank branches.It issued a separate statement saying you could continue to exchange your old notes at one of its branches.November 25: Foreign citizens allowed to exchange their currency notes up to a limit of Rs 5,000 per week till December 15.November 28: RBI said it would allow withdrawals beyond the stipulated limit if one deposited legal currency.December 19: The customer now needs to explain the delay in depositing old Rs 500 and Rs 1,000 notes.December 21: The RBI changed the December 19 order, and exempted fully KYC-compliant bank accounts from the Rs 5,000 cap.RBI says ban on Rs 1000, Rs 500 notes proposed hours before telecast of PM’s speechAuthor: Aloke TikkuPublication: The Hindustan TimesDate: December 24, 2016URL: Reserve Bank of India (RBI) recommended demonetisation of 500- and 1,000-rupee banknotes hours before Prime Minister Narendra Modi announced the surprise move in a televised address to the nation in the evening of November 8.The government and the RBI have kept the consultation process that led to the decision to demonetise 86% of India’s cash in circulation a closely-guarded secret. Both, however, have insisted that the demonetisation plan had been under discussion for long and consultations were being held.Economic affairs secretary Shaktikanta Das told reporters on November 8 that there was “no need to go into the process which led to this decision. I think what we should be focusing on is the outcome and the decision itself”.The government’s shock move has led to a severe cash crunch, forcing millions of people to line up at banks and ATM kiosks for more than a month. Cash withdrawals have been restricted, but most banks are unable to provide even that. The Opposition’s protests over the demonetisation move have washed out the winter session of Parliament.The Reserve Bank of India Act, 1934, empowers the Union government to demonetise any series of banknotes. The government, however, cannot take this decision on its own, but only on the recommendation of the RBI’s central board.In response to a right to information request, which Hindustan Times has sought, the RBI said the bank’s central board of directors made the recommendation at its meeting in New Delhi on November 8. Only eight of the 10 board members attended the crucial meet.Apart from RBI chief Urjit Patel and economic affairs secretary Das, the meeting had RBI deputy governors R Gandhi and SS Mundra, Nachiket M Mor, the country director for the Bill and Melinda Gates Foundation, Bharat Narotam Doshi, former chairman of Mahindra and Mahindra Financial Services Limited, former Gujarat chief secretary Sudhir Mankad, and financial services secretary Anjuly Chib Duggal.The law provides for a 21-member board, including 14 independent members, but the central bank has been operating with less than half.Between the RBI board meeting and Modi’s demonetisation announcement, the government just had a couple of hours to process the bank’s formal recommendation.Prime Minister Modi had convened a meeting of his cabinet later in the day when they were told about the decision. The ministers — who had to leave their mobile phones outside — were told to stay back till his address was telecast.It isn’t that the RBI or the government hadn’t been making preparations for the mammoth notes recall exercise. The bank had already printed Rs 4.94 lakh crore in Rs 2,000 notes by November 8.But former RBI officials said this implies that the board’s approval was a formality.The way the demonetisation decision was taken was “highly irregular”, said a former top RBI official, who didn’t wish to be named. He said he did not believe the government and RBI had taken “adequate steps” to minimise harassment of people.Another said he was concerned at the large number of vacancies in the central board. Of the 14 independent directors, the board has just four.“According to the RTI reply, only three of them were present (at the meeting). That is the quorum,” he said.Modi's solution to black money, demonetisation, as bad as the problemAuthor: Anshuman Tiwari @anshuman1tiwariPublication: Dailyo.inDate: December 23, 2016URL: of a sudden, banks have turned into large scale money laundries.Has cash crunch created the mother of all shortages and devils of discretion?While the tangible results of note ban-driven tax raids are yet to emerge, India’s economic governance has already been plagued with the bizarre anti-climax of demonetisation. All of a sudden, banks have turned into large scale money laundries.Illicit money changers mushroomed everywhere. On top of it, the government unleashed a nationwide crackdown by not-so-clean tax hounds.This happened only because the haphazard monetary reset unintentionally empowered the two most fundamental factors of corruption in India: shortages and discretions. These are the two primary reasons behind the massive corruption in India and demonetisation came handy to fuel the same.---------------------------------Yogendra Yadav @_YogendraYadavThis is the "explanation" I have given my bank for making a small deposit today. Pl retweet if you agree pic.v1JyhpADZ3December 20, 2016---------------------------------Cash currency was the only instrument used to transact more than 90 per cent of financial exchanges in India before demonetisation. The demonetisation drive wiped off more than 86 per cent currency from circulation and thus incarnated the proverbial grandmother of all shortages the nation had ever seen.The monetary shock has vested huge power into concerned authorities (bank and tax officials) making them devils of discretion.Going by the recent surveys on transparency and corruption, it is not difficult to decipher that major part of corruption in India comes from the shortages of goods and services. Most bribes are exchanged in sectors and services like railways, education, electricity, and government jobs, which are perennially short of supplies.More than 70 per cent of the bribes are given to beat the shortage and avoid delays. Telephone, LPG, automobile and cement are the sectors where bribes and corruption have just vanished with the increase of supplies.In a nation where people use cash to beat all other shortages, the scarcity of cash has forced everyone to go after it and thus unleashed umpteen opportunities to engage in corruption.It was probably the first instance in modern history when India witnessed several illegal rates for currency exchange, as observed in Zimbabwe and Venezuela in recent times. In economies with high cash-to-GDP ratios such as India, cash crunch is a critical crisis for both the supply and demand sides of the market. Cash chaos has triggered a contraction in demand and resulted in short term deflation, which will be followed by production cuts and a high inflation, eventually.In India, ranging from distribution of general amenities to the justice, leaders and officials relish unprecedented discretionary powers. Scarcity always buttresses their authority, as we have witnessed in the case of demonetisation.Banks have emerged as India’s super-powerful bureaucracy by virtue of being the only institutions capable of offering relief amid an overwhelming cash crunch. Bank officers have exercised discretion to the fullest and produced mint fresh black money right in the middle of the drive against the parallel economy.Despite several corruption cases linked with the banks, it was surprising why Reserve Bank of India (RBI) authorised them with the exceptional discretionary power to question depositors via its new circular. After the wide outrage, the RBI has partially amended this order, but the power to question non-KYC account holders is still vested with the bank officers. Dirty banking is just the beginning of the corruption driven by discretion. Tax vigilantes are out to chase black money that entered in the banking system. A meagre 15,000 officers from Income Tax department are likely to be tasked to scrutinise as many as 144 crore bank accounts to trace and book the black money.It is obvious that the humanly impossible mission of banks accounts' mega scrutiny can’t be done without the use of discretion. It is worth mentioning that the search (raids)-to-prosecution ratio in the Income Tax department is not as impressive as headlines they often grab after the crackdown.As the note ban approaches the finale, government is more or less convinced with the fact that black money has made its way into the banking system. The demonetisation has finally boiled down to a humongous vigilance task to be done by the banks, tax and intelligence authorities - the most tainted trio of Indian governance setup.The government is left with no option but to ensure an increasing supply of cash to quell the retail corruption while keeping a check on the discretionary power of tax and banks bureaucracy to avoid further damage to its credibility.As far as an anti-corruption narrative of demonetisation is concerned, the government has proved Milton Freedman right. "The government’s solution to a problem is usually as bad as the problem."Could India Be the First to Get Rid of Cash?Author: Mihir SharmaPublication: Date: July 20, 2016URL: "Black money" -- the colloquial name for a vast network of off-the-book cash transactions and unbanked savings -- is one of India's biggest scourges. Am ounting to as much as $460 billion a year, bigger than the GDP of Argentina, all that money lies beyond the reach of the tax authorities, creditors and anti-corruption investigators.Efforts to bring it into the open have struggled. Ironically, though, they may be setting up India to leapfrog past other, far more advanced economies into a future without any cash at all.India's black money pile is unusually large for several reasons. First and foremost, about half the country's output comes from the small, informal sector, where cash transactions are the norm. Meanwhile, taxes are cumbersome to pay and easy to avoid. To collect revenue, India’s government has to rely on indirect levies such as sales and excise taxes, which are distortionary and regressive, rather than on income tax. Direct taxes contribute only 35 percent of the take in India, compared to the OECD ideal of two-thirds.Tax evasion has been a hot-button political issue in India for at least a decade. The anti-corruption crusader Arvind Kejriwal -- now chief minister of the Indian capital Delhi -- made headlines when he accused top politicians and businessmen of having illegal offshore accounts. Prime Minister Narendra Modi gave a series of fiery speeches on the campaign trail in 2014 in which he promised to “bring back each and every penny deposited abroad by Indian citizens" and declared that "this money belongs to the poor people of India."An investigative team of retired judges appointed by Modi handed in the fifth of its reports last week. Like the previous ones, it was full of worthy suggestions. What grabbed headlines, though, were its recommendations that cash transactions of over Rs. 300,000 (about $4,500) be banned and that nobody should be permitted to hold more than Rs. 1.5 million in cash.While those ideas might sound extreme, some developed countries already have similar laws. Belgium, for example, which has the highest proportion of cashless transactions in the world -- 93 percent of consumer spending, according to a 2013 MasterCard report -- has banned cash payments of over 3,000 euros. And in India, pressure to move away from cash has been building among politicians and regulators.In a radio address two months ago, Modi tried to persuade listeners to stop using cash. And even the Reserve Bank of India, which tends towards conservative thinking about financial innovation, has come onboard, setting up a joint committee with the government to push cashless transactions. The committee will focus on reducing the cost to consumers of using credit cards, currently around 2 percent of each purchase.Of course, only when the far more nimble Indian private sector gets involved will this transition gain steam. And that’s the surprisingly good news. The Indian government is also quietly and patiently putting into place, over the next five to seven years, the plumbing that would let the private sector lead India into a cashless future.Recently, the Indian policymaker and IT billionaire Nandan Nilekani listed some of these changes. Most important, perhaps, is the “unified payment interface” that Nilekani and RBI Governor Raghuram Rajan rolled out last month, which made it easier for Indian consumers to use their mobile phones to transfer money to each other. Nilekani argues that “this will also shift the business models in banking from low-volume, high-value, high-cost and high fees, to high-volume, low-value, low-cost and no fees.”Rajan, for his part, says “a banking revolution” will add to what India already has -- “the most sophisticated public payments infrastructure in the world." Building on this infrastructure, a host of financial technology startups are trying to reduce transaction costs for Indians. As one such entrepreneur recently pointed out, merely transporting cash to and from villages in India cost about $335 million last year: "We are replacing that truck of cash”.India’s got a long way to go, to say the least. China already boasts futuristic banks where you can set up an account in a minute, with just a mobile phone number, your national ID number and a selfie. In the U.S., more than 80 percent of consumer spending is cashless.But there’s good reason to suppose that cashless payments could be adopted much faster in India than elsewhere. It’s the classical example of leap-frogging. India’s many poor people and migrants still struggle to access its chronically inefficient banking system, despite the government's efforts at reform. If presented with an easy and frictionless way of transferring cash, there's no reason to think consumers wouldn't embrace it quickly -- just as most Indians skipped fixed-line telephony to go straight to mobile phones. Smartphone penetration is increasing faster in India than anywhere else in the world.As cash gets used for fewer and fewer transactions, it will become easier for authorities to crack down on tax evasion. That's why the government should focus more on enabling this transition than on draconian and hard-to-implement laws that threaten tax evaders with years of hard labor. The best way to eliminate black money is to get rid of the money.(In sixth and eleventh paragraphs, clarifies that the MasterCard report examines consumer spending.)This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.To contact the author of this story: Mihir Sharma at m.s.sharma@To contact the editor responsible for this story: Nisid Hajari at nhajari@This government’s modus operandi is constant distractionAuthor: Pratap Bhanu MehtaPublication: The Indian ExpressDate: December 24, 2016URL: distracts our attention from vital questions of institutional health and economic governance.During the second half of UPA 2, the press, with some justification, created a frenzy of anxiety over India’s future, especially its economic future. After two and a half years of the Narendra Modi government, if the same standards of concern about India’s future were brought to bear on the present government, what would the heightened expression of concern look like? Why have the dramatic headlines that focus on worries of substance disappeared?The first headline would be: Spectre of Stagnation. Despite the headline GDP growth number, private investment has barely moved. In any other context, such tepid growth in private investment would have had us screaming from the rooftops. At the end of the day, this number tells you more about how the economy is doing and is likely to do than almost any other number. Second, we used to joke that India can grow despite the state. But the fact of the matter is that for the first time in a decade, the share of public investment in projects under implementation exceeds private investment. And this is likely to continue for some time.In short, we are becoming an economy that is not growing despite the state; it is becoming even more reliant on the state. The risks are that such an economy will need constant pump priming by the government, creating all sorts of fiscal and institutional distortions.Admittedly, the government inherited a slew of problems. But even accounting for that, in any other context, such tepid private investment, combined with weak IIP numbers and job growth would have led to a great expression of economic anxiety.The second headline would have been: Botched Execution. The Modi government’s self-proclaimed fabled execution capabilities have been severely dented by demonetisation. But even apart from this, its execution capabilities are coming under serious question. One of the better performing ministers in the government, who seems candid and clears bottlenecks, Nitin Gadkari, had the decency to admit that road building targets are way short of his ambitious targets; in fact, they are at an embarrassing six kilometres per day for the year. The mobilisation of private investment for infrastructure is stuck. There are modest successes in energy, on the renewables, but it would be hard to argue that total capacity augmentation exceeds that of the UPA. Four flagship programmes of the government are floundering: Swachh Bharat devolved into a gamed construction project with little appreciable effect on the problem it was designed to tackle; Clean Ganga is probably irrelevant, since you cannot declare the prime minister to be like the Ganga and acknowledge that the river is not clean.Smart Cities is probably doing less for the health of cities than the distribution of buses under JNNURM alone did for public transport. City government reform is not even on the agenda. Make in India is not much more than a slogan. Admittedly, these are all long-term projects, and the government made unrealistic claims. But that bombast was not, contrary to what we thought, a sign of ambition; it was a sign of lack of thought about execution. Yes, a couple of programmes like Jan Dhan and Aadhar have acquired great momentum, but it would be hard to argue that aggregate execution capacities have increased, if you went ministry by ministry. And execution is important, not just for growth. Because when execution fails, the prospect of the state turning executioner in a literal sense also rises.The third headline would have been: Hyper Arbitrary State. Let us be very clear. India needs the rule of law. It needs sensible law, respect for law. The core institutions of intelligent law enforcement are police, investigating agencies, prosecution and judiciary. Ask yourself: Have the institutional capacities of any of these increased for the better? In fact, this government’s enforcement imagination is not about the rule of law; it is a very Seventies’ style view that societies can be disciplined by arbitrary injections of fear every now and then. The judiciary and the government are in a serious standoff; the investigating agencies inspire no more confidence than before, and government is being empowered in unprecedented ways to regulate and control the lives of individuals.Questions of surveillance, privacy, the appropriateness of data-sharing, choice, are all by the wayside; independent institutions that were our protection are being gutted. The advocates of minimum government who excoriated the UPA for statism have left that largest intrusion of the state, across a number of sectors, into our lives unremarked. Is it all because we climbed a measly few places in that ridiculous index of ease of doing business, while almost every other aspect of our lives has become more statist? We have moved from arbitrariness to hyper arbitrariness. The spectre of statism no longer elicits howls of protest; it produces docility.Even this government’s core muscular claims on defence need critical scrutiny. I would have imagined during the UPA, we would have run the following headlines: India besieged on both ends (that is how Kashmir and Manipur would have been described). As Sushant Singh pointed out in this paper, the number of army casualties on the LoC has doubled this year. So much for the effects of surgical strikes. During the UPA, there was perhaps a little exaggerated fear of embracing America; in this regime, an almost whole-scale alignment towards American interests is not even provoking a discussion.Conditions that would have led the press to take out its critical swords, scream Armageddon under the UPA, now barely evoke a whisper.This may be for three reasons. First, 2004-2009 really spoilt us; we had gotten used to a high and so, when the slowdown came, we were angrier. Now we have settled into an adjustment with the usual muddling. Second, in the UPA, the government did not speak, so we dug up our own assessments of different ministries. Now the government constantly speaks, and we take their briefs. Third, this government’s modus operandi is constant distraction: It will continually provide you with headlines, or a circus that will make sure your attention is diverted from the fundamental questions of institutional health or economic governance.Our deeper sin is not that we have caved in, but we have fallen for the circus. Governance by distraction and hubris is a recipe for long-term economic Armageddon. But it is a strange alchemy when we no longer fear that prospect.(This article first appeared in the print edition under the headline ‘Government as circus’)- The writer is president, CPR Delhi and contributing editor, ‘The Indian Express’Demonetisation disrupted supply chains will be recreated, like New Orleans after Katrina: NITI Aayog’s Arvind PanagariyaAuthor: Express News ServicePublication: The Financial ExpressDate: December 24, 2016URL: supply chains that have been temporarily disrupted due to the withdrawal of high-value currency notes last month will “recreate themselves very quickly” just as New Orleans in the USA was rebuilt after Hurricane Katrina in August 2005, according to Arvind Panagariya, vice chairperson, Niti Aayog.The supply chains that have been temporarily disrupted due to the withdrawal of high-value currency notes last month will “recreate themselves very quickly” just as New Orleans in the USA was rebuilt after Hurricane Katrina in August 2005, according to Arvind Panagariya, vice chairperson, Niti Aayog.Speaking at the Express Adda event Thursday evening, Panagariya said, “The supply chains, etc., that get temporarily disrupted will recreate themselves very quickly. I think of, for example, this hurricane that came to New Orleans and it looked like the city will never be rebuilt again and of course, New Orleans is back to life. And that is the history, actually, in many cities when they experience some gigantic shock like that. Eventually, they come back and rebuild themselves.”Panagariya said that demonetisation was not an isolated move and that while the transition is painful, India would recover the loss in growth in the current quarter very soon.“And ultimately, it is all a matter of incentives. People do react to incentives and as long as we go in and ensure that we recreate the incentives, which we will recreate when the liquidity is fully there in the system and better because a lot of the digital technologies would have also been adopted by then, at least by a significant proportion of the population. So I think in the longer run we will come out more stronger and further ahead,” he said.On November 8, Prime Minister Narendra Modi had announced the scrapping of existing currency notes of Rs 500 and Rs 1,000 to curb corruption and black money. Modi had asked for 50 days, until December 30, for the situation to stabilise.“The basic objectives of demonetisation will be achieved and much more. I never saw this move as an isolated step. There are half-a-dozen steps, which were taken prior to this. This being the biggest so far and I don’t think this will be the last one either. India has a long way to go in terms of setting policies right,” said Panagariya.Since the demonetisation of old currency notes of Rs 500 and Rs 1000, there have been several flip-flops by the government and the RBI during the implementation of the drive. So far, 59 communications have been issued by the RBI-Finance Ministry combine.On December 19, it was announced that all cash deposits exceeding Rs 5,000 would be scrutinised. A day later, the RBI withdrew the limit for KYC-compliant accounts, sparking a debate on the independence of the central bank.Panagariya said the powers of the central bank cannot be compared to the powers of the US Federal Reserve.“In the US, the Fed is completely independent. In the Indian system, still the central bank is not quite as independent as the Fed Reserve is. In fact, if you read the RBI Act, it even actually gives the government the power to give direction to the central bank,” said Panagariya.On the burden of Non-Performing Assets (NPAs), Panagariya said the government has recognised the problem.“…the options perhaps of cleaning up the assets through some sort of asset reconstruction company or some sort of bad bank and all is being discussed. Some of the momentum has been a little lost temporarily because of the demonetisation but I think there is recognition in the government that something absolutely needs to be done. I am very optimistic we will get there,” he said.Public Opinion, Not Snobbish Elites, Will Determine The Success Or Failure Of DemonetisationAuthor: Shashi ShekarPublication: Date: December 24, 2016URL: by the tone of the op-ed pundits at home and abroad, the “Armageddon” is upon us in the season of Christmas, and we should be prepared for genocidal excesses worse than Hitler’s Germany and Mao’s China. The reality across India, however, is far more complex and largely benign in stark contrast to the exaggerated alarmism we are being treated to by op-ed columnists.Much of the angst over demonetisation from the Lutyens’ pundits comes down to the manner of decision-making rather than the substance of the decisions themselves. After all, it was these same columnists who not too long ago had advocated for the shift towards a cashless, digital society by calling for eliminating “black money by eliminating money itself”.Today, the elite find themselves on the margins of decision-making, thanks largely to a prime minister who continues to see himself as an outsider in Lutyens’ Delhi. The same elite who used to monopolise policy debates and exert disproportionate influence on policy decisions now increasingly find themselves “out of the loop” and are not liking it one bit. This, more than anything else, explains the exaggerated metaphors and the runaway alarmism of op-ed columns.How, then, must we judge Prime Minister Narendra Modi’s demonetisation? Is all criticism illegitimate? Are all voices in support of demonetisation “econoapologists of Modi”, as one editor labelled them?Without mincing words, let it be said that the shock of demonetisation was rude and sudden. The road to recovery from it has been uneven with the final destination not yet in sight. Along the way, several lessons have been learned even as mistakes were corrected and rules were fine-tuned.The shock of demonetisation also told us much about our attitude towards cash and our insouciance towards tax evasion. In its wake, a window of opportunity has also opened up to formalise the Indian economy with more digital and low cash transactions.All of this, of course, will happen over an extended time period in the near future. How, then, must we judge Modi’s demonetisation in the immediate time frame? What questions must we ask? How do we know if the right questions are being asked?Take the narrative around “demonetisation deaths”, for instance. Nothing is more stunning than how so many otherwise-smart people have been taken in by this narrative around deaths allegedly caused by demonetisation. So powerful is this narrative that you’re no longer lectured that “correlation is not causation”. So mind-numbing is the rhetoric that you no longer are subjected to detailed statistical analysis on the mortality rates on a typical day in India or on the proportion of deaths by cause across a population of a billion, and if these incidents were even statistically significant to be labelled as “demonetisation deaths”. Yet we see commentary and rhetoric replete with statistical fallacies that makes out “demonetisation” to be some kind of deadly political disease like “Vyapam”, logic and truth be damned.A particularly disturbing aspect of this narrative, built on statistical fallacies, is how anecdotes and perceptions based on a few personal experiences have become a substitute for sound data. Every day we are fed news reports on how a given sector of the economy is in dire straits or on how a certain segment of the workforce is jobless. It is striking that none of these reports are on the basis of sound data, not even on sample-based surveys. Almost all of them are either anecdotal in nature or based on the perceptions of some sources, mostly unnamed.An unintended consequence of the shock of demonetisation is that we now know how poorly we monitor and measure the economic health of several sectors of our economy with few reliable leading indicators.And then you have arguments on how cash has suddenly become freedom’s twin sibling, perhaps lost at the Kumbh Mela of op-ed punditry only to be found in the wake of Modi’s demonetisation tsunami. The libertarian arguments on cash being synonymous with freedom make for powerful rhetoric and provide good material for abstract essays. But little do we hear anyone ask the question, when and how did cash become an entitlement on par with fundamental rights?After all, hard cash is a supply-constrained commodity that needs to be printed, distributed, collected and replenished. When the already-constrained supply chain of cash is further grossly distorted by hoarding, forgery and a black market, how can it be treated as an entitlement on par with other freedoms?The extent to which cash is akin to freedom is in that it needs the state to guarantee it, so we may repose our trust and faith in transactions involving it. There is no doubt that cash provides anonymity and a degree of freedom that we all seek in our lives from time to time. Such freedom is, at best, a luxury and hardly an entitlement when it has to come with a state guarantee and all the constraints and demands that such a guarantee would naturally entail. Perhaps these diehard libertarians who believe in a borderless economy and a stateless currency should switch to the bitcoins, but then they would have to go digital and cashless to dwell in that libertarian utopia.The other side of the ‘cash is freedom’ argument that doesn’t get discussed much is how cash has also become the freedom to evade taxes in most small-value transactions. When Amartya Sen waxed eloquent on how demonetisation has deemed everyone a criminal, he forgot how all of us are guilty of aiding and abetting tax evasion every time we chose to be party to an off-the-books cash transaction with a shopkeeper, trader or even a doctor.When cash became an entitlement, so did evasion on all petty cash transactions, for we also seem to want the right to a discounted price on goods and services that goes hand in hand with such evasion. When we burden our conscience over the hardship caused by demonetisation, do we also burden it over the hardship not alleviated because we have collectively deprived the treasury of those taxes which could have paid for a scholarship or a pension?When we outrage sanctimoniously over the lack of empathy towards the hardship of others due to demonetisation, do we also pause to ask which hardship is more immoral?When we question the morality of the shock of demonetisation, we must also ask what other strong medicine would it have taken to kick the habit of tax evasion in a democracy of our size and complexity?Referring to the decisions made in the past month as authoritarian and autocratic is particularly reflective of the intellectual snobbery of the elite. Much of that labelling has to do with the culture of governance we have institutionalised in India, where we are excessively suspicious of the executive, largely cynical of the legislature and blindly in awe of the judiciary.It also has to do with what the elite deem to be “democratic” or “undemocratic”. Activist decisions of the judiciary routinely encroaching on the domain of the executive are deemed “democratic” and “just” when they reflect the consensus of the elite. Such activism is rarely labelled authoritarian or autocratic, never mind the fact that neither the decisions nor the decision-makers can be held to account electorally.The most legitimate line of criticism one has read of demonetisation till date has been on the effectiveness and integrity of the institution of the Reserve Bank. Paradoxically, having an eloquent RBI governor all these years meant little popular scrutiny of the institutional mechanisms of the RBI, for the former governor turned the spotlight away from the institution and to the individual.With the current media-shy RBI governor letting the institutional processes and mechanisms speak for themselves, he has paradoxically ended up exposing their many shortcomings. If Raghuram Rajan was such an effective leader of the RBI over the past many years, no reflection on his individual brilliance as an economist, why is it that the RBI’s institutional mechanisms have come up short over the past month, be it in the area of planning or communication?In conclusion, it must be said that there are only two courts that matter where Narendra Modi’s demonetisation will be judged, much like the flawed debate on judging him on Gujarat 2002. The first is the Supreme Court, which is already seized of the matter, where the constitutionality of demonetisation will be tested. The second and the ultimate court is the court of public opinion, with elections serving as the only legitimate test. The democrat that Modi is, he has not shied away from putting his decisions to the ballot test in every recent contest, and will most certainly continue to do so in every upcoming election.The hardship of demonetisation is real, but over-the-top morbid punditry on it is vastly exaggerated. Till the citizens of India pass their judgment on demonetisation with their ballots, can we please give the morbid op-ed alarmism a rest?Demonetization: What does the world’s most unbiased reporter say?Author: ChaiwallahPublication: Date: December 15, 2016URL: might come as a shock to The Hindu, The Troll, The Wire and The Huffington Post. Not to mention a shock to Newslaundry. The best journalists in the world don’t come out of Doon school and St. Stephens College and JNU and Jamia Millia Islamia. To say nothing of Columbia University school of Journalism.Here is the world’s best journalist:It’s called money.Suppose that you want to know how India’s rice farmers are doing right now. Suppose you want to know how the laborers who sowed the rice, the laborers who harvested the crop, the farmers who sold the crop, the traders who bought the crop and the truckers who transported the crop and finally the grocers who put the rice on market shelves are doing.You have two choices. You could go to a “journalist” who will pick one person from each category and ask the question that is the hallmark of airhead reporting today: “Aapko kaisa lag raha hai?”. But keep in mind that this journalist could have an agenda. He or she could have been an Agustapatrakar. Even a Radia stenographer perhaps. Or maybe a Bhakt?But there is a second, much better choice. You could simply go check the price.The price is one single magical number that captures the situation of every single person in the supply chain. The best thing about prices is that they don’t have an agenda. The price does not have a political affiliation. The price doesn’t care if you are a Modi supporter or a Rahul Gandhi supporter. The price doesn’t care if you are an illiterate person or you have an arts degree from JNU.Since Nov 8, we have all read fantastic stories of how all the agricultural Mandis are empty, of how trucks have gone off the road. We have heard about how farmers cannot harvest their crop nor sell their crop nor plant a new crop. Amazingly however, there is one stubborn fact. Prices aren’t rising!Apparently, no trader, no hoarder has noticed yet the opportunity of a lifetime. Hardly any crop got harvested, hardly any crop got sowed and hardly any crop got transported. The farms are empty, the trucks are empty, the Mandis are empty, but the markets are full. Amazing!In fact, is there one item that people can name that has disappeared from the shelves since Nov 8? From tomatoes to journalists to intellectuals, the markets seem well stocked with stuff for sale as usual.Those claiming “poor implementation” of demonetization should answer the question about why there are no price shocks happening anywhere? Do they understand what it takes to keep 1200 million people supplied with milk, grain and vegetables after sucking 86% of all currency out of the system? And yet, not a single price shock.In fact, in the initial weeks, the “poor implementation” brigade was greedily looking forward to a collapse of the supply chain. Here is the Wall Street Journal on Nov 16.----------------------------THE WALL STREET JOURNALIndia’s Cash Crunch Starts to Choke the Food Supply ChainAt a Delhi wholesale produce market, business is running on IOUs; some farmers have already thrown crops out because of weak sales----------------------------Choked since Nov 8 but still prices not rising. Will good Dr. Manmohan Singh kindly explain this? Look at this:----------------------------The Indian ExpressThe sugar test: Demonetisation couldn’t have come at a worse time for those in jaggery businessFrom the production units in Shamli to the markets in Delhi and the middlemen in between, how the cash crunch is choking the supply lines. Photographs by Abhinav Saha.----------------------------It’s on Nov 20 that The Indian Express confirmed the collapse of the sugar supply chain. It’s Dec 14 and still no coup in the prices of sugar. Clearly an RSS conspiracy.----------------------------Indiatoday.inDemonetisation pushes 70 per cent trucks off roads, supply chain badly hitTrucks contributed about 5 per cent to the GDP last year, but after demonetisation, 70 per cent of the transporters are forced to take their vehicles off roads.IndiaToday.in | Edited by Prabhash K DuttaNew Delhi, November 24, 2016 | UPDATED 13:15 IST----------------------------Again on Nov 24, a confirmation from India Today that 70% of trucks are off the roads. As if further evidence was needed, they even have a photograph of 7 trucks parked side by side. The other 3 trucks must still be on the road. But still no price rise? Why? What is the deal, Modi ji?----------------------------Scroll.inDemonetisation has left India's food markets frozen – and the future looks tenseThe liquidity crisis has affected both the trade in food and the planting of the winter crop.----------------------------Food markets frozen since Nov 18 as reported by Scroll.in, complete with a picture of a gloomy trader sitting with the last vestiges of India’s food stocks.The prices still aren’t rising. Only intolerance is.The closest we came to a price shock was a rumor about a shortage of salt. In a matter of a few hours, salt prices across the country went through the roof, with gullible people buying one kg of salt for as much as Rs 200 and journalists buying it for as much as Rs. 400.----------------------------Rana Ayyub @RanaAyyubSalt is 400 rupee a kilo? Achche din indeed here10:23 AM - 12 Nov 2016----------------------------That is what can happen simply from the perception of a shortage. And here we have confirmed reports from Wall Street Journal, India Today, The Indian Express and Scroll.in about a freeze in the supply chain. But the price system still shows no sign of cooperating with the intellectuals. Has the credibility of journalists become so low that people would go in a mad rush to buy salt based on Whatsapp rumors but ignore the hard hitting reporting of qualified journalists? I guess this must be the “post truth society” the liberals keep complaining about.- Chaiwallah is an ordinary Bharatiya who opposes the dynasty and blogs at defends changes in demonetisation rules, says govt sensitive to feedbackAuthor: TNNPublication: The Times of IndiaDate: December 26, 2016URL: Notebandi was only the first step in the fight against corruption and black money and an incisive law on "benami property" was next, PM Narendra Modi said on Sunday. "In the coming days, this law will also become operational," he said in his 'Mann ki Baat' radio address.Modi said a "benami property" law was promulgated in 1988 but it was dormant for 28 years because rules had not been framed. "I assure you that this is not the end. This is just the beginning in our fight against corruption. We have to win this war against corruption and black money. There is no question of stopping or going back in this fight," he said.With his 50-day deadline for return of normalcy nearing, the PM defended the frequent changes in rules of demonetisation, saying it showed that the government was sensitive to the problems of the people and was acting on the feedback on their hardships."Another issue which comes up is this, why are rules changed time and again? This government is for the sake of the people. The government continuously endeavours to take feedback from them. What are the areas of difficulty for the people? What are the rules that are creating hindrances? And what are the possible solutions? The government, being a sensitive government, amends rules as required, keeping the convenience of the people as its foremost consideration, so that citizens are not subjected to hardships," he said.The strong defence came in the wake of frequent tweaking of norms being cited by experts and the opposition as a sign of government's confusion post-currency ban, with arguments that it showed the decision was taken without enough thought.In what appeared to be a dig at the political opposition which has been highly critical of demonetisation, Modi said, "People who cannot endorse corruption and black money openly resort to finding fault with the government relentlessly."Referring to a spate of arrests of "influential persons" and seizure of currency notes, the PM said the source of information behind this crackdown was the common man. "Information being received from common citizens is many times higher than that being obtained through government machinery," he said, adding that people were taking risks to expose such elements.Demonetisation: The queue getting shorter but wallet is still lightAuthor: ET BureauPublication: The Economic TimesDate: December 25, 2016URL: our previous two articles, we have found evidence of reduced consumption, and estimated that the people of Delhi had lost an entire working day standing in queues since November 8. This week, Cashless Chronicles, a nonpartisan open data initiative, has surveyed bank branches and queues in small towns and cities across the country. We attempt to understand how demonetisation has affected banks’ ability to dispense cash, as well as people’s ability to access and spend it. In most of the small towns, waiting times are lower and banks are open for longer time than in Delhi. However, nearly every survey town has reported a slowdown in consumption. There is one important caveat to the results reported here. Our survey in Delhi was a randomly selected sample of public sector bank (PSB) branches, making it representative of the capital. We have tried to cover several parts of the country, and have visited small towns and rural areas in Bihar, Andhra Pradesh, Himachal Pradesh, Gujarat, Rajasthan and Maharashtra. In many of these, we have covered nearly every PSB branch in selected blocks. In all, we have covered 121 bank branches/ATMs, and interviewed 342 individuals waiting in line. Relying on Credit Saharsa in Bihar, on the banks of the river Kosi, is one of India’s most backward districts. Yet, the banking infrastructure in Saharsa has fared rather well. All 23 PSBs were open and disbursing cash at the time of surveying. The average wait time in queues was only 4 minutes. 51% of Saharsa residents reported no disruption in their lives during demonetisation.However, withdrawal limits are still hitting consumption in places with cash-heavy economies. Despite little change in bank behaviour, Saharsa respondents are now taking 11 days to consume Rs 2,500, as opposed to the 9 days they used to take before demonetisation. In the significantly more prosperous district of Satara, Maharashtra, the story in the Jawali block is similar. All banks were open, and had been dispensing cash almost every day of the previous week, with waiting times in queues at about 20 minutes. However, 40% of respondents reported major disruption in their lives, with nearly half of them relying on credit for food expenses, and a third relying on credit for business reasons. Consumption too had dropped, with residents taking 12 days to spend Rs 2,500, compared with 9 before demonetisation. Our surveys also covered every PSB in two rural blocks of Jaipur, both about 30km from the city. All banks were open when we visited, though on an average they did not have cash for 2 days in the previous week. Waiting time was 20 minutes, and residents were travelling about 30 minutes to visit banks and ATMs. They reported large effects: over 40% said they had experienced major disruptions, with nearly every respondent relying on credit. 89% reported relying on credit for some food expenses. In Patan, Gujarat, about 1.5 hours from Ahmedabad, banks were faring less well. 80% of banks we visited were open and dispensing cash. Banks had no cash for nearly 4 days the preceding week, with cash being available for 5 hours on the days when banks were open. Respondents had visited banks/ATMs 7 more times after demonetisation, spending an average of 40 minutes travelling and 30 minutes in queues. Although nearly 90% were relying on credit for some of their food expenses, very few reported major disruptions to their work or business. In Eluru, a small town in Andhra Pradesh with a population of about 2,80,000, nearly 40% of the banks had no cash at the time of the survey. Among the 34 PSB branches surveyed, banks had cash for 7.2 hours per day and were closed for an average of 1.45 days per week. Residents also had to make about 14 additional visits to banks/ATMs than they would have in a regular month. Consumption has fallen significantly, with Rs 2,500 lasting 7 days for an average household before demonetisation and being stretched to 8.5 days since. ** Across towns, about 6 visits a month were made to banks/ATMs before demonetisation. After demonetisation, it jumped up to 14. This means people surveyed on average had to make 8 additional visits. The Worst Hit: Shimla, Solan Within our survey sample, the worst hit were the two blocks in the districts of Shimla and Solan. Respondents are now reportedly taking nearly 10 days to spend Rs 2,500 compared with the 6 days it used to take before demonetisation. They also have made 11 additional bank/ATM visits — higher than even Delhi. The hilly terrain also adds to the travel time, with respondents reporting an average travel time of 40 minutes. Taking this together with average waiting time of 40 minutes in queues, our respondents in Himachal have spent nearly 15 hours, or almost 2 working days trying to access cash since demonetisation. While the extent to which the banking infrastructure has coped varies widely among the areas we have covered, the results on consumption have worrying implications, if this cash crunch continues for much longer. - (The writers and researchers of Cashless Chronicles are Dwijo Goswami, Putul Gupta, Santosh Harish, MR Sharan, Kriti Mittal, Vikram Srinivas) ‘Heat on Munde-led bank shows govt’s intent to act tough on cash stashers’Author: Akhilesh Singh, TNNPublication: The Times of IndiaDate: December 25, 2016URL: CBI action against a cooperative bank, controlled by BJP's 'Munde family' in Maharashtra, has sent a strong message about PM Narendra Modi's insistence that no violator would be spared in the government's efforts to cleanse the economy post demonetisation, party members say.Sources said the PM and BJP chief Amit Shah have been personally monitoring compliance of their instructions to BJP lawmakers to maintain transparency about their transactions after November 8. Sources said the PMO cell, set up for calls against illicit monetary transactions and currency conversions, has helped agencies arrest a large number of violators since Rs 500 and Rs 1,000 notes were scrapped.The CBI registered a case on Friday against two officials of a bank controlled by BJP MP Pritam Munde and some others, following recovery of Rs10 crore in demonetised notes last week. The agency carried out searches at 11 places at Beed, Aurangabad, Pune and Mumbai. However, nobody has been arrested so far.On December 15, police had recovered Rs 10.10 crore, including Rs10 lakh in new Rs 2,000 notes, from a car in Maharashtra. It turned out that Rs 10 crore of this was part of the Rs 25 crore in demonetised notes that the officials of Vaidyanath Urban Co-op Bank Ltd were transporting. Pritam Munde is director of the bank.Action against the Munde family followed raids by the I-T department last week at eight premises of BJP member and former chairman of Madhya Pradesh Rajya Sahakari Awas Sangh, Sushil Vaswani, unearthing unaccounted cash in crores — in both old and new currency. Income-tax officials had found discrepancies in transactions through Mahanagar Nagrik Sehkari Bank at Bairagarh, where Vaswani is a director and founder-member.A senior party leader said action against the two ruling party lawmakers testifies that Modi and Shah mean business and that days of immunity for ruling party leaders are over."There should not be any exceptions while enforcing law of the land. Unlike Congress, our party believes in setting example for others as we can't expect from people what we can't do," he said.Problems caused by demonetisation are easing: Chandrababu NaiduAuthor: PTIPublication: The Times of IndiaDate: December 26, 2016URL: caused by demonetisation are "easing out" and the move will eventually benefit the nation, Andhra Pradesh chief minister Chandrababu Naidu stressed here on Monday, days after he said the decision was not as per "our wish" and that he had to "break his head" to find solutions.Naidu, who heads the 13-member committee formed by the Centre to look into note ban-related issues, also sought to allay apprehensions over cyber security, saying the country is "very strong" in the sphere and information technology."Nowadays, it is easing out. More and more cash is coming, Rs 500 currency note is in circulation. Naturally, it will ease out. The problems are there temporarily. Ultimately, it (demonetisation) is going to benefit the nation," he told reporters here.To a question whether the inconvenience caused by note ban will end by December 30, Naidu said one has to consider "plus or minuses" and that the sacrifices are being made for long-term gains."It is going to provide future for people. Sometimes for long term gains, you have to sacrifice something, that is what is happening today. Yesterday, situation was different, today it is different, tomorrow it is going to be much more different," he said.On apprehensions about cyber security as the Centre pitches for turning the country into a less-cash economy, stressing more on digital transactions, Naidu said "all over the world" countries are following digital economy."We are very strong in cyber security and also in information technology. Our people are heading Google, Microsoft. That is the caliber India has," he said.The 13-member committee is expected to meet on December 28 again.Speaking at a party workshop in Andhra Pradesh's Vijayawada on December 20, Naidu, who had initially supported demonetisation, said the November 8 move was not as per "our wish" and that a "lot of problems" still remain without any solution in sight."I am breaking my head daily but we are unable to find a solution to this problem," he had said.A day later, Naidu had said his comments were "distorted" but acknowledged that currency problems continued.Tonnes Of Data, Ounce Of Insight: Why We Will Never Know If DeMo WorkedAuthor: R Jagannathan Publication: Date: December 26, 2016URL: Esther Duflo, economics professor at MIT and co-author along with Abhijit Banerjee of the insightful book Poor Economics: Rethinking Poverty and Ways to End It, is apparently no fan of India’s demonetisation. She believes, not without reason, that the move was unleashed without paying adequate attention to implementation issues, and that “we might never know” how this shock will impact poverty alleviation in India “because there is no effective mechanism to measure GDP creation in the informal economy”. She told Mint newspaper in an interview, “We might never know the exact magnitude of loss.”She is, of course, right. India is very poor at data, both in its collection and in its accuracy. But the surprising thing is even this needs to be said. While Duflo may worry about not being able to calculate the magnitude of loss, this can equally be said about the long-term gains that might accrue from this shock treatment for the economy. Even assuming a group of microeconomists and macroeconomists collectively scour enough data from the November 2016 to March 2017 period – which is likely to be the immediate impact period of demonetisation – it is unlikely that they will come up with anything more useful than there was loss and there was gain, and we don’t know which bit outweighed the other.The point is simple: a huge macro measure like demonetisation will have multiple systemic impacts, and its success or failure will depend on how people respond to the shock. There cannot be any simple measure of loss or gain. There will be both gains and losses, and almost anyone can cherrypick data to prove his point.Consider what we now count as loss: these could include business loss, tax revenue loss, informal jobs and income losses, man-hours lost in bank queues, etc. The gains could include the drop in interest rates for borrowers and the treasury gains for banks from lower yields. There could also be revenue gains by the forced expansion of the tax base, as most demonetised currency comes back into banks.But here’s the rub: what if business is not lost forever, but only postponed? What if the interest drop is transient? What if banks see a rise in non-performing assets (NPAs), but the profit rise covers this? Sometimes, the medium term gain or loss may cancel out today’s short-term loss or gain. How do we ever get to know if the effort was worth it? It is going to remain a free-for-all, with political bias being the dominant determinant of projected gain or loss.Duflo talks about poor data about the informal sector, but we should also worry about the data that we do get, especially in the short term.As I wrote in another article last week, any economist who claims he knows what will happen is probably bluffing.Consider one data point we already have: prices. While the consumer prices index (CPI) came in at a record low of 3.63 per cent in November, can anyone say this was due to demonetisation’s impact on demand and not the sharp fall in food inflation post a good monsoon? Perhaps after a long time, but not now, when the impact of two different forces on prices cannot be separated.Around mid-January, we will get the Index of Industrial Production (IIP) data for November, which will show how sharply demonetisation has impacted factory output. But with October already reporting a 1.9 per cent drop in IIP, how will we know if November is merely following the established trend and not specifically responding to demonetisation?Or take gross domestic product (GDP). Everyone has assumed that GDP will take a sharp hit in the current quarter and also the next (ending March 2017). But Pronab Sen, the government’s former chief statistician, told Business Standard that he expects no impact on third quarter GDP growth, since “agriculture will do well” and this output is measured in terms of quantity. “Also, people (ie, farmers) will manage their transactions for one-and-a-half months somehow through their savings, which is the period of demonetisation in the quarter.” So there may be no doom on the farm front for all we know.Also consider the tax data currently at hand. Business Standard reports that advance tax receipts (due 15 December) from the top 43 taxpayers show a decent 10.1 per cent growth, despite the knocks taken by the consumer goods and automobiles sectors. The losses on these fronts have been made up by higher earnings in the petroleum sector and banks. In the next quarter, the figures could well reverse, as the rush for using old notes at petrol outlets reduces, and consumer industries pick up after a slack third quarter.Or consider the likelihood of other macroeconomic data making much sense in the short run. Thanks to demonetisation, banks have seen a huge surge in deposits. Given the slower pace of remonetisation and withdrawals against these deposits, fiscal 2016-17 may well see an abnormal spike in the savings rate, currently hovering around 30-31 per cent. Will this forced saving help interest rates fall and see a revival in investment in 2017-18? We can’t know now.And then there is the question of how the huge deposit inflows from black cash get reported in the national GDP data. Have companies with lots of cash reported higher earnings from sales despite an actual drop due to demonetisation? Will backdated sales data, which tends to get fed into the ministry of company affairs’ database from which gross value added (GVA) is computed, show a sudden spike in some black money-prone sectors?The truth is we can’t know what has actually happened due to demonetisation from the early data that’s begun to come in. Even the next quarter, for which data will come only by May 2017, will not bring clarity to how the cash crunch has affected economic behaviour.The chances are government will choose to see one set of data if they look good and the opposition another set. Economists should not jump to conclusions for at least the next four quarters.Demonetisation is a perfect example of living in a data-rich but fact-free reality. Both critics and supporters of demonetisation will get to pick and choose their data.Woman finds Rs 100 crore in Jan-Dhan account, approaches PMOAuthor: PTIPublication: The Economic TimesDate: December 26, 2016URL: to find nearly Rs 100 crore in her Jan-Dhan account in a Meerut branch of a state-run bank, a woman here on Monday sought the PMO's intervention after the bank officials did not attend to her complaint and kept asking her to come some other time. In the complaint to the PMO, sent by her husband Ziledar Singh, Sheetal Yadav said she maintained a Jan-Dhan account in Sharda road branch of the State Bank of India. On December 18, she went to draw money from the ATM of ICICI bank near their house and was shocked to see that her account stood at Rs 99,99,99,394. Unable to believe it, she said she asked the person standing next to her in the queue to check it and he confirmed the same amount. She went to another ATM of YES bank nearby and found the same balance. She continued to visit her bank for two days but the staff did not attend to her complaint and asked her to come after a day when the branch manager would assist her to rectify the matter. When she again went to the bank, she was sent back under another pretext. Singh, who works in a transformer manufacturing company, said that his wife, working in the packaging department of a factory, draws a salary of Rs 5,000 per month while he also works on a meagre salary. They were shocked when this huge amount came into her account. Frustrated over the local bank staff's attitude, Singh said he asked an educated person to help them to send a mail to the PMO."We have posted a mail on December 26 to the PMO to help us in solving our problem from where about Rs 100 crore came into the account where the maximum limit of deposit is restricted to Rs 50,000 only," he said, showing the ATM slips and bank passbook to the media. No bank employee was available for comments.Old notes selling at a premium in Kolkata marketAuthor: Rohit Khanna, TNNPublication: The Times of IndiaDate: December 27, 2016URL: a time when people across the country are queuing up outside banks to get rid of old Rs 500 and Rs 1000 notes, the scrapped currencies are selling at a premium in the serpentine bylanes of trading hub Burrabazar. Old notes of Rs 500 and Rs 1000 will fetch you Rs 550 and Rs 1,100 here.On Monday, TOI spotted men sitting with wads of new currency notes in the shops dotting the trading hub. They were there a month ago too, but then they were handing out anything between Rs 800 and Rs 850 in exchange for a note of Rs 1000 in old denomination. The sudden reverse exchange may stump commoners but those in the know say it has been triggered by shell companies who need to shore up 'cash in hand' in their balance sheets that show huge paper transactions. The city's accountancy fraternity sees this as a bid to justify the paper transactions before the third quarter ends on December 31.In the balance sheet, 'cash in hand' is the amount held by a company in the form of notes or coins. In layman's term, 'cash in hand' is the money that is kept to pay small amounts but is not deposited in the bank. However, it does not mean the money lies in physical form in a chest or a drawer.After PM Modi announced demonetisation on November 8, the business community in the city adopted every possible means to either exchange the notes or get some deposited in banks. With the third quarter coming to an end, they have little cash left to show as 'cash in hand'. Income tax officials have come across a number of companies which have shown a large amount 'cash in hand' in the balance sheet when the physical cash was much less.If these companies have shown 'cash in hand' over a long period, then a large part of the amount is expected to be in the form of old Rs 500 or Rs 1,000 notes. But, as per RBI guidelines, these notes can be deposited in banks only till December 30 this year. This has led to the sudden surge in demand for the scrapped currency. "There is such a possibility but I can't say if anyone has utilised the scope to fudge the balance sheet," said Anirban Datta, chairman of Institute of Chartered Accountants of India (eastern region).9.3% rise in foreign tourist arrivals in NovemberAuthor: PTIPublication: The Times of IndiaDate: December 27, 2016URL: lakh foreign tourists visited India in November this year, a growth of 9.3 per cent over the same month last year, indicating that demonetisation move did not impact the tourists footfall adversely.Foreign tourist arrivals (FTAs) during November 2015 was 8.16 lakh, while it was 7.65 lakh in November 2014.Foreign Exchange Earnings (FEEs) from tourism during the month of November were Rs 14,474 crore as compared to Rs 12,649 crore in the same month last year, recording a growth of 14.4 per cent.The US accounted for highest share of tourist arrivals followed by the UK and Bangladesh in November 2016, according to an official release.FTAs during January-November, 2016 were 78.53 lakh, recording a growth of 10.4 per cent as compared to 71.14 lakh during the corresponding period last year.FEEs from tourism in January-November were Rs 1,38,845 crore, witnessing an increase of 14.7 per cent as compared to the Rs 1,21,041 crore during the corresponding period last year.Among the top 15 source countries in November, share of the US was highest with 15.53 per cent, followed by the UK (11.21 per cent), Bangladesh (10.72 per cent), Canada (4.66 per cent), Russia (4.53 per cent), Australia (4.04 per cent) and Malaysia (3.65 per cent).The share of Germany was 3.53 per cent, while that of China 3.14 per cent, France 2.88 per cent, Sri Lanka 2.49 per cent, Japan 2.49 per cent, Singapore 2.16 per cent, Nepal 1.46 per cent and Thailand 1.37 per cent.Among the top 15 ports, the share of Delhi Airport was highest with 32.71 per cent, followed by Mumbai Airport (18.51 per cent), Chennai Airport (6.83 per cent), Bengaluru Airport (5.89 per cent), Haridaspur Land check post (5.87 per cent), Goa Airport (5.63 per cent), Kolkata Airport (3.90 per cent) and Cochin Airport (3.29 per cent).The share of Hyderabad Airport was 3.14 per cent, while that of Ahmadabad Airport (2.76 per cent), Trivandrum Airport (1.54 per cent), Trichy Airport (1.53 per cent), Gede Rail (1.16 per cent), Amritsar Airport (1.15 per cent), and Ghojadanga land check post (0.82 per cent).Demonetisation fallacies and demonetisation mathAuthor: Jagdish Bhagwati, Vivek Dehejia, Pravin KrishnaPublication: Date: December 27, 2016URL: For a policy designed, in effect, as a one-time tax on black money, it is a truism to argue that it cannot by itself tackle future flows of black moneyMore than a month has passed since the 8 November announcement by Prime Minister Narendra Modi that high-denomination currency notes would be scrapped and remonetisation would occur through replacement of new notes and deposits of old notes in bank accounts. Often termed “demonetisation”, this policy has created considerable confusion among commentators, some ill-informed, some politically motivated. A number of fallacies continue to persist—concerning the value of “unreturned” versus “returned” money, the existing “stocks” versus future “flows” of black and counterfeit money, the short- versus the long-term impact on black money, and the expansionary versus contractionary effects of the policy reform—allowing opponents of the policy to claim, prematurely, and without evidence, that it is a failure. We clarify in what follows. First, it is frequently asserted that the return into the formal monetary and banking system of a large percentage, perhaps 80% or more, of the old notes represents a failure of the policy. This is a fallacy which results from the misunderstanding that unaccounted money that is deposited into bank accounts has been converted successfully without penalty from black into white—which, actually, is not the case. The current rules dictate that deposits of unaccounted money will be taxed at 50%—with a further 25% taken by the government (into the Pradhan Mantri Garib Kalyan Yojana) as an interest-free loan for a period of four years.Thus, the return of money to the formal banking system, when taxed, will generate a fiscal gain to the system. Interestingly, money that is not returned to banks is implicitly taxed at 100% from the perspective of the “owner” of that money, and this too could result in a fiscal gain under certain circumstances, which we clarify below.The first requirement for any possible fiscal gain from that portion of the old stock of demonetized notes that are not returned is that such notes be de jure denotified, rather than merely de facto demonetised. This would allow the Reserve Bank of India (RBI) to cancel the liabilities associated with the issued currency.Second, assuming that de jure denotification were to occur, any putative fiscal bonanza for the government would require one specific mechanism through which the resulting mismatch between the assets and liabilities of the central bank are rectified, which would be that the RBI, in effect, creates new money of equivalent value and turns that over to the government to do with as it pleases. This, however, is not the only mechanism to correct the asset-liability mismatch. Another possibility would be for the RBI to offset the drop in liabilities by, for example, writing off an equivalent value of non-performing assets, thereby squaring its balance sheet. Yet another would be to effect a “helicopter drop” indirectly into the hands of the public, thereby creating new liabilities equivalent in value to the extinguished liabilities. While neither represents a direct fiscal gain for the treasury, it yields an outcome which is similar to what would have happened if the treasury had used its own resources for the same purposes.What does all this add up to? Since there are gains to be had on black money, when it is returned to banks and also when it is not, the quantum of “unreturned” money is not a good indicator of the success or failure of policy. How then can we assess policy success?Clearly, at least from the perspective of its effectiveness in dealing with the black money issue, success has to be measured by the sum of tax revenue generated and black money destroyed. Suppose we accept the estimate that one-third of the approximately Rs15 trillion in demonetised notes is black money. Roughly speaking, the revenue that would have been generated had that income been taxed in the first place is 30% of that (so, Rs5 trillion times 0.3 = Rs1.5 trillion). Perfect detection of black money should now yield 50% as tax revenue (so Rs5 trillion times 0.5 = Rs2.5 trillion), if all black money is returned and identified as such. Of course, perfection is rarely achieved in practice. Allowing for slippages, we should neither expect all the black money to be returned, nor that all the black money that is returned will be perfectly identified and taxed. If we assume that by 30 December, Rs1 trillion is unreturned, as is believed, and we further assume that only half of the remaining Rs4 trillion of black money that is returned falls within the tax net, the net gain works out to Rs1 trillion of black money destroyed and 50% times 2 trillion = Rs1 trillion in tax revenue. When compared with the approximately Rs2.5 trillion in income taxes collected annually, the government could reasonably claim this as a successful outcome.A second major fallacy concerns another stated goal of the demonetisation drive: counterfeit currency. Will demonetisation penalize those who have introduced counterfeit currency into the system? To address this question, one needs to clarify the distinction between stocks and flows. Thus, the stock of counterfeit money already in circulation, which has changed hands many times and, for better or worse, was already in use in the Indian economy on 8 November, will not be affected by the demonetisation exercise. At best, to the extent that the security features introduced into new notes limit immediate counterfeiting, the policy may minimize the future flows of counterfeit notes for some time. Thus, demonetisation addresses future flows, but not the current stock, of counterfeit money.A third fallacy relates to the expectation of some that demonetisation will put an end to black money generation. This is because compared to the impact of demonetisation on counterfeit money, exactly the opposite is true for black money: demonetisation, by invalidating existing high denomination notes, deals with the stock of black money—but, in and of itself, does nothing to address future flows of black money (which may accrue in the new currency notes). Relatedly, note that the demonetisation strategy proposed by Harvard economist Kenneth Rogoff—the slow replacement of high denomination notes by lower denomination ones—is essentially aimed at eliminating flow accumulation of black money in the future (by making the hoarding of high values of cash physically difficult), but does little to address the existing stock of black money, which remains legal tender under his proposal.Fourth, it is argued by critics that the current exercise will not tackle the underlying roots of corruption, which lie in areas such as election finance, burdensome regulation, high taxes, and so forth. While perfectly true, this criticism misses the centrality of what economists call the “targeting principle”—the idea that, typically, each policy objective requires a specific, targeted policy instrument—a fundamental concept in the theory of economic policy.In other words, for a policy designed, in effect, as a one-time tax on black money, it is a truism to argue that it cannot by itself tackle future flows of black money. Eliminating such flows will require further reforms. For instance, lowering stamp taxes on property transactions would incentivize the lower levels of evasion associated with such transactions. Further, electronic registration of real estate transactions (and re-registration of existing ownership claims) to match individual identification numbers will go a good distance in minimizing the channelling of corrupt earnings into real estate.Fifth, it is argued by critics, including some well-known economists, that the short- to medium-run economic impact post 8 November will be contractionary. This is normally assumed to follow from the temporary liquidity shortage induced by an insufficiently fast replacement of old notes with new notes. Yet, this is not necessarily the only outcome possible. On the one hand, if black money that was actively in circulation (as opposed to being hidden in a mattress) is unreturned to the banking system and is invalidated, the effects, in the first instance, may be contractionary (unless an equivalent sum is printed and spent by the government or delivered as a helicopter drop, as we have previously discussed).On the other hand, money that has been proverbially hoarded under the mattress, whether white or black, and which has entered the formal financial system via bank deposits, now may grow via the classical money multiplier, assuming a portion of it is loaned out by banks. This could, at the margin, have an expansionary impact, which could be further magnified by standard Keynesian multiplier effects.Further, ironically, benami deposits by the rich in the names of the poor, may also have an expansionary effect, even in the short run, to the extent that the poor keep a fraction of those deposits for themselves and spend it.Finally, it has been said that the swap of currency notes has damaged trust in the monetary system. This misses the fact that in a world of fiat paper currency not backed by commodities such as gold, by far the greatest threat to trust in the currency is hyperinflation. It is risible to compare any possible trust deficit in the Indian rupee wrought by the current exercise to the episodes of hyperinflation that have ravaged trust in currencies, leading to their abandonment as a medium of exchange, unit of account, and store of value. In such cases, one typically sees some variation of “dollarisation”, as one has seen in other emerging economies. Yet there is no credible evidence that there has been significant dollarisation in the wake of 8 November. Contrary to what doomsayers suggest, the vast majority of Indians still trust the rupee. - Jagdish Bhagwati, Vivek Dehejia and Pravin Krishna are, respectively, university professor and director, Raj Center on Indian Economic Policies at Columbia University; resident senior fellow at the IDFC Institute; and Chung Ju Yung distinguished professor of international economics at Johns Hopkins University and deputy director of the Raj Center on Indian Economic Policies at Columbia University.A note to RBIAuthor: Usha ThoratPublication: The Indian ExpressDate: December 28, 2016URL: reputation has taken a beating, needs salvaging. It could start with being more transparent, communicative.It is indeed a sad day to see one of the most respected public institutions in India becoming an object of ridicule and scorn. There have been times when the Old Lady of Mint Street was criticised for being too conservative and cautious — for not being able to keep up with innovation and markets — but never has she been accused of not knowing her job. Never has she been the butt of as many jokes as in the last few days.For one who has been associated with the Old Lady for more than 40 years, it is second nature to start defending the institution. There was need for secrecy; hence the ability to stock up notes for remonetisation in advance was limited. It was not possible to envisage all the emerging situations beforehand; hence the RBI responded quickly by clarifying the position through various circulars. The scale of the remonetisation being what it is, the capacity of the note presses to meet the transaction demand for currency of the public is limited. The need for ensuring defect-free notes also slowed down the supply chain of notes.At the same time, one is assailed by doubts: Could this not have been managed better? Could the RBI not have been given more time?Could it not have refrained from issuing the circular of December 19 that clearly went against earlier assurances and had to be rescinded immediately? How could the RBI staff connive in exchanging old notes for new?The common person has been patiently waiting in queues in ATMs and branches in the hope that tax evaders and corrupt officials will get caught. It has been a matter of wonder that her tolerance is so high. Maybe it is because she is willing to bear pain to see real gains. She is happy to see the media reports of raids on the wealthy, while angry that these few seem to have got privileged access to lakhs of new notes when she and others like her have to make do with just Rs 2,000 each time she stands in a queue — other than, of course, the days when the notes are over by the time she reaches the head of the queue.Cashless, digital wallets and e-money are good for the system but cannot happen overnight. The United Payments Interface (UPI) is a brilliant concept but needs to be populated and popularised. The rural areas with poor connectivity and limited POS will need cash for a long time to come.So what can the RBI do now?First, be transparent. It is good that the RBI has started giving some information on the notes issued and deposited periodically. Doubts have been expressed on the double counting of old notes returned to the RBI. There are press reports that the data furnished by the RBI on notes issued between December 10 and December 19 do not tally between the pieces and values. Data on notes returned to the RBI after December 12 has not been officially released — this is generating enormous speculation whether the notes returned exceed the notes issued. The RBI would do well to release every week, say, every Monday, data on the notes issued, denomination and value-wise, as also on old notes returned, to set all speculation to rest.Second, the RBI top management must communicate more through the media and speaking opportunities. This is necessary in the interest of transparency and credibility. It generates confidence that the RBI believes in honest communication.Third, the sight of new currency notes being seized in hoards creates huge distress among the public and provokes anger against the RBI and banks as they rightly feel agitated that they have not even been able to withdraw the minimum of Rs 24,000 as per the rules and here there are people who have beaten the system flagrantly in connivance with the officials. All such cases need to be investigated and the conniving officials severely punished. The public needs to be informed about what action has been taken.Fourth, there has to be some rationale in the supply of currency to the various states — it cannot be disproportionate to the level of economic activity in each state. Periodic data on currency issued in each state would also add a great degree of credibility.Fifth, it is presumed that the banks would have sorted the notes for quality before returning them to the RBI. In any case, the RBI would be taking up, for sorting, all old notes before giving the final credit to the banks. Since it is highly unlikely that the fake notes can be traced to individual tenders, it is likely to be tracked down only to the branch level. Clearly, value cannot be afforded to these notes and the banks will have to take a loss on such notes. As the RBI processes these notes, it would do well to let the public know how many notes were detected as fake.Sixth, the RBI must ensure speedier adoption of the UPI by the banks. More importantly, banks need to ensure a massive education and familiarisation campaign in all languages and through all media. The UPI needs to be quickly opened up to authorised non-bank payment system entities. The UPI must become a reality at the grassroot level and rural areas, so that over time and without pain the economy can adopt the cashless mode of payment with comfort and security.Digitisation cannot happen overnight and hence the need of the hour is to ensure that the requisite currency is produced and supplied to every nook and corner of the country, in the denomination desired — a fundamental responsibility of the RBI.- The writer is former deputy governor, Reserve Bank of IndiaSuleiman and Anwar discover demonetisation is not a failure, liberals areAuthor: Minhaz Merchant @minhazmerchantPublication: Dailyo.inDate: December 27, 2016URL: of government policies by Left-leaning liberals may woo the studio audience, but at the grassroots, the BJP is still winning.“Suleiman!” Anwar’s voice boomed over the phone. “I’ve been invited to a post-Christmas adda by a friend who’s a true-blue liberal. The place will be full of clever liberals. None of these silly right-wingers.”Suleiman was delighted. After spending over a decade in illiberal Saudi Arabia he always looked forward to meeting liberals in India on his visits home. “That’s great, Anwarbhai,” he said, glancing around his sparsely furnished room in Delhi. He was in India for a few days and was keen to learn about all the frenetic things that were going on in the country. It’ll be nice to listen to liberal, open-minded people, he thought to himself.Anwar picked Suleiman up just after 6.00pm on the day after Christmas from his modest rented home. “Nice car, Anwarbhai,” Suleiman said as he slid into the front leather seat of his friend’s black 5 Series BMW. “When did you get it?”“Oh, just a few weeks ago, Suleiman,” Anwar replied with a slightly embarrassed smile. “It’s a gift, actually. I couldn’t afford the Rs 60 lakh price tag myself.”“A gift from a liberal friend?” Suleiman asked quizzically. “They seem to be the ones caught with black money in all those raids after demonetisation.”Anwar changed the subject. “Ah, here we are, Suleiman,” he said as he eased his BMW into a parking slot just outside an imposing building in south Delhi. “My media friend is a great organiser of these idea addas.”As the two friends entered the large hall with theatre-style seating, a bespectacled man with a neat moustache who used to edit a newspaper greeted them. “Anwar, Merry Christmas, so nice to see you. You’ll meet lots of your friends here. And we have a great line-up of speakers today.”As Suleiman and Anwar settled down in their seats towards the front of the room, the first speaker on stage was just getting into his stride. “The liberal, democratic ethos of our country is under attack,” he thundered. “First, the failed demonetisation experiment. Then the banning of all those secular NGOs. Now these nasty right-wingers are even telling people what not to name their child. We are heading towards fascism.”Suleiman nudged Anwar. He whispered in his friend’s ear: “But Anwarbhai, if India was heading towards fascism, how come these people call Prime Minister Narendra Modi psycho, madman, coward, fool, Hitler and yet nothing happens to them? ”Anwar shot him a warning glance but Suleiman continued: “Anwarbhai, I read in a Saudi newspaper that Mamata Banerjee and Arvind Kejriwal had warned of riots because of demonetisation. Have there been any riots?”“No, there haven’t, Suleiman,” Anwar said crossly. “But that doesn’t mean there won’t be any. My liberal friends says there’s still hope –” Anwar stopped mid-sentence, biting his tongue. “I didn’t mean it to sound like that Suleiman. You know, liberals like us hoping for riots…”Suleiman interrupted him with a grin: “So that we can blame it on Modi, Anwarbhai? The only riots I’ve read about are in West Bengal and Mamata, not Modi, is in charge there.”A second speaker had meanwhile taken the stage to applause. Suleiman recognised him as a renowned historian with a withering contempt for right-wing intellectuals.“He mumbles,” Suleiman said, nudging Anwar. “He’s as incoherent a speaker as he is a writer.” Anwar looked at his friend with a shocked expression. “Suleiman, that’s our pre-eminent historian! Sure, he swallows his words but he’s right, the Right hasn’t produced an intellectual since Arun Shourie.“And the Left has produced Rahul Gandhi,” said Suleiman mischievously.“Shhh…” Anwar gestured to the stage as yet another speaker arrived at the lectern. “That’s the famous op-ed columnist who heads a think tank,” Anwar said to Suleiman softly. “Listen carefully. He’s a fount of wisdom.”Suleiman spent the next half-hour in rapt attention as the columnist waxed eloquent about the “renegade attempt to destablise an economic sub-system with a mendacious strategy unencumbered by rational thought.”Suleiman looked sideways at Anwar. “I think, in English, he means demonetisation was a bad idea.”Anwar grinned sheepishly. “Yes, he does rather get carried away with words. But he’s right, you know. Demonetisation is an utter failure.”“Really Anwarbhai,” Suleiman asked, puzzled. “If it’s so bad, why did the BJP sweep the Chandigarh municipal election last week? I heard they won 21 out of 26 seats along with their alliance partner SAD. And of those the BJP won 20, SAD just 1 and the incumbent Congress 4. Looks like voters don’t agree that demonetisation’s a failure.”Anwar rolled his eyes. “Suleiman, you’ve incorrigible. Anyway, here’s the panel discussion. Listen!”On stage, a group of three grim-faced men were discussing the rise of right-wing fascism. When it was question time, a woman at the back of the hall asked: “Would you call the Left, with its record of bloody violence in Bengal and Kerala, fascist as well?”There was a short silence before one of the panelists, an aman ki asha veteran, launched a defence of why Left-wing fascism was part of a people’s movement while Right-wing fascism was imposed by fringe Hindutva elements. He was met with liberal applause from the audience.Suleiman shook his head in mock despair. “Anwarbhai, the RSS and the Left are two sides of the same coin. Both are conservative on economic policy. And liberals on the Left still worship Marx!”Anwar sighed. His friend would never change, he thought to himself. “You’ve been away from India for too long Suleiman,” he said good-naturedly.After the adda was over, Anwar and Suleiman walked slowly back to their car. Both were lost in deep thought. Suleiman broke the silence.“You know, Anwarbhai, if what we just heard was an example of clever liberals, I’m not sure they’re either clever or liberal. They seem intolerant to other views. And that’s not liberal. Nor were their ideas particularly original or clever.”Anwar patted his friend on the back. “Forget it, Suleiman. Maybe it was just their off-day. They’re usually better than this.”Suleiman smiled to himself as they slid into Anwar’s gifted new BMW. That’s why, he mused, liberals are called gifted people.On Notes Ban, Rahul Gandhi's 5 Questions For PM Modi. And BJP's RetortAuthor: Deepshikha GhoshPublication: Date: December 28, 2016URL: Gandhi's list of questions for Prime Minister Narendra Modi today included how much black or untaxed money has come back into the system since November 8, when 500- and 1,000-rupee notes were banned. "50 days are coming to an end, the PM needs to answer key questions," he said, speaking to reporters on the Congress party's 132nd foundation day.The ruling BJP retorted, "Rahul Gandhi should first answer who benefited from the VVIP chopper scam," referring to the allegations that kickbacks were paid to officials and politicians for a deal to supply a dozen choppers to be used by top leaders, signed when the Congress was in power."Modiji has performed demonetisation yagna for 50 families and one per cent super rich people of the country," Mr Gandhi said, questioning: "What are the collections after November 8? What is the loss incurred by economy? How many people have died after November 8, have they been given compensation?"He also asked, "Who were the experts the PM consulted before the notes ban?"The BJP's Srikant Sharma shot back: "We understand your frustration, Rahul Gandhiji, because you have been helping those who tried to destroy the nation with their black money. Since the allegations against you in the VVIP chopper scam reached your doorstep, you should first answer who benefited from the mota maal (hefty amount)."In the morning, addressing party leaders, Mr Gandhi said the notes ban is an example of how the Modi government has fostered fear among people."The Congress listens to you, does for you. It is not about what we want to do," Mr Gandhi said, adding, "Congress is the idea that it is not only my view that will prevail...I must seek out your views."PM Modi "is doing only what he wants", he said, calling demonetisation an example."We can all see what a disastrous decision that has been. People in the country have been robbed of their money. Why has Modiji imposed such restrictions on people? He just wants to instill fear among people," Mr Gandhi charged.How the Indian Air Force and Army fuelled the economy post demonetisatonAuthor: PTIPublication: The Times of IndiaDate: December 28, 2016URL: After demonetisation, the defence forces have played their own part in the efforts to make the fresh currency available to the public at the earliest.While Air Force has put into service its heavy transport aircraft for ferrying fresh currency to various places, the Army personnel have been deployed in at least two printing units to secure the venue and the currency.The IAF planes have so far transported 610 tonnes of freshly-printed currency."We have also helped the government in running at least one of the mints 24x7 with help of our people," Air Chief Marshal Arup Raha said at a press conference here while talking about IAF's contribution to the demonetisation move.He said the IAF has pitched in to carry cash from mints using its heavy transport aircraft and choppers."Large volumes of cash has been transferred from one place to another. As of today we have flown 35 sorties, and have carried about 610 tonnes of cash," he said.Raha, who will be retiring on December 31, defended the move of roping in the IAF saying he thinks it is "perfectly alright in terms of serving the nation, the people, to overcome the difficulties that they are facing".He said the demonetisation has been a very huge initiative taken by the government.He said both the armed forces and the government realised that there has been lot of hardships for the people because of the non-availability of cash in the ATMs and the banks."We are there to serve the nation, serve the government, like HADR (humanitarian assistance and disaster relief), aid to civil authorities, be it law and order situation..." he said.Opposition fails to fuel backlash over note banAuthor: TNNPublication: The Times of IndiaDate: December 29, 2016URL: the 50-day deadline for depositing old currency notes approaches, PM Narendra Modi seems ahead in a hard-fought battle with the opposition over whether the "surgical strike" on black money is working.The political scuffle will only intensify as elections to UP, Punjab, Goa, Uttarakhand and Manipur approach, the results of which will be inevitably read as a verdict on demonetisation.But as the initial, traumatic phase of "notebandi" ends, Modi seems to have managed to retain popular support in the face of demands that he resign as people continue to face hardships.After successes in municipal elections in Maharashtra, Gujarat and Chandigarh, BJP claims that demonetisation has received a thumbs up, all the more because its rivals made the decision an election issue.Though civic polls can reflect local factors intensely, the absence of a backlash will reassure the BJP as the PM uses every public speech to attack opponents, who he accuses of supporting black money hoarders.Rahul Gandhi and Mamata Banerjee have demanded Modi's resignation for failing to restore normalcy, also attacking him over diaries alleging pay-offs to Modi when he was the Gujarat CM. The diaries seized in raids on the Sahara and Birla group offices were raised in a dramatic fashion by Rahul who said he was being prevented from speaking in Parliament as his revelations would lead to a political "earthquake".In the punch-counter punch BJP and Modi have won some crucial points with the opposition missing out on some crucial moments. While it managed to stall Parliament and maintain opposition unity, the Congress failed to anticipate that the government itself would turn obstructionist in the last few days of the winter session preventing Rahul from speaking.The Congress's decision to drop its insistence on an LS debate under a voting rule came late as by then BJP began arguing that it wouldn't allow Rahul to hold the floor and target Modi and "force" a shutdown of Parliament.Modi has brushed aside the Sahara and Birla diaries and the BJP pointed out that the Supreme Court has refused to consider the evidence strong enough to order a probe. More problematically for Congress, important non-NDA parties distanced themselves.Unless Rahul follows up with more dirt on the PM, the charges may fail to stick.A strident campaign with the declared intent of "driving Modi out of politics" may suit Mamata as the Trinamool leader looks to hold centre stage and, in a regional context, ensure the Muslim vote doesn't look at the Left.Congress leaders would be aware of the need to challenge Modi's claim that notebandi is a success.But while they accuse him of shifting goalposts from black money to digitalisation, lack of a popular upsurge will worry them.Demonetisation should not be used as an excuse to delay GST, if anything it should expedite GSTAuthor: Pratik JainPublication: The Times of IndiaDate: December 29, 2016URL: latest GST council meetings have fallen short of expectation. Lack of consensus on the issue of tax administration or ‘dual control’ means that the April 1, 2017 deadline for GST implementation looks unachievable. A few states also believe that GST should be deferred due to the ongoing demonetisation drive.These states argue that they cannot absorb the impact of two ‘major disruptions’ – demonetisation and GST – simultaneously. This is interesting, because GST was hardly seen as a ‘disruption’ before the currency ban.So, should demonetisation be a ground for delay in implementation of GST?A closer look at facts suggest otherwise. At a conceptual level, one of the primary objectives of both demonetisation and GST is to check tax evasion. Demonetisation does it by bringing a larger part of economy under banking channels, GST is proposing to do it by tracking all business transactions through the GST Network (GSTN) system. So, GST should complement measures to curb black money.Some economists make the point that small businesses are most impacted by demonetisation and they would not be able to align themselves with GST so quickly. There is hardly any merit in this argument. In GST, there is a proposal to exempt small businesses upto annual sales of Rs 20 lakh (10 lakh for northeastern states). Further, those in the range Rs 20-50 lakh would have the option to pay composition tax at a flat rate, without claiming credits and maintaining detailed paperwork.These small businesses will hardly be impacted by GST. It’s relevant to point out that agricultural produce would be kept out of GST as well. Larger businesses were anyway expected to prepare for GST, with or without demonetisation. In fact they look forward to savings, which GST-led efficiencies are expected to bring about.These businesses are used to making tax payment online, also mandatory under current excise and service tax laws. Further, they can make GST payment through debit and credit cards as well, which will further simplify the tax payment process. In any case GST is now likely to be delayed by at least 3 months or so, which gives businesses more time to prepare for it.From state governments’ perspective, admittedly, demonetisation could lead to drop in tax revenues (primarily VAT) in the current year, due to lower sales that many companies are experiencing, particularly those dealing with FMCG or consumer products. However, such a revenue loss is fully protected by the Centre for a period of 5 years of GST implementation.Further, the base year to be taken for arriving at the state tax revenues is 2015-16, before demonetisation. For every year thereafter, a minimum annual growth of 14% has been assumed. Therefore, even assuming that state revenues drop in 2016-17 due to demonetisation by say 20%, they would continue to get compensation on the basis of base year 2015-16 plus 14%.It only means that the quantum of compensation might increase for the Centre due to less than normal revenue collection by states. Thus the Centre needs ways to collect additional revenue. In the last GST council meeting, a consensus has already been reached that alternative sources to fund the additional compensation should be explored by the Centre.For the Centre, while excise and customs duty collections may drop initially (due to fall in demand after demonetisation), they could make up the shortfall by higher collection of income tax as a significant part of parallel economy is expected to come within the tax net, as we go forward.For consumers, GST is decidedly a better system of taxation – simple and transparent. There is an expectation that GST would bring down the prices of most products of general usage. The government’s proposal to introduce an ‘anti profiteering’ clause in the revised draft of GST laws would mean that businesses would be forced to pass on the benefit accruing to them on account of GST, even though implementation of such a provision could be a challenge. Drop in prices would spur demand, which is exactly what the doctor ordered to deal with demonetisation’s fallout.So demonetisation should not delay GST, if anything it should expedite GST. Most definitely, it cannot be used as a scapegoat for derailing the GST bandwagon.Disunity in oppositionAuthor:Publication: The HinduDate: December 29, 2016URL: since the Bharatiya Janata Party was voted to power with a majority of its own in the 2014 Lok Sabha election, Opposition parties have been trying to find an issue that would resonate with the people, identify a rallying point that would put the Narendra Modi government at the Centre on the defensive. But when such an issue did crop up after Mr. Modi announced the demonetisation of high-value notes on November 8, opponents of the BJP found themselves unprepared and unable to tap into the public resentment at the seemingly unnecessary pain caused by the shortage of cash. The demonetisation exercise did far more than divide the Opposition parties: it left them confused on the approach to be taken against the government. They were unable to fault the stated aims of the move: to curb black money, flush out counterfeit notes from the economy, and thereby curb terror funding. And when Mr. Modi sought 50 days to ease the cash flow, his opponents had no choice but to wait it out. Other than making noises about long queues at banks and ATMs and the flip-flops in announcing new rules for withdrawals and deposits and amending them in quick time, they had little to do. They could not attack the move in principle without being seen as supporting the corrupt and the devious. And they could not attack the manner of implementation without giving Mr. Modi the time he wanted to deal with what could not but have been a crisis in cash supply.It was probably inevitable that the Opposition parties would speak in different voices on an issue like this, but it was inexplicable that the main Opposition party, the Congress, did little to forge a united front in Parliament and outside. When Opposition parties were planning to petition President Pranab Mukherjee on the demonetisation issue, Congress vice-president Rahul Gandhi met Mr. Modi with a delegation of party leaders to request a waiver of farm loans. Leaders of the Samajwadi Party, the Bahujan Samaj Party and the Left parties were unhappy with the Congress approach. Not surprisingly, at a joint press conference of Opposition parties called by Mr. Gandhi, only Trinamool Congress leader and West Bengal Chief Minister Mamata Banerjee was at hand to attack Mr. Modi. The other participants were mostly long-time allies of the Congress. The Janata Dal (United), whose leader Nitish Kumar had nice things to say about demonetisation initially, did not participate in a maha dharna organised by the RJD against demonetisation. The JD(U) stand was that it would rather wait for the 50 days before judging the move to be a failure or a mistake. Far from bringing together Opposition parties, the demonetisation move appears to have driven apart parties already in alliance.Missing in oppositionAuthor: EditorialPublication: The Indian ExpressDate: December 29, 2016URL: government is taking large steps. There is incoherence across the aisle.The Opposition looked divided again on Tuesday, as some parties held a press conference to relaunch their attack on Prime Minister Narendra Modi and his government’s policy of demonetisation. Trinamool Congress chief Mamata Banerjee demanded the PM’s resignation if the cash crunch did not ease after the expiry of his 50-day deadline, but other leaders seemed reticent on the matter. Congress vice president Rahul Gandhi repeated his charges of corruption against the PM based on the purported Sahara and Birla group papers, but the rest didn’t chime in.The Left was among the Opposition parties missing on stage, with the CPM later complaining that it was neither informed nor consulted about the joint campaign. The JD(U) had, in any case, broken ranks with the Opposition on the issue of demonetisation, extending the policy its support. As the government’s ambitious and controversial experiment enters its next stage, then, and the nation a new year, the Opposition’s talk of a common minimum agenda sounds like a difficult proposition.In a sense, this is as it should be. After all, in a diverse and layered democracy, why must the Opposition speak, or be expected to speak, in one voice, always? That Nitish Kumar and Naveen Patnaik have extended their support to the government’s demonetisation policy, for instance, while other prominent leaders criticise it roundly only underlines different ideas, interests and compulsions of players operating in and addressing different arenas of a complex polity. Having said that, however, it is also true that over the last few weeks and months, a contrast has been highlighted again and again — while the government has been seizing the initiative, and the headlines, moving from one consequential policy and project to another, with demonetisation following close on the heels of the surgical strikes across the Line of Control, the Opposition has seemed overtaken and reactive.It also lacks a centrepiece that could hold even a loosely defined joint strategy together. As the main Opposition party despite its dwindled numbers in the Lok Sabha, the Congress, which remains convulsed with its own incoherence and uncertainties, has seemed unprepared for the role. And so far, no other party, be it Nitish Kumar’s JD(U) earlier or Mamata Banerjee’s Trinamool Congress now, has fully stepped up either.What this means is that at a time when a robust Opposition is needed in a healthy and argumentative democracy — when the government is taking important decisions that deserve to be fully discussed and vigorously debated, even if not necessarily opposed — the Opposition has seemed unfocused. Whether or not it can find a centre of gravity and get its act together is a question for the new year.The Seven Disruptions Of Modi: Five, Including DeMo And GST, Underway; Two More To GoAuthor: R Jagannathan Publication: Date: December 28, 2016URL: will be a while before we can calculate the long-term benefits and costs of demonetisation, but one thing is clear: it has disrupted the system, and that is a huge gain in itself. By opting for demonetisation of high-value currency, Narendra Modi has established his credentials as a consistent disrupter of the status quo.His record as chief minister of Gujarat from 2001 to 2012, and as Prime Minister in the last two-and-a-half years may have given the impression that he is an incremental reformer; he is that for sure, but he is also a disruptor. His day-to-day incrementalism, where he pushes the envelope in the right direction in multiple areas, is interspersed with larger disruptions to give the system a jolt and build greater momentum.Not all disruptions succeed, but if even some do, Modi would have left his mark on history.The first disruption was, of course, his emergence as the Bharatiya Janata Party’s (BJP) prime ministerial candidate, where he disrupted his own party to become its prime ministerial candidate and later led it to victory in 2014. He became the first politician to craft a single party majority in 30 years. He disrupted the idea that India can only be ruled by coalitions, and ended the Congress party’s hegemony in Delhi. He achieved this partly by launching a presidential-style campaign, and partly by harnessing the power of digital technologies, including the social media.The second planned disruption was a failure. He tried to disrupt the cosy and incestuous judicial system by legislating the National Judicial Appointments Commission (NJAC), which would have been a good first step to reform India’s moribund legal system. He was stymied by the system, especially a judiciary that felt threatened by reform. This reform will now have to be done differently – possibly by lighting fires under a wayward lower judiciary, which is the weakest link in the legal system. NJAC would have worked if the judiciary had had a change-oriented Chief Justice like J Chelameswar, the lone dissenter in the NJAC bench, rather than no-changers.The third disruption has been quieter: the shift of subsidies to cash, or direct benefits transfers. The move was a Congress brainchild, but the UPA did not have the guts or gumption to carry out this disruption, using Aadhaar as the platform. During the rest of Modi’s tenure, and possibly in a second term after 2019, India’s entire subsidy system will be reformed. Some of these subsidies may well morph into a minimum basic income. It may be universal, or targeted at the demonstrably poor. Corruption in this system is far less than in the physical transfer of subsidies.The fourth disruption will happen with GST – the goods and services tax – which must be implemented by mid-September. There is little doubt that it was Modi’s political support that allowed Finance Minister Arun Jaitley to get states on board to sign up to the constitutional amendment. And it is Modi’s push that is going to see it go into effect, despite last-minute foot-dragging by the likes of Mamata Banerjee. GST is a big disruption for the simple reason that it will formalise and bring the largest number of producers into the indirect tax system, an area of major corruption and evasion. Modi should be given maximum credit for this because GST strikes at the core base of BJP support – traders and small businesses in cities. GST will be pure heartburn in the initial years, but only a disruptionist like Modi could even have attempted it. A UPA-3 could not have delivered GST, especially when major states ruled by the BJP would have opposed it.Demonetisation (DeMo) is, of course, the fifth disruption, though it has come ahead of GST. We cannot be sure if it will deliver more long-term economic gains than short-term losses, but either way no one can deny that it has disrupted a way of thinking about cash and taxes. Whatever the outcome, cash will be less used in India in future, and digital payments will gain traction; and the direct taxes base will be widened significantly.The most important disruption that DeMo brings is to dethrone the idea of cash as king. The economic fallout of this could well be negative in the short run, but the message it has sent out is clear: no one can assume that the informal and black economy will never be torched.However, if Modi is to permanently seal his place in the Hall of Disruptors, he must follow up with two major initiatives – change he has hinted at already. He must fix the problem of political funding, and the Gangotri of all corruption – real estate. This is where politicians hoard their ill-gotten wealth.The sixth and seventh disruptions – the assault on illegitimate political funding, and real estate rackets – will be the toughest to enforce. This is where the bulk of the political opposition will be preparing for its final war with Modi. He will also face huge opposition within his own party, especially on real estate reform, for even BJP politicians store their wealth here.Of the two, political funding reform will be easier, for one can start with two simple moves that initially threaten few vested interests directly. One is a promise to fund Lok Sabha candidates, as this does not involve a huge political or economic cost. At an average of Rs 5 crore of political funding per constituency, state funding in the Lok Sabha polls will cost around Rs 2,700 crore. A second reform in this area would be to ban cash donations above Rs 2,000. Modi would do well to put these ideas in the public domain, for few politicians can argue that those who want to donate more than Rs 2,000 are poor people without bank accounts. With cash anyway in short supply, the logic of seeking higher cash donations would appear perverse. Corporate funding can be encouraged by legislating a law that would prevent governments from harassing donors who want to fund rival political parties.The most difficult (and disruptive) reform is real estate. For two reasons: political resistance will be maximum in this area. And two, any disruption in real estate has huge consequences for short-term growth, employment and the banking system. Real estate and construction are the biggest job creators, but without reforming this sector, its potential will be underwhelming.In other words, without disrupting real estate, you cannot revive the sector and the country’s biggest growth engine. Politicians and benami holders of land stand in the way.I can see only two ways to disrupt real estate: one is to force BJP-led state governments to reform real estate laws so that more land is available for development, and stamp duties are cut to the bone (a maximum of 1 per cent) to encourage more buying. Plus, the Benami Properties Law can be used as a stick for forcing change.Logically, given the unaffordability of most urban properties, realtors themselves should be cutting prices to push sales. But they are possibly prevented from doing so by their benami owners, who want to milk higher margins from their holdings.Perhaps the best way for Modi to bring about change is to precipitate a crash in property prices through harsh income-tax or other laws, but a better way would be to coax and coerce his own state governments – now ruling some of the most progressive states, including Maharashtra, Gujarat and Haryana – to make these changes. Once these states lead the way, the rest of India cannot but follow suit, for capital, investment and jobs will move to these states.The only caveat is banks – they are the biggest holders of real estate mortgages, and any drop in real estate prices will impact the value of their loan books. This means they must have their capital shored up. Loans to builders will be quick to turn non-performing assets, but loans to individuals will not go bad that easily, as their properties are financed by incomes and not by manipulating regulation and speculation.A real estate crash will be manageable if Modi prepares for it before-hand. It will face huge political opposition and cause major disruption. But once it is done, India will be the biggest beneficiary. It will be a disruption that will truly revive jobs and growth like no other sector could. An affordable and transparent realty sector will drive growth like no other.Buyers walk back in at Gurgaon's Mall Mile RoadAuthor: Ratna BhushanPublication: The Economic TimesDate: December 28, 2016URL: sales seem to be springing back after plunging in the weeks following the November 8 demonetisation announcement, as consumers warm up to digital payment before the festive season winds to a close with New Year. Stores along the ‘Mall Mile,’ a stretch on MG Road that’s lined by some of the Millennium City’s biggest shopping and entertainment complexes, had reported a sales slump of 25-40% after old `500 and `1,000 notes ceased to be legal tender. Most say consumer sentiment has perked up and so have sales. “We did see a 15-20% dip in sales in the first three weeks after Nov--ember 8. But they have bounced back and shopping sentiment is returning,” said VP Pushpa Bector, an executive of real estate developer DLF Utilities’ premium malls division. “Card transactions have shot up by 85% post demonetisation, with a collaborative focus on increased digitalisation.”Aiding footfall is an effort by mall operators to set up card payment systems even for low-ticket transactions such as parking. According to industry estimates, Gurgaon’s malls — Ambience, Sahara, MGF Metropolis, DT City Centre, Mega Mall and Central — generate Rs 3,000-4,000 crore in revenue every year, driven by a steady stream of shoppers, many of whom come from the National Capital, braving heavy traffic. Ambience, which houses over 100 fashion and lifestyle retailers, entertainment zones, some 50 restaurants and cafes and an ice skating rink, had reported a 15-20% fall in retail sales in the first few weeks after demonetisation. “But sales are back at Ambience Gurgaon and given the revived consumer sentiment, we are expecting to do better than last year in the Christmas-New Year weekends,” said Arjun Gehlot, director for Ambience Mall (Gurgaon and Vasant Kunj). Sameer Lamba, managing director of Kwal’s Group, which operates food courts at DLF Mega Mall and Raheja Grand Mall on Sohna Road, said sales at the food courts had slumped 40% in the first four weeks after the old notes were banned. “Discretionary spending at food courts in malls was impacted significantly in the first month. But the past fortnight has seen a revival and sales are back at what they were, perhaps because of a combination of the gradual easing of the liquidity crunch and setting in of the (Christmas and New Year) festive season,” Lamba said. Retailer Future Group, which owns Big Bazaar, was quick to leverage the situation and set up cash withdrawal facilities at the supermarket chain’s stores. On the first day of the facility being introduced, four Big Bazaar stores in Gurgaon at Ambience, Sahara, Omaxe and Spazedge, dispensed over Rs 15 lakh in cash.Arun Jaitley on note ban: Tax collection up, more new notes of Rs 500 soonAuthor: TNN & AgenciesPublication: The Times of IndiaDate: December 29, 2016URL: 50 days after the implementation of demonetisation, finance minister Arun Jaitley said on Thursday that the critical phase for the economy is now over and the situation will only improve further."The critical part of remonetisation is now behind us and it will be much better, going forward," Jaitley told reporters at a media briefing.Jaitley said that the November 8 decision+ has greatly benefitted the economy, with a double-digit increase in tax collection figures."Notwithstanding what critics predicted, there has been significant increase in tax collection in all segments. Till December 19, direct tax mop-up rose 14.4%, indirect tax grew 26.2%, central excise is up 43.3%," Jaitley said.On the issue of cash crunch, the BJP leader informed that remonetisation has advanced substantially and the RBI has a large amount of currency available with it."A large part of the demonetised currency has been replaced and more new notes of Rs 500 are being released for circulation," he added.Asked whether the government would take a conscious decision to reduce the quantity of money in circulation in the remonetising process, Jaitley said that is a decision RBI will take guided by market requirements."One of the intentions as far as government of India is concerned is that the paper currency should shrink and a large part of businesses should be in the alternative digital or cheque mode. Considering the very large increase in digital users that have taken place we seem to be moving in the right direction," he said.Replying to questions on when customers can see easing of curbs on cash withdrawals, Jaitley said, "That is a decision the central bank will take in consultation with everyone."The finance minister underscored that contrary to apprehensions, the impact on GDP was not as bad as feared and in fact, various sectors such as investment in mutual funds and life insurance, fuel consumption, and tourism witnessed growth post demonetisation.However, he refused to hazard a guess on the GDP growth for the year or the possible impact on tax proposals in the Union Budget for 2017-18 on account of increased revenue collections, PTI reported.Jaitley thanked people for supporting demonetisation and said that not a single incident of unrest has been reported over junked notes.Demonetisation will impart far reaching changes going forward, says RBI Governor Urjit PatelAuthor: PTIPublication: The Times of IndiaDate: December 29, 2016URL: RBI on Thursday said that GST and demonetisation have the potential to transform the economy, "notwithstanding some inconvenience to public and momentary adverse impact on growth", even as it flagged elevated risks due to continuous deterioration in banks' asset quality.It also observed that while the financial performance of the corporate sector has improved in 2016-17, the risk of lower turnover remains. It also said large borrowers registered significant deterioration in their asset quality."The measures such as transition to the nationwide GST and the withdrawal of legal tender status of specified bank notes (old Rs 500/1000) could potentially transform the domestic economy, notwithstanding some inconvenience to public and the momentary adverse impact on growth," the RBI said.These observations were made in the Report on Trend and Progress of Banking in India 2015-16 (RTP) and the 14th issue of the Financial Stability Report (FSR).In his foreword to FSR, RBI Governor Urjit Patel said the withdrawal of Rs 500/1000 notes "will impart far reaching changes going forward"."It is expected to significantly transform the domestic economy in due course in terms of greater intermediation, efficiency gains, accountability and transparency through increasing adoption of digital modes of payments, notwithstanding the short-term disruptions in certain segments of the economy and public hardship," he said.The RBI Governor also cautioned that there is "little room" for complacency and it is important to guard against sporadic volatility in financial markets.The RBI further said that the banking stability indicator shows that the risks to the banking sector remained elevated due to continuous deterioration in asset quality, low profitability and liquidity.The business growth of banks remained subdued with public sector banks (PSBs) continuing to lag their private sector peers. System level profit after tax (PAT) contracted on y-o-y basis in the first half of 2016-17.The asset quality of banks deteriorated further between March and September 2016. PSBs continued to record the lowest capital to risk-weighted assets ratio (CRAR) among the bank groups with negative returns on their assets."The GNPA (gross non-performing advances) ratio of SCBs increased to 9.1 per cent in September 2016 from 7.8 per cent in March 2016, pushing the overall stressed advances ratio to 12.3 per cent from 11.5 per cent."The large borrowers registered significant deterioration in their asset quality," said the central bank.History and 50 daysAuthor: EditorialPublication: The Indian ExpressDate: December 30, 2016URL: demonetisation, PM risked political capital, people took leap of faith — shoddy execution does disservice to big ing on the heels of a voluntary disclosure scheme, which offered an opportunity to those dodging taxes to pay a penalty and come clean, the demonetisation drive signaled the government’s seriousness about curbing black money. The landmark move, which completes 50 days today, also envisaged a progressive shift to a cashless economy with a greater focus on electronic transactions and the formal banking sector. For a country that has long tried to bring the parallel economy into the tax net, the salience of the move cannot be overstated. Demonetisation could not avoid being disruptive — at one stroke, 85 per cent of the currency in circulation was pulled out of the economy. It also entailed considerable political risk — no matter how well planned, it meant hardships for the aam citizens. For Prime Minister Narendra Modi, it has meant putting his tremendous political capital at risk, alienating, potentially, his party’s core base of traders and businessmen. By all accounts, however, people, in general, have endorsed the intent, acknowledged the long-term goals even if it has meant braving serpentine queues in banks and ATMs. Or suffering the indignities of being viewed with suspicion through the more than five dozen orders that have been issued.That is why the government, by not always matching the composure displayed by the people, has done a disservice to its own big idea. Demonetisation has not been carried through with the assurance required by a move of such consequence. Some of the hardships could have been mitigated by homework. It took a week, for instance, for the new Rs 2,000 notes to reach the ATMs simply because the machines had not been properly calibrated. There was little to reduce the problems of the informal sector, labourers, farmers and small firms. The government’s announcements in the last two weeks also give rise to fears of a return to “inspector raj”. It had initially said that deposits of the demonetised notes amounting to less than Rs 2,50,000 will not be probed. Later, the IT department announced that it will look into “suspicious” and “unusual” deposits even if they are less than Rs 2,50,00. The government’s December 28 ordinance, that talks of penalising people who possess “large numbers” of the scrapped notes, betrays an anxiety unbecoming of a regime carrying out far-reaching changes. The ordinance justifies the proposed fines on grounds that they will deter a parallel economy in the demonetised cash. But according to the RBI, a little more than 80 per cent of the demonetised money had been deposited in banks by December 10 and this percentage would have gone up since.Instead of issuing directives that go against its credo of “maximum governance, minimum government”, or using the cover of good intentions to brush vital issues under the carpet, the government would do well to address the snags that threaten to jeopardise its bold, daring move. It needs to create sound digital infrastructure, address the shortfall in point of source terminals, draft robust privacy laws. It needs to appear far more sure-footed and responsive to people’s concerns as the economy undergoes a major disruption — towards, hopefully, a more robust transition.A new story of usAuthor: Manish SabharwalPublication: The Indian ExpressDate: December 30, 2016URL: and demonetisation are risky. But they could end up reviving the lost romance of policy.A modern state is a welfare state with formal enterprises and formal jobs. An entrepreneurial state takes big risks to get us there. But recent commentary about GST and demonetisation suggests some of us have lost the romance of policy which views the state as a force for change, justice and risk-taking. An entrepreneurial state fights for what it believes in despite the re-election risks of imposing short-term pain for long-term gain, knows that change does not come from a beheading but death by a thousand cuts, and has the self-confidence that a 10-year plan isn’t 10 one-year plans. Restoring the lost romance of policy is important because creating formal jobs for 10 lakh kids every month needs big risk-taking.The most painful arguments against GST and demonetisation have been a defence of informal employment. Employers who don’t pay minimum wages, Provident Fund, and ESI don’t deserve sympathy. How long do young Raju and Chhotu have to work in informal retail without an appointment letter or eight-hour workday? Are small enterprises only viable if we don’t enforce our laws? Isn’t informality the slavery of the 21st century? Isn’t universal enforcement of minimum wages only possible with electronic salary credit? India is poor not because Indians don’t work hard but because our informal enterprises don’t have the productivity to pay the wage premium.Of our 6.3 crore enterprises, 2.4 crore don’t have an office or work from home, only 85 lakh have any tax registration, only 12 lakh pay the mandatory social security, and only 18,000 companies have a paid-up capital of more than Rs 10 crore. We don’t need so many enterprises; the US economy is seven times our size and only has 2.2 crore enterprises. No decent country has 84 per cent of its currency in high value notes, 85 per cent of its labour force working without a formal appointment letter, or 99 per cent of its enterprises with less than 10 employees. The notion that “Indian culture” is responsible for this informal employment is, at best, the soft bigotry of low expectations and at worst, racism. Informality is a child of regulatory cholesterol and the riskless view of informality.GST and demonetisation have real economic risks like skill hysteresis, demand deferring, and informal employment cratering. But thankfully, demonetisation’s biggest human risks are unrealised; there’s been no change in food prices at the 100 largest mandis or the 22,500 people that die every day. Report cards either way are premature; pundits must remember the wise “It’s too early to tell” quip of Chinese Premier Chou Enlai to Henry Kissinger’s question in 1970 about the impact of the French revolution of 1789. More importantly, the true risks of failure of big decisions in complex systems need to be underestimated; economist Albert Hirschman called this underestimation of failure the hiding hand necessary for entrepreneurship and progress.Ricardo Hausmann of Harvard suggests the only way to improve air traffic safety is having plane crashes since everything known about air traffic safety is already built in. The country’s honourable patience with demonetisation not only has lessons for the GST transition but suggests three immediate policy actions; civil service reform, taxation recalibration, and lower regulatory cholesterol. The first is obvious.Though necessary secrecy cramped style, some demonetisation pain came from government plumbing not keeping up with the cognitive, technical and specialised demands of India-scale. The generalist civil service needs rebooting with lateral entry, specialisation, performance management, adopting the early retirement army colonel threshold, etc. Second, the next budget should lower tax rates and raise the individual exemption limit to Rs 5 lakh. Finally, higher formal employment needs lower regulatory cholesterol; three low hanging fruit are a Universal Enterprise Number (instead of the 25 plus numbers every enterprise has today), going PPC (paperless, presenceless and cashless for all compliance), and salary choice (employee flexibility in mandatory salary confiscation of 45 per cent).Globally, voters are forcing politicians to blur neat boundaries between the left and right and conservative and liberal. It was always simplistic to assume that business people don’t care about people and politicians hate fiscal discipline or can’t get re-elected once they do the right thing. Instead of misunderstanding Keynes’s quip “in the long run we are all dead” as foolishness in planting trees you won’t sit under, an entrepreneurial state knows the best time to plant a tree was 20 years ago but the second best time is now. Indians must lose our sense of humour about the rule of law by moving from deals to rules; it’s economically corrosive for an Indian who follows a rule to feel she has missed a deal.On my first trip to Patna this month a wise man said it has been Bihar’s misfortune that imaandaari (honesty) is equated with bewakoofi (stupidity). This isn’t a moral or spiritual insight; formal jobs are a rare — if not extinct — species in Bihar. The stories a society tells itself are unacknowledged legislation; India’s new story about formalisation, enforced laws, and lower costs of imaandaari will create new role models in business, politics and bureaucracy. Risk-taking could change the perception of government from “meddling, ungrateful, arrogant, dishonest, jealous, and surly” to a force for good. It’s the state that lays the foundation of equality; our biggest romance of policy was universal franchise at birth (previous democracies progressed through the landed, rich, and educated before reaching women).Obviously, risks, like romance, can end badly and demonetisation could translate to political punishment in 2019. But it could translate to higher tax revenues for redistribution, a beginning of the end for informality, and a fairer India. A magnificent case for the romance of risk was Tagore’s quip that life should not be the infinite elongation of a straight line; the risks of GST and demonetisation are real but we won’t get a modern state until we have an entrepreneurial one.- The writer is chairman, Teamlease Services60 lakh depositors put Rs 7 lakh crore in banks, govt probing all of themAuthor: PTIPublication: The Economic TimesDate: December 29, 2016URL: with information about Rs 7 lakh crore deposits made by some 60 lakh individuals and companies, the government today warned of hauling up anyone unable to show legal means saying mere depositing in bank does not convert black money into white. Top officials said while the government will not hound any genuine depositor, it will not hesitate to litigate at any forum to catch any black money holder trying to convert illegal wealth into white. Post demonetisation, unaccounted wealth holders have an option to avail of a tax evasion amnesty scheme Pradhan Mantri Garib Kalyan Yojana (PMGKY) and pay their dues, failing which the government's long arms will surely catch them, they said. "People are thinking that money has come into the banking system and it has all become white. This is not so. We have been getting daily information of all the deposits above Rs 2 lakh, Rs 5 lakh and the number and amount deposited and we have been collating this information with past information about the same person," a top government official told PTI. "So, there is a huge scope for taxing now which has arisen and we do hope that people will understand that simply because they have put in bank it has become white that is not the case. We do hope that people themselves will come forward to participate in the scheme. But if they don't, they are not going to be happy," the official further said. The tax department is armed with systems to track those with multiple banks accounts as well as those who are depositing in accounts of others and tax department will not leave anyone who is trying to evade taxes, he added. "Even if you take deposits of more than Rs 2 lakh, we have information about more then 60 lakh individuals, companies and institutions who have deposited more than Rs 7 lakh crore of money. That's an astonishing number. We will be looking at it. For individuals the deposit figure would be Rs 3-4 lakh crore. "We do expect a lot of revenue buoyancy because of this either in this year or in subsequent years but nobody will go scot-free," the official said. Following the demonetisation of 500 and 1,000 rupee notes on November 8, government has come out with PMGKY under which people can disclose unaccounted cash and come clean by paying 50 per cent tax. Besides the scheme provides for a mandatory deposit of 25 per cent of such income in the zero-interest bearing Pradhan Mantri Garib Kalyan Deposit Scheme, 2016, for four years. PMGKY commenced on December 17 and shall remain open for declarations and deposits up to March 31, 2017. The official said that tax department is doing data analytics. The purpose of demonetisation was to bring the money into the banking system so that there is a money trail with regard to the anonymous cash holding. "We don't want to send any inspector to people but at least we would like people to know that we know about them. Now this is a big change. Earlier, people used to keep a lot of black money and think that nobody knows about it. Now, the entire black money has come into the banking system," he said. The official said that at least 70 per cent of bank accounts have PAN numbers and are linked with Aadhar, and hence all deposits can be easily tracked. Besides, RBI has already asked banks within two months all accounts have to be linked with PAN or else there will be restrictions. "It is better to disclose the deposits under the PMGKY and pay the tax rather than keep it hidden as the tax department will eventually be able to track them," the official said. The PMGKY scheme provides an opportunity to persons having undisclosed income in the form of cash or deposit in an account maintained with a specified entity (which includes banks and post office) to declare such income and pay tax, surcharge and penalty totaling in all to 49.9 per cent of such declared income. Besides, the scheme provides that a mandatory deposit of not less than 25 per cent of such income shall be made in the zero-interest bearing Pradhan Mantri Garib Kalyan Deposit Scheme, 2016, for four years. "When there is a scheme of 50 per cent tax payment available, no one should keep money at home. Unless it is a case of corrupt officer he doesn't disclose. Business people will put money in bank and relax," the official added.Three Ugly Truths Unveiled By DeMo Chaos: Poor State Capacity, Compromised System And Trust DeficitAuthor: R Jagannathan Publication: Date: December 29, 2016URL: we come to the end of the note-badli deadline of 30 December, there are more questions than answers on the real impact of demonetisation. We know damage has been done to the cash economy, growth and jobs, but we don’t know how much.But some broader conclusions can be drawn and lessons learnt.First, state capacity to execute such major reforms is poor. The mishandling of the exchange of old notes and poor preparation for the two months of transition cannot but reflect badly on the capacity of both the Finance Ministry and the Reserve Bank of India (RBI). They were simply not equipped for flawless, top-down implementation, especially in a federal polity where there is no alignment between what the centre wants done and what the state can do – or are willing to do. Implementation of any reform thus needs to be a staged process. Blundering along should not be an option in future.Second, the system reeks of compromise and corruption. It was disheartening to see people standing in queues for withdrawing money and crooks accessing crores of new notes through clandestine deals with bankers and other corrupt officials. A seriously compromised system will stymie any moves for reforms. Reform will thus have to be pushed steadily rather than in one go.In this context, both centre and states have to be conscious of the fact that when the goods and services tax (GST) is implemented in 2017, we must prepare for a lot of trial, error and heartburn before the system functions reasonably well. Millions of GST assessees, central and state tax officials and IT network staff have to be taught to transit to the new system. Again, it is saddening to realise that centre and states are fighting over dual control of small assessees. This is nothing but a corrupt system trying to retain its access to speed money and bribes.Third, India is too wedded to cash for all the wrong reasons – evading taxes and staying under the state’s radar. The scale of the disruption – which is yet to be estimated – caused by the withdrawal of high-value notes suggests that Indians are inherently suspicious of the state, and unwilling to formalise their transactions to avoid the clutches of the state. This indicates that once the currency crisis eases, people may simply go back to cash. The digital payment mode may grow very slowly, and will need both a strong legislative push and taxing of high-value cash deals.The simple learning should be that the state must become more trustworthy for citizens to learn to respect it.Lack of trust in the state is what has created the addiction to cash, causing serious disruption in economic activity when a prime minister wants to ring in a more honest polity. The numbers show the damage done by this trust deficit. Mint reports a drastic fall of over 34 per cent in RTGS (real-time gross settlements) payments between October and December. If we take RTGS as an indicator of economic activity in the formal parts of the financial system, this must be worrisome. The cash economy chaos is impacting the non-cash part too.But then, it is quite possible that economic activity was higher in the festival season of October, and the fall may be exaggerated.What is heartening is to see non-cash payment averages holding up between November and December. (And remember, November had normal activity for the first eight days). Average daily transactions (through RTGS, NEFT, IMPS, cheques, credit cards, and e-wallets, among other things) are flat – Rs 3.13 lakh crore in November and Rs 3.09 lakh crore in December (upto 27 December).Despite the damage to the cash economy, the digital part of the economy is holding up.But that can be no consolation when we see how poorly the demonetisation drive has been implemented. Clearly, when big moves are planned, a lot more planning must go into it to prevent flawed implementation. And yes, the state has a long way to go before it earns the trust of its citizens enough to wean them off cash.'No Leader In Modern Democracy Could Have Survived Demonetisation Crisis As Modi Has'Author: Aakar PatelPublication: Date: December 27, 2016URL: No other Indian leader, and few politicians in democratic politics anywhere could have ahieved what Modi has since November 8.No leader in India and perhaps no other political figure in any modern democracy could have survived the demonetisation crisis for seven weeks as Narendra Modi has.If one is looking for evidence of his talents as a mass leader, it has been on display in this entire period. Let us look at it and appreciate it, because we are in the presence of a true master. We have a few clues that the currency exchange crisis may not have been fully anticipated by the government. The first clue is Modi's initial announcement where he made some predictions on a return to normalcy that were incorrect. The second is that he continued on a scheduled visit to Japan, at the time when the extent to which the note shortage would affect the economy was just being realised. By the time he returned from Japan it was clear that the queues were not going to disappear quickly.His initial announcement was so powerful and energetic that it carried popular opinion. The media was fully on his side and a nervous Congress lacking in confidence also announced support for the move. Only two grassroots leaders, Mamata Banerjee and Arvind Kejriwal, recognised the danger and opposed it. Modi was, in fact, able to recruit large parts of the population on his side, probably including millions who did not vote for him, but who did not mind the inconvenience because they anticipated major change.It is difficult to imagine the Manmohan Singh government producing this kind of euphoria in either the media or the middle class urban population if it had chosen to demonetise. The reaction would likely have been the opposite: resentment at being made to go through the trouble. And if it had carried on for seven weeks there would have been extreme anger. Perhaps that anger is building now when it is clear that the disturbance is going to stay for months, but for Modi to have sustained it even for this length of time is remarkable.The second demonstration of his talent was how quickly he grasped that the negative consequence of the policy was bigger than anticipated. Immediately, on his return from Japan he made a couple of speeches in which he did two things. First-he said to Indians that he meant well and that he had sacrificed his family life for his mission. The uncharacteristically emotional moment of that speech, when he briefly broke down, may also have been the moment when he acknowledged to himself that the issue was out of hand.Second, he said that normalcy would not return before 50 days. With this second move, he bought himself time and space to recalibrate his strategy. Once again, he got the media on his side and the discourse over the immediate problems that people were facing was diverted. Now Modi could have waited for things to settle on their own, but he chose instead to voluntarily offer a timeframe before being pressed on it by the opposition. It is this comment on 50 days of inconvenience that allowed him the freedom to think of how to reposition demonetisation. As some publications have noted, there was no reference to a digital economy in his initial announcement, which was limited to black money, counterfeit currency amd terrorism. It is after his return from Japan and those speeches that suddenly the discourse shifted and it shifted because of Modi's talent and credibility. One can picture him thinking about it alone. The opposition said this was a shifting of goalposts, but they should understand that this is not a university debate. So long as Modi can convince large parts of the population that the policy is good and the inconvenience will ultimately be beneficial, he will continue to do so. The specific benefits of the policy are unimportant to politics.Proof of this appeared when the Bharatiya Janata Party continued its electoral successes across India even a month after demonetisation, including in Punjab where it is in power and suffering anti-incumbency.There is actually no opposition to Modi at the moment and he is still in full control of the narrative, which is astonishing because it has affected every single Indian negatively. The Congress had the opportunity to exploit mass inconvenience but it has so far been unable to. Many people are hesistant to publicly voice their dislike of demonetisation because they are afraid that they will be abused.No other Indian leader, and few politicians in democratic politics anywhere could have ahieved what Modi has since November 8. Perhaps this will change in 2017 when the medium term effects of demonitisation are on display in the second salary cycle after November 8. For now it must be acknowledged that so far, the prime minister has shown that he is where he is not because of luck but pure talent at bringing public opinion to his side and keeping it there.Full text of PM Modi's address to the nationAuthor: PTIPublication: The Times of India Date: December 31, 2016URL: fellow citizens,In a few hours, we will be ushering in the new year of 2017. 125 crore Indians will join the rest of the world, in welcoming it with new hope, new energy and new dreams.Since Diwali, our nation has been witness to a historic rite of purification. The patience, discipline, and resolve displayed by 125 crore Indians, will play a critical role in shaping the future of the nation for years to come.In God's creation, humans are endowed with fundamental goodness. With time, the distortions of badness creep in. People feel suffocated in a bad environment, and struggle to come out of it. Corruption, black money, and counterfeit notes had become so rampant in India's social fabric, that even honest people were brought to their knees.People were forced by circumstances, in defiance of their inherent goodness. It seemed at times, that the evils and corruptions of society, knowingly or un-knowingly, intentionally or un-intentionally, had become a part of our daily lives. Developments post-Diwali have shown, that crores of Indians were looking for an escape from this suffocation.We have, during the external aggressions, of 1962, 1965, 1971 and Kargil; witnessed the intrinsic strength of our citizens. Such collective energy and patriotism is under- standable, in the face of external threats.However, when crores of Indians unite to fight a war against internal evils, it is unparallelled.Indians have, with firm resolve and infinite patience, faced difficulties with a smile, re-defining the concept of sacrifice. We have lived these ideals. 125 crore Indians have shown, in their fortitude, the importance we place in truth and goodness. This has been written on the sands of time.Indians have displayed the strength of people power, utmost discipline, and the ability to discern the truth in a storm of disinformation. They have shown that resolute honesty, can defeat dishonesty.They have shown how much, even people trapped in poverty, are willing to do, to build a glorious India. The people, through persistence, sweat and toil, have demonstrated to the world, an unparallelled example of citizen sacrifice, for the brighter future of a nation.Usually, when people's movements have arisen, the people and the government have been at loggerheads.It is historic, that both the people and the government are on the same side in this battle against evil. The Government is well aware, that in this period, you had to queue up, and face difficulty in withdrawing your own money. I received letters from many people.They have shared their pain and sorrow with me, but also emphasized their support. You have talked to me as one of your own. In this fight against corruption and black money, it is clear that you wish to walk shoulder to shoulder with us. For us in Government, this is a blessing.Friends, It is accepted the world over, that terrorism, Naxalism, Maoism, counterfeit currency trade, drug trade, human trafficking - all of these depend on black money.These evils have become a festering sore on society and Governments. Demonetistion has dealt a severe blow to these trades.Today, youth who had turned to the wrong path, are returning to the mainstream in large numbers. If we remain vigilant, we can now save our children from returning to those evil ways of violence and cruelty. The fact that so much of the cash in circulation has been deposited in the banking system indicates the success of this mission.Events of the last few days indicate that escape routes for the dishonest have all been sealed. Technology has played a big role. The habitual offenders will be forced to abandon their misdeeds and join the mainstream.Friends, This also represents a golden opportunity for the country's banking system. During this period, bank employees have worked day and night.Female employees too, worked till late hours as part of this mission. Post office staff, banking correspondents- all did exceptional work.Amid this herculean effort, some grave crimes by some officers in some banks have come to light. Some Government officers have also committed serious offences, and tried to take advantage of the situation. They will not be spared.At this historic juncture, I wish to make an appeal to the banks. History is witness that the Indian banking system has never received such a large amount of money, in such a short time.While respecting the autonomy of the banks, I appeal to them to move beyond their traditional priorities, and keep the poor, the lower middle class, and the middle class at the focus of their activities.India is celebrating the centenary of Pandit Deendayal Upadhyay as Garib Kalyan Varsh. Banks should also not let this opportunity slip. They should take appropriate decisions in public interest promptly.When policies and programmes are made with clear objectives in mind, not only are beneficiaries empowered, but both short term, and long term benefits are achieved. Spending is carefully scrutinized, and chances of good results are maximised.The more the villages, the poor, the farmers, the dalits, the tribals, the marginalized, the oppressed, the deprived and women are empowered, and financially enabled to stand on their own feet, the stronger the country will become, and the faster will be the pace of development.Friends, to further the principle of Sabka Saath - Sabka Vikaas, on the eve of the new year, Government is bringing some new programmes for the people.Even so many years after independence, millions of poor do not have their own home. When black money increased in our economy, houses became out of reach of even the middle class.The Government has taken some major decisions to ensure homes for the poor, the neo middle class and the middle class.Two new middle income categories have been created under the Pradhan Mantri Awaas Yojana in urban areas. Loans of up to 9 lakh rupees taken in 2017, will receive interest subvention of 4 per cent. Loans of up to 12 lakh rupees taken in 2017, will receive interest subvention of 3 per cent.The number of houses being built for the poor, under the Pradhan Mantri Awaas Yojana in rural areas, is being increased by 33 per cent.In addition to this, another scheme is being put in place for the neo middle and middle class in rural areas. Loans of up to 2 lakh rupees taken in 2017, for new housing, or extension of housing in rural areas, will receive an interest subvention of 3 per cent.Friends in the last few weeks, an impression was sought to be created that the agriculture sector has been destroyed. Farmers themselves have given a fitting reply to those who were doing so. Rabi sowing is up by 6 per cent compared to last year. Fertilizer offtake is up by 9 per cent. During this period, the Government has taken care to ensure that farmers do not suffer for want of access to seeds, fertilisers and credit. Now, we have taken some more decisions in the interest of farmers.Farmers who have taken loans for the Rabi crop from District Cooperative Central Banks and Primary Societies, will not have to pay interest on such loans for a period of 60 days. Farmers who have paid interest during the last two months, will receive these amounts back, directly into their bank accounts.Arrangements are being made to provide farmers even better access to loans from cooperative banks and societies. NABARD created a fund of 21,000 crore rupees last month. Now, Government is adding 20,000 crore rupees more to this. The loss that NABARD suffers by giving loans to cooperative banks and societies at low interest rates, shall be borne by the Government of India.The Government has decided, that 3 crore farmers who have Kisan Credit Cards, will be given RuPay debit cards within three months. Kisan Credit Cards were launched in 1998, but so far, it was essential to go to a bank, to use them. Now, farmers will have RuPay Debit Cards, which they can use anywhere.Just as agriculture is vital for the economy, so are the medium and small scale enterprises also called the MSME sector. Government has taken some decisions in the interest of small and medium businesses, which will also boost ernment of India underwrites loans given by banks to small businesses through a trust. So far, loans were covered upto one crore rupees. This limit is now being enhanced to 2 crore rupees.Earlier the scheme only covered bank loans. Hereafter it will cover loans given by NBFCs as well. This decision will enable better access to credit for small shop-owners and small enterprises. Banks and NBFCs will not levy high interest on these loans, as Government of India is bearing the cost of underwriting ernment has also asked banks to raise the credit limit for small industry from 20 per cent of turnover to 25 per cent.Banks have also been asked to increase working capital loans from 20 per cent of turnover to 30 per cent, for enterprises that transact digitally.Many people connected with this sector have made cash deposits in the last few weeks. Banks have been asked to take this into account when deciding on working capital.A few days back, Government announced a major tax relief for small businesses. Income of businesses with turnover of up to Rs 2 crores was calculated at 8% of the turnover. Now, for such businesses income from digital transactions will be calculated at 6%. This will effectively reduce their tax liability by 25%.Friends, The progress of the MUDRA Yojana has been very encouraging. Last year, nearly 3 and a half crore people have benefited from this. The Government now aims to double this, giving priority to Dalits, Tribals, Backward Classes and Women.My effort is to take the banking system to normalcy as fast as possible in the new year. I have asked all concerned officers in the Government to focus their attention to this task. They have especially been told to proactively resolve the problems in rural and remote areas.Friends, There is no precedent globally, to what India has done. Nations similar to us do not have the amount of currency that we had. Over the last ten to twelve years, 500 and 1000 rupee currency notes were used less for legitimate transactions, and more for a parallel economy. The excess of cash was fuelling inflation and black-marketing.It was denying the poor, their due. Lack of cash causes difficulty, but excess of cash is even more troublesome. Our aim is to achieve a balance. Economists agree that when cash is outside the formal economy, it is a cause of worry.When it joins the mainstream, it is an opportunity for development.I am sure, if great sons of India like Jayaprakash Narayan, Lal Bahadur Shastri, Ram Manohar Lohia, and Kamaraj had been present today, they would have applauded the patience, discipline and resolve of our countrymen.In the past few weeks, there have been many gratifying instances - it would take weeks to list them.It is a healthy trend for any nation, when the people wish to join the mainstream abiding by the law, and helping the Government in serving the poor.Friends. How long will we overlook facts that stare us in the face? I wish to share some information with you, which will either make you laugh, or make you angry. According to information with the Government, there are only 24 lakh people in India who accept that their annual income is more than 10 lakh rupees. Can we digest this? Look at the big bungalows and big cars around you.If we look at any big city, it would have lakhs of people with annual income of more than 10 lakh. Do you not feel, that for the good of the country, this movement for honesty, needs to be further strengthened?In this fight against corruption and black money, it is natural to debate the fate of the dishonest. What punishment will they get? The Law will take its own course, with its full force. But the priority of the Government now is how to help the honest, protect them, and ease their difficulty.How can honesty gain more prestige?This Government is a friend of good people. And it aims to build an enabling environment for the dishonest to return to the path of goodness. It is also a bitter truth, that people have complaints of bad experiences at the hands of Government machinery, and some government officers.This reality cannot be wished away. No one can deny that Government officers have a greater responsibility than common citizens.Therefore, it is the responsibility of all of us in Government, at central, state and local levels, to protect the common man, help the honest, and isolate the dishonest.A new scheme is being launched for pregnant women. We are introducing a nation-wide scheme for financial assistance to pregnant women. 6000 rupees will be transferred directly to the bank accounts of pregnant women who undergo institutional delivery and vaccinate their children.This scheme will help reduce the maternal mortality rate, in a big way. This will help ensure nutrition before and after delivery, and improve the health of mother and child. So far, pregnant women in 53 districts were being given financial assistance of 4000 rupees, under a pilot project.We are initiating a scheme for senior citizens. Banks often reduce their deposit rates, when they receive a large volume of money. This should not adversely impact senior citizens. Under the scheme, senior citizens will receive a fixed interest rate of 8 per cent for a period of 10 years, on deposits upto 7.5 lakh rupees. The interest will be paid monthly.Friends, Political parties, political leaders and electoral funding, figure prominently in any debate on corruption and black money.The time has now come that all political leaders and parties respect the feelings of the nation's honest citizens, and understand the anger of the people. It is true that from time to time, political parties have made constructive efforts to improve the system.I urge all parties and leaders to move away from a "holier than thou approach," to come together in prioritising transparency, and take firm steps to free politics of black money and corruption.In our country, people ranging from the common man to the President, have at some point or another, advocated simultaneous conduct of state and national elections.This is to break the endless cycle of elections, reduce election expenditure, and minimize pressure on the administrative machinery. The time has come for this to be seriously considered and debated.Positive change has always found space in our country. We can now see a positive momentum towards digital transactions in India. More and more people are transacting digitally.Yesterday, Government has launched a new, swadeshi platform for digital transactions - named BHIM after Babasaheb Bhimrao Ambedkar.BHIM stands for Bharat Interface for Money. I call upon the youth, the trading community, and farmers to connect with BHIM as much as possible. Friends, the developments, decisions, and policies that were put in place after Diwali, will of course be evaluated by economists. It will be good if social scientists also do the same.As a nation, India's villages, poor, farmers, youth, educated and uneducated men and women, have all displayed infinite patience and people power. In a short time, the new year of 2017 will begin. Exactly 100 years ago, in 1917, Mahatma Gandhi initiated a Satyagraha in Champaran. Now, a century later, we witness that the people of India continue to share that feeling towards truth and goodness.Today, Mahatma Gandhi is not among us. But the path towards truth that he showed us, is still most appropriate. As we begin the centenary year of the Satyagraha, let us recall the Mahatma and resolve to follow his message of truth and goodness.We cannot allow this fight against black money and corruption to stop or slow down. Firmness in truth is a guarantee for success. A country of 125 crore, with 65 per cent below the age of 35, having the means, the resources, and the capability, has no reason to stay behind.The new dawn of the New Year, comes with the resolve of new success. Let us all come together, to move ahead overcoming obstacles and constraints.Happy New Year. Jai Hind!!!Modi's Speech Was An Admission Of DefeatAuthor: Mihir Swarup SharmaPublication: Date: January 1, 2017URL: the end, Prime Minister Narendra Modi's speech on New Year's Eve was not exactly the stuff of what history is made. It could be seen as any of three things: an admission of defeat; a declaration of war; or a pivot to populism. Or, perhaps, it's best understood as a combination of all three.Consider the pivot to populism first. Poor Modi! He's spent the first two years spending so much - essentially blowing up the fiscal oil bonanza - that today, when he really needs the money, he doesn't have enough to throw at people yet. Perhaps when the final numbers for demonetisation are announced, and the RBI can "extinguish the liability" of some tens of thousands of crores of unreturned rupees, then he might have a bit more to play with. But at the moment, he simply can't announce the big helicopter drops of money he'd clearly love to. So he was forced instead to signal intent: with promises of interest subsidies here, credit guarantees there, loan subsidies everywhere - any old scheme he could repackage and sell as a new, post-demonetisation sop for those most affected. There was little in this appeal that was new - an extraordinary lack of creativity, in fact, especially when compared to the radical imagination that went into conceiving demonetisation. But the proportion of the PM's speech devoted to the handouts showed that he definitely felt that he had a bit of political ground to recover - with women, the poor, small and medium enterprise owners, and so on.And that's what was the admission, in fact. In spite of the brave words that compared demonetisation to independent India's wars and declared that JP and Kamaraj (Kamaraj? Why Kamaraj?) would have approved of modern-day Indians' giant sacrifice, the PM himself essentially admitted that those who have been worrying about demonetisation's impact on the more marginalised sections of India's population had a point. Many women have had to bring their long-concealed cash savings into public view, with possible negative consequences; and so, for women, he had to announce special measures. (Repackaged old measures, but that's not the point.) Many smaller enterprises are struggling with a shortage of working capital decimating their operations; so a series of attempts to alleviate that problem were announced. The poor faced considerable hardship; so affordable housing schemes were touted. (Don't forget that the corporate real-estate sector, in such trouble after demonetisation, will be given an out as well.) The only sufferers in demonetisation not given anything were the long-suffering banks, who had to listen to another long set of instructions and exhortations, as if they hadn't already been given multiple non-commercial objectives to fulfil.And in all this there wasn't the slightest mention of the actual details of how demonetisation has been a success - just a few highly doubtful assertions, including the claim that young men had turned away from violence thanks to it. Not even a positive spin on interim data, something that this government otherwise does very well. It's difficult to see this as anything other than an admission of defeat.But, finally, it's also a declaration of war. Modi was very explicit about the next steps: that the bad would be made good, through the strictest possible implementation of the law. Together with the many actions that various enforcement agencies have taken across the country in recent weeks, this sounds like 2017 will be the year when the raid raj returns to our shores. Speaking on NDTV after the PM's speech, Commerce Minister Nirmala Sitharaman clearly indicated that we were entering a new age of income-tax raids - but insisted that this time, things were different, because the raids would be based on the analysis of data revealed by demonetisation. This is fine, as far as it goes - but it doesn't go very far. It doesn't mean that there won't be discretion for the taxman, and it doesn't mean that there won't be harassment. But that's simply not relevant. It will have to happen anyway, whatever the costs to the Indian economy or to regular people. The failure of demonetisation on its own terms means that, to make it a success, Modi has to expand its scope. It has to become not a "surgical strike on black money" but simply the first battle in a long war against the corrupt.You have to ask yourself: is this the speech the PM expected on November 8 he would have to give 50 days later? I don't think anyone can answer in the affirmative. The PM expected, no doubt, an easy skirmish and a quick victory - "all over by Christmas", as they famously promised of World War I. Other leaders might have accepted responsibility and expressed remorse, perhaps sought some sort of forgiveness. But not this Prime Minister; rather than admit defeat on one front, he will expand the war. What a pity that so many innocent civilians are caught in the middle of the battlefield.(Mihir Swarup Sharma is a fellow at the Observer Research Foundation.)Narendra Modi Just Dug Himself a Great Big HoleAuthor: Siddharth VaradarajanPublication: Thewire.inDate: January 1, 2017 URL: a speech full of faulty economic reasoning, Modi made one factual claim – the number of Indians with official incomes greater than Rs 10 lakh is just 24 lakh. If demonetisation really works, he needs to up that figure substantially in the next two years.It was a speech of not just shifting goalposts but vanishing playing fields, and yet Narendra Modi couldn’t resist making a rhetorical point about black money that might well prove costly for him by the time 2019 comes around.“I wish to share some information with you, which will either make you laugh, or make you angry,” he said, with a flourish half-way through his speech. This was the point where everyone expected him to reveal how many old Rs 500 and 1000 notes had become ‘worthless paper’ thanks to demonetisation but he had another number in mind: “According to information with the government, there are only 24 lakh people in India who accept that their annual income is more than 10 lakh rupees. Can we digest this? Look at the big bungalows and big cars around you… If we look at any big city, it would have lakhs of people with annual income of more than 10 lakh.”Until then, the prime minister had sought to sweep the growing public concerns about the effects of his demonetisation decision under a fraying carpet of nationalism. But by drawing attention to a stark statistic in an attempt to provide some justification for the chaos he has unleashed in the lives of hundreds of millions of poor Indians, Modi has unwittingly laid down a new metric by which the success or failure of his supposed drive against black money must be judged: will he manage to add the “lakhs of people” who have an income of more than Rs 10 lakh to the list of those who pay income tax? If he doesn’t, then what was the point of subjecting the whole country to so much disruption and pain?Finance minister Arun Jaitley initially claimed that a certain proportion of the demonetised notes would remain outside the banking system and get extinguished, thus providing a blow to the black economy and a fiscal boost to the government.When they realised there was unlikely to be significant extinguishing and that most of the high denomination notes in circulation would probably end up getting deposited, Modi and Jaitley claimed the income tax authorities would be able to track down the owners of black money since their funds had entered the banking system.Astonishing claims about cashNow that it is apparent the IT department will not find it that easy to undertake such a massive exercise – its inefficiency is the reason the list of those with official incomes of Rs 10 lakh and over is just 24 lakh to begin with and is unlikely to grow – Modi has tried to sell another bizarre idea to the public about why the cashless hardship they are putting up with is in the national interest.“Over the last ten to twelve years, 500 and 1000 rupee currency notes were used less for legitimate transactions, and more for a parallel economy,” he claimed in his speech on December 31. “The excess of cash was fuelling inflation and black-marketing. Lack of cash causes difficulty, but excess of cash is even more troublesome.”Let us consider these astonishing assertions one by one. Modi says that most of the old Rs 500 and 1000 notes were used in the black economy rather than for legitimate purposesFirst up, he needs to provide some evidence to back up this claim. Second, even Jaitley, who noted that 25% of high-denomination notes got extinguished in 1978 (and were probably used in the parallel economy), believed the corresponding figure for the 2016 exercise would likely be less than that. So on what basis did Modi tell the people of India in a televised national address that most of the notes he demonetised were not being used legitimately?Modi’s second assertion – that the excess of cash was fuelling inflation – simply reflects his poor knowledge of basic economics. Indeed, it is astonishing that no one in the PMO or finance ministry had the economic literacy – or the moral courage – to tell the prime minister that the opposite is true, that bank deposits are more inflationary than cash holdings with the public. When the public deposits cash, either voluntarily or, as is currently the case, under duress, banks keep only a portion of this with the RBI as reserve (depending on the ‘cash reserve ratio’) and lend the rest. If the CRR is, say 10%, and an individual deposits 1 lakh with her bank, this leads to an expansion of bank deposits by a factor of 9. This increased money supply is bound to be more inflationary than if the individual had held on to her cash. My monetary economics is rusty so I checked the position with a former board member of the Reserve Bank of India. Pat came the answer: “When M1 enters the banking system and bumps up M3, that will, ceteris paribus, give an upward thrust to inflation.”What about the third claim Modi made, that “excess of cash is troublesome”? World data suggests there is little or no correlation between the amount of cash in circulation and corruption.Banking on bank depositsModi made another assertion that was both naive and disingenuous when he praised himself for having generated a huge increase in bank deposits. “History is witness that the Indian banking system has never received such a large amount of money, in such a short time,” he said, before holding out the promise of easier credit for poor and middle class citizens.This assertion is disingenuous because the deposits were coerced and are likely to be reversed as soon as people are able to withdraw their hard-earned money from the banks. But it is naive because Modi and his advisors have not understood the theory of money demand. The demand for money is the amount of assets or wealth that people want to hold in the form of cash. This, in turn, is a function of the volume and frequency of their transactions as well as of interest rates (i.e. the opportunity cost of holding cash). There is also a third component, which is the precautionary demand for money. While the transaction and speculative demand for money may be constant, the precautionary demand for money is likely to increase as a result of the cash shortages of the past two months. Indeed, the longer the economy is cash constrained, the higher will be the precautionary demand so chances are that once the banking situation normalises – as Modi has promised it will – there may actually be a fall in aggregate bank deposits compared to what they were on November 8, 2016, when the demonetisation madness rmal economy is not always black, formal not always whiteModi also appears to be guilty of equating the informal economy with the parallel economy. “Economists”, he said, “agree that when cash is outside the formal economy, it is a cause of worry.When it joins the mainstream, it is an opportunity for development.” In fact, the informal economy in India is very much part of any logical definition of the “mainstream”. Cash may be the preferred medium of exchange of India’s informal economy but only a fraction of the informal economy consists of fiscally (or legally) illegitimate transactions. Similarly, a fraction of the formal economy too generates numerous possibilities for black income (via over-invoicing, for example, or the various ingenious methods used in the 2G scam).Whether they occur, black economy transactions need to be stopped but the mistake Modi made was to buy the pup that demonetisation would be a silver bullet. He now knows it is nothing of the sort and that is why he devoted the bulk of his ’50 days of demonetisation’ speech on Saturday night to listing out various welfare measures his government was taking or going to take for the benefit of the poor. At some stage, it sounded as if Modi had stolen a march on Jaitley and was presenting an early version of the national budget. I will leave the parsing of the schemes he announced to those more qualified than me but at least two of his announcements – for pregnant women and farmers – have already been exposed as overblown:Re grant for pregnant women in PM's speech, is that in addition to 6000 already in Nat'l Food Security Act or better implementation of it? pic.jOEIR8n6WP— Tanvi Madan (@tanvi_madan) December 31, 2016Writing-off 60 days interest on Coop loans drawn for kharif and rabi sowing was inevitable. RBI kept Coop banks non-operational post Nov 8— Devinder Sharma (@Devinder_Sharma) December 31, 2016The weakest point of this shifty speech was when Modi sought to address public concerns about the lack of any action on his part against the role of black money in big politics. Here, there was no promise of change, no scheme: “I urge all parties and leaders to move away from a “holier than thou approach,” to come together in prioritising transparency, and take firm steps to free politics of black money and corruption.”What the prime minister did was to cleverly use the growing anxiety about the role of money power in politics to hard-sell his idea that all elections in the country – Lok Sabha and assembly – be held simultaneously. Whatever its merits or demerits for electoral democracy, as an anti-corruption proposition it is morally suspect: we politicians will always need black money to fight elections, he seems to be saying. The only way to have less black money is to have fewer elections.Jan Dhan Account Deposits Double To Rs 87,000 CroresAuthor: Press Trust of IndiaPublication: Date: January 1, 2017URL: , the tax department also has data on small cash deposits between Rs 30,000-50,000 made in 4.86 lakh accounts totaling to Rs 2,000 crore.Deposits in Jan Dhan account have more than doubled to Rs 87,000 crore in 45 days post demonetisation, prompting the tax department to "dissect" information relating to such deposits, a top government official said.Besides, the tax department also has data on small cash deposits between Rs 30,000-50,000 made in 4.86 lakh accounts totaling to Rs 2,000 crore.Between November 10-December 23, the total deposits in Jan Dhan accounts reported is Rs 41,523 crore in 48 lakh accounts. This, together with the total deposits of Rs 45,637 crore as on November 9, takes the aggregate amount in Jan Dhan accounts to over Rs 87,100 crore."All these information received on Jan Dhan Accounts are being dissected. If it is found that money deposited in these accounts belong to some other persons, necessary action will be taken at appropriate time," the official told PTI.Cash deposit between Rs 30,000 and Rs 50,000 have been reported in 4.86 lakh accounts till November 30, taking the total deposits in such quantum to Rs 2,022 crore.The official further said that inflows of funds into Jan Dhan accounts was the highest in the first week after demonetisation at Rs 20,224 crore, but after that the deposits went down substantially."The inflow of funds in Jan Dhan accounts after the first two weeks was below Rs 5,000 crore per week and thereafter it got reduced to about Rs 1,000 crore per week," the official said, adding that the deposits have come down significantly after the tax department warned people not to allow their accounts to be misused for converting black money into white.Prime Minister Narendra Modi had on November 8 announced junking of old Rs 500 and Rs 1,000 notes, and replaced the currency with new Rs 2,000 and Rs 500 notes.After setting a cash deposit limit of Rs 50,000 in Jan Dhan accounts, the government had on November 18 cautioned account holders that they will be prosecuted under the I-T Act for allowing misuse of their bank accounts through deposit of black money in Rs 500/1,000 notes during the 50-day window till December 30.The directive came against the backdrop of reports that some are misusing other persons' bank accounts to convert their black money into new denomination notes.As per latest data available, Rs 12.10 lakh crore in form of old 500 and 1,000 rupee notes have returned into the banking system till December 12, 2016. It was estimated that now defunct notes constituted 86 per cent or Rs 15.45 lakh crore in circulation.(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)Why aam aadmi is not mad at NaMo despite DeMoAuthor: Manu JosephPublication: The Times of India Date: January 1, 2017URL: you are someone who takes the respectable media seriously, you may have thought, or still think, that Narendra Modi has committed a huge blunder by delegitimising large notes, and that it would destroy him because most of India is furious. There have been reports of the poor losing jobs and of people dying in queues outside banks. Every time a rustic man committed suicide, it was relayed to us as a “farmer suicide”, of course, and the reason this time was not his disenchantment with genetically modified seeds (that spin has run its course) or drought (the season has changed), but cash crunch.There was a bit of exaggeration in the coverage because drama is an old friend of human-interest stories but most of the tales of misery were true. They are still trickling in. Yet there is evidence that the average Indian feels Modi is on to something. Or at least, for some reason, he is not angry with Modi. If the cash crunch continues for another month, the mood might change but as of now it does appear that Modi is going to be fine. The people standing in the queues suggest that. Even small traders, who are very important to Modi in some states, say that. One of them, in a newspaper interview, said that the trading community is hardwired to go with the flow and not against the flow. BJP has not been punished in the by-polls or civic elections that were held in several states after the demonetisation. In fact, the party fared well in seven states. And, there has not been a single incidence of rioting even though the political foes of Modi appeared to contemplate the prospect somewhat fondly.What is going on, and what does it say about India?Most of the poor seem to believe that the rich have been affected more than them. Cash is a powerful cultural symbol of wealth, hence the perceived fiefdom of the rich. Anarchy in the cash economy, their reasoning goes, would hurt the rich more. That is a significant political sentiment. It is a persistent and under-reported phenomenon across the world that the poor tend to hate the rich more than they hate their politicians. This is true even when the politicians themselves are rich and the rich, at least the refined rich, make so many sweet gestures.Also, in the perception of the majority, such an extraordinary monetary shock has a ring of righteousness about it. Another factor that has favoured Modi for now is the fact that the current misery of the poor, which seems so severe to the middle classes, is only slightly worse than their regular problems. They queue up often for many things, return empty-handed, queue up again, and go for days without employment or money.Even so, one would have expected widespread protests and shutdowns in some regions, especially Kerala, but miraculously that did not happen. In the southern states, there is a cautious wonderment — never has a Prime Minister directly affected their lives as Modi has with this measure. What the Prime Minister has done is to make them queue up for their own money. Still, they see in this an unprecedented prime ministerial impact on the rich.Again, it is a question of time before many delicate perceptions change but it is remarkable how Modi has gotten away till now. By his own admission, the implementation was a screw-up. He said so in an interview on Thursday. He said that demonetisation as a policy (apparently to clean up the economy) “is unequivocally clear, unwavering and categorical.” But the strategies to implement it could have been better, he said. One of the political strategies to absorb the shock though has worked – the impression that he is going to wire the money that he has robbed from the rich into the bank accounts of the poor.The ideological foes of Modi, who have named themselves liberals, perceived the policy through the filter of their immense hatred for him, and have refused to see the collateral benefits of millions of Indians joining the formal banking system. Even though they claim to worship objectivity, they often demonstrate that they are not capable of it. In the immediate aftermath of demonetisation, they saw the political demise of Modi, and very triumphantly lamented the suffering of the poor. They seemed to suggest, especially in the early days, that the poor are furious with Modi. But, the average Indian often appears to wait for the urban sophisticate to reveal his learned opinion so that he can feel the exact opposite emotion.Demonetisation has made Rahul Gandhi come out looking better than ModiAuthor: Harmeet Shah Singh, @HarmeetSSPublication: Dailyo.inDate: December 30, 2016URL: by bhakts as 'Pappu', the Congress VP seized on the havoc brought upon millions of poor and middle class Indians.Sir Issac Newton's time-tested theory tells us that every object will remain at rest or in uniform motion in a straight line unless acted upon by an unbalanced force. And that's how inertia is usually defined.Prime Minister Narendra Modi's abrupt withdrawal of the nation's 86 per cent of currency from circulation was an unbalanced force that changed the course of national politics, let alone economy. Else, the ruling BJP would have stayed ensconced in the TINA (there is no alternative) factor.The unbalanced force of demonetisation also unstuck Congress vice-president Rahul Gandhi from his political inertia. Hammered by Modi cheerleaders as "Pappu" - quite unfairly on social media - the 46-year-old family scion swung dramatically to seize on the havoc the November 8 demonetisation brought to hundreds of millions of poor and middle-class Indians.In rallies after rallies in the election-bound Uttar Pradesh state, he flagged the Sahara diaries that the Supreme Court had already rejected. Still, Gandhi reiterated his calls for investigations into Modi.In politics too, public perception acts as Newton's unbalanced force. BJP bhakts have skilfully deployed the uncivilised Pappu caricature in public psyche to alter the people's perception of the Congress vice-president. But this deployment creates no bulletproof shield for the reputation of their government either.Remember, public opinion is fragile. And Rahul Gandhi scrambled to win it when he sensed the Modi administration had landed on a slippery slope with its demonetisation measure. That whether or not he ran afoul of a sub-judice matter is up to his lawyers to decide on.Politically though, he met his objective on the burning issue when none other than Modi responded to his comments with derision. Of late, Gandhi has also become a topic of some positive living-room discussions about him.But that's not all. The Congress leader has a long way to go if his overall goal is 2019. He, indeed, has broken out of his passivity but he has to guard against his own habit of slipping into hibernation.I concurred completely with my friend Chandana Bawa that Gandhi must maintain his momentum as a watchdog of the government's behaviour if he has to stay relevant right up to 2019. He has to pepper his public speeches with data mined from government sources and with the richness of Urdu and Hindi languages.Gandhi, Bawa said to me during a dinner at her lovely home, should ponder over the advice Himanta Biswa Sarma offered to him via TV after the party lost Assam this year. The Congress vice-president, Sarma alleged in May, paid more attention to a little dog than to a party delegation seeking his attention to leadership issues in Assam."Attention begets loyalty," Bawa, a former management trainer, told me.And that perhaps explains why Sarma left Gandhi's Congress and spearheaded the BJP's campaign in the northeastern state to a successful conclusion. Last but not least, a large population of India wants to shake political dynasties off.So, invoking parents, a grandmother or a great-grandfather every now and then in public speeches carries its own downsides: a sense of entitlement that many ordinary citizens might just detest.‘World has started making fun of Modi’: Kejriwal seeks white paper on note banAuthor: IANSPublication: Hindustan Times Date: January 1, 2017URL: demonetisation a “huge scam”, Delhi chief minister Arvind Kejriwal on Sunday sought an independent probe into and a White Paper on the note ban.The Aam Aadmi Party (AAP) leader also told the media in New Delhi that Prime Minister Narendra Modi had become a laughing stock globally after taking out 86 per cent of the currency from the system on November 8.“The world has started making fun of Modi... At least (former Prime Minister) Manmohan Singh had the respect of the world.”“Demonetisation is the biggest scandal in independent India,” Kejriwal said. “The entire exercise was political and guided by corruption.”He claimed that even hardcore BJP and RSS supporters were disappointed by Modi’s speech of Saturday because he failed to mention when people could resume withdrawing money from their bank accounts at will.“There should be an independent investigation into the note ban,” he said. “There should also be a White Paper on the stated objectives of the demonetisation and what was really achieved.”He said the White Paper should detail the fall in GDP growth and in industrial and agricultural production after the November 8 announcement.Kejriwal and the AAP have been among the most vocal critics of the note ban which caused an unprecedented cash crunch in the country.He said after all the hardships that people endured, none of the stated objectives in Modi’s November 8 speech were achieved.He said there had been no reduction in corruption, black money had not been wiped out and terror financing had not ended.The AAP leader accused the BJP leaders of converting black money into white before and amid the cash shortage and demanded to know why Modi was promoting Paytm for cashless transactions. “Has he taken bribes from Paytm? Paytm is the biggest gainer from demonetisation.”Kejriwal also denounced Delhi Metro’s fiat that only Paytm transactions would be considered valid in select metro stations.“They can’t do this. They can’t promote one single company. I will ask them... Maybe they are under pressure.”Demonetisation’s hydra-headed criticsAuthor: Vivek DehejiaPublication: Date: January 1, 2017URL: it turns out that notes extant on 8 November were somehow under-counted, it would mean that RBI had greater liabilities than its books showedIll-informed, misguided or (ideologically or politically) motivated criticisms of the swap of old for new currency notes initiated by Prime Minister Narendra Modi on 8 November are akin to the Lernaean Hydra of Greek mythology: As soon as one chops off one of the heads, another replaces it. It might take a demigod of the stature of Heracles to slay the baleful beast of bogus arguments and fact-free opinions. Economists Jagdish Bhagwati, Pravin Krishna and I made an attempt to chop off at least a few of the hydra’s heads in a long essay in these pages last week (see “Demonetization Fallacies And Demonetization Math”, 27 December). In light of developments since then, it might be worthwhile to revisit and refine a few of our ideas.First, if unconfirmed news reports at the time of writing, suggesting that even more of the old demonetized notes will come back in by 30 December than officially were extant on 8 November (approximately Rs15 trillion) turn out to be true, one possibility is an accounting error by the Reserve Bank of India (RBI), either post 8 November, or before. In other words, it could be that the RBI under-counted the notes extant on 8 November, or has over-counted what has returned since then. An entirely different possibility is that there is a greater stock of undetected counterfeit currency than has been widely believed.If it turns out that notes extant on 8 November were somehow under-counted, it would mean that the RBI had greater liabilities than its books showed. This scenario seems unlikely, as such money would have found its way into the hands of the public through classical open market operations or other mechanisms which would require entries on both the asset and liability side of the balance sheet. If this type of error indeed occurred, the resulting excess liabilities after 30 December would need to be rectified by the RBI extinguishing an equivalent amount of exiting liabilities or marking up an equivalent value of assets. Likewise, if it turns out that the discrepancy is due to a larger than expected stock of counterfeit notes, which heretofore have been undetected and which remain undetectable after 30 December, the RBI might again be in the position of extinguishing other liabilities or marking up some of its assets. Both of these scenarios appear unlikely, but are theoretically possible.If it turns out, as is much more likely, that notes returned have been over-counted, the possible fiscal gain could be larger than anticipated when a correct recount is arrived at. As Bhagwati, Krishna and I clarified, any putative fiscal gain would require, in the first instance, that the old notes be de jure denotified, not merely de facto demonetised. That has now happened through a government ordinance. The second step is that the RBI should choose to rectify the resulting asset-liability mismatch on its balance sheet created by extinguishing liabilities on the old notes by creating new liabilities in the form of new money, transferred to the government or to the public via helicopter drop. If, instead, it chooses to mark down an equivalent value in assets, the gain will be indirect. In any case, as we argued in some detail, there is likely to be a fiscal gain irrespective of whether all of the old notes re-enter the formal financial system or not, but the mechanism for the fiscal gain could differ.Consider now one of the hydra heads that Bhagwati, Krishna, and I did not find the occasion to take on: the meretricious argument that, since some of those currently defending the currency exchange exercise as being potentially gainful, including this author, did not explicitly advocate it earlier, there is some inconsistency involved. This is to make the elementary error of conflating falsely ex post facto analysis of the effects of the currency exchange with an ex ante judgement on its effects. In other words, before 8 November, an economist who might have been asked about the merits of the currency exchange would have weighed the likely short-run costs against the medium- to long-run gains, and determined if the policy passed the test of this cost-benefit analysis. However, post 8 November, as both the magnitude and nature of both short-run costs and long-run benefits is becoming somewhat clearer, it would behove any sensible economist to revisit and revise her ex-ante judgement, if any had been made.It is clear to this economist, post 8 November, that the most important long-run economic effects will revolve around the increasing digitization and formalization of the economy, wrought by Prime Minister Modi’s attack on black money, of which the currency exchange is but one piece of the puzzle.As I put it at a meeting of outside experts convened by vice-chairman Arvind Panagariya on 27 December at Niti Aayog and chaired by Prime Minister Modi, it is as if, post 8 November, the tide has receded, revealing rocks in the harbour. That is, the jump-start to formalization since then—most notably, pulling workers and firms out of the darkness of the black economy and bringing them into the light of the formal economy—has highlighted the need, indeed, the urgency, for follow-on reforms which simplify the tax and regulatory burden on ordinary citizens.We await such further reforms with anticipation.Every fortnight, In The Margins explores the intersection of economics, politics and public policy to help cast light on current affairs.Demonetisation and welfareAuthor: Shruti Rajagopalan, Lawrence H. WhitePublication: Date: January 3, 2017URL: evaluating demonetisation, one must account for any associated economic losses to the publicIn their recent defence of the Narendra Modi government’s demonetisation and subsequent remonetisation programme, Jagdish Bhagwati, Vivek Dehejia, and Pravin Krishna (hereafter BDK) rebut many of the smaller criticisms levelled against the programme. We agree with BDK that demonetisation by itself cannot be expected to remedy counterfeiting, corruption, and future flows of black money. Other reforms will be needed. Disappointingly, however, BDK disregard the short-term and long-terms costs of the programme. A more balanced evaluation is called for. BDK regard demonetisation as “a policy designed, in effect, as a one-time tax on black money” and propose that its “success has to be measured by the sum of tax revenue generated and black money destroyed”. They arrive at a back-of-the-envelope calculation of “the net gain” to the government as “Rs1 trillion of black money destroyed”. which will generate government revenue to the extent that the Reserve Bank of India (RBI) issues replacement currency, plus “Rs1 trillion in tax revenue” from the 50% tax on black-money deposits. They add: “The government could reasonably claim this (Rs2 trillion in revenue) as a successful outcome.” We have no objection to the arithmetic of the BDK revenue guesstimate, only to its economic interpretation. Revenue gained is a very peculiar criterion for “success”. The standard economic approach is to evaluate the economic success of a programme not just by summing up its estimated benefits, but by summing up its benefits and then subtracting its costs. This is well known to BDK, who have written admirably on the benefits and costs of trade policies. The efficiency of a tax is evaluated by comparing its revenue to its “deadweight cost” or “excess burden”, the sum of economic activity discouraged by the tax plus the costs of tax collection. The most successful or “efficient” tax is one with the least cost per rupee of revenue raised. BDK, however, judge the success of demonetisation as a government revenue programme without accounting for any associated economic losses to the public (we put aside any tally of its injustices).BDK reject an accounting of the costs of demonetisation as “premature” and “without evidence”. But the facts are on the ground. The Centre for Monitoring Indian Economy (CMIE), an independent think tank, has estimated the total costs accumulated during the 50-day transition from old to new notes at Rs1.28 trillion. This figure represents a 64% deadweight cost of collecting the Rs2 trillion revenue estimated by BDK, making demonetisation a very high-cost tax. The CMIE estimate includes the Rs168 billion spent in printing, transporting, and circulating the new currency. About Rs150 billion in wages were foregone by households waiting in queues to get new notes. An estimated Rs351 billion in costs has been incurred by banks, putting other business aside to exchange notes. The greatest losses fell on business enterprises hit by the sharp curtailment of currency transactions, estimated at Rs615 billion. The widely cited CMIE report offers a conservative cost estimate, limited to the 50-day window that ended on 30 December. Various other non-partisan forecasters have estimated that demonetisation will cost the economy between 0.4 and 3.3 percentage points of growth. On an estimated gross domestic product of Rs145 trillion, one percentage point of lost growth equals Rs1.45 trillion. BDK may want to quibble with the various cost estimates, but assigning zero to the costs will not do.These estimates don’t include the cost of auditing, collecting, and enforcing taxes on unaccounted money that has entered the formal system via banks. These costs may be substantial, given India’s complex tax code and the Prime Minister’s promise to prosecute every single tax evader. BDK treat the matter of whether the “economic impact post 8 November will be contractionary” as a hypothetical question. They point out that a demonetizing government might prevent a currency shortage by immediately issuing new currency to replace the old. It might, undeniably, but it has not. The government did not have the new currency ready to prevent a currency shortage. Even economists in the government, like Arvind Panagariya, vice-chairman of NITI Aayog, have acknowledged this: “In the short run, you have a liquidity crunch. It is going to impact economic activity and it is also happening.” Although the shortage is easing, the stock of currency may not be fully replenished before May 2017. The next two quarters may continue to experience a slowdown. The effects of the disruption in cash-dependent sectors like construction and informal manufacturing may last still longer. Finally, challenging the claim that the botched remonetisation “has damaged trust in the monetary system,” BDK reassure us that the situation is not as bad as a hyperinflation. While trust in the rupee has indeed not been completely destroyed, it has eroded. The rupee has become less attractive as a currency in which to invest or hold wealth. Perhaps the worst casualty is the loss in the credibility of the Reserve Bank of India, which has tweaked rules more than once a day (roughly 60 notifications in 50 days) to deal with the currency shortage. We need to count both costs and benefits to evaluate intelligently whether this was the best available method of taxing black money, or if the goal could have been pursued by less costly means. - Shruti Rajagopalan and Lawrence H. White are, respectively, assistant professor of economics at SUNY, Purchase College, and professor of economics at George Mason University.Hoarded black money to be converted into cheaper loans: JaitleyAuthor: Special CorrespondentPublication: The Hindu Date: January 1, 2017URL: future agenda of the government, as stated by Prime Minister Narendra Modi in his speech on New Year’s eve, is to channel the wealth that was previously being hoarded as black money into cheaper capital for affordable housing, women’s health, the agriculture sector, and medium and small enterprises, Finance Minister Arun Jaitley said on Sunday.Mr. Jaitley added the remonetisation process is progressing “extremely well” and would be completed very soon.“I see 2017 as a year whose agenda has been set last night by the Prime Minister,” Mr. Jaitley said. “Cheaper loans for affordable housing, women’s health, for the agricultural sector, for the MSMEs, and therefore cheaper capital and the transfer of this wealth which was being hoarded as black money now as cheaper capital in these areas is the future agenda of the government. The Finance Ministry will do its best to implement every word of what the PM has announced yesterday.”Major reformsWhile saying that 2016 saw several major economic reforms like the passage of the insolvency law, the creation of the Monetary Policy Committee, and the passage of the constitutional amendment bill on the Goods and Services Tax, Mr. Jaitley added that he was confident that 2017 would see GST being implemented.“Last year we saw a large number of major economic steps taken by the government. We had the Monetary Policy Committee, we are now keeping inflation under control, there is a specified target and consequently we have also seen the interest rates coming down which hopefully should come down further,” he said.“And for the implementation of GST this year, we are moving at a fairly good pace. And, I am sure 2017 will see this historic indirect tax reform in India, which will be the biggest ever tax reform since independence.”On demonetisation, Mr. Jaitley said that it process has been completed in “a very successful and peaceful manner”, with the whole country supporting it overwhelmingly.“The remonetisation process has progressed extremely well and I am sure in the days to come it will be very soon completed,” he said. “The benefits of this are already flowing into the system. What was the shadow economy and black money has now lost its anonymity and come into the banking system. This will lead to a changed spending habit of the people.”“And obviously it will mean the more lending capacity of the banks and the cost of capital will come down,” Mr. Jaitley added. “There will be more taxation receipts of the government, so the government’s ability to spend and support the spending will also increase.”Still 97 per cent support Modi over demonetisation, 75 per cent blame others for cash crunch: SurveyAuthor: Prabhash K DuttaPublication: Indiatoday.inDate: December 31, 2016URL: to social engagement platform LocalCircles, the survey's results are based on around 3.5 lakh responses and have been astonishingly the same over the last 50 days.The demonetisation deadline, as spelt out by Prime Minister Narendra Modi, has ended but 'currency normal' situation is still weeks, if not months away.Notwithstanding the cash crunch that still continues, an online survey done over the period of 50 days shows that support for PM Modi has not dwindled.In the survey, conducted by social engagement platform LocalCircles, 97 per cent participants are still with Modi on the question of demonetisation.The survey result is astonishingly the same over the last 50 days. According to LocalCircles, the survey's results are based on around 3.5 lakh responses. It also says that more than 1 lakh citizens participated in the debates and discussions on demonetisation before the final results were drawn.% Citizens supporting the Cause of DemonetisationWeek 18-Nov-201697 %Week 12-Dec-201697 %Week 29-Dec-201697 %Total Voters-9832However, the participants' frustration showed up in the response about implementation of demonetisation. While 51 per cent citizens found implementation of note ban a good step in the second week of demonetisation, only 30 per cent were satisfied with the agencies dealing with cash crunch.% Citizens Rating Demonetisation Implementation GoodWeek of 18-Nov-201651 %Week of 12-Dec-201639 %Week of 19-Dec-201632 %Week of 29-Dec-201630 %Total Voters-9832A large chunk of the respondents complained about the non-availability of low and middle-value currency notes. As many as 68 per cent people said that they were yet to get a Rs 500 note.Post Demonetisation, have you recived (from someone or bank/atm) the new 500 rupes note?NO 68 %Yes32 %Total Voters-9326While Rs 2,000 notes are seemingly in good supply, close to 60 per cent people said that they were not using denomination as frequently.How are you using the 2000 rupee note?Not using, saving it for emergency needs 14 %Using it only when it’s absolutely necessary, otherwise saving it45 %Using it often41 %Total Voters-9239About 14 per cent stated that they were saving Rs 2,000 notes for any future emergency needs. Another 45 per cent said they were using Rs 2,000 notes only when it became an absolute necessity for them to do so.In a way, thus, 59 per cent people reported hoarding of Rs 2,000 notes in December. And, they were not the usual suspects for black money holders.Who do you hold most responsible for the planning and implementation gaps in the Demonetisation scheme?Bank24 %Reserve Bank of India28 %Prime Minister25 %Ministry of Finance23 %Total Votes -6242Another interesting finding of the survey was that about 75 per cent people gave a clean chit to PM Modi for demonetisation troubles.While 25 per cent of the respondents said PM Modi was responsible for demonetisation woes, others blamed the RBI, local banks and the finance ministry for the poor handling of cash crunch.WEEKLY WITHDRAWAL LIMIT STAYS AT RS 24,000The RBI has relaxed the ATM withdrawal limit from Rs 2,500 to Rs 4,500 a day per debit card, which is expected to give some respite to people. However, the weekly withdrawal limit stays at Rs 24,000.There are reports that almost 90 per cent of the demonetised currency has been replenished. However, there is no official word on it.The Reserve Bank of India has not made public the data about how much money has been infused back into the banking system after demonetisation of 86 per cent of the existing currency on November 8.The last data available in public domain corresponds to the money supply as on December 19, till when the RBI had infused Rs 5.92 lakh crore of currency into the banking system.Demonetization dries up fund flow of Jharkhand ultra groupsAuthor: PTIPublication: Date: January 2, 2017URL: least Rs 80 crore cash of the naxal groups has thus been destroyed due to demonetization, said Additional Director General (ADG), Jharkhand, R K Mallick.Several extremist groups in Jharkhand were reported to have incurred losses to the tune of Rs 80 crore following the demonetization decision of the Central government on November 8 last and thus suffered a body blow, a top police officer said.The ultra groups are desperate ever since the Narendra Modi-led government had decided to demonetize Rs 500 and 1000 currency notes from the midnight of November 8 last, which had an adverse impact on the activities of naxal and extremists group in the state, Additional Director General (ADG), Jharkhand, R K Mallick said.Quoting an intelligence report, he said at least Rs 80 crore cash of the naxal groups has thus been destroyed due to demonetization.The ultra outfits have weakened as their major economicsystem was destroyed post-demonetization, which prompted the naxals to indulge in looting cash in desperation, going against the Maoist ideology, Mallick claimed.However, the state police was prepared to foil all their nefarious design, he said.Responding to a query, ADG said as per an intelligence report, the naxals used to collect Rs 140 crore in the form of levy three years ago but it had come down to Rs 100 crore owing to intensified anti-naxal operation launched by the security personnel during last couple of years.Further quoting Intelligence report, Mallick said that the naxal and other extremist organisations had saved around Rs 100 crore for meeting expenditure for one year but the money had suddenly become defunct in the wake of government's decision on November 8 last.The ultra groups including Maoists, however, were reported to have succeeded in exchanging old currency notes into new currencies worth Rs 20 crore with the help of their over-ground workers and sympathisers as well as by threatening poor villagers and farmers, he said.Elaborating stringent action launched by the state administration to crush naxals in the state, Mallick said the ultras could not exchange majority of old currencies into the new one and they are now conspiring to loot cash vans of banks and post-offices in desperation.He said around 100 incidents would have taken place across Jharkhand, where the ultras had tried to convert the old currency notes forcibly through banks, but could not succeed due to vigilant state police.He said 37 naxals had been killed while 35 surrendered during 1546 special campaign launched against them by the security personnel last year, claiming that the situation had worsened to such an extent at one time that extremist outfits were recruiting poor farmers and villagers forcibly to enhance their strength.A huge resentment was prevailing among the common man due to their bullying approach, he said, adding the development work being carried out by the government also restricted naxals, who were left with no option but to leave the state.Modi’s Cash Ban Brings Pain, but Corruption-Weary India Grits Its TeethAuthor: Geeta AnandPublication: The New York TimesDate: January 2, 2017URL: was a bold and risky gamble by Prime Minister Narendra Modi of India that quickly seemed to backfire.The announcement of a ban on the largest currency bills circulating in India, which came into full effect at midnight Friday, the last day for depositing the old notes at banks, set off cash shortages that have hit the country’s most vulnerable people hard and prompted worries about the economy.But despite those concerns, as well as doubts about whether the currency ban will reduce corruption as it is designed to do, for the moment, at least, Mr. Modi’s bet appears to be paying off in the public arena.Even as the poorest Indians have struggled, many have continued to voice support for the prime minister’s initiative to target the vast amounts of untaxed money, known as “black money,” flowing through the country’s economy, in hopes that it will combat an endemic culture of corruption. Mr. Modi, analysts say, has successfully tapped into deep frustration with the corruption that pervades almost every public interface with government.“Even though the cash ban has produced enormous hardship for me and my family, I support what Mr. Modi is doing for our country,” said Hem Raj Chechi, 39, a taxi driver in New Delhi, the capital, who said business had been down 50 percent since the ban was announced.Mr. Chechi has not been able to pay his children’s school fees or send money back to his village to support them for nearly two months. But, he said, “We need to fight black money, even though it is hurting little people like me.”Mr. Modi came to power as a disruptive force pledging to overturn the status quo in New Delhi, bring jobs and fight corruption. Indians have repeatedly taken to the streets in recent years to demand an end to corruption, widely seen as being most detrimental to the poor and powerless.Declaring war on corruption, Mr. Modi announced on Nov. 8 that 500 and 1,000 rupee bills, worth about $8 and $15, would be banned the next morning.With the currency ban, Mr. Modi has managed to convince many disaffected Indians that he is on their side. He has also used his powerful skills as a communicator to persuade people like Mr. Chechi that the pain stemming from the ban is for the long-term good.That frustration with a political and business elite viewed by many as corrupt is what drove many Americans to vote for President-elect Donald J. Trump last year, said Eswar S. Prasad, an economics professor at Cornell University who is a native of India.“Trump made the case that only he could effect change by blowing up the system,” Mr. Prasad said in an interview. “Modi, in the same way, did have a persuasive narrative that small changes at the margins can’t tackle deep-rooted problems like corruption. We needed big and painful changes, really disruptive ones.”Mr. Modi appeared on television on New Year’s Eve to tell Indians he understood their pain and urge them to bear with him in the aim of creating a better nation.He compared his cash ban to the freedom struggle led by Mohandas K. Gandhi, a battle of good versus evil. “Today Mahatma Gandhi is not among us, but the path that was truth that he showed us is still most appropriate,” Mr. Modi said, using the honorific for Gandhi.“As we begin the centenary year of the Satyagraha,” he said, referring to Gandhi’s nonviolent resistance movement, “let us recall the Mahatma and resolve to follow his message of truth and goodness.”Mr. Modi was presiding over one of the fastest-growing major economies in the world when he announced the ban on the rupee notes, which made up 86 percent of the money in circulation.“It’s a little bit crazy,” said Geng Xiao, a professor of finance and public policy at the University of Hong Kong. “When I first read the news, I couldn’t even figure out if it was true.”The government said that people depositing large amounts of old currency — more than 250,000 rupees, or about $3,670, could be asked to prove that they had paid taxes on it. Some saw vast amounts of untaxed holdings suddenly rendered worthless.Whether Mr. Modi’s far-reaching move will actually reduce corruption is a matter of debate. Some economists believe it could pave the way for other measures intended to discourage bribery or restructure the economy.But others say the currency ban is unlikely to result in a significant reduction in corruption, even as it has inconvenienced hundreds of millions of people who have struggled to get enough cash to meet their daily needs while the government tries to print enough new notes to replace the banned ones.And a country short of cash has been unable to spend it, which is likely to reduce economic growth in the short term, economists say. People living on the edge of poverty have been hit hard, their diets and livelihoods severely affected.Many in India see Mr. Modi, who has also had success persuading Parliament to clear the way for a unified goods-and-services tax to make it easier to ship and sell things across state lines, as living up to his promise to be a reformer of India’s ossified and bureaucratic economy.But in the process, he has placed the Indian economy and his political future at risk. Many economists believe that the Indian economy will take at least a short-term hit because of a dire shortage of cash, and that the future impact is uncertain. If the effects are prolonged, the public support for Modi could wane.“If this move damages the economy, he’s in for a rough ride,” said Harsh Pant, the head of strategic studies at the Observer Research Foundation, a New Delhi think tank.Mr. Xiao said that in a system in which the informal sector is substantial, the economy could be expected to experience a shock when so much cash is suddenly taken out. “You need offsetting stimulus policies to keep the economy growing,” he said.Mr. Modi was elected by an overwhelming majority in 2014, defeating the government, led by the Indian National Congress party, that had ruled for most of the country’s post-independent life, on the promise of bringing development and jobs and reducing corruption.“In 2014, he had presented himself as the big disrupter,” Mr. Pant said. “He was the precursor to what’s happening in the West.”Mr. Modi was then the chief minister of the state of Gujarat, where he had a reputation for tearing away the country’s red tape so businesses could set up shop and expand.But during his first two years after winning national election, Mr. Modi, whose party did not control the upper house of Parliament, struggled to achieve a significant economic overhaul.Mr. Modi changed the political narrative in 2016 as he successfully fought to get Parliament to clear the way for the simplified goods-and-services tax.He cast the opposition as “people who don’t want change, who don’t want reform,” Mr. Pant said, forcing them in August to support the changes.But the challenges facing Mr. Modi remain considerable. Seven weeks after the cash ban began to be put in place, the currency shortage remains acute, leading to a sharp drop in demand for services and earnings, many providers said.Nagender Tiwari, 42, a rickshaw driver in East Delhi, said he was earning only 60 percent of the 1,000 rupees, or about $15, that he used to take home daily before the cash ban. As a result, his family, which includes two children in 11th grade, has reduced its consumption of fish and meat. They have been unable to pay the rent on their home, he said.He said he was skeptical about whether the ban was reducing corruption, noting that he continued to be stopped by traffic police officers who extorted bribes.“So if bribery is not stopped, how can black money be stopped?” he asked.Raj Kumar Bindal, 65, a paper trader in New Delhi, said sales that plummeted to nearly nothing in the days after the cash ban had returned to about half of what they were before.“We can’t shift to a cashless mode overnight,” he said.Surjit Bhalla, a New Delhi-based economic adviser for the Observatory Group in New York, said he believed Mr. Modi was likely to enact several other major changes in the coming months, possibly including a move to a simplified personal income tax.India needs to reduce the incentives for taxpayers to cheat, Mr. Bhalla said. In the United States, for every $100 collected in income tax, an estimated $20 owed is not paid, he added. In India, for that same $100 in taxes paid, $200 more is owed, he said.Collectively, the cash ban and other anticorruption initiatives have the potential to transform India, Mr. Pant and others said.But doing so depends on Mr. Modi’s continuing to command the political narrative of the country, as he has so successfully done since instituting the cash ban.“So far, he has taken control of the narrative and the people are with him,” Mr. Pant said. “He thinks he can continue to do it, but we really don’t know. There are so many unknowns.” Leveraging demonetisation: This year could see the advent of a credible national challenger to ModiAuthor: Bindu DalmiaPublication: The Times of IndiaDate: January 3, 2016URL: has been hugely disruptive, transforming the national narrative into either bemoaning or hailing the virtues of the reform. This year will likely see the advent of a much needed national challenger to Prime Minister Narendra Modi who is also credible, depending on who picks up the gauntlet and sustains that momentum till Lok Sabha elections of 2019.It is worth noting here that depending on how severely demonetisation damages the economy, or alternatively its success augurs prosperity, future polarisation would hinge on this issue and electoral arithmetic would give less weightage to caste and parochial considerations and more to economic delivery, as in more mature democracies.Whether a singular contender emerges or a coalition head fills that niche, the anti-Modi space is wide open now and crucial UP and Punjab elections should portend that antagonist. Despite the sombre mood of the nation Modi towers, dwarfing his likely challengers by capturing the moral high ground. But should his economic adventurism fail, he would have self-destructed and derailed his own vibrant growth story, as his balance two years will be spent retrieving a now underperforming economy.A Kejriwal edge in Punjab could provide an opportunity to showcase the model state he had intended for Delhi, but found himself checkmated due to the state lacking independent powers. It is unclear from Arvind Kejriwal’s stewardship of Delhi whether he had the capability to deliver but was stymied by the Centre clipping Delhi’s powers, or he was just an inexperienced leader in perpetual opposition mode. However, should demonetisation succeed, Modi would have stolen Kejriwal’s anti-corruption, anti-Congress plank.Mamata Banerjee entered pan-Indian politics, for which she is rumoured to have hired a Hindi tutor (just as Kejriwal is upgrading his Punjabi), using hardship inflicted on the aam admi by demonetisation as her prop. Nitish Kumar has been more ambiguous and he is constrained by his ‘political promiscuity’, neither being with the Centre nor a nodal opposition figure.BJP will always perceive JD(U) as a ‘frenemy’. Despite having delivered improved governance in Bihar, it’s unlikely Nitish can replicate the Modi template of success as Gujarat CM to come centre stage. As a coalition leader, Mamata has that head start over Nitish because of her recent activism, as also Trinamool Congress being the fourth largest party in the Lok Sabha with 34 MPs. The success of demonetisation will be inversely proportional to the decline of Mamata as antagonist to Modi, and how long she can keep stoking the fires of demonetisation.If Akhilesh wins in UP, then his brand could see the rise of an earnest and experienced next-gen scion, inching closer to central aspirations in linear progression. His track record of deliverables sets him up for a wave of pro-incumbency and appeals to New Age concerns of aspirational youth, especially if he can triumph over feudal uncles and win leeway to modernise SP.In contrast, his dynastic peer Rahul Gandhi’s narrative still weaves itself around fatigued garibi hatao rhetoric, without a compelling vision for youth that comprises 50% of the country’s demography. How much Rahul matures in oratory and disciplines himself from being a now-on now-off into-vipassana leader remains to be seen, as well as how much he can pick on Modi’s failures and capitalise on them instead of hurling unsubstantiated allegations.This would necessitate a better backroom team for Congress with better speech writers, as also a breaking away from the old guard to signal a bold intent, like Akhilesh, that the old order is changing. His anointment as party president is likely to be timed with a Congress victory in Punjab should that happen, as Congress culture is to shield the Gandhis from losses but attribute every win to their leadership. Also, by 2019, public amnesia would grant Congress pardon for being scam tainted in 2014, allowing Rahul to develop his offensive.The dominance of Modi within BJP leaves no space for a younger successor, though this year will likely be his make or break year. The PM’s balm delivered on New Year’s Eve, timed to kick-start the UP elections before the election code of conduct sets in, is inadequate to soothe demonetisation’s wounds. Public ire over demonetisation is unlikely to recede before UP elections, nor will the gains of the reform be quantifiable by then, because a longer gestation period is needed to play out its benefits.The party that had a virtual sweep in the Hindi heartland in 2014 is likely to find religious nationalism inadequate to consolidate the Hindu vote, though a contrived narrative is bound to be kept alive by the fringe. BJP needs an upgrade in its brand appeal beyond Hindutva. Modi had sensed the pulse of the people to shelve mandir for progress in 2014, but BJP is now beginning to sound like a socialist government that punishes prosperity in the guise of eradicating illicit wealth. With deglobalisation setting in, economies have to revert to relying on internal consumption, which will need Modi to reformulate his script once again.India Will Make Up For Growth Rate Decline In The Next Fiscal Year, Says Arvind PanagariyaAuthor: PTIPublication: Huffingtonpost.inDate: January 3, 2017URL: "We would make up for what we lose."Niti Aayog vice-chairman Arvind Panagariya on Tuesday said demonetisation would have some impact on the economy in the third and fourth quarter of this fiscal but the country would make up for those losses in FY 2017-18."In the quarter in which the demonetisation decision was made and possibly even the quarter that follows which will be the last quarter of the fiscal 2016-17, we might see some decline in the growth rate," Panagariya told CNBC-TV18. "...the impact is going to be small and subsequently as we get into the next fiscal 2017-18, we would make up for what we lose in these two quarters," he said.Asked whether the government is contemplating of providing big stimulus post-demonetisation, Panagariya said it is too early to jump on any conclusion and one must wait to see the economic impact of demonetisation."So whether or not we need a stimulus etc. The answer to that question will depend on what we observe," the Niti Aayog vice-chairman noted. Panagariya further said that some room for increased expenditure may nevertheless come from higher revenues and that is generally a good news.People are dying because of an audacious cash policy that India says will modernize its economyAuthor: Shashank Bengali and Parth M.N.Publication: Date: January 2, 2017URL: Boinavad, a farmworker in western India who underwent a heart operation as a teenager, began suffering from chest pains last month. A doctor advised the 26-year-old to seek heart valve surgery in the nearest major city, 200 miles away.She immediately ran into another problem: cash.India has been in the grip of a severe currency shortage since early November, when the government banned 500 and 1,000 rupee bills — amounting to 86% of the cash in circulation — in an effort to fight corruption and tax evasion by forcing so-called black money into the formal economy and the banking system. Indians had until Dec. 30 to deposit the old notes at their banks.In the farming region where Boinavad and her husband live, banks have been slow to receive the new replacement bills, leaving most customers to wait. And like most rural Indians, the couple did not have a checkbook or debit card.Not that they even had the $1,500 or more that the operation would cost. But amid the currency crisis, they couldn’t even scrape together $100 for transportation to the hospital.To raise cash, Boinavad’s father decided to sell his two buffaloes. But the buyer asked him to wait a few days because he couldn’t find cash either.It didn’t come in time. Boinavad’s pain worsened for several days until she died at her parents’ home Dec. 13 in Nanded, 300 miles east of Mumbai.“If not for demonetization” — the name for the government’s policy — “she would still be with us,” said Boinavad’s cousin, Sanjeev Halde.Few peacetime episodes in India’s 70-year history have proved as contentious or chaotic as the currency ban, which has unleashed tragic consequences across this cash-dependent economy and stained Prime Minister Narendra Modi’s reputation as a capable administrator.Nearly two months after Modi canceled the value of the two biggest bills in circulation — worth about $7.50 and $15 — cash remains scarce and Indian news reports have attributed scores of deaths to the stress of not having access to cash, with some people collapsing after hours in the line at the ATM. Others have reportedly died after being refused treatment at hospitals because they couldn’t pay cash. Bank employees have been said to have died of overwork. Reports of suicides and even a killing have been linked to the new policy.Modi had said the “pain” would be over by now, but fewer than half of the country’s 200,000 cash machines are working and strict limits remain on how much currency can be withdrawn from bank accounts.The misery has also taken subtler forms: migrant workers unable to send money home to their families, small businesses forced to close, a slowdown in sales of everything from SUVs to spinach. Foreign banks have slashed their 2017 growth forecasts for India, which has been the world’s fastest-expanding major economy.Modi’s government has struggled to explain why the policy, crafted in near-total secrecy, has been implemented in such a disorganized way. The central bank — the Reserve Bank of India, whose well-regarded Gov. Raghuram Rajan resigned amid disagreements with Modi’s government in June — has found itself becoming a national punchline as it issues rule upon rule on deposits and withdrawal limits, some conflicting with one another.“It is unfathomable why some of the smartest minds and most competent officials were unable to see that the currency transfusion will be a complex, difficult, painful process full of unintended consequences,” said Nitin Pai, co-founder of the Takshashila Institution, an independent policy research organization.Modi has offered alternating explanations for why he took such drastic action. He initially said his target was tax evaders who had supposedly stashed away large hoards of undeclared wealth — giving them until Dec. 30 to deposit it in banks, where it could be audited, or watch its value evaporate.But 80% of the canceled bills were deposited in the first three weeks. Some experts said that indicated there was less black money in the market than the government expected — or that much of it had effectively been laundered into legitimate accounts and would escape scrutiny from India’s much-maligned tax authority.More recently, Modi has emphasized the need to reduce India’s reliance on cash, encourage more people to use bank accounts and electronic payment methods and modernize the economy.In that case, analysts said an overnight currency swap was too extreme.“The shifting goal posts are a sign that the authorities are desperately clutching at straws to justify their terribly flawed decision on demonetization,” said Meera Sanyal, an opposition politician and former chief executive of the Royal Bank of Scotland in India.Meanwhile, Indians have been outraged by stories of law enforcement agencies uncovering huge quantities of the otherwise scarce new bills. Tax inspectors in the eastern city of Chennai reportedly seized more than $5 million in new notes in a series of raids on well-connected businessmen, including $45,000 found at properties used by the state’s top-ranking civil servant. Modi has expressed regret for the inconvenience but cast the policy as a nation-building project. One of the government’s top economic advisors compared the disruption to Hurricane Katrina’s effect on New Orleans, saying the economy would eventually rebuild."We cannot allow this fight against black money and corruption to stop or slow down," Modi said in a nationally televised speech New Year's Eve. "Firmness in truth is a guarantee for success."Modi, elected in 2014 on promises to boost economic growth, remains popular, partly because of the shambolic performance of the political opposition. His Bharatiya Janata Party, or BJP, performed well in a pair of local elections in northern India last month, suggesting that many citizens are willing to tolerate the turmoil if it results in reforms.“I think [Modi] must have thought it through,” said Sayyad Jamal, a Mumbai furniture seller who pleads with customers to pay cash but ultimately supports the policy “if black money is being eradicated.”Experts say there is a powerful feeling of schadenfreude among the general public: a hope that India’s highflying, tax-dodging one-percenters will suffer more if the economy is cleaned up. But that could have limits.“If their inconvenience does not diminish faster than their schadenfreude, the mood will turn against Mr. Modi,” Pai said. “It all depends on how quickly the [cash] transfusion can be completed.”An analysis by IndiaSpend, a news site, suggested that the earliest that government printing presses could replace all $210 billion that was withdrawn from circulation is April 2017 — five months after the policy was introduced.It could take even longer for sufficient quantities of bills to reach the two-thirds of Indians who live in rural areas and remain tethered to cash. Only 2.5 million rural Indians had enrolled in cashless systems in the six weeks after the announcement, according to a government task force assigned to increase the use of electronic payments. Raghunath Kasbe, who works for a local council in Nanded, recalled how his father, a farmer, lined up outside the bank near his village for two straight days in mid-November, yet failed to obtain cash. On the third day he returned and joined the line before 8 a.m.Around noon, Kasbe got a call saying his father had collapsed while waiting.Digambar Kasbe, 60, died of a heart attack, doctors said. His son said he had been worried about paying for seeds and the wages of laborers who work on their 3-acre farm.“He was desperate because even my salary had been delayed … and it wasn’t going to come any time soon,” Raghunath Kasbe said. “There is no way we can do without cash.”What do you feel after the 50 days of Demonetization? Are you satisfied with the cash problem or not?Author: Krishna JhaPublication: Date: January 3, 2017URL: write up on demonetisation, I thought worth sharingIndeed thought provoking!!!Yesterday, Chidambaram asked the PM to admit, demonetization was a ‘mistake’. The narrative which started as ‘India would see riots’ by the Chief Justice ...which later traversed from ‘huge queues & deaths’ to ‘people starving’ to ‘unimaginable loss to India’s economy’ to ‘GDP reduction’ to ‘failed initiative with no major benefits’ to finally ‘at least say it was a mistake’. That seems to be a very big climb-down.While the Economists & Politicians may keep debating the impact of this demonetization, one thing is for sure, India has pulled off one of the biggest ever ‘de & re’ monetization of its economy of a scale hitherto unknown. India’s size, by population, is close to North America + Europe + Australian Continent + Half of South America. (Yes 3 & half Continents!) And this huge poverty-stricken country, with more than 600,000 villages, has peacefully gone through such a humungous monetary exercise isn’t a mean achievement. And this hasn’t happened purely due to PM’s popularity or any ideological support. It could happen, only because the new notes could actually reach the last person, of the last village. The fact is no citizen was required to starve or see his children starving for lack of new notes. Had villages seen their children starving, there would have definitely been arson & looting. After all, haven’t we heard stories of how Americans loot shops during hurricanes & natural calamities? I believe, this couldn’t have happened unless RBI & other banks hadn’t planned the re-monetization with utmost precision. Try executing a small project in your office & you will know what I am saying. The sheer size of this operation is so mind boggling & when people say ‘’It wasn’t planned properly”, you really feel sorry! And if somebody is changing rules each night, doesn’t it also suggest that perhaps there is a war-room monitoring real-time data. More so, when the govt isn’t suffering any casualty on the ground despite daily changes.Demonetization is perhaps the boldest move by any Indian government. More than, bank nationalization coz, there, Indira Gandhi was taking on certain rich private individuals who owned banks. Here entire India was participating in churning of almost the entire cash. This demonetization could have happened only when India had both popular leadership & as well as a healthy economy. Nobody would dare such a move, when economy is growing at say 2%. And if, as expected, India indeed grows over the next 2-3 decades, it would be a much healthier & inclusive growth … thanks to the main-streaming of a large part of our economy post demonetization. There will also be other short-term benefits in form of Notes not returned and taxes due to amnesty scheme. And even here the benefit would be far bigger than what India has ever witnessed.SADLY, THE MEDIA CONTINUED TO REMAIN HOSTILE TRUE TO THEIR AVOWED REPUTATION. This was one occasion when they could have cheered ‘Buck up India’. Rather, on several occasions, it lied. Death outside ATM which was later retracted, Waiver of Mallya’s loans, Donations of political parties not to be questioned, Supply Chain of goods on standstill etc could have easily been doubly-verified before reporting. Neither did we see pictures of vegetables rotting on highways nor did we see price rise, which is immediate fallout of a supply chain failure. I still cant believe, they tried to build a narrative that capitalization of our own nationalized Banks is evil. Most of international media, who have ear to the ground, were also very critical. The same ones who promised Hillary will win. Despite all the provocation, a country as diverse as India stood united. And now if Dangal is breaking box-office records across all territories, normalcy has already returned. ATMs may be dry, but your pockets aren’t really.Time will tell whether demonetization is a success or a failure for our economy. But that is Modi’s headache. As far as RBI is concerned, it will now become a learning ground for Central Banks of many countries. And that plump RBI Governor Urjit Patel, who is made to look like a joker – thanks to our media, will have the last laugh!!Samajwadi Party MLA's body guard discovers his bank account balance has suddenly risen over Rs 99 croreAuthor: Navbharat TimesPublication: The Times of IndiaDate: January 4, 2017URL: the bodyguard of a Samajwadi Party MLA checked his account balance at a State Bank of India ATM here today, he made a startling discovery: his account had mysteriously been credited with over Rs 99 crore.The guard, Ghulam Jilani Siddiqui, shouldn't have had more than Rs 73,000 in his account by his own admission, but there was no mistaking the exact amount on the mini-statement: Rs 99,99,02,724.A worried Siddiqui informed his boss, MLA Irfan Solanki, who in turn brought the matter to the attention of the city magistrate.It isn't clear for now whether the drastic increase in the bank balance was the simply the result of a software error, or whether there was something else behind it.Siddiqui and Solanki plan to inform the SBI about the incident tomorrow.Demonetisation: 40% of deposits in SBI may stayAuthor: TNNPublication: The Economic TimesDate: January 3, 2017URL: chairman Arundhati Bhattacharya has said that the bank now expects nearly 40% of the deposits that have come in following demonetisation to remain in the bank. The deposit surge and the slowdown in lending have prompted the bank to launch a slew of retail loans, including "insta top-up" on mortgages and "bridge" loans for those who want to upgrade homes but don't yet have a buyer. Announcing the new schemes on Monday, Bhattacharya said that the bank was likely to postpone the merger of its associate banks with itself to March 30 as this would require changes in IT systems. "We stop all modifications to the IT systems in mid-February as it can have an unforeseen impact. We do not want to take chances when our accounts are being finalised," said Bhattacharya. According to Bhattacharya, a clear indication on how much money would remain in the system would come up after limits on withdrawal are removed. The SBI chairman added that she expected normalcy to return to the banking system by end-February or March and the bank would take a decision on reviewing its savings account rate in April. SBI has added Rs 1.65 lakh crore to its deposit base since demonetisation. This has resulted in the share of current and savings accounts (low cost deposits) in total deposits rising to 47.6% of total deposits from 42.7% earlier. But the bank's loan book has not seen any increase during the period. "If we move from government bonds, which give us a return of over 6% into loans, we immediately get a step up of 2% on our spreads," said Bhattacharya, explaining the rationale for launching new loans. Insta loans are in the form of top-ups on existing home loans which the bank claims it will disburse in a day. These top-up loans will be available at 9%. Similarly, the bank plans to sell bridge loans to those who have not yet finalized sale of their existing flat but want to seal a deal on a new one. The bank will offer one year bridge loans at 10.45%. Car loan rates have also been reduced to 9.1-9.25%. Bhattacharya said that the bank has introduced a special scheme under which borrowers can get home loans at 8.5% for the first year and at rates linked to the floating rate benchmark subsequently. "This is not a teaser rate. A teaser rate by definition is one that is below the marginal cost of lending rate (MCLR) or the Base Rate," said Bhattacharya.The Runaway KaamchorAuthor: RavinarPublication: Date: January 4, 2017URL: job and profession requires certain talents and skills. One can get by with lesser talent but hard to get by without the requisite skills. Not possessing skills is not a crime but not willing to acquire the required skills for the chosen job will only lead to failure and disaster. Some jobs require multiple skills – a plumber’s major skill is plumbing but he also requires some skills in masonry and carpentry. How does one make it in life? You either work and get somewhere. Or you get born in a rich family and squander your life the way you want. Or, you marry a rich man or woman and spend your life and money watching movies and taking frequent vacations. George Best could have been the greatest footballer of all time. His talent and skills were known to far exceed the great Pele or even Maradona. But his own quote sums how he destroyed his great talent, skill and wealth: "I spent a lot of money on booze, birds and fast cars. The rest I just squandered”. Try this one: “In 1969 I gave up women and alcohol - it was the worst 20 minutes of my life”. Rahul Gandhi is no George Best. He neither has talent nor skill in anything other than blabbering nonsense, sabre-rattling or grandstanding. The guy just visits India sometimes every year, spends a few months, talks nonsense and vanishes. He does no known work. His only gift, as somebody called it, is that he’s a “Lucky sperm” born into a rich political family. That’s all. And this family has made the Congress a private company where all the employees are bonded for life or have to leave if they don’t accept mandatory servitude to the Chinese Gandhis. Even some very talented Congis shamelessly crawl at their feet. That RG is a comedian is now an immutable truth and even Congis cannot deny it. It is fashionable for our cheap MSM to plagiarise American terms. They now call our MPs and MLAs “Lawmakers” as in the US. Our MPs and MLAs actually have a much bigger role to play than just make laws. They are given funds and can demand funds for projects or facilitate developmental work. Our little Pappu does nothing of that sort. For 666 years Amethi has been the private property of these Gandhis with nothing much to show. RG goes around blabbering in the whole country and even runs abroad but does nothing for anyone. Even his jibes are tutored and read from scripts. Even from written scripts he fails miserably. Look at this (Video 1.47 mins):When you don’t have the talent or skills for something then don’t try to cover it up by more stupidity. For a politician, Modi has extraordinary skills in oratory that is known. But what is not recognised is that Modi also uses his arms, hands and fingers in good supporting animation. He is a well-trained speaker it seems. If you see RG, the only thing he does monotonously (in all speeches) with his right arm and hand (other than rolling up his sleeves like a streetfighter) is do a “Swaha” as we do in yagnas or in a marriage ceremony. Doesn’t anybody teach this dunce in Congress on how to use animation or emphasise a point? But the problem seems to be that Pappu is eminently UNTEACHABLE and he has been proving it since 2004 when he entered politics. From Kalawati to Dalit homes to suit-boot ki Sarkar to earthquake-like speeches in parliament the guy simply blabbers nonsense. And our stupid media promotes this guy as the next messiah:---------------------------Economic Times @EconomicTimes#RahulGandhi says proof against PM @narendramodi 'bulletproof' but keeps it secreteconomictimes.news/politics...12:20 PM - 16 Dec 2016---------------------------The Hindu @TheHindu.@OfficeOFRG has asked @narendramodi to lift restrictions on cash withdrawals and pay Rs 25,000 to every BPL family.bit.ly/2iihPls5:44 PM - 31 Dec 2016---------------------------Does this guy really possess any knowledge or brains to even ask questions on any topic to the PM or offer advice? I don’t think so. A little jerk who goes around talking “Aloo factories” in UP clearly needs some education on many things. And each time our MSM crooks orgasm in chorus when they see a scripted glimmer. In January 2013, they collectively orgasmed over his “Power is poison” nonsense. Then during the parliament session over demonetisation they kept asking “Has Rahul come of age”? In reality, these MSM fools, instead of calling him the dunce he is they pin their hopes on anybody, just anybody, who can topple Modi in any way possible. Just look at this Intellectual Moron, the Award-Wapsi gang leader, when she found Pappu can’t dance:---------------------------NDTVPM Modi Has Met His Match In Kanhaiya Kumar: Writer Nayantara SahgalAll India | Press of India | March 07, 2016 23:00 IST---------------------------The Congis have no option but the media will frequently find options like Kejriwal or Akhilesh or even the Peeking Kanhaiya to keep their “Choola” burning but still end up losers. And RG throws mud at quite a few people and creates “item girl” ruckus in parliament. The Congress as a party backs this ruckus and drowns the voices of even others in the Opposition. That at the cost of promoting this duffer, the Congress drowns all other voices on the Opposition benches. No one pointed this out better than Modi on the drama that Congress uses to promote the blabbering dolt as a hero (Video: 3.45 mins): That is as accurate as anyone can be. To cover up the “inferiority complex” of RG (and he is actually inferior to any Indian of his age or lesser at that) the Congress takes up the most nonsensical campaigns or disruptions. From “Earthquake” speeches to stupid nation-wide movements to fear of surgical strikes against corruption. Wait… Surgical strikes against corruption? Even that rattles the Congis? Of course, if Congis face hurdles in corruption they would feel like fish out of water. Thus, the silly utterances of the footsies of Pappu continue:---------------------------The Indian Express @indianExpressCongress to launch nation-wide movement against demonetisation from january 1 | article/india/...6:41 PM - 31 Dec 2016---------------------------ANI @ANI_newsThere was fear that PM would unleash 2nd surgical strike & announce further harsh measures in his fight against corruption: Prithviraj Chauhanpic.QW41HNcnN74:23 PM - 1 Jan 2017---------------------------Stands in a Q to convert old notes. Goes to Bhiwandi for a court hearing and blabbers another speech trashing Modi against demonetisation. Goes to Mumbai and again disturbs Qs at banks or ATMs for his stupid stunts. This is what a Kaamchor does. His inferiority in talent or skills to make any sense leaves him with no option but to indulge in such theatre and drama. Politics wouldn’t be fun without some drama but the politician is not supposed to become a loose-tongued comedian. And after all this what does he do? Behaves like a Runaway Kaamchor:---------------------------Ofiice of RG @OfficeOFRGI will be traveling to Europe for a few days. A very Happy New Year to everyone (1/2)1:55 PM - 28 Dec 2015Ofiice of RG @OfficeOFRGI will be traveling for the next few days. Happy New Year to everyone, wishing you and your loved ones success & happiness in this coming year3:54 PM - 31 Dec 2016---------------------------He is very worried for India. He is very worried for Dalits and poor people. He will protect India from Modi. He will fight RSS to protect India. He will fight corruption. He will cause earthquakes of laughter with his comedy. He was found to be partying after 26/11 happened. Was abroad when Uttarakhand floods happened and returned to take a grand King-like tragedy tour. He will hunt for suffering farmers anywhere but not visit them in the Congress-ruled state of Karnataka. In short, a tragedy-tourist with no purpose at all. And THEN… he will runaway to his favourite jaunts in Thailand or Europe or anywhere. Anywhere but an Indian town or vacation haunt. Nobody has any problems with anyone taking a vacation. And our MPs are mostly on vacation considering Parliament sessions are only for around 150 days a year. The other days people like RG are anyway on vacation. He does no work. And his history of being the Runaway Kaamchor has been documented in many reports. See this one in particular from IndiaToday which describes his hop-scotch vacations:In that particular episode RG had disappeared for over 50 days with no one then knowing where he was or what he was doing. Many suspect he was in a detox centre for drug-abuse. When he returned the Congis grandly announced “A new, improved, rejuvenated RG would be visible” like New Improved Surf. Never mind that. Who does he meet? What deals does he make? Why so much secrecy around his trips that need so much investigation by the media? And then the Congress party rants about Modi’s official foreign trips for national business which are no secret and not party-hopping jaunts. Only a person with no responsibility and runs away from any serious work and born into a family with money to burn can behave like this. And the media is being finally forced to recognise the wanton vacationing and runaway kaamchor:Long ago there was a movie called “Kaamchor”. In this film, Rakesh Roshan is a slacker who weaves nice stories just to find a rich woman to marry and live a life of comfort doing nothing. He convinces the woman he wants no riches but true love and will never become a “Ghar Jamaai”. The rich woman falls for him and marries him. But unfortunately, instead of living in her mansion she decides to live in his poor house. Roshan’s dream-life shattered, the marriage goes into trouble till his wife finally forces him to work and live in honour. He finally learns his lesson and mends his ways. It’s not just running away. The Gandhis have a history of running away without as much as a mild intimation to the LS Secretariat. That is more like escaping from the country for various reasons. For RG one doesn’t even need to draw new cartoons on his silly antics. This cartoon is from January 2016 and needs no alteration at all:Unfortunately for RG, there is no wife or woman who will teach him a lesson. Even his doting mother seems helpless. And his footsies wouldn’t dare teach the duffer that he has to do some real work to earn his political life and respect of people. He continues to live the life of a slacker. Shoots his mouth here and there and then runs off to his playgrounds in Europe or the East. Even the anti-Modi Gardiner Harris of NYT couldn’t help pointing out RG is a total failure and unfit for politics (See video at the end of this post). India is now in a different age from Pappus who passed before. This Runaway Kaamchor will not learn. He has no learning skills. And the poor Congis will keep hanging on to the Gandhis in search for their elusive crumbs.Happy days ahead! Cash crunch may ease by Feb-end, says SBI reportAuthor: Gayatri NayakPublication: The Economic TimesDate: January 6, 2017URL: Reserve Bank of India replaced as much as 44% of the currency extinguished by demonetisation with new notes by December 30, according to a State Bank of India report. India's currency supply is likely to return to near normal by February end and growth, which has been hit by the withdrawal of Rs 500 and Rs 1,000 notes, is likely to bounce back faster than earlier expected, said the analysis by India's largest commercial bank. December 30 was the last day on which the public could deposit old notes with banks following the November 8 demonetisation announcement. The level of replenishment is perhaps not rising faster because the central bank, having initially focussed on pumping new Rs 2,000 notes into the system, is now concentrating on currency of lower denominations, SBI group chief economist Soumya Kanti Ghosh told ET. The SBI report forecast that, by the end of this month, 67% of the cancelled currency will get replaced if the central bank prints notes of various denominations at the current pace, and to 80-89% by the end of next month."Either way, contrary to market perception, things will be closer to normal by February-end as opposed to predictions of the crisis lasting longer," Ghosh said. "If this is the case, the possibility of a GDP bounce-back faster than anticipated may not be ruled out." COUNTING OLD NOTES Separately, the central bank said it was too early to put a value on the amount of old notes that have been deposited after Bloomberg said 97% of the scrapped notes were back in the system in what it described as a setback to the fight against black money and corruption. "We would like to clarify that the periodical SBN (specified bank notes) figures released by us were based on aggregation of accounting entries done at the large number of currency chests all over the country," RBI said in a press release on Thursday. "Now that the scheme has come to an end on December 30, 2016, these figures would need to be reconciled with the physical cash balances to eliminate accounting errors/ possible double counts etc." The central bank said it would release this data as soon as it was compiled. "RBI has already initiated this process and till this is completed any estimate may not indicate the actual numbers of the SBNs that have been returned," it said. "RBI is taking all steps to complete the process expeditiously so as to release firm figures of SBNs received at an early date." CASH CONFUSION There has been some confusion regarding the exact amount of cash that ceased to be legal tender starting November 9. According to the weekly data that RBI puts out, between November 4 and December 30, total currency in circulation contracted from Rs 17.97 lakh crore to Rs 9.38 lakh crore. In its reply to a Right to Information (RTI) query, the central bank said total cash amounted to Rs 24 lakh crore on November 8 and of this, Rs 500 and Rs 1,000 notes added up to Rs 20.51 lakh crore, or 85%. The RBI later clarified that this included money in currency chests that hadn't been distributed to the public. An affidavit filed by the government in the Supreme Court pegged the proportion of withdrawn notes at 86% or Rs 15.25 lakh crore out of a total Rs 17.74 lakh crore. The difference in both the figures is because the total figure includes currency in chests not available to the public. The finance ministry had said earlier that by December 10, Rs 12.44 lakh crore of old notes had been deposited but clarified that double counting may have taken place due to inter-bank deposits and new notes coming back to the system. RBI sought details of scrapped notes returned to currency chests to ascertain the total quantum of old notes returned to the system, banks said.Why a higher proportion of cash returning to banks may actually be a sign of success of demonetisationAuthor: Publication: Date: January 5, 2017URL: window given for regular deposits of old currency notes under demonetisation expired on 30th December 2016. There have been numerous attempts by various commentators to declare the entire demonetisation exercise a failure, but somehow none of these op-eds (which have mostly been short on facts), have cut any ice with the public. Now as the window has ended, a new parameter is being raised to declare that the demonetisation scheme failed.As reported by , in the last couple of days, some media outlets have run speculative reports claiming that most of the demonetised currency has come back into the banking system. A Bloomberg report said yesterday that Indians have deposited 97 per cent of the demonetised notes till 30 December. Business Standard report claimed that the figure was 94 per cent.The Indian Express based its post on the Bloomberg’s data and asked whether: “Demonetisation complete failure?” since 97% of the notes came back. No other argument was put forth. Leftist site thewire.in also made similar arguments, albeit with slightly different figures. Firstpost’s Sandipan Sharma too toed a similar line:But, on current evidence, it seems most of the money may actually end up getting legally tendered in banks, entering the system as white money. Whither kala dhan?So why do they say that demonetisation has failed since most of the cash has come back into the system? This claim could partly be based on this theory, which was first started by the media itself:Currency Notes issued by the RBI are RBI’s liabilities to the bearer of the notes. Since due to demonetisation, after 30 December certain notes stop being legal tender, they will no be RBI’s liabilities any more, and a waiver of liabilities would result in an accounting profit for the RBI, which could then be passed on as dividend to the Government of India.This theory was floated by the likes of the Indian Express, the Economic Times (twice) and also The Hindu Businessline. Many other sites promoted this theory too, but just a sample is being presented.In early December itself, the RBI had itself stated that it had absolutely no plans to pass on as dividend to the government, the amount of money that does not come back into the system once the deadline of the demonetisation exercise expires on December 30, 2016. This one statement by RBI should have ideally shut up all those who claimed that a higher percentage of notes returning to the system would mean a bigger failure for demonetisation. But then, that would need them to be honest.The other argument made to show that a higher percentage of money returning to banks is a failure of the scheme is the one placed by the likes of Sharma in Firstpost: “Whither kala dhan”, meaning, if all the money came back into the banks, it means there was no “black money”. The argument is based on the stupid notion that any money deposited into the banks is by default “white”.The fact though is, “black” money can turn “white” only once you pay taxes on it. As such, all the money deposited in banks will have to be explained by the depositors by showing the source of income (on which tax has already been paid) or, the depositors will have to now pay tax on these deposits. And there in lies the key: contrary to what is being argued, a higher amount of money coming back can actually be good:1. As explained above, every penny deposited will have to be explained and the appropriate tax on it will have to be paid. The tax can vary from 30% (regular income) to 50% (under the Pradhan Mantri Gareeb Kalyan Yojana) to even upwards of 80% (in case the depositor is caught cheating the tax department)2. The above is just the one-time gain. There is also a recurring gain. Once a person deposits his cash into the bank, he indirectly alerts the tax department that he is capable of earning that much money over a few years. Take for example a trader who was never filing taxes previously. He now deposits say Rs 25 lakhs in cash into his accounts. Assuming he has accumulated such cash over 5 years, his annual net savings would be Rs 5 lakhs odd, and his annual income could be more than that. Till now, the tax department had no clue that this trader could earn such income. Now they know. And the tax department doesn’t forget. Not only will the trader have to pay tax on Rs 25 lakhs, henceforth, he will be on the radar of the tax department. Assuming that he goes back to his old ways and doesn’t file taxes in the future, now the tax department at least knows about him and knows how to catch him. There can never be any estimate of this recurring incremental tax being earned by the Government.There are other arguments too, which would debunk this claim by media that a higher amount of cash returned is a sign that demonetisation has failed, for example lower interest rates etc, but these two key factors will have to be kept in mind. End of the day, the cabal which wants to declare demonetisation as a failure will have to work harder in the face of hard facts.PM Modi’s new year sops to cost govt Rs3,500 crore annually: SBI ResearchAuthor: PTIPublication: Date: January 3, 2017URL: Research says the overall fiscal impact of PM Modi’s new year sops will be around Rs3,500 crore per year, which is minimal compared to the social and economic benefitsThe government will have to make an additional budgetary provision to the tune of Rs3,500 crore to pay for the slew of welfare measures announced by Prime Minister Narendra Modi for the poor, pregnant women and farmers on the eve of the New Year, says a report. “The overall fiscal impact of all these measures announced by the PM on 31 December, will be around Rs3,500 crore per year, which is minimal compared to the social and economic benefits,” SBI Research said in a note on Tuesday.Modi announced a slew of schemes for multiple beneficiaries last Saturday, in a bid to soften the blow of demonetisation drive between 8 November and 30 December. In what looked like a mini-Budget speech, Modi announced interest subventions for agricultural loans, financial assistance of Rs6,000 for pregnant women and an increase in the number of houses being built for poor by a third, among others.The note said the interest subvention on agri loans will result in a fiscal burden of Rs1,300 crore, schemes for women and children will be a fiscal drag of another Rs1,200 crore and the benefits under the PM Awas Yojana will cost Rs1,000 crore to Exchequer.Modi had announced loans of up to Rs9 lakh taken in the new year under two new scheme — Pradhan Mantri Awas Yojana — will receive interest subvention of 4% and loan of upto Rs 12 lakh will get a 3% interest waiver. For rural areas, the number of houses being built for poor will be increased by 33%. In addition, another scheme is being put in place for the neo-middle and middle- class in rural areas where loans up to Rs2 lakh for new housing loans or extension will receive an interest subvention of 3%. Farmers will get 60 days interest waiver on crop loans taken for the Rabi sowing and those who have already paid will get back the money into their accounts to the tune of the 3% interest waiver. They will get even better access to loans from cooperative societies with the government adding Rs20,000 crore to the Rs21,000 crore fund created by Nabard last month.Demonetisation may slow down economy: President Pranab MukherjeeAuthor: Ankit MisraPublication: Indiatoday.inDate: January 5, 2017URL: "Demonetisation, while immobilising black money and fighting corruption, may lead to temporary slowdown of the economy," Mukherjee said.President Pranab Mukherjee today, while acknowledging that Prime Minister Narendra Modi's demonetisation drive immobilised black money and fought corruption, had a word of caution too: it may lead to temporary slowdown of the Indian economy."Demonetisation, while immobilising black money and fighting corruption, may lead to temporary slowdown of the economy," Mukherjee, who had called note ban a "bold step" two months ago, said today.The President said we all will have to be "extra careful" to alleviate the sufferings of the poor following the banning of Rs 500 and Rs 1000 notes in a shock announcement by Modi on November 8."We need to be extra careful to alleviate the sufferings of the poor that might become unavoidable for the expected progress in the long term," he said.The President's words of caution came when he was addressing the Governors and Lt Governors through video-conferencing from Rashtrapati Bhavan.Mukherjee said that while he appreciates the thrust on transition from entitlement approach to an entrepreneurial one for poverty alleviation, he is not too sure that the "poor can wait that long"."They need to get succour here and now so that they can also participate actively in the national march toward a future devoid of hunger, unemployment and exploitation," the President said. TEN DAYS AGO, HE WAS OPTIMISTICBarely ten days ago, while addressing an event in Hyderabad, President Mukherjee was a lot more optimistic about the Indian economy."India is on the cusp of a leap towards a higher economic growth trajectory. A decade after the 2008 global economic crisis, major economies of the world are still limping. But, the Indian economy is growing fast", he had said on December 23 while addressing the Centenary Year Celebrations of the Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry in Hyderabad.Interestingly, the word demonetisation - arguably the word of 2016 along with surgical strikes - found no mention in the President's Hyderabad address.On November 9, a day after Modi's televised announcement on note ban, Mukherjee had welcomed the move "which will help unearth unaccounted money and counterfeit currency".FULL TEXT: President Pranab Mukherjee's speech on why demonetisation is bad news for IndiaAuthor: Ankit MisraPublication: Indiatoday.inDate: January 5, 2017URL: care must be taken to alleviate sufferings of the poor triggered by economic slow down which has become unavoidable after demonetisation, President Pranab Mukherjee said today.Extra care must be taken to alleviate sufferings of the poor triggered by economic slow down which has become unavoidable after demonetisation, President Pranab Mukherjee said today. "We all will have to be extra careful to alleviate the suffering of the poor which might become unavoidable for the expected progress in the long run," he added.FULL STATEMENT OF THE PRESIDENT1. My dear Governors and Lieutenant Governors, let me begin by extending warm greetings and best wishes to you for a year full of peace, prosperity and happiness.2. The year that has just gone by was a year of mixed fortunes. It began on a very promising note with the economy performing well, overcoming the weak global economic trends. GDP growth of 7.2 percent in the first half of 2016-17 ?€“ same as that of last year ?€“ is a pointer to the fact that our economic recovery has been on solid grounds. In 2014 and 2015, below normal rains had caused rural distress. A good monsoon in 2016 is expected to improve agricultural production and increase rural employment and incomes. Though our exports have been affected by weak global demand, we have a stable external sector. Reviving exports will remain a challenge but we can overcome it by improving the competitiveness of the domestic industry.3. Demonetization, while immobilizing black money and fighting corruption, may lead to temporary slowdown of the economy. We all will have to be extra careful to alleviate the suffering of the poor which might become unavoidable for the expected progress in the long term. While I appreciate the thrust on transition from entitlement approach to an entrepreneurial one for poverty alleviation, I am not too sure that the poor can wait that long. They need to get succour here and now, so that they can also participate actively in the national march towards a future devoid of hunger, unemployment and exploitation. The recent package announced by the Prime Minister will provide some relief.4. This year, there will be elections in as many as seven states. The dates for elections in five states have already been announced. The conduct of free and fair elections has made our democracy one of the most vibrant in the world. Elections reflect the attitudes, values and beliefs of the people towards their political environment. They symbolize the sovereignty of the people and provide legitimacy to the authority of the government. They also serve the purpose of regulation of public policies and mobilization of public opinion.5. As we have all experienced, elections are usually marked by competitive populism, electoral rhetoric and vote bank politics. Noisy debates can deepen the fault-lines in the society. You, as Governors and Lt. Governors, command respect and attention of the people of your state. Through your interaction and wise counsel, you can play an important role in easing the tensions in the society. Goodwill must prevail between different communities. At times, harmony may be put to test by vested interests. Communal tensions may rear their ugly head. Rule of law must form the sole basis of dealing with any such challenging situation.6. In a pluralistic democracy like ours, tolerance, respect for contrary views and patience are a must. These values have to be preserved. India is a multi-faceted nation of 1.3 billion people, 122 languages, 1600 dialects and 7 religions. In the words of Pt. Jawaharlal Nehru which I quote: "It is a country held together by strong but invisible threads" (unquote). India's strength lies in her diversity. The multiplicity in culture, faith and language is what makes India special. There will always be divergent strands in public discourse. We may argue. We may disagree. But we cannot deny the prevalence of multiplicity of opinion. You can, through your calm influence, inculcate amongst the citizens of your state this fundamental ethos of our civilization.7. You are the first citizens of your states. When you assumed this exalted office, you had taken an oath to protect, preserve and defend the Constitution. This pious document protects the liberty of the people and promotes the well-being of the citizens. It decrees inclusiveness, tolerance, self-restraint, and protection of women, senior citizens and weaker sections as essential ingredients of our polity. Our institutions of democracy must operate on these vital features. Strong credible institutions lead to good governance ensuring a healthy functioning of the democracy.8. You all have a very important role to play in the improvement of higher education in your states. As chancellors and visitors of various universities, you can work with the academic leaders to effect holistic changes for quality up-gradation in the institutions of higher learning. I have been exhorting the academia to concentrate on attaining excellence through original research and technology development. A look at numerous social problems affecting millions of women and men in our farms and factories clearly shows that humane values have not yet become a dominant driver of our intellectual pursuits. This should receive your focused attention. Our interactions at the conferences at Rashtrapati Bhavan have yielded several positives in areas like: faculty sourcing and development; ICT for pedagogic refinement; research and innovation; industry-academia interface; and alumni involvement. I am aware of the good work being done by many of you in this field. Interaction amongst academic institutions can help spread best practices. These institutions can leverage knowledge and experience to the benefit of all. Your keen interest can rejuvenate a sector that is best positioned to support an innovation-led knowledge economy.9. Another area where I envisage a role for you is in promoting art and culture in your respective states. As I have said elsewhere, art and culture are our link with the past. They provide the foundation for our current thought and by extension, the platform for our future action. They also provide a stable base to life and make it possible for us to have a joyous existence. With art and culture, we can experience life in its fullest and most meaningful form. They add to the overall happiness and well-being of the society.10. Before I conclude, I express my deep appreciation to you all for coming together on this platform for our interaction. Within the limited time available, let us share some of our key concerns. I do look forward to our extended interface in the Governor's Conference, when we will have the time to hear each one of us in detail.Shiv Sena Terms Centre As 'Worst In 10,000 Years' Over Notes BanAuthor: Indroneil B BiswasPublication: Date: January 7, 2017 URL: Shiv Sena today launched a scathing attack on its ally BJP over the issue of notes ban and described it as the "worst regime in 10,000 years". In an editorial, the Sena claimed that instead of eradicating black money, the notes ban measure has only caused distress to the middle class, poor and unemployed.Reacting to reports of protest by a woman in front of the RBI office in Delhi after failing to get a few banned notes exchanged, the Shiv Sena said, "If the government cannot see and understand the suffering of this woman, then such a ruthless and deaf regime would not have been in existence in the last 10,000 years."The party further claimed that her plight looked like a "government-sponsored Nirbhaya tragedy"."When a woman in distress sits on a street in Delhi and condemns the government, it is like government-sponsored Nirbhaya tragedy," the Shiv Sena said through an editorial in their newspaper, 'Saamana'."If you term the act of this woman as nationalism, you need to a Talibani doctor to treat your brains. Such atrocities against women happen only in Talibani regimes," the editorial added, according to news agency PTI.The Shiv Sena also attacked Maharashtra Chief Minister Devendra Fadnavis and said, "We want to ask the Chief Minister, whose side are you on; demonetisation or this helpless woman."The Shiv Sena, which is a part of the NDA government at the Centre, said that the woman has brought out the sufferings and anger of women on the streets.Relations between the BJP and Shiv Sena soured ever since the parties clashed over seat sharing in the 2014 Maharashtra assembly polls. The Shiv Sena had also marched with Trinamool Congress chief Mamata Banerjee and other opposition parties on November 16 against the notes ban. It is, also, often critical of Maharashtra Chief Minister Devendra Fadnavis and his policies.Note ban: J&K sees 60% dip in terrorism-related violence, hawala operations down 50%Author: TNNPublication: The Times of IndiaDate: January 7, 2017URL: call traffic between hawala agents in India dropped almost by half post demonetisation, says a recent assessment by the central intelligence agencies. Payments to the end beneficiary of hawala deals are traditionally in cash, with Rs 500 and Rs 1,000 being the favoured denominations.The demonetisation of these high-value notes on November 9 severely affected hawala operators, and going solely by call traffic, their business may be down by 50%, said an intelligence source.Terror funds are mostly sourced in counterfeit currency, comprising high-quality fake notes that Indian agencies suspect are printed at the Pakistan government printing press in Quetta and its security press at Karachi.Given this fact and the drop in hawala transactions, demonetisation has dried up funds used for organised stone-pelting in Kashmir and paying overground terror supporters in the state.Intelligence officials claim that terrorism-related violence in J&K dipped by 60% post the cash ban, with only one major blast reported from the valley in December.An intelligence official claimed that apart from organised stone-pelting, a direct casualty of demonetisation in J&K was the overground network of terror facilitators."The overground supportbase of terrorists depends on instant cash payments. A weakened OGW (overground worker) network due to demonetisation has resulted in several successful counterterrorist operations in the Valley over the past several weeks," said the officer.A sharp decline in corrupt deals and price correction in the artificially skewed real estate market (by the land mafia) in J&K are among the other positives witnessed in the state in the aftermath of demonetisation.The impact of the government's decision is even more pronounced in areas hit by Left-wing extremism, given that most of their annual extortion income is held in cash. CPI (Maoist) is reportedly finding it difficult to fund activities of its mass organisations.Senior CPI (Maoist) members in Chhattisagrh's Bastar division as well as Jharkhand have allegedly contacted people seeking help to convert the banned notes into legal denominations.According to intelligence estimates, over Rs 90 lakh has been seized from Maoist cadres/supporters since demonetisation kicked in on November 9. Demonetisation has also stepped up pressure on CPI(Maoist) cadres to surrender in large numbers, said an intelligence officer.Similarly, northeastern insurgent groups, hit by post-demonetisation losses, are finding it difficult to procure arms and ammunition from across the border.A K Bhattacharya: A toolkit for judging demonetisationAuthor: A K BhattacharyaPublication: Business StandardDate: January 3, 2017URL: short, the impact of demonetisation on black money is going to be severely limitedWith 2016 behind us, it is time to take a look at how 2017 is likely to pan out and how it can make a difference to the Indian economy. In 2016, developments of far-reaching significance and magnitude took place — both domestically and internationally. The election of an inward-looking Donald Trump as the next US president, the Brexit vote that dealt a body blow to European integration, a breakdown in global trading arrangements and a slowing China marked 2016 internationally just as on the domestic front demonetisation of 86 per cent of the total money in circulation overshadowed everything else.It is a measure of the huge impact of demonetisation that several other significant initiatives taken by the government during 2016 have been nearly forgotten by most people. A quick look at them would be instructive — an amendment to the Constitution to usher in the goods and services tax (GST) regime, passage of the bankruptcy law to facilitate winding up of failing businesses and recovery of debt, creation of an independent and new institutional arrangement to formulate monetary policy, setting a legally bound inflation target and periodic adjustments in petro product prices in small doses to achieve at least three goals in one stroke — pass on the impact of rising international crude oil prices to domestic consumers, gradually link all petro products to a market-linked pricing regime and reduce the government’s fuel subsidy bill.In the normal course of events, each one of these decisions taken during 2016 would have been hailed as a big step. But such has been the widespread and disruptive impact of demonetisation on the people and the economy that what Prime Minister Narendra Modi announced on November 8 has without doubt become the most defining event of 2016. Even as we enter 2017, the focus of economic commentary and analysis remains mainly confined to assessing the impact of demonetisation on the economy.There is little doubt that demonetisation was executed poorly, causing immense hardships to people across the country — farmers, small traders and businesses. Its original goal of eradicating black money has turned elusive as almost 97 per cent of the demonetised currency notes appear to have returned to the banks, preparing the ground for a massive and long-drawn fishing expedition by the income-tax department to unearth those accounts that may have received deposits that could be black money. The spectre of a reinvigorated inspector raj lurks quite menacingly.The need for assessing demonetisation is even greater because in his address to the nation on December 31, Mr Modi did not outline the specific results of his big initiative. Nor has any other senior government representative explained the outcome so far. Statements to the effect that the decision was a success are in plenty, but there are no numbers yet to substantiate such claims. Thus, here is a list of three broad areas which should be closely watched to determine the medium- to long-term impact of demonetisation.The first area should be the share of cash used in all transactions in six months or a year later. The situation prevailing before November 8 indicated that cash was used for about 90 per cent of transactions by volume and about 60 per cent by value. If demonetisation was indeed expected to push more Indians to digital transactions, both those figures should decline significantly over the next few months. A related yardstick would be the share of cash in India’s gross domestic product. If it was 12 per cent pre-demonetisation, it should be lower by a few percentage points in the coming months. The government should make such data public to help understand how far demonetisation’s secondary objectives were achieved.The second indicator would be a change in the country’s taxation base. Demonetisation and the drive towards digital transactions must have already brought a large number of economic activities under the tax net that hitherto remained unreported for tax purposes. On the direct taxes front, the current financial year should see a surge in tax collection from individuals as also from companies including small businesses and traders. On the indirect taxes front, a similar increase in the number of transactions reported for taxation purposes can be expected. This augurs well for the launch of the goods and services tax, which also would have captured a larger number of trade deals that earlier would go unreported. If the government has to take credit for demonetisation, it can scarcely rely on its effect on black money. An expansion in the tax base would be one such indicator. Of course, this goal could become easier to achieve if the forthcoming Budget reduced direct tax rates along with removal of exemptions without unduly making a big compromise on the government's fiscal consolidation plan. Finally, it will be important to monitor if the banking sector has come under greater stress because of the government rolling out an array of financial sops in its desire to soften the adverse impact of demonetisation on vulnerable sections of society like farmers, women, senior citizens, traders and small businesses. So far it seems the central exchequer will take the hit on account of the many concessions announced by Mr Modi and the banks may be spared. But this is a trend that needs to be watched carefully. This government has often shown signs of deviating from its promised path of minimum government to provide maximum governance. Promises of full-scale privatisation are yet to be fulfilled and the commitment to distance government ownership of banks from their management is not yet adequately honoured. Addressing concerns of demonetisation should not become an alibi for a return to statism.In short, the impact of demonetisation on black money is going to be severely limited. Therefore, the areas that need to be monitored to assess the impact of demonetisation are the preponderance of cash in economic activities, size of the taxation base and the extent to which the government has shrunk its role in areas that should be left alone to the private sector.The high economic costs of India’s demonetisationAuthor:Publication: The EconomistDate: January 8, 2017URL: benefits of withdrawing 86% of the rupees in circulation remain elusiveMOST 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.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.Never Understood Demonetisation Logic: Economist Abhijit BanerjeeAuthor: Debayan Roy, Tushar DharaPublication: Date: January 7, 2017URL: economist Abhijit Banerjee is best known as one of the founders of the Abdul Latif Jameel Poverty Action Lab (J-PAL), which pioneered “randomised control trials”, experiments designed to test the efficacy of public policy through empirical evidence. He is also a co-author of ‘Poor Economics’ an international best seller that lies at the confluence of economics, policy and action. Banerjee, the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology, replies to questions on Prime Minister Narendra Modi’s demonetisation drive: Q.: We have now crossed the 50-day period that Prime Minister Modi asked after announcing demonetisation. What’s your verdict?A.: I never understood the logic behind it. For one, why introduce Rs 2,000 notes? And I suspect the pain is much greater than is being currently anticipated.Q.: It has been said recently that India doesn’t have an effective mechanism to measure the informal economy. How does one then capture the impact of demonetisation on India’s informal economy?A.: Since we mostly measure the informal sector by the size of the formal sector, at least in the short run, our GDP data is probably going to undercount the economic losses. Q.: There are two views on the economic impact. One is that things will get better in a quarter or two while the other says that the effects will be more long lasting. Which view do you subscribe to?A.: I really don't know; it depends on how effectively informal credit arrangements substituted for cash. And to be honest, no one knows. We are doing a survey trying to understand this very question. Q.: During the last crisis in 2008, rural demand as a result of purchasing power through redistributive programs kept the Indian economy afloat. Is there a safety mechanism you see this time round which will help ride out the impact of demonetisation?A.: I hope that MGNREGA will do something to stabilise demand this time as well, but it relies on the panchayats responding quickly and expanding the raft of projects they propose and the Centre being willing to relax the purse strings. What I hope does not happen is another lending boom, like the one in 2009, which leads to the disastrous state of our banking sector.Q.: How big is the informal economy in India and how does one begin to understand what ‘informality’ is? Is this sector served better by cash or cashless/digital means?A.: It is everyone who is not an owner of a registered firm or a formal employee of such a firm, a not-for-profit organisation or the government. It employs between 85 and 90 percent of the labour force. Q.: The main rationale for demonetisation was to combat black money, which later shifted to ushering in a cashless or less-cash economy. What is your view on the impact of demonetisation on both?A.: I think the long-term move to a cashless economy is desirable and will help make corruption somewhat less profitable but in the end there is no remedy for corruption that does not involve contract and law enforcement against the corrupt. The impunity with which the largest defaulters on bank debt are allowed to function suggests that there is not enough appetite to take them on. Till that happens, corrupt people will pay each other in gold and transfers from their foreign bank accounts if there is no cash.Q.: How is India’s demonetisation being viewed abroad in policy and academic circles?A.: With bewilderment!Q.: Which sections benefit the most and which sections lose the most out of demonetisation?A.: It depends on what you call benefit. I think there is a lot of joy among those who might have themselves felt some pain, but feel that the corrupt rich were much more hurt. If the claims about 97 percent of the cash having come back are true then the rich may not have felt so much pain, and the joy might mentFrom: Ashok Chowgule (ChGoa) [mailto:ashokvc@] Sent: Sunday, January 8, 2017 2:45 PMTo: 'banerjee@mit.edu'Subject: Re your article at Prof Banerjee,Pranam,Perhaps the enclosed video (less than 11 minutes) might help you to understand.Namaste.Ashok ChowguleNajam Sethi on Demonetization plan in India-MUST WATCH Published on Dec 23, 2016 24sDemonetisation – A look back at the last two monthsAuthor: Arun JaitleyPublication: Date: January 8, 2017URL: – A look back at the last two monthsTwo months have passed since the Prime Minister announced the decision that high denominational currency notes would cease to be a legal tender. Subsequently those notes have been demonetised. When 86% of a country’s currency constituting 12.2% of its GDP, is squeezed out of the market and sought to be replaced by a new currency, there would obviously be significant consequences of that decision. Now that the queues outside the banks have disappeared and the remonetisation has moved ahead, it would be worthwhile to analyse the rationale behind the decision and its impact.1. Steps against Black Money The Narendra Modi Government had absolute clarity from day one that it would move against the shadow economy and black money. It’s first decision was to constitute SIT under the directions of the Supreme Court. The Prime Minister had proposed to the G-20 at Brisbane that international cooperation in sharing information with regard to base erosion and profit shifting should be expedited. The arrangement with the United States furthered this object. The NDA Government completed its agreement with Switzerland that w.e.f. 2019, details of assets held by Indian citizens in Switzerland and vice versa would be provided to each other. Since 1996, the Double Taxation Avoidance Treaty with Mauritius was being renegotiated. The treaty effectively incentivised round-tripping. It was renegotiated. Similar treaties with Cyprus and Singapore have also been renegotiated. The Black Money Law dealing with illegal assets outside India opened a window for disclosure with 60% tax and provides a ten year imprisonment. The Income Declaration Scheme (IDS) 2016 was highly successful with a 45% tax. The PAN card requirement for cash transaction beyond rupees two lakhs put hurdles on expenditure through black money. The Benami law legislated in 1988 and never implemented. It was amended and has been put into action. The GST, which is scheduled to be implemented this year, will provide for better indirect tax administration and being a more efficient law will check tax evasion. The demonetisation of high denominational currency notes was the big step in the same direction. 2. The new normalIn the year 2015-16, 3.7 crore assesses of the total population of over 125 crores, filed income tax returns. Out of these, 99 lakhs declared income below Rs.2.5 lakhs and paid no taxes; 1.95 crores declared income less than Rs.5 lakhs; 52 lakhs declared income between Rs.5 to10 lakhs, and only 24 lakhs declared income above Rs.10 lakhs. No better evidence is required to substantiate that both in the matter of direct and indirect taxes India continues to suffer being a hugely tax non-compliant society.Expenditure required for poverty eradication, national security and economic development have to be compromised with on account of tax non-compliances. For seven decades the Indian “normal” has been to undertake transactions partly in cash and partly in cheque. “Pucca” and “Kachha” accounts are a part of the business language. Tax evasion has been considered as neither unethical nor immoral. It was just a way of life. Several Governments have allowed this “normal” to continue even though this compromised with larger public interest. The Prime Minister’s decision is intended to create a new “normal”. It seeks to change the expenditure pattern of India and Indians. It is obviously disruptive. All reforms are disruptive. They change the retrograde status quo. The demonetisation puts a premium on honesty and penalises dishonest conduct.3. The adverse consequences of CashPaper currency is a zero interest anonymous bearer bond. It has no name or history attached to it. Crime can take place with or without cash but excessive cash as a medium of exchange is favoured by the underground economy. It results in non-compliance in the matters of tax payments which creates an unjust enrichment in favour of the evader as against the poor and the deprived. Mountains of cash money reach tax havens through the hawala route from the original paper currency. Cash facilitates real time untraceable payments. Cash is the medium which funds bribery, corruption, counterfeit currency and terrorism. Ethical and developed societies aided by technology have consistently moved towards banking and digital transactions as against the excessive use of cash. Paper currency opens the doors for many vices. When Governments are able to collect more tax from tax evaders, they are in a better position to collect less tax from everyone else. Reducing cash may not eliminate crime and terrorism but it can inflict serious blow on them. States have shown that the stores of cash do not disappear on their own till Governments take active steps to reduce the quantum of paper currency. 4. The magnitude of the decisionThe Prime Minister’s decision to replace the high denominational currency and eventually demonetise it required both courage and stamina. The implementation of the decision carried pain. It can lead to short term criticism and inconveniences. Drop in economic activity on account of the currency squeeze during the remonetisation period would have a transient impact on the economy. The decision involves high level of secrecy and printing substantial amounts of paper currency, distribution through banks, post offices, banking mitras and ATMs. The fact that large quantum of high denominational currency has been deposited with the banks does not render this money to be legitimate cash. Black money does not change its colour merely because it is deposited in bank. On the contrary, it loses its anonymity and can now be identified with its owner. The Revenue Department would thus be entitled to tax this money. In any case, the amendment to the Income Tax Act itself provides that the said money, if voluntarily declared or if involuntarily detected, would be liable for differential and high rates of taxation and penalty. 5. The situation todayThe period of pain and inconveniences is getting over. Economic activity is being restored. The banks today admittedly have a lot more money available in order to lend for growth. Since this money constitutes low cost deposits with the banks, it is bound to bring down the rate of interest. Both these things have already happened. Lakhs of crores, which were floating in the market as lose currency, have now entered the banking system. Not only has the money lost is anonymity, it’s owners, after being taxed, are entitled to put it to more effective uses. The size of the banking transactions and consequently the size of the economy is bound to increase. In the medium and long run, the GDP would be bigger and cleaner. Money entering into the banking system and officially transacted would give an ample scope for higher taxation – both direct and indirect. The Centre and the State Governments would both stand to gain. The economy would also be serviced by both cash and highly digitized transactions. 6. The OppositionThere was no social unrest while implementing such a major decision. All opinion polls conducted by independent media organizations have shown that an overwhelmingly large percentage of people have supported the Government’s decision. The opposition disrupted a full Session of Parliament. Their protests have been ineffective. Their exaggerated claims on the disruption of the economy have proved wrong. It is a tragedy that a national party like the Congress decided to adopt a political position, opposing both technology, change and reforms. It sided with black money friendly status quo. 7. The marked differenceThere was a marked difference in the approach of the Prime Minister and his opponents. The Prime Minister was being futuristic, and thinking of a more modern, technology driven cleaner economy. He is now speaking of cleaning the political funding systems. His opponents want a cash dominated, cash generating and cash exchange system to continue. The difference between Prime Minister Narendra Modi and Rahul Gandhi was clear - the Prime Minister was thinking of the next generation while Rahul Gandhi was only looking at how to disrupt the next Session of Parliament.People have a right to know source of BJP’s funds, PM Modi saysAuthor: Mohua Chatterjee & Akhilesh Singh, TNNPublication: The Times of IndiaDate: January 8, 2017URL: Narendra Modi stepped up his drive against corruption ahead of assembly elections to five states, pledging BJP will be proactive in disclosing funds received by it and urged other parties to follow suit."People have a right to know where our funds are coming from," the PM told the BJP national executive on Saturday, indicating the move is in sync with the government's demonetisation ing against the backdrop of the PM's earlier statements arguing that campaign finance reforms have become an absolute necessity and that it was time the political class shed its resistance to growing insistence for transparency in political funding, Modi's remarks on Saturday further enhances the likelihood of the government bringing in a bill during the budget session of Parliament beginning January 31.Modi had indicated that he would call a meeting of political parties to discuss the issue before or during the session. Senior government sources told TOI on Saturday that the Prime Minister was keen on going ahead on the issue even if all the parties don't come on board.BJP and most other national parties get the bulk of their funds from opaque sources.They are helped by a provision in the law exempting them from the requirement of disclosing the source of contributions not exceeding Rs 20,000. Rivals and critics have highlighted this to say that BJP's funding pattern does not jell well with the opaque manner in which the party sources its funds.Marking reform of political funding — an area he has flagged with increasing urgency — a priority, Prime Minister Narendra Modi told BJP's national executive on Saturday, "A culture of transparency is emerging in the country and politicians should use their wisdom to bring in transparency in running their respective parties."Modi's initiative to bring in transparency can help rebut the criticism about opaque funding. Besides, it carries the promise of projecting him as the agenda-setter on an issue which riles the public.In his address to the national executive, Modi also set out a "pro-poor" focus and struck an emotional note saying he has a first hand experience of poverty having grown in a family of modest means."I was born in poverty, have lived poverty," he said, adding that working for the poor was not "help" but "service".The BJP economic resolution also noted: "Prime Minister's appeal to all political parties about election expenditure is a revolutionary step as political parties' freedom from black money and corruption is essential for the making of the India of our future."Briefing the media, law minister Ravi Shankar Prasad quoted the PM to say, "BJP will be proactive in disclosing the source of its poll financing as there must be transparency in funds and people have every right to know about the source of money a political party receives."Modi recalled President Pranab Mukherjee's observations as also the Supreme Court and Election Commission taking up cudgels for poll reforms, Prasad said. He added the PM reiterated the need for holding Lok Sabha and state assemblies elections simultaneously.Modi laid out the post-demonetisation political line underlining "service for the poor" as the motto for BJP at the closing of the national executive. With demonetisation as the party's main campaign theme, the message was summed up by BJP's key campaigner as demonetisation being a major step to curb corruption and reward the honest.Narendra Modi’s dream of cashless economy comes alive at Sabarimala, sales revenue via e-payments rises to 15%Author: Rajesh RaviPublication: The Financial ExpressDate: January 7, 2017URL: Ayyappa, the deity at the famous hill shrine of Sabarimala in southern Kerala , seems to have taken PM Narendra Modi’s dream of a cashless economy very seriously, with digital payments now accounting for nearly 15% of the daily revenue that...Swamy Ayyappa, the deity at the famous hill shrine of Sabarimala in southern Kerala , seems to have taken PM Narendra Modi’s dream of a cashless economy very seriously, with digital payments now accounting for nearly 15% of the daily revenue that accrues from sale of prasadam, puja and offerings.Thousands of pilgrims flock to the shrine between November and January, bringing cash, precious metals and jewels in offerings. Fifteen swipe machines were installed by Dhanlaxmi Bank in response to the demand from pilgrims who recounted practical difficulties in the wake of demonetisation.Pilgrims are swiping an average of Rs 10-15 lakh a day at the shrine as offerings and to buy prasadam, MR Manjith of Dhanlaxmi Bank, official bankers of the Travancore Devaswom Board (TDB), said. “On the first day the pilgrimage season, the collection from digital payment was Rs 5 lakh and it has moved up very quickly,” he added.Devotees can also transact any amount of money to the deity as offering through the ‘e-hundi’ and put the receipts in a conventional hundi kept beside. All types of credit and debits cards of all banking institutions could be used at the e-hundi counter and for a credit card, up to a low of R1 can be transacted. Bank sources said that digital payment is preferred mostly for buying prasadam and has a share of 15-20% of the daily sales of Aravanaa and Appas out of the total sales of Rs 70-80 lakh.“Devotees still prefer to use cash as offerings in the ‘hundi’ and the ‘e-hundi’ offering is limited to R20,000-25,000 per day,” bank sources at the temple said.Hundi collections for the current season is seen around R6.65 croreDhanlaxmi Bank sources said that the shrine has six ATM machines at the top of the hill and one at the base camp.BJP sweeps Madhya Pradesh Municipal Polls with 30 wards, Congress 4, Independent 1Author:Publication: The Financial ExpressDate: January 7, 2017URL: Janata Party on Saturday recorded a decisive victory in the Madhya Pradesh municipal elections, winning 30 seats in the 35-member civic body.Following its victories in local body polls in parts of country such as Maharashtra, Rajasthan, Gujarat and Chandigarh, with the demonetisation policy as one of the main campaign planks, Bharatiya Janata Party on Saturday recorded a decisive victory in the Madhya Pradesh municipal elections, winning 30 seats in the 35-member civic body. Congress somehow managed to win 4 seat and the remaining 1 was taken by an independent contestant.BJP’s Maalti Ganwar won the Mandaw Nagar council President post and 12 ward commissioners of the party has marked victory in the district whereas Prabha Panaria has won the Amarkantak council President post with 11 ward commissioners winning from the district.Earlier BJP had also marked a remarkable victory in the Chandigarh Municipal Election that happened in December last year. Here 20 out of 26 seats were swapped by the ruling party and 1 by its alliance in the state Shiromani Akali Dal. Congress managed to secure only 4 seats here. After winning the Municipal Elections, BJP President Amit Shah extended his greeting to the party workers and said that people have approved the demonetisation move and this victory is the sign for the same.BJP president Amit Shah, who had kicked off the campaign last month asking voters to vote not for local candidates but for Modi, tweeted that the “landslide win in Chandigarh is yet another instance of people reposing their faith in BJP’s development politics and PM Modi’s vision”.The RBI’s bounty and its independenceAuthor: Gita GopinathPublication: Date: January 9, 2017URL: rush to transfer the bonus from reduced RBI liabilities to the government does not come for freePost demonetisation on 8 November, it has been furiously argued, including by some prominent economists, that in the event that some fraction of the demonetised notes are extinguished and never exchanged or deposited, the liabilities of the Reserve Bank of India (RBI) would reduce, and generate space for the central bank to print and transfer an equivalent monetary value to the government. That is, supposing Rs1 trillion does not make it back into the banking system, then RBI can print Rs1 trillion and transfer it to the government to be used for fiscal expenditure. This fiscal bounty for the government can be used to finance government projects or can be simply transferred to people’s accounts for their spending (the so-called helicopter drop of cash). The government of India recently passed an ordinance to formally extinguish the liability of the central bank on the demonetised notes. Consequently, the RBI is legally within its rights to make this bonus-transfer and the presumption is that it will follow.This entire line of reasoning, however, fails to recognize that this transfer by the RBI has direct consequences for its target interest rates and target inflation. Therefore, it is impossible to speak of this transfer without recognizing that it can compromise the central mandate of the RBI, which is to maintain stable inflation. The argument for a benign transfer that does not interfere with RBI targets assumes the following: Nothing has changed post demonetisation, either with regard to economic activity or with regard to people’s preferences for holding cash or cash-like deposits. Consequently, there is no impact on the demand for money in the economy. In this case, the RBI can maintain the same level of its liabilities, that is currency in circulation plus bank reserves, as pre-demonetisation without compromising its main policy targets.As should be immediately obvious, these assumptions are unlikely to hold. Regardless of how optimistic one is about the consequences of demonetisation, it will be hard to argue that economic activity will not slow down in the next several months. The latest estimates point to a contraction in the manufacturing sector (for the first time in 2016), with the purchasing managers index falling, and a sharp decline in new investment proposals. This is consistent with other evidence that points to a sharp drop in retail sales of consumer durables and non-durables. This decline in economic activity will reduce the demand for money for transaction purposes. If the RBI decides to print money and maintain the same level of its liabilities (currency plus bank reserves), it will require a cut in interest rates that reduces the opportunity cost of holding money and raises the demand for it. In other words, this RBI transfer to the government will be the equivalent of a monetary stimulus. If the demonetisation shock is mainly a negative shock to demand, then a monetary stimulus can be a good idea. However, if demonetisation has negatively affected the supply in the economy with a breakdown of supply chains in the cash-dependent informal economy, this monetary stimulus will be inflationary.The other assumption that nothing has changed with regard to the preference for holding money flies against everything the government is trying to do to move towards a cashless economy, encourage people to save in interest earning accounts, and use digital payments for their transactions. This transformation will by design have an impact on the demand for money and once again affect the RBI’s interest-rate targets. Households may also decide to save increasingly in non-rupee instruments like gold or in foreign currency or in real estate. Once again, if the RBI maintains the same level of its liabilities, it will have to target a lower interest rate.The bottom line is that the rush to transfer the bonus from reduced RBI liabilities to the government does not come for free. It has important consequences for monetary policy, and anything done in haste without a thorough evaluation of the consequences for the main mandate of the RBI, that is to maintain stable inflation, will be imprudent. In recent weeks, the RBI’s credibility has come under attack as it has reversed its demonetization rules when they appeared in conflict with statements coming out of the finance ministry. The many rule changes, the lack of effective communication on when the cash crunch will end, and the surprising absence of any report on the consequences for the economy of the demonetization move has triggered criticism from several quarters, including from former senior RBI officials. It is, therefore, imperative that the RBI wades into this much touted bonus-transfer scheme with care. The demonetization shock will transform the demand for money in the economy and the sensitivity of money holdings and economic activity to interest-rate changes. This directly influences monetary policy and the RBI’s ability to accomplish its mandate. To safeguard its reputation and independence, the RBI should publicly counter any pressure to make the bonus-transfer and highlight that this can conflict with the goals of monetary policy. Further, it should postpone any decision regarding these transfers until it is able to evaluate its implications for successfully accomplishing its own mandate, which is stable inflation.- Gita Gopinath is professor of international studies and economics at Harvard University and economic adviser to the chief minister of Kerala.Demonetisation impact: 40 days see Rs 3L crore put into 2 cr new accounts, says FIU dataAuthor: Vasudha VenugopalPublication: The Times of IndiaDate: January 9, 2017URL: days witnessed over two crore new bank accounts, and over Rs 3 lakh crore new deposits — that’s the big bang demonetisation impact.Data from the Financial Intelligence Unit (FIU) show that between November 15 and December 25, 2016, 2.10 crore bank accounts were created and over Rs 3 lakh crore was deposited in them. Of the amount deposited, around Rs50,000 crore was cash deposit, and Rs3 lakh crore was non-cash deposit (cheques, drafts, etc).Top officials closely involved with demonetisation policy spoke to ET about the Centre’s current assessment of the November 8 announcement last year.These officials spoke off the record. The FIU data was asked for and studied by the government to analyse the impact of declaring high-value notes illegal tender. Officials also said the fact that a huge proportion of extinguished cash has come back into the system is not a sign of failure but a testament to the policy’s success in formalising the economy.A senior official who was involved in the currency strategy from its inception told ET that “the amount of money that has come back wouldn’t have come back even in the next five years”.He said after two years, only 20 crore bank accounts under Jan Dhan were opened, but post demonetisation, “with no extra effort, we have seen around three crore new bank accounts getting opened in a month.” This official said the rush of money coming in shows black money holders had no choice but to enter the banking system since the other two options were buying gold or destroying old high denomination notes.The officials also said the government is convinced that a start has been made in creating a major behavioural change. Black money is now considered costly, another official said. More policies aimed at changing preference for gold and data-backed smart scrutiny of banks accounts that identify suspicious activities are being planned, officials said.A close look at the taxation system is a so on. But officials said the decision on income tax slabs will depend on signalling priorities of the budget. A large public spending programme accompanied by tax rationalisation are among the strategies being discussed, officials said.RBI started working on demonetisation move 6 months before announcementAuthor: Deepshikha Sikarwar, ET BureauPublication: The Economic Times Date: January 9, 2017URL: government had sent a reference to the Reserve Bank of India asking it to approach its central board to consider a proposal to invalidate Rs 500 and Rs 1,000 notes, three people familiar with the matter told ET, elaborating on the sequence of events that led to one of the country’s most significant reforms in recent times. However, six months before the initiative, a small group of top officials belonging to the key stakeholders had begun working on the move. The formal communication cited above was sent by the department of economic affairs in the finance ministry, according to two persons privy to deliberations. RBI’s central board considered the proposal and approved it on November 8 and the endorsement was conveyed to the government. The proposal was quickly approved by the Cabinet and announced by PM Narendra Modi in a televised address at 8 pm the same day.ET approached members of the central board but they either declined to speak on its deliberations citing confidentiality agreements or didn’t respond. While the formal communication was sent by DEA nearer to the date of the board meeting, a group of top-ranking officials at RBI, PMO and the finance ministry had begun work on the contours of the exercise more than six and half months ago before it actually unfolded.The process and the preparation carried out by this very select grouping have not been disclosed though officials have acknowledged that discussions with RBI had been on for some time. RBI and the finance ministry did not respond to queries sent by ET. It should be noted that Urjit Patel took over from Raghuram Rajan as governor in September. There was no response to an email sent to Rajan on Sunday morning India time. The RBI Act, 1934, empowers the government to give directions to the central bank. “The central government may from time to time give such directions to the bank as it may, after consultation with the governor of the bank, consider necessary in the public interest,” according to Section 7 of the Act. The central government can declare any series of any denomination ceases to be legal tender, on recommendation of the central board, as per the Act. The communication sent by DEA was a reference or a request and not a direction, said the people cited. The November 8 announcement cancelled about 86% of currency in circulation, prompting economists and the Opposition to question the decision as well as the process by which it had been reached. The government said the move was aimed at battling black money, counterfeiting and terror financing. It was also part of a strategic shift to a cashless economy in which transactions could be more easily tracked. Power Minister Piyush Goyal had told Parliament on November 16 that RBI’s central board had recommended the move and Cabinet approved the decision. “The Reserve Bank board took this decision and sent it to the government, which appreciated the decision and moved to take Cabinet approval for the plan to discontinue old notes of Rs 500 and Rs 1,000,” he had said. Besides government and RBI nominees, the central board has Nachiket Mor of the Bill and Melinda Gates Foundation, financial expert Bharat Doshi, N Chandrasekaran of Tata Consultancy Services and former bureaucrat and expert on education and finance Sudhir Mankad as independent members. The RBI nominees include the governor and three deputy governors. The government nominees include the secretaries of the economic affairs and financial services departments. The Cost of India’s Man-Made Currency CrisisAuthor: The Editorial BoardPublication: The New York Times Date: January 9, 2017URL: months after the Indian government abruptly decided to swap the most widely used currency notes for new bills, the economy is suffering. The manufacturing sector is contracting; real estate and car sales are down; and farm workers, shopkeepers and other Indians report that a shortage of cash has made life increasingly difficult.Prime Minister Narendra Modi announced on Nov. 8 that the 500 and 1,000 rupee notes (roughly $7.50 and $15) that made up about 86 percent of all currency in circulation could no longer be used in most transactions and would be replaced by new 500 and 2,000 rupee notes. People could deposit old notes in banks until Dec. 30 and withdraw a limited number of new notes every week. This was meant to help identify people who were hoarding cash — or “black money,” as it is known in India — to avoid paying taxes or to engage in corruption. Mr. Modi’s government later said that it was also eager for Indians to move to electronic transactions.But the swap was atrociously planned and executed. Indians had to line up for hours outside banks to deposit and withdraw cash. New notes have been in short supply because the government did not print enough of them in advance. The cash crunch has been worst in small towns and rural areas. The amount of cash in circulation fell by nearly half, from 17.7 trillion rupees ($260 billion) on Nov. 4 to 9.2 trillion ($135 billion) on Dec. 23, according to the Reserve Bank of India.No economy can lose that much currency in a few weeks without creating major hardship — certainly not one like that of India, where cash is used for about 98 percent of consumer transactions by volume. And while a growing number of people have debit cards and cellphones that can be used to transfer money, most merchants are not set up to accept such electronic payments.Meanwhile, there is little evidence that the currency swap has succeeded in combating corruption or that it will forestall future bad behavior once more cash becomes available. The government had said that people bringing more than 250,000 rupees ($3,660) of the old notes to banks would have to show that they had paid taxes owed on the money. Because of those rules, officials had expected that a lot of black money would never make it back to banks. Yet local news outlets are reporting that Indians have successfully deposited the vast majority of old notes. That suggests that either there wasn’t as much black money out there as the government claimed or that tax cheats found a way to deposit their hoards of cash without attracting the government’s attention, perhaps with the help of money launderers.Many Indians have said that they are willing to tolerate some pain in the fight against corruption. But their patience won’t last if the cash crunch continues and the swap does little to reduce corruption and tax evasion, as many economists predict.BHIM app safer than mobile wallets, says e-security firmAuthor: Yuthika BhargavaPublication: The Hindu Date: January 8, 2017URL: uses three-factor authentication, making it easier to trace fraud Allaying security concerns over the Centre’s flagship digital payment application BHIM, the CEO of cybersecurity solutions firm Lucideus, said it was currently among the most secure ways to make digital payments.Saket Modi, CEO of Lucideus, one of the many firms involved in testing the UPI-based application’s safety, said that the increasing adoption of Unified Payments Interface (UPI) payment mechanism would spell doom for mobile wallets, which saw a surge in their usage in the past two months owing to the cash crisis following the demonetisation of high-value currency on November 8.‘Not in haste’Comparing the BHIM App’s features with larger apps like Facebook, Mr. Modi said that testing an app for the latter with 200-odd features may take a year, but the BHIM App has only two features so the argument that it was released hastily without appropriate tests doesn’t hold water. “The security of an application definitely requires a particular time frame, but that isn’t a valid argument. BHIM has only two main features — send or ask for money and see your account balance or previous UPI transactions. Somebody who says this, needs to find a flaw and report it,” he told The Hindu. “We have been working on UPI for many months. BHIM is only an abstraction layer on top on UPI. UPI common library — a piece of code that NPCI made and gave to every bank to be embedded into their net banking application, was already there,” he said, stressing that this should quell concerns about the application’s security based on its creation in a short span of time. The encryption used for the application to communicate with the payments server is the same that is used in Google Wallet or Apple Pay.While e-wallets use a one-factor authentication mode by default, both net banking and credit or debit cards use two-factor authentication. “BHIM uses three-factor authentication and hence, is relatively more secure from a consumer point of view. It also combines the convenience of a mobile wallet with the security of net banking,” he said.When a user opens BHIM application for the first time, the application automatically binds itself to their device ID and phone number — both of which are unique. This means that the same UPI cannot be used from two phones. The BHIM application will also not work on a phone which doesn’t have a SIM card. “This uniquely identifies not just the device but the active number. If there is some fraud…you have an operational number plus the device ID, which in some cases can be masked, but a combination of both makes it easy to track the cell phone and law enforcement agencies can physically trace the person, if needed.” Mr. Modi said.“The third factor is the UPI PIN, set by the user, which will be required for every transaction through the application.” No user would be able to do transactions without the UPI PIN, he said.M-wallets doomed?“You can send and receive money in real time very conveniently and securely. So you don’t require m-wallets now as UPI and BHIM are there. Once everybody gets a Virtual Payment Address, why would you ever want to upload money into a wallet from your bank when you can pay directly?” he said, pointing out that UPI eliminates the need for a third party wallet.Once the BHIM App is installed, the user can select her bank out of the 35 listed banks. The application, which already knows the phone number, runs a check to match the mobile number against the selected bank’s data base to automatically detect the account whose KYC details you have already filled in while opening the bank account.For consumers, before UPI, there were three popular options of digital payments — net banking, mobile wallets or plastic cards. Net Banking allows a users to access the bank account without going to the bank, but a third party transfer even within the same bank takes a minimum of 30 minutes. “The entire net banking process is lengthy and complex… That is where e-wallets came in. They are far more convenient (don’t even ask for a KYC). But convenience always comes at a cost,” Mr. Modi said. “With cards, there is an issue of limited PoS terminals along with the physical logistics of manufacturing and delivering a card,” he explained.Mr. Modi’s firm Lucideus has also been involved in the security of the UPI common library. “We have done the security for the code… which is the heart of UPI.”Narendra Modi government is trying to overcome demonetisation ‘blunder’, says Robert VadraAuthor:Publication: The Financial ExpressDate: January 9, 2017URL: the demonetisation as 'unplanned and unthought process', Vadra said, "The Govt seems to have reached its levels of desperation to overcome the initial blunder it created.".Congress President Sonia Gandhi’s son-in-law Robert Vadra on Monday lashed out at the Narendra Modi government over the face-off between petrol pump owners and the ruling dispensation at the centre. Terming the demonetisation as ‘unplanned and unthought process’, Vadra said, “The Govt seems to have reached its levels of desperation to overcome the initial blunder it created.” “First government offered sops to push people to use Debit/Credit cards, and when people started using more of cashless means, now lack of coordination with banks and their policies is forcing petrol pump owners to adopt these drastic steps.. what was the whole meaning to offer 0.75 % discount and then the banks start charging MDR 1% from petrol pumps? I dont see any rational, do you?” Vadra said in a Facebook post.Earlier Petrol pumps have deffered their decision not to accept payments through debit and credit cards starting Monday to January 13. Union Minister Dharmendra Prasad’s statement provided some respite to people who were left bewildered after petrol pumps’ announcement. The minister has said that the government is negotiating with banks and oil marketing companies to arrive at an acceptable solution.BJP, meanwhile, has hit back at Vadra, saying that “Robert Vadra is deeply affected by this black money drive.” “The entire family is in a state of crisis,” BJP spokesman G. V. L. Narsimha Rao said.----------------------Check out Robert Vadra’s Facebook postThe Govt seems to have reached its levels of desperation to overcome the initial blunder it created, through the unplanned and unthought process of demonetisation.First government offered sops to push people to use Debit/Credit cards, and when people started using more of cashless means, now lack of coordination with banks and their policies is forcing petrol pump owners to adopt these drastic steps. what was the whole meaning to offer 0.75 % discount and then the banks start charging MDR 1% from petrol pumps ? I dont see any rational, do you?----------------------The Delhi Petrol Dealers Association president Anurag Narain had earlier announced that Petrol Pumps will not accept digital payments following Sunday midnight. The announcement came in the wake of the announcement by HDFC Bank and Axis Bank that an extra 1% fee would be levied on petrol pumps. Tamil Nadu Petroleum Dealers echoed the Delhi Petrol Association’s concern. However, for now, people looking to go the e-cash way to make payments for fuel will not be facing any difficulties, at least till the 13th.In an attempt to promote cash-less transactions post demonetisation, the government had waived the MDR on fuel purchase for consumers, but following the expiry of the 50-day window, the banks decided to levy MDR on petrol pump owners. In their letter to Jaitley, the All India Petroleum Dealers’ Association stated that as had been no mention of passing the charge to consumers, the dealers would sustain a loss.Vadra has been vehement against the demonetisation move. Earlier, he had criticised the Narendra Modi government questioning its ‘experiment’ on people of country to ‘prove itself correct’ even as he expressed concerns for people suffering due to demonetisation. “For how long & how much more will the Government experiment on us, to try & prove itself correct? Now, deposits of more than Rs. 5,000 of demonetised currency note, will be allowed only once, till December 30 & that too with an explanation. It has has turned financial institutes to interrogation offices,” Vadra had posted on Facebook.Is Robert Vadra doing a better job than Rahul Gandhi in protesting over demonetisation?Author:Publication: Dailyo.inDate: January 9, 2017URL: family son-in-law continued to attack government while Congress vice-president has gone missing.Congress president Sonia Gandhi’s son-in-law Robert Vadra has attacked the Centre for lack of management after petrol pumps across the country threatened to stop accepting payments through credit or debit cards following imposition of 1 per cent surcharge by banks on card transactions."The government seems to have reached its levels of desperation to overcome the initial blunder it created, through the unplanned and unthought (sic) process of demonetisation," he said on Facebook.Vadra, who has been relentlessly attacking the government ever since the decision to scrap old notes of Rs 500 and Rs 1000 was announced on November 8, added that the government first offered sops to push people to use debit/credit cards. And when everybody actually started making more cashless payments, "now lack of coordination with banks and their policies is forcing petrol pump owners to adopt these drastic steps".He may not be saying something that's unexpected but his comment, especially when his brother-in-law and Congress vice-president is "missing in action" owing to his new year trip abroad, shows that the Gandhi family son-in-law is more in touch with the everyday happenings in the common man's life.Gandhi, after an impressive won't-budge-come-what-may performance against the Narendra Modi government over demonetisation, suddenly decided to disappear. As always, he chose the worst time — when his party needs him the most — to go on a vacation. But the Congress vice-president has earned a reputation for that. It has now become an annual quiz event when everybody is trying to come up with an answer to "where is Rahul Gandhi?".Just as the Congress seems to be inching closer to forming an alliance with the Samajwadi Party in the crucial state of Uttar Pradesh to cash in on the Muslim-Yadav equation, Gandhi is conspicuous with his absence. With Gandhi scheduled to return today (January 9), things have also come to a standstill in as many as 40 constituencies in Punjab as the state Congress is eagerly awaiting his return to declare the remaining 40 candidates.What could be more damaging are the developments in Uttar Pradesh. Despite talks of alliance with SP, Congress said it was going ahead with preparations for fielding candidates in all 403 Assembly seats in the state. "We are in the process of selecting candidates for all the seats," UP PCC chief Raj Babbar said in Lucknow on Sunday (January 8).While all eyes are on Gandhi, Vadra definitely managed to steal the Congress vice-president's thunder this time.Political funding reforms: PM Narendra Modi shows why he remains a step ahead of rivalsAuthor: Sreemoy TalukdarPublication: Date: January 8, 2017URL: conclusions leap at us from the BJP's two-day national executive meeting which came to a close at the NDMC Convention Centre in New Delhi on Saturday. One, Narendra Modi continues to stay a step ahead of his political rivals. Two, his authority over the party's power structure remains absolute. Interestingly, this command isn't borne out of fear as is the case in some of India's one-man or one-woman political outfits. Peers and party colleagues are genuinely in awe of the prime minister, a curious happenstance for a party like the BJP which is no stranger to internal power struggles.To take the first point, however, rivals are more often than not being forced to react to the agenda set by Modi because when it comes to political messaging, he is peerless among his generation of leaders. Modi's moves are rarely driven by impulse or emotion, but a hard cost-benefit analysis with an eye on eventual electoral fallout. Like a chess grandmaster, he preempts the steps of his rivals and accordingly calibrates strategy. Above everything else lies his ability to connect with the masses and understand their impulse. Collectively, these strengths allow him precious time that is denied to his rivals. Let's see how.Critics of demonetisation have alleged that the prime minister's risky manoeuvre has endangered a lot of lives for barely conceivable gains. Citing industrial output, bank credit growth and other such data, economists and media have slammed Modi for bringing to the heels world's sixth-largest and fastest-growing economy. The fact that nearly all of the outlawed currency has made its way into the system has been cited as a "proof" that demonetisation has failed to root out black money (though this claim is questionable). Modi's rivals have latched on to large-scale public inconveniences, job losses and tried to generate mass movements around it though these haven't been too successful.The reason isn't too difficult to fathom. Even his most hard core critics agree that demonetisation has tapped into the narrative of "suffering for a good cause" in such a way that the more people suffer, the more they are convinced of the nobility of the cause. The poor, the marginalised and the downtrodden — the sectors hit hardest by the currency swap — still retain their trust in Modi which has enabled him to sell demonetisation as some sort of a Robin Hood story, using the resentment that the poor has towards the rich to great effect. This is a devastating political message, one that only Modi could have pulled off at a great initial risk to his political capital.The Opposition knows this, which is why mass leaders like Mamata Banerjee have moved the heaven and earth to develop a counter message but has remained unsuccessful so far.There was, however, one chink in this narrative. Modi was acutely aware that politicians are perceived in public opinion as intrinsically corrupt and as such, the fact that political funding remains an opaque exercise undercuts his message of transparency.If the prime minister was really serious about cleansing the system, why doesn't he do something about the rule that allows political parties exemption from disclosure for all donations below the Rs 20,000 mark? Critics were quick to highlight this fallacy.Milan Vaishnav, senior fellow at the Carnegie Endowment for International Peace and one of the many commentators to have highlighted this anomaly, recently wrote in his article for The Indian Express that "the reluctance of the government to put forth a concrete plan of action (to tackle dirty money in politics) perpetuates the impression that there is one set of rules for the public and another set of rules for those who make the rules." Among many other suggestions, he advised the government to do away with the any donation threshold in the interest of "total transparency for every paisa of political giving."Modi would have been aware of this lacunae. On Saturday, during his speech at the BJP national executive, the prime minister sent his strongest message yet for transparency in political funding. The speech, as most of his speeches, carried multiple messages but the one on finance reforms of parties' was direct and unambiguous."People have a right to know where our funds are coming from," said Modi while addressing party colleagues during the meeting. Exhorting the Opposition to come to a consensus over the reformative step, he said "a culture of transparency is emerging in the country and politicians should use their wisdom to bring in transparency in running their respective parties," according to The Times of India.According to the report, Modi was apparently keen on an all-party meeting on political funding reforms and the government may bring a bill during the Budget session.There were messages also on the need to accept criticism in the right spirit and a self-identification with poverty, when he said that the BJP doesn't look at the poor from a lens of vote-bank politics. But Modi knew where the gap lay in his message and he moved quickly to stem it. It is significant that none of the political leaders who have been criticising Modi and demonetisation has so far taken this up as an agenda for agitation.The difference this creates in public opinion among Modi and the rest is deep. The prime minister emerges as a trend-setter and one truly intent on cleansing the system while the others as opportunists bent on exploiting a public inconvenience.The other thing that's clear from the two-day meeting is that Modi towers over his party colleagues and peers. This also puts to rest clever manoeuvres from some political leaders who were keen on highlighting the fault lines within the BJP which they believe have been generated due to Modi's deeply disruptive drive. Some like Mamata had called for Modi's resignation and installation of senior patriarch LK Advani, hoping that this may fuel some sort of internal unrest among different camps in BJP.But even if these differences do exist, there has been nothing but total endorsement of Modi's line during the national executive. Arun Jaitley, one of Mamata's "proposed candidates" who according to her should replace Modi at the helm, put forward the resolution which was unanimously adopted. ""Party believes that this fight is important step in the re-making of an equitable and strong India. The step of the central government has reaffirmed the belief that patriotism isn't just a political talk but it is a political will to take strong and decisive steps to favor the last man," it read, according to another The Times of India report.It remains to be seen what the Assembly elections throw up but right at this moment, national executive proceedings show Modi at the top of his game, drawing unmitigated allegiance from his party. Opposition must come up with a better strategy.Maharashtra civic polls: BJP bags 100 seats, retains top position in final phaseAuthor: PTIPublication: The Indian ExpressDate: January 9, 2017URL: BJP on Monday bagged 100 seats in the last phase of municipal council polls in Maharashtra for 244 seats and secured seven posts of Municipal Council President.The BJP on Monday bagged 100 seats in the last phase of municipal council polls in Maharashtra for 244 seats and secured seven posts of Municipal Council President. This takes the ruling party’s tally at the end of fourth and final phase of elections to 1190 councillors and 71 municipal council presidents, retaining overall top position.The polling for last phase of Municipal Council and Nagar Panchayat elections took place on Sunday across 11 local bodies in Nagpur and Gondia districts. These 11 municipal councils were: Kamthi, Umred, Katol, Kalameshwar, Mohpa, Ramtek, Narkhed, Khapa and Saoner in Nagpur district, and Tirora and Gondia in Gondia district.As many as 92 candidates were in the fray for 11 Municipal Council President posts, and 1190 candidates for 244 seats of councillors in these two districts. An average 67.36 per cent voter turnout was registered.Congress bagged 58 seats and won two council president posts. The party finished second overall, with 952 seats and 34 council presidents, at the end of final phase. NCP won 26 councillor seats and finished with 812 seats in total. The party also won 22 council president posts. It did not win any president’s post in the fourth phase.Shiv Sena which won 598 seats in three phases, won another 14 seats in the fourth phase finishing with 612 councillors. The party won 26 council president posts. It did not win a single council president seat in the last phase. MIM won a seat in Kamptee, while 18 seats in Katol were secured by ‘Vidarbha Maza’ party and four by PWP. In Saoner, Rashtriya Samaj Paksha won three seats.BJP won president’s posts in Khapa, Saoner, Gondia and Tirora, Umred, Kalameshwar and Ramtek. Congress won the president’s seat in Kamptee and Mohapa. Vidarbha Maza won Katol council president’s seat. Narkhed council president’s seat went to Peoples Republican Party Nagar Vikas Agadhi.Co-operative banks used note ban as opportunity to launder crores: I-T deptAuthor: PTIPublication: The Times of IndiaDate: January 9, 2017URL: income tax department has raised serious concerns over the working of a number of cooperative banks across the country claiming they used the "opportunity" of demonetisation to make a quick buck and indulge in money laundering worth several crores.An analysis report prepared by the department that has been accessed by PTI, said tax sleuths found these banks have been involved in generating and routing of black money at an "unprecedented" scale post-November 8 when the currency scrap was announced by Prime Minister Narendra Modi.The report claims that "collusion in such illegal activities took several forms" as it goes on to chronicle the alleged clever and illegal modus operandi adopted by these banks to launder huge monies and criminally indulge in transaction of black money.The I-T probe found that in the case of such a bank based in the small town of Alwar in Rajasthan, the directors of the bank cheated it of Rs 8 crore "by fraudulently obtaining loans in the names of 90 persons of doubtful identities" even as it was used to launder personal "unaccounted cash" of Rs 2 crore by the management."In a case of a co-operative bank at Jaipur, unrecorded cash of Rs 1.5 crore was found secreted in an almirah in the 'clearing house' room of the bank," the analysis report said, adding it was also found by an I-T team that made a surprise visit to the bank that over 2000 new notes of Rs 2,000 were "taken out of the bank illegally".In a majority of these cases involving cooperative banks, the I-T department said it was found that the banks used weak KYC documents and the transaction records were recorded, giving a hoot to banking rules and laws as framed by the RBI.A huge amount of cash was seized by the department from un-allotted and benami lockers in multiple cities, prominently from small cities like Solapur, Pandharpur (in Maharashtra), Surat (Gujarat) and Jaipur in Rajasthan, it said.In a case which, the I-T sleuths said, shocked them was when they went for a survey operation at such a bank in Pune and another in Mumbai, only to find that the "excess cash" was more than Rs 100 crore as what was reported by them on paper to the RBI.A similar case of such a bank in national capital's Daryaganj is being touted as one of the biggest disclosures of black money generation through cooperative banks post demonetisation."Demonetisation was used as an opportunity by this bank to make a quick buck through offer of money laundering services," the report said, adding the Chairman and his aides "opened benami and fraudulent accounts to launder cash for beneficiaries"."More than 1,200 new accounts were opened post demonetisation in the name of third persons or name lenders on the basis of fake IDs and or weak KYC documents. A total of more than Rs 120 crore was deposited in the bank by December 26, most of which were routed to the beneficiaries," it said.Official sources said while the department has flagged these issues to authorities concerned, it is also speeding up its investigations under I-T laws and to check tax evasion."These findings on the modus operandi deployed by these banks to illegally benefit from demonetisation underlines the absence of necessary regulatory framework and this needs to be corrected immediately. A similar modus operandi was found in more or less each case."The I-T department has done the needful by informing the agencies concerned and the government," a source said."Difference Between Manmohan Singh, Modi As PM Is...": A UP Voter ExplainsAuthor: Suparna SinghPublication: Date: January 9, 2017URL: Singh, 29, has recently begun working as an Uber driver in Lucknow. As he pulls out of the local airport (which boasts a poster declaring it "the world's No 2 airport"), Mulayam Singh Yadav towers on a hoarding near the over-head tracks for the city's new metro. The poster, even from the ground, is visibly rippled, struggling against the wind to keep its place, twinning the politician's desperate attempt to prevent his son, Chief Minister Akhilesh Yadav, from hijacking their Samajwadi Party.Raghavendra Singh says that in 2012, he voted for the Samajwadi Party. This time around, he says, he will switch to the BJP. Prime Minister Narendra Modi has made it clear that his shock demonetisation drive or note-bandi will form the bedrock of his campaign for Uttar Pradesh. While the opposition says it will highlight what is insists is the large failure of the scheme and the cash shortage it created, Raghavendra Singh says he has no complaints. "Poor people had no cash earlier...and they have no cash now...so how are we worse off?" he asks. "There is Paytm now, people are using mobile phones for payments. In any case, people don't spend much more in villages - not more than Rs. 1,000 - 2,000. Maybe it is the big businessmen who are feeling the pinch," he says hopefully.He is also impressed with the Jan Dhan or zero-balance accounts enabled by the centre. "There are everywhere in our villages," he says, "along with LPG subsidies."In a series of recent speeches, PM Modi has declared the poor will witness a surge of benefits from the notes ban. Raghavendra Singh does not care that of an estimated 15.4 lakh crores of abolished currency, nearly all has reportedly been turned in. The opposition says this proves no black money has been unearthed or forcibly pushed out of the economy. "They say that", Raghavendra Singh says, "but in our villages, you see - at every square, people are gathered around TV screens watching Modi's speeches. We watch them on YouTube too. Everyone believes him.""When Manmohan Singh spoke, he used English. Nobody understood a word he says. Modi, he speaks to us. And we listen," says the driver. It's clear he has been following the PM's comments closely. "With the notes ban, the government is collecting more taxes, budgets will increase," he says, echoing what the PM has been pledging at his public meetings.Jaitley: tax figures show little disruption from cash crackdownAuthor: Rajesh Kumar SinghPublication: Date: January 9, 2017URL: Finance Minister Arun Jaitley on Monday flaunted robust tax receipts to dismiss reports of economic disruption following Prime Minister Narendra Modi's decision to abolish high-value currency bills.Jaitley said indirect tax receipts grew by an annual 14.2 percent in December, helped by a surge in excise and service tax collections.In the first three quarters of the fiscal year that ends in March, overall indirect tax collections were up 25 percent from a year earlier. Direct tax receipts during the same period were up 12.01 percent year-on-year.In early November, Modi scrapped 500- and 1,000-rupee notes as part of a crackdown on tax dodgers and counterfeiters, leaving companies, farmers and households all in pain.The shock decision prompted most private economists to slash growth forecasts for Asia's third-largest economy to 6.3-6.4 percent for the fiscal year 2016/17 from over 7.5 percent, citing the impact of the demonetisation, which they said would linger for one more year.Jaitley called those concerns unfounded."All the stories about job losses or businesses suffering losses are anecdotal," he told reporters. "This data is real."The tax data comes days after the federal statistics office predicted strong economic growth in the current fiscal year that ends in March.Gross domestic product is estimated to expand by an annual 7.1 percent in the current fiscal year, slower than a provisional growth of 7.6 percent in 2015/16.The statistics office's estimate, however, didn't fully account for the economic fallout of the demonetisation drive.- (Reporting by Rajesh Kumar Singh; Editing by Douglas Busvine) Government, RBI ask banks to boost ATM cash supplyAuthor: Sidhartha, TNN Publication: The Economic Times Date: January 9, 2017URL: government and the RBI have asked banks to make ATMs fully functional and have said that more cash should be diverted to vending machines and rural areas. Almost two months since the demonetization decision of November 8, and despite currency presses working overtime, ATMs across the country continue to run dry in quick time or remain shuttered. Complaints of lack of cash in ATMs have poured in from across the country. "Banks have been asked to divert more cash to ATMs and also ensure adequate supplies of funds in rural and far-flung areas," said an official, who did not wish to be named. "From next week onwards you will see a sharp improvement in the situation at ATMs. Availability of cash at ATMs has improved significantly in the past few days," the official said. He said that over 66% of the country's 2.12 lakh ATMs have been fully functional which means that they are dispensing cash. "The next focus is to ensure that 100% of the ATMs have cash throughout and are fully functional," the official said, adding that he expects all the ATMs to function fully by the end of the month or early February. The official said that cash supplies from printing presses have also been stepped up and the availability of Rs 500 notes has improved. A large chunk of the ATMs has been starved of cash as banks have been focusing on dispensing currencies to customers at branches. The official said the daily limit on cash withdrawals at ATMs and the weekly limit is likely to be eased by end January or middle of February. "We are reviewing the situation constantly and will decide on easing the limits shortly," he said.Demonetisation: Auto, FMCG, realty, telecom companies worst-hit, India Inc Q3 numbers set to disappointAuthor: FE BureauPublication: The Financial Express Date: January 9, 2017URL: Inc is likely to witness declining to flat profitability during the October-December quarter as companies start reporting their earnings for the season from January 13, which will once again underline that the economy is moving in the terrain of low...India Inc is likely to witness declining to flat profitability during the October-December quarter as companies start reporting their earnings for the season from January 13, which will once again underline that the economy is moving in the terrain of low demand and any broad-based recovery is far off the mark. The October-December quarter earnings will also be significant from another point of view — it will reflect the impact the government’s demonetisation measure, which kicked in from the midnight of November 8, has had on various sectors.According to an analysis done by brokerage research firm Kotak, the net income of the BSE-30 Index is likely to be flat on a year-on-year basis and decline 2.3% on a quarter-on-quarter basis and several sectors will be impacted by demonetisation.Kotak has said its universe of companies are expected to post a strong 23% y-o-y growth in net profit but that will be because of low or negative profit or even losses in the same quarter last year. It said excluding the banking, energy, industrials and metals & mining sectors where several stocks had low or negative base, net income of the KIE universe could decline by 3.9% y-o-y. “We expect a y-o-y decline in the net income of automobile, consumer products, real estate and telecom sectors, partly due to the negative impact of demonetisation on sales volumes,” the brokerage wrote in its report.In the automobile sector, which has seen low sales in November and December due to demonetisation, the expectation is that volumes would be muted, which along with the increase in commodity costs, will see Ebitda margin impacted of all the car makers. “We forecast net profits of companies under our coverage universe to decline by 10% y-o-y (mainly led by a weak quarter for Tata Motors) driven by a 4.2% y-o-y decline in revenues and a 10.5% y-o-y decline in Ebitda. We expect the Ebitda margin for companies under our coverage universe to decline by 90 bps on a y-o-y basis,” Kotak observed.Similarly, consumer products, which has borne the impact of demonetisation, the expectation is of a dismal quarter with aggregate revenues and Ebitda/Pat for the KIE consumer universe (ex-ITC/Nestle) likely to decline by 0.2% and 5-6%, respectively.In the real estate sector, another casualty of the demonetisation measure, weak sales would result in increase in debt for most developers. New land tie-ups will slow down and the expectation is that debt would increase for most listed developers also, barring Oberoi and Sunteck.In telecom where the full impact of the launch of Reliance Jio Infocomm’s is to be felt during the quarter, Kotak has estimated that in the voice segment, Bharti Airtel and Idea Cellular would report a 3-4% q-o-q decline in their revenues driven by a sharp 8-10% q-o-q decline in reported voice realisation per minute. It, however, expects voice traffic growth to be strong at +6-7% q-o-q.In the data segment, the estimate is a flattish y-o-y and 9-12% lower q-o-q revenue for the two companies as customers shift their usage to Jio’s free platform. “Revenues/Ebitda we model a 5.4% q-o-q and 2.5% y-o-y decline in revenues for Idea while for Bharti, we estimate a 4.5% q-o-q decline and 0.5% y-o-y growth. We expect overall wireless segment costs to be broadly flattish for the two companies as increase in network opex is mitigated by some savings on interconnect and regulatory costs. Ebitda will see near -100% flow-through impact of lower revenues and is likely to decline 10% q-o-q for Bharti and around 18% q-o-q for Idea. On a y-o-y basis, this would mean a 4.2% growth for Bharti and an 18.3% decline for Idea,” Kotak has noted.State tax collections up despite note banAuthor: Sidhartha, TNNPublication: The Times of IndiaDate: January 9, 2017URL: State tax collections have not been hit by demonetisation, data shared with the Centre show, providing fire power to the Narendra Modi government battling charges of slowing down of the economy because of phasing out of Rs 500 and Rs 1,000 notes.Seventeen of the 31 states and Union territories have shared the numbers for December and only three - West Bengal, Meghalaya and Arunachal Pradesh - have reported a decline. In November too, three of the 23 states saw a decline in VAT collections and the trend is similar for central sales tax.West Bengal, which has been complaining about a decline in revenue, saw its VAT collections jump 10.75% in November, although the mop-up dipped to 8% in December. The situation was similar in Meghalaya, while Arunachal Pradesh saw a decline in both the months.The Centre is maintaining that its revenues have not been hit. Last week, fnance mnister Arun Jaitley said direct and indirect tax collections will exceed the budget target.For most states, the growth in VAT collections had slowed in December, compared to November when Modi announced the decision to withdraw the two high-denomination notes that accounted for 86% of the total stock of currency in circulation.This may be attributed to the scarcity of cash in the initial days of December besides some of the spending and purchases taking place before Modi's announcement on November 8 evening.In addition, some people rushed to use the demonetised currency in the early days of November since they remained valid for some transactions. With cash supply improving in recent weeks, the government expects a pick-up in sales. The increase in oil prices may also be responsible for a part of the gain in VAT collections.The Centre has been under pressure amid claims that economic activity has slowed down significantly post-demonetisation. Advance estimates of GDP released by the CSO on Friday projected that the economy would grow 7.1% this year, the slowest pace of expansion in three years.The estimate does not factor in the impact of demonetisation but most private economists have projected lower growth rate for the current financial year.Apart from own revenue raised through VAT and other taxes, states get 42.5% of the Centre's revenue.The numbers show that J&K has seen a sharp increase in both the months, with Maharashtra topping the list among the bigger states. Delhi, Gujarat and Telangana are among those which have not shared the data.13 cooperative banks deposited Rs 1,600 crore in banned notes post demonetisationAuthor: Pradeep Thakur, TNNPublication: The Times of IndiaDate: January 11, 2017URL: ongoing investigation by the Enforcement Directorate against 50 bank branches of ten leading banks across the country has raised suspicions of big money laundering operations across the country post demonetisation, using dormant and newly opened accounts. In one case, 13 cooperative banks had deposited around Rs 1,600 crore in the Mumbai branch of a commercial bank. Another cooperative bank in Surat deposited Rs 20 crore in demonetised notes in its account with the Bank of Baroda.These 14 cooperative banks are among 300 the ED is currently investigating for suspected money laundering. According to sources, an ED audit of the ICICI Bank's BKC branch revealed that Rs 1,596 crore in banned currency notes were deposited by 13 cooperative banks between November 16 and 21 in accounts they had with the bank.Within a week of the announcement of the demonetisation of Rs 500 and Rs 1,000 on November 8, the central bank had restricted these cooperative banks from accepting banned notes.In another case in Mumbai, the agency had detected irregularities in deposits of Rs 196 crore in a cooperative bank which had earlier reported deposits of Rs 1,400 crore in banned notes to the Reserve Bank of India, after the demonetisation.The agency has, meanwhile, started registering cases under the Prevention of Money Laundering Act and made some arrests. The ED registered a case in Delhi and arrested two managers of Axis Bank and a chartered accountant for laundering Rs 39 crore, after they were found misusing the banking channels.The audit of bank branches revealed dormant accounts were used for deposit of banned notes. For instance, at the Punjab National Bank's Allahabad branch, the ED found details of 205 newly opened accounts where huge deposits in Rs 500 and Rs 1,000 notes were detected.At the Axis Bank's Ranchi branch, details of 16 newly opened accounts were found which were used for deposits of banned notes. In Axis Bank's Jaipur branch, 11 cases of third party deposits without proper authorisation were found. The agency could not find any documents pertaining to Rs 17 lakh in the branch. Similarly, the ED could not find any documents relating to exchanges of old notes in 43 cases at the same branch.The ED is also probing 34 Jan Dhan accounts having cash deposits of more than Rs 10 lakh each. It has also examined bank accounts of top 80 jewellers spread over 16 cities with suspicious transactions.RBI does not decide anything anymore, PM Modi does: Amartya SenAuthor: PTIPublication: The Hindustan TimesDate: January 11, 2017URL: two former RBI Governors YV Reddy and Bimal Jalan, Nobel Laureate Amartya Sen on Tuesday raised questions on Reserve Bank’s autonomy saying the central bank does not decide anything now and all decisions are taken by Prime Minister Narendra Modi.Highly critical of the demonetisation, Sen opined that it has failed to eliminate black money though Modi would continue to get the ‘benefit of doubt’.“People think Prime Minister is doing something to eliminate black money... Modi will continue to get benefit of doubt... The idea that rich is suffering is appealing to poor people,” Sen told India Today TV in an interview.On RBI’s decision to ban exchange of scrapped notes after December 30, he said, “I don’t think this is RBI’s decision. This must be Prime Minister’s ...I don’t think RBI decides anything at this time.”Modi in his November 8 address to the nation had said those who could not deposit old notes by December 30 could “go to specified offices of the Reserve Bank of India up to March 31, 2017 and deposit the notes after submitting a declaration form.”Sen further said the RBI was quite independent when Raghuram Rajan was Governor. It was served by illustrious persons like IG Patel and Manmohan Singh.Earlier, Reddy as well as Jalan had underlined the need for preserving the autonomy of RBI.As regards the black money, Sen said it was puzzling why the government opted to eliminate tiny 6% black money by demonetising 86% of the currency. Several countries including USA, Japan have lots of cash.On the government’s claim of eliminating fake currency through demonetisation, he said it was never a problem.“Fake money was never a big problem in India. Fake money problem was not something you want to hold while economy in ransom,” the Nobel laureate said.The demonetisation decision was taken by small group of people, he said, adding state governments should have been consulted as India has a federal polity.The government in a surprise move demonetised Rs 500 and Rs 1,000 notes, which constituted 86 per cent of the currency, from midnight of November 8.Economy returning back to normalcy faster than expected: Anand MahindraAuthor:Publication: The Financial ExpressDate: January 10, 2017URL: the chaos over economic growth post demonetisation Anand Mahindra, the executive chairman of Mahindra Group, said that the economy is returning back to normalcy much faster than expected and remained optimistic about the faster growth of the country.Amid the chaos over economic growth post demonetisation Anand Mahindra, the executive chairman of Mahindra Group, said that the economy is returning back to normalcy much faster than expected and remained optimistic about the faster growth of the country. He was talking to ET NOW. The 61-year-old business tycoon also has high expectations from US President-elect Donald Trump. “Need to wait and watch Donald Trump’s economic policies,” he said. Donald Trump has been elected the US President and will assume the office from January 20. Before this, India had enjoyed a strong and favourable relationship with the US under the presidentship of Barack Obama.As India is shifting to a cashless economy, the economic growth was expected to be slow and less than it was predicted before because of Narendra Modi-led government’s sudden recall of high denomination bank notes that hit certain cash-based segments of the economy due to the resultant cash crunch. That the government has brought the financial system back to normal has given Mahindra hope of country registering faster growth. He has also predicted that sectoral issues will be resolved soon.Mahindra’s comments came at the time when the Centre is facing criticism from the Opposition for its demonetisation move, however, it is saying that the move will swing the fate of the country and black money holders and even terrorists will be hit by the move. The government has seized crore of rupees and a major chunk of new, old and counterfeit currency post demonetisation.On the streets, though the lines outside banks and ATMs are almost nill, but a limit over the withdrawal of money is still causing inconvenience to the people.60% rise in Aadhaar enrolment in December aloneAuthor: Rohith B R, TNNPublication: The Times of IndiaDate: January 11, 2017URL: There has been a sharp surge in the number of people enrolling for Aadhaar following demonetisation last November and the Centre's push to facilitate Aadhaar number-enabled financial transactions through mobile phones as part of its drive aiming for a cashless economy.Statistics from the Unique Identification Authority of India (UIDAI) available with TOI reveals that the monthly Aadhaar enrolment during December 2016 for the entire country saw a 60% rise compared to the previous month. While in October 12.19 million people enrolled for Aadhaar, the figure dropped to 10.49 million in November. But December saw a sharp surge with 16.05 million enrolling for the card, the highest enrollment for a month in 2016.Speaking to TOI, a senior UIDAI official said, "Even in January 2017, over 3.63 million people enrolled for Aadhaar by the first week itself. All this has taken the total number of Aadhaar enrolments in the country to 110 crore, translating into 98% coverage of adult population. The reason for the sudden rise in the enrolment numbers in December could be attributed to the after-effects of demonetisation with people possibly realizing that having Aadhaar could come in handy for several purposes such as bank transactions or as a document proof with various service providers. There is peer pressure as well."The official further said people are also looking at the future where most financial transactions are slated to become Aadhaar-enabled, which will be card-less and pin-less, like the BHIM App.Another reason is there is no charge for Aadhaar card and there are less procedural delays involved. So, there is an eagerness across urban and rural areas to get Aadhaar," he added.Enrolment centres strengthenedWhen TOI visited the UIDAI regional office on Race Course Road in Bengaluru on Tuesday , over 50 people had queued up with queries about Aadhaar enrolment, making changes in the card and to check when their Aadhaar cards would be delivered. "Post demonetisation, we see about 300-400 people visiting our office with various queries every day , up from 100 or so earlier. This shows how the demand for Aadhaar has gone up. We have strengthened the enrolment centres across the city so that more people can enroll," said an official. Suman NB, a food delivery boy and a resident of Rajajinagar in west Bengaluru, said he was not keen on Aadhaar initially. "Recently, I came to know that employers ask for Aadhaar details when you apply for a job. Also, Aadhaar is increasingly becoming inevitable for bank and other financial transactions. I applied for it in December and came here as I was curious to know the status of the enrolment," Suman said.Demonetisation is Modi's Napoleon moment: Amartya Sen to India TodayAuthor: Bijin JosePublication: Indiatoday.inDate: January 10, 2017URL: "Demonetisation is a gigantic mistake, both in terms of its objective of dealing with corruption as well as the objective of one rapid jump of getting into a cashless economy," said Amartya Sen.Two months after Prime Minister Narendra Modi's demonetisation move, world renowned economist and Nobel laureate Amartya Sen spoke to India Today's Karan Thapar about the aims and achievements of the move and its consequences. "It is a gigantic mistake, both in terms of its objective of dealing with corruption as well as the objective of one rapid jump of getting into a cashless economy," Sen said while talking about note ban Amartya Sen.The Nobel Prize winner asked if it was fair to demonetise 86 per cent of all currency to tackle black money. "These statistics were known to everyone and it must have been known to the Prime Minister as well. So if there is only 6 to 7 per cent of black money in cash, how do you expect to have a major victory? It is puzzling to me," said Amartya Sen.POLICY AFFECTED LARGE SECTION OF PEOPLEThe economist feels that the policy has affected a large section of people in India as it was taken unilaterally by the Centre. "It was indeed not even the whole of the Central government, it was a very small group around Modi. So the biggest question here, with the State Assembly elections approaching, is there an issue of federalism that needs to be addressed?," Sen asked.When asked about why the support towards Modi's continues to soar Amartya Sen said, "Modi is a very good political leader, there is no doubt about it. He can certainly convince people so the Modi magic is there. But this is Modi's Napoleon moment."DEMONETISATION - A NAPOLEON MOMENTThe 19th century French conqueror Napoleon is known for cultivating an infallible image through his propaganda. He garnered immense public support by capitalising on his victories. During his tenure he floated literature and various publications that exaggerated his accomplishments."Napoleon after his attempt to raid on Russia, on his way back, said that actually he did not wanted to do anything , just wanted to do an excursion into the snowy mountains of Russia," said Sen.SEN ON RBI Further emphasising on the role of the Reserve Bank of India, the noted economists said that RBI was simply following Prime Minister Modi's order. He said that while the government failed to eliminate black money, it leaped towards digitisation from corruption. According to him the Modi government changed its focus midcourse. The economist said that corruption continues to worry the nation. He added that black money creation will continue.‘Scoop’ Without A Whoop: DeMo Could Never Have Been RBI’s Call; It was Government’sAuthor: R JagannathanPublication: Date: January 11, 2017URL: has been made of a newspaper “scoop” which indicated that the demonetisation (DeMo) decision was based not on the Reserve Bank of India’s own conclusions but on the “advice” of the Narendra Modi government. Since many former governors, from Bimal Jalan to Y V Reddy, have since piped in on the central bank’s alleged lack of autonomy, it is worth looking at the issue in depth.The “scoop” lay in the fact that The Indian Express got hold of the note written by the RBI to the parliamentary committee on finance ahead of the rest of the media, and not in the revelation that it was the government which advised the RBI on DeMo. The RBI note says that on 7 November it was asked by the government to consider the demonetisation of Rs 500 and Rs 1,000 notes at its board meeting the next day in order “to mitigate the triple problems of counterfeiting, terrorist financing and black money…”.The Express then went on to editorialise its own “scoop”. It used Y V Reddy’s observations about the “credibility and reputation of the central bank” to suggest the demonetisation itself was some kind of encroachment on the RBI’s autonomy.This is bunkum. The RBI does not have a mandate that is independent of what the elected government of the day deems to be its mandate, a point emphasised by an Economic Times editorial today (11 January). The editorial notes, that “the Reserve Bank of India or any other central bank had the duty to carry out the will of the sovereign, as articulated by the duly elected government of the day. Its job is to carry out that mandate well, planning and implementing its execution in an optimal fashion.”As far as DeMo is concerned, there is no way the idea could have come from the central bank, and even if it had, it needed the government’s sanction. DeMo is a political and economic policy decision, and the RBI’s role was to give the right advice, if sought, and implement the policy to the best of its ability.So the real question is whether the RBI gave the Modi government the right advice, whether this advice was heeded, and whether, after being given the mandate to exchange old notes for new, it did the job well or badly.It is also worth expanding a bit on the question of the central bank’s autonomy. Real autonomy is required, for without it, the RBI cannot deliver even what the government wants it to do.Take the question of monetary policy and rate setting. The RBI’s (and now the Monetary Policy Committee’s) autonomy has to be real for it to deliver on the government’s inflation or growth targets. The autonomy flows from the government’s policy goals, and is not independent of this. Contrary to what some economic analysts assume, it does not help even the government to have a “yes man” at the central bank. In a political economy, governments need external validation for their policies, and also someone to blame for hard times, and the RBI serves this purpose. If it becomes obvious that the RBI has no autonomy, it does not serve the government’s objectives too.The US Fed’s autonomy flows from the Federal Reserve Act, which states that “the Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”While the Fed’s mandate is cast in stone, in India, the RBI’s mandate comes from an elected government, and its mandate right now is to contain retail inflation around 4 per cent over the medium term, plus or minus 2 per cent. But growth is also part of this mandate. Autonomy is needed to ensure that it delivers on this goal, and not as a benefit in itself. If these goals change, or if the government of the day decides that the central bank’s goals ought to be something else, the RBI cannot claim the right to conduct monetary policy according to its own best judgment.More specifically about DeMo, it was entirely the government’s call. The government has accountability to the people, not the RBI, and if DeMo is judged to be a failure, the government will pay a price, not the RBI.The most interesting bit about the Express “scoop” is not that DeMo was the government’s idea, but the kind of ideas the Reserve Bank itself was floating. Apparently, sometime in October 2014, five months after Modi was elected and pledging to clean up black money, the Raghuram Rajan-led RBI was proposing the issue of Rs 5,000 and Rs 10,000 notes as inflation had dented the value of the rupee since the last high-denomination note (Rs 1,000) was introduced 15 years ago.The RBI was on another planet on this one. The lesson for the central bank is that it should not be living in an ivory tower, proposing ideas far removed from the needs of the political economy or a politician’s mandate.The RBI’s autonomy is a “negotiated autonomy”, where it creates space for itself based on government-mandated objectives.Another point is also worth making. Ask yourself: if the net result of DeMo is more financial inclusion, and more formalisation of the economy, will monetary policy work better or more badly?If DeMo, and later GST, steadily expand the frontiers of the banking and financial system, will RBI interest rate policies have better traction or less traction?The net result of DeMo will be a strengthening of the RBI’s ability to influence the trajectory of inflation and growth more than it is capable of now. Real autonomy flows from real power.Almost Rs 25,000 crore cash transactions moved to digital post note ban: SBIAuthor: Saloni ShuklaPublication: The Economic TimesDate: January 10, 2017URL: one of the most positive fallouts of demonetisation almost Rs 25,000 crore or 15 per cent of the total cash based transactions have moved to digital sources in the last two months, according to a survey conducted by the State Bank of India. At least 41 per cent of people that SBI polled already who already had point-of-sale machines saw an increase in their transactions post note ban. “This number could have been even higher because the behavioural shift has not happened yet and many merchants still prefer cash transactions when the transaction amount is not large,” said Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI. “So they are mostly discouraging people from using PoS the for small transaction value of say less than Rs 200 or so.” SBI has suggested that the government should quickly start the exercise of onboarding new merchants, particularly small and marginal traders, grocery shops, etc. on the digital platform by a more targeted approach. The lender also said that onboarding of merchants could be an incentive and it is done by some support funds from Government. “We also suggest that RBI should enhance the mobile wallet user limits further to shift more of the cash transactions to digital wallets,” Ghosh said. Recently, RBI revised the per month limits on mobile wallets spend to Rs 20,000 for users and to Rs 50,000 for merchant bank transfers. Although banks have supplied more than 1 lakh PoS terminals since demonetisation the supply is still low compared to high demand.Almost 69 per cent respondents that SBI polled said that their business has been impacted due to note ban. The decline in business is less than 50 per cent for the majority of business polled. Construction and informal roadside vendors were the worst hit with 55 per cent and 71 per cent respondents respectively saying that their business got reduced by more than 50 per cent.View: Who is YV Reddy really blaming? Narendra Modi or Manmohan Singh?Author: MC Govardhana RanganPublication: The Economic TimesDate: January 11, 2017URL: Dr. Yaga Venugopal Reddy speaks, every word matters. Be it the Goa speech in 1997 which still remains the bedrock of India's foreign exchange policy , or his Tobin Tax idea to contain the deluge of foreign exchange flows which he retracted under pressure from the then finance minister P Chidambaram, his words carry a lot of weight. His latest one, which seems to have triggered an intense debate among the nation's conscience keepers, is the autonomy of the Reserve Bank of India, thanks to Reddy's fears that the institution he once headed is being bulldozed. The soft-spoken but stubborn bureaucrat turned central banker's belief that the `institutional identity of the RBI has been damaged,' and there is a `reputational risk' hanging over the central bank, is good enough for a campaign on the RBI's autonomy. His lament appears to be that the RBI's role and responsibilities is being diluted and it is being left with very little to do. Over the years there has been an attempt to encroach on the central bank's territory like regulation of the markets. The governor, some believe, has been reduced to just one more in a panel of six people who decide on the monetary policy. An attempt was made to move the regulation and supervision of the repo market to the Securities & Exchange Board of India, but was aborted after then Governor Raghuram Rajan opposed it. The creation of the public debt management office is another that is seen as clipping the wings of the central bank. Not but the least, the rank of officials who would interview candidates for the central bank vacancies. Reddy goes further to highlight what kind of calamity is about to befall us if the nation allows the slide show to continue where he equates the `financial security' to the `security of a country' and the need to look at it as a `national problem' to arrest the slide. Why is the Narendra Modi government on such a path to destroy an institution that has withstood all the pressures in the past? Is there a systematic plan to make the central bank toothless? Reddy himself gives the answer.“The old framework, whatever the background, which committee, which commission, which judge produced it, we need not go into it. The limited point is, the role of central bank in our economy is under threat and it is a national problem which has to be addressed as a national problem.”Anyone with reasonable memory would realise that Reddy is targeting the same gentleman that his successors at the RBI, D Subbarao and Raghuram Rajan found fault with. He is Justice B Srikrishna --who headed the Financial Sector Legislative Reforms Commission that hit at the root of RBI's autonomy. The Manmohan Singh government sowed the seeds for actions that undermine the RBI now, and not Modi's alleged authoritarianism. As in many areas of administration, Modi is now being called upon to repair the destruction that commenced under Dr. Singh, a former RBI Governor.Worst is yet to come, says Manmohan Singh on PM Modi’s demonetisation moveAuthor: Aaron PereiraPublication: The Indian ExpressDate: January 11, 2017URL: vice-president Rahul Gandhi, former finance minister P Chidambaram and other senior party leaders addressed the session at Talkatora Stadium in the national capital.Former prime minister Manmohan Singh on Wednesday said the impact of demonetisation was being felt across the country but the worst was yet to come. “Demonetisation has hurt the country. Things have gone from bad to worse, but the worse is yet to come.”“I’ve said it before in Parliament… demonetisation will have an impact on the economy. Some rating agencies have said the GDP could slow down to 6.6 per cent,” the former prime minister said in his brief address. “Modi ji keeps saying he’s out to transform the economy. We now know the beginning of the end has come. His claims are hollow.”Dr Singh was speaking at the Jan Vedna Sammelan called by the Congress to highlight the “disastrous impact” Prime Minister Narendra Modi’s demonetisation move has had on the people. Congress vice-president Rahul Gandhi, former finance minister P Chidambaram and other senior party leaders addressed the session at Talkatora Stadium in the national capital.Earlier in the day, Rahul said, “Demonetisation is just an excuse. PM Modi knows that he won’t be able to hide in the garb of Yoga and Make in India. When he got worried, he broke the backbone of the Indian economy (through demonetisation),” said Gandhi. “Almost every economist of repute has rebuked demonetisation.”“2.5 saal pehle Modi ji aaye kaha Hindustan ko saaf kardunga, sabko jhaadu pakdaya. Fashion tha, 3-4 din chala phir bhool gaye (Two-and-a-half years ago, Modi government had said they will clean India. They gave brooms to everyone. It used to be fashionable. It continued for some time, then they forgot about it),” said the Congress leader in reference to the government’s flagship Swacch Bharat Abhiyan.Chidambaram too strongly criticised the note ban saying it would affect the GDP adversely. He also questioned who would compensate those who have lost their lives and livelihoods due to the Modi government’s decision. “I demand that the government pay compensation to the daily wage workers who lost their livelihoods,” he said, adding that 45 crore people lost their livelihood for 70 days “due to one man’s decision.”The Beginning of the End, Warns Manmohan Singh On 'Disastrous' Notes BanAuthor:Publication: Date: January 11, 2017URL: Prime Minister Manmohan Singh, expressing concern that growth would plunge after the notes ban, warned today that "the worst is yet to come."Addressing the Congress' "Jan Vedna" conclave, Dr Singh also described the government's decision to suddenly ban 500 and 1,000 rupee notes in November as a "disaster"."The beginning of the end has come," commented the renowned economist, who was Prime Minister for 10 years.In Gandhinagar, addressing the Vibrant Gujarat summit, Union Finance Minister Arun Jaitley dismissed the fears of slowdown. "Difficult decisions initially pass through difficult phases. Historic decisions have temporary pain attached to them," the minister said."Excessive paper currency has its own vices, leads to its own temptations. We have seen its impact in India,'' Mr Jaitley added.Former Finance Minister P Chidambaram had earlier claimed that there was no record of the Cabinet meeting of November 8 when PM Modi announced the big move.Dr Singh said after demonetization, "things are going from bad to worse and that the worst was yet to come". He dismissed as a hollow claim that the situation has started looking up, and told Congress leaders it was their "solemn duty" to raise awareness on what he called "Modi's propaganda".Both Dr Singh and Mr Chidambaram said there would be decline in the country's GDP or Gross Domestic Product because of the notes ban, which wiped out 86 per cent of the cash in circulation.The government and the central bank generally have differences but "never before has a government treated RBI like a department of the government of India," remarked Mr Chidambaram.He added that even one per cent decline in GDP will lead to a loss of Rs. 1.5 lakh crore to the country.The party issued a statement that the Prime Minister must reveal what percentage of the demonetised currency notes was black or untaxed money.Dr Singh said: "Modi's propaganda that the national income of India in the last two years has gone up has failed... The 7.6 per cent growth rate of country has come to 7 per cent in only a few months as a consequence of steep fall in the GDP of the country."Demonetisation and monetary policyAuthor: Alok SheelPublication: Date: January 12, 2017URL: ’s currency swap is yet another example of how the powerful monetary policy tool is a victim of its own successAlthough the underlying motive may be non-economic, from the economic perspective, the recent demonetisation in India can be viewed as part of ongoing experimentation with monetary policy around the world. An eminently powerful and successful policy tool, it has become the victim of its own success—with attempts to expand its scope, objectives and toolkit to a point that is undermining its efficacy, tarnishing the halo deservedly acquired by central bankers and hobbling their putative independence. We have moved from a point where Alan Greenspan, the chairman of the US Federal Reserve, was acknowledged as the master of the universe, to calls for the abolition of the Federal Reserve. How has this come about? Let us start from the beginning. Global growth before the Industrial Revolution was not only extremely uneven but, in the absence of continuous technological and productivity improvements, averaged well under 1% per annum. With the Industrial Revolution, it rose to 1% between 1700 and 1900, and to 1.3% in the first half of the 20th century. Periods of growth, however, continued to be punctuated with sharp declines. Global growth rose dramatically to average 3.8% between 1950 and 2014. While the stimulus provided by the war economy is credited for pulling the US out of the Great Depression, and the initial momentum of the postwar boom was provided by the reconstruction of Europe and Japan, later sustained by the development of East Asia, and more recently of China and India, this spurt in growth was only partly fortuitous. Much of the credit goes to sound structural policies and reform. The remarkable fact that the global economy has not seen a single year of negative growth after 1950 can be ascribed to advances in macroeconomic, and particularly monetary, policy.The original objective of central banking was monetary and financial stability. Its origin lay in the response to freebooters, bank runs, financial bubbles, and dislocation caused by war. Following the Great Depression and the postwar Keynesian revolution, macroeconomic stability became a second objective, soon overriding the original. The macroeconomic policy toolbox was initially limited by the gold standard. Beginning with the US in 1970, the world went off the gold standard, adding fiat currency as a powerful new tool for expanding and contracting money supply at will. Like a baby getting a new toy, this tool was flogged to excess. Hyperinflation followed. Fiscal policy was too political, making for easy entry and difficult exit. Originally inclined to be accommodative of lax fiscal policy, monetary policy run by independent central banks now became the policy tool of first resort, with fiscal policy being largely relegated to automatic stabilizers. Beginning with Milton Friedman’s monetarism, it became rule-bound, culminating with the Taylor rule. The underlying rules depended on central bank targets, which were prices and employment in the US, price stability as primary and growth as subsidiary target in the European Union, and inflation targeting in the UK and Japan. India’s revamped monetary policy objectives are like those of the European Central Bank.As financial markets developed, advanced economies moved away from monetary aggregates to the overnight policy interest rate as the chief instrument to modulate the demand for and supply of money, defending this rate through market intervention. The overnight rate was transmitted along the entire yield curve by financial markets. Monetary policy attained its high watermark under chairman Paul Volcker of the Federal Reserve, who used the policy rate to telling effect to tame hyperinflation.Unbeknown to central bankers, even as their reputation was becoming formidable, their eminently successful framework was unravelling on account of three separate developments. First, globalization blunted macroeconomic policy tools as they could leak abroad: Fiscal expansion fuelled competitive external economies, monetary easing sent capital abroad instead of increasing investment. Second, as headwinds to growth in advanced economies increased on account of ageing and declining productivity growth, they became reliant on financial markets as the engine of growth, losing sight of financial stability. Symptomatic of this was the “Greenspan put” of reducing rates to fight market falls. Third, monetary policy overreach expanded the objectives beyond short-term stabilization to addressing structural problems such as rising public deficits and debt, and more recently, illicit wealth. Additional objectives led to expansion of central bank toolkits far beyond the conventional overnight policy rate. The Bank of Japan deployed quantitative easing (QE) to stimulate growth when policy interest rates hit the zero bound to fall into a liquidity trap in the 1990s. Extending its market intervention to the purchase of long-term bonds to directly influence long-term rates did not work, however, as the headwinds to growth were not cyclical. QE helped stabilize financial markets in 2008-09, but successive rounds were less effective, despite the increase in scale, bond maturities, and credit easing that targeted specific segments of the yield curve by churning, instead of simply expanding, the balance sheet. The objective changed, more aligned to those of the Bank of Japan.New objectives were added with public debt spinning out of control. The zero-bound policy rate was protracted to support these additional objectives. The latest addition is targeting illicit wealth through the demonetisation of high-value currency notes, recommended by Harvard economist Kenneth Rogoff—when India demonetized its high-value currency, it burdened the tool with the additional objective of reducing cash transactions. The experience with unconventional monetary policy has been arguable at best, and has at worst generated unintended negative externalities, such as new asset bubbles (QE), damaged savings (protracted zero-bound rates) and damaged growth (demonetisation). Macroeconomic policies are designed to address short-term perturbations around structural trends, not to modify underlying structures such as trend growth, public debt or illicit wealth. These are best addressed through structural policy and reform. Central bankers must return to a time when monetary policy did not attempt to do too much and was focused on stabilizing financial markets and growth. - Alok Sheel is a retired civil servant.RBI took a bold and brilliant call: Arvind SubramanianAuthor:Publication: The Economic Times Date: December 7, 2016URL: a chat with ET Now’s Mythili Bhusnurmath, Arvind Subramanian, Chief Economic Advisor, says that this is a call to try and signal stability, continuity at a time of rapid uncertainty and volatility.Edited excerptsQ.: Are you surprised with RBI’s decision to hold rates constant because markets really had factored in a 25 bps cut?A.: I think it is an absolutely bold and brilliant call by the Reserve Bank of India, the Monetary Policy Committee to hold rates.Q.: But earlier, you were always a bit of a sceptic of the entire focus on inflation targeting in an economy as complex as India where the RBI is a full service central bank. So does it seem as if the MPC has put excessive focus on inflation control at a time when the focus should have shifted to growth because the mandate really was priced stability keeping in mind the objective of growth? Have they forgotten the latter part of the mandate?A.: First of all, remember that this is quite an unusual situation for the RBI. We have had a major monetary event in our country and that has led to a lot of questions about the future course of growth and inflation that is on.Second, it comes at a time of tremendous international volatility with global interest rates going up, capital flows from emerging markets declining and therefore lots of pressures on the currency. So in a sense you have to understand the context for this decision that there was a major event creating a lot of uncertainty domestically and international developments and therefore I think that this is a call to try and signal stability, continuity at a time of rapid uncertainty and volatility.Q.: But given the fact that markets had already factored in the rate cut and bond yields had fallen very dramatically, in fact close to 70 bps post the demonetisation, does it seem as the RBI is completely out of kilter with the markets? We have already seen bond yields reverse very dramatically from barely 6.2 before the policy announcement to over 6.31 now. So is that kind of volatility desirable? Should not the RBI as an intelligent central bank take its cues from the market even if it does look as if it is following the market whereas it should be leading the market?A.: You cannot say markets wanted therefore you should deliver. Remember, you have to understand this call also in terms of whatever effects of demonetisation are going to be and whether they are going to be transient or permanent. If you think they are going to be more permanent, then it calls for a particular policy response. But if you think it is going to be transient, you want to see through that and take into account broader factors that I mentioned the need to stabilise markets at a time of considerable uncertainty domestically and internationally. When we get to know when the data comes in a month or two, about how transient even the liquidity flows are, how much is coming in and how much is going out, I think that would be the time to take a more careful call on how monetary policy should be assessed. Put yourself in the shoes of a central bank that on the one hand has to tighten because of excessive liquidity flows into the banking system and also has to intervene because of volatility in foreign exchange markets. It creates a real kind of dilemma and communication problem when you say we have raised CRR. We are going to use MSS. We may have to intervene in foreign exchange markets and then you cut policy rates. So you have to think about the overall context and not get wedded to this narrow context, inflation or whatever. In fact, it is one of the more difficult calls for the RBI because the situation is so unusual and I think they did make a really bold and brilliant call.Q.: Well absolutely. Almost everybody’s sympathies would be with the governor and the MPC but having said that, the central bank governor is in a tight spot because markets always expect them to be wiser than everybody else. But did the Reserve Bank of India central board really think through the consequences of what they were suggesting because after all prima facie it was recommended by the central board of the Reserve Bank of India as is required under the law but we have a board which is virtually a lame duck. We have as many as close to 10 vacancies amongst the independent directors, at the same time, there does seem to have been a lack of thought given the kind of disruption that we have seen in economic activity. Could the central bank really have taken a decision so quickly?A.: I think now we are going from monetary policy to other issues and in terms of who did what. These are questions where I think it is difficult for me to second guess what happened. But in terms of today’s decision I am really pleased that they made exactly the right decision.Q.: On the issue of the impact on GDP, we heard Michael Patra say that they expect the demonetisation impact to be only 15 bps and whatever negative impact was there is already there in the second quarter. The deduction that they have in the GVA to 7.1 per cent, he says is largely because of second quarter numbers. But the second quarter really did not feel the impact of demonetisation and what we have seen is successive brokerages have cut their estimates by a much more aggressive number. So would you go along with that number of this 15 bps reduction of the third quarter GVA?A.: We are looking at all the data. Now we are looking at all the high frequency data. There is lot of uncertainty, mixed signals and I still do not think we have the first macro read on the impact of demonetisation. So we are going to be looking at those numbers and once we make a considered assessment, then we will come back and talk about that.Q.: Absolutely. We are in uncharted waters and it is very difficult to really take a call. What is the impact as far as profits of the Reserve Bank of India are concerned? If there is some amount of money, that does not get returned to the banks and here the governor was very categorical that it does not impact the RBI’s balance sheet but he also added the caveat and he repeatedly said that “as of now”. What does this “as of now” mean? Is the government thinking of doing something beyond taking away the legal tender status which would impact the balance sheet of the Reserve Bank of India?A.: I am not an expert on the legal situation here. I think that these are all decisions we have to make when the data come in finally. So I think those calls will be made later. I do not exactly what the legal status is and the RBI governor knows more than that but in terms of going forward what the government is likely to do, I think we will take a call when the data come in and when we see what has happened, take an overall assessment of what has happened with demonetisation.Q.: The governor very categorically said when he was questioned on demonetisation, that Rs 11.5 lakh crore have already made its way back to the system and he said it is going to enhance security, move towards digitisation. I am going to ask you a very blunt question is that reason enough to demonetise? It had to serve a larger purpose and if a lot of money makes its way back to the system, as it looks it will, was this an exercise in futility then?A.: One has to assess demonetisation in its overall context and that is what we are in the process of doing at the moment. We are going to be looking at all the data, the high frequency data, get our first macro read and then provide a more considered assessment in the days and weeks to come.Q.: The growth forecast by the RBI has been lowered from 7.6 to 7.1%. A large of that lowering of growth according to the RBI is on account of Q2 GDP figures. Some part of it is on account of demonetisation which they believe is transitory. Is North Block as optimistic about the impact of demonetisation being transitory or do you actually see that data point being lowered as much as RBI has done so and perhaps a lot more?A.: You know because there are a lot of mixed signals coming we have to wait, assess the data, we still do not have a proper macro read even the first macro read of what is going on. Once we have those data, we will analyse them very carefully and come back with a more considered assessment in the days and weeks ahead. At the moment, it is not very easy to make a really definitive call on the magnitudes of all these impacts.Q.: A definitive call may not be possible but you and I both know that there has been a demand destruction, there will be a growth collapse. In such a scenario did RBI err too much on the side of caution by not cutting policy rates, should not they have committed to a lower rate regime?A.: No. I am absolutely sure and confident that they made exactly the right call and remember exactly because of all the expectation and perhaps even market pressure to lower interest rates, I think this was actually a bold and brilliant call for three or four reasons. Let me go through those reasons very carefully with you again. First, you know we have had a lot of uncertainty from the demonetisation, so inherently there is more volatility and uncertainty in markets and therefore this is a time to stabilise and convey a picture a stability and continuity. Second, you have seen in the last two, three weeks after the US elections, bond rates have gone up all over the world and India has been almost the only country where bond rates have come down. As a result of this. there has been extra pressure on the rupee, a lot of volatility and so in this stage we want to contain that liquidity and therefore I think that is another reason why this is a good call.Third, we do not know whether for sure how much of the effects are going to be transient and how much are going to be permanent and monetary policy should not respond to transient changes. Finally, think of the communication dilemma for the RBI on the one hand they have had to raise CRR, on the one hand they have also had to intervene in the foreign exchange markets because of volatility. Both of these are contractionary in nature so that they have been doing that. Now if you say well they have to cut rates then the signalling problem becomes so difficult because you are both contracting and easing and this is therefore not an easy situation to-- an easy call to make and an easy call to communicate and therefore I think if you wanted clarity of policy in communication I think this is very consistent with what they have been doing recently. So I think that overall if you were to look at all these factors and remember in a month or two we will get to know how much of the liquidity is permanent, how much will flow back, how much of the growth effects are going to be permanent as opposed to temporary and then they can always take a call on which way monetary policy should head in the face of new data.Q.: So do you expect inter policy action between this policy and the next? Do you expect inter policy action by the RBI?A.: This is a question that nobody can answer any more. So it is not a question that I can answer or will answer. It is not an easy question.Q.: The only reason why I asked you that question is because people in New Delhi and especially people within the government have said that RBI should have cut rates radically, here we have a situation where RBI wants to communicate that it does not want to contract and expand at the same time and so has decided not to cut rates, will this disappoint political masters in New Delhi?A.: Because it is absolutely the right decision economically, I think it should be seen that this is in the best interest of the country at this stage. So I think that is the way to view this action by the Monetary Policy Committee.India’s Demonetization Triggers Extreme Poverty and FamineAuthor: Gideon PolyaPublication: Globalresearch.caDate: January 11, 2016URL: The demonetisation of Rs. 500 and Rs. 1000 notes by the government of Prime Minister Narendra Modi is disproportionately impacting the poor of India. Presently 4.5 million Indians die avoidably from deprivation each year and demonetisation will make this worse by increasing poverty, deprivation and disempowerment. Indians must reject this callous and deadly attack on the poor, reject deadly pro-One Percenter neoliberalism and demand social justice via social humanism (democratic socialism). editor Binu Mathew has written:“In a cashless / digital money India Big Brother would be watching 24/7. The digitally illiterate vast majority would be driven out of circulation like the old notes. It’s a long process, perhaps more lethal than Hitler’s “Final Solution”. More people died in World War II Bengal famine (1942-45) than Hitler’s gas chambers. Did it make it at least into the footnotes of Indian history? Demonetised India doesn’t need gas chambers, hunger will do the job!” [1].Unfortunately Binu Matthew is essentially correct and indeed quite conservative in his estimation. Poverty and disempowerment combine to constitute a deadly deprivation in India today that is already linked to an annual avoidable mortality of 4.5 million Indians each year as estimated from mortality data from the UN Population Division [2]. Avoidable mortality (avoidable death, excess mortality, excess death, untimely death, deaths that should not happen) is the difference between actual deaths in a country in a given period and deaths that would be expected if that country were at peace and subject to humane governance [3].Demonetisation will make this horrendous Indian avoidable mortality holocaust worse by increasing poverty, deprivation and disempowerment.The annual mortality in India (2017 population 1,350 million [2]) is 7.3 deaths per 1,000 of population [2]. However for poor and high birth rate but decently governed countries the annual death rate is about 4 deaths per 1,000 of population [3], the difference being 7.3- 4.0 = 3.3 avoidable deaths per 1,000 of population per year and accordingly 3.3 avoidable deaths per 1,000 of population x 1.35 thousand million people = 4.46 million avoidable Indian deaths from deprivation every year. It must be noted that a total of 17 million people presently die avoidably each year from deprivation in the Developing World (minus China) [3]. In contrast, annual avoidable death is effectively zero (0) for China, South Korea, Japan, Western Europe, and the colonization-derived countries of the US, Canada, Australia, New Zealand and Apartheid Israel [3].4.46 million or about 4.5 million avoidable Indian deaths every year in “the world’s biggest democracy” means that untimely Indian deaths every 2 years exceed the carnage of the WW2 Jewish Holocaust (5-6 million Jews killed by violence or imposed deprivation in 1941-1945) [4] or of the WW2 Bengali Holocaust (Bengal Famine) in which the British with Australian complicity deliberately starved 6-7 million Indians to death in 1942-1945 for strategic reasons in Bengal, Orissa, Bihar and Assam [5-14], Australia being complicit by withholding grain from its huge wartime wheat stores from starving India [5]. When the price of rice rose up to 4-fold (for a variety of complex reasons), those living at the edge (notably land-less labourers) could not buy food and perished under merciless British rule.The appalling 4.5 million avoidable deaths each year in ostensibly democratic but neoliberal India as compared to zero (0) in authoritarian but pluralistic and altruistic China is testament to the abolition of endemic poverty in China but not in India. The ostensibly free but One Percenter-owned Mainstream media of India are able to report the explicit, publicly-visible horrors of war, terrorism and famine but fail to report the worsening avoidable mortality holocaust occurring behind closed doors. Thus it has been estimated that in 2003 about 3.7 million Indians died avoidably from deprivation as compared to the 4.5 million such deaths expertly predicted for 2017 [3]. But just as Western media still overwhelmingly ignore the WW2 Bengali Holocaust (6-7 million avoidable Indian deaths from deprivation in Bengal and neighbouring states in 1942-1945), so Indian media largely ignore the worsening Indian avoidable mortality holocaust (presently about 4.5 million avoidable deaths from deprivation each year).Indian famine expert and 1998 Nobel Laureate for Economics, Amartya Sen, and his colleague Jean Drèze commented thus on media reportage and avoidable deaths from deprivation (1995):“The contrast is especially striking in comparing the experiences of China and India. The particular fact that China, despite its much greater achievements in reducing endemic deprivation, experienced a gigantic famine during 1958-1961 (a famine in which, it is now estimated, 23 to 30 million people died), had a good deal to do with lack of press freedom and the absence of political opposition. The disastrous policies that paved the way to the famine were not changed for three years as the famine raged on, and this was made possible by the near-total suppression of news about the famine and total absence of media criticism of what was then happening in China… However, it appears that even an active press, as in India, can be less than effective in moving governments to act decisively against endemic under-nutrition and deprivation – as opposed to dramatically visible famines. The quiet persistence of “regular hunger” kills millions in a slow and non-dramatic way , and this phenomenon has not been much affected, it appears, by media critiques” [15].Thus the World is well aware of the 1958-1961 famine in China (23-30 million deaths) that was associated with the Great Leap Forward but is overwhelmingly unaware of the hundreds of millions of “slow and undramatic” avoidable deaths from deprivation under the British and post-Independence. Using Indian census data 1870-1950, assuming an Indian population of about 200 million in the period 1760-1870, and estimating by interpolation from available data an Indian avoidable death rate in (deaths per 1,000 of population per year) of 37 (1757-1920), 35 (1920-1930), 30 (1930-1940) and 24 (1940-1950), one can estimate Indian excess deaths (avoidable deaths, untimely deaths) of 592 million (1757-1837), 497 million (1837-1901) and 418 million (1901-1947), roughly 1.5 billion in total or 1.8 billion including the Native States. However after Independence the avoidable death rate dropped dramatically to circa 3.5 deaths per 1,000 of population per year by 2003 (2003 population 1,057 million), with 1950-2005 avoidable deaths from deprivation totalling about 350 million [16].Brilliant Indian writer and activist Arundhati Roy has provided a succinct explanation for Mainstream lying by omission over appalling social realities (2004): “The ultimate privilege of the élite is not just their deluxe lifestyles, but deluxe lifestyles with a clear conscience” [17]. It must be recognized that ignoring horrendous realities and lying by omission are far, far worse than repugnant lying by commission (explicit lying) because the latter can at least be refuted and admit the possibility of public discussion [18, 19].Demonitisation is worsening the conditions of the poor of India and will thus inevitably contribute to a worsening of the killing of “millions in a slow and non-dramatic way” that presently stands at about 4.5 million avoidable Indian deaths from deprivation each year.Demonetisation has led to a cash shortage that disproportionately affects the poor. The poor have limited cash to buy food, farmers have limited cash to pay rural labourers to harvest food, farmers are having trouble selling harvested food, and the result is real deprivation and hunger [20]. West Bengal chief minister Mamata Banerjee has claimed (January 2017) that the demonetisation of Rs. 500 and Rs. 1000 notes (announced by Prime Minister Narendra Modi on November 8, 2016) could lead to suffering and famine for the poorest:“The decision to demonetise the currency has led to severe hardship among the poor and the marginalised. In many areas, labour is not available to harvest the grains from the field. In other parts of the state, farmers are not able to earn money from cultivation of vegetables as demand has slowed down and people are cutting consumption… Tea sellers who used to earn Rs500 a day are now unable to find customers due to shortage of currency. This Rs2,000-note has created more confusion and hardships for the people. This happens when the leadership loses connection with people” [21, 22].News World India has commented on the massive move to a cashless society:“On November 8, all Rs 500 and Rs 1,000 notes were made invalid. Was this a masterstroke by Prime Minister Narendra Modi? He must have had a noble intention behind this decision but, economic prudence can never allow that 86 percent of the money should be removed from circulation… But, what about that daily wage earner who doesn’t even know what ‘go cashless’ means. A large amount of money belonging to the poor and the uninformed lot has become invalid. It is their hard-earned savings which they are unable to convert either because they don’t have access or right information about the whole process… The so called- informal economy is collapsing for the simple reason that it thrives on cash transactions. More than 90 percent of the labour force in India is dependent on this, receiving the biggest setback of their lives. The demand has come down drastically and the small or micro enterprises have slowed down on their production. Since the labour force works on a daily wages, a loss of one-month of their pay has crippled the informal economy like never before” [23].“The Hindu” similarly concludes that demonetisation has caused a shortage of cash (a “cash famine”) that disproportionately impacts the poor who are not part of the digital economy [24].Physicist and outstanding Indian environmental and social analyst and activist, Dr Vandana Shiva, has excoriated this disempowerment of the poor for the benefit of the rich (January 2017):“As 2017 begins and we flounder in our mad rush to force all of India into a digital economy overnight… We live in times where the non-working rent collectors and speculators have emerged as the richest billionaires. Meanwhile, the hard working honest people, like farmers, workers in self-organised economies (mistakenly called unorganised and informal) are not just being pushed into deep poverty, they are, in fact, being criminalised by labelling their self-organised economic systems as “black”… Imposing the digital economy through a “cash ban” is a form of technological dictatorship, in the hands of the world’s billionaires. Economic diversity and technological pluralism are India’s strength and it is the “hard cash” that insulated India from the global market’s “dive into the red” of 2008… When I exchange Rs 100 even a 100 times it remains Rs 100. In the digital world those who control the exchange, through digital and financial networks, make money at every step of the 100 exchanges. That is the how the digital economy has created the billionaire class of one per cent, which controls the economy of the 100 per cent. The foundation of the real economy is work. Gandhi following Leo Tolstoy and John Ruskin called it “bread labour” — labour that creates bread that sustains life. Writing in Young India in 1921, he wrote: “God created man to work for his food, and said that those who ate without work were thieves” [25].Satya Sagar, a journalist and public health worker, has similarly commented on this massive disempowerment of the poor (January 2017): “From all evidence so far it is clear, that the Scheduled Castes and Tribes, who make up a bulk of those surviving off India’s vast informal economy, are the worst affected by the sudden disappearance of cash from the economy. Agricultural labour, construction workers, employees of micro-enterprises, the urban and rural poor – mostly from these marginalized castes- have been pushed to the brink of starvation or worse due to loss of jobs and income. The other sections, whose lives have been severely disrupted are small and medium sized farmers, who are overwhelmingly from Other Backward Castes and artisans, mostly from poorer Muslim communities…what the Narendra Modi dispensation is doing through its devious insistence on a digitalised economy – imposing on the already disadvantaged a test designed to not just make them fail but also put the blame for their misery on their own ‘ignorance’. If in the past they were actively denied knowledge of the ‘Vedas’ by the upper castes now, as they are trying to catch up, the rules of the game are either being changed abruptly or they are being priced out of the market. The most apt way to describe what is happening in India today is perhaps through a completely new term –dwijitalisation. It captures well the long-term implications of Narendra Modi’s push for a digital economy in a country that has long been ruled by the dwij – or twice born castes as the Hindu elite call themselves. Under the new rules of the dwijital economy only the dwij– at the top of the social, economic and political ladder – will climb still higher, while kicking the ladder down to ensure no one can follow” [26].Final comments.The Indian demonetisation is a huge shift towards a largely cash-less, digital economy that disproportionately impacts the largely digitally illiterate poor. This shift is towards a massive disempowerment of the poor for the benefit of the rich.The top One Percent of the world own half the world’s wealth and this is clearly incompatible with one-person-one-vote democracy. India, even more blatantly so than other ostensible democracies, has become a kleptocracy, plutocracy, lobbyocracy, and corporatocracy in which Big Money in the hands of a relative few buys people, politicians, parties, policies, public perception of reality, and hence votes and more political power, with the consequences of even more private profit and private wealth that further trash democracy. Indeed India can be seen as a kind of extreme Apartheid state in which the rich One Percenters rule because the poor majority have been duped by Big Money perversion of democracy. Small wonder that nuclear terrorist, serial war criminal, racist Zionist-run, genocidally racist and democracy-by-genocide Apartheid Israel has successfully courted Modi.Poverty and disempowerment constitute a deadly deprivation in India today that is already linked to an appalling, worsening and resolutely ignored annual avoidable mortality (annual untimely deaths) of 4.5 million Indians. Demonetisation will inevitably worsen deprivation and avoidable death. However the very callousness, wealth transfer, disempowerment and inequity implicit in Modi’s demonetisation may prove to be just too much to bear and hence lead to the downfall of the neoliberal One Percenters running kleptocracy India.The currently dominant neoliberal economic model involves maximizing the freedom of the smart and advantaged to exploit the natural and human resources of the world for private profit, with an asserted trickle-down of some benefit to the poor. The clear, humane alternative to neoliberalism is social humanism (socialism, democratic socialism, ecosocialism, the welfare state) that seeks via evolving social contracts to maximize human happiness, opportunity and dignity for everyone [27, 28]. Yet, as demonstrated by the injustice of demonetisation, India is firmly in the hands of the neoliberal One Percenters.Indeed democracy is fundamentally the expression of the will of the people and one would reasonably suppose that a fundamental desire of virtually all people would be minimization of avoidable deaths from deprivation, especially for themselves and their loved ones. The annual avoidable deaths of 4.5 million Indians is testament to the utter perversion of fundamental democracy by the rich One Percenters.The sheer callousness of the Modi-led One Percenter demonetisation will hopefully induce national clarity in which humane Indians will reject neoliberal greed, corruption, inhumanity and inequity, and demand realization of the social humanist decencies for all promised at Independence nearly 70 years ago.References.[1]. Binu Matthew, “Modi’s New Year’s Eve speech: what comes next?”, Countercurrents, 1 January 2017: .[2]. UN Population Division, “World Population Prospects 2015 Revision”: .[3]. Gideon Polya, “Body Count. Global avoidable mortality since 1950”, that includes a history of every country from Neolithic times and is now available for free perusal on the web: .[4]. Martin Gilbert “Atlas of the Holocaust”(Michael Joseph, London, 1982).[5]. Gideon Polya (2011), “Australia And Britain Killed 6-7 Million Indians In WW2 Bengal Famine”, Countercurrents, 29 September, 2011: .[6]. Paul Greenough (1982), “Prosperity and Misery in Modern Bengal: the Famine of 1943-1944” (Oxford University Press, 1982).[7]. Jean Drèze and Amartya Sen (1989),“Hunger and Public Action” (Clarendon, Oxford, 1989).[8]. Gideon Polya (2008), “Jane Austen and the Black Hole of British History. Colonial rapacity, holocaust denial and the crisis in biological sustainability” , G.M. Polya, Melbourne, 2008 edition that is now available for free perusal on the web: .[9]. Cormac O Grada (2009) “Famine a short history” (Princeton University Press, 2009).[10]. Madhusree Muckerjee (2010), “Churchill’s Secret War. The British Empire and the ravaging of India during World War II” (Basic Books, New York, 2010).[11]. Thomas Keneally (2011), “Three Famines” (Vintage House, Australia, 2011).[12]. “Bengali Holocasut (WW2 Bengal Famine) writng iof Gideon Polya, Gideon Polya: .[13]. Colin Mason (2000), “A Short History of Asia. Stone Age to 2000AD” (Macmillan, 2000).[14]. Lizzie Collingham (2012), “The Taste of War. World War II and the Battle for Food” (The Penguin Press, New York, 2012).[15]. Jean Drèze and Amartya Sen, “Introduction” in Jean Drèze, Amartya Sen and Athar Hussain (editors), “The Political Economy of Hunger”, pages 18-19, Clarendon Press, Oxford, 1995.[16]. Gideon Polya, “Economist Mahima Khanna, Cambridge Stevenson Prize And Dire Indian Poverty”, Countercurrents, 20 November, 2011: .[17]. Arundhati Roy and David Barsamian, “The Chequebook and the Cruise Missile”, Harper Perennial, New York, 2004).” from[18]. “Mainstream media lying”: .[19]. “Mainstream media censorship”: .[20]. Rahul M., “Staying half-hungry due to the demonetisation “drought””, Countercurrents, 27 December 2016: .[21]. Archisman Dinda, “Demonetisation could lead to famine, Mamata Banerjee says” , Gulf News, 7 January 2017: .[22]. “Indian demonetisation could lead to famine”, Pakistan Observer, 8 January 2017: .[23]. “The demonetisation, a crippled economy and the mayhem!”, News World India, 15 December 2016: .[24]. “Demonetisation causes cash famine in Malabar”, The Hindu, 2 December 2016: .[25]. Vandana Shiva, “Demonetisation: beware of digital dictatorship”, Countercurrents, 3 January 2017: .[26]. Satya Sagar, “Cashless is not casteless”, Countercurrents, 9 January 2017: .[27]. Brian Ellis, ”Social Humanism. A New Metaphysics”, Routledge , UK , 2012.[28]. Gideon Polya, “Book Review: “Social Humanism. A New Metaphysics” By Brian Ellis – Last Chance To Save Planet?”, Countercurrents, 19 August, 2012: .Dr Gideon Polya has taught science students at a major Australian university for 4 decades. He has published some 130 works in a 5 decade scientific career, most recently a huge pharmacological reference text “Biochemical Targets of Plant Bioactive Compounds” (CRC Press/Taylor & Francis, New York & London , 2003). He has published “Body Count. Global avoidable mortality since 1950” (G.M. Polya, Melbourne, 2007: ); see also his contributions “Australian complicity in Iraq mass mortality” in “Lies, Deep Fries & Statistics” (edited by Robyn Williams, ABC Books, Sydney, 2007.The original source of this article is CounterCurrentsCopyright ? Gideon Polya, CounterCurrents, 2017India was ‘pretty incompetent’ in scrapping high value banknotes: RogoffAuthor: Justina Crabtree @jlacrabtreePublication: Date: January 4, 2017URL: way India handled the scrapping of its high-value banknotes was "pretty incompetent," Harvard professor Kenneth Rogoff told CNBC's Worldwide Exchange.Rogoff, professor of economics and public policy at Harvard University, told CNBC that Indian Prime Minister Narendra Modi's move had been "pretty paralyzing" for the emerging market economy.In early November, Modi announced that India would be scrapping its 500 and 1,000 rupee notes in an effort to clamp down on fraud, replacing them with new 500 and 2,000 rupee notes instead. Indians were effectively given a few hours' notice that their existing cash would no longer be considered legal tender. The recall period for the old notes ended on December 30.Distribution issues followed Modi's decision, with Rogoff adding that "worst of all, (the Indian government) hadn't printed the new cash to replace the old cash.""I don't really think that's an ideal policy for developing economies in general," Rogoff said, adding that he advises "phasing out large bills slowly over five to seven years" in contrast to Modi's shorter-term action, in which he "did that overnight."Rogoff said that India's move at the end of 2016 could signify the start of national economies shifting away from cash, referencing Australia, which is "talking about phasing out its 100 dollar bill.""I'm for less cash, not cashless," he clarified, "I think we need paper currencies for ever, just not the mountains of it that we have in large denomination notes."India’s prime minister has a knack for shrugging off embarrassmentAuthor:Publication: The EconomistDate: January 14, 2017URL: party is poised to prosper in state elections despite its ill-judged “demonetisation” schemeADDRESSING a conference in his home state of Gujarat on January 10th, Narendra Modi, India’s prime minister, exuded confidence. India’s economy is the fastest-growing and one of the most open in the world, he declared, reaffirming his government’s commitment to reform. The 5,000-strong audience, sprinkled with foreign heads of state and corporate bigwigs, applauded warmly. One multinational’s boss drew cheers with a sycophantic call for India to “export” Mr Modi to run his home country, America, too.The optimism and praise, however, contrasted with sobering economic news. Since November rating agencies have sharply lowered their growth forecasts. Small and medium-sized firms report big lay-offs. Vehicle sales fell in December by 19% compared with the previous December, their steepest drop in 16 years, says a car-industry lobby group. Housing sales in India’s eight biggest cities slid by 44% in the last quarter of 2016 compared with the year before, reckons Knight Frank, a global property firm, in a report. “The Indian government’s demonetisation move on November 8th brought the market to a complete standstill,” it says, alluding to Mr Modi’s surprise order to withdraw 86% of the notes used in daily transactions.There is little doubt that Mr Modi’s assault on cash has caused ordinary Indians disruption, annoyance and, particularly for the poorest, severe distress—though the pain is easing now as the government prints more money to replace the scrapped notes. Yet just as would-be foreign investors seem happy to continue boosting Mr Modi, many Indians also still trust and admire the prime minister. Like America’s president-elect, Donald Trump, who once claimed he could “shoot somebody” and not lose votes, Mr Modi’s support seems oddly unaffected by his flaws. Anecdotal evidence, online polling and informal surveys all suggest that the prime minister’s misstep has scarcely dented his standing.Opinion polls in India have a poor record, and none published since the demonetisation drive has specifically measured Mr Modi’s popularity. However, two surveys carried out in December in the state of Uttar Pradesh, India’s most populous, suggest that his Bharatiya Janata Party (BJP) remains poised to perform well in imminent state elections. When the results from several rounds of voting are tallied in March, the BJP could be basking in its biggest triumph since Mr Modi won national elections in 2014. The party has not suffered in municipal votes in several states since November and is well positioned in several other looming state polls.Prior to the demonetisation drive, Mr Modi had handily weathered other storms. Murderous communal riots tarnished his long term as chief minister of Gujarat, for instance. Yet according to Pew, a research firm, the prime minister’s popularity in mid-2016, at an enviable 81%, had declined only marginally from a stunning 87% the year before. The liking is personal: Mr Modi regularly scores higher in such polls than either his party or his policies.Some pundits speak of “Modi magic” to explain his immunity from criticism, but there are more straightforward reasons. One is the prime minister’s talent as a politician. Although often dour in countenance, Mr Modi is a pithy speaker in Hindi, with an unerring nose for the class-driven grudges that often guide voter sentiment. In debates over demonetisation, he successfully projected himself as a champion of the common man against currency hoarders and tax evaders. He is also extremely protective of his own image as a man above the fray. Mr Modi’s dress, gestures and public appearances are theatrically staid and uniform, punctuated by meaningful looks and silences. He does not hold press conferences, preferring to retain control of his narrative via carefully rehearsed interviews and his monthly “From the Heart” radio address.Pygmy-slayerMr Modi is also lucky. His well-funded, highly disciplined and pan-Indian party faces an unusually divided and uninspiring opposition. Congress, a party that ran India for decades and still commands a nationwide base, is burdened by squabbling and corrupt local branches and a lack of clarity over ideology and the role of the Gandhi dynasty. India’s many other parties are all parochial, tied to the interests of one state, caste or other group, and so with little hope of playing a national role. Handed the golden opportunity of Mr Modi’s demonetisation fumble, the opposition has failed to mount a united charge.Other institutions that might check Mr Modi’s ambitions, such as the press and the judiciary, are also not as vigilant as in other democracies. Some parts of the media are owned by Mr Modi’s friends and supporters; others by business groups with interests that are vulnerable to retribution. Journalists, whistle-blowers and activists are keenly aware that critics of the government often pay a price, whether in the form of “trolling” on the internet, harassment by officials or spurious lawsuits. India’s courts, meanwhile, do often clash with the government but are cautious in picking fights: on January 11th India’s supreme court airily dismissed a public-interest lawsuit demanding investigation of documents that appear to implicate dozens of officials in bribe-taking.Even Mr Modi’s foes believe his administration is less corrupt than previous ones have been. However, as the banknote debacle revealed, it is not necessarily much more competent. The most iron-clad rule of Indian politics is anti-incumbency. Even the investors vying for Mr Modi’s attention may take note that, for all the talk of openness, India still has some of the world’s most tangled rules, highest corporate tax rates and most capricious ernment may set threshold for probe into deposits to prevent harassment of taxpayersAuthor: Sidhartha & Rajeev Deshpande, TNNPublication: The Times of IndiaDate: January 16, 2017URL: a bid to curb possible harassment of taxpayers during investigations into bank deposits post-demonetisation, the government is looking to lay down norms for tax officers, including a threshold below which scrutiny will not ordinarily be initiated.Even as estimates of cash deposits made by individuals are still being worked out, the tax department is analysing a mountain of data related to demonetised currency notes that were deposited in bank accounts between November 10 and December 30.Initially, the government said cash deposits of Rs 2-2.5 lakh made by housewives and small businessmen and traders would not be questioned. But amid largescale deposits by "money mules"+ , it began analysing data for deposits of Rs 30,000 and above in case of Jan Dhan and dormant bank accounts that sprang to life November 10 onwards.As elections to five state assemblies near, with both BJP and the opposition making demonetisation a major issue, the government seems sensitive to the possibility of bad publicity resulting from honest deposits being questioned. It is a narrative that the party is keen to avoid.Tax authorities suspect that cash deposits amounting to as much as Rs 4 lakh crore may be unaccounted wealth that found its way into the banking system. Though data is being analysed and the focus is on high value, the government is wary of being accused of harassing the common man."Arbitrary action will anger public opinion that has largely supported demonetisation. We don't want an inspector to start proceedings," said a source, adding that investigations, particularly those below a specified limit, should be cleared by senior officers.A section within the government fears that the hunt for black money may result in giving undue discretion to tax officials, which should be avoided as it would expose NDA to the charge of "tax terrorism", a term PM Narendra Modi used for the UPA government during his 2014 campaign.In an interview, Niti Aayog vice-chairman Arvind Panagariya had told TOI that there should be clear-cut rules to reduce discretion by tax officers. "First, we could adopt a rule that barring exceptional circumstances, bank deposits made between November 8 and December 30 below a specified threshold will not be subject to scrutiny," he had said.Panagariya also said the government could adopt a rule that a certain proportion of taxable income during specified number of previous years would be treated as housewife's savings and deposits resulting from them would not be scrutinised. "In other cases, we should run audits using data analytics instead of letting tax officers take a call. This would eliminate the interface between the taxpayer and tax officer and minimise scope for extracting bribes," he had suggested.RBI enhances cash withdrawal limit from ATMs to Rs 10,000 per day per cardAuthor: TNNPublication: The Times of IndiaDate: January 16, 2017URL: a welcome move, the Reserve Bank of India (RBI) on Monday decided to increase the cash withdrawal limit from ATMs to Rs 10,000 per day from the present Rs 4,500 with immediate effect.However, there is no change in the weekly withdrawal limits, which stays at Rs 24,000."The limit on withdrawals from ATMs has been enhanced from the current limit of Rs 4,500 to Rs 10,000 per day per card. It will be operative within the existing overall weekly limit," the central bank said in a statement.The limit on withdrawal from current accounts has been enhanced from the current limit of Rs 50,000 per week to Rs 1,00,000 per week. This also extends to overdraft and cash credit accounts.On December 28, the RBI had revised the cash withdrawal limit from Rs 2,500 to Rs 4,500, which came into force on January 1, 2017. The move had been hailed by cash-strapped people all over the country.The limit on withdrawal from current accounts has been enhanced from the current limit of Rs 50,000 per week to Rs 1,00,000 per week. This also extends to overdraft and cash credit accounts.On December 28, the RBI had revised the cash withdrawal limit from Rs 2,500 to Rs 4,500, which came into force on January 1, 2017. The move had been hailed by cash-strapped people all over the country.Demonetisation: Why PM must pay attention to YV Reddy’s warning on RBIAuthor: Rajesh Mahapatra Publication: The Hindustan timesDate: January 15, 2017URL: Venugopal Reddy is a man of few words, but his words carry a lot of weight — especially in the world of finance. Earlier this week, the soft-spoken former governor of Reserve Bank of India chose strong words to describe the state of play at the central bank. The “institutional identity of the RBI has been damaged” and it is facing “reputational risk”, Reddy told a television news channel, referring to demonetisation — the way the decision was made and handled.It would be a mistake to club Reddy’s comments with the barrage of criticism the government has faced since it announced a ban on Rs 500 and Rs 1,000 currency notes on November 8. There are few central bankers in the country who match Reddy’s intuitive understanding of the financial markets and his long years of experience in economic administration. In 2003, when he was offered the top job at the RBI, he refused to sign up for the usual three-year term. He came on board only after Prime Minister Atal Bihari Vajpayee’s government agreed to a five-year term. Vajpayee knew the worth of the man who would go on to shape India’s monetary policy in the peak years of its globalisation.Members of the ruling dispensation cannot brush aside Reddy’s criticism under the pretext that he was a policy maker who benefited from the patronage of the Congress. A major part of his 11-year stint at the RBI — first as deputy governor and then as governor — was under the NDA government.Also, Reddy doesn’t have a reputation for speaking out of turn. If he has chosen not to sit it out, there is reason to believe the credibility of the RBI has been seriously undermined.The note-ban decision is perhaps the biggest disruption India’s financial system has seen since Independence. Yet, it emerges now that the decision was taken by the government and not the RBI, although decisions such as demonetisation fall in the domain of the latter, which is a constitutional entity. Worse, according to the RBI’s own admission made before a parliamentary committee, the central bank was given just a day’s notice to execute the decision.These revelations, which surfaced through news reports over the past week, may have prompted Reddy to come out so strongly and press for a debate on the role of “the central bank and how it should be run”. To appreciate his concern over “reputational risk”, it is important to understand the historical context in which central banks evolved from holding bullion as physical collateral against issuing currency notes to issuing the same bills based on the governor’s promise that its value would be honoured. Anything that affects the credibility of the central bank, therefore, affects the financial stability and security of a country.That said, this is not the first time that the government has consciously or unconsciously sought to undermine the autonomy of the RBI. There have been many instances in the past when the government of the day has nudged the RBI and its governor to make a decision not to their liking. But there has rarely been a precedent in which a major decision has been made without consultations. Both sides have always found a way to agree to disagree. That healthy tradition appears to have been disregarded in the case of demonetisation. The RBI’s institutional identity has been compromised and the consequences could be grave for a central bank that counts as among the world’s best and most respected — a reputation built by its illustrious governors.- The author is Chief Content Officer, Hindustan TimesPoor, Illiterate Women Will Be the Worst Casualty of DemonetisationAuthor: Sakuntala NarasimhanPublication: The WireDate: January 16, 2017URL: , patriarchy and a lack of familiarity with technology make poor women highly vulnerable in a cashless economy.As soon as Jaya, her daughter Manji and daughter-in-law Saroj finish their daily cleaning work (Jaya works for me, the other two for the showrooms on the ground floor) I call them in and tell them, “You need to know about cashless transactions, this is what Prime Minister [Narendra] Modi plans.” Jaya and her daughter are illiterate, Saroj has had three years of schooling, and is, for all purposes, illiterate too.I see their faces brighten. “That’s nice, amma,” Jaya enthuses. “Money has been tight for us, cashless would be just what we need.” As they sit around me, faces suffused with excitement, I begin to explain. Cashless is not what they think it means. “I thought Modi has declared everything will be free for the poor, no cash needed,” Jaya says, disappointment writ large on her face.At 52, she is already a great grandmother; Manji’s 18-year-old daughter Asha has just given birth. Manji left her abusive husband, an autorickshaw driver, within a year of being married at age 16. Jaya’s alcoholic husband passed away 25 years ago, and Saroj’s husband who worked in a grocery store, committed suicide at age 28 after his employer accused him (wrongly, it turned out) of stealing a mobile and had him thrashed by the police.The three women live in a small room in a slum. Without any man in the family, Jaya decided to get a teen-aged Asha married off “for safety” last year. Now Asha has a baby. Jaya’s is not a uniquely ill-fated family. My interactions show that most families in the same economic strata have similar distress stories, with varied details.They have post office savings accounts but are dependent on others to make sense of the entries and fill up deposit chalans. Jaya’s family is one among millions of illiterate domestic workers who eke out a bare living through cleaning and sweeping. The 2004-5 National Sample Survey figures say there are 4.2 million domestic workers, but that is an underestimate; employees keep no records, the workers sign no muster and they are a ‘floating’ population, moving from one insecure part-time job to another.E-payments and e-banking but no literacyWhat a cruel joke on the illiterate, subsistence workers who cannot even add or multiply, and don’t understand about passwords, PINs, and the need for secrecy and vigilance. India has the world’s largest population of illiterate people. Among them, women are particularly vulnerable when socio-cultural factors put them at the mercy of the male members of their families, especially over money matters. How can we talk of e-payments without addressing the lacunae in literacy and awareness levels? Even literate citizens are not immune to banking frauds and accounts being hacked. We don’t have adequate laws to protect us from such technology-based malpractices.How then do I convince Jaya of the benefits of “going cashless” when even seven decades after independence we have not even been able to ensure adequate literacy?Where is the guarantee that the person she depends on to help her access her accounts online will not cheat her? When entire families share a room in a slum, how does one explain the importance of secrecy in safeguarding PIN numbers? Jaya has a mobile but not a smartphone she can use for such activities – India has over a billion phones, but most are basic mobiles used only for calls. But more crucially, not all smartphone owners have the expertise or awareness to handle e-payments and protect their accounts. Do these ‘human’ dimensions of poverty and deprivation appear on the radars of politicians, administrators and economists who declare that a little distress in the short term is worth it for the sake of long term gains to be made in fighting corruption?“How can I not reveal my PIN and password to my ganda (husband)?,” Sushila, a maid servant in south Bengaluru, asks. “A good wife cannot have secrets from her ganda, he is her devaru ( God, protector)”.Women face greater vulnerability as compared to men. Sushila confides that she had secretly stashed away some cash from her own earnings “to make some ornaments for my daughter-in-law when my son married – it is a matter of izzat, even among the poor” and couldn’t get the notes exchanged for fear that her husband would appropriate the money for his own needs. “He has a right, no amma? I am his, so all I have is also his to claim,” she said.She is devastated that those notes are now worthless. Her crime? She is poor and illiterate because the government did not fulfill the constitutional promise it made nearly 70 years ago regarding education to all. To date, illiteracy is higher among Indian women.Mason Chinna ordered his wife to stand in line at the bank to change old notes as he did not want to take time off work. His earnings from construction work are higher than what she earns from coir-rope making at a local women’s self-help group. When she asked him if she could keep some of the money for her own tea expenses since she had lost the day’s earnings, he thrashed her.She hasn’t heard the word ‘patriarchy’, but that’s what rules her life, as it does the lives of millions of Indian women, rural and urban.Ramya is the widow of a cobbler. She too is illiterate. Her brother-in-law handles her post office account. She cannot argue with him, assert herself, or even keep her petty earnings from housework. What does “cashless” mean to her except more dependence?What about corruption?How does inconveniencing the poor curb corruption, Jaya asks, laughing wryly, after I spend two hours explaining the whole idea behind demonetisation. “Amma, I have been running for six months to get new ration cards that I have been told I need. The clerks make me run a hundred times, my friend says he needs to be bribed or I won’t get anywhere – isn’t that corruption, amma?” Saroj adds, “My friend next door says she was told her card will come on the internet; what is that amma?”What do I tell her?For a below poverty line (BPL) card, the rules decree that the applicant has to go to the “internet” to get one. Are the rule-makers so ignorant of the reality of BPL lives? Isn’t this akin to the French queen’s comment ‘Let them eat cake’ upon being told that her starving peasant subjects had no bread to eat.Mallika is a roadside banana seller in Bengaluru. She too is a deserted wife. Her 30-year-old widowed daughter sells flowers by the roadside. Recently Mallika was missing from her usual place. Her daughter told me she had to go to some office to sort out problems with her pension. For Mallika, missing a day’s sale means no food that night. When she has been drawing a pension for ten years, why make her run around now? Who helps her? Why doesn’t the official explain what the problem is?Even the basic things that this section are entitled to under the law do not reach them without bribes. What corruption is demonetisation eliminating? Will Mallika – who cannot even afford treatment for a swollen leg – have to get a point of sale machine in order to get paid by her customers when they buy bananas because India is going “cashless”? How does she pay for the bananas she buys at the wholesale market every morning? How many millions of roadside vendors are there who cannot operate “e-banking”? What about the additional service charges they will have to incur, even if they agree to use ATMs and debit cards?Sure she has a small bank account – which she hardly operates – but is that enough to ensure she is not exposed to fraud? There have been reports about the distress among other sections of the 94% of our labour force that is in the unorganised sector (carpet weavers, wood carvers of Sahranpur, farmers and garment workers) but what about the domestic workers, who are mostly women? As it is, these women have a tough time without male support. What about the wages they lose by absenting themselves from work while standing in queues to access their savings?It will be a long time before women of the lower strata acquire their own computers, smartphones and e-cards, and the necessary familiarity with technology to protect themselves from fraud. For that, they first need education. A long way to go till the utopia of “cashless”, and even that, as illiterate Jaya points out, does not root out corruption.After Demonetisation, IMF Cuts India’s Growth Forecast to 6.6%Author: The Wire StaffPublication: The WireDate: January 16, 2017URL: IMF on Monday cut India’s growth rate for the current fiscal year to 6.6% from its previous estimate of 7.6% due to the “temporary negative consumption shock” of demonetisation, days after the World Bank also decelerated India’s growth estimates.“In India, the growth forecast for the current (2016-17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative,” the IMF said in its latest World Economic Outlook (WEO) update released today.The IMF said that after a lacklustre outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies.The global growth for 2016 is now estimated at 3.1%, in line with the October 2016 forecast.Economic activity in both advanced economies and emerging market and developing economies (EMDEs) is forecast to accelerate in 2017-18, with global growth projected to be 3.4% and 3.6%, respectively, again unchanged from the October forecasts, it said.In 2017, IMF has projected a growth rate of 7.2 % as against its previous forecast of 7.6%.The Indian economy is likely to revive to go back to its previously estimated growth rate of 7.7% in 2018, according to the WEO update.The cut in India’s growth rates comes days after the World Bank decelerated India’s GDP growth for 2016-17 fiscal to 7% from its previous estimate of 7.6% citing the impact of demonetisation. But forecast issued on January 11 said that India would regain momentum in the following years with a growth of 7.6% and 7.8% due to a reform initiatives.Despite IMF’s downward revision of India’s growth rate and a slight upward revision of China’s growth projections, India continues to be the fastest growing countries among emerging economies.But in 2016, China with 6.7% has edged past India (6.6%) by 0.1 percentage point. The growth forecast for 2017 was revised up for China (to 6.5%, 0.3 percentage point above the October forecast) on expectations of continued policy support, the IMF said. India’s growth rate in 2017 as per the latest IMG projections is 7.2%.In 2018, China’s growth rate is projected to be 6% against India’s 7.7%.In China, the IMF said, continued reliance on policy stimulus measures, with rapid expansion of credit and slow progress in addressing corporate debt, especially in hardening the budget constraints of state-owned enterprises, raises the risk of a sharper slowdown or a disruptive adjustment.These risks can be exacerbated by capital outflow pressures, especially in a more unsettled external environment, the IMF said.IMF said global activity could accelerate more strongly if policy stimulus turns out to be larger than currently projected in the US or China.Notable negative risks to activity include a possible shift toward inward-looking policy platforms and protectionism, a sharper than expected tightening in global financial conditions that could interact with balance sheet weaknesses in parts of the euro area and in some emerging market economies, increased geopolitical tensions and a more severe slowdown in China, it said.Maurice Obstfeld, economic counsellor and IMF research department director, at a news conference here, said among emerging economies, China remains a major driver of world economic developments.“Our China growth upgrade for 2017 is a key factor underpinning the coming year’s expected faster global recovery. This change reflects an expectation of continuing policy support; but a sharp or disruptive slowdown in the future remains a risk given continuing rapid credit expansion, impaired corporate debts, and persistent government support for inefficient state-owned firms,” he said.In light of the US economy’s momentum coming into 2017 and the likely shift in policy mix, IMF has moderately raised its two-year projections for US growth.“At this early stage, however, the specifics of future fiscal legislation remain unclear, as do the degree of net increase in government spending and the resulting impacts on aggregate demand, potential output, the federal deficit and the dollar,” Obstfeld said.Projections of how badly demonetisation will hurt India’s economy are becoming more clear. The Centre for Monitoring Indian Economy (CMIE), a think-tank widely known for its robust data collection and analysis, has scaled its 2016-17 growth projection down 164 basis points, as compared to the IMF’s 100 basis points.More crucially, the head of CMIE, Mahesh Vyas, believes that “on average, growth during the coming five years up to 2020-21” will be scaled down by 187 basis points compared to the centre’s earlier forecast for the same period.Before the Modi government’s demonetisation move, CMIE had expected that India’s economy would accelerate its real GDP growth rate from 7.5% to over 8% per annum. “We now expect this growth trajectory to shift down to about 6% per annum for the next five years. The economy is unlikely to achieve a growth of 7 per cent any time during the coming five years,” Vyas writes.What is CMIE basing this on? Their assumption rests on a “vicious cycle of low demand for labour and low consumption expenditure.” This cycle is unlikely to be shattered soon, and indeed will only persist once three conditions are fulfilled.The first, Vyas notes, is full restoration of liquidity. The second is full restoration of the economy’s confidence in that liquidity. And the third condition is that consumers are “yanked out of their equilibrium at lower levels of consumption of non-essential commodities”.CMIE’s analysis also points out that the new Rs 2,000 notes fail to provide the necessary liquidity required and that rumours that the notes may be demonetised in six-to-eight months still largely persist.“The government or RBI have not taken steps to scotch rumours of demonetisation of the two thousand rupee currency notes. As a result, the effective liquidity in the markets is much lower than is measured by the issuance of new currency notes,” Vyas writes. damage only partially.In big boost to Modi govt, UN report says, India’s economy projected to grow by 7.7%Author: PTIPublication: The Financial ExpressDate: January 17, 2017URL: is projected to grow by 7.7 per cent in fiscal 2017, remaining the fastest growing large developing economy, as it benefits from strong private consumption and gradual introduction of significant domestic reforms, a United Nations report said.India is projected to grow by 7.7 per cent in fiscal 2017, remaining the fastest growing large developing economy, as it benefits from strong private consumption and gradual introduction of significant domestic reforms, a United Nations report said.The United Nations World Economic Situation and Prospects (WESP) 2017 report launched today said India’s economy is projected to grow by 7.7 per cent in fiscal year 2017 and 7.6 per cent in 2018, benefiting from strong private consumption.It however cautioned that low capacity utilisation and stressed balance sheets of banks and businesses will prevent a strong investment revival in the short term.China’s growth on the other hand is projected to remain stable at 6.5 per cent for fiscal years 2017 and 2018, supported by favourable domestic demand and accommodative fiscal measures, including off-budget fiscal support through policy banks and public-private partnerships.However the implications of China’s ongoing economic rebalancing will inevitably be felt by the region in the medium and long-run through trade (including commodity prices) and financial channels, albeit to a varied extent across countries, the report added.The report, UN’s flagship publication on expected trends in the global economy, comes just a day after the International Monetary Fund cut India’s growth rate for the current fiscal year to 6.6 per cent from its previous estimate of 7.6 per cent due to the “temporary negative consumption shock” of demonetisation.The World Bank too decelerated India’s GDP growth for 2016-17 fiscal to 7 per cent from its previous estimate of 7.6 per cent citing the impact of demonetisation. The UN report does not make any mention of the withdrawal of the high-denomination 500 and 1000 currency notes by the Indian government nor its impact on the country’s economic growth.The report said India has positioned itself as the most dynamic emerging economy among the largest countries and is expected to remain the fastest growing on the back of robust private consumption and significant domestic reforms gradually being implemented by the government. It estimated that in the 2016 fiscal, India grew by 7.6 per cent.In India, “investment demand is expected to slightly pick up, helped by monetary easing, government efforts towards infrastructure investments and public-private partnerships, and the implementation of domestic reforms such as the introduction of the Goods and Services Tax (GST) Bill,” the report said.It added that the GST reform constitutes a “major change” by establishing a new uniform tax rate.The reform should promote investment in the medium term through lower transaction and logistic costs and efficiency gains. Its effective implementation requires adequate capacity building of the tax administration.The report added that in India, in spite of a strong emphasis on rural areas and infrastructure investments on the expenditure side, fiscal policy has largely followed a cautious approach and the budget deficit is expected to further decline gradually.For 2016/17, the deficit is projected to reach 3.5 per cent of GDP and is on track to meet the medium-term target of 3.0 per cent of GDP.On inflation, the report forecast consumer price inflation for India at 5.7 in 2017, declining slightly to 5.4 in 2018.The report said the world economy expanded by just 2.2 per cent in 2016, the slowest rate of growth since the Great Recession of 2009. World gross product is projected to grow by 2.7 per cent in 2017 and 2.9 per cent in 2018, a slight downward revision from the forecasts made last May.Although a modest global recovery is projected for 2017-18, the world economy has not yet emerged from the period of slow growth, characterised by weak investment, dwindling trade and flagging productivity growth, the report added.Launching the report here, Assistant Secretary-General for Economic Development, United Nations Department of Economic and Social Affairs, Lenni Montiel underscored the “need to redouble the efforts to bring the global economy back on a stronger and more inclusive growth path and create an international economic environment that is conducive to sustainable development”.It added that global oil demand continued to grow in 2016 but the pace of growth was slower than in 2015 as the positive boost from low oil prices to consumption growth waned. “Oil demand was driven mainly by robust consumption in the large emerging economies, particularly China and India,” the report said adding oil demand is expected to continue strengthening in line with the projected improvement in global growth. Growth in oil demand will remain supported mainly by the United States and the large emerging economies, particularly China and India.Growth in developing economies slowed to a meagre 3.6 per cent in 2016, the slowest pace of expansion since the global financial crisis, mainly due to lower commodity prices, weak global trade and persistent uncertainties in the world economy. Going forward, average growth in developing economies is expected to pick up to 4.4 per cent in 2017 and 4.7 per cent in 2018 on the back of a moderate recovery in Africa, Latin America and the Caribbean and Western Asia.The report noted that fragilities in the banking sector and stressed balanced sheets of corporates remain important challenges for some economies. It cited the Indian government’s commitment to a USD 3.7 billion package to recapitalise state-owned banks, saying various regulations have been introduced in order to reduce banks’ financial exposures and to encourage private participation in the banking sector.“Although countries should try to avoid a sudden tightening of monetary and liquidity conditions in the outlook period, policy measures will critically depend on the evolution of external factors, such as oil prices,” it said.India Is No Longer the World’s Fastest-Growing Large Economy, IMF SaysAuthor: Raymond ZhongPublication: The Wall Street JournalDate: January 17, 2017URL: China took back in the crown in 2016 thanks ‘primarily’ to Modi’s cash cancellationWatch the ThroneThe International Monetary Fund estimates that India lost the mantle of fastest-growing large economy last year. Estimated output growth in 2016, percentage change from a year earlier. COUNTRYPERCENTAGEChina6.7India*6.6Asean-54.8Mexico2.2U.K. 2Eurozone1.7U.S.1.6Japan0.9South Africa0.3Russia-0.6Nigeria-1.5Brazil-3.5Canceling nearly 90% of cash in circulation cost India the mantle of world’s fastest-growing large economy in 2016, the International Monetary Fund said, though it categorized the slowdown as temporary.India’s growth slowed to 6.6% last year from 7.6% in 2015, according to the fund’s latest World Economic Outlook, which estimates that China’s economy grew by 6.7% in 2016. The fund expects India’s expansion to bounce back to 7.2% this year and accelerate to 7.7% in 2018. China, meanwhile, is projected to continue decelerating, to 6.5% in 2017 and 6.0% the year after.The IMF said it trimmed its 2016 forecast for India by one percentage point “primarily” because consumers tightened their purse-strings after November’s currency invalidation.The fund’s sister institution, the World Bank, doesn’t think that was enough for India to lose the global growth crown, however. In the latest update to its global forecasts, released last week, the bank lowered its estimate of India’s 2016 growth to 7.0%—down from its earlier prediction of 7.6% but still ahead of China’s 6.7% growth.None of these comparisons is exact. The IMF and World Bank both follow India’s practice of presenting output growth for the fiscal year, which ends March 31. China’s numbers—as with those of nearly every other large economy—are for the calendar year.Still, the downgrades reflect deep uncertainty about India’s economic health since Nov. 8, when Prime Minister Narendra Modi stunned the country—and the world—by declaring all of the country’s high-denomination bank notes null and void for transactions. The move, aimed at flushing out stacks of cash amassed by businessmen and crooked bureaucrats, has driven families to cut back on spending, companies to let go of workers and investors to put projects on hold.Earlier this month, India’s Central Statistics Office said it expected growth for the financial year to come in at 7.1%. But that projection was calculated using economic data only through last October, before the currency move was announced. More-recent data weren’t—and in some cases, still aren’t—available to statisticians.Good News For PM Modi, Experts See Gap With China Closing: Foreign MediaAuthor: Jeanette RodriguesPublication: Date: January 18, 2017URL: India doesn't figure among the most sought after global destinations for expatriates, foreigners in India are more confident about their prospects than in many other Asian countries, an HSBC report shows.Prime Minister Narendra Modi has something to cheer about even as economists slash India's growth forecasts. A clutch of studies and surveys published around the World Economic Forum show that perceptions about India's outlook are improving, closing the gap with China. The results will be heartening for PM Modi, who's under fire at home for his shock currency withdrawal that's left analysts scrambling to calculate the impact on the $2 trillion economy. Forecasts and perceptions will play a role as PM Modi nears several state elections scheduled to start next month. His administration is also due to present its annual budget on Feb. 1. ECONOMIC OUTLOOK The cash clampdown will hurt India in the near term, though growth will rebound, according to the International Monetary Fund. It cut its forecast for India's gross domestic product to 6.6 percent from 7.6 percent. "Even with our downgrade, India's growth rate remains substantial," said Maury Obstfeld, the IMF's research director. "We do agree with the general goal that motivated this, which is reducing the extent of illicit transactions in the economy."BUSINESS PROSPECTS While global chief executives are less interested in India than they were in 2011 -- "perhaps because structural reforms have been slow to come" -- local business leaders are more optimistic about prospects in the South Asian nation. PWC surveyed almost 1,400 CEOs across 79 countries.BULGING MARKET Much of this confidence can be attributed to consumption, crimped by PM Modi's cash ban but still the highest in Asia. Consumer sentiments, which slipped 2.4 points in June-December from the first half of 2016, stays in "extremely optimistic" territory in Mastercard's survey. NIMBLE POLICIES Credit must also be given to policy makers, whose responses to political and economic risk are seen as most likely to help business prospects. About 20 percent of respondents in the Economist's survey felt their firm's expectations were "overly optimistic" for China. The same proportion believed that corporate expectations were too low for India. EFFECTIVE INSTITUTIONS That sentiment is also echoed among citizens. Edelman assessed institutional trust by surveying more than 33,000 people in 28 countries between Oct. 12 and Nov. 16. 'Informed public' refers to college-educated people aged 25-64, who're in the top 25 percent of household income in their countries and who report significant media consumption. ATTRACTING FOREIGNERS While India doesn't figure among the most sought after global destinations for expatriates, foreigners in India are more confident about their prospects than in many other Asian countries, an HSBC report shows. A majority of expats in India say that living here has accelerated their progress toward long-term savings and investments.LINGERING WORRY The biggest concern -- for PM Modi and his citizens -- will be the onward march of the robots. Over a quarter of employers in India say that automation will kill jobs over the next two years, according to a report from ManpowerGroup, which surveyed 18,000 employers in 43 countries. It urged companies to invest in their employees' skills so people and organizations can stay relevant.? 2017 Bloomberg L.PIndia's Economy Projected To Grow By 7.7% In FY 2017, Says UN ReportAuthor: BW Online BureauPublication: Businessworld.inDate: January 17, 2017URL: is projected to grow by 7.7 per cent in fiscal 2017, remaining the fastest growing large developing economy, as it benefits from strong private consumption and gradual introduction of significant domestic reforms, a United Nations report said.The United Nations World Economic Situation and Prospects (WESP) 2017 report launched today said India's economy is projected to grow by 7.7 per cent in the financial year 2017 and 7.6 per cent in 2018, benefiting from strong private consumption.It, however, cautioned that low capacity utilisation and stressed balance sheets of banks and businesses will prevent a strong investment revival in the short term.China's growth, on the other hand, is projected to remain stable at 6.5 per cent for fiscal years 2017 and 2018, supported by favourable domestic demand and accommodative fiscal measures, including off-budget fiscal support through policy banks and public-private partnerships.However the implications of China's ongoing economic rebalancing will inevitably be felt by the region in the medium and long-run through trade (including commodity prices) and financial channels, albeit to a varied extent across countries, the report added.The report, UN's flagship publication on expected trends in the global economy, comes just a day after the International Monetary Fund cut India's growth rate for the current fiscal year to 6.6 per cent from its previous estimate of 7.6 per cent due to the "temporary negative consumption shock" of demonetisation.The World Bank too decelerated India's GDP growth for 2016-17 fiscal to 7 per cent from its previous estimate of 7.6 per cent citing the impact of demonetisation. The UN report does not make any mention of the withdrawal of the high-denomination 500 and 1000 currency notes by the Indian government nor its impact on the country's economic growth.The report said India has positioned itself as the most dynamic emerging economy among the largest countries and is expected to remain the fastest growing on the back of robust private consumption and significant domestic reforms gradually being implemented by the government. It estimated that in the 2016 fiscal, India grew by 7.6 per cent.In India, "investment demand is expected to slightly pick up, helped by monetary easing, government efforts towards infrastructure investments and public-private partnerships, and the implementation of domestic reforms such as the introduction of the Goods and Services Tax (GST) Bill," the report said.It added that the GST reform constitutes a "major change" by establishing a new uniform tax rate.The reform should promote investment in the medium term through lower transaction and logistic costs and efficiency gains. Its effective implementation requires adequate capacity building of the tax administration.The report added that in India, in spite of a strong emphasis on rural areas and infrastructure investments on the expenditure side, fiscal policy has largely followed a cautious approach and the budget deficit is expected to further decline gradually.(PTI)China's GDP growth falls to 26-year lowAuthor: Saibal Dasgupta, TNNPublication: The Times of IndiaDate: January 20, 2017URL: revealed that its economy has performed the worst in 26 years as it grew at the rate of 6.7 per cent of gross domestic product in 2016. The announcement comes hours before Donald Trump, who had vowed to take adverse measures against Chinese business, takes charge as the 45th US president tonight.The country's GDP may be much lesser if the suspicion of fudged data is taken into account. One of Chinese provinces, Liaoning, recently admitted that it had be faking growth data between 2011 and 2014.The competition with India, which raced ahead of China in GDP growth last year, will become interesting because New Delhi is expected to release last figures and the impact of demonetisation in the coming weeks.The National Bureau of Statistics( NBS) defended China's gross domestic product+ which expanded 6.7 percent year-on-year in 2016 to reach 74.41 trillion yuan ($10.84 trillion), as "truthful and reliable".Ning Jizhe, the NBS chief, added that "statistics departments on various levels will also be strengthening the law enforcement, supervision, and checks on figures" and "resolutely guarding and preventing" the fabricating of data."Generally speaking, China's economy was within a proper range with improved quality and efficiency," said Ning Jizhe in Beijing."However, we should also be aware that the domestic and external conditions are still complicated and the foundation for a stabilized but progressing economy should be further consolidated," he said.Fixed-asset investment grew by 8.1 per cent year-on-year, 0.1 percentage point slower than that in the first three quarters. The total real estate development in 2016 rose by 6.9 per cent, 5.9 percentage points faster than last year.Notebandi: Nobel Laureate Economist Asks US To Follow SuitAuthor: Swarajya StaffPublication: Date: January 18, 2017URL: Nobel Prize-winning economist has urged the US to get rid of cash and change over to a digital economy.On 8 November, Prime Minister Narendra Modi had announced demonetisation of 86 per cent of India’s currency in one go. Columbia University professor, Joseph Stiglitz, recommended to the US to follow suit to rein in tax evasion and corruption through demonetisation.Eliminating currency in the long run has “benefits that outweigh the cost”, he said at the World Economic Forum's Annual Meeting in Davos.“Quantifying the magnitude of the problem, Stiglitz, who was speaking at the session, Ending Corruption, said: “You can put it into the context of one of the big issues being discussed in Davos this year – the backlash against globalisation, the darker side of globalisation ... The lack of transparency in global financial markets, the secrecy havens that the Panama Papers exposed, just reinforced what we already knew ... There is a global framework for both corruption and tax evasion and tax avoidance.“ The fact that you can hide ill-gotten gains so easily in these secrecy havens really provides incentives for people to engage in this activity as they can get the economic returns and then enjoy the benefits of those returns. If there were not these secrecy havens then the benefits from engaging in these kinds of illicit activity would be much diminished.Saying that US is one of the countries that has done little to fight corruption, he suggested the remedy would be to go cashless and embrace digital currencies.“ I believe very strongly that countries like the United States could and should move to a digital currency so that you would have the ability to trace this kind of corruption. There are important issues of privacy, cyber-security, but it would certainly have big advantages.Stiglitz’s ideas for a “less-cash” society have been echoed by Harvard's Kenneth Rogoff, who argued for two decades that a society awash with cash contributes to the growth of the underground economy. Rogoff believes large-denomination bank notes, rarely used by ordinary people and businesses, should be phased out.“Cash facilitates crime because it is anonymous, and big bills are especially problematic because they are so easy to carry and conceal,” he says.Talks with government on demonetisation began early last year: RBI governor Urjit PatelAuthor: PTIPublication: The Times of India Date: January 18, 2017URL: Bank of India Governor Urjit Patel is learnt to have told the parliamentary panel on demonetisation that discussions between the central bank and the government on the process began early last year.Congress members of the committee asked questions like whose decision was it to withdraw high currency notes+ and also about autonomy of the RBI, sources said.The BJP members of the panel, headed by Congress leader Veerappa Moily, however, chose not to raise much questions during the meeting, they added.The questions put up by the panel ranged from the total amount of money that came back during the demonetisation period to the total amount of new bills of Rs 500 and Rs 2,000 that were printed and sent to the banks.It is also learnt that Manmohan Singh, one of the members who had described demonetisation as monumental management failure, too raised questions on the issue.Sources said Patel told the Parliament standing committee on finance over the demonetisation issue that discussions between the central bank and the government were taking place since early last year.The finance ministry has sought time from the panel to provide answers to the queries raised during the meeting in which the finance secretary made a presentation before the committee, the sources said, adding that the members seemed not too satisfied with the replies.The crucial meeting was held to discuss the "demonetisation of Indian currency notes of Rs 500 and Rs 1,000 and the impact thereof".Patel is also scheduled to appear before the Public Accounts Committee of Parliament on the same issue on January 20.Don't Answer That Question, Dr Manmohan Singh Said To RBI GovernorAuthor: Rahul ShrivastavaPublication: Date: January 18, 2017URL: RBI Governor Urjit Patel testified for a parliamentary committee today on how the sudden notes ban was planned and implemented, former Prime Minister Dr Mamnohan Singh quickly intervened to help him on a tricky matter.Dr Singh, who served as the top boss of the central bank before his terms as Finance and Prime Minister, advised Mr Patel not to reply to questions which could create problems for the central bank, whose autonomy, according to critics, has been depleted by its role in the demonetization drive.Sources on the Standing Committee of Finance, which had summoned Mr Patel today, said that in particular, Dr Singh jettisoned a question raised by Digvijaya Singh, an MP from his party, the Congress, about whether "chaos" would break out if the existing restrictions on cash withdrawals are removed. "You should not reply to that query," Dr Singh counselled.Yesterday, the RBI announced that the daily limit for pulling out cash from ATMs has been raised from Rs. 4,500 per day to Rs. 10,000. However, no more than Rs. 24,000 per week can be withdrawn per savings account.On November 8, Prime Minister Narendra Modi announced that 500- and 1,000-rupee notes would be illegal within a few hours, a move aimed at unearthing black money and fighting tax evasion and corruption. The sudden announcement created a huge cash shortage with 86% of the notes in circulation suddenly declared abolished. Mr Patel today refused to provide any figure for how many of the banned notes had been deposited into the banking system and he did not provide clarity on when the cash situation would become normal.In November, Dr Singh tore into PM Modi in a speech in parliament, calling his move an "organized loot and legalized plunder" of the country. He also said demonetization will cost the GDP two percentage points, describing that as "an underestimate and not an overestimate."Demonetisation: Do Panipat and Waterloo have any lessons for Modi?Author: Manimugdha S SharmaPublication: The Times of India Date: January 18, 2017URL: since Prime Minister Narendra Modi announced the grand demonetisation exercise, his critics as well as news outlets have alluded to history. Right from the Opposition comparing the PM to the French queen Marie Antoinette (of the ‘let them eat cakes’ fame) to news outlets detailing past demonetisation exercises in different countries, we have heard a lot about history in the last couple of months. But there’s one thing in history that most critics of Modi seem to be referring to a lot more—Waterloo. Could demonetisation be BJP and Modi’s Waterloo moment? The nation seems to be asking.But while we are obsessed about Waterloo and its lessons, are we ignoring our own Waterloo equivalent—Panipat? Does Panipat have any lessons for Narendra Modi and the BJP? Do both Panipat and Waterloo have lessons for our times?Panipat was not a planned battle, but it was the result of a big push by the Marathas to evict Ahmed Shah Abdali from north India. A decisive campaign, at least going by the objective.A painting depicting the Battle of Waterloo.Waterloo was the result of Napoleon’s plan for a pre-emptive strike on the Seventh Coalition before they could gather enough forces to effectively counter him.The demonetisation exercise was planned like a black op with the philosophy of “the left hand not knowing what the right is up to”. Until now, nobody knows who all were in the loop and who advised the Prime Minister to go ahead with it. And when it was announced finally, it was advertised as a great “surgical strike” on black money—almost like a final solution to the problems created by the shadow economy.But how was it planned, really? The banks didn’t have replacement currency. The ATMs were not recalibrated to accept the new notes. And the government wasn’t prepared for any eventuality. Just like the Marathas were poorly equipped, supplied and even dressed to fight the north Indian winter at Panipat.Demonetisation soon metamorphosed into a demon in a Kafkaesque way. In panic, the government brought out and withdrew multiple notifications, reducing the whole exercise to a dumb joke. In battlefield terms, it was like moving multiple units from one position to another without knowing from which way the enemy was coming. It was just like the Allies moving deeper into Belgium in 1940 to stop the Germans when the Germans were coming through the Ardennes.Prime Minister Narendra Modi declared war without knowing where the enemy (read black money) was and what he was like. He, however, was quick to declare his victory on graft. At Waterloo, Napoleon told his generals that the “general of the sepoys” (the Duke of Wellington) was a “bad general”, and that beating the English was “nothing more than eating breakfast”.One can never say how demonetisation would affect BJP and Modi electorally. But both the battles of Waterloo and Panipat have a fundamental lesson for our policy-makers—what looks good in theory may not be as good in practice.With over 1,00,000 troops, Napoleon had an impressive army of veterans as the Waterloo campaign began. The Seventh Coalition had more troops but these were not as battle hardened as the French. For instance, the Duke of Wellington only had a few thousand veterans of the Peninsular War available to take on Napoleon—a significant majority of his former troops was pulled out to fight the Americans in the War of 1812. Wellington had complained about it to the government as well.Napoleon started his Waterloo campaign on a positive note. He managed to engage both the Prussians and the other army under Wellington separately. He trounced the Prussians under Blucher at Ligny while his trusted deputy, Marshal Ney, fought Wellington at Quatre Bras. Ney’s action, however, was indecisive—he was, in fact, repelled and pushed back to his starting point. But Wellington was forced to retreat when he got the news of Blucher’s reverses at Ligny. If anyone had applied the proverb, ‘morning shows the day’, the outcome of this campaign would have been a foregone conclusion.As Wellington retreated towards Brussels, Napoleon sent a large detachment under Marshal Grouchy to keep Blucher cut off from Wellington while he himself went in pursuit of the “English aristocrat”. Unknown to him, though, both armies had withdrawn parallel to each other, never too far, really, to come together on a juncture.Over half a century earlier, two armies, not bigger in size than the belligerents of Waterloo, had been playing a cat-and-mouse game on both banks of the Yamuna near Delhi. One was led by Afghan king Ahmed Shah Abdali, a veteran of many battles, many victories and defeats. The other was led by Sadashivrao Bhau, a brave but somewhat impetuous cousin of the Peshwa of Poona.Both these armies weren’t exactly modern in the European sense, but the Maratha commander was certainly trying to fight in the European fashion. He had a big park of artillery—about 200 guns—that was, at least on paper, a war-winning arm when compared to the 80-odd guns of the Afghans. Only recently, Bhau had worsted the Nizam at Udgir and was raring to repeat the feat against Abdali. But he hadn’t factored in the fact that the Afghans didn’t fight like the Mughals, the Marathas did. Two Maratha commanders had earlier experienced first-hand the difference when Malharrao Holkar was worsted in a skirmish and Dattaji Scindia was felled at Burari Ghat.But Bhau was different from both. Though heavily outnumbered in infantry, Bhau had 10 battalions of French-trained, drilled Telangi infantry armed with flintlock fusils. Coupled with his field artillery, the Gardi infantry under Ibrahim Khan Gardi was a potential match-winner. And Bhau had every reason to believe so. After all, Ibrahim Khan had learnt his trade from the legendary de Bussy.This confidence bore Bhau good results. The Marathas smoothly captured Delhi and the Red Fort. Later, they successfully stormed Kunjpura, an Afghan stronghold, even as the main Afghan army watched helplessly on the other side of the flooded Yamuna. Both actions went decidedly in favour of the Marathas due to Ibrahim Khan’s artillery.But then Bhau did something that exposed his lack of tactical thinking. Ignoring advice and throwing caution to the wind, he marched on to Kurukshetra with his entire camp for pilgrimage. Abdali was stranded on the other side and the river was flooded. Bhau was complacent, nay cocksure that Abdali would stay put on the other side. But Murphy’s law kicked in and Abdali crossed the Yamuna with his entire camp. The road to Delhi for the Marathas was cut off.Elsewhere in Belgium, after withdrawing from Quatre Bras, Wellington chose a ridge near the village of Waterloo to give battle to Napoleon. In fact, Wellington had pre-selected it as a possible place to fight if he had to fight Napoleon near Brussels. When the French came, the Coalition had a terrain advantage.As it turned out later, the so-called lack of experience among Wellington’s ranks was more than compensated by the reverse slope advantage and the boggy ground in front caused by incessant rain of 24 hours before the battle. But it would be wrong to say that the terrain shielded the Redcoats completely from Napoleon’s trump card: his artillery.The French emperor had 246 guns of various calibres in 34 batteries. His favourites were his 12-pounders with which he had demolished and even terrorised his opposition at Austerlitz, Smolensk, Borodino etc. Then there were 6-pounders and some 8-pounders as well. The Coalition, in comparison, fielded 157 pieces in 25 batteries, the biggest of which were the ‘Blomfield’ 9-pounders. The Allies also had a rocket artillery unit, but Wellington wasn’t very upbeat about its performance. In fact, he seemed to have doubted the efficacy of British rockets even though he himself had been terrorised by Tipu Sultan’s rockets at the Battle of Sultanpet Tope (or Sultan-pettah Tope in some British accounts) 16 years earlier.While the French artillery’s incendiary rounds as well as other roundshots had a negative impact initially due to the soggy ground, the guns were recalibrated to a devastating effect by the French gunners.At Panipat, even though the Marathas had immense firepower against their Afghan enemies, their guns were heavier and not easily manoeuvrable as compared to the Afghan park. But there was something else that proved to be more than a limiting factor for Maratha gunnery—fog.Even today, it’s usually quite cold and foggy in mid-January in most parts of North India. Back then, too, a fog screen wrapped the battlefield of Panipat where about two kilometres of open ground separated the two armies. When the Afghan artillery opened up, almost the entire first barrage fell short of the target; when the Maratha guns fired the first volley, the shots landed behind the Afghan lines.Gardi’s gunners recalibrated their guns and opened fire again. And this second barrage caused much havoc in the Afghan lines. But the Afghans shifted their lines and the Maratha artillery couldn’t alter the ranges of their guns that well, also because they couldn’t very well see their targets.On the left of the Maratha line was Gardi and his infantry battalions. Their job, along with that of the artillery, was to crush the Afghan right and force a passage through it to Delhi for the whole Maratha host to slip through. But while Gardi kept to the plan, others didn’t.Call it a quest for individual glory or battlefield indecision, some Maratha sirdars broke formation with their cavalry and sallied forth towards the Afghans. The moment that happened, the Maratha artillery had to stop firing. Of course, this is in the realm of ‘what ifs’, but had the Maratha artillery got a couple of more hours to soften up the Afghans (factoring in the hits and misses), the disaster that followed could have perhaps been avoided.Meanwhile, the light cavalry units that charged were cut down before they reached the Afghans. These cavalry units under the command of Vitthal Shivdev Vinchurkar and Damaji Gaekwad were supposed to protect the Gardi musketeers if the Afghans attacked. Yet when the infantry was attacked, the cavalry was no longer available to break up the charging adversary.And yet the drilled infantry persisted, discharging their muskets in European fashion and cutting through the enemy like “a knife slicing through butter” (an expression I love, which appears in Dr Uday S Kulkarni’s ‘Solstice At Panipat: 14 January 1761’).At Waterloo, Napoleon started the battle with an artillery barrage: his signature style of starting a battle. Napoleon planned to take a chateau called Hougoumont, which lay in front of Wellington’s right. The French spent the rest of the afternoon and evening, trying and failing to take it.Napoleon next focused on Wellington’s left and attacked a farmhouse in front of it called La Haye Sainte. This one was guarded by a small contingent of the King’s German troops, which had the experience of fighting in the Peninsular War. The Germans gave them a bloody nose. But eventually, the French did manage to take it.At Panipat, the Maratha right was held by the Scindias and Holkar. The Scindia contingent that had Junkoji, Tukoji and Mahadji Scindia, put up a desperate fight; Holkar, however, took no part in the battle. While many motives have been ascribed to Holkar for doing this, motives that either tarnish his reputation or burnish it, it’s possible that Holkar’s behaviour was in tune with the military doctrine prevalent in the Indian subcontinent then. Good commanders tried not to lose their men if they saw the situation was hopeless.The Rohillas on the Afghan left troubled the Maratha right by firing rockets and other light and heavy field pieces at them. And when Viswas Rao was killed, Holkar withdrew from the field with his contingent. The Afghans flanked the Maratha forces on the right and pushed them towards the centre.At the centre, Bhau let loose his elite Huzurat cavalry. This caused shock and awe among the Afghans so much that their centre almost gave way with many of their troops fleeing.At Waterloo, Marshal Ney, misjudging a realignment of the Allied line as withdrawal ordered a cavalry charge right on the centre of Wellington’s line. The Allies quickly formed infantry squares and warded off the attack, which came in several waves. The French cavalry advantage was frittered away.But an hour before the French had charged, it were the British Household and Union brigades that had charged at the French, causing great losses to the French but sustaining heavy losses themselves. The charge of the Scots Greys, in particular, has been romanticised in popular culture. The Scots Greys hadn’t seen action for 20 years until Waterloo.At Panipat, once the attack of the Huzurat slowed down, Abdali unleashed his qizilbash (Iranian) and bashgull heavy cavalry. To support them, about 3,000 camel-mounted swivel guns or zamburak were pressed in as well. In between this, Viswas Rao was killed. And the tide of the battle turned in favour of the Afghans.The news of Viswas Rao’s death spread panic among the Maratha rank and file. To make matters worse, Bhau placed his young nephew’s body on his elephant and himself mounted a charger. That led to a complete breakdown of morale.Bhau himself led sally after sally against the Afghans till he disappeared in the melee. A battlefield psychologist today would perhaps spot combat stress reaction in him. He was behaving like a battalion officer, not the commander of his army.At Waterloo, Marshal Ney was showing similar signs. He hit a cannon from the flat end of his sword blade, raved and ranted and abused, and tried to rouse his men to go on fighting even when it seemed hopeless. It didn’t occur to him even after the first charge totalling nearly 4,500 sabres was repulsed that the Allies hadn’t withdrawn, they had merely gone back a little to avoid getting hit by the French artillery. Yet it was again Marshal Ney who led the Imperial Guard when Napoleon decided to use his trump card as a final push. When the Guard retreated in the face of relentless fire, the entire French host ran pell mell. After Bhau was gone, the Maratha rout became complete.After both battles ended, the time to apportion blame came. The surviving Maratha sirdars blamed one another, with Holkar drawing the maximum flak. But the greater share of the blame went to Bhau himself. His arrogance, his inability to bend or compromise, his “ill-treatment” of other sirdars were all discussed for centuries after that. Caste equations also came into play as the Brahmins became increasingly despised in the Maratha country in colonial and modern times.As for the French, those disliking Napoleon blamed him; others blamed Marshal Ney and Marshal Grouchy.Cut to 2017 and India is still debating the merits and demerits of the demonetisation exercise. And all is no longer hunky dory for the Narendra Modi government. But let’s start the journey from November 8 when Prime Minister Modi, brimming with overconfidence, announced that there would be “minor inconvenience” for “one or two days” following the demonetisation exercise. In reality, the inconvenience continues to this day, over two months after the exercise began.Modi and his acolytes, both in the corridors of power and outside, defended the move citing various grounds, from the need to maintain secrecy to target the black money hoarders to teaching a lesson to counterfeiters and terrorists sponsored by Pakistan.As it turned out, all these theories proved counterproductive. The new Rs 2,000 notes were faked on the third day of the exercise itself! Neither did terrorism go down, going by the two terror attacks that happened on Army installations in the immediate aftermath of the drive.The “minor inconvenience” of “one or two days” turned out to be terrible chaos and a man-made disaster. This forced the PM to revise the timeline to 50 days (remember his tear-jerking performance in Goa?), and declare after that period was over that things would improve “bit by bit”.Mr Modi’s ministers and fans dismissed reports of major inconvenience from the ground, even when those came from BJP MPs and MLAs.But when it became clear that it was indeed a disaster, blame game started. First, it was the bureaucracy that was blamed, then the harried bankers, then Reserve Bank of India itself. All these groups, in turn, blamed it on the government, sometimes directly and sometimes through insinuations. This perhaps had more similarities with the Battle of Balaclava than either Panipat or Waterloo.At Balaclava, after the disastrous charge of the Light Brigade, Lord Cardigan had blamed Lord Lucan for giving him the order to charge; Lord Lucan had blamed Lord Raglan for sending him the order; and Lord Raglan had, at least initially, blamed Brigadier Richard Airey for writing the order. The rank and file, though, thought it was Captain Nolan who had misguided Lord Lucan.All this while, the Indian press, by and large, acted as the handmaiden of the government, trying very hard to exonerate Mr Modi. Some might argue that the “bakhars” and “kaifiyats” written on behalf of Holkar and Bhau after Panipat were similar attempts at exoneration.Overall, the Third Battle of Panipat was the climactic moment of a largely offensive and aggressive Maratha campaign against the Afghans. But the Marathas had to fight a defensive battle at the end. The Narendra Modi government, too, started the demonetisation exercise in an aggressive manner. Halfway down the road, though, it went more and more on the backfoot.It needs to be seen now if demonetisation proves to be Modi’s Waterloo or Panipat. Or if it creates an all new metaphor for disaster.(The anniversary of the Third Battle of Panipat was on January 14; the 202nd anniversary of the Battle of Waterloo falls on June 18; Narendra Modi has completed 2.5 years in power, jumping from one controversy into another.)RBI has pumped in 9.2 trillion rupees of new notes - sourceAuthor: Nigam PrustyPublication: Date: January 19, 2017URL: Reserve Bank of India has injected 9.2 trillion rupees ($135.21 billion) worth of new currency notes into the banking system to help replace the notes banned in November, a parliamentary panel member quoted central bank governor Urjit Patel as saying on Wednesday.Patel met the panel on finance to answer questions about the Nov. 8 abolition of 500- and 1,000-rupees notes, or 86 percent of the currency then in circulation, in a bid to unearth billions of dollars of unaccounted money.About 15.4 trillion rupees worth of the notes were removed from circulation.Patel, however, failed to provide any figure for how many of the banned notes had been deposited into the banking system and he did not provide clarity on when the cash situation would become normal, according to a second member of the panel who was also present at the appearance.Both the members spoke on the condition of anonymity as the panel's deliberations are confidential.The RBI governor also told the parliamentary panel that consultations between the government and the central bank on demonetisation had began in January 2016, the second panel member told Reuters.However, the government notified the RBI it wanted specifically to scrap 500- and 1,000-rupee notes on Nov. 7, a day before the RBI board formally approved the recommendation, the member said, citing a note sent to the panel by the central bank. Modi then announced the decision later on Nov. 8.The ban sparked a severe cash crunch that has disrupted economic activity, leading to the biggest monthly fall in automobile sales in 16 years in December. The slump coincided with a contraction in services industry and manufacturing activity.The International Monetary Fund (IMF) on Monday cut a full percentage point off India's GDP growth forecast, to 6.6 percent, in the fiscal year that ends in March 2017, citing the blow to the cash-reliant economy.The IMF also trimmed the growth outlook for the fiscal year 2017/18 to 7.2 percent from 7.6 percent estimated earlier.On Wednesday, two top finance ministry officials also appeared before the panel to present the government's position. The member said the panel would summon Patel again after the upcoming parliament session.($1 = 68.0429 Indian rupees)Modi has crippled India's growth story with demonetisationAuthor: Angshukanta Chakraborty, @angshukantaPublication: Dailyo.inDate: January 17, 2017URL: of the PM’s cashless drive, ours is no longer the world’s fastest growing economy. He owes us an explanation.Predictions and economic outlooks in 2016 moved from being cautiously cheery to downright gloomy roughly overnight. As it happened, on November 8, when Prime Minister Narendra Modi appeared on television at around 8pm and announced that Rs 500 and Rs 1,000 notes – the backbone of India’s cash transaction economy comprising 86.4 per cent of all the cash exchange – were no longer legal tender, economists, particularly those without a vested interest in greasing the palms that deploy them to fudge facts and mislead en masse, saw the darkness spreading.While many saw the demonetisation diktat as something that was slated to disrupt the cash-heavy but legitimate and entirely “white” informal/quasi-formal economy of the country, affecting wage labour, decelerating demand, breaking down the supply chain, causing wastage of productive time and labour while standing at serpentine ATM queues for more than two months, the stamp of legitimacy on their grievance came from a different, slightly unexpected quarter.On November 24, 2016, former prime minister and economist, the ever-laconic Dr Manmohan Singh, warned in no uncertain terms that PM Modi’s demonetisation drive was “legalised plunder and organised loot”. He predicted that the growth rate would be significantly hit, and might come down to six per cent from a whopping 7.3 per cent that had been the case in the third quarter ending September 2016.Well, it took a good number of economic think tanks, as well as the International Monetary Fund (IMF) to come out with exactly those dire predictions.While the Centre for Monitoring Indian Economy (CMIE) has said that India’s GDP growth rate for the current financial year is set to slow to six per cent, “on account of demonetisation”, it has, in fact, warned that there’s no hope of recovering from this slower pace for the next five years!The IMF in its 2016 World Economic Outlook has a marginally better rate in its predictions, at about 6.6 per cent for India, but it mentions that ours is no longer the fastest growing major economy, as China grew at 6.7 per cent during the last year.Given that we have had a steep fall from roughly 7.3-7.6 per cent growth rate for 10 months of 2016, to six per cent at the end of it, it would mean that since the onset of demonetisation, the growth rate had slowed to about 3.4 per cent, so that the mean growth rate comes down to six per cent from 7.3 per cent in 2016.And, since 58 per cent of India’s GDP is held by its top one per cent of population, the multi-billionaires and mega industrialists at whose behest demonetisation was brought in in an overnight financial coup, as it were, it is obvious that those at the bottom of the fiscal pyramid, a mammoth 70 per cent of the population who depend a lot, if not entirely, on cash economy for sustenance, have borne the real brunt of demonetisation.Illogical promisesThe initial premise and the promises of demonetisation – that it would curb black money, suck out fake currency from the system and eradicate corruption – have been proved to be thoroughly null and void.As this public database maintained by a bunch of young number-crunchers shows, the total amount of new currency seized in the freshly minted Rs 2,000 note is about Rs 262.86 crore, a strange number given the cash crunch that most of us suffered for over two months.This clearly means that black money or hoarded untaxed cash isn’t just out there stuffed in mattresses of Bollywood-styled villains, but is circulating, and those with the connections will always find a way of obtaining excess, unaccounted cash, whether in old notes or new.As economist specialising in black money and black wealth, Professor Arun Kumar, has explained: “[T]he black ‘money’, or cash component, immobilised is only 3 percent of the total black income generated this year. Black income generation will continue because there are a large number of mechanisms by which it is generated, which may or may not depend on cash circulation.”Similarly, a study undertaken by the Kolkata-based Indian Statistical Institute has placed the value of Fake Indian Currency Notes (FICN) at about Rs 400 crores at any given time, which is only 0.02 per cent of the currency in circulation.Given that FICN is the basis of all “subversive” activities, such as financing terror, smuggling of weapons, drugs and other illicit items, the elimination of FICN, a paltry Rs 400 crore, surely did not merit striking at the heart of a currency circulation valued at Rs Rs 15.44 lakh crore, or 86.4 per cent of total currency circulation at Rs 17.975 lakh crore (as of November 4, 2016, according to RBI data).This means that all the three initial promises that PM Narendra Modi himself made were not only far removed from ground reality, they were completely misleading. Demonetisation could not achieve any of those so-called goals by removing Rs 500 and Rs 1,000 notes overnight from circulation.Colossal wastageBut the botched job on the security and corruption front is only the tip of the iceberg. The real impact of demonetisation has been crippling of the economy, particularly its cash-reliant sprawling base which employs over 80 per cent of its population, including the salaried middle classes.Demonetisation has hit agricultural sector, crop sowing, seed purchase, harvest, wage agricultural labour, rendering millions temporarily jobless because of lack of cash. In urban areas, it has crippled street vendors, small shopkeepers, food stall owners, those doing menial jobs like cobbling, sweeping, those in construction and other daily contract labour.In Gujarat, dairy farmers from milk cooperatives have not been paid for two months. In Maharashtra, farmers are destroying tomato crops because the prices have come down owing to demonetisation and yet hardly any purchase is happening. Migrant workers have gone back home in hordes after failing to get employment post note ban. Tourism has taken a huge dip as cash withdrawal limits made it harder for foreign travellers to make it in India, with Kerala losing over Rs 1,000 crore in tourism revenue.All this when Gandhi’s face kept disappearing from the Rs 2,000 and Rs 500 notes, as the rules of engagement changed faster than we changed our clothes. Modi toyed with regurgitating Indira Gandhi’s “garibi hatao” slogan, in his relentless and tear-jerking virtuoso performances on national television. He even fronted his nonagenarian mother, Heeraben, to do the theatre of cashless austerity for him, even as over 105 people lost their lives because of panic, stress and other physical ailments induced by cash crunch.First as farce, then as tragedyWith the RBI governor sorely missing in action, and experts world over admonishing India’s “sickening and immoral” experiment with sudden cashlessness, demonetisation and its attendant aim to spontaneously shift to a digital-heavy economy, have been thoroughly exposed.With very few gainers, who have made a killing while others bled, such as the online wallet-turned-payment bank Paytm, new sharks in the water such as Jio Money, and crores of disgruntled, cash-strapped, often hungry and ailing poor and middle class Indians, Modi’s “masterstroke” in monetary patriotism has shown he has little clue about the staggering behemoth that is the Indian economy.With the growth rate now significantly slowed down, the India story that had beaten even the 2008 Wall Street crash, lies in tatters. Obviously, the extreme inequality in India would ensure that even this six per cent would see highly different growth rates in different sectors, with corporates that want to monopolise the emergent (and downright imposed) financial technologies making hefty profits as millions more are driven to penury, while those below poverty line find even a square meal terribly difficult to obtain. What could have been done over a period of at least five years, creating digital and financial infrastructure to support a “whitening” of the economy, has been turned into a terrible farce with no accountability.In a country where over 40 per cent of its population is still unbanked, while about 250 million have the newly created Jan Dhan accounts with many having just one rupee in them, the mass and coercive digitisation is nothing short of financial genocide.Unfortunately, PM Modi doesn’t believe in explanations, apology and paying heed to real economists.RBI governor Urjit Patel afraid of revealing demonetisation information: Congress leaderAuthor: Agencies Publication: Hindustan Times Date: January 19, 2017URL: on Reserve Bank of India (RBI) governor Urjit Patel for ‘dereliction of his duty’, a Congress leader said on Thursday he failed to answer a parliamentary committee over the demonetisation move’s aftermath because he was afraid of revealing the information.Patel couldn’t give on Wednesday a time frame for an end to cash restrictions nor could he provide a parliamentary panel a figure for the amount of banned notes deposited into banks after demonetisation, sources said.The central bank had pumped in Rs 9.2 lakh crore in new banknotes to help replace the Rs 500 and Rs 1,000 bills banned on November 8, Patel told a parliamentary panel. Around Rs 15.4 lakh crore worth of the notes were removed from circulation.“It shows the unpreparedness on the part of Reserve Bank of India. The RBI governor appeared before the parliamentary committee and this notice was given to him two weeks back. Not that he did not have the information but he is afraid of revealing it to parliamentary committee, which is dereliction of duty on the part of the RBI governor,” Congress leader PC Chacko told ANI.Chacko said nobody can hold back any information of the parliamentary committee.“When the question was put to the RBI governor he did not report to the committee that by what time things will be normal, by what time the currency will be made available. Various pertinent questions were put to him by the committee was not answered so it is a question of privilege that he is holding back and not revealing the facts,” he added. “The RBI governor was unable to tell us how much old currency has come to the banks,” panel member and Trinamool Congress MP Saugata Roy told media on Wednesday, criticising Patel for his “inability” to answer vital questions.Demanding Patel’s resignation, Chacko said he has lost the moral authority to continue as the RBI governor and added that the central bank behaved like the junior department of the central government.“The chairman of central bank is always considered as a very highly independent position because the monetary control of the country is mainly done by the RBI. Such an organisation should be in a position to advice the government on matters and should not take orders from the government,” he added.Patel and several finance ministry officials appeared before the panel to answer questions on the demonetisation decision that triggered a huge cash crunch and restrictions on money withdrawals.Patel, who took over as the country’s top banker on September 4, had a tough time fending off MPs, prompting former prime minister Manmohan Singh, who is also on the committee, to come to his rescue, sources in the panel said.Singh, a former RBI governor, told Patel not to answer questions that would compromise the autonomy of the central bank, sources said.Patel failed to provide a figure for how many of the banned notes were had been deposited. The RBI was still in the process of calculating how much money came into the banking system, he said.The figure would be an indication of the success or failure of the disruptive move, which the government said was aimed at curbing black money and choking counterfeit currency.Demonetisation fails to dent Samsung mobile phone salesAuthor: Special CorrespondentPublication: The Hindu Date: January 18, 2017URL: has not affected mobile phone sales of Samsung India, which holds nearly half of India’s smartphone market and a sizeable portion of the feature phone market. “Our Diwali and Puja sales were very good in October, after which it always cools down (in November). However, after the initial slowdown, it was back to normal in December,” Manu Sharma, Vice-President, Mobile Business, Samsung India, said in response to a question.“Retailers as well as consumers have been smart in their adaptability of digital payment modes,” he said at a press meet, adding that the company closed 2016 with a strong double-digit growth.In India, Samsung Mobiles has 46.9% share of the smart phone market and 36.9% share of the feature phone market, according to Mr. Sharma.Speaking after the unveiling of Galaxy C9 Pro, he said, “We expect this product to be a game-changer. India is one of the fastest-growing smart phone markets. Consumer trends indicate that more users prefer larger screen smartphones. Indian users are now moving to their second or third smart phone and are demanding more from their phones.”He said that this was the first Samsung phone with a powerful 6 GB RAM which offers seamless multi-tasking experience. Samsung Mobile is part of Samsung Electronics Company Ltd., which is into TVs, mobile phones, wearable devices, tablets, cameras, tablets and digital appliances among other products.ED smells laundering as cooperative banks misreport depositsAuthor: TNNPublication: The Times of IndiaDate: January 20, 2017URL: cooperative banks across the country are suspected of laundering hundreds of crores in demonetised Rs 500 and Rs 1,000 notes by reporting more cash in hand to the Reserve Bank of India than the actual physical possession of such currency. This allowed them an extra window to convert illegal tender till December 30, the deadline by which commercial banks were allowed to accept banned notes.During scrutiny of one such cooperative bank in Mumbai, the Enforcement Directorate had found the bank had over-reported its receipts by Rs 400 crore to the central bank. The income tax, too, has brought to the notice of the RBI two instances of cooperative banks from Mumbai and Pune which had over-reported cash receipts in banned currency by more than Rs 100 crore. The agencies suspect that these banks indulged in exchanging banned currency notes beyond the stipulated date.The central bank had, within a week of the announcement of the demonetisation of big currency notes on November 8, stopped cooperative banks from accepting illegal tender. Such currency deposits and exchange were only allowed in commercial banks and at RBI counters.However, as the probe reveals, many of these cooperative banks maintained an option of accepting illegal tender much beyond the deadline by misreporting 'excess' cash pile to the RBI.An ED probe against 13 cooperative banks in Mumbai revealed that these banks had deposited Rs 1,596 crore in banned currency notes in the vault of a commercial bank in which they had maintained accounts. A cooperative bank in Surat was found to have deposited Rs 20 crore in demonetised currency with a government bank with which it had an account. All these cases are under investigation for the source of their cash receipts.In the Pune case, the cooperative bank reported to the RBI that it had accepted deposits of Rs 242 crore, while scrutiny of physical stock by the I-T revealed the bank only had Rs 141crore.The bank had misreported to the RBI possession of 'excess' old currency, as on December 23, to the tune of Rs 101 crore. In another case in Mumbai, the I-T found the cooperative bank having Rs 12 crore less cash in banned notes than what it had reported to the central bank, raising suspicion of money laundering..Currency situation to normalise soon: Urjit PatelAuthor: TNN & AgenciesPublication: The Times of IndiaDate: January 20, 2017URL: Bank of India (RBI) Governor Urjit Patel on Friday said that the cash crisis following the recent demonetisation in the country will normalize "soon", ANI reported."All efforts are being made to normalise situation in rural areas," Patel said while explaining the demonetisation and its impact to the Public Accounts Committee.He also said that specific agencies like Financial Intelligence Unit and Income Tax Department are looking into abnormal deposits.--------------------------ANI @ANI_newsRBI Guv Urjit Patel gives explanation to Public Accounts Committee (PAC) members, assures cash situation will normalise soon: SourcesANI @ANI_newsRBI Guv told PAC that efforts are on to normalise situation in rural areas&situation in urban areas is almost normal-Sources #DeMonetisation1:48 PM - 20 Jan 2017--------------------------"The organisation is also working on bringing down transaction costs of digital payments," Patel informed committee.Earlier this week, Patel had told the Parliamentary Standing Committee on Finance that new currency notes worth Rs 9.2 lakh crore have been introduced into the system post the removal of old notes.Prime Minister Narendra Modi, in a surprise move on November 8, demonetised high-value currency notes in order to curb the menace of black money, sucking out 86 per cent of cash currency in circulation in the country. The total value of the demonetised Rs1000 and Rs 500 notes was at Rs 14.6 lakh crore.Exclusive: What Went Down In The Hours Before PM Narendra Modi's Notes Ban SpeechAuthor: Rahul ShrivastavaPublication: Date: January 20, 2017URL: hours before Prime Minister Narendra Modi used a television speech to announce that 500- and 1,000-rupee notes would be abolished at midnight, the board of the Reserve Bank of India had cleared the ban.RBI Governor Urjit Patel is meeting today with a second parliamentary committee to explain the sequence of events that resulted in November 8's shock demonetisation drive. Mr Patel told the Public Accounts Committee that the central bank's board, which is headed by him, met at 5.30 pm that evening and cleared the government's advisory note, sent a day earlier, on outlawing high-denomination bills.On Wednesday, he testified for parliament's Finance Committee. The accounts he presented today and then show that though the government and the RBI began discussing demonetisation in May last year, it was on November 7 that plans kicked into action at breakneck speed for 24 hours.While the RBI board was looking at the plan to make 500- and 1,000-rupee notes illegal, the PM had his cabinet waiting in his office from 7 pm onwards. The ministers were not allowed cellphones – a decision first introduced in July for cabinet meetings. Sources said that the Prime Minister's Office staff as well as the Finance Ministry team that knew what was coming were on edge as they waited for news from the RBI's board, which was meeting in Delhi.Then arrived the message that the government's proposal had been unanimously cleared by eight of the RBI'S board which has 10 members. Right after that, PM Modi drove from his home to his office and disclosed his huge reform to the cabinet, which formally reviewed the notes ban as its agenda, and okayed it. At 8.00 pm, the Prime Minister was on air addressing the country.That is when India was told that 86 per cent of the money in circulation, adding up to 15.44 lakh crores, was no longer valid for transactions.The RBI says it was ready. Eight of its 10 board members had cleared the proposal in Delhi. A ninth was abroad. A tenth was in the central bank's Mumbai headquarters, assigned to coordinate the immediate implementation of one of India's biggest-ever economic sources say that while the final push was a sprint, the planning for the notes ban was not casual or rushed. They since that starting in May, the RBI chief and a Deputy Governor would fly down to Delhi regularly to meet with an as-yet-undisclosed team compiled by PM Modi from the Finance Ministry and his own office.The meetings, held nearly every Friday after 6 pm, were detailed planning sessions that also tried to gauge and prepare for the consequences of the notes ban. The need for secrecy meant that minutes of the meeting were not recorded.Mr Patel has told parliamentary panels that the RBI agreed with the government's assessment of the notes ban serving as a deterrent for black money and counterfeiting. Blueprints that had been compiled at the Friday sessions were shared as soon as the move was announced with enforcement agencies like the Income Tax Department and the Enforcement Directorate, which handles financial crimes.Sources say that Dr Raghuram Rajan, who was RBI Governor, was part of the discussions between May and August, when his term ended and Mr Patel replaced him. Sources claim that there was a minor delay in the printing of the new 2,000-rupee notes because of the change in leadership. The decision to introduce the new high-denomination note had reportedly been taken in June to ensure that once the old notes were banned, replacements were ready. The Prime Minister and Finance Minister Arun Jaitley had allegedly cleared the new design and security features. The new bills needed the RBI Governor's signature, so the printing of notes was held up till Mr Patel took office. All other requirements were in place - as soon as he took charge, his signature was cleared and the printing of notes began.The RBI has been faulted by critics who say it failed to take charge of a move that allowed the country to hurtle into a major cash shortage with little clarity on guidelines for banks and people. But the RBI Governor has offered the details here to prove that the central bank was not just in the know, but performed its role through several months of preparation.No to more radical economic revolutionsAuthor: Milind MurugkarPublication: Date: January 20, 2017URL: govt enjoying a majority support feels emboldened to disregard the advice of experts and plays with radical ideas, ignoring their long-term impactA ‘radical’ or ‘bold’ decision can also be a ‘thoughtless’ or ‘irresponsible’ one, as evidenced by the havoc wrought by demonetisation. Media reports and revelations by the responses to the Parliament’s Public Accounts Committee (PAC) give a clear impression that the decision was foisted upon the Reserve Bank of India (RBI) rather than being recommended by it, as claimed by the government. If a decision as important as this has bypassed the institution set up to weigh the pros and cons and the feasibility of the action, we have indeed a reason to be concerned about the decision making process. The electronic media in Maharashtra, by and large, seem to be in agreement that the demonetisation idea originated from Arthakranti, a non-government organization that has also been advocating radical changes in the tax structure of the country for a decade and a half now. A national Hindi channel described Anil Bokil, Arthakranti’s founder, as Modi’s Chanakya. The purpose of this article is to suggest that the government should exercise great caution before it takes further steps while marching to Arthakranti’s drumbeat and performs more radical surgeries. Note that Union minister Nitin Gadkari has indicated in a recent speech to bank workers that he is attracted to the idea of replacing all the direct and indirect taxes by a bank transaction tax as suggested by Arthakranti.The idea is simple. Replace the present system of direct and indirect taxes with a single tax of 1.5-2% on bank transactions that will be deducted automatically by banks. Demonetise all notes above Rs50 making it very inconvenient to carry out large transactions through cash. In other words, force people and businesses to make all substantial transactions through banks. In addition to the inconvenience of making cash transactions through bundles of small denomination notes, make it illegal to do any transaction above Rs2,000 through cash. The claim is that since bank transactions are traceable, there is little scope for black transactions. In addition, the tax base will be expanded. For example, the agricultural incomes are not taxed presently but under the proposed scheme, they will be. Arthakranti claims that the net tax rate on those who currently pay taxes will decline while the total tax revenue of the central government will go up four fold. The idea is tantalizing but Arthakranti’s claims need to be put under the scanner. A tax of this sort has some theoretical problems. First, a transaction tax of this sort is similar to a turnover tax. When a farmer sells wheat to a baker who, in turn, sells bread to a restaurant that sells a sandwich to a customer—a tax of this sort will be levied at each stage in the production line from farmer to the customer. In effect, the value added by the farmer gets taxed three times and by the baker two times. This creates incentives for vertical integration of the production chain whether organizationally efficient or not. This consideration is important enough for most developed countries to move away from such a tax to the value added tax. A move to transaction tax would be tantamount to going in the opposite direction to the goods and services tax (GST).Second, modern supply chains use a lot of sub-contracting to small competitive firms that have small profit margins. A transaction of Rs100 may generate only a profit of Rs4. A tax of Rs2 will be taxing this profit at 50% that will create huge incentives to go to cash transactions; never mind the inconvenience. We would be marching in the opposite direction from the avowed goal of cashless society. The main problem with this proposal is that it is utopian. It envisions an economy where the banks are ubiquitous, flawlessly interconnected and the networks for a cashless economy work smoothly. Our experience with demonetisation has laid bare the inadequacy of our financial infrastructure. It would be clearly a big mistake to prematurely rush into an ‘arthakranti’ (or economic revolution) of this sort.Whether the benefits of an easy-to-collect transaction tax system outweigh these costs need careful scrutiny. Also, whether the claims that the tax revenue will grow four-fold need to be checked. The decisions that can have a huge impact on the economy and thus, on our lives, need meticulous prior studies and public debate. It is wise to carry out small experiments to see if the required infrastructure is compatible with the idea. Arthakranti’s proposal hasn’t been subjected to serious scrutiny. It is possible that the experts in taxation considered this proposal not worth their time. But then they could be mistaken. Which economist took Baba Ramdev, who is influenced by Arthkranti, seriously when he demanded scrapping of high-denomination notes? A government enjoying a majority support feels emboldened to disregard the advice of experts and plays with radical ideas, ignoring their long-term impact. We have seen the consequences of such foolhardiness with the demonetisation decision. It is a catastrophe. Please do not bring on another one through a rash action undertaken without proper prior study and preparation.- Milind Murugkar writes about contemporary economic and political issues.Demonetisation: Congress comes prepared but fails to corner Modi govt at PAC meetAuthor: Debobrat GhosePublication: Date: January 20, 2017URL: the meeting of the Public Accounts Committee in New Delhi on Friday, the efforts of the Congress to corner the Narendra Modi government over the issue of demonetisation didn’t fructify.Despite doing its homework and chalking out a strategy to extract maximum information from the RBI governor on the impact of demonetization on the Indian economy, the panel headed by KV Thomas didn’t succeed much in its efforts.While the Congress was prepared to grill Urjit Patel over the issue, it wasn't prepared for the checkmate that followed. Patel stumped the panel by listening to its questions patiently and sealing the day with the reprieve that he would come with written answers in the next meeting.According to sources, the PAC chairman Thomas had met Congress vice president Rahul Gandhi a day before and both had more than an hour-long discussion. Later, Thomas met former prime minister Manmohan Singh.“After meeting Rahul Gandhi, Thomas also met Manmohan Singh to get technical tips on note ban and demonetisation. Later, he also had a discussion with another senior Congress leader," a source said.As the agenda of Friday’s meeting was ‘monetary policy and impact of demonetisation on Indian economy’, Congress members ensured to come prepared on demonetisation issue at the PAC meeting to corner the Modi government by quizzing the RBI governor and his team.Patel reportedly refrained from answering the key question asked by the panel — "Who initiated the demonetisation process?"The sources said that he has sought a fortnight to come up with a complete reply to all queries in writing. However, the RBI chief while informing the panel, reportedly emphasised that demonetisation would have a short-term impact on GDP but have a positive mid and long-term impact on Indian economy.Patel’s statement got a strong backing from the PAC members from the BJP.The BJP reportedly said that the previous UPA government had also thought of demonetisation but "it didn’t have the courage to do it in fear of backlash." "All the political parties welcomed the note ban and none opposed it. This demonetisation move is like a bitter pill and its advantage will be visible in the long term. It has also led to less-cash transaction like payment through cheques and debit and credit cards. Why only one person should pay tax? Let the others also do it. If we have financial transactions through banking instruments, it’ll be on record and no one can escape paying taxes," a BJP member reportedly said during the meeting. Supporting the government’s move, a panel member, who is also a BJP MP, said that the common man had welcomed demonetisation and it would prove helpful in economic development in future.On RBI governor refraining from answering the questions, Thomas said, "We asked a series of questions, but RBI governor was not ready to answer. They have sought time to do so and will get back after a fortnight."Apparently, the PAC chairman is of the opinion that "RBI is an institution and its governor can’t be grilled like a minister or MP in the Parliament."In a meeting of the Parliamentary Standing Committee held on 18 January, Manmohan Singh had come to the rescue of Patel and reportedly advised him not to reply to questions which could create problems for the central bank. Singh, who was also a RBI governor earlier, had said, "RBI as an institution needs to be respected."The sources said that Thomas has agreed that the government should be given time to respond on the volley of questions posed by the panel. Besides the RBI governor, Friday’s meeting was also attended by Patel’s deputy SS Mundra and deputy CAG H Pradeep Rao. As the Union Budget is just around the corner — on 1 February — the finance ministry officials will face the panel after the mentThe title reflects the text of the article.It makes me wonder the following:Was the purpose of the meeting to corner the prime minister, or was it to seek information from the RBI governor?Clearly the Congress’ plan did not succeed.? So, was its preparation faulty?Or, was there really no substance to the attempt to corner the prime minister?Namaste.Ashok ChowguleNote ban has had no immediate impact on agriculture, finds surveyAuthor: TNNPublication: The Times of IndiaDate: January 23, 2017URL: perception survey of village panchayat heads across nine states appears to corroborate nationwide sowing data suggesting that demonetisation may not have had an immediate impact on agriculture.The survey conducted by Shubhashis Gangopadhyay, Nishant Chadha and Arijit Das of the research organisation India Development Foundation (IDF) covered 48 districts across nine states.It was carried out between January 10 and January 20 and aimed to find out, based on early indicators, whether the impact of demonetisation was uniform across states. The states covered were Madhya Pradesh, Uttar Pradesh, Tamil Nadu, Gujarat, Rajasthan, Andhra Pradesh, Telangana, Jharkhand and Maharashtra.At the end of the second week of January, government data showed that area sown for rabi crops was 616.2 lakh hectares, 6% higher than in the same period last year.Sowing in the previous year, however, was influenced by deficient rainfall during the southwest monsoon. IDF's survey data showed that area under rabi had either increased or remained the same in a little over half the villages surveyed.Other key agricultural indicators such as fertiliser use also suggested that demonetisation did not have a negative impact. According to Gangopadhyay, the survey results showed that demonetisation did not have a uniform impact and there could other factors influencing the results on agriculture. Another indicator that has been widely used as a proxy to measure the impact of demonetisation is food prices.In December, the consumer price index, which measures retail prices, showed a1.3% inflation in food products, the lowest level in two years. Food prices have been low regardless of demonetisation, said Gangopadhyay. Prices started trending lower before PM Narendra Modi's announcement of the demonetisation og high value currency notes on November 8 and the main reason for low food prices was weak aggregate demand in the economy, he added.The survey also covered the impact of demonetisation on the use of agricultural labour. The results showed that more than half the sample reported that the use of labour remained unchanged or had increased.Why Congress blaming Modi government for attacking RBI’s autonomy is hypocriticalAuthor: MuglikarPublication: Date: January 23, 2017URL: Rahul Gandhi accused the Narendra Modi led Government of interfering with the autonomy of the Reserve Bank of India (RBI). This added chorus to the various statements made by the opposition parties on similar lines. The allegations range from pressure by the Government on RBI to accept “demonetisation advice” to “non-independent decision making” of the Board of Directors of the RBI.Going further, Rahul Gandhi even went on to claim that it was the Congress which “strengthened” RBI as an institution and it was PM Modi who “murdered” the “soul” of the RBI.However, facts are just the opposite.In 2011, the then UPA government had appointed the Financial Sector Legislative Reforms Commission (FSLRC), which submitted its report (pdf link) in March 2013. The Commission recommended trimming the powers of the RBI. Instead of “regulatory autonomy”, recommendations included vesting the government with more powers over the financial sector.On the issue of autonomy and independence of the RBI, two important suggestions of the Commission need to be analysed.Firstly, FSLRC recommended that the public debt management should be handled by an independent body and it should be taken out of the purview of the RBI. It is important to remind Rahul Gandhi and the former Prime Minister Manmohan Singh that it was the Congress party that led the bank nationalisation; it was their socialistic policies that caused massive fiscal deficits. These policies, which continued for decades, gave us massive public debt. All the banks were forced to take these as a part of their liquidity ratios. The UPA era further saw jobless growth and high public debt. Meddling with RBI’s powers to manage this debt in such a scenario was a direct attack on the independence of the RBI.Secondly, FSLRC recommended appointment of a Committee to dictate the monetary policy. The Constitution of the Committee would have made the RBI governor one among several others. Majority of the members in the committee were proposed to be appointed by the Government of the day. This recommendation disregarded a clear conflict of interest, as the government is the biggest borrower in the market. The Committee would be driven by short term political gains than short/long term economic interests of the nation.Do these recommendations not “murder” the “soul” of the RBI? It should be noted that the UPA led government did not reject any of the recommendations by the commission.Not just that, forming FSLRC itself was seen as an act of trimming RBI’s powers because the UPA government and the central bank were often at loggerheads over interest rates during 2008-2013. This is documented in detail in the book ‘Who Moved My Interest Rates’ authored by the former RBI governor D Subbarao, where he says in no unclear terms that the UPA government had overstepped into the RBI’s turf.And now Congress party leaders are going on claiming as if the RBI was a free bird and a respected autonomous institution before the Modi government took over.Let me make it clear that the hypocrisy of the Congress party and the doublespeak by its leaders doesn’t absolve the current Modi government of its responsibilities. After May 2014, the new government should have setup a fresh committee to advise on the role of RBI and other financial system regulators.However, they continued to work on the 2013 recommendations. Going a step further, the Finance Ministry released the Indian Financial Code (IFC) in 2015 for public comments. It proposed the formation of a Monetary Policy Committee (MPC) with four out of seven members being appointed from the government’s side with no veto power to the RBI governor on any decision taken by the MPC. It attracted negative comments. What the current government needs to do is to come up with reforms in this sector too, as they had done by bringing changes to the SARFEASI Act, etc.To conclude, with a little politics, this is another Jallikattu type controversy. The mess was created during the UPA regime with active involvement of Congress party leaders, but the BJP has to carry the burden and blame, for they neither communicated successfully nor acted quickly enough.What the U.S. can learn from India’s move toward a cashless societyAuthor: Vivek WadhwaPublication: The Washington PostDate: January 23, 2017URL: Valley fancies itself the global leader in innovation. Its leaders hype technologies such as bitcoin and blockchain, which some claim are the greatest inventions since the Internet. They are so complex that only a few mathematicians can understand them, and they require massive computing resources to operate — yet billions of dollars are invested in them.India may have leapfrogged the U.S. technology industry with simple and practical innovations and massive grunt work. It has built a digital infrastructure that will soon process billions more transactions than bitcoin ever has. With this, India will skip two generations of financial technologies and build something as monumental as China’s Great Wall and America’s interstate highways.A decade ago, India had a massive problem: nearly half its people did not have any form of identification. When you are born in a village without hospitals or government services, you don’t get a birth certificate. If you can’t prove who you are, you can’t open a bank account or get a loan or insurance; you are doomed to be part of the informal economy — whose members live in the shadows and don’t pay taxes.In 2009, the government launched a massive project, called Aadhar, to solve this problem by providing a digital identity to everyone based on an individual’s fingerprints and retina scans. As of 2016, the program had issued 12-digit identification numbers to 1.1 billion people. This was the largest and most successful I.T. project in the world and created the foundation for a digital economy.India’s next challenge was to provide everyone with a bank account. Its government sanctioned the opening of 11 institutions called payment banks, which can hold money but don’t do lending. To motivate people to open accounts, it offered free life insurance with them and made them a channel for social-welfare benefits. Within three years, more than 270 million bank accounts were opened, with $10 billion in deposits.And then India launched its Unified Payment Interface (UPI), a way for banks to transfer money directly to one another based on a single identifier, such as the Aadhar number.Take the way that credit-card payments are processed: When you present your card to a store, the cashier verifies your signature and transmits your credit-card information to a billing processor such as Visa, American Express or MasterCard — which works with the sending and receiving banks. The billing processors act as a custodian and clearing house. In return for this service, they charge the merchants a fee of 2 to 3 percent of the transaction. This is a tax that is indirectly passed on to the customer.With a system such as UPI, the billing processor is eliminated, and transaction costs are close to zero. The mobile phone and a personal identification number take the place of the credit card as the authentication factor. All you do is to download a free app and enter your identification number and bank PIN, and you can instantly transfer money to anyone — regardless of which bank he or she uses.There is no technology barrier to prevent a UPI from working in the United States. Transfers would happen within seconds, even faster than the 10 minutes that a bitcoin transaction takes.India has just introduced another innovation called India Stack. This is a series of secured and connected systems that allow people to store and share personal data such as addresses, bank statements, medical records, employment records and tax filings, and it enables the digital signing of documents. The user controls what information is shared and with whom, and electronic signature occurs through biometric authentication.Take the example of opening a mobile-phone account. It is cumbersome everywhere, because the telecom carriers need to verify the user’s identity and credit history. In India, it often took days to produce all the documents that the government required. With the new “know-your-customer” procedures that are part of India Stack, all that is needed is a thumb print or retina scan, and an account can be opened within minutes. The same can be done for medical records. Imagine being able to share these with doctors and clinics as and when necessary. This is surely possible for us in the United States, but we aren’t doing it because no trusted central authority has stepped up to the task.India Stack will also transform how lending is done. The typical villager currently has no chance of getting a small-business loan, because he or she lacks a credit history and verifiable credentials. Now people can share information from their digital lockers, such as bank statements, utility bill payments and life insurance policies, and loans can be approved almost instantaneously on the basis of verified data. This is a more open system than the credit0scoring services that U.S. businesses use.In November, in a move to curb corruption and eliminate counterfeit bills, Indian Prime Minister Narendra Modi shocked the country by announcing the discontinuation of all 500- and 1,000-rupee (about $7 and $14) notes — which account for roughly 86 percent of all money in circulation. The move disrupted the entire economy, caused pain and suffering, and was widely criticized. Yet it was a bold move that will surely produce long-term benefit, because it will accelerate the push to digital currency and the modernization of the Indian economy.Nobel Prize-winning economist Joseph Stiglitz said at the World Economic Forum meeting in Davos, Switzerland, that the United States should follow Modi’s lead in phasing out currency and moving toward a digital economy, because it would have “benefits that outweigh the cost.” Speaking of the inequity and corruption that is becoming an issue in the United States and all over the world, he said: “I believe very strongly that countries like the United States could and should move to a digital currency so that you would have the ability to trace this kind of corruption. There are important issues of privacy, cybersecurity, but it would certainly have big advantages.”We are not ready to become a cashless society, but there are many lessons that Silicon Valley and the United States can learn from the developing world.- Vivek Wadhwa is Distinguished Fellow and professor at Carnegie Mellon University Engineering at Silicon Valley and a director of research at Center for Entrepreneurship and Research Commercialization at Duke. His past appointments include Stanford Law School, the University of California, Berkeley, Harvard Law School, and Emory University. ? Follow @wadhwaIn Its Third Month, India’s Cash Shortage Begins to BiteAuthor: Geeta Anand And Hari KumarPublication: The New York TimesDate: January 24, 2017URL: , Yashpal Singh Rathore’s marriage was delayed by his future in-laws, who, like most Indians, ran short of cash after Prime Minister Narendra Modi banned the country’s largest currency notes in November.Then the 29-year-old lost his job when the ensuing cash crunch hit demand for motorcycles and scooters sold by the company where he worked, Hero MotoCorp Ltd. After that, the prospective in-laws refused to let the wedding go forward until he found another job.“So I lost my job and I lost my marriage,” he said in an interview at a protest, where he shouted slogans with more than 100 red-flag-waving workers let go by Hero.Mr. Rathore is one among a large number of Indians — the precise number is not known — who have lost their jobs since Nov. 8, when Mr. Modi abruptly banned 86 percent of the country’s currency in a bid to eliminate “black money,” currency on which taxes had not been paid.For the sake of secrecy, the government largely avoided printing replacement notes in advance. So there has been an acute and protracted shortage of cash as the government struggles to catch up. That, in turn, has proved economically damaging.Exactly how harmful remains hard to determine, but the available data is not reassuring. Demand for vegetables is declining because people don’t have the money to pay for them, for example, and some service industries are reporting steep job losses.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. While the full impact is still difficult to discern, there is little doubt who is suffering the most. “This has actually hurt the poor enormously,” said Nasser Munjee, chairman of DCB Bank and a company director at HDFC and Tata Motors.The pain is hidden, for the most part. Accustomed to hardship, many who lost employment were at first convinced by Mr. Modi’s speeches that their setbacks were transitory and, in the long run, would be worth the suffering. But as the crisis drags on, with no end in sight, some are growing frustrated, as they told us in a series of interviews at protests and at day labor gathering points.Many of them, even children, are forced to go without fruit, vegetables and milk — now unaffordable luxuries. Most had not paid apartment rents and their children’s school fees in the months since the cash ban. Many had sent their families back to their villages, and were ready to give up and follow if things did not turn around soon. Sending cash to the elderly parents they had long supported is now out of the question.As is common in India, the workers said that although they had worked on Hero MotoCorp’s shop floor, wearing company uniforms, they had been formally employed by other contractors, meaning they could be let go more easily without benefits.Sunil Kumar, 28, who had been earning 15,000 rupees a month, about $220, at Hero, said he had been supporting his wife and two children when he lost his job without notice Nov. 29. They immediately cut milk, green vegetables and fruit from their diets, including for their 3-month-old and 3-year-old children. Paying rent is out of the question.“This is like a massacre for us,” he said. “My livelihood is gone after the cash ban. What do I do now?”The decline in vegetable demand is so steep that the prices of eggplants, potatoes, cauliflower and tomatoes dropped between 42 percent and 78 percent, the NCDEX Institute of Commodity Markets and Research said.In the first month alone after the currency ban, micro and small-scale service industries cut staff by 35 percent, the All India Manufacturers’ Organization said, based on a survey. It released a study this month saying that job losses in a variety of industries, including automobile parts, infrastructure and construction, would swell to as much as 35 percent by March.The anecdotal evidence is painful. Mr. Rathore, whose wedding was postponed, is among 582 workers who reported losing their jobs at Hero MotoCorp in November and December, as the company suffered a 34 percent drop in two-wheeler sales in December from a year earlier. Hero did not respond to requests for comment.Most economists believe the economy will rebound, but nobody knows how long it will take.In Noida, a satellite city of New Delhi, hundreds of unshaven men in rumpled clothing stood recently at a three-way intersection called Khoda Labor Chowk that is a gathering place for people seeking work.Before the currency ban, they told us, they would be hired most days, earning 400 to 600 rupees, about $6 to $9, for a day of carpentry, floor tiling or masonry. But since the ban, most interviewed said, they had worked for only a week each month, at best, and even on the few days when they were hired their wages had fallen by half.Rafiq Ali, 46, said that, having worked only 12 days in the last two months, he had sent his wife and two children back to his native village about 200 miles away, where it is cheaper to live.“I am surviving on roti and potato with salt,” Mr. Ali said, referring to the flat Indian bread that is a staple in the Indian diet. “I’ve stopped taking milk, even in tea, and eating vegetables.”But what hurt him most, he said, was a recent call from his wife, back in the village, who wanted money to take their sick daughter to a doctor. Mr. Ali said he had nothing to send.“A sense of desperation and helplessness is emerging,” he said. “This currency ban is not helpful for poor people.”Hoti Lal, a 38-year-old father of three, said he could get work for only six days during the last two months, forcing his family to survive on money his 18-year-old son made cleaning offices. Mr. Lal had hoped his son could give up that job to go to college, but that dream is fading fast.His son’s salary of 7,000 rupees a month, a little over $100, is about half of what he used to earn regularly, Mr. Lal said. So, Mr. Lal said, his family has cut back entirely on green vegetables and milk.Almost every man we interviewed said he was a migrant who had been sending a portion of his salary home to support his parents in his native village — and had been unable to do so since the currency ban wiped out work.Vikas Sahu, 30, who had been working at Hero for four years, has been unable to send money back to his parents, wife and children, who live in his village about 100 miles west of New Delhi. His first grader’s school fees are overdue by months, and his father took out a loan of 70,000 rupees, about $1,000, for agricultural expenses, including paying for repairs on the family’s tractor.“How long I can survive like this?” he asked.With little else to do, Rakesh Yadav, 28, shows up most days to protest, hoping for some relief from the government or some upbeat economic news that might induce Hero to begin rehiring. He had worked there for eight years as a machine operator on the shop floor.To cut costs, his wife and daughter went home to his village. He gave up the one room they had shared at a monthly rental of 3,300 rupees, or about $50, and moved in with four other men who share a room.“I do not know where to go or what to do,” he said.Mr. Rathore said he thought about giving up and returning to his village in Bilaspur district, about 750 miles south of Delhi, but he just cannot bear to do so, at least not yet.“What can I do in my village?” he asked.Hit by note ban, HDFC net climb slows to 12%Author: dna CorrespondentPublication: Date: January 31, 2017URL: dip in disbursements is largely on account of the fall in real estate prices triggered by the government's demonetization decision: Keki MistryHDFC Ltd, the largest housing finance company in India, on Monday reported an 11.9% rise in its net profit at Rs 1,701.21 crore for the quarter ended December 31, after providing for Rs 830 crore in taxes.Though the profit is higher than expectations, it was under pressure after demonetization slowed down disbursements as the real estate sector was among the sectors hit the most. The Board also approved a proposal to raise Rs 35,000 crore through private placement of non-convertible debentures to fund its business expansion.During the quarter, its total income rose 12% to Rs 8,137.2 crore compared to Rs 7,268.4 crore. Net interest income (NII) rose 17.2% over the previous year to Rs 2,769.86 crore. Net interest margins (NIM) stood at 4.14% as compared to 3.9 % in the year-ago quarter, mainly on account of a reduction in incremental funding by 0.22% during the quarter.Its loan book rose 16% to Rs 2,86,876 crore with both individual and corporate loans growing but at a slower pace. The individual loan book rose 15%, slowing from the 17% growth levels that the housing finance companies had maintained over the preceding quarters.Keki Mistry, vice chairman and chief executive officer of HDFC, said at a press conference in Mumbai, "The dip in disbursements is largely on account of the fall in real estate prices triggered by the government's demonetization decision. The situation should normalise over the course of the next two months."On Monday, HDFC shares closed 0.13% at Rs 1368.90 on Bombay Stock Exchange (BSE).The asset quality of the HFC was stable. Provisions increased 72.1% to Rs 117 crore from Rs 68 crore last year. On a sequential basis, provisions increased 23.2%. Gross non-performing assets rose to 0.81% of the loan portfolio versus 0.76% in the July-September quarter.Gross non-performing loans (NPAs) as at December 31, 2016, amounted to Rs 2,341 crore, or 0.81% of the loan portfolio. The non-performing loans of the individual portfolio stood at 0.65% while that of the non-individual portfolio stood at 1.16%. As per the National Housing Bank norms, the company is required to carry a total provision of Rs 2,263 crore, of which Rs 1,505 crore is against standard assets. The provisions as on December 31, 2016, stood at Rs 3,198 crore, of which Rs 705 crore is on account of non-performing loans. This provision is equivalent to 1.11% of the portfolio.Demonetisation 2.0Author: Ashutosh VarshneyPublication: The Indian ExpressDate: February 2, 2017URL: has become manifestly clear that it is a political move without an economic rationale.My last column (IE, January 3, 2017) was on demonetisation. After spending three more weeks in India, the politics and economics of demonetisation have become clearer. It can be bluntly stated that Prime Minister Narendra Modi’s withdrawal of 86 per cent of the nation’s currency had no economic rationale. The motivations were entirely political.Economic theory and comparative historical experience point to three reasons that might provide legitimate justification for demonetisation. The first is hyper-inflation. In the second half of the 20th century, some Latin American and African countries experienced exorbitantly high inflation rates. If the inflation rate is, let us say, 15,000 per cent, the value of the currency changes virtually every day, if not every hour; people don’t wish to hold on to domestic notes; and the monetary function of the currency begins to collapse. Demonetisation, under such circumstances, is a way out of the economic crisis. Second, if a substantial part of the currency is counterfeit, it makes sense to demonetise. It restores integrity to the monetary system. Third, rarely used in routine transactions of citizenry, high-value notes primarily help the operations of smugglers and criminals. As an attack on organised crime, such high-denomination notes can be decommissioned without hurting law-abiding citizens.None of these conditions obtained in India on November 8. India’s inflation rate is low; the estimated size of counterfeit currency is small; and the crime-fighting purpose of large-value notes was undermined by the issuance of new Rs 2,000 notes. Moreover, if only an estimated 6-8 per cent of the black economy was in cash, it is unclear how an overnight decommissioning of high-value notes meaningfully attacked the problem of corruption.Finally, and this has not been adequately noted, economic policy in all democracies is debated in terms of costs and benefits, not in terms of loyalty and disloyalty to the nation. Historically, only Communist (or authoritarian) polities have tended to link economic policy with loyalty to the nation or polity, as Stalin did in the Soviet Union during the First Plan (1928-32) or Mao in China during the Great Leap Forward (1958-61). In democracies, a cost-benefit calculus is used for economic reasoning; the loyalty-disloyalty binary is deployed in times of war. Modi chose the latter narrative. Economic policy is not war.All analytical roads thus lead to political motivations as the primary, or only, rationale for why Modi undertook demonetisation. Modi is an intense political being. Gujarat’s economic progress gave people the impression that he knew economics well. But it is worth reconsidering that conventional wisdom. In May 2014, in his last election campaign speech in Varanasi, I heard him say that for balanced development (santulit vikas), he would turn the Indian economy into “1/3 agriculture, 1/3 industry, and 1/3 services”. He repeated the same argument in another speech I heard after his 2014 election victory.Agriculture now constitutes only 12-13 per cent of India’s GDP. There is no branch of economics which argues that economic development calls for increasing the share of agriculture in the economy, let alone nearly tripling it. If anything, economic progress requires reducing the share of agriculture in a growing economy, and creating jobs for the rural folk in non-agricultural sectors. No society has ever helped its villages by keeping people tied to agriculture. Getting one-third of the GDP from agriculture is a sign of poverty, not prosperity.These incidents betray the paradox that even if Modi wishes to lift India economically (which he undoubtedly does), he does not always think economically. Economic policy for him is, more often than not, a political tool. Most political leaders are, of course, non-economists. But for economic policy, the advice of economists is always sought, though politicians normally reserve the right to pick among the alternatives offered. Never, perhaps, since Independence has India’s political leadership reduced economists to such awful irrelevance. Their job now is to provide ex-post justifications for demonetisation, or deal with its consequences in the best possible way.What, then, are the political motivations underlying demonetisation? Unfortunately, Modi rarely allows interviews, nor does he give press conferences. In democracies, these are the routine forums for asking leaders questions about policies. Nor was demonetisation issued as an ordinance. Had that been done, there would have been a debate in parliament, or the ordinance would have lapsed in six months. We only have declarations by the prime minister, no direct questioning yet.Only Mrs Gandhi’s bank nationalisation is a policy parallel, as has been widely noted. All of Nehru’s economic policies were debated in parliament or in party forums. Significantly, even Nehru’s plan to collectivise agriculture, which would have radically shaken the Indian countryside, was discussed — and defeated — in a Congress party forum in the mid-1950s. Nehru accepted policy defeat at the hands of Charan Singh.The probe into political motivations can thus only be presented as a set of hypotheses, listed below. No single hypothesis may suffice. It may be that a combination of these motivations were at play.First, Modi needs to win the Uttar Pradesh elections. The data collected by the Association of Democratic Reforms makes it clear that compared to the BJP, the election funding of the BJP’s two main rivals, the SP and BSP, depends much more on unaccounted money. Sixty-five per cent of the BJP’s income comes from unknown sources, whereas that figure is 83 per cent for the SP and 100 per cent for the BSP. Demonetisation was aimed at hurting adversaries disproportionately.Second, though he remains popular, Modi needs a new grand narrative to re-energise his political prospects. Swachch Bharat (clean up India) is not working; achche din (good days) haven’t yet arrived; digital India and smart cities can’t win elections. Attacking black money, a promise made in the 2014 campaign, could in principle provide a new narrative to fire up upcoming campaigns.Third, Modi wishes to reduce the BJP’s dependence on the RSS, which remains obsessed with old ideas of Hindu revival. The turning point was the cow protection campaign, which Modi vehemently criticised, but the RSS did not disown. Religion and culture fuel the organisational energy of the RSS, not economic policy.Who knows which of these hypotheses constitutes the true motivations? But it is manifestly clear that demonetisation, a giant economic policy move, was politically driven.- The writer is director, Centre for Contemporary South Asia, Sol Goldman Professor of International Studies and the Social Sciences, Watson Institute for International and Public Affairs, Brown UniversityDemonetisation signals an important regime shift: Arvind SubramanianAuthor: Deepshikha SikarwarPublication: The Economic TimesDate: February 1, 2017URL: note-swap initiative marks an inflection point, chief economic adviser Arvind Subramanian told ET in an interview after the Economic Survey was unveiled on Tuesday. He added that the world may be entering a period of de-globalisation and that India must take a lead in the discourse on openness. Edited excerpts: Q.: You have listed six achievements of the government in the past year. Why doesn’t demonetisation figure among those? A.: I have covered demonetisation separately. It merited a separate chapter so we have given it that special treatment. Q.: Is demonetisation good or bad? A.: It is one of those things which is analytically complicated. If you read the chapter in the Survey, I have said it clearly raises three questions. The public has also raised three questions. First, design and implementation — it’s not the Survey’s business to go there — second, cost and benefits and third, what it says about broader economic policy reform and things going forward. On cost and benefits, we clearly lay out what they are and the final calculus will have to await history. In that sense, it responds to your first question as well— we have to wait and see. There is going to be a shortterm cost, which is real and significant. There’s going to be an effect on GDP, let’s see how much. But then, it has potential to create these long-term benefits.Digitisation, black money, more compliance, more accounting for income, more disclosure and of course, a lot depends on the follow-up actions. This is true for most policy actions. You need to follow up with other things. I think all of these are important. The last is, of course, what it means for broader economic policy direction. We have to wait and see. We have identified these three meta challenges and cracking those will require a shared vision. It’s not one government saying I will do subsidy reform. It brings me back to the primacy of the broader problem of ideas. Even you look internationally, narrow economic calculations are repudiated and rejected in favour of something much bigger. Frankly, if you look at the popular reaction to demonetisation, it’s been very interesting. Precisely those who have been most affected by it, have actually backed the move. So, what this means is that people don’t do narrow calculations for their economic self-interest if there’s something bigger. Unless you make reforms appeal in that bigger sense, it will be difficult to crack these challenges. Q.: Which do you think is the biggest achievement of demonetisation — the shift to digital or the crackdown on corruption? A.: They are both important and they are both related. But without hedging, I do think the main objective and signal is that we will punitively and permanently increase the cost of illicit transactions. It is trying to signal a regime shift. And that’s the most important message from demonetisation. Q.: Has demonetisation moved us further away from 8% growth? A.: As I said, there’s going to be a temporary dip in growth, which we have quantified. But we will be back on the path we were on, which is 6.75-7.5% next year. So, I think we can get back to pre-demonetisation levels. But, there’s the next level of 8-10%. I think that requires a favourable external environment. We keep forgetting what I said in the last survey that when we achieved 9% growth, our exports— both merchandise and services—were growing at 20-25% in dollar terms because the international environment was favourable. We need supportive environment internationally. We need to undertake reforms. We need to chip away at the three meta challenges— ambivalence of the private sector, inefficient distribution and strategic disinvestment—if international environment is not going to be cooperative. Q.: There is this increasing refrain internationally that the classical age of globalisation is drawing to an end... A.: The age of globalisation began after World War II. In fact (economist) Paul Krugman often quotes an article that I wrote. Then, there was the age of hyper-globalisation. I do think something fundamental has shifted in the world. I think one cannot rule out the possibility that we may be entering a period of de-globalisation going forward. There is so much uncertainty and unpredictability in actions of major nations. It is a serious worry. I do believe there has been a tectonic shift. We can no longer take those developments or evolutions for granted. Q.: India is a major beneficiary of globalisation... A.: No question. All the countries that grew—East Asian tigers first, then China and then India—have been major beneficiaries. How do you get 25% export growth if world markets are not open? But (the) corollary to that is the message we should send to our leaders… that in the old days you could take others’ openness for granted but no longer. We need a new leadership of voices to maintain that openness because that is in our own self-interest. We have to take the initiative, which means we have to contribute as well. You can’t say keep your markets open, we have to open our markets as well. That, I think, is the policy message for us as well. China is staking claim to leadership. I think we should too because we want to influence this process. Q.: Have you quantified these changes in your growth forecast? A.: I have quantified it in what it can do to our exports. In the survey, there is a box on what will happen to our exports if the world became protectionist. We matter less in terms of global manufacturing but we matter a lot in terms of global exports of services. So if we want to increase our services, that affects the world’s ability to absorb that. The world is increasingly more interconnected, that we can no longer sit back passively and must take on more responsibilities is one of the messages coming out of this. Q.: Would you suggest India bring down tariffs to lower barriers to trade? A.: I think we have brought down our tariffs more than people give us credit for. We should have a multipronged approach to this. We need to push our FTAs (free trade agreements) with Europe and the UK. I do think there is an opening for reviving WTO again because when Asian integration is on hold, the trans-Atlantic integration, Nafta, is on hold. I do think that the multilateral process has an opening. We need to play a big role in that because traditional leaders, the Americans, are not… going to be champions of this for some time at least. Q.: What is your quick take on the H-1B developments? A.: It is very troubling. Of course it is still at an early stage but just the signal it sends out is that it is going to be difficult. It’s not just the H-1B but you can get restrictions in outsourcing as happened two election cycles ago. Services exports had just begun to look up and they can be set back. Q.: How flexible is the fiscal deficit target? A.: It’s something we addressed in the Fiscal Responsibility and Budget Management Act (committee). I think the broader point is that do governments acquire credibility by saying what others say we should do, or do you acquire credibility doing what you say you must do? (The) government’s record on fiscal deficit has been very good. We have achieved about 1% reduction in fiscal deficit, which is steady on the downward path, as it should be.Demonetisation Hits HT, Telegraph? Hundreds of Media Employees Sacked in Hush Hush MoveAuthor: Seema MustafaPublication: The CitizenDate: January 11, 2016URL: has hit at least two mainstream newspapers, one of which has been actually in the forefront of a campaign supporting the controversial move till date.Both have moved to dismiss hundreds of employees in what remains a hush-hush almost covert operation as journalists and other staff struggle to cope with the sudden notices served on them. In December the Ananda Bazaar Group that publishes The Telegraph in English, and the Ananda Bazaar Patrika in Bengali from Kolkata moved to check the losses that insiders claim were caused by demonetisation. ABP reduced the pages of each publication that the Business Standard, once owned by the group but since independent, reported were at least six per publication;informed departmental heads to cut down the staff; and reduced the retirement age arbitarily of course, from 60 to 58 years that impacted immediately on 45 employees, again according to the BS report. There have been reports whispering their way on to the internet, of a drastic fall in advertisement revenues of the entire media. A major newspaper that does not seem to have the ability to cushion the losses is the Hindustan Times that has closed down at least six editions, and some Bureaus. At least 200 employees have been adversely affected, again according to the grapevine without official confrmation, with a new editor Bobby Ghosh being brought in to preside over the largescale retrenchment. Hindustan Times proprietor Shobhna Bhartia has not seen it necessary to explain the reasons for the sudden shut downs with the process of sacking staff still continuing, and not completed. Some of the editions---Indore, Bhopal, Varanasi, Allahabad, Kanpur, and perhaps Kolkata soon if not already closed---have been working since almost two decades. It is interesting that at least three editions that have been closed are from Uttar Pradesh, a state going in for elections next month. Again one must reiterate that this information is not independent, and comes from the few and scattered reports that have found their way to the media. HT employees are too terrified to talk as the Damocles sword of dismissal is still hanging over most heads. It has been for a while that the corporate owners of newspapers have changed the rules of employment from the wage board to contracts, that they insist give them the right to throw out employees without even the proverbial golden handshake. Dismissal has become a favourite with media managements to control the news by controlling the journalists, with one major Delhi newspaper having sacked an editor a few years ago without informing him, and merely pasting a notice on his door that he read when he came in to work one morning. News channels when they change hands, such as News X that went through different ownerships, fell the employees without notice with one rather nasty decision by the channel earlier locking out over 200 employees when they reported for work, without notice, and without compensation. They were not even allowed to go inside to pick up their belongings by the security guards at the gate. This power wrested by the managements of media houses over the years has seriously compromised the quality of journalism. Reporters are constantly threatened with dismissal through the basic nature of the contracts they sign when they join work, and have to follow the management line that is often in direct violation of journalistic ethics that are based on honesty and commitment to facts. The result is a sense of fear within media houses, particularly where dismissals on flimsy grounds are not an aberration, with journalists censoring their news even before writing it to keep their jobs from being threatened. Since most managements controlling the media like to support the government of the day, and switch loyalties with every election, the irreverence, honesty, independence associated with the fourth pillar of democracy has become a major casualty. Faced with the real risk of dismissal, scribes not always from well to do families, fall in line and prune the news accordingly. The old editor versus reporter face off on stories, that were a hallmark of almost every good newspaper through the 1960’s till the mid 1990’s at least, have been replaced in entirety by ‘management policy’ that guides the editorial content so that it does not impact on other businesses and on advertisement flow. As senior editors like Kuldip Nayar have often pointed out, “today journalists crawl even if they are asked only to bend”. This is because the scribe does not have a choice. He is caught between reporting the truth, and a jobless existence on the other side. Most compromise, and toe the line without question. However, as the current spate of dismissals proves this too is often not enough. It might be recalled, however, that every media house attributing the dismissals to losses pay huge salaries to a select group of scribes usually based at the headquarters. These figures are mind boggling, and are paid to those who generally have a good and sound line to the government of the day. The more capable of these journalists that form the central core manage to shift loyalties with governments, having perfected the art as it were. The compensation is huge salaries with or without even having to write on a regular basis. There is a certain rot that has set in, crippling journalism and violating the rights of working journalists. The profession is being turned into a supplicant of authority, with journalists unable to resist the pressure in real terms. Journalistic bodies that are in existence have not proven equal to the task of protecting the scribes from such controls--- that hinge on economic livelihood of the reporter and the family he or she supports--- with the professional editor-in-chief having been replaced in almost the big media houses by the money bags. And the appointed editors doing the bidding, or else facing the proverbial ‘notice on the door’ asking them to leave as per immediate effect. A senior journalist and editor of the Times of India, who has sadly died in recent months, was never really able to shake off the reputation of siding with a big newspaper management in the 1980’s to introduce the contract system. This really turned the tables on the working journalists, and ensured that the power moved almost irretrievably to the ‘management floor.’ Several ‘editors’ have since sat over large scale dismissals of working journalists who are often unable to find another job because of the created glut in the ‘market’. All these worthies draw big salaries, and enjoy the confidence of the management so long as they oppose the rights of the working journalists, and exert pressure on the employees usually drawing a fraction of their salaries. News is thus reported under pressure, with a phone call from the government of the day ensuring a virtual ‘black out’. Often the management well versed in the kind of news that should be projected, exercises the pressure, with the recalcitrant journalist in the chain being pushed out to ensure smooth functioning of the apparatus as it were. There are numerous examples of such pressure across the media industry, most that go unreported but are well known to the insiders. Large scale sacking is not frequent, but now not unknown either. It speaks of the times, and of the fear that is almost pervasive in the media however, that despite hundreds being rendered jobless without notice since December into January this year, the media managements are able to get away with this violation of basic working rights without even a murmur of real protest.Lens on Rs 10 lakh crore high-value deposits after demonetisationAuthor: Sidhartha, TNNPublication: The Times of IndiaDate: February 5, 2017URL: middle class and rich seem to have made nearly two-thirds or over Rs 10 lakh crore of deposits in the old Rs 500 and Rs 1,000 notes during the 50-day demonetisation window, using over one crore bank accounts.Although the scale of deposits has surprised even the tax department, it is making an allowance for institutional deposits — from cooperative banks and finance companies to businesses and government departments and other agencies — as it sieves through the data to spot suspected black money which was put into bank accounts. As a result, the initial round of scrutiny on "suspect" deposits is limited to 18 lakh accounts where over Rs 5 lakh were deposited and the stack added up to nearly Rs 4.2 lakh crore for which e-mails and SMSes are being sent out.Sources told TOI that with data analytics company on board, it will do a more detailed splicing of bank account details as well as loan repayments that were made in cash. "It is not going to be a one-off exercise, we are going to analyse the huge pile of information that we have received over the next 18-24 months and catch whoever sought to misuse the system, while ensuring that the honest are not harassed," said a senior revenue department official.Officials said the government realises that it has a challenging task at hand and is nudging people who have deposited large amount of cash to come forward and make use of the disclosure scheme for unaccounted funds. The numbers accessed by TOI are on the lines of those shared by finance minister Arun Jaitley in his budget speech. The minister had said that deposits of Rs 2 lakh to Rs 80 lakh were made in about 1.09 crore accounts with an average deposit size of Rs 5.03 lakh.Deposits of more than 80 lakh were made in 1.48 lakh accounts with average deposit size of Rs 3.31crore. The numbers were also meant to address criticism that the several poor people were displaced by an exercise that caused tremendous hardship and did not yield any significant amount of black money.Elections will expose Modi's gamble with India's economyAuthor: Kamal Mitra Chenoy @KamaIChenoyPublication: Dailyo.inDate: February 5, 2017URL: Goa, the anti-noteban sentiment I observed against the PM and BJP was overwhelming.The very high turnouts in the Punjab and Goa elections, of 78 per cent and 83 per cent, respectively, are a clear example of anti-incumbency.In both states, the ruling SAD-BJP coalition in Punjab and the BJP in Goa appear to be on the way out. In Punjab, the AAP has emerged as a major force battling the Congress.Though Captain Amarinder Singh is the foremost leader in the state, the Arvind Kejriwal-led AAP has made major inroads into the dominant Malwa region, and among Punjabi Hindus, Dalits and, of course, the Sikhs.A major issue in both states is demonetisation. In Goa, for 14 days ending on January 9, the anti-noteban sentiment I observed against PM Narendra Modi and the BJP was overwhelming.Though defence minister and former Goa CM Manohar Parrikar campaigned hard and long in the state, he is unlikely to be able to turn the tide.Other issues such as stoppage of the English language stipend in schools are very unpopular, and the Roman Catholic Archbishop was highly critical of poor governance in Goa.Here, since AAP is a new force without sufficient influence in the panchayats which are a critical political-social force, the Congress appears to be ahead. But since there are many small parties in the fray, there could be a hung Assembly.And Punjab? AAP started with a bang. Thereafter there were a number of fissures culminating in 30 important AAP leaders leaving the party, including Dharamvira Gandhi, MP, and Sucha Singh Chottepur, then AAP's Punjab convener.This stalled AAP's momentum but Kejriwal along with local leaders like the charismatic Bhagwant Singh Mann and HS Phoolka, a noted campaigner for justice for Sikh victims in the 1984 riots, rejuvenated the AAP campaign.Rahul Gandhi stalled the announcement of Amarinder Singh as the CM candidate, weakening the Congress campaign. So what will emerge?Many commentators think AAP has the edge. But a 2 per cent shift in votes can mean a major swing.The very high turnouts in the Punjab and Goa elections, of 78 per cent and 83 per cent, respectively, are a clear example of anti-incumbency.In both states, the ruling SAD-BJP coalition in Punjab and the BJP in Goa appear to be on the way out. In Punjab, the AAP has emerged as a major force battling the Congress.Though Captain Amarinder Singh is the foremost leader in the state, the Arvind Kejriwal-led AAP has made major inroads into the dominant Malwa region, and among Punjabi Hindus, Dalits and, of course, the Sikhs.A major issue in both states is demonetisation. In Goa, for 14 days ending on January 9, the anti-noteban sentiment I observed against PM Narendra Modi and the BJP was overwhelming.Though defence minister and former Goa CM Manohar Parrikar campaigned hard and long in the state, he is unlikely to be able to turn the tide.Other issues such as stoppage of the English language stipend in schools are very unpopular, and the Roman Catholic Archbishop was highly critical of poor governance in Goa.Here, since AAP is a new force without sufficient influence in the panchayats which are a critical political-social force, the Congress appears to be ahead. But since there are many small parties in the fray, there could be a hung Assembly.And Punjab? AAP started with a bang. Thereafter there were a number of fissures culminating in 30 important AAP leaders leaving the party, including Dharamvira Gandhi, MP, and Sucha Singh Chottepur, then AAP's Punjab convener.This stalled AAP's momentum but Kejriwal along with local leaders like the charismatic Bhagwant Singh Mann and HS Phoolka, a noted campaigner for justice for Sikh victims in the 1984 riots, rejuvenated the AAP campaign.Rahul Gandhi stalled the announcement of Amarinder Singh as the CM candidate, weakening the Congress campaign. So what will emerge?Many commentators think AAP has the edge. But a 2 per cent shift in votes can mean a major swing.Narendra Modi's LS speech: Rhetoric aside, PM is bracing for demonetisation repercussionsAuthor: Sreemoy TalukdarPublication: Date: February 7, 2017URL: is no doubt that Narendra Modi is an orator par excellence. He adjusts his tone in accord with the audience and can alternate between statesmanlike addresses and scathing jibes with élan. His communication skills and deft handling of oratorical tools allow him to draw blood from his targets even as he demands stunning admiration from listeners. Much of the popularity that he enjoys as a mass leader stems from his ability to influence the audience. And the prime minister is just as comfortable speaking within the confines of Parliament as he is off it.It wasn't surprising, therefore, to see him rip Rahul Gandhi to shreds once again while replying to the motion of thanks on President’s 31 January address. Modi lampooned the Congress vice-president's threat of "causing earthquake" if allowed to open his mouth and connected it to Monday's earthquake in northern parts of India. In December last year, Rahul had threatened to cause "a quake" with "explosive evidence of prime minister's personal corruption" which later turned out to be old allegations that the Supreme Court had found no merit in.Speaking at the Lok Sabha on Tuesday, Modi said: "There was finally an earthquake yesterday. While we will do whatever we can to aid those affected, I was wondering where did the quake come from? The threat was issued a long time ago. There must be some reason for Mother Earth to be so angry."In what should come as a veritable lesson to the Gandhi scion on the rules of public speaking, Modi took up his own poll acronym for UP Assembly polls that Rahul had sought to modify, and twisted the knife.In reply to Modi's jibe that 'S-C-A-M' in UP stood for 'Samajwadi Party, Congress, Akhilesh and Mayawati', Rahul tried to give it a new spin by defining it as 'Seva, Courage, Ability and Modesty.' Modi wondered in Parliament, on Tuesday, how on earth could someone see seva (service) in SCAM. Unwittingly perhaps, by seeking to subvert his message, Rahul was giving Modi's barb greater political legitimacy.These intricacies of political messaging were also evident in the way Modi targetted Congress leader of Lok Sabha Mallikarjun Kharge for uttering an unsavoury remark. Speaking on the floor of the House on Monday, Kharge said that when it came to patriotism, Congress leaders like Indira Gandhi had sacrificed their lives for the country while not "even a dog from BJP" could claim such feats. The Congress leader's barb was possibly aimed at reclaiming patriotism as a concept which the party feels has been usurped by the BJP.Modi chose to take the high moral ground on Tuesday, saying, "Hum kutton wali parampara se pale bade nahin hain" (We haven't been brought up in a tradition of sycophancy) and added that "there are many like me who were born after Independence and wasn't lucky enough to take part in the freedom struggle but have been living and working for India."He suggested that culture of sycophancy in Congress is such that everything is attributed to "one family".As mentioned above, these oratorical victories are easy meat for Modi since neither Kharge nor Rahul can hold a candle to him when it comes to public debate.While dissecting an orator's speech, therefore, we must read between the lines.In this regard, prime minister's defence of demonetisation timing is of special significance. In his addresses to the nation during and since the decommissioning of high value notes and in his plethora of public rallies since the move, Modi had never defended the timing of demonetisation in the way he did on Tuesday. He offered strong defence and said the post-Diwali timing was "perfect"."Some people have said why was this (demonetisation) decision taken when the economy was doing well… It was the best time as the economy was strong. Had it been weak, then we could not have done it successfully,” he said, proffering the analogy of operating on a patient."Before subjecting a patient to surgery, a doctor checks all the parameters and only when those parameters are fine, is the operation undertaken,” he said. Modi dismissed suggestions that it was done in a haste. "Don’t assume that Modi does anything in haste. For that you will need to study Modi."The post-Diwali time of 8 November was "perfect", said the prime minister, because the peak trading season of Diwali is usually followed by a natural dip in sales and the business cycle reboots. Modi said he was fully aware that the economy would face a contraction for 15-20 days and slowly return to normalcy after 50 days or so. "We are moving in the exact direction as envisaged," he said.Modi added that he was aware of the political risks but didn't lose his sleep over it since he wasn't "concerned about the elections" but about the country. The decision is a "movement to clean India (of corruption and black money) like Swachh Bharat," he added.He also defended the many changes in rules and regulations (some suggested it amounted to 150 or more during his speech) during the implementation and said it was done either to make life easier for citizens based on constant feedbacks or to outsmart the "looters" who are adept at subverting the system. He didn't spare the Congress for making it an issue, saying that UPA had quietly changed the rules that governed a social benefit scheme like MNREGA 1,035 times without even "half the pressure" of demonetisation.Despite the robust defence of his deeply disruptive policy, it appeared that Modi is acutely aware of the repercussions that face BJP during the ongoing Assembly polls. His painstaking justification of the move indicated that he expects some sort of an adverse effect, hence the repeated stress that he "didn't do it for political benefit".That may well be true.Demonetisation may have long-term advantages and in the long run our economy may emerge cleaner, stronger and more compliant to taxes. But for all his charisma and long-term planning, Modi cannot ignore the urgency of the moment. If BJP loses in UP, for the first time in his tenure his leadership will come under a lot of questions.Modi's speech showed today that he is aware of that possibility.'You Will Have To Study Modi,' Says Prime Minister To Critics Of Notes BanAuthor: Raija Susan PanickerPublication: Date: February 7, 2017URL: The economy was strong and the timing of the notes ban was perfect, PM Modi said in parliament today, in a detailed defence of his decision to abolish 500 and 1,000-rupee notes in November last year, aimed at eliminating corruption and black money. Congress governments before his would have done it, PM Modi said, if there was any electoral benefit to be derived. The PM's address comes in the middle of crucial assembly elections in five states and just ahead of voting for the first of seven phases in Uttar Pradesh.Replying to a motion of thanks to the President's address at the start of the Budget session, the Prime Minister hit back at opposition leaders who criticised the notes ban in their speeches during the debate. "You would have done this first, but this is not about keeping the seat of power, it entails a lot of hard work, so was not a priority for you. No worries. We do not shy away from work," PM Modi said.He countered critics who have accused him of taking a hasty decision by saying, "Nothing was done in haste. To understand that you will need to study Modi." The ban, he said, was timed to coincide with the slump that follows a peak in trade during the Diwali festival. "We calculated that this would be the least disruptive time and the maximum impact would be over within 50 days. Our calculation was accurate," the Prime Minister said. He was often asked, he said, why he had made the sudden decision to scrap high value notes when "things were going fine." It was a preventive step at a time when the economy was resilient, the PM said, asserting, "for demonetisation, this was the most opportune time. India could handle it best at this time."The Congress' Mallikarjun Kharge had on Monday demanded that PM Modi apologise for the notes ban, which he said had caused people untold misery. Mr Kharge was supported by leaders of other opposition parties.PM Modi said the notes ban has "cleansed India, ended the shadow economy," underscoring that "the strength of a policy is dependent on intent. If the intent is harmful, the policy goes into minus, not just zero."The steps he said were not sudden, reminding the house that the Supreme Court had asked why successive governments had done nothing to curb black money. "We took it very seriously" and worked towards it, he said. Rival parties have taken demonetisation to the election battleground, accusing the government of punishing the poor rather than the corrupt with the cash crunch that followed the notes ban announcement on November 8 last year, which took out 86 per cent of the cash in circulation. The currency shortage hit the rural poor and the middle class, farmers and small traders hardest and the government has admitted that it has also caused a slowdown of the economy, promising that will not spill over into the next year. The elections in five states all through February and into March are the first big electoral test that the ruling BJP faces after the notes ban. It has credited gains in by-elections and civic polls to PM Modi's firm steps against corruption, saying these are a signal of the people's support for the move.700 Maoists Have Surrendered Post Notes Ban: PM Modi In Rajya SabhaAuthor:Publication: Date: February 9, 2017URL: 700 Maoists have surrendered post-demonetisation and funds to terrorists in Jammu and Kashmir have been choked, Prime Minister Narendra Modi said in Rajya Sabha on Wednesday, while insisting that the note ban has had a direct impact on naxalism and terrorism. Replying to the debate on Motion of Thanks to the President's Address, he said cash as well as fake currency is used in promoting terrorism and naxalism. "In the last 30-40 days (after demonetisation), over 700 Maoists have surrendered in the country. The process is on," he said. He went on to add: "It cannot be that nobody in the House is satisfied with the surrender of Maoists. How can it be? But if it is not, then there is some other meaning to it." The Prime Minister said some people are "jumping up and down", saying Rs. 2,000 notes were found on terrorists. "We should know that in the post-note ban period in the country, there were attempts to loot banks and take away new currency notes, especially in Jammu and Kashmir because they (terrorists) were facing difficulties in carrying out day-to-day activities post demonetisation," he said. He said terrorists killed a few days after banks were looted in J&K, were found possessing new currency. "This has a direct link. We should understand," he said. He said the counterfeit currency used in the economy could not reach banks due to demonetisation. "When the decision (of demonetisation) was taken on November 8, there was no question of fake currency coming back. Fake currency was neutralised there and then. Therefore, if somebody has a record of it, I wonder how. The fake currency was neutralised at that time itself," he said. To press his argument, PM Modi also made a mention of TV reports about suicide by a trader engaged in fake currency notes business in an "enemy country", an apparent reference to Pakistan. "You must have seen a television report. People in our enemy country running fake currency business had to commit suicide," he said. PM Modi also noted that today black money, terrorist organisations, fake currency business, drugs trade, hawala trade have entered various streams of life and thus their reach has widened. He said it is correct that cash is essential for the country's formal economy and the Rs. 1,000 Rupee notes were not going into the formal economy and a less number of 500 rupee notes were going. "Now since such a big amount of currency has come to the banks, it will increase their capacity to lend to the common man," he said.It’s time Modi government said demonetisation was a mistakeAuthor: Rajesh MahapatraPublication: The Hindustan TimesDate: February 13, 2017URL: Minister Narendra Modi thinks he couldn’t have picked a better time to demonetise the economy. Speaking during the motion of thanks on the President’s address to Parliament, Modi used the analogy of medical surgery to defend his decision. No matter how critical, a surgery is carried out only after ensuring the patient is scoring fine on vital parameters such as blood pressure, heart rate etc. The Indian economy was in good health when the government decided to scrap Rs 500 and Rs 1,000 notes, Modi said. Also, it was done at the risk of minimal disruption because it came days after Diwali, when the economy usually enters a lull phase. That is why, he argued, the government could successfully implement what has now come to be known as the biggest disruption in India’s financial history.Given that this was the first time the prime minister spoke on demonetisation in Parliament, one expected he would support his claim with hard data and empirical evidence. Unfortunately, he didn’t. He didn’t because he can’t. Because, the economy was as shaky at the time of the note-ban decision as it was when Modi came to power in May 2014.Data available now suggest industrial output contracted in as many months as it grew during the January-October period last year. More importantly, November had seen a sharp increase – 5.7% – raising hopes that the economy was finally turning around. This was also reflected in exports, which had picked up a sustained momentum through September and October, after a roller-coaster ride for nearly two years.Non-oil imports also tracked a similar trend. These green shoots of a smarter economic recovery were also mirrored in business confidence. According to industry body FICCI, which routinely conducts a survey of its member companies, business confidence had picked up between April and September. Companies were beginning to explore investing in new projects – sluggish private investment has kept the broader economy from growing faster.In such a scenario, the economy needed measures that would bolster sentiments and sustain the momentum. Demonetisation, it would be difficult to argue, was one such measure. Latest government data on industrial production show factory output contracted 0.4% in December; exports slipped nearly 15% month on month; and FICCI’s quarterly business confidence index dropped to 58.2 in October-December period compared to 67.3 in the preceding quarter and a high of 72.7 when Modi became prime minister. Data on job losses and other effects have yet to come in, but it would be fair to say the story would not be any different there.Another way to look at the strength of the Indian economy at the time of note-ban decision is to place it in a global economic context. Crude prices had begun to firm up and foreign investors in the stock and bond markets were beginning to pull out as part of a worldwide trend in which capital was moving out of emerging economies to safer financial markets such as the United States. In October, FIIs pulled out more than Rs 5,000 crore. That number jumped to a monthly average of Rs 13,000 crore after demonetisation. Such flight of capital, coupled with rising crude prices, tends to weaken the rupee and add to inflationary pressures. Last week, the Reserve Bank of India refrained from cutting its key lending rate. The central bank fears inflation — which dipped temporarily because of the cash crunch after demonetisation — may rise again.One of the biggest expectations from demonetisation was that it would help reduce interest rates. There has been some softening, but not enough to accelerate growth in credit and investment flows. And the stance taken by RBI means any further reduction is ruled out for now.There was nothing right about the timing of demonetisation, just as there was never an economic rationale for the decision. It is time the government acknowledged it made a mistake.- The author is Chief Content Officer, Hindustan?Times.5.3 lakh taxpayers explain cash depositsAuthor: Special CorrespondentPublication: The HinduDate: February 13, 2017URL: 5.27 lakh out of a total 18 lakh taxpayers, who have been sent digital queries by the income tax department over large cash deposits made in scrapped high-value currency notes, have responded to the income tax department with explanations about such deposits. These responses were filed on an online portal within a fortnight of its launch.“The explanation of cash deposit submitted by the taxpayer is being analysed in the context of nature of business and business profile in the earlier returns of the taxpayer,” the Finance Ministry said on Monday. This e-verification exercise was conducted for large cash deposits made between November 8, 2016 and December 30, 2016.Under the ‘Operation Clean Money’ launched at the end of January, the IT department has sent queries to 18 lakh taxpayers via e-mails and SMS. The last date for submitting responses has now been extended up to 15th February, 2017 to allow taxpayers to avoid enforcement actions under the Income Tax Act and other applicable laws.“The operation has seen an overwhelming response and till 12th February, 2017 more than 5.27 lakh taxpayers have already submitted their response. Out of the 7.41 lakh accounts confirmed by the 5.27 lakh taxpayers, the cash deposit amount has been confirmed in more than 99.5 per cent accounts,” the statement said.Further, these taxpayers have increased the cash deposit amount in nearly 90,000 accounts and provided details of additional 25,000 bank accounts in which cash was deposited, according to the income tax department.Around 4.84 lakh taxpayers have not yet registered with the e-filing portal and fresh messages have been sent on their mobile numbers even as the department is keeping a vigil on PAN card holders who have still not registered on the e-filing portal or who have not yet submitted their online response.Demonetisation, higher fuel see SpiceJet Q3 net profit plunge 24% to Rs 181.1 croreAuthor: TNNPublication: The Times of IndiaDate: February 14, 2017URL: cost carrier SpiceJet on Tuesday reported a profit of Rs 181.1 crore in the quarter ended December 2016, down 24% from a profit of Rs 239.9 crore in the same quarter in previous fiscal. The airline said that demand in the quarter had softened "due to demonetisation.""Profits for the quarter were impacted by demonetisation and higher fuel prices," the airline said. The airline recorded a load factor of 90.7% for the quarter, the highest in the industry, and had highest on time performance across metros."We have reported our eighth successive profitable quarter despite headwinds. Our... aircraft order signifies the end of the turnaround phase for SpiceJet and marks the beginning of a growth story. This order will help build an even stronger and more profitable airline. We will be relentless in reducing our costs and identifying new avenues for revenue generation," said SpiceJet chairman Ajay Singh."The company's total liabilities exceed its total assets by Rs 65,154.4 lakh as of December 31, 2016. These conditions... indicate the existence of a material uncertainty that may cast significant doubt about the company's ability to continue as a going concern," the airline's auditor, S R Batliboi and Associates, says in its limited review.The LCC's total income from operations in Q3 was Rs 1,642.4 crore, up from same quarter in previous fiscal's figure of Rs 1,459.9 crore. However, fuel cost rose to Rs 473.7 crore this Q3 over Rs 366.6 crore in Q3 FY 2016.Rising oil prices have started seriously denting the profitability of Indian carriers. Jet Airways reported a net profit of Rs 142.4 crore in the quarter ended December 2016, -- down 70% from Rs 467.1 crore in same period last fiscal. Low cost carrier IndiGo saw its Q3 FY 17 net profit fall at Rs 487.2 -- down 25% from Rs 650.3 crore in same period previous fiscal.The art of policymakingAuthor: Ashok V. DesaiPublication: Indiatoday.inDate: February 10, 2017URL: PM's advisors are mistaken. Cash may be the medium, but black money resides not in any asset, but in a transaction.The prime minister is a very popular speaker. He is great on the hustings; some may say he is a superb rabble-rouser. but that would be unparliamentary language. Anyway, he is good at it; the names he calls his opponents may be impolite, but are memorable. The prime minister has practised a different art of communication, though, in his weekly radio talks.That said, somehow he has been economical when it comes to speaking in parliament; the number of times he has spoken in the two years since he was elected can be counted on the fingers of one hand. So his speech at the end of the debate of the president's opening speech was quite an event. Perhaps he realises that the lower house is not functioning as it should, that its negative atmosphere needed a positive note.He reeled off his government's achievements. Now this is not something that happens often. The recessive Narasimha Rao used to speak little; he used to leave it to his finance minister to explain what the government was doing, and boast about what it had done. That tradition was followed by Atal Behari Vajpayee and Manmohan Singh. In Modi's time too, the finance minister has been the mouthpiece. But the prime minister travels a lot and meets many; maybe he has read the mood of the nation, which is none too upbeat after demonetisation.The prime minister picked up the issue. He was told that black money is stashed in jewellery and property; but for him, it all begins with cash: whoever buys such assets has to pay cash, for payment by cheque or draft will create a record that will make tax evasion difficult.But his advisors are mistaken. Cash may be the medium, but black money resides, not in any asset, but in a transaction. If a part of its sales value is not disclosed to tax authorities, that part is called black money. But it is a sum, not an asset; the undeclared part may be settled in any asset. Once an asset is sold, there is no way of tracing the black money used to buy it. If the government wants to curb black money, it can take powers to buy up assets at their declared value, or it can insist that assets must be publicly auctioned. The prime minister can try that, but it will not make him popular, and it will land his government in great trouble. It will be saddled with thousands of properties, and will not know how to keep track of them and sell them off; and auctions will simply not work in small places where there are not enough buyers and sellers. If the prime minister is keen on taxing property, he should levy an annual tax, based on the value of the property. it will not be easy; absent markets will make it difficult to determine the value in many places, and people of limited means, who live in their only property, will find it difficult to pay tax. But that is how it is done in industrialised countries; that is how the prime minister will have to do it.It is not unusual for advisors to be wrong. anyone can get economics wrong. even where there is no mistake, there are often many policy options, and choosing one requires judgement. This is why the finance ministry has had an economic advisor ever since i.g. Patel was borrowed from the international monetary fund in the 1950s. When i was economic advisor, i did not put all my trust in my judgement; before the budget, i would call in a dozen or so of india's best economists to meet and advise the finance minister. Prime minister vajpayee did even better; he met a dozen good economists, including me, once a month. Narendra Modi also needs to consult, not just economists, but knowledgeable people with differing views.- The author is a former economic advisor to the government of India.Demonetisation unnecessarily demonised: Aditya PuriAuthor: PTIPublication: Date: February 18, 2017URL: , who heads the second largest private sector lender HDFC Bank, concurred, saying, "demonetisation is being demonised for nothing" and listed several positives from the move.A day after Rajiv Bajaj lashed out at the demonetisation exercise, industrialist Anand Mahindra and banker Aditya Puri today stood by the government, saying the move has created transparency but is unnecessarily demonised."He (Prime Minister Modi) has created transparency and traceability. He has changed the mindset (in such a way that) everybody is going to think twice about going back to their old ways and from what I understand, the conversion to digital has occurred at a pace much faster," Mahindra said at the annual NILF here.Puri, who heads the second largest private sector lender HDFC Bank , concurred, saying, "demonetisation is being demonised for nothing" and listed several positives from the move.It may be noted that speaking at the same event yesterday, Bajaj Auto managing director Rajiv Bajaj had said it is incorrect to blame the government for bad execution during the demonetisation exercise, saying the idea to ban high value notes was itself "wrong".The positives of demonetisation drive listed out by Puri included more money in the system, a wider tax base, lower interest rates with possibility of going down further, greater transparency and cost reductions in the system.Improvising on yesteryears' Bollywood actor Dharmendra's famous dialogue 'Chun chun Ke maroonga' to 'Chun chun ke nikalenge', Mahindra, who termed Modi as a "practical man", said the government may not have succeeded in getting a windfall out of the exercise but will get "somewhere" to bridge the deficit.Puri explained that depositing money into bank accounts does not legitimise it and added that the government will be using data science to get to the wrongdoers and called this a "big idea".Mahindra said corruption is "virtually non-existent" in the corridors of power in New Delhi under the present Modi regime.Drawing from his recent field visits, Puri asserted that agricultural activities have not been affected because of the demonetisation exercise."The sowing was at a record level, let us be very clear about this, agriculture did not suffer," he said. Puri also dismissed notions of newer ways of corruption being found out because of demonetisation.It can be noted that industrial activity and consumption have been impacted due to the November 8, 2016 announcement of the Prime Minister to ban Rs 500 and Rs 1,000 currency notes, which accounted for 86 per cent of the outstanding currency in the system in a cash-dependent economy like India.The RBI had to resort to a cash rationing consequent to the move and the long queues because of it led to over 80 deaths in the country.Demonetisation was worst idea ever (and government silence proves that)Author: Anshuman Tiwari @anshuman1tiwariPublication: Dailyo.inDate: February 19, 2017URL: print of Budget and Economic Survey reveals that there are no numbers to back tall claims.Demonetisation, India's boldest idea against the empire of black money, was never expected to terminate in deafening silence. The much-anticipated Union Budget followed by the RBI's monetary policy has passed mutely without giving an iota of information on the impact and result of the noteban exercise.However, reading the fine print of Budget and Economic Survey numbers reveals certain significant facts, which explains why the government resisted speaking on the consequences of India’s most excruciating reform.Can’t measure, can’t manageIf you can't measure it, you can't manage it, goes a saying. Finance minister Arun Jaitley himself declared in November that there is no reliable estimation of black money or cash in black revolving in the system.If that is the case, the government was further expected to explain on what grounds the decision to withdraw Rs 500 and Rs 1,000 notes was taken.If we go by the Economic Survey, the decision was taken on the basis of soil rate (the rate of soiling of notes as well as physical damage to them). The soil rate shows how often the notes have changed hands.The soil rate is 33 per cent for notes below Rs 500 denomination, RBI data showed. It means 33 per cent of notes below Rs 500 are replaced every year. The soil rate of Rs 500 notes is 22 per cent whereas that of Rs 1,000 notes is 11 per cent.The survey, by using relative soil rates for the $50 and $20 bills and applying them to comparable Indian high denomination notes, concluded that there were high denomination notes of Rs 3 lakh crore which were rarely used in transactions.Can this amount be taken as black money, which amounts to 2 per cent of GDP?The survey is silent on the answer, although it logically explains the difference between black money and white money:White Money: It is the money stored in households for emergencies or for giving salary in cash to employees, the payments and receipts of which they declare to tax authorities.Black Money: Black money is when small enterprises pay for input in cash but do not declare the transaction to tax authorities. The unaccounted cash stashed by businessmen to distribute to their favoured candidate during election campaigns is also considered black money.At sixes and sevens The Budget figures do not seem to be hitting the noteban targets. Tax figures do not hold any promise of giving extraordinary windfall, even though the figures show that the growth rate in tax collection will be high.After the noteban, the advance tax payment increased by 35 per cent. Next year an increase of 25 per cent in tax collection is expected. If the figures turn out to be correct, in the next two years, an amount of Rs 1.5 lakh crore can be added to the total tax collection.Much before RBI governor Urjit Patel's advice, the RBI developed a thick skin on the results of demonetisation. There are no figures available of any huge dividend coming from the RBI, as the bank is muted on how much money has been left outside the banking system in the form of big notes.Collateral damageAfter endlessly reiterating that the noteban has not created an economic slowdown, the government has finally accepted that growth has been derailed. The Economic Survey shows growth rate will fall by 1 per cent in the current (2016-17) year from last year’s rate of 7.6 per cent.The Economic Survey concedes that the noteban has severely hit agriculture and the unorganised sector, and the government has no estimates for these losses. The final reckoningBecause the noteban was a monetary decision, its gains and losses should also be reckoned in numbers. After combing through the Economic Survey, we get only two sets of reliable numbers about it:Gain: In the next four months to one year, an additional growth of Rs 1.5 lakh crore in tax collection can be hoped for.Losses: In 2016-17, there will be a loss of about 1 per cent to GDP because of the noteban, which comes in at around Rs 1.5 lakh crore.To put it in perspective, the increase in tax revenues gets balanced by loss in GDP of the formal economy.Note that indirect losses, cost of printing new notes and the interest on issuance of bonds for liquidity management, have not been added here.In the light of these numbers, no economic expertise is required to understand - itna sannata kyu hai bhai!Here’s why mobile money is dramatically reducing poverty in KenyaAuthor: Robert GebelhoffPublication: The Washington PostDate: December 22, 2016URL: Tavneet Suri, an economics professor at MIT who grew up in Kenya, much has changed in her home country over the past decade. What used to be an economy relatively closed off to the rest of the world is now a one where the vast majority of people are paying bills and sharing money with one another through cellphones.“It’s baffling to me,” Suri said in a phone interview. “I’m just like, ‘Oh my God, how did we get here?’”For the past decade, Suri has been studying the development of mobile banking in Kenya and how it is rapidly altering the ways people save money and interact with each other in times of need. In a study published in the journal Science this month, she and her co-author have shown just the potential of the technology, lifting a staggering 194,000 Kenyan households — 2 percent of the country’s population — out of extreme poverty, defined as living on less than $1.25 a day. [Microcredit isn’t dead] This is the first study detailing the decade-old technology’s impact on poverty — specifically how it encourages saving, reduces transaction costs and offers an option to find funds in the case of an emergency. But that doesn’t mean mobile money is the solution to extreme poverty. It’s important that we carefully examine exactly why Kenya’s experiment was so successful to determine how it can benefit other countries.Development economics is an field of study filled with fool’s gold. Time and time again, programs are introduced to end poverty only to result in, well, about the same amount of poverty. For several countries, mobile money has been no exception; economists have long puzzled over why the model hasn’t been nearly as successful outside Kenya. It seems to have foundered in India, and earlier this year, Vodacom discontinued its mobile money services from South Africa after it failed to attract much growth.So what did Kenya get right? A couple of important things to consider:First, Kenya had the right regulatory environment. There were some considerable fears early on that mobile money wouldn’t be secure or that it would offer an outlet for money laundering or fraud. But the country’s central bank kept an open mind back when it was being piloted more than a decade ago. Because transactions are limited and because phones are protected by PIN passwords, fears that the technology would encourage crime never materialized.Second, Kenya’s mobile market is dominated by a single operator — Safaricom, a subsidiary of the U.K.-based Vodafone. Because so many people already had access to the company’s money-sharing product, called M-PESA, Safaricom was able to scale up mobile banking quickly and effectively. It also put a lot of investment into M-PESA early on and worked on getting the business model right before it took off.Finally, this is a product Kenyans need. While half of the population has a bank account, banks and other financial institutions are spread out and difficult to access. Mobile money offers financial services Kenyans ordinarily would not have.Nearby countries experimenting with this technology such as Tanzania, Uganda and Rwanda — as well as comparable countries further away, such as Afghanistan and Bangladesh — could see similar success by replicating M-PESA’s business model.A major takeaway is that access to financial institutions actually is really, really important. Economists often talk about “financial inclusion,” but the buzzword has lost its luster. After microcredit failed to deliver on its big promises to reduce poverty, the argument that the only thing people need is access to financial tools seems to be discredited. [Does globalization hurt poor workers? It’s complicated.] This latest research offers good evidence that having a place to put money that’s safe and easily accessible can make the lives of poor people considerably more efficient than cash-reliant economies. For many Kenyans, getting to a bank means having to walk kilometers. Before mobile banking took off, some people reportedly began trading airtime on their cellphones as a form of virtual currency to carry out day-to-day transactions. It shouldn’t be too surprising that upward of 96 percent of Kenyan households have quickly embraced the technology.“You have to look really hard and ask, ‘What problems are being solved?’” said Nick Hughes, who led the team that brought M-PESA from concept to scale. “Unless problems aren’t being solved, it becomes a bit of a hype.”For Hughes — who no longer works on M-PESA — mobile money is just the beginning. The technology offers opportunities to tackle other problems, such as making it easier for people to access clean energy, make insurance payments or send their children to school. Hughes is now working on another project he launched, called M-KOPA, which uses mobile banking to make solar energy more accessible for Kenyans living off the grid.Talk of “cashless societies” might be overblown, but societies in which digital transactions can be made seamlessly by all are by no means fiction. This is a good step for economic development and a sign that governments should encourage innovation that can solve problems facing people in extreme poverty.India consumer confidence hit ten-year high despite demonetisation: Nielsen surveyAuthor: Deepti GovindPublication: Date: February 21, 2017URL: in the confidence index in fourth quarter reflects strong economic, commercial performance at the end of third quarter and at the beginning of fourth quarter, says Nielsen’s Prasun BasuConsumer confidence in India rose to the highest level in 10 years in the December quarter despite the effects of demonetisation, Nielsen’s global consumer confidence index report showed on Monday. India retained its No.1 spot among the 63 countries surveyed, with its score increasing by three index points sequentially to 136. The Philippines (132 points) and the US (123 points) ranked second and third, respectively. An index reading above 100 points denotes optimism.Confidence in the Asia-Pacific region in the December quarter stood at 111 points, up two points from the previous quarter and led by India, which Nielsen called “a nation of determined optimists.”“The three-point increase in the confidence index in the fourth quarter reflects strong economic and commercial performance at the end of the third quarter and at the beginning of the fourth quarter, further benefited by the timing of the festive season, when confidence typically rises,” Prasun Basu, Nielsen’s South Asia president, said in the report.India scored the top spot in Nielsen’s survey for eight consecutive quarters until June last year when it trailed the Philippines. But it regained the position in the September quarter and has retained that lead in the December quarter.More than eight in 10 Indian respondents in the latest survey were confident about their personal finances (85%) and job prospects (84%) in the coming year, and nearly seven in 10 (69%) said they believe it is a good time to spend.“During the survey period, the Indian government announced demonetisation of high-denomination notes. While this move created short-term constraints for consumers, the long-term outlook is bullish–a sentiment clearly echoed in other Nielsen research and by a recently released study by the Reserve Bank of India–thus strengthening the overall confidence levels for the next 12 months,” Basu added.“For most FMCG (fast moving consumer goods) companies, the impact of demonetisation was in two broad areas - servicing the distribution channels and the hit on consumer demand. At the consumer level, the sales naturally declined due to the cash crunch. The staples did not see a sizeable impact; however, discretionary consumption did take a hit. This was, however, a short-term phenomenon. With the stable inflow of new currency, we are seeing a steady revival and expect improvement on a continued basis,” said Varun Berry, managing director, Britannia Industries Ltd.At a global level, Nielsen’s consumer confidence index was at 101 points in the December quarter, up two points from the previous quarter.Established in 2005, the Nielsen Consumer Confidence Index is filed quarterly in 63 countries to measure the perceptions of local job prospects, personal finances, immediate spending intentions and related economic issues of real consumers around the world.UP Election 2017: SP, BSP lose edge as ghosts of demonetisation fail to terrorise votersAuthor: Debobrat GhosePublication: Date: February 25, 2017URL: seems that the ghosts of demonetisation have failed to terrorise voters of Uttar Pradesh in the ongoing Assembly elections in the state, turning the electoral tide in favour of the Bharatiya Janata Party (BJP).The results of the Brihanmumbai Municipal Corporation (BMC) election in Mumbai also point towards this shift, proving that the grassroots voters in the country – perceived to be the biggest victim of Prime Minister Narendra Modi’s note ban – have trashed the opposition’s claims that demonetisation has jeopardised the country’s economy and public life.At the same time, political parties opposing BJP have failed to capitalise on the 'demon' that emerged out of demonetisation. Except for using ‘note ban and its ill-effects’ as a narrative in public rallies, opposition parties couldn’t build up on the issue, which seemed to have lost relevance amongst the common voters in Uttar Pradesh. Barring a few, the majority were not interested in discussing the demerits of the note ban.In the 53 Assembly seats, including 19 in Bundelkhand, where the fourth phase of polling took place on Thursday, if there was no clear Modi wave, or Samajwadi Party (SP), Bahujan Samaj Party (BSP) predominance; then there wasn't an anti-demonetisation wave either. Everything boiled down to caste factor alone.The picture is similar in other parts of the state as well. Only political leaders are desperately trying to push the note ban issue in public rallies with hackneyed statements – be it Uttar Pradesh Chief Minister Akhilesh Yadav, Congress vice-president Rahul Gandhi or BSP supremo Mayawati.The rhetoric, more or less, revolves around these few statements: “Modiji ne sabko line mein laga diya (Modiji made everyone stand in a queue)."“Pradhan Mantri ji ne gareebon ko, kisano ko, unke khud ke paison ke liye ghanto bank ki line mein khada kar diya (Prime Minister made the poor, the farmers, stand in bank queues for hours to get their own money)."“Note badalne ke chakkar mein, line mein khade khade, kai logon ki maut ho gayi (Many people died while standing in queue to get their currency notes exchanged)."This disparity between the leaders' agenda and the public response raises a few pertinent questions:What was the impact of demonetisation at the grassroots level?“The effect of the note ban among farmers and labourers was not much. It was the rich, with lots of unaccounted cash in hand, who faced the wrath of demonetisation. They used labourers to get their banned currency notes deposited in banks or get them exchanged. During the ongoing election, nobody is bothered about the note ban issue and it’s the political parties who are using the rhetoric to prevent voters from voting for the BJP," Jhansi-based journalist Santosh Pathak remarked."The poor man, who was not affected by the note ban, is however angry at the fact that the rich people and the politicians successfully got their unaccounted money exchanged by circumventing the rules imposed after demonetisation,”“The general public is well aware of the facts. During the last four phases of polling, we have seen that every issue boiled down to religion, castes and sub-castes,” Pathak said.Jawahar Lal Rajpoot, a farmer-activist, contesting from Jarotha as a BJP candidate, said, “Initially, there were some difficulties, but they got over in about two weeks. The fact is that small farmers hardly have any cash on them, so it’s not them but those with black money who faced problems. Black money hoarders, including many politicians, created this myth of the suffering farmer.”Why note ban failed to become a major poll issue? Contrary to popular belief and perception that poor people, labourers and farmers had to stand in long queues in front of banks for hours to deposit their banned currency notes or get them exchanged, the ground report reveals otherwise.Firstpost spoke to a large section of people across Uttar Pradesh to know why the SP-Congress alliance and BSP had failed in using the note ban as ammunition against the BJP.“Public sab jaanti hai, aur yeh neta unhe bewakoof na samjhe (Public knows everything and these leaders shouldn’t take them for granted). Despite RBI circular to help farmers, the local banks, especially Allahabad-UP Gramin Bank failed to provide cash to farmers. It’s because these bank branches ensured to disburse large sum of cash to rich and powerful people of the area, and not to farmers. Everyone has understood that demonetisation move was not bad, but it was the functioning of bank branches that gave the move a bad name,” quipped Brahmadutt Pandey, a farmer from Atharra in Banda district of Bundelkhand.“The local banks should be taken to task for improper implementation of RBI orders. But, on the other hand, the local banks situated in villages and tehsils can’t do much as they have to listen to local MLAs and political heavyweights. These people withdrew new banknotes in large amounts and the poor failed to get any money,” Amrendra Sinha of Kanpur said.If farmers and labourers had suffered due to note ban, why are they unmoved by the issue? “Immediately after the note ban was announced, the local market where daily wagers gather in the morning was almost empty, for nearly a month. The daily wagers were hired by builders and many politicians to stand in bank queues to exchange old notes for them. They were paid Rs 500 per day and at some places 5-10 percent was paid as commission for the job. So, the queue that these SP, BSP and Congress leaders are referring to, actually belonged to these rich and mighty. Even the SP MLA from Jarotha, Deep Narayan Singh Yadav, got labourers from adjoining districts and provided food and shelter to them for almost a month, so that they could stand in queue on his behalf,” alleged Sachin Chaturvedi, an entrepreneur from Jhansi.An Allahabad-based jeweller, on conditions of anonymity, said, “If the note ban has really impacted anyone, it’s these politicians. That evening when the prime minister announced it, these politicians rushed to the jewellers with huge sums of cash and bought gold in large quantities. And, now these politicians are claiming that the poor and the farmers were worst hit by the move. They can’t fool voters anymore by creating a false perception,” Chaturvedi said.With four out of seven phases of polling already over, without any visible impact of demonetisation, it’s unlikely that the ‘demon’ of 8 November, 2016 will have any impact on the remaining three phases as well.Notebandi a non-issue as BJP sweeps local pollsAuthor: Kanchan GuptaPublication: The PioneerDate: February 26, 2017URL: larger point is the continuing decay and decline of India's only other (now increasingly notional) national party, as Rahul Gandhi leads it from disaster to unmitigated disaster. It voters are increasingly switching sidesThere was much excited chatter in Lutyens’s Delhi on how elections after Prime Minister Narendra Modi’s bold gamble with demonetisation would return a negative verdict for the BJP. The chatter, admittedly, was largely restricted to Opposition politicians and the usual suspects beggared by the overnight de-legitimisation of Rs 1,000 and Rs 500 notes. Sizeable wealth, illegitimately acquired, was wiped out this winter. What could be salvaged came attached with a fat bill.Senior journalists, orphaned by the passing of the Congress-led UPA regime, amplified that chatter, making common cause with rabble-rousers like Arvind Kejriwal, Mamata Banerjee and Mayawati. P Chidambaram was accorded space and time to put out spurious data. Every tuppenny economist was touted as an expert. Intellectuals known for their relentless acid rant against ‘neo-liberalism’ and economic growth as an index of development became raucous champions of GDP. Deprived of access to the corridors of power and denied the perks and privileges of being establishment hacks, these journalists extracted their revenge on Modi sarkar by playing Cassandra.Or so they thought. As did their patron politicians in the Opposition. The results that have come in so far of local elections, in both urban and rural areas, have proved them wrong. In Odisha, where the BJP had been floundering ever since it parted company with the BJD, the party has taken off on a steep trajectory, landing as a close second to its former ally and leaving the Congress a distant straggler. In Maharashtra, the BJP has demolished the Shiv Sena in Mumbai and swept the polls in other places.Notebandi seems to have had an opposite effect in Odisha, Maharashtra, Madhya Pradesh, Chhattisgarh, Gujarat, Haryana and Chandigarh — all the places where local body elections have been held since demonetisation. This indicates that nearly three years into his term, not only is Modi riding an extraordinary popularity wave, people are willing to repose their trust in him despite the turbulence and enormous difficulties caused by demonetisation.Let there be no mistake in understanding the phenomenal winning streak of the BJP. A revived and reinvigorated party organisation is no doubt to be credited, but the real credit must go to Modi. “We support Modi” is the common refrain among the masses. And that refrain is heard in the States where Assembly elections are on at the moment. Which is not to suggest that the BJP will necessarily sweep these polls too.Conventional wisdom has it that the Akali Dal-BJP combine is on its way out in Punjab; the BJP will hold on to Goa and upstage the Congress in Uttarakhand; and likely come to power in Manipur. Which leaves us with the biggest battle in this round of State elections: Uttar Pradesh. Halfway through the polls, the party bosses are upbeat and confident of ousting the Samajwadi Party from power in Lucknow. The amazing response to Modi at his rallies across Uttar Pradesh explains their confidence.How well or badly the BJP performs in Uttar Pradesh will also reflect the success or failure of Modi’s audacious social-engineering. It will also test the effectiveness of his many social welfare schemes. Victory in Uttar Pradesh will mean the BJP is no longer circumscribed by a narrow social base but has successfully expanded it to include non-Yadav OBCs and non-Jatav Scheduled Castes. It would also mark an endorsement for schemes like Jan Dhan Yojana aimed at including the poor in the banking sector for direct benefit transfers and providing them with free cooking gas, something which they could only dream about till now.If the local body elections are any indication, the Congress is on its way to extinction. Even if it were to scrape through in Punjab, it would be dishonest of the Congress’s central leadership, the party’s First Family and more so heir apparent Rahul Gandhi, to claim credit for it. Clutching on to a straw is an altogether different matter.The larger point is the continuing decay and decline of India’s only other (now increasingly notional) national party, as Rahul Gandhi leads it from disaster to unmitigated disaster. His unintelligent and unintelligible blather leaves even the most diehard Congress voter wondering whether it would be wise to switch loyalties. The gentle former Chief Minister of Delhi,Sheila Dikshit, who was named the Congress’s chief ministerial candidate for Uttar Pradesh and then unceremoniously abandoned as Rahul swung a deal with Akhilesh Yadav, agreeing to play second fiddle to Samajwadi Party, puts it down to the lad’s lack of maturity.Rahul will be 47 this year. At that age, people whose votes he seeks have lived more than half their lives, fulfilling onerous responsibilities. Immaturity is not a virtue that voters seek in their leaders; it is a liability. The voter today is aspirational and seeks inspirational leadership. With Rahul leading the Congress, it gets auto-rejected. This simple fact is not unknown to either Congress president Sonia Gandhi or the loyal retainers who crowd her court. It’s a recognised fact down the Congress hierarchy, such as it is, and among those who still take out a party membership.Yet they are reluctant to do the right thing: Tell the dynast that the fine robe he sees himself clothed in is no more than the imagination of an addled mind. It’s almost a death wish, a paralysis of the body and spirit. As a result, the Congress’s fortunes continue to sink and a party that once scripted India’s history is now reduced to a footnote of that history. “Congress-mukt Bharat” was a BJP slogan that has been rendered real by the Congress.This may delight those who despise the Congress for its venality. But it also leaves only one party, the BJP, at pole position at the national level. There’s only that much space vacated by the Congress at astounding speed which the BJP can occupy. The rest will be occupied by disparate regional parties who have no national vision and whose leaders’ views should alarm nationalists who wish to see India grow and prosper. Sadly, this realisation escapes both the Congress and its critics.- (The writer is commissioning editor & commentator, ABP News)Demonetisation’s impact on the corporate sectorAuthor: Manas ChakravartyPublication: Date: February 28, 2017URL: quarter results of Indian companies show little impact of demonetisation. A closer look, however, reveals a more nuanced pictureOverall corporate financial results for the December quarter, at first glance, show little impact of demonetisation. Consider these figures from the Centre For Monitoring Indian Economy (CMIE) database: net sales for companies in the non-financial sector (sample size: 3,356 companies) show a year-on-year (y-o-y) rise of 5.9%—the first positive growth since September 2014. Operating profit growth for the non-finance sector showed an increase of 21.5% from a year ago, the highest since the June 2014 quarter. For the manufacturing sector as a whole, sales growth at 7.5% is the highest since June 2014. For manufacturing excluding petroleum products, it’s the highest since September 2014. Operating profit growth for manufacturing excluding petroleum products has been a startling 30.4%, the highest y-o-y rate of growth since at least March 2012. These numbers seem to strongly suggest the concerns over the impact of demonetisation on the corporate sector were overblown.How did we get such extraordinary results? Look a bit more closely and a more nuanced picture emerges. Demonetisation did indeed hit the sales of companies in the consumer goods sector, with overall sales shrinking. It created havoc in the domestic appliances segment, with consumer electronics being the worst affected. It slowed growth in sales of passenger vehicles and two- and three-wheelers. Many services were affected, including business consultancy and recreational services. Even sales of food products showed lower growth.On the flip side though, there were many businesses that did well. For example, sales growth in the metals sector moved up sharply, no doubt due to rising prices. Sales of machinery too improved in the December quarter. Mining did very well. Rather surprisingly, the real estate sector showed good growth, due to the commercial complexes segment. Industrial construction, information technology (IT), chemicals all did better than in the previous quarter.What holds true for sales was also reflected in operating profits. Mining, metals, machinery and even real estate showed strong growth in operating profits, primarily because of the sharp contraction in profits a year ago, so the base effect was very positive. What appears to have happened is that consumer-facing sectors did badly, while companies in the industrial segments did much better, with a favourable base effect and a turnaround in metals prices being major factors.There is, however, another twist to this story: inventories piled up in the December quarter. The CMIE database shows that the increase in stocks of the manufacturing sector excluding petroleum products was the highest since at least March 2012. There was a substantial rise in inventory in the automobile, metals, housing construction and in the wholesale trading sectors. This pile-up in inventory, to the extent that they are finished goods inventory, would mean higher profits.At the same time, though, the sustainability of those profits would depend on whether the finished goods are sold in the current quarter. There would also be an element of sales being pushed by companies to dealers, so the final offtake of these goods by consumers in the current quarter would also matter. The question then is: how soon will consumer demand rebound from the disruption caused by demonetisation?Most analysts believe the lingering impact of demonetisation will continue to be felt in the current quarter. Opinion is divided whether we will then see a V-shaped recovery or a more sedate one, depending on one’s assessment of the demand destruction in the informal sector. The initial disruption caused by the introduction of the goods and services tax (GST) in the next fiscal year needs also to be weighed.We do, however, have a handy tool to gauge the consensus opinion of analysts. The Bloomberg consensus EPS (earnings per share) estimate for the Sensex was Rs1,540 for FY17 and Rs1,848 for FY18 as on 8 November when demonetisation was announced. Currently, this estimate for FY17 is Rs1,435 and for FY18, Rs1,722. If we make the assumption that other factors haven’t changed, the fall in EPS estimates would be the impact of demonetisation. But of course, there are many other factors that have changed, especially the global outlook. Nevertheless, the downward revisions in EPS do suggest that the impact of demonetisation will linger on in FY18 as well.For investors, the rise in the equity market despite lower earnings estimates shows that the recent rally has been based entirely on an expansion of the price-earnings multiple, or higher valuations, underling the need for caution.Nevertheless, as far as the macro picture goes, Gaurav Kapur, chief economist at Indusind Bank, points out that the upbeat corporate results for the manufacturing sector will also be reflected in the manufacturing gross domestic product (GDP) estimates for the December quarter.- Manas Chakravarty looks at trends and issues in the financial markets. Respond to this column at manas.c@.India Fastest Growing Economy Despite Notes Ban, China Second: 10 UpdatesAuthor: Surajit DasguptaPublication: Date: February 28, 2017URL: 's GDP or gross domestic product growth fell to 7 per cent in the October-December quarter.India defied expectations today to remain the world's fastest growing major economy, despite the notes ban and its aftershock. GDP or gross domestic product growth however fell to 7 per cent in the October-December quarter, from 7.4 in the previous quarter, with Prime Minister Narendra Modi's surprise decision on November 8 to scrap 500 and 1,000-rupee notes or around 86 per cent of the currency then in circulation, putting economic activity on the skids in a predominantly cash-reliant economy. China was number 2 with its economy growing at 6.8 per cent in the December quarter.Here are 10 things to know:1) "There was just a temporary impact of demonetisation, which is over now. There was an overestimation about the effect of demonetisation by some. It is satisfying to note that this was not true. We still remain a 7 per cent-plus GDP country," said Economic Affairs Secretary Shaktikanta Das. 2) The central statistics office or CSO has retained its growth forecast for the fiscal year ending in March 2017 at 7.1 per cent. The December quarter GDP beat the estimates of economists; analysts polled by Reuters had forecast 6.4 per cent growth for the October-December period.3) The CSO's forecast for the year is higher than that of the International Monetary Fund or IMF, which has revised its estimate down for India's growth in the year ending March 31, 2017, to 6.6 per cent from 7.6 per cent earlier. But the IMF expects India's economic growth to rebound to 7.2 per cent in 2017-18.4) Industry bodies like the Federation of Indian Small and Medium Enterprises refused to comment on the growth projection, but maintained that they were hit by the notes ban. "The effect was two- fold - one was in carrying on our day to day activities like paying the workers, and then suddenly we found demand evaporated," said Anil Bharadwaj of the federation.5) Some economists predict the aftershocks of demonetisation will linger for months. The sale of two-wheeler vehicles, a proxy for rural demand, fell for a third straight month in January. Services activity plunged into contraction following the notes ban, and still hasn't recovered fully, while factory activity also declined in December before returning to a modest growth in January.6) "The GDP estimates significantly overshoot the expected figures and that's why I feel that the overall impact of demonetisation has still not been factored into these estimates. I expect the impact of demonetisation to linger on for at least another quarter or so, and based on that, I feel that the final GDP numbers would be significantly lower," said Upasna Bhardwaj, senior economist at Kotak Mahindra Bank.7) Today's data also backs the Reserve Bank of India or RBI's assessment, which has all along maintained that the slowdown caused by the cash ban is a transitory phenomenon and expects a sharp rebound in economic growth in the next fiscal year as cash conditions improve.8) The Indian economy expanded at 7.6 per cent in 2015-16 and at 7.2 per cent in 2014-15.9) The economy had grown at 7.2 per cent and 7.4 per cent in the first quarter (April-June) and second quarter (July-September) of 2016-17 respectively.10) The Economic Survey, which sees the Indian economy growing between 6.75 and 7.5 per cent in the coming fiscal year (2017-18), flagged a spike in oil prices, global trade tension and a spillover of the demonetisation as key risks to growth.New GDP Figures Have Economists Surprised, CautiousAuthor: Tushar DharaPublication: Date: February 28, 2017URL: new GDP estimate, which shows demonetisation had little or no impact on the growth trajectory of the country, has prominent economists surprised, while one speculated the growth in financial services thanks to the drive to go cashless may have offset other shortcomings. “It is a surprise... a pleasant surprise and I will have to look at the numbers carefully,” said NR Bhanumurthy, an economist with the National Institute for Public Finance and Policy.The Ministry of Statistics and Programme Implementation (MOSPI) on Tuesday estimated that the economy will grow at 7.1% in the fiscal year 2016-17. Tuesday’s release was the ‘second advance estimate’. The first advance estimate was released in January of this year.What has taken economists by surprise is that there is no difference in the estimate for GDP growth between the first and the second estimates, although the first one didn’t factor in the impact of demonetisation. The latest number is far higher than the Reserve Bank of India’s estimate of 6.9% and Chief Economic Adviser Arvind Subramanian’s projection of 6.5%.Govinda Rao, a former member of the Prime Minister’s economic advisory council and previous head of the National Institute of Public Finance and Policy, said he couldn’t hazard a guess as to what extent the MOSPI numbers reflect the impact of demonetisation.“I am not imputing any motives here. They must have worked with the data they had, but there are a lot of mysterious things in these numbers,” Rao told News18.He pointed out that the figures showed that private consumption has increased, whereas most data points since demonetisation have indicated that it has in fact decreased. Also, agriculture has been estimated to grow faster this year than the previous year, which Rao said may be an optimistic assumption.Abhijit Sen, economist and a former member of the Planning Commission, too was cautious. “Did the economy actually grow at the rate the government is saying? I don’t know, because these figures largely capture what occurred in the organized sector whereas demonetisation’s real impact was on the unorganised sector,” he said.However, Sen felt there were three reasons that could have helped the economy. The first was that tax collections in November and December were good. The second is that industrial production did not suffer too much and the third is that agriculture will probably grow faster this year than last year.Bhanumurthy said that the reason for the higher than expected growth could be that financial services could have grown at a faster pace because the withdrawal of cash may have forced people to switch to cashless means, pushing up the growth rate of the sector.All the economists that News18 spoke to said that the real picture regarding GDP growth will become clear when the full year figures come.Q3 Shock For DeMo Cassandras; How They Got It Wrong, And Why Q4 May Not Prove Them Right EitherAuthor: R JagannathanPublication: Date: March 1, 2017URL: will be many glum faces among demonetisation (DeMo) Cassandras, both in the political arena and in the ivory towers inhabited by macro-economists. Reason: both of them predicted dramatic drops in gross domestic product (GDP) growth, with former prime minister Manmohan Singh famously predicting a 2 per cent GDP loss, and Ambit Capital 3.3 per cent. Others gave decline figures ranging from 0.5 per cent to 1 per cent.The pessimists have lost this round. The third quarter (Q3) of 2016-17 growth numbers, which was bang in the midst of the DeMo crisis that peaked in November and December, have come as a shock to them. The feared de-growth is nowhere near as bad as they had imagined (or hoped) it would be. The figures, released yesterday (28 February), show a gross value added (GVA) growth number of 6.6 per cent, just 0.1 per cent below what was achieved in the previous quarter (Q2). And GDP growth (which is GVP plus taxes minus subsidies) was at 7 per cent, a 0.4 per cent drop from the second quarter’s 7.4 per cent, but still a respectable number given the dire forecasts given for the economy.India will probably remain the fastest-growing economy this year too, and the Central Statistics Office’s (CSO) second advance estimates for 2016-17 put GDP growth at 7.1 per cent, which would be 0.8 per cent below the revised figures for 2015-16 of 7.9 per cent.With Q1, Q2 and Q3 yielding GDP growth of 7.2, 7.4 and 7 per cent, it is statistically impossible for growth in the last quarter (January-March 2017) to collapse below 6.6 per cent for the whole year, even assuming GDP in Q4 hits a low of 5 per cent. On the other hand, with the cash crisis now well and truly over, the chances are the economy will do better in Q4 than how it performed in Q3. It makes no logical sense to claim that an economy will do worse when it is recovering than when it was reeling under a shock.To be sure, the pleasant surprise of 7 per cent in Q3 is said to be the result of two favourable factors – the revival in agriculture, which reported GVA growth of 6 per cent during the quarter, and the favourable base effect, with the third quarter of 2015-2016 fiscal year showing a dip in GVA over the second quarter, falling from 8.4 per cent to 7 per cent. Thus, the 6.6 per cent GVA growth in the 2016 third quarter was helped by the lower base of the previous year.But these blips do not quite explain why anecdotal evidence of a sharp drop in business, especially in the trade and informal sectors, has not significantly impacted the third quarter GDP numbers.In the eight sectors that the CSO classifies economic activity, only two (construction, and financial services, real estate, and professional services) reported a drop in GVA growth over the second quarter. While construction dropped from 3.4 per cent to 2.7 per cent, financial services and real estate dropped like a stone from 7.6 per cent to 3.1 per cent. These, clearly, were the direct impact areas of DeMo. The impact, clearly, did not carry through to the remaining six sectors.The Cassandras have now gone on to say that the real impact of DeMo may now come in the fourth quarter. Aditi Nayar of rating agency Icra has been quoted by Mint as saying that the early GDP estimates rely on figures from the formal sectors, and thus the final numbers for the third quarter may be revised downwards.She is surely on to something. To this we can also add that the deceleration and income losses reported in the cash economy may feed through to lower demand from the rural sector in the fourth quarter. The secondary and tertiary order effect of a demand crunch in one quarter may well linger in a subsequent quarter, if not further.But we need to counter this argument with the possibility that if DeMo merely postponed demand for consumer non-durables and durables, we should see a bounce-back in the fourth quarter. The property I did not buy in November-December may well be bought in January-March.Consider the case of the auto sector. Maruti Suzuki has reported back-to-back increases in domestic sales in January and February 2017, by 26 per cent and 11.7 per cent respectively. While February data is still to come in for many companies, in January, eight of the 13 auto sector players (car and two-wheeler makers) reported a rise in sales or at least flat growth. The only real losers were Hero (the market leader, which operates in the most price sensitive zone) and Bajaj Auto (which is in the power bikes category, and hence more vulnerable to demand swings). This explains why Rajiv Bajaj railed against DeMo a few days ago. But February may bring better news for both these big players too.While the spike in agriculture in the third quarter may explain a part of the growth, in the fourth quarter we could have better news from the export and consumer sectors, now that DeMo is well and truly over, and banks are raring to lend to consumers and property sector at low rates.The lesson Cassandras (and optimists) need to learn, apart from humility, is simple: when something as big as demonetisation of 85 per cent of issued currency happens, you cannot know what the net impact of it will be in advance. Human beings and corporations respond to negative stimuli by changing their strategies. Demand may shift from one product to another, people may use more digital currency, and the need to reduce inventory may lead to price cuts and thus greater demand in the next quarter. Hence the final impact of a big move may be less (or occasionally more) that one would expect.For example, when DeMo crimped demand, and given the small window they had to deposit demonetised currencies, it would have been logical for black money holders to deposit money in banks and show it as sales income. This may be one reason why manufacturing showed a growth of 8.3 per cent, when most newspaper reports talked of a fall in sales. The sales may be fictitious, but the GVA numbers are real to the extent the unaccounted part of the economy (representing past sales) is now being counted.In the fourth quarter, where economists are again hoping their dire forecasts will come true and save their reputations, we could again see normal growth, for several reasons: pent-up demand surfacing, higher export growth, and the continuing need to window-dress annual results. Government spending also peaks in the fourth quarter.One thing is clear: India is recovering rather quickly from the DeMo blow. The only ones not on the path to recovery are the Cassandras.Economists seek GDP clues amid data doubts; Modi rides high on growth dataAuthor: ReutersPublication: Business StandardDate: March 2, 2017URL: official figures were music to the ears of Modi's ruling Bharatiya Janata PartySurprised again by India's strong official growth statistics, economists are relying increasingly on high-frequency indicators like bank credit and rail freight to gauge the real health of Asia's third-largest economy. For India's cash-reliant economy, Prime Minister Narendra Modi's decision in November to outlaw old 500 and 1,000 rupee banknotes came as a big shock.The decision sucked 86 percent of cash out of circulation, and everyone from street hawkers to big consumer goods firms suffered a slump in sales.With data on commercial vehicle output, rail freight, service tax receipts and home appliance sales showing slowing growth or contraction, economic expansion in the quarter to December was forecast by economists at 6.4 percent.In fact, it came in at 7 percent, slower than the previous quarter but enough for India to retain the title of the world's fastest growing major economy."Forecasting India's GDP has become like predicting the English weather," said one senior economist with an international ratings agency. "You never know when it will rain, when it will shine."The shock was bigger for economists at Mumbai-based brokerage Ambit Capital, who predicted the economy may even contract in the quarter after the cash crunch hobbled businesses.Ambit's Ritika Mankar Mukherjee defended her team's view, which she said was based on an extensive survey of small- and medium-sized enterprises. She also cited a slowdown in bank credit growth to a multi-year low of 5 percent."India is a heavily bank credit-dependent economy," she said. "How come you have an acceleration in manufacturing activity when credit growth is slowing down?"Ambit is one of several brokerages to devise their own measures of economic activity, applying methods honed in China, where GDP figures are suspected to have been "smoothed" for years by the authorities."The message from the GDP numbers doesn't tally with what we see on the ground," said Sonal Varma, an economist with Nomura in Singapore. "It does become important to supplement your analysis with additional information." POLITICS OF DATAThe official figures were music to the ears of Modi's ruling Bharatiya Janata Party, as it fights a tough election in the battleground state of Uttar Pradesh.Modi had taken flak for his shock monetary therapy from opposition parties as well as Nobel laureates Amartya Sen and Paul Krugman. Buoyed by the growth figures, he hit back at Sen, who teaches economics at Harvard University."Hard work is more important than Harvard," he told a campaign rally in Uttar Pradesh on Wednesday.The regional election in a state that is home to one in six Indians is a key mid-term test of Modi's popularity. A strong showing would boost his chances of winning a second term in 2019.Sandeep Shastri, a political scientist, says the GDP figures will have little bearing on the election."It is not a substantive issue for voters," he said.Official GDP data has been questioned since a change in methodology in 2015 transformed India into the world's fastest-growing major economy. New Delhi defended the overhaul, citing an improved database of hundreds of thousands of firms.Data reporting has long been a challenge in an economy where the informal sector accounts for 40 percent of output and employs nine in 10 workers.The federal statistics office carries out periodic surveys of the grey economy, but it mostly extrapolates data from old surveys.And since India does not have reliable national retail sales data, statisticians use production figures to estimate consumer spending.Still, some economists are perplexed by figures showing growth in consumer spending hitting a four-year high, even as sales of beverages, home appliances and vehicles fell.Earnings of consumer goods giants such as Hindustan Unilever and drug makers like GlaxoSmithKline Consumer Healthcare also took a hit.Some data also appear to be contradictory. For example, services dependent on government spending grew at a faster pace in the quarter, but overall government spending fell. "This does not add up," said Varma, the Nomura economist.Harvard Economists Face PM Modi's Censure After GDP SurpriseAuthor: Jeanette Rodrigues and Bibhudatta PradhanPublication: Date: March 2, 2017URL: 's not the economy, stupid.Prime Minister Narendra Modi took a dig at critics of his cash ban after government data showed surprisingly strong growth that helped India retain its position as the world's fastest-growing big economy."Well known intellectuals from Harvard and Oxford, who have been at key positions in the Indian economic system, had said the GDP would go down by 2 percent, some others said it would go down by 4 percent," PM Modi said at a campaign speech Wednesday in the key electoral state of Uttar Pradesh, without naming anyone. "On one hand, there are these intellectuals who talk about Harvard, and on the other, there is this son of a poor mother, who is trying to change the economy of the country through hard work.""In fact, hard work is much more powerful than Harvard," he said.Gross domestic product data has become the focus of divisive debate in India, as PM Modi's critics and supporters tussle over the impact of his unprecedented cash ban announced in November. At stake is the credibility of the nation's outlook to investors, who may choose to eschew a stock-market rally and wait out the uncertainty.GDP grew 7 percent in October-December, data showed Tuesday, a slight slowing from the previous year's 7.3 percent but far stronger than the median 6.1 percent estimate in a Bloomberg survey of economists. While this early data doesn't capture the note ban's impact on small companies and unorganized workers -- a fact the finance ministry's advisers acknowledged last month -- policy makers and analysts had predicted a slump followed by a sharp recovery.The government's top statistician on Thursday said the entire data set will be available only next year and economists including at HSBC Holdings Plc. expect the numbers will be revised as clarity emerges. The data runs counter to underlying indicators such as factory output and credit growth."This does not add up," Sonal Varma, an economist at Nomura Holdings Inc., wrote in a report after the data was published. "Is India becoming another China, with incredible growth momentum and statistics nobody quite believes?" Bloomberg View columnist Mihir Sharma wrote on Thursday.Sen, SinghAmong critics of demonetization are Nobel Prize winner Amartya Sen, a Harvard professor, and former Finance Minister Palaniappan Chidambaram, who was educated at Harvard, and PM Modi's predecessor Manmohan Singh, who read economics at Oxford. Manmohan Singh had told lawmakers the cash ban could strip as much as 2 percentage points off GDP."The prime minister making a sarcastic dig at an election rally has revealed his political desperation," said Sanjay Jha, a spokesman of the main opposition Congress party. "These are estimates that are bound to see a downward revision, because in reality they have not factored in the impact on the informal sector, which was most affected by the demonetization. The number deserves further public scrutiny."Jagdish Thakkar, a spokesman in the Prime Minister's Office, didn't answer calls.'Same Statistics'"As soon as the data was published and their lies were exposed, they have started saying that the data is incorrect, questioning 'where has Modi brought these numbers from?'," PM Modi said at another rally in Uttar Pradesh on Wednesday. "The numbers come from the same place they always were coming from. We are using the same statistics that the country has used since the past 10 years," he added.India changed its method of calculating GDP in 2015, a year after PM Modi took office, and several economists have questioned it ever since."Those who are being projected as Harvard and Oxford supporters are those who have been very strongly critical of various policies the government adopted, including demonetization," said Sandeep Shastri, pro-vice chancellor at Jain University in Bengaluru."The prime minister stands to project himself as representing a line of thinking which challenges what could be called the mainstream or elite way of looking at issues" and divergence between the extremes is only set to increase, he said.(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)GDP not impacted by demonetisation: Read what ‘experts’ had predictedAuthor: OpIndia StaffPublication: Date: March 1, 2017URL: , India’s GDP data for the quarter ended December 2016 is out. October to December 2016 was the quarter which included the demonetisation period, from 9th November 2016 to 31st December 2016. Various “experts” had given dooms day views regarding the demonetisation move:Some termed it as “bad economics“. Some called it a “large shock to the Indian economy“. Some called it an example of “bad policy” Some suggested that India will face “dire consequences“. Some proclaimed that “The Deep Shock of Demonetisation May Devastate the Economy“. Some said that demonetisation would incur “high economic costs“. Some said “Demonetisation has turned India into world’s fastest slowing economy“. Some said “demonetisation may spell doom for the economy“.The commentary was overwhelmingly negative, except for a few bright spots here and there. But most of the above commentary was in the form of abstract, immeasurable comments. To really objectively analyse this commentary, we need measurable predictions. And we did get them. Everybody who knew how to speak in English, began commenting on India’s GDP prediction. Here is what various people and agencies said:The “economist” former Prime Minister of India, Manmohan Singh had spoken after a long time, to claim that demonetisation could shave off 2% from the GDP rate.Ambit Capital, predicted “a distinct possibility of GDP growth contracting in Q3FY17″ and said that the annual GDP growth rate could fall to 5.8 % year-on-year (from 7.3 percent).An HSBC report predicted that India’s GDP for the December quarter could fall down to 5%. For reference, India’s GDP rate was 7.4% for the earlier quarter, and was 6.9% for the same quarter last year.Another HSBC report quoted by media suggested that GDP would fall by 1%.Estimates of Associated Chambers of Commerce and Industry of India pointed to a contraction of 2.5 % of the GDPAnalysts polled by Reuters had expected a 6.4% growth rate in the quarter to December.Various other GDP predictions can be read here.To cut things short, the GDP predictions ranged from a low of 5% to a maximum of 6.4%. But the final data which came out yesterday proved to be egg on the face of all of the above. India’s economy grew at a healthy 7% in the fiscal third quarter. It was also higher than China’s 6.8 percent growth for the last three months of 2016. India’s GDP rate was also higher than BRICS nations:-------------------Geetu Moza @Geetu_MozaIndia GDP higher than other BRICs. The key catalyst for recovery lies in RBI OMO that will ease lending rates says @BofAML @BTVI @szarabi pic.564L72GZV5March 1, 2017-------------------One of the few who got the forecast almost bang-on was economist and columnist Rupa Subramanya, who had predicted a minor 0.4-0.5% correction:-------------------Rupa Subramanya @rupasubramanyaI’d guess 0.4-0.5% likely hit to GDP due to currency swap but too early to even say that with any certainty. Wait and see.November 20, 2016-------------------Now that the hard numbers have slapped some analysts on the face, the first reaction is pure disbelief. Even GDP numbers are being doubted now, and more such “doubts” will emerge, since the data doesn’t match their predictions.“I am totally surprised and stunned to see this number. Perhaps this data is not capturing the impact of demonetisation,” said Aneesh Srivastava, chief investment officer, IDBI Federal Life Insurance Co. Reuters, whose poll got the prediction wrong, went on to doubt the credibility of the data. Excuses are being bandied about that the Government will have to eventually revise the data. Congress on its part has even begun trending a hashtag “#ModiFudgedGDP”.Next, one may expect media hit jobs on the GDP data as well. For example, last year, media reports claimed that India had admitted “errors” in its GDP data. The fact remained though that economic illiteracy had led to this foolish claim, which we had destroyed here.Left parties can learn from PM Narendra ModiAuthor: T K ArunPublication: The Economic TimesDate: March 8, 2017URL: class warriors, the Left, can still mine the rich vein of class anger Demonetisation has tapped so effectively and creatively. Whether PM Narendra Modi would blow away all opposition in Uttar Pradesh and win the state for the BJP remains a matter of conjecture as of now. What is fairly certain is that Demonetisation (DeMo) has been far from the electoral disaster it deserved to be, for having wrecked jobs, small businesses and domestic peace in all homes where the women had squirrelled away small sums without their menfolk’s knowledge.Modi AlchemyThe reason DeMo could inflict pain without eliciting anger against the government is class antagonism. This column had argued, in ‘Narendra Indira Modi?’ (November 16, 2016), that Modi was using DeMo to rally the poor against the rich, with his high-pitched rhetoric against ill-gotten wealth and call to the people to join the battle by bearing the shortterm pain of missing cash.Modi rolled out traders and businessmen, who directly bore the brunt of business loss and the conversion cost of turning black money into white, from his support base. At the same time, he rolled in the poor, who took the pain in their stoic stride, but delighted in the evident panic among the rich, and at Modi’s messianic promises: the queue in front of the bank is the last line in which the poor would stand, for the end of black money would make them rich.DeMo does not, of course, even scratch the surface of the black money problem. To begin with, only a part of black money stays as wealth, the rest flows through the economy. When a politician’s corrupt income is lent to a builder or a variety of small and medium enterprises that do not have access to bank finance, the flow starts as black money, becomes white when the recipient uses it to buy material for construction or pays his workers. The supplier of some of the materials he has purchased could cook his books to evade taxes, and create fresh black money. This could again become white and change colour as it courses through the economy’s veins.Of the black money that is stored as wealth, the bulk is in real estate, the rest mostly in gold and dollar holdings. Except in the case of the really rich, the kind who overinvoice project costs, raise more debt than they need and siphon money out of their projects during implementation. They can also overinvoice imports and underinvoice exports and take money abroad. They can start companies abroad — for which they can take money out with the Reserve Bank of India’s (RBI) permission.The companies can invest in countless subsidiaries in places like Panama, the Isle of Man, etc, and lose their original identity, after which their funds can flow back to India as subaccounts of FIIs. None of this would be affected by DeMo.Prof Arun Kumar, formerly at JNU, has studied black money extensively; he estimates that only about 3% of black money is stored as a cash stash. This is the only bit affected by DeMo. But even the owners of cash found ways and means to convert their stored cash into legitimate bank deposits. So much so that the RBI has not released the data on how much of the demonetised currency came back to the banks. Hopefully, it would finish counting the notes at least when the Election Commission finishes counting votes in the ongoing assembly elections.Political MessagingAt the same time, DeMo depressed economic growth by something like 1%, according to the Economic Survey. When GDP data for the September-December quarter came out, it seemed to belie such forecasts, prompting a commentator to suggest that the government demonetise four-fifths of the currency in circulation every other month or so, just to keep economic momentum strong.It is not the case that the CSO fudged figures. Indian ingenuity did. Traders and businesses showed huge sales and profits, so as to bring their cash hoards into legal channels. They paid tax on these, leading to robust tax collections as well. The CSO estimates industrial growth looking at financial reporting by companies and tax collections. Since these were robust, so was its growth estimate.Revisions would clear this illusion.The ordinary voter does not go by GDP numbers. He goes by the political messaging he receives. In the midst of growing inequality, driven presumably by cronyism and corruption, and in the background of generalised venality among politicians and babus, he sees one political leader take decisive action to stamp out ill-gotten riches. His class anger against the illicit rich transmutes into support for this decisive leader.Class anger is widespread and offers scope for class politics. But Modi targeted the anger not against the rich in general, but against the illicit rich. This is important.The Left has marched its way to the margins of India’s polity ranting against capitalists and capitalism. It must change its line. Accept that capitalism creates the prosperity the poor need. Focus not on foiling capitalists but on forging policy that would make capitalist success yield shared prosperity.From Harvard to House, how notebandi naysayers got it so wrongAuthor: Swapan DasguptaPublication: The Times of IndiaDate: March 12, 2017URL: the time this column is read, the outcome of the five assembly elections would have become clear. Determining why lakhs of people voted as they did is an impossible task in aggregation. In these elections, some voted out of community solidarity, others on the strength of political calculations that ranged from anger and hate to expectation, and still others for reasons that were intensely personal — as personal as, say, someone’s preference for Shah Rukh Khan over Salman Khan. Democratic politics rests on collective choice. Yet what determines the preference of the many is a hotchpotch of individual impulses that analysts reduce to a statistic.The mood in the Central Hall of Parliament last Thursday was expectant. Without exit polls to hang their predictions on, MPs banked entirely on feedback from their party colleagues. These ranged from predictions of an outright sweep for the BJP (except in Punjab), to anticipatory glee over the taming of Narendra Modi. Frankly, no one really knew the outcome — an uncertainty that augurs well for Indian democracy.Yet, there was an unexpected measure of agreement on one point.In the winter session that was disrupted by boisterous protests over demonetisation, the ruling party had been threatened by taunts of imminent voter retribution. As MP after opposition MP narrated tales of hardships suffered by the many and spoke of economic devastation caused by a measure that lacked the endorsement of ‘eminent’ economists, the assembly elections, it was believed, would be a referendum on demonetisation. In Kolkata, Mamata Banerjee had plastered the city with billboards proclaiming ‘Modi hatao, desh bachao’; and in Parliament, the otherwise taciturn former Prime Minister Manmohan Singh described the demonetisation as “organised loot and legalised plunder of the common people”. From Harvard, Amartya Sen compared the move to Napoleon’s monumental Russian misadventure.In the Central Hall last week, however, there was a deafening silence over demonetisation. A move by the government that had affected every Indian in one way or another had abruptly ceased to be the talking point in the campaign. The only exception seemed to be Punjab where notebandi had blended with fierce anti-incumbency sentiment.Even many BJP functionaries in the districts, while gushing over the PM’s indefatigable energy and Amit Shah’s shrewdness, weren’t very forthcoming over demonetisation. It’s not that they were embarrassed by it, just that they couldn’t quite decipher the people’s reaction. Anger is easy to comprehend and India’s voters have never been shy in being demonstrative about displeasure with politicians. The problem lay in reconciling trader dissatisfaction (an important consideration in the BJP’s ecosystem) and media reports of widespread dislocation, with the near-total absence of social unrest. There was some bewilderment that many of those in the long queues before banks took selfies while flashing a V-sign.The assembly elections may not resolve questions over the economic consequences of demonetisation, but they will put a lid on the debate over its popular acceptance. From all indications, demonetisation has not affected the BJP’s prospects adversely. On the contrary, it has enhanced Modi’s personal stature and made the party more acceptable to underprivileged voters. The BJP core was always middle class — a category that extends beyond income levels and covers attitudes and aspirations. After notebandi, the party’s centre of gravity has shifted a little down the economic ladder.Most Indians have not gained directly from demonetisation. The benefits are still in the future. A small minority has, however, been adversely affected by being exposed to the tax net. Those who were directly hit have protested loudly while those who were merely inconvenienced have chosen the path of resilience.Anecdotal evidence suggests that in shaping public perception there was a moral quotient at work. The age-old belief that the path of goodness lies through sacrifice has been infrequently tested in the political realm. Mahatma Gandhi was unique among politicians in linking the quest for freedom with personal suffering and sacrifice. For him, freedom also involved the penances linked with tapasya.This idea of personal sacrifice for the larger national good has been lost in the mad rush for entitlements, a form of politics that happily coexisted with venality and corruption. Modi appears to have restored it to the political centrestage and given Indians a personal role in making India better. The message of moral cleansing that underpinned demonetisation was readily accepted because the man behind the move had established a reputation for pressing for the larger good. The call to sacrifice resonated because there was harmony between the man and his message.Raghav Bahl, Bloomberg Quint, and the art of faux-economicsAuthor:Publication: Date: November 26, 2016URL: , sorry. This is a misleading headline.This article, written by Raghav Bahl, the founder of Bloomberg-Quint, “India’s premier multi-platform business and financial news company”, cannot be called even faux-economics. It is just pure mumbo-jumbo. Yup, Bahl, who had been thoroughly “demonetised” here, is back for another spanking.This time, Bahl tries an interesting format, where he gives us what he calls us the ‘Official Spin’, which according to him is the popular narrative, and then proceeds to give ‘The Reality’. Except that the ‘Official spin’ is mostly a figment of his own imagination, and ‘The Reality’ is worse than all of Shirish Kunder’s jokes put together.Let us deconstruct each one:1. The ‘Official Spin’, as per Bahl, here is that the demonetisation scheme has snatched a windfall from the bad-guys, and would give the Government a hefty sum to spend on development.Bahl counters this by using the most asinine logic available on the face of this earth. First, he criticises the scheme because he feels it has aided the crooks in converting their black money into ‘white’. Of course, he coolly forgets the costs attached here: A minimum of 30% of Income Tax, the chances of a penalty ranging from 50% to 200% of the tax, reported amended taxes which could be in the range of 50-60% (funnily, reported on Bloomberg-Quint itself; maybe Raghav Bahl doesn’t read his own website?), Indirect taxes such as VAT or Service Tax catching up, and of course, the lack of any sort of immunity allowing the Income Tax Department to dig up all your past records.Yup, in Bahl’s mind, this demonetisation is just one easy black-to-white window of opportunity with no consequences.This blinkered viewpoint is not a mistake though, because in the 2nd part of his ‘The Reality’, he claims that the Government would not get any money for development schemes since all the money deposited, could easily be withdrawn from banks! It’s difficult to comprehend where to start regarding this:A. Mr. Bahl, the Government was never supposed to use the money deposited in banks for development. Governments can’t do that! The money in the banks is that of the depositors, which the banks can ONLY lend to borrowers, not donate to the Government of the day. Imagine a private bank like HDFC Bank giving away public deposits to the Government. Mr. Bahl, do you have the faintest idea of how the banking system works all around the world? You put forward a stupendously stupid idea, imagine that it is government’s plan, and then go ahead and counter that.B. The money, which the Government is touted to receive, is the tax component on the deposits of black money. Yes, the same tax which you conveniently forgot about in the first limb of your argument. Tax on income = Government’s money, and Income deposited in banks = Public money. Hope that’s clear!Now let’s move to the 2nd point Mr. Bahl makes:2. Here, Bahl says, the ‘Official Spin’ is that the public has given a thumbs up to the move via the positive results for BJP in the latest bye-elections.Bahl’s ‘The Reality’ is that BJP’s margin in Shardol Lok Sabha shrunk, in Lakhimpur Congress gained 8% vote share (although BJP won), and in West Bengal assembly bye-elections BJP lost. This is enough to prove that the public did not support demonetisation.Firstly, it was the media that made the bye-elections a referendum on the demonetisation, and then conveniently back-tracked post results:--------------------------Ankur Singh @iAnkurSinghBefore #BypollsTheWire- Will Demonetisation decide results?BJP winsTheWire- Results cant be interpreted as Mandate for #Demonetisation pic.WdL9PleafGNovember 22, 2016--------------------------Secondly, Bahl has viewed the results from a myopic angle, so as to get data which suits his final argument. The BJP won in Shardol and Lakhimpur, it also increased its margin in Nepanagar (which Bahl skipped). In Arunachal, BJP wrested the Hayuliang seat from Congress (which Bahl skipped). BJP also won in Assam and in Tripura, its vote-share surged to 20% in the red bastion, relegating Congress to a distant third. In Bengal too, BJP’s vote share has increased. Overall, BJP has increased its tally from 3 to 5 while the Congress is down from 4 to 1.Bye-elections are often influenced by local factors and incumbent governments, but if Bahl wants to make them into a referendum for demonetisation, then the verdict is clear.Finally, the last point:3. The ‘Official Spin’ here is the narrative that public are overwhelmingly in support of the scheme, based on various surveys and polls.Here, Bahl’s spin is basically trashing Huffington Post-C Voter’s survey and also that on the PM’s app. And the trashing itself is juvenile:Was it conducted on the phone? On the internet? In one-on-one field interviews? How large was the sample? On which dates was the poll conducted? Right after November 8, or on November 20? How was the question framed?What Bahl wants to ignore is just the results, which show an overwhelming majority of people in support of the scheme. These results are not just shown in the C-Voter poll or the Narendra Modi App poll, but also on most polls conducted online.And if Bahl wants to trash surveys, then why he didn’t trash this poll posted on Bloomberg-Quint which was only conducted online, that too among just 601 people? Or this poll on Bloomberg-Quint which had a sample size of just 1002 (lower than the C-Voter sample)?The point is such flimsy, shallow remarks can be made about any opinion poll or survey, just because you don’t like them. Of course, if Bahl had spoken out about unscientific polls like this one on demonetisation on Times Of India, which allows multiple votes per person, thus leaving it vulnerable even to a code, then it would a fair criticism.In the end, going by Bahl’s earlier lousy post, and this even lousier post, which claims to profess economics on a business news portal, is basically a joke on the concept of business journalism or rather any kind of journalism in India.Nonetheless, we finally know from where Rajdeep Sardesai got his smarts (for the uninitiated, Raghav Bahl was also the founder of Network18, where Rajdeep worked for most of his TV journalism career).Try harder next time Mr Bahl. Until then, Ciao.Raghav Bahl and the depressing jugaad of Indian journalismAuthor:Publication: Date: November 13, 2016URL: like no one’s watching, Sing like no one’s listening, and Write articles in the mainstream media like no one’s fact-checking: This seems to be the modern mantra. And one devout follower of this mantra is Shri Raghav Bahl, founder of the Bloomberg-Quint, an Indian online “Business and Financial” site, in tie-up with the worldwide giant Bloomberg. Bahl displays his fact-free lifestyle in a particularly obtuse piece titled: PM Modi, Demonetisation ‘Brahmastra’ Could’ve Avoided Hurting PoorAs is fashionable these days, the piece starts with an example of the quintessential maid, who is dumb enough to be conned into giving her Rs 5000 (in notes of Rs 500) to some “friend” shopkeeper for just 5 notes of Rs 100. Maybe this maid studied at FTII, but I have 2 maids (house-helps to be politically correct) at home and 1 at work; and all 3 of them knew exactly what was going on. Hope this maid of Bahl’s fantasies isnt like one of those fake “gau rashaks attacked me” stories.Bahl’s entire article argues that the government should have given time to people till 31st December. That may sound so good given the reports about inconvenience people are facing due to long queues at banks. But Bahl himself agrees that giving this time could have given an escape route to people with unaccounted cash, who could have indulged in some deals to turn that cash into white money or legal assets. Now they can’t deal with that cash as it’s no longer a legal tender.So what exactly is Bahl’s point? He essentially says that people can still do some “jugaad” and convert their unaccounted cash into white money. He offers ridiculously simplistic explanations (actually there are no explanations, just fantastical stories) in his article as how this jugaad can happen. If only real life was so simple as if playing a video game with cheat code.In this video game that Bahl is playing through his article, there is a character called “Rambhai”, the quintessential corrupt businessman. Before we get to how Rambhai actually manages to get rid of his ill-gotten cash through jugaad, let us study his character, through Bahl’s own words:“At 8 pm on 8 November, Rambhai would have finished a greasy vegetarian meal and settled down to listen to his hero, Prime Minister Modi’s specially televised address.”You say it best when you say nothing at all Raghav-bhai. What Bahl wanted to say was Rambhai was a Hindu, high-caste Gujju (hence vegetarian), possible gau-sevak, corrupt Modi bhakt, but wrapped it in euphemisms like “Ram” bhai, and “vegetarian meal”.Now that we know Bahl’s Rambhai, let us enter Bahl’s cuckoo world where all laws cease to exist and only jugaad (which he never cares to explain) reins.So Rambhai apparently has Rs 1 crore in unaccounted cash, which he has to finish before the deadline of midnight 8th November. How does he do it? Simply pays Rs 60 lakhs to a goldsmith (Shyambhai) for buying gold at 8.45 pm, and subsequently, at an undisclosed time, pays Rs 40 lakhs to a Tata Motors dealer for a sparkling new Jaguar XF.Forget about the gold for a bit and let’s talk about the Jaguar. In Bahl’s world, Tata Motor’s showrooms are open beyond 8.45 pm at night. Nonetheless, I checked up with the local Mercedes showroom for the procedure to buy a car. They said irrespective of my mode of payment, I would need to submit my PAN. Why, because a PAN is mandatory while buying or selling a four-wheeler that requires registration under the Motor Vehicles Act, 1988, irrespective of its value. PAN is also mandatory for all transactions above Rs 2 lakhs. And more recently, there is a levy of 1% TCS on sale of all motor vehicles costing over Rs 10 lakhs, which again entails a declaration of PAN.How does Raghav-bhai imagine Rambhai will avoid all this reporting? Jugaad. Yes, he says that the local auto dealer of Tata Motors would do some “usual jugaad”.So is Raghav-bhai suggesting that Tata Motors would sell a luxury car worth Rs 40 lakhs without an invoice? And would account for this mysterious disappearance of inventory by claiming “Modiji ne kiya hai”? Or does he suggest Tata Motors does not maintain documentation for purchases and the entire product chain, which is why it is so simple for them to do this magical “jugaad”? Maybe this is why Mistry was sacked then?Since there was no explanation or hint of this jugaad, I tried to hazard a guess; maybe the dealer puts a dummy guy’s PAN. Cash from Rambhai but PAN of Laxmanbhai (why should only Bahl create characters?). But even in that case, the dealer has to register the car in Rambhai’s name only. So again, it will be a mismatch and this jugaad can easily be spotted as fraud by authorities.So there is no explanation of how this “usual” jugaad is happening, but we are supposed to believe that it is happening. Going further, Raghav-bhai mentions that “Rs 40 lakh of black money has made its way into the Tata Motors’ balance sheet”, so how does this exactly work? Tata Motors dealer doesn’t do any documentation which incriminates Rambhai, YET, the money is reflected in Tata Motors accounts. Super-Jugaad this.At this point I was reminded of a post that I saw on Facebook by one of my friends. He claimed that some bankers were taking “cut” of 10% and converting unaccounted cash into white money. How? In the same Facebook post he claimed that he doesn’t know how, but this is happening. I laughed at such rumor mongering, but now I think he should be hired by Raghav Bahl as a senior correspondent at The Quint. He can also drop words like cut and jugaad without any explanation. Poor guy is writing Facebook posts when he could have written ing back to the Bahl’s Rambhai, he gets a car and gold and apparently all his accounted cash is now white, because taxmen are blind not to see a luxury car or glitter of gold. Yes, in Bahl’s story, Rambhai is all cool and safe. Now the story moves to Shyambhai, the person who sold gold to Rambhai and is saddled with the cash now.How does Shyambhai get rid of this cash in Raghav-bhai’s wonderful lala land? He buys a Harley, an iPhone and an “Italian Jacuzzi”. And just like that Shyambhai’s problems are over too. But what about the sellers of these goods, the other “bhais”? How do they account for this sudden cash without raising invoices in the name of Shyambhai? Unless Multinational companies like Harley Davidson and Apple also practice the “Tata Motors Jugaad” of not maintaining records yet adding to their topline?But this is the example of just one Rambhai, what about the millions of such Rambhais? Well, Raghav-bhai has an answer for that too:“They will round up 1 crore poor, unemployed people all over the country, especially in small towns and far-flung villages. For 50 mornings, these 1 crore people will throng banks and post offices, depositing cash in small quantities in their hitherto unused Jan Dhan accounts. Each will deposit an average of Rs 3 lakh, until Rs 3 lakh crore are in the bank.”Of course, rounding up 1 crore poor people and ensuring 100% secrecy and privacy for such dealings is so easy in the video game real world. I mean if the “Tata Motors Jugaad” is doable, why not this? It’s not as if the Government can not trace and monitor this sudden spurt in Jan Dhan Accounts now, can it?-----------------------------THE TIMES OF INDIAGovt looking into sudden spurt in Jan Dhan account depositsPTI | Updated: Nov 12, 2016, 10:30 PM IST-----------------------------In a parallel universeAnd that is how Indians like Rambhai and Shyambhai would have made their way around Modi’s seemingly impregnable plan. So easy no? And with that, Raghav-bhai proves that while corrupts like Rambhai and Shyambhai are all cool and safe, the poor and honest are inconvenienced by standing in queues and struggling for ready cash.And why is this all believable? Because the learned Raghav Bahl wrote this all while chewing on his beef steak after signing a petition for PETA (hey, even I can hazard a guess on Raghav-bhai’s dietary habits going by his world view right?). And of course because no Government or media body would ever dare take any sort of action an any of the highly misleading content. Why? Because then Raghav-bhai would scream “Emergency”.What did PM Modi’s note ban do to India’s economy? Here’s what RBI staff thinkAuthor: Dinesh UnnikrishnanPublication: Date: March 15, 2017URL: 10 March research paper prepared by the staff at the Reserve Bank of India (RBI)’s monetary policy department tells us that the 8 November demonetisation move by Prime Minister Narendra Modi has not done any major damage to the economy so far. Instead, the note ban promises several positives to the economy in the medium to long term, the preliminary assessment says. The RBI distances itself from the observations saying these are not its official views, but entirely belongs to those of the contributing staff.The core theme of the paper is that “demonetisation has had some negative macroeconomic impact, which, however, has been transient as remonetisation has moved at an accelerated pace in last twelve weeks" — a view the RBI and government have maintained so far. More importantly, demonetisation is expected to have a positive impact over the medium to long term, the paper says.“In particular, there is expected to be greater formalisation of the economy with increased use of digital payments. The reduced use of cash will also lead to greater intermediation by the formal financial sector of the economy, which should, inter alia, help improve monetary transmission,” it says.Here are some of the observations in the paper:Economy: Demonetisation impacted various sectors of the economy; however, the adverse impact, in general, was short-lived as it was felt mainly in November and December 2016. The impact moderated significantly in January and dissipated by and large by mid-February 2017, reflecting an accelerated pace of remonetisation.The GVA growth in Q3 of 2016-17 was felt mostly in real estate and construction, but because of stronger growth in agriculture, manufacturing, electricity, and mining, the overall impact on GVA growth was modest. With remonetisation progressing at a fast pace, the adverse impact is expected to have reversed from the latter part of Q4 of 2016-17. GVA growth is estimated to recover significantly in 2017-18. But what about the protruding disconnect between GDP and other high frequency macro indicators? Read an earlier comment on this here.Banks: With the return of SBNs (specified bank notes or invalidated old notes), currency in circulation declined and deposits with banks surged. The share of ‘investment in government securities’ on the asset side of banks’ balance sheet increased significantly. Large surplus liquidity led to a significant improvement in monetary policy transmission as reflected in a significant decline in deposit and lending interest rates. The sharp increase in low cost CASA (low cost) deposits by banks is expected to have increased banks’ net interest income.But, will this huge inflow of deposits really benefit industry unless demand improves? Read a comment on this issue here.FMCG companies: Reflecting the expected slowdown in sales and earnings, share prices of cash intensive sectors such as automobiles, FMCG, consumer durables and real estate declined sharply in November-December 2016. Most of these sectors have more than recovered the lost ground subsequently. In fact, the consumer durable sector outperformed the overall increase in the stock market post-demonetisation. The impact on the forex market was transitory.Financial markets: The impact of demonetisation on the various segments of the financial market has varied. Overnight call money market rate remained within the policy corridor, but with a softening bias due to surplus liquidity at banks. After initial softening, G-sec yields increased significantly on two occasions, i.e., after the announcement of application of incremental cash reserve ratio (ICRR) and the status quo in monetary policy in December 2016. Thereafter, yields have moved in either direction on account of both domestic and external factors, including the change in monetary policy stance in February 2017, which was largely not expected by market participants.Exports: Demonetisation has impacted some segments of the export sector such as readymade garments, and gems and jewellery. The impact, however, was transitory. Imports of gold increased sharply in November, but moderated in December.Digital payments: There has been a significant improvement in the use of digital modes of payments post-demonetisation, although their base is still small. But didn’t the subsequent data reveal that cash is making a comeback to the system and small traders are shying away from embracing digital mode of payments. Read a comment here.The MPD staff concludes the paper saying that given the partial information that is available post demonetisation so far, the analysis, especially of growth, is only preliminary in nature. It should, therefore, be possible to make an analysis in greater detail as more data becomes available in the coming months.As the MPD staff rightly says, these are preliminary trends. What we know so far is that demonetisation gamble has certainly paid off handsomely for Modi and BJP as is evident from the historic victory in the Uttar Pradesh elections. The common man, in big numbers, hails this move as Modi’s big war on black money hoarders and cronies in the society, no matter what the short-term pain meant for him.But, the impact in terms of meeting the original targets (recovering black money, ending corruption and a rapid transformation to a digital age) and on the larger economy will show only with a lag. For this, one must wait for the numbers, including those from the central bank.Demonetisation violation? Banks accepted over Rs 1 lakh crore lakh without PAN detailsAuthor: Appu Esthose SureshPublication: The Hindustan TimesDate: March 16, 2017URL: the weeks after demonetisation, banks across India received about Rs 1.13-lakh crore in “high-value deposits” from customers without valid documents, indicating possible collusion of officials to conceal dodgy cash, classified government data accessed by HT revealed.About half of these transactions took place in six states -- Gujarat, Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh and Karnataka. The deposits have raised the suspicion of the Financial Intelligence Unit (FIU), a government agency that monitors illicit transactions.A high-value transaction is defined as a bank deposit above Rs 2.5 lakhs that the government made liable for tax scrutiny as part of its cash-purging, anti-corruption campaign launched on November 8.Together, these states also received a third of all high-value bank deposits – with and without identity documents -- made in the first two months of demonetisation. In these states, Jan Dhan deposits under the government’s banking-for-poor programme were 25-30% higher than the national average.But to be fair, these states are farming and trading hubs that see high volumes of cash deals. Plus, farm income is not taxed.The November 8 scrapping of 500-and 1,000-rupee banknotes was aimed at stamping out illegal cash from the economy. But many say corrupt bank officials helped some people park their ill-gotten cash in others’ accounts. In December, two junior central bank officials were arrested in Bangalore for illegally converting banned currencies for the new.HT analysed bank data for 26 states that is available with the FIU. The data was sourced from 187 public, private and cooperative banks across India. A bank-wise breakup of the data was not available.The data shows that the so-called high-value transactions across the country between November 9 and December 30 amounted to Rs 7.33-lakh crore. Of this, Rs 1.13-lakh crore was deposited without Permanent Account Numbers (PAN).PAN details, which are mandatory for deposits above Rs 50,000, help detect tax evasion and fraud.Experts say the demonetisation decision was so sudden that it left banks with little time to prepare, leaving gaps in enforcement of regulation.“So, some elements surely misused the system as we saw in many cases,” MM Joshi, ex-chairman of Central Board of Direct Tax (CBDT), told Hindustan Times.“In the past also we have found many instances in which banking officials were party to opening of fake accounts.”Spiking deposit baseThe six states reported the maximum spike in deposits above Rs 2.5 lakh, accounting for Rs 2.3-lakh crore in deposits. Of this, Rs 55,000-crore came in without PAN details.The spike in the deposit base of these states after demonetisation has been significant.For instance, the maximum number of high-value deposits was made in Maharashtra (Rs. 1.1-lakh crore). But the state already had a substantial bank deposit base at Rs 6.51-lakh crore on November pare this with Rajasthan: High value amounts totalling Rs 50,000-crore were deposited within 50 days of demonetisation. The deposit base of banks in the state on November 7 was Rs 1.16 trillion.Another pattern that emerged from the data accessed by HT showed that deposits in three conflict zones---Jammu and Kashmir, Chhattisgarh and the Northeast --- were consistent with their deposit bases.This possibly belies government apprehensions that these insurgency-hit regions were used to push fake Indian currency and unaccounted-for money.Demonetisation impact on BSE firms’ December quarter resultsAuthor: Mobis Philipose Publication: Date: March 24 2017URL: An overall analysis of Q3 results reported by BSE companies shows that Indian firms weathered the worst of the fallout from demonetisationIndian companies kept their eyes on the ball and did fairly well in the December quarter, despite the upheaval caused by the November ban on old, high-value banknotes. While sales volumes in some sectors were hurt, a number of companies made up by tightening their belts. Net profit of Sensex companies rose 0.8% year-on-year, after adjusting for exceptional gains and losses, according to data collated by Kotak Institutional Equities. Of course, this is not to say that demonetisation did not impact the performance of Indian companies. Volume growth was weak and even negative in a number of sectors—such as automobiles—and credit offtake was weak in the banking sector. “Underlying volume trends disappointed across sectors, especially in the case of PSU (public sector undertaking) banks (credit), consumer staples, cement and industrials, as the disruption to the economy in the second half of 3QFY17 due to demonetisation exacerbated the prevalent subdued demand conditions,” Kotak’s analysts wrote in a note to clients.The markets, meanwhile, appear to believe all of the Indian economy’s woes are behind them. Valuations have risen sharply nearly across the board, and are now at levels similar to previous occasions when irrational exuberance ruled the day. “The market seems quite unperturbed about ‘high’ valuations despite an uncertain earnings outlook and unhelpful global and domestic interest-rate cycles. Investors have chased valuations to ‘high’ levels on expectations of a strong recovery in the economy and earnings. We expect a slow economic recovery”, Kotak’s analysts wrote in the recent ing back to the December quarter results, there were hardly any signs that the recovery picked up pace. As mentioned earlier, sales of automobile companies, particularly makers of two-wheelers and commercial vehicles, were weak. Commercial vehicle sales had picked up in October, but fell post-demonetisation.For most large-sized consumer goods companies, volumes fell, reversing the trend of single-digit growth in previous quarters. For instance, Hindustan Unilever Ltd’s volumes fell 4% and Colgate Palmolive India Ltd’s volumes fell as much as 11%. Some cement makers reported declines in sales, although this was similar to the trend in the September quarter. Overall volumes were flat largely because of growth in southern markets.Credit off-take weakened post-demonetisation with overall credit declining to a 20-year low, according to Kotak’s analysts. Credit to industry was down 4% in end-December. “The year-on-year decline in loans in the industry segment reflects (a) lack of new projects to finance, with the refinancing of extant loans the only real activity in the industry segment and (b) the reluctance of banks to lend to the industry and infrastructure sectors,” Kotak’s analysts wrote. The silver lining is that non-performing loans appear to have peaked, and are not wreaking havoc on banks’ financial statements as they were about a year ago.Order inflows at capital goods companies declined, compared with decent growth in the previous quarter. At the same time, the revenue of these companies increased. While the growth in revenue is heartening, unless the size of the order book picks up, growth of the sector will be muted. Reliance Jio Infocomm Ltd’s free services took their toll on Bharti Airtel Ltd and Idea Cellular Ltd, with the latter even reporting a net loss. And growth in India’s information technology services exports continued to decline. Growth in organic revenue of top-tier firms has fallen to around 7%, from around 9-10% a year ago. On the other hand, companies in some sectors such as metals and energy did well, thanks to a low base in the year-ago period—thanks in turn to favourable commodity prices.In less than a month, when companies start reporting March quarter results, it will become clear whether the demonetisation impact was only temporary and whether there are clearer signs of a recovery.A look at how the various sectors performed during the December quarter:DeMo Impact On GDP: The Cassandras Got It More Wrong Than The OptimistsAuthor: R JagannathanPublication: Date: June 1, 2017URL: were partially right for the wrong reasons, and for that they get one cheer and two boos.However, they may have one more chance to crow – if the first quarter GDP for the current financial year shows another dip.The Cassandras appear to be right after all. The Central Statistics Office’s provisional estimates for 2016-17 – a year marked by the shock demonetisation (DeMo) of high-value notes in November 2016 – show that gross domestic product (GDP) growth dropped from 8 per cent in 2015-16 to 7.1 per cent last year, while GVA (gross value added) growth plummeted from 7.9 per cent to 6.6 per cent, a drop of 1.3 percentage points.Quarter-to-quarter comparisons are even starker, with the fourth quarter of 2016-17 showing a precipitate drop of 3.1 per cent in terms of GVA to 5.6 per cent from the corresponding quarter of 2015-17, when GVA growth was a spiffy 8.7 per cent – the highest in the Narendra Modi years. This effectively seems to validate all the naysayers, from Manmohan Singh’s estimate of more than 2 per cent drop in growth, to Ambit Capital’s more pessimistic prediction of a 3.3 per cent in 2016-17.However, even the Cassandras are wrong, for they predicted a spectacular GDP drop (and not a GVA drop). GDP is GVA adjusted for taxes and subsidies. The actual GDP figures for 2016-17 show a 0.9 per cent drop over the year before, and even GVA has dropped from 7.9 per cent in 2015-16 to 6.6 per cent last year – a fall of 1.3 per cent.The pessimists are as wide off the mark as the optimists, who foresaw a 0.5-1 per cent drop. In fact, the optimists got closer to the mark than the pessimists. Ambit’s GDP number for 2016-17, made post-DeMo in November last year, was 3.5 per cent (half the final number of 7.1 per cent). They didn’t hit the broad side of the barn. Manmohan Singh got closer, but he was wrong by 1.1 per cent at least – a huge margin of error.The others did much better. The predictions made post-November were the following: Crisil said GDP would be hit by 1 per cent (nearly right), Moody’s said GDP would be 7.1 per cent (bang on for the final number), Care said GDP would drop by 0.3-0.5 per cent (which was too optimistic), and the IMF said GDP would fall to 6.6 per cent, missing the mark by 0.5 per cent on the side of excess pessimism. But this is a reasonable miss, and a far cry from the political naysayers who wanted GDP to fall.We also need to separate the full year’s GDP drop from that of the fourth quarter, when the impact of DeMo was maximum. Moreover, the third quarter was benefited by the festive season lift in October and early November, and orders already placed before had to be executed during November. The real negative impact started from December, and continued till at least end-February. Which is why you are seeing a concentrated impact in the fourth quarter.But GDP dropped to 6.1 per cent in the fourth quarter, a far cry from the 2 per cent drop predicted by the former prime minister, even assuming he was talking about just the worst quarter (he wasn’t). GDP fell from 7 per cent in the third quarter to 6.1 per cent, and GVA from 6.7 per cent to 5.6 per cent. The only figure that bears out the excess pessimism is a comparison of the fourth quarter GVAs of 2015-16 and 2016-17 – the drop was steep from 8.7 per cent to 5.6 per cent.But when the Cassandras had made their predictions, they were not talking about GVA or the fourth quarter.They were partially right for the wrong reasons, and for that they get one cheer and two boos. However, they may have one more chance to crow – if the first quarter GDP for the current financial year shows another dip. After that we get into the uncertainties of GST implementation, and all comparisons will be meaningless. Despite Return Of King Cash, Digital Payments Continue To Soar In MayAuthor: R JagannathanPublication: Date: June 8, 2017URL: return of King Cash post-demonetisation has not diminished the use of non-cash modes of payment at all. In fact, whether it is e-wallets or mobile payments, credit cards or the unified payments interface (UPI, including the Bhim app), RTGS, NEFT or IMPS (all electronic funds transfers), almost all non-cash modes of payment have recorded a significant month-on-month increase.Overall, May 2017 saw a 1.3 per cent jump in such transactions over April to Rs 111,09,970 crore (ie, Rs 111 lakh crore), which, when annualised, works out to more than 15.6 per cent growth. Even adjusting for the fact that May has one more day than April, the annualised growth rate is a healthy 15 per cent. (See table below)The shift to non-cash modes is growing twice as fast as the gross domestic product (GDP).What is interesting, though, is how choice is shifting between various electronic and digital modes month on month.Among the fastest growing modes of payment are UPI, which grew a phenomenal 26 per cent in May over April and pre-paid instruments (ie, e-wallets like MobiKwik, Payzapp and Paytm), which grew 13 per cent. The Bhim app of UPI has had 20 million downloads, reports The Economic Times.But mobile payments went over the moon. Values transacted zoomed by over 34 per cent in May. This suggests that mobile banking payments could well be in high growth mode. In May, mobile banking volumes soared to over Rs 1.94 lakh crore, higher than even the peak volume month of March (Rs 1.44 lakh crore).RTGS, NEFT and IMPS reported month-on-month growth rates of 1.8 per cent, 2 per cent and 4 per cent respectively. These are terrific rates, when annualised. Credit and debit cards rose by 2.3 per cent over the month.The only major non-cash instrument to degrow was cheque payments. Between April and May, the value of cheques issued fell by 3.5 per cent.But this degrowth should actually strengthen the case for claiming that people are moving away from physical modes of payment (cash, cheque) to digital and electronic modes.Whatever else demonetisation may or may not have achieved, the shift to digital modes of payment is clear.Demonetisation: Tax officials surprised as Delhi deposits Rs 56,665 cr & Mumbai Rs 35,272 cr in old currencyAuthor: Dipu RaiPublication: Date: June 8, 2017URL: the almost-two-month period that the NDA government's demonetization was in effect — November 8, 2016-December 30, 2016 — it was Delhi that outdid all other important business centres in so far as cash deposits are concenred.According to data prepared by the Department of Revenue in the Ministry of Finance, the national capital registered the maximum number of cash deposits of old currency among all the major metro cities with Rs 56,665 crore while Mumbai stood a distant second with Rs 35,272 crore.The DNA is in possession of the government figures for the menting on the demonetization deposits of the two cities, a senior tax officer told DNA, "We did not expect such a large amount of demonetization deposits from Delhi and that there would be such a large gap between Delhi and Mumbai. We thought that we would see larger deposits from Mumbai."DNA has accessed this data through exclusive documents from the Financial Intelligence Unit-India (FIU) a specialised agency that works under the finance ministry to monitor suspicious bank transactions. According to the FIU data, while Delhi and Mumbai stood at first and second place, Bengaluru ranked third at Rs 24,835 crore. Tax officials stated that this figure was lower than expected. On the positive side, officials said that they received a larger than expected cash deposits from smaller cities, especially from Surat and Lucknow. Revenue department data showed that Surat deposited Rs 12,593 crore during the 50-day period.Lucknow deposited Rs 8,195 crore cash deposits in the same time.In terms of states, tax officials stated cities across Uttar Pradesh had especially responded to the demonetization drive. "It's not just Lucknow, large demonetization deposits have been seen in cities across Uttar Pradesh. We specially found large deposits from Ghaziabad, Noida, Varanasi and Kanpur," said the tax officer.Data from the Revenue department showed that totally Rs 10 lakh crore was deposited in 98 lakh accounts during this 50 day period. This shows that on average Rs 10 lakh had been deposited in one account during this period.Tax officials from the Revenue department told DNA that they had only mined data on individuals and companies which had deposited over Rs 2 lakhs over the 50 day period. They said that this had been specifically done to track potential offenders and those who may be using the benami route to hide their black money."Doubtful" DepositorsThe Revenue department has identified that the deposits of 17.92 lakh depositors are "doubtful." On January 31, 2017, under "Operation Clean Money", the Tax department has asked these "suspicious" cash depositors for online clarification. Notices have been sent via mail and SMS to those people who entered into cash transactions that did not appear to be in line with their tax profiles. Around 9.46 lakh of these 17.92 lakh persons, so far, have responded. Officials stated that the rest have been listed and an investigation is under process.Paul Krugman blames demonetisation, RBI & strong rupee for tepid growthAuthor: PTIPublication: The Economic TimesDate: July 5, 2017URL: the Modi government's note-ban, hawkish monetary policy of RBI and a strong rupee for the tepid growth, Nobel winning economist Paul Krugman today said the 6 per cent GDP expansion is "disappointing" for a country like India. The noted American economist also questioned whether the favourable demographics which makes the country with the highest working age population in the world, would aid economic growth at all. "Your 6 per cent growth is actually disappointing. You probably should be doing 8 or 9 per cent," the economist said. Unlike the advanced economies, it is "conventional macroeconomic issues" which are afflicting India, he said. Diagnosing what limits the economic expansion, Krugman blamed the sudden demonetisation announced last November, the continuing tight monetary policy and also a strong rupee which makes exports uncompetitive. "You have an odd demonetisation which created some disruption, you have a monetary policy that looks tighter than one can easily justify. I don't quite understand why it isn't looser," he said. On the continuing hawkish stance of the RBI, he added, "if advanced countries saw the trends of inflation that you see here, you would be talking of substantial loosening of your monetary policy."Despite inflation trending much below its target of 4 per cent, the RBI has held on to its elevated rates which many experts blame for stifling growth. The GDP grew by 6.1 per cent in the last quarter of fiscal 2017, which was attributed largely to the note ban. On November 8, 2016, Prime Minister Narendra Modi took the nation by surprise abolishing Rs 500 and Rs 1,000 banknotes with stated objective to fight the scourge of blackmoney. However, withdrawing 86 per cent of the currency in circulation in a economy that was close to 98 per cent cash- driven, had its impact on growth, as seen in the official data released in May. On the issue of demographics, Krugman termed the situation to be a "little problematic" for the country. "India is still a surplus labour economy with a large number of people inefficiently employed in agriculture which means instead of providing the base for rapidly growing production...it is not clear why a favourable demography is not translating into favourable growth," he said.Demonetisation Not So Bad After All: Paul Krugman Author: Swarajya StaffPublication: Date: July 6, 2017URL: laureate Paul Krugman, who said demonetisation will do no good for India – long term or short term – had to eat his words when he now said that the impact was not as bad as everyone feared.“There is a lot of collateral damage. But we can say that the damage to the economy is not as bad as some of us feared,” he said in an interview to the Economic Times (ET).“When it happened, my first reaction was, if I had to guess, the economy would shrink in proportion to the reduction in the monetary base. That did not happen, which is a good thing.”"Seems like a highly disruptive way to deal with the problem of illicit hordes of cash, though it is not clear what significant long terms gains will come of it," Krugman had said back in December 2016.Though he termed the DeMo exercise a “shock therapy that was not well advised”.Calling Prime Minister Narendra Modi’s economic policy “less dramatic than people had imagined”, he, however, said the goods and services tax (GST) is the right kind of paring Modi to Japanese Prime Minister Shinzo Abe, he said though Abe is a nationalist, he has done a lot of good for the country’s economy, and despite his social conservatism, has done a lot for women in Japan.“I felt that there is some of that here, the odd mix of assertiveness and slight authoritarian tinge, but then reasonably effective but in some ways oddly socially progressive policies.Modi's note ban can't kill corruption, it could damage Indian economy significantly: Paul KrugmanAuthor: MC Govardhana Rangan, Joel RebelloPublication: The Economic TimesDate: July 6, 2017URL: laureate Paul Krugman said he was puzzled by demonetisation and that it was a blunt instrument to tackle the problem of black money and corruption. He said that Prime Minister Narendra Modi’s performance is a bit below expectations and called on the government and RBI to spur economic growth by cutting rates and increasing fiscal spending. Edited excerpts from an interview with MC Govardhana Rangan and Joel Rebello: Q.: Six months ago this country did a major experiment — pulling out 86% of the cash from the system. What do you think about it? A.: It was puzzling. I would not have done this… It was an attempt to flush out corruption with a very blunt instrument. There is a lot of collateral damage. But we can say that the damage to the economy is not as bad as some of us feared. When it happened, my first reaction was, if I had to guess, the economy would shrink in proportion to the reduction in the monetary base. That did not happen, which is a good thing. It was shock therapy that was not well advised. It is not going to make any lasting dent in corruption and it could do a significant amount of damage to the economy. Q.: What is your take on the economic policies of the Narendra Modi administration? A.: It has been less dramatic than people had imagined. I think that GST is the right kind of thing, emphasis on public investment is a good thing but it does seem to be a little less than promised. I listened to Modi speak in Delhi when I was there. What he reminded me of was oddly of Shinzo Abe in Japan, of whom I am an admirer. It is funny because in Abe’s case he is someone who is a nationalist whose views I consider appalling, but has done quite a lot for the Japanese economy and also rather oddly given his social conservatism has done a lot for women in Japan. I felt that there is some of that here, the odd mix of assertiveness and slight authoritarian tinge, but then reasonably effective but in some ways oddly socially progressive policies. Q.: You have indicated that the era of ‘hyperglobalisation’ is over and global trade may be plateauing. Where does global trade go from here? A.: The evidence of a global plateau in trade is very clear now. Hyperglobalisation looks like a one-time event between 1990 and 2010. In terms of the underlying economics, there is no inherent reason why trade has to grow or grow faster than GDP. It can shrink because it is about relative rates of technological progress in transportation and communication versus domestic production. So far, the slowdown in world trade does not seem to be about protectionism. We had a major move towards free trade back in the early 90s on the part of emerging markets and advanced countries before that. We are not seeing any reversal of that movement. So far, it is only about the technology. There is nothing inherently bad about it though it raises some questions about the development model. The chances of an actual protectionist revival have obviously gone up. The institutions that have sustained global trade have less political support than people thought. We definitely have the possibility that the guy in the White House will lash out. We are already seeing some tensions with Germany and China. What happens if there is some kind of a trade war? Germany is to be blamed for quite a lot in terms of European economic policy, but the bilateral surplus with the US is a very bad place to challenge them. It is possible to see a series of escalating actions (and) retaliation based on the falling apart of the WTO structure. That would be the scenario that one would worry about in which the US would end up imposing major tariffs and other people would do the same thing. It would probably not cause a great depression. That’s a misunderstanding. It might cause some short term economic slowdown, but that’s much less clear. But it would cause a lot of disruption. Q.: Who gets hurt in that situation? A.: If we had a trade war we would take an existing structure and disrupt it and restructure the things that we already got. Communities were hard hit by the moving of jobs by the US to Mexico or to China in the past. Now we have communities that earn their livelihood exporting to Mexico or are part of the global value chain that includes China, which will be disrupted. So you would create a whole new wave of displacement of workers. The effect on overall GDP might not be that large but the effect on job churn, the number of communities disrupted would be quite, and the impact on emerging nations would be serious. India would be exposed, but I really think places like Bangladesh and Sri Lanka would be terribly exposed. Q.: China with its belts and roads is showing ambition. Is it becoming the Middle Kingdom again? A.: Firstly, it is unclear exactly how this is going to work: whether China is really going to finance all of this infrastructure in other countries, or is it going to try to put its name on things that would have happened anyway. It is true that water transportation is still cheaper than over land. It is possible. I would like to see them do it. It has been a while that we have seen a major improvement of the global infrastructure for the physical goods. You can tell a story of how China ends up becoming the economic centre of gravity of the world in part because of abdication, for different reasons, of the US and Europeans. Q.: In the age of robotics and artificial intelligence, what do you think of leaders talking about manufacturing for jobs growth? A.: It makes far more sense for India than for the US for sure. It is surprising in so many ways that India does not export more manufacturing goods. You can make an argument that there are some policy issues that have restricted manufacturing growth in India. Manufacturing could be a bigger deal in India. If you are talking about the rest of the world then it is quite foolish to imagine that manufacturing can be a big source of job growth. It wouldn’t restore the previous glory of manufacturing as an employer. You say robotics, but even general productivity growth has meant that we can satisfy the demand for manufacturing even with a small labour force. The same happened to farming. People who imagine that prosperity means more manufacturing, it’s the same way 100 years ago when people said the true economy is that of the farmers and that is not going to happen. Q.: We have seen problems in global banking; Europe has moved away from crisis and now we have seen bailouts in Italy. Is the financial world out of the woods? A.: The long-term history of banking has seen many crises. There is a little bit of confidence trick in the activity of banking because banks are inherently leveraged institutions which create liquidity and so there is always the chance of bad decisions, or panic creating a crisis. After the great depression we established a system of heavy regulation which meant that crisis became rarer. Then the deregulation in the 80s in some ways made a return to the old regime of frequent crises and we had a moral hazard because people expect to be bailed out, so we have much lower capital ratios than what was in the pre-regulation era. So regular bailouts become a recurrent feature of the system. A year ago if you had asked me I would have said we are gradually re-establishing a sort of 21st century equivalent of the 1950s system when we were gradually tightening regulations. What we are seeing in Europe is not a new risk. We are not seeing bailouts in Italy because Italian banks have acted responsibly in the last five years, we are seeing legacy risks. We have a Congress in the US that seems to be determined to recreate the conditions for a 2008 crisis, they may mange to do that. We forgot the lessons of the great depression and then failed to learn from the repeat of the crisis. Q.: So should we expect a repeat of what happened? A.: In Europe most of the problems are known unless there is something on the horizon. The euro area crisis was probably a one-time event. We had this tremendous capital flow into southern Europe after the creation of the euro and then the crash and a lot of NPAs coming out of that. That particular crisis is not going to happen a second time. Something else might happen. I don’t see this as an endemic banking crisis in Europe. I think Europe has a political crisis rather than a banking crisis. Q.: Globalisation of finance led to the 2008 crisis and we saw a lot of liquidity being pumped in. Then there’s this carry trade. How does it come to an end? A.: With a little luck we will have fewer bouts of euphoria followed by panic in emerging markets. Maybe I am being excessively hopeful because the finance industry always does seem to find ways to become excessively enthusiastic and then suddenly change its mind. We are not in a situation now where we have very heated capital flows to the developing world which will suddenly collapse as policy tightens in advance countries. I think the flows look much more stable and there is a lot less hot money involved in the story now, and also a lot of graduation. Twenty years ago emerging markets were extremely vulnerable because they had underdeveloped financial sectors and had borrowed too much in dollars and euros and they were exposed. That is much less the case now. A few years back we had the taper tantrum and many emerging market currencies like the Brazilian real tumbled, but the real economic fallout was not really as bad as the Asian crisis. I think we are more robust now. I am also not clear how fast the financial normalisation is going to go. I suspect the Fed is now nervously looking at inflation numbers and saying do we really want to keep raising rates. Q.: What do you think they should be doing? A.: Nothing. I don’t think they should have raised rates at all. I think they should definitely wait and see actual evidence of inflation before doing anything more. Q.: What can go wrong for the global economy? A.: There are multiple plausible stories. There is the Chinese crisis that we keep on thinking is going to happen, but never seems to happen. But one of these days, may be, it does. There is the Constitutional crisis in the US that might be interesting. It is looking like the European system is a bit stronger after France. But now we look at Italy which looks wobbly, and if they exit that would be disastrous for the European system. The US has got a crazy person in the White House, the European system is badly flawed in many respects, and China has not managed the transition to a more consumer-based economy. So which of these things are going to happen? At some point, some will. God knows.Monthly card payments hit record Rs70,000 crore on the back of note ban: SBIAuthor: Komal GuptaPublication: Date: July 14, 2017URL: growth in digital payments has been attributed to demonetization of Rs1,000 and Rs500 banknotes on 8 November and also announcements made in the Budget 2017.Card payments on point-of-sale (POS) terminals have hit a record monthly amount of Rs70,000 crore, a level that would have taken three years to reach had demonetization not taken place, State Bank of India (SBI) said in a research report on Thursday.“We have analysed that demonetization has brought the nation at least three years ahead in digital payments. In other words, if demonetization had not happened, it would have taken three years more for credit and debit cards transactions on PoS terminals to reach the current level of Rs700 billion (assuming a yearly growth rate of 25%),” said the report authored by Soumya Kanti Ghosh, group chief economic adviser, SBI.The report states that a similar trend has been observed in the usage of pre-paid instruments and mobile banking.The growth in digital payments has been attributed to demonetization of Rs1,000 and Rs500 banknotes on 8 November and also announcements made in the Budget 2017.The finance minister, in his budget speech, announced major tax exemptions in basic customs duty (BCD), excise/countervailing duty (CV) duty and special additional duty (SAD) for manufacturers of PoS card readers, mobile PoS (mPoS), fingerprint readers and iris scanners.“We believe that increasing number of PoS terminals (post demonetization, Indian banks have been able to set up 1.18 mn extra PoS terminals) and ease of doing digital transaction will increase this level further,” said the SBI report.The government had announced in the budget 2017 that 1 million additional PoS machines would be installed by March next year. The SBI report said the target has been exceeded in less than a year’s time.Use of cash is not efficient anymore, especially post-demonetization and the Goods and Services Tax (GST), said Rahul Gochhwal, co-founder of Trupay, a financial technology company.“Most traders and merchants preferred cash to avoid tracing of income before demonetization and GST. However, they don’t have that incentive now. A little investment needed to set up card acceptance infrastructure discouraged them to move to digital payments before demonetization,” he said.Rural India bounces back from the cash crunch Author:Publication: The NationalDate: July 18, 2017URL: ’s vast rural hinterland, which makes up 70 per cent of the South Asian country’s population, is showing signs of recovery from last year’s cash crunch, boosting optimism that increased spending will help the broader economy regain its vigour.The micro-finance industry is rebounding, real rural incomes are rising and unemployment is falling, according to brokerage Motilal Oswal Securities and an Indian unit of HSBC in analysis that contrasts to the distress that has swept the farming sector.“We believe repayments and improved collection trends have increased the confidence of companies to start disbursing loans at a healthy pace again,” Mumbai-based Alpesh Mehta and colleagues wrote in a report from Motilal Oswa.India’s micro-finance industry, which provides small loans to entrepreneurs and business owners who have little collateral, was slammed when the government withdrew high-denomination bank notes from circulation late last year in a bid to stamp out corruption. And while farmers have taken to the streets across India to protest against plunging food prices, labourers who get paid a wage to work the land have actually seen their incomes rise after last year’s good monsoon, the HSBC economists wrote.Loan collection rates in Uttar Pradesh, India’s largest and most populous state, are largely back at about 98 per cent levels, up from less than 50 per cent after denomonetisation, say Mr Mehta, Piran Engineer and Subham Banka. Other major states such as Karnataka are displaying “much improved collection trends”, they add.Micro-finance disbursements, which grew 13 per cent last year compared with 80 per cent the previous year, are expected to return to pre-ban levels in three to six months, according to Motilal Oswal.The gold loan company Manappuram Finance has risen 68 per cent from its low after demonetisation in November and Bharat Financial Inclusion, India’s largest listed micro-finance firm, has rebounded 64 per cent over the same time frame.However, the Indian state of Maharashtra, home to India’s financial capital, Mumbai, is lagging other states and continues to face delinquency pressures, with about 20 per cent of loans unpaid 90 days past due, according to Motilal Oswal.Interactions with micro-finance companies reveal no expectation of disruption from the rise of farm loan waivers in Indian states but instead a focus on the effects of demonetisation, the report said. Microfinance Institutions Network – India’s largest group of microfinance firms – reported that “demonetisation severely impacted the micro-finance business in multiple ways including slowing down of growth due to non-availability of cash for a few months”.Motilal Oswal intends to observe delinquency trends for a few more quarters before reaching conclusions over the impact of waivers on micro-finance. Maharashtra, Punjab, Uttar Pradesh have all announced, waiver programmes.The rise in credit growth at the micro-finance level is complemented by a rise in rural incomes and purchasing power, according to HSBC Securities and Capital Markets (India).“Macro indicators have improved” in rural India, say the HSBC economists Pranjul Bhandari, Aayushi Chaudhury and Dhiraj Nim. The plunge in inflation has helped to boost annual real income growth to just under 4 per cent from contracting levels a year ago, while rural unemployment has sunk from about 9 per cent last September to about 4 per cent, according to HSBC.Normal rains so far in 2017 and a bumper crop in 2016 after a two-year drought have generated more jobs for rural Indians who work the land – some 70 per cent of rural households who are “landless", according to HSBC.That has help to pushed up motorcycle sales and the production of consumer non-durables in this segment, according to HSBC. Shares of companies with substantial rural customer bases are experiencing steady growth.While falling farm prices have hit many rural Indians hard, they have also boosted purchasing power and consumption among the population, which could help a broader recovery in the Indian economy that is suffering from a slowdown in growth, soured loans and weaker manufacturing sector.Modis demonetisation has proved to be a success, critics must apologiseAuthor: Rajiv Kumar, @RajivKumar1Publication: Dailyo.inDate: April 13, 2017URL: economy has only come out stronger.On April 11, finance minister Arun Jaitley informed the Rajya Sabha that Rs 5,400 crore of undisclosed income had been detected since the November 8 announcement that demonetised 86 per cent of the currency in circulation.Critics will surely latch on to this rather measly figure to declare that demonetisation has palpably failed in expropriating owners of “illegal money”. Such criticism would only further display the inherent ideological bias and politically motivated opposition by these critics.Bias This bias had led Amartya Sen to declare Prime Minister Narendra Modi to be a “despot” and Manmohan Singh to lampoon the measure as “organised loot”. Some economists had spelled the demise of SMEs that were cash-dependent.Others like Kaushik Basu and Arun Kumar had forecast a sustained downward spiral that would land the Indian economy in severe and deep recession in which it would flounder for a long time. And some like Prabhat Patnaik and his co-authors had pointed to a similar action in the former Soviet Union having been a factor in its break up in 1990 — the ominous implications for India being quite clear.From organised loot to the possible break-up of the country, demonetisation was attributed with all possible negative outcomes by its trenchant critics. In the light of developments in the post-demonetisation period, these critics should publicly recant and apologise. Will they?Nothing even remotely resembling the dire forecasts of those viscerally opposed to Modi has come to pass and nor is it at all likely to emerge. GDP growth in 2017-18 will, in my estimate, be higher than in 2016- 17 because the global economy is reviving and domestic investment is about to start rising as well. Export earnings, to which the unorganised sector contributes significantly, are rising since October 2016.Indian economy not only not imploded as a result of demonetisation but has perhaps come out stronger and better primed for growth.The rupee, which was headed towards Rs 70 to a dollar in November, has actually strengthened by more than 6 per cent since January 2017 despite the US Fed having raised rates. Rabi output is expected to be normal. Consumer price inflation is below four per cent; fiscal deficit remains within FRBM targets and the current account deficit at manageable levels.Real estate prices are beginning to creep up again in metros like Mumbai and Delhi and construction activity, pushed strongly by the government’s promotion of affordable housing, is on the rise.In complete contrast to the critics’ ominous warnings, the Indian economy is well on track to not only sustain its growth momentum but may even see an inflexion point to a higher growth trajectory as investors, more confident of transparent governance and lower levels of corruption and easier environment for doing business, start expanding capacities.Indian economy not only not imploded as a result of demonetisation but has perhaps come out stronger and better primed for growth. Thank you.IllegalHowever, the fight against illegal and criminal money and wealth is certainly not over by a long shot. The finance minister has pointed out that the I-T department has identified 1.8 lakh bank accounts in which deposits do not reconcile with declared incomes and average deposits in these accounts has been about Rs 3.01 crore, far above Rs 2.5 lakh, which was seen to be the “safe” amount to be deposited.These account holders are now being contacted and will hopefully be pursued. The benami properties act and the instructions to link all bank accounts with Aadhar numbers will help unearth hordes of illegal wealth.Limits on cash transactions, linking Aadhar with PAN numbers will also surely identify a huge number of fictitious and ghost depositors, just as it did for ghost gas connections and kerosene users.Lowering the limit on political funding, though not optimal, will put some constraint on illegal monies being used for political purposes. The good news surely is that having used the most drastic measure for signalling his commitment against corruption, Modi and his ministers can hardly afford to go soft on this now.The die against corruption, bribery and ill-gotten monies has been irrevocably cast and it will be very difficult to roll it back.CorruptionHowever, there is simply no room for complacency. The wild show of money power in the now deferred RK Nagar constituency by-poll is sufficient evidence to show that the malaise is chronic and widespread. Corruption and illegality related to the political process will have to be fought for a long time.It is time for a real public debate on the issue of electoral funding, which will hopefully generate ideas to minimise, if not eliminate, pernicious corruption in this area. However, an even greater danger lurking around is that of the tyranny of the taxman over the honest individual and corporate taxpayers.It is already reported that in several cities, the intrepid tax inspector is already using his/her extra powers to harass honest taxpayers. This must change. Investors have to be convinced that additional powers granted to the I-T department through recent amendments will neither apply retrospectively nor with vengeance or complete impunity.The Modi government has benefited by people’s positive response to demonetisation. He now has to demonstrate his unflinching support for domestic and foreign investors by reining in the tax officials, demanding utmost honesty of them — ruling out retrospective action except in the most exceptional case and assuring both the investors and political opposition that the I-T Act is not a tool in government hands to "sort out" recalcitrant investors or political opponents.Only then will demonetisation produce its desired outcome of ushering a new culture of honest economic activity in India.(Courtesy of Mail Today.)For Demonetisation to Work, Modi Must Root Out Political and Bureaucratic CorruptionAuthor: Rajiv KumarPublication: The WireDate: November 29, 2016URL: follow-up measures, it will be difficult for Modi to counter the charge that demonetisation is meant to serve a narrower political and personal agenda.Even former prime minister Manmohan Singh, speaking in Rajya Sabha during the debate on demonetisation, admitted that its objectives were worthy of universal support. Moreover, people queuing up in front of banks for hours and 90% of those responding to Prime Minister Modi’s online survey have unequivocally supported the measure. This should have put to rest any doubts about the mass appeal of this measure. This near universal positive perception could, however, be based on a misperception of possible macroeconomic outcomes from demonetisation. Being undoubtedly the largest such exercise in the world, it has even drawn in international experts like Kenneth Rogoff and Larry Summers into the fray. This is, therefore, an appropriate time to take stock of the on-going demonetisation. The worst outcome of demonetisation, which has sucked out 86% the total currency in circulation, could be that the cash crunch will kill those units operating in the informal sector, which work predominantly or exclusively with cash. The liquidity shortage could fatally affect both their input supplies and/or revenue flows. Added to the mayhem in the informal sector, farmers could be in severe distress if they can’t sell their kharif harvest because of the cash shortage and as a consequence, be short of necessary agro-inputs for sowing rabi crops. The real estate sector will suffer from a precipitous fall in speculative and investment demand due to the attack on black money. And to top it all, consumption demand could collapse dramatically as consumption demand, especially ostentatious and luxury demand takes a big hit as a result of demonetisation. All these negative impacts could effectively bring all economic activity to a grinding halt for the next six months or longer. This nightmare scenario is reflected in the forecast by Ambit Capital that India’s GDP growth will halve to 3.5% in 2016-17 with the third and fourth quarters (September to March) recording only 0.5% growth. The slowdown will persist for the next two years, resulting undoubtedly in a resounding electoral defeat for Modi in 2019 general elections. According to these die-hard pessimists, Modi has dug his own political grave by implementing this measure. Has Modi been totally unaware of these grave downside risks when taking this step?But Modi could have a different perspective. All informal sector enterprises essentially have some access to formal credit sources and only partially depend upon cash revenues for their survival. With more than 600 million account holders in the country, it is difficult to conceive of MSMEs depending exclusively on cash for their sustenance. For example MSME units, which provide nearly 45% of India’s exports, necessarily operate with credit and through the banking system. They will certainly not be harmed by demonetisation. Moreover, with the impending introduction of GST in the near future, a majority of MSME units are shifting to the formal economy to be able to take advantage of tax credits. These informal sector units could also realistically hope to secure their material inputs on credit terms, especially in such difficult times. Payday incomingThe crucial issue will be whether or not these informal sector enterprises are able to pay salaries to their employees in cash. An inability to do so, could result in acute and widespread deprivation and a backlash that could reverse the extant support for the move. The government must now urgently identify MSME clusters and export oriented units in labour-intensive sectors such as gems and jewellery, leather goods, garments, brassware and other handicrafts and ensure that their cash requirements for salary payments are fully met. This will prevent the ugly outcome of large numbers of workers in specific locations faced with extreme penury despite having toiled for a month and unable to access their legitimate salaries. If this impending salary crunch could be handled, a large majority of MSME enterprise could overcome the transient disruption and not suffer a mortal blow on their activity as the Cassandras forecast. Farmers are not so badly affected. Nearly 80% of rural households do not operate with 500 and 1,000 currency notes for their day to day activities. A hundred rupees still goes a fair way in the rural economy. Further, almost the entire kharif harvest of paddy can be sold to at government procurement counters at officially announced minimum support prices. Sugarcane harvest is sold to sugar mills and their revenues traditionally credited to the farmers’ bank accounts. From all reports so far, rabi sowing is on track because most if not all agro-inputs including tractors and harrows services are provided on 30-60 day credit. Temporary inconvenience yes, but there is no real economic distress in the agriculture sector. The only segment to suffer are the middlemen or the arthiyas, who have traditionally not only operated with cash but also generated large quantum of black incomes from their callous and age-old exploitation of Indian farmers. Recent reports from the real estate sector are that demand has suddenly shot up with property developers obliging black money holders with back-dated purchases paid in ‘old currency’. This is surely an illegal blip in housing demand and the real estate sector will suffer from the loss of black incomes and cash shortages, However, it has also been evident during the last three years that the withdrawal of speculative demand has been confined to major metros and has not affected housing and real estate demand in tier one and tier two cities and towns. The demand for housing in these smaller urban centres has been buoyant and is expected to remain so in the coming period. The government can feasibly ratchet up its expenditure to boost real estate and housing demand and take advantage of its extensive linkages and multiplier impact to boost aggregate demand.Incoming lossesThis extreme downside risk to economic growth arising from demand weakness and supply side disruption will unfold in the third and fourth quarters of the current financial year, 2016-17. According to Manmohan Singh, we could see a decline of 2% in GDP growth, which would then come in at 5.5% instead of 7.5% as generally estimate prior to demonetisation. Singh’s estimate of a decline in GDP growth would imply a one-off loss of nearly Rs 27 lakh crore to the economy. This will surely be accompanied by job losses across sectors but concentrated perhaps in real estate, wholesale and retail trade, production units in the informal sector and intermediate services like transport and logistics. These costs would be justified only if demonetisation is seen as the first step in eliminating the malignancy of black economy. The government can try to minimise these losses by following some steps. It can stagger the period of using the old currency for a longer period and also for a larger number of users than permitted at present. The period for depositing the currency notes could be extended beyond December 31, to provide more time for residents in far-flung villages to deposit their holdings of old currency and relieve the current pressure on commercial bank branches. The government should actively consider steps to augment the supply of currency by importing it if necessary. They must rope in various departments and agencies as distribution centres for the new currency, especially for its own employees and affiliated agencies. This opportunity could be used to accelerate the adoption of digital payment methods that are already in use. This could see India leapfrog other economies in the area of ‘fintech.’ Finally, it is surprising that there have been no arrests so far for people trying to spuriously exchange money or depositing huge amounts in Jan Dhan deposits. This needs to be reversed. An upside scenario also deserves attention. Rather than result in a dead loss to the economy of 2% of GDP, demonetisation could actually yield a fairly strong fillip to economic activity. With commercial banks now flush with nearly Rs 6 lakh crore of additional deposits, short-term lending rates have already trended downwards rather sharply. It is true that a very large part of these deposits will be needed in due course to meet liquidity requirements, but some additionality in deposits is a near certainty. Lower interest rates on saving deposits will be followed by a reduction in lending rates on working capital loans immediately and term loans subsequently. A reduction in capital costs will help make Indian firms globally competitive.More importantly, five structural changes that will boost GDP growth rates may well take place as a direct consequence of demonetisation. One, the currency preference of the general public will surely weaken after this event, thereby bringing down the currency to GDP ratio. This is high in India at 12% as compared to an average of 4-5% in other emerging economies and 7% in the US, notorious for its cash preference. This will reduce costs of currency printing and also reduce the space for black money. A related gain will be to eliminate counterfeit currency that has been used for financing terrorist and extremist organisations. Costs of producing the counterfeit currency will increase substantially. Second, the move will provide a strong fillip to digital payment methods. Given our (Indians) somewhat surprising affinity to and ability for adopting innovative practices, a shift is already underway and will most likely spread in double time. This will also hasten the adoption of Unified Payment Interface (UPI), promoted by the National Payment Corporation. UPI enables subscribers, at no extra cost, to digitally transfer (pay and receive) money from their deposits either to vendors and other individuals. With 26 commercial banks already on board and the clear prospect of behemoths like SBI joining the platform, UPI could well help India surge ahead in the adoption of digital money. With Prime Minister Modi himself promoting its adoption in public rallies, this could see a very rapid adoption of digital cash transfers in keeping with greater penetration of smartphones and internet. The direct implication will be a further constriction of the space for black money and generation of parallel economy.Third, it is estimated that up to Rs 4.5-5.0 lakh crore ($74 billion) may not find its way back to the banking system. These estimate would change in light of the latest announcement by the government that black money hoarders would be permitted to hold on to 40% of their holdings in bank deposits with a lock-in period of three years and carrying zero interest. However, to the extent that some black currency will be ‘killed’, it will represent a windfall gain for the government as the liability represented by the quantum of ‘non-returned currency’ will be permanently extinguished. This could be used in several different ways to increase the fiscal space for the government for ramping up public expenditure and by the RBI to sharply cut interest rates. Fourth, demonetisation also lower the price of urban land and real estate. In conjunction with lower costs of capital, this will ceteris paribus, encourage investment and switch the Indian growth story from its dependence on domestic consumption to being investment driven. This would be far more sustainable and also more employment generating. Finally, faced with the loss of domestic purchasing power, Indian entrepreneurs would be forced to look more actively and aggressively for export markets. India could enter a period in which the past trend of net exports being perpetually negative would be reversed and India’s presently measly share of 1.6% in global merchandise trade could rise. This would also contribute to the all-important task of generating employment in a country that will see the addition of at least one million new workers every month for the next fifteen years.Like dominoesAll these five positive outcomes, however, depend crucially on whether this first step of demonetisation is followed by others that are aimed at rooting out political and bureaucratic corruption. These are the fountain-heads of black incomes and also quite often the principal cause of honest businessmen resorting to corrupt practices. The prime minister has, on several occasions assured on this count and one hopes that these assurances will be honoured. Some steps have already been implemented. These include, making the industrial licensing system more transparent and less discretionary; implementing the GST; linking bank accounts to Aadhaar; making Aadhaar and pan card numbers compulsory for large value purchases; the passing of Benami Property Act and its early implementation etc. All these will surely make the generation of black and illegal incomes more difficult in future and reduce the space and scope for the parallel economy.One warning. The government has to ensure and assure the people that they will not be hounded and terrorised by the income tax bureaucracy that may see itself as having been doubly empowered. Some ominous signs of this ‘taxman’ overreach and harassment are already visible. Apprehending culprits and money launderers will have to be done most cautiously and with due care for not harassing the professionals, common businessman, traders and entrepreneurs. Prime Minister Modi must make it clear to the income tax officials that it is only a simple, rational and non-threatening tax process that engenders much-needed taxpayers’ confidence in the system. Taxpayer cooperation will not be achieved through persistent threats of harassment and exploitation. I am afraid the income tax department has not so far covered itself with glory on this count. On the contrary, stories of their patently unacceptable boorish and downright inhuman behaviour during income tax ‘raids and searches’ are legion. This raid and seizure culture and practices must change if we are to become a civilised and honest society, which successfully eliminated the pernicious illegal economy. Simultaneously, measures will have to be initiated to roll back political corruption that generates black money. The principle cause for this is undoubtedly the need for slush funds for election campaign finance. Many solid suggestions to curb and root out the need for black money for financing election campaigns have been made including most recently by B J Panda, a BJD MP. The prime minister has all the wherewithal to implement this critical change as well. He has near total control over this own party; has a large majority in the Lok Sabha and the BJP could have a sizeable presence in the Rajya Sabha after the next round of provincial elections. Modi has also developed a strong direct connect with the people to whom he could appeal to overcome any political resistance to his proposals to make election campaign financing more transparent and accountable. If these two critical steps of reigning in the income tax bureaucracy and cleansing the election campaign process are implemented, Modi will certainly usher in the golden period in India’s economic development. We will become attractive for both domestic and foreign investors with a relatively corruption free environment that offers predictability and accountability. It will provide the positive encouragement for honest workers and professionals who will not see themselves as constantly lagging behind their corrupt peers. India could regain its ethical and moral elan. A golden period for the Indian economy could then ensue and see the economy achieve double-digit growth for a sustained period. Without these follow-up measures, I am afraid, a great opportunity would have been wasted. It would then be difficult for Modi to counter the charge, currently being hurled at him by those who oppose this move, that demonetisation with all its attendant pains and disruptions was not undertaken for serving national interest but instead to serve some narrower political and personal agenda. I am convinced that Modi, who knows the score all too well, will not let the down the common Indian who has supported him despite the pain and inconvenience he has suffered in the wake of ‘currency surgical strike’ on 8/11. - The author is Founder Director at Pahle India Foundation and Senior Fellow CPR, Delhi.Demonetisation: Unusual deposits of Rs 1.7 trillion detected, says RBI paperAuthor: PTIPublication: Date: August 11 2017URL: Minister Narendra Modi on 8 November had announced demonetisation of Rs1,000 and Rs500 notes valued at Rs15.4 trillion and constituting 86.9% of the value of total notes in circulation in a major assault on black money, fake currency and corruption. Photo: AP‘Unusual’ cash deposits totalling Rs1.6-1.7 trillion were made during the demonetisation period, says a research paper posted on the Reserve Bank of India (RBI) website. In nominal terms, it said, the excess deposits accrued to the banking system due to demonetisation are estimated in the range of Rs2.8-4.3 trillion. “The ‘unusual’ cash deposit in specific accounts, which are usually less active, is estimated to be in the range of Rs1.6-1.7 trillion,” according to the paper, ‘Demonetisation and Bank Deposit Growth’. Prime Minister Narendra Modi on 8 November had announced demonetisation of Rs1,000 and Rs500 notes valued at Rs15.4 trillion and constituting 86.9% of the value of total notes in circulation in a major assault on black money, fake currency and corruption. The paper is authored by Bhupal Singh and Indrajit Roy who are directors in the monetary policy department and department of statistics and information management, respectively. It said that excess deposit growth in the banking system during the demonetisation period (11 November 2016 to 30 December 2016) works out to 4.0-4.7 percentage points. If the period up to mid-February 2017 is taken into account to allow for some surge to taper-off, excess deposit growth is in the range of 3.3-4.2 percentage points, it said. “Considering some more temporal tapering of deposits, the exercise taken up to end-March 2017 reveals that excess deposit growth would be in the range of 3.0-3.8 percentage points,” the paper said. According to the paper, aggregate deposits grew by 14.5% (y-o-y) during the period 11 November to 30 December 2016, as against 10.3% during the corresponding period of 2015. Overall, there appears to have been a significant increase in bank deposits due to demonetisation, the paper said, adding, “which if sustained, could have a favourable impact on financial savings and their channelisation to capital markets.” A separate research paper titled ‘Financialisation of savings Into non-banking Financial Intermediaries’ said that demonetisation appears to have led to an acceleration in the financialisation of savings. The research paper is authored by Manoranjan Dash, Bhupal Singh, Snehal Herwadkar and Rasmi Ranjan Behera; all work at Reserve Bank of India. The paper also pointed out that in parallel, there is a shift towards greater formalisation of the economy in the near term aided by the introduction of goods and services tax (GST) and regulations such as the Real Estate (Regulation and Development) Act, 2016 (RERA) and the Benami Transactions (Prohibition) Amendment Act, 2016. “These developments may also incentivise greater shift from physical to financial savings,” it said.Mutual funds see Rs 93,000 crore surge in Q1 on note ban: RBI studyAuthor: TNN Publication: The Times of India Date: August 12, 2017URL: studies published by the Reserve Bank of India (RBI) have said that demonetisation has led to 'financialisation' of savings with households choosing mutual funds and other financial investments that had turned attractive vis-a-vis gold, which had seen a decline in price.According to the first study, banks have experienced excess deposit growth in the post-demonetisation period, leading to a fall in interest rates. This, in turn, triggered a flow of money into non-banking financial intermediaries — such as mutual fund schemes, life insurance policies and non-banking finance companies — which saw their balance sheet expand by 14.5% during 2016-17.The study says that new legislation like the goods and services tax (GST), the Real Estate (Regulation and Development) Act, 2016 (RERA) and the Benami Transactions (Prohibition) Amendment Act, 2016 will promote formalisation of the economy. This will sustain the shift to financial instruments.The change in investor behaviour is in line with the forecast by former RBI governor D Subbarao immediately after demonetisation. Subbarao had said that real estate, which was a traditional haven for black money, will face a squeeze and households, who have traditionally parked a bulk of their savings in physical assets like gold and dwellings, will be positively biased towards financial savings.The first study places the excess deposit growth in the banking system during the demonetisation period (ie, November 11, 2016 to December 30, 2016) at 4.0-4.7 percentage points. "In nominal terms, excess deposits accrued to the banking system due to demonetisation are estimated in the range of Rs 2.8-4.3 lakh crore. The unusual cash deposit in specific accounts, which are usually less active, is estimated to be in the range of Rs 1.6-1.7 lakh crore," the report said.The second study shows how the sustained move towards 'financialisation' has resulted in money moving from bank deposits to the capital markets in search of better returns. According to the report, assets under management (AUM) by mutual funds touched an all-time high of more than Rs 17.5 lakh crore by end-March 2017 and further increased to Rs 20 lakh crore at end-July 2017, boosted by rising stock indices. "Resource mobilisation under equity schemes more than doubled during this period. There were also net inflows in the income/debt schemes in November 2016-June 2017 in contrast to net outflows in November 2015-June 2016," the report said.Besides mutual funds, insurance companies too saw a surge. Premium collected by life insurance companies more than doubled in November 2016. Premium collections by life companies during November 2016 to January 2017 increased 46% over the same period in FY16.These reports, authored by senior RBI officials, were published on the central bank's website on Friday. The RBI said that the findings and views are entirely of the authors and should not necessarily be interpreted as an RBI view.Demonetisation revealed Rs 3 lakh crore black money, says PM Narendra ModiAuthor: TNNPublication: The Times of IndiaDate: August 16, 2017URL: Minister Narendra Modi on Tuesday hit out at critics of the demonetisation drive and promised to continue the fight against black money while citing independent data to argue that 3 lakh crore of unaccounted wealth had flown into the banking system due to the withdrawal of two high denomination notes."When demonetisation was announced, the world was surprised. People thought that this was the end of Modi. But the way our 125 crore countrymen showed patience and faith, we were able to take one step after another in our drive against corruption," the PM said in his Independence Day address.Modi said deposits of over 1.75 lakh crore made in banks post demonetisation, and 18 lakh people with income suspected to be beyond their known sources, were under scrutiny. Of the 18 lakh, 4.5 lakh people are now amending their "mistakes", while one lakh "who had neither heard of income tax nor paid income tax have now been forced to do so", the PM said. Modi added that demonetisation forced "black money which was hidden to be brought to mainstream. Our effort was to get money into banks and make it a part of formal economy and we have done it successfully".He suggested that compliance levels had improved, which was manifested in the surge in tax filers, pointing out that the number of additional I-T returns filed between April and August 5 had more than doubled to 56 lakh this year, compared to 22 lakh in the corresponding period last year. Besides, he pointed to other steps initiated by his government since it swept to power in 2014 to argue that the fight against black money was unrelenting. Modi said that over 3 lakh shell companies had been detected, of which around 1.75 lakh had been de-registered."Post demonetisation, the reports from data-mining astonishingly revealed that there are 3 lakh shell companies dealing in hawala transactions... Even if five companies shut shop in India, there is a huge public outcry. And here, we have closed 1.75 lakh companies. The looters of nation's wealth will have to answer."The demonetisation move, he said, had checked the generation of new black money.The PM also said that in a short span of time, the authorities had confiscated more than 800 crore of benami properties.Demonetisation data shows it failed on many counts, but had some long-term benefitsAuthor: Ajit RanadePublication: Theprint.inDate: August 30, 2017URL: there were multiple objectives of demonetisation, one cannot completely say whether the experiment was a failure or a success.The initial metric of evaluating the success or failure of demonetisation was never clear. The first narrative was focussed on black money, curbing terrorist financing or counterfeit currency. Later on, the focus shifted to providing incentives for digital payments, and much later to widening their tax base. So, since there were multiple objectives, one cannot completely say whether the experiment was a failure or a success.A big stand-out feature is that 86 percent currency going instantly overnight out of circulation was such a huge disruptive event and the stand-out feature is that the economy could withstand it. For example, by comparison, Venezuela at the same time attempted discontinuation of its high value notes and there were riots on the street and within one or two days, they had to reverse their decision.Looking at each of the objectives, black money has two components: the stock of black money and the flow of black money. The ministries’ own database from their past, records of income tax raids and confiscation of disproportionate assets shows that 93 percent of disproportionate assets, which are confiscated are not in the form of cash. They are kept in the form of benami land or gold and so on. We clearly knew that large proportion of the stock of black money is not in the form of cash.When it comes to flow it is true that much of it circulates as high value notes. On that account, we have had very limited success because 99 percent of the cash is come back, as we learn today. In any case, one can’t beat the ingenuity of black money operators.We must now look at other aspects that demonetization brought about: the increase in digital transaction, which has almost doubled. And we have seen the widening of the income tax net, and a huge jump in the number of assessee. As many as 1.8 million accounts have been identified with suspiciously large amounts, so they will be investigated. Explanations will be sought.And there is a move to bring more and more of the informal economy into the formal economy, and thereby increasing tax collections, savings, investments into the formal financial sector and so on. These are all medium to long term agenda items and to that extent, the demonetisation event has contributed.But we cannot forget that demonetisation led to drop in GDP growth since it affected the rural and the informal economy adversely. We lost almost one percentage point of GDP.The RBI had to incur the costs of demonetisation in terms of direct printing costs and also in terms of having to pay such an amount of interest on the excess cash which was coming into the system. That’s why the dividend paid by the RBI to the government of India went down by half instead of 60-65,000 crores, it was only 30,000 crores this year, which is also a cost of demonetization.- Ajit Ranade is an economic commentator.Demonetisation Part II: Modi's black money elimination drive has just begunAuthor:Publication: The Economic Times Date: August 31, 2017URL: govt will now scrutinise the deposited cash and a good part of it may turn out to be black money.With 99 per cent of the demonetised 500 and 1,000 rupee notes having returned to the banking system, has demonetisation failed to serve its purpose? That may not be true, because Project Demonetisation is not over with the mere return of junked notes. The more important part begins now, or has already begun. With so much of the cash in the mainstream now, the government will scrutinise the deposited cash and a good part of it may turn out to be black money. Demonetisation has already expanded the tax base. Individual income tax returns jumped 25% so far in the current financial year as the authorities turned up the heat on evaders after demonetisation. The returns filed by individuals were 25.3% higher at 2.79 crore as of August 5, an addition of about 55 lakh from 2.23 crore in the corresponding period of 2016-2017. Growth in filing in the previous year was 9.9%. An estimated Rs 15.4 lakh crore worth old 500 and 1000 rupee notes were demonetised on November 8. As most of it has come into the banking system, the money will be under the tax scanner. Of course, the black part of this money will become white, but not before it is taxed. Such a large amount entering the tax system is itself a success of demonetisation which was touted as a drive against black money. The tax authorities have identified more than 400 benami transactions up to May 23, and the market value of properties under attachment is more than Rs 600 crore. Expect more of this happening now. Not just that. Money trails generated by demonetisation resulted in identification on two lakh shell companies. Transactions of more than 3 lakh registered companies are under the radar of suspicion while 1 lakh companies were struck off the list, the government has said. It has already identified more than 37,000 shell companies which were engaged in hiding black money and hawala transactions. Around 163 companies which were listed on the exchange platforms were suspended from trading, pending submission of proof documents. All these consequences of demonetisation mean a major impact on the country's black-money economy. The government is deploying advanced data analytics tool to scrutinise the deposited money. Demonetisation cast a harsh light on hidden hordes of black money which has found its way to banks through various routes. Now the government has to separate the black from white and tax it. Demonetisation will be over once the government accounts for all the returned money.Demonetisation impact: India’s cash to GDP ratio now compares with nations like Germany and France, says RBIAuthor: FE OnlinePublication: The Financial Express Date: August 31, 2017URL: annual report says demonetisation has helped India's cash to GDP ratio compare with advanced economies.Old Rs 1000 and Rs 500 notes were scrapped on November 8, 2016The Reserve Bank of India’s annual report for the year 2016-17 says demonetisation has helped the country’s currency in circulation (CIC) to GDP ratio compare with advanced economies like Germany and France.Last year, the cash to GDP ratio in India was 12.2%. It came down to 8.8% by the end of March 2007 as demonetisation hit the total high value currency in circulation. The demonetisation decision announced by the government on November 8 had scrapped old high-value currency notes of Rs 500 and Rs 1000.In the weeks following demonetisation until December 31, 2016, the RBI pumped in 23.8 billion pieces of bank notes into circulation, which was Rs 5,540 billion in value. By the end of March 2017, CIC had reached 74.3% of the peak. ”“At end-March 2017, CIC amounted to 8.8 per cent of GDP, down from 12.2 per cent in the previous year. At this level, India’s currency to GDP ratio compares well with a host of advanced and emerging market economies (such as Germany, France, Italy, Thailand and Malaysia),” the RBI report said. A screeshot from RBI Annual Report 2016-17Just a week before the announcement of demonetisation decision, India’s cash in circulation was at an all-time high of Rs 18 trillion.Last year, India’s cash to GDP ratio, which is an indicator of the amount of cash used in the economy, was much higher than developed economies including the US, UK and Euro but below Japan (around 18%), PTI had reported on November 27, 2016. In contrast, an emerging economy like Indonesia had a much lower ratio of around 5%. Experts believe that high cash to GDP ratio is the biggest impediment in India’s march towards becoming a cashless economy.The RBI annual report also revealed that only around 1.4% of scrapped Rs 1,000 notes didn’t come back into the banking system post demonetisation. Out of 632.6 crore pieces of Rs 1,000 currency notes in circulation, 8.9 crore haven’t yet returned to banks.According to the report, around 89 million old Rs 1000 notes were in circulation in March 2017, while in March 2016, around 6.3 billion Rs 1000 notes were in circulation. This means that 89 million (or 8.9 crore) of Rs 1000 notes, which were banned by Centre in November, didn’t return to the banks.Those who slam Modi's note ban are completely missing these pointsAuthor: R Sriram, ET BureauPublication: The Economic Times Date: September 1, 2017URL: the morning of November 9, 2016, the mood of the nation could be summed up in one word: Bewilderment. PM Narendra Modi's decision to cancel the tender of 85 per cent of currency in circulation was greeted with delight in some quarters and anger in others but the overwhelming feeling was one of bewilderment. The educated few with interest in global affairs were equally bewildered by the decision of people in the world's oldest democracy to elect Donald J Trump as their next president but the rest of India's attention was focused elsewhere. If the BJP and its supporters thought that 'notebandi' would be a tremendous success, people's experience of its implementation in the first few weeks would have left them nervous and agitated. The long queues, the cash crunch, the collapse in economic activity were not good tidings especially if you are going to fight elections in the country's largest state in a few months. Political condemnation of the move was to be expected. After all, no party wants its money-generating operations to be affected and other party to get maximum mileage, but the surprisingly virulent condemnation of the move from the media/intellectual elite in Delhi and other cities told a different story. Nearly a year later, the same intellectual class that told you demonetisation would be a political disaster and latched on to charade that was the Akhilesh Yadav/Rahul Gandhi bandwagon during the UP elections are now crying `demonetisation debacle' and promoting the myth that it was a failure after the release of the RBI annual report. The political and intellectual class, the same class that could not read the political tea leaves in favour of demonetisation and compared notebandi with nasbandi, is now telling you that the exercise is a failure. Bear this in mind as we explore the political impact and the continuing positive economic benefits of demonetisation. Politically, the move has been a grand success. The massive win in UP, Nitish Kumar's return to the NDA fold, the silent and sometimes not so silent support given by other parties like the BJD, the NCP, the YSR Congress to the BJP; All this would not have been possible without demonetisation's tremendous popularity among the masses. Very often, political parties win largely through the support of floating voters. They have some committed support but sustained political success comes only by converting the floating voters into a committed support base. This is achieved largely through populist means or a complete economic transformation. PM Modi, whose political acumen is far sharper than most politicians both within and outside his party, knew this very well. He knew that the 2014 victory would be considered a fluke if he did not take steps to convert all that floating support he received in 2014 into permanent, committed support. Demonetisation was the key to this conversion and the political results have been spectacular. Critics of demonetisation make two major arguments against it. One, that it was expensive, ill-timed, unnecessary. Second, that it did not root out black money and the move has failed since all the money has come back. There is one major counter argument to this. The Modi government has taken a number of initiatives to root out black money. Demonetisation is just one of them. The others are the drive against benami property, GST, the push towards a less-cash economy. You can't analyse or fully appreciate the black money crackdown by only focusing on demonetisation. It is a major move all right but one of the many aimed at rooting out black money. Second point. The big number on demonetisation is not the amount of money that has come back into the system. It is the amount of suspicious transactions that have been uncovered by the banks, the RBI after the deposits. This amount, according to various estimates, is about Rs 1.6-1.7 lakh crore. Bear in mind that money doesn't become white just because it is deposited in banks. The money leaves an address, a trail. The depositors become known to bankers and the income tax department. Suppose businessman A has rupees one crore of illegal money stashed away in his house. He is forced to deposit it in his account but this does not mean he has escaped scrutiny. The tax department can now go after him and unearth his income and financial transactions for the year and demand appropriate tax. Not only that, they can also question his income of previous years' income and demand tax on that. They can go after any benami property he has. There is no escape once you become known as a tax evader. PM Modi's move to give a short window of four hours on November 8 was a master stroke. It ensured that the guilty could not escape and had to show themselves. The main reason for the money coming back was that people with ill-gotten wealth did not know what to do. They were forced to deposit with banks and now have to face the music from the tax guys. Is this not a major move against black money? Demonetisation economic benefits are only beginning to tell. The rise in digital transactions, the transparency and reduced corruption caused by less use of cash and the widening of the tax base all means that India is in the midst of a major clean-up. The corrupt will no longer be able to hide. That's the big message from demonetisation and the other black money initiatives. Views expressed here are the author's own, and not 'sIndia factory activity unexpectedly expands in August as orders bounce backAuthor: ReutersPublication: Business-Date: September 1, 2017URL: ’s factory activity unexpectedly expanded in August, snapping back from a contraction the previous month, as disruptions stemming from confusion over a new national sales tax eased, a business survey showed on Friday. The rebound suggests that India’s economic growth rate, which unexpectedly slipped to a three-year low of 5.7 percent in the April-June quarter from a year ago, may also improve in the current quarter. The Nikkei/Markit Manufacturing Purchasing Managers’ Index rose more than three points to 51.2 in August from 47.9 in July, beating the median economist forecast of 49.3 in a Reuters poll. A reading above 50 indicates expansion. That was the biggest one-month jump in 5-1/2 years. “In July, firms indicated that orders, production and purchasing had been postponed due to a lack of clarity about the new tax regime, but they have now been resumed as manufacturers, suppliers and their clients have become more knowledgeable of the GST rates,” said Pollyanna De Lima, economist at IHS Markit, in a release. That surprise growth slowdown from 6.1 percent in the previous quarter undercut the median forecast of 6.6 percent in the Reuters poll by nearly a percentage point. Prime Minister Narendra Modi’s shock move last November to scrap high-value banknotes late last year has continued to weigh on overall economic activity.Why India’s GDP Growth Decelerated To 5.7 Per Cent In The First Quarter – And No, It’s Not DeMoAuthor: Swarajya StaffPublication: Date: August 31, 2017URL: https:// /economy/why-indias-gdp-decelerated-to-57-per-cent-in-the-first-quarter-and-no-its-not-demoSNAPSHOTIt wasn’t demonetisation that caused GDP growth to slow down in the first quarter of fiscal year 2017-18. Here’s what did.The gross domestic product (GDP) numbers for the first quarter of fiscal year 2017-18 are in and the picture does not look pretty as far as the economic outlook is concerned. The data shows that India's GDP growth in the quarter decelerated to 5.7 per cent, compared to 6.1 per cent in the preceding one. Finance Minister Arun Jaitley said the slump was a matter of concern. Indeed, it is.Why did the growth rate slide? One thing is clear. It's not because of demonetisation, which did play some role in slowing the growth rate from 7 per cent in the third quarter of 2016 to 6.1 per cent in the fourth; however, its impact seems to have subsided in the June quarter.Take the heavily cash-reliant construction sector, for instance, where growth rate had fallen drastically due to a cash flow choke. But it rebounded in the June quarter, registering a growth rate of 2 per cent compared to the -3.7 per cent in the March quarter.Similarly, growth in the trade and hotel transportation sectors, which were also heavily impacted by demonetisation, revived, registering a double-digit growth of 11.1 per cent against 6.5 per cent in the March quarter.The real reason for the slide down of the growth rate is implementation of the Goods and Services Tax Act (GST). Though it came into force from 1 July, after the first quarter ended, most of the destocking activities were taken up by manufacturers in the preceding months; that is, during the first quarter. Understandably, growth rate in the manufacturing sector fell from 5.3 per cent in the March quarter to 1.2 per cent in the June one. Similarly, growth in the mining sector also registered negative growth of 0.7 per cent against the rate of 6.4 per cent in the previous quarter. Both will bounce back in the September quarter.Another major reason for the fall seems to be the sharp decline in net exports growth, which stood at a measly 1.2 per cent in the first quarter compared to 10.3 per cent in the March one. Imports also registered a growth rate of 13.4 per cent, a mild increase in their 11.9 per cent growth rate in the previous quarter. Hopefully, these will be favourable in the next quarter.Growth in private consumption also declined from 7.3 per cent to 6.7 per cent; however, this is not the major reason for the slide in overall growth.Shifting to the new wholesale price index (WPI), which is used as a deflator for many sectors of the economy for calculating the nominal GDP, may have also played spoilsport. The Department of Industrial Policy Production updated WPI by changing the base year from 2004-05 to 2011-12. It revised weights to the list of items that are used to calculate WPI and dump many which had become obsolete. The Index of Industrial Production was also updated with 2011-12 as the new base year.With inputs from @Bodhisatvaa.Why aren't Indians angrier over note ban failure?Author: Justin RowlattPublication: Date: August 31, 2017URL: might imagine that people here in India would be angry at the news that Prime Minister Narendra Modi's audacious attempt to crack down on the scourge of "black money" had failed.The surprise cancellation of 86% of the country's currency caused huge disruption.At one point it seemed the entire 1.2 billion population of the world's seventh biggest economy had joined a giant bank queue.But this was much more than an issue of inconvenience, everyone was affected.Remember, virtually all transactions in India are conducted in cash.Businesses stalled, lives were disrupted. Lots of people barely had the money to buy food."We never expected that we would be reduced to becoming destitute in this manner," one of the hundreds of thousands migrant workers who lost their jobs told the BBC in the days after the policy was announced."We never expected our children to go hungry."The cash crisis touched every aspect of life."It's my daughter's wedding tomorrow and I need money to pay for everything. I have nothing at the moment," worried an anxious father in the eastern state of Bihar."They told us to deposit our old money so I have given the bank everything I had, now they are not giving me anything back."With tens of millions of people suffering distressing consequences you'd have thought there would be some blowback for the government now that we know almost all the cash was returned.So why hasn't the country risen up in fury?One reason is that lots of people find all the big numbers and complex details difficult and - frankly - dull.You only need to look at the hundreds of news websites in India to see that. The story barely makes the list of top stories on the sites of the leading TV stations or even the country's biggest newspaper.Another explanation is the success Mr Modi has had in spinning his note ban as a bold attempt to strike a blow to the rich and powerful on behalf of the poor."Those who have indulged in corruption by cheating the poor, cannot have a good night's sleep," he thundered from the ramparts of the Red Fort two weeks ago on the anniversary of India's independence.Thanks to demonetisation, he continued, "no one is allowed to cheat in the country any more, everyone is answerable."The figures from the Reserve Bank of India may suggest the policy did not achieve that but, in a country riven with inequality, Mr Modi's message hit home hard.In part that is also because the government changed the emphasis of the policy as soon as it became clear that it wasn't working out quite as planned.First off, demonetisation was all about tackling so-called "black money"."There comes a time in the history of a country's development when a need is felt for a strong and decisive step," is what Mr Modi said when he launched the policy on the 8 November last year."For years, this country has felt that corruption, black money and terrorism are festering sores, holding us back in the race towards development."But within a few weeks of that announcement it was already clear that far more money was coming back than the government had expected.So the talk became more about how the policy was a tool to persuade Indians to use less cash and enter the so-called "digital economy"."We can now see a positive momentum towards digital transactions in India," said Mr Modi in a New Year address. "More and more people are transacting digitally."There certainly was a dramatic increase in digital transactions but, at the same time, the International Monetary Fund cut its growth forecast for India by one percentage point.The other objective that came to the fore was the effort to tackle India's rampant tax evasion.Because so much business is done in cash here it is very easy to evade tax - and many, many Indians do. Figures released last year showed just 1% of the population paid income tax in 2013.This is one area where the policy may have actually been quite successful.Between 1 April and 5 August more than 5.6 million people filled in their income tax returns this year, according to Mr Modi. Last year the figure was just 2.2 million over the same period.But boredom and political spin aside there is another, even more compelling reason why Indians aren't more annoyed about the shortcomings of the policy.The truth is that, nine months on and the worst hardships of demonetisation are over and, in a country as poor as India, most people have more pressing issues to think about than whether or not a government policy, however disruptive, has worked.Those who slam Modi's note ban are completely missing these pointsAuthor: R Sriram, ET BureauPublication: The Economic Times Date: September 1, 2017URL: the morning of November 9, 2016, the mood of the nation could be summed up in one word: Bewilderment. PM Narendra Modi's decision to cancel the tender of 85 per cent of currency in circulation was greeted with delight in some quarters and anger in others but the overwhelming feeling was one of bewilderment. The educated few with interest in global affairs were equally bewildered by the decision of people in the world's oldest democracy to elect Donald J Trump as their next president but the rest of India's attention was focused elsewhere. If the BJP and its supporters thought that 'notebandi' would be a tremendous success, people's experience of its implementation in the first few weeks would have left them nervous and agitated. The long queues, the cash crunch, the collapse in economic activity were not good tidings especially if you are going to fight elections in the country's largest state in a few months. Political condemnation of the move was to be expected. After all, no party wants its money-generating operations to be affected and other party to get maximum mileage, but the surprisingly virulent condemnation of the move from the media/intellectual elite in Delhi and other cities told a different story. Nearly a year later, the same intellectual class that told you demonetisation would be a political disaster and latched on to charade that was the Akhilesh Yadav/Rahul Gandhi bandwagon during the UP elections are now crying `demonetisation debacle' and promoting the myth that it was a failure after the release of the RBI annual report. The political and intellectual class, the same class that could not read the political tea leaves in favour of demonetisation and compared notebandi with nasbandi, is now telling you that the exercise is a failure. Bear this in mind as we explore the political impact and the continuing positive economic benefits of demonetisation. Politically, the move has been a grand success. The massive win in UP, Nitish Kumar's return to the NDA fold, the silent and sometimes not so silent support given by other parties like the BJD, the NCP, the YSR Congress to the BJP; All this would not have been possible without demonetisation's tremendous popularity among the masses. Very often, political parties win largely through the support of floating voters. They have some committed support but sustained political success comes only by converting the floating voters into a committed support base. This is achieved largely through populist means or a complete economic transformation. PM Modi, whose political acumen is far sharper than most politicians both within and outside his party, knew this very well. He knew that the 2014 victory would be considered a fluke if he did not take steps to convert all that floating support he received in 2014 into permanent, committed support. Demonetisation was the key to this conversion and the political results have been spectacular. Critics of demonetisation make two major arguments against it. One, that it was expensive, ill-timed, unnecessary. Second, that it did not root out black money and the move has failed since all the money has come back. There is one major counter argument to this. The Modi government has taken a number of initiatives to root out black money. Demonetisation is just one of them. The others are the drive against benami property, GST, the push towards a less-cash economy. You can't analyse or fully appreciate the black money crackdown by only focusing on demonetisation. It is a major move all right but one of the many aimed at rooting out black money. Second point. The big number on demonetisation is not the amount of money that has come back into the system. It is the amount of suspicious transactions that have been uncovered by the banks, the RBI after the deposits. This amount, according to various estimates, is about Rs 1.6-1.7 lakh crore. Bear in mind that money doesn't become white just because it is deposited in banks. The money leaves an address, a trail. The depositors become known to bankers and the income tax department. Suppose businessman A has rupees one crore of illegal money stashed away in his house. He is forced to deposit it in his account but this does not mean he has escaped scrutiny. The tax department can now go after him and unearth his income and financial transactions for the year and demand appropriate tax. Not only that, they can also question his income of previous years' income and demand tax on that. They can go after any benami property he has. There is no escape once you become known as a tax evader. PM Modi's move to give a short window of four hours on November 8 was a master stroke. It ensured that the guilty could not escape and had to show themselves. The main reason for the money coming back was that people with ill-gotten wealth did not know what to do. They were forced to deposit with banks and now have to face the music from the tax guys. Is this not a major move against black money? Demonetisation economic benefits are only beginning to tell. The rise in digital transactions, the transparency and reduced corruption caused by less use of cash and the widening of the tax base all means that India is in the midst of a major clean-up. The corrupt will no longer be able to hide. That's the big message from demonetisation and the other black money initiatives. Demonetization revelations: 22.22 lakh high-cash depositors never filed tax returns everAuthor: Dipu RaiPublication: Date: September 2, 2017URL: government started identifying suspicious cash depositors from day one of demonetization.Individuals and entities who deposited a total of more than Rs 2 lakh crore cash during demonetization had never ever filed any income tax return, reveals Union Finance Ministry data accessed by DNA. The papers show a total of 22.22 tax-evaders, of which 21.12 lakh were individuals, 11,579 companies, and the rest comprising of firms (57,693), trusts, Associates of Person (AoP), Hindu Undivided Family (HUF), Artificial Judicial Person (AJP), and miscellaneous categories.The government started identifying suspicious cash depositors from day one of demonetization. All these tax-evaders are high cash depositors who have returned banned notes worth Rs 1.02 lakh crore. One-third the total individual depositors in the country did not disclose their income. Around 47 per cent AoP, 24.71 per cent trusts, and 38.9 per cent AJP had never filed tax returns.Department of Revenue's specialised wing of tax officials has received two sets of data from apex direct tax body CBDT and FIU — a dedicated agency which monitors suspicious transactions of banks. This data has been segregated on the basis of Permanent Account Number (PAN) and government officials scrutinised these PANs against tax return data.In the first set of bank transactions, tax officials identified people and entities making cumulative cash deposits worth Rs 2 lakh to 80 lakh during the first 50 days of demonetization. In the second set, the super rich or heavy cash depositors made cash deposits worth more than Rs 80 lakh in 500 and 1,000 currency notes.Tax officials have found that 99.40 lakh transactions made in the first set made a total Rs 5.40 lakh crore cash deposits. In the second set of heavy cash deposition by the super-rich, over Rs 80 lakh has been deposited through 1.41 lakh ernments and Public-Sector Units (PSUs) have deposited about Rs 50 thousand crore cash in old notes during demonetization. Similarly, scheduled banks have also deposited around 1.40 lakh crore cash of demonetised notes.Why DeMo, GST are not to blame for slowdownAuthor: SA AiyarPublication: The Times of IndiaDate: September 3, 2017URL: ’s GDP growth has fallen four quarters in a row to just 5.7% in April-June, down from 7.9% in the same quarter last year. No longer is India the world’s fastest growing major economy — it has sunk well below China’s 6.5%. Manufacturing is the worst sector, with just 1.7% growth. So much for “Make in India” or “achhe din”.Opposition parties have blamed demonetisation (or DeMo).The government blames pre-GST disruptions. These are distractions. The biggest problem is export stagnation for three years. No country in history has sustained 7% GDP growth for a decade without export growth of at least 15%. This was true of Japan, the four Asian tigers, other ASEAN countries, and India too in 2003-11. No country has ever grown fast on domestic demand alone. Unless exports revive, GDP will disappoint.DeMo hit GDP in the October-December and January-March quarters. But its impact must have fallen by April-June, while GDP slowed even more. Note, GDP slowed for almost three quarters before DeMo. Other factors were at work, mainly export stagnation.The government has defended DeMo as an attack on black money, but cannot deny that it hit the cash-based informal sector. Recent economic data are based largely on formal sector production. Growth figures will fall to even more dismal levels when revised data (covering the informal sector) become available next January.Is the worst over? The Purchase Managers’ Index for both manufacturing and services plunged deeply in July, with some recovery in August. This dampens hopes of an economic rebound this quarter, or even in this financial year.Some economists blame the “twin balance sheet” problem, the fact that many companies in steel and infrastructure cannot repay bank debts, which in turn hits the banks’ ability to lend more. Serious though this problem is, DeMo made banks flush with liquidity. Yet there is so little demand from industry that banks cannot find large borrowers. Falling capital goods production confirms that India Inc is investing less and less. Why invest, says India Inc, when we already have excess capacity, and demand is so weak?Now, domestic demand is naturally sluggish in a slowing economy. But the world market represents unlimited demand. If only India gets competitive, exports will boom, and so will investment, bank lending and GDP.The demand problem cannot be solved by additional government investment alone. The fiscal deficit target set in the Financial Responsibility and Budget Management Act has been postponed repeatedly to try and spur GDP, but in vain. Increasing government investment by even 0.5% of GDP is fiscally tough, yet this cannot compensate for the loss of demand for exports, which constitute over 20% of the economy.The 8% GDP boom years between 2003 and 2011 were also years of 20% export growth. Export stagnation set in soon after. Merchandise exports fell 1.2% in 2014-15, another 15.6% the next year, and then recovered only marginally to $274 billion in 2016-17. This was well short of the export peak of $318 billion in 2013-14. Software and other services exports also hit rough weather.One problem has been a sluggish world economy, which may never return to the boom days of the 2000s. But the world economy is definitely reviving this year. India, alas, is sliding down.The REER (Real Effective Exchange Rate) is the exchange rate adjusted for inflation. It has been rising sharply, making exports uncompetitive. The RBI has a REER index with respect to 36 countries, including India’s main competitors. This index rose gently from 100 in 2004-05 to 103.3 in 2013-14, a period when exports did well. Since then the REER has shot up to 119.9, and exports have stagnated.Now the exchange rate is not the only factor affecting exports. What also matters is productivity, the cost of doing business, export logistics and red tape, and the cost of credit. India has failed to match up to competitors in all these respects. The government’s attempt to make business easier has not worked well, according to a recent research paper of Niti Aayog. India has high real interest rates, high land costs (after the recent land acquisition law) and uses high rail freight rates (that hit exports) to massively subsidise passenger traffic.Reforms are needed in all these areas. A quick remedy will be for the RBI to depreciate the rupee and cut interest rates. But for sustained 7-8% GDP growth, productivity must rise faster in India than among competitors, making exports dynamic. Domestic demand alone cannot ensure more than 5-6% growth on a sustained basis.Amit Shah at FICCI event: ‘Demonetisation a very tough call, boosted formal economy’Author: ENS Economic BureauPublication: The Indian ExpressDate: September 10, 2017URL: Saturday, Shah stated: “We have taken some decisions for which we have faced severe criticism. But let me make one thing clear that BJP’s Narendra Modi government does not believe in taking decisions that just appear good to people."BJP President Amit Shah on Saturday said that the demonetisation exercise is an example of a “very tough” decision taken by the Narendra Modi government and that it has lead to an increase in the “formal economy” of the country.“We have not attached policy decisions with our vote-bank. It is possible that we may face — or may have faced — some political losses for this reason. Nevertheless, by being very tough, and by understanding what is necessary to boost the economy, we have taken decisions in that direction. Demonetisation is its biggest example. We can debate a lot over this issue. Reserve Bank’s figures have come, and I will tell you its benefits if we sit in a small forum, but I firmly believe that demonetisation has led to an increase in the formal economy,” Amit Shah said while addressing industrialists at a session of Federation of Indian Chambers of Commerce and Industry (Ficci) in New Delhi.(Humne nitigat nirnayon ko votebank ke saath nahi joda hai. Ho sakta hai is se humara rajneetik nuksaan kabhi kabhar hota hai, ya hua bhi hoga. Parantu humne badi kathorta ke saath, desh ke arthtantra ko aage badane ke liye kya zaroori hai, is disha me humne faisle lene ka kaam kiya hai. Vimudrikaran, or demonetisation, iska sabse bada udaharan hai. Bahut saari bahas ispar ho sakti hai. Reserve Bank ke aankde aane ke baad, koi chote forum me baithenge to mai bataunga ki is ke fayde kya hue, parantu mai itna nischit maanta hu ki demonetisation ke kaaran formal economy badi hai) On the evening of November 8, Prime Minister Narendra Modi had announced that two categories of notes — Rs 500 and Rs 1,000 — would cease to be legal tenders from the midnight of November 8. The government had allowed people time till December 31 to exchange and deposit the old Rs 500 and Rs 1,000 bank notes.On Saturday, Shah stated: “We have taken some decisions for which we have faced severe criticism. But let me make one thing clear that BJP’s Narendra Modi government does not believe in taking decisions that just appear good to people, but it believes in taking decisions that are actually good for people. (Kuch kadam humne aise liye hain, jiske liye hume kadi alochana bhi sahan karni padi hai…par mai ek baat spasht kar deta hun ki BJP ki Narendra Modi sarkar logon ko acchein lagein aise faisle lene me nahi maanti hai, logon ke liye acche faisle ho aise faisle liye jate hain.)” He added: “Those people who are asking about the benefits of demonetisation, I would like to tell them that since Independence, we were able to add only 3.7 crore in our tax payer base…In last three years, we have increased the number of taxpayers from 3.7 crore to 6.3 crore. This shows that our economy is growing, and our transparency is also growing, but for this, some of the difficulties have to be faced right now. (Demonetisation ke jo fayde puchte hain unko mai batana chahta hun ki number of taxpayers mein pehle 3.7 crore aazadi se ab tak ka tha…. 3.7 crore taxpayer aazaadi se 65 saal tak the, humne teen salon me 3.7 crore ko 6.3 crore tak pahunchaane ka kaam kiya hai. Yahi batata hai ki hamari economy badh rahi hai, aur paardarshitaa bhi badh rahi hai, magar is karan kuch tatkaaleen jo cheezein sahan karni padengi wo sahan karni padengi.)” On the issue of rising non-performing assets (NPAs) in the banks, Shah said: “How can you treat the disease by hiding it? If NPA is there, it is there. By not showing it, or by doing jugglery in balance sheets, there is no benefit. We have taken a tough step, we have brought all NPAs on record. Due to this, there have been some difficulties right now but we will find a solution (Kisi bhi rog ko chupaane se rog ka samadhan hai kya? Agar NPA hai to hai. Isko naa dikhane se, aur balance sheet dikhaane ki jugglery karne se koi faayda nahi hai. Humne kathor nirnay kiya, aaj saare NPA ko hum record par lekar aaye hain. Iske kaaran jo thodi bahut taqleef abhi ho rahi hai par iske raaste hum doodhenge.)” Shah added on this topic: “It is an extremely courageous step to solve NPAs and to clear balance sheets of the banks. And, it is a big thing that Narendra Modi government has shown such courage by showing the details of NPAs of the banks….I would like to make one thing clear that not a single loan, which has turned NPA, has been given by BJP government. (NPAs ki yukti aur balance sheets ko clear karna, yah bahut bada sahasik kadam hai. Aur Narendra Modi sarkaar ne bankon ke andaar se jo NPA darshaane ki jo himmat dikhayi hai, wo bahut badi baat hai…mai ek baat spasht kar dena chahta hun ki jitne bhi ye NPA hue isme se ek bhi hamare samay ka loan nahi hai.)” Did pvt banks get more new currency during demonetisation? CVC begins probeAuthor: Kumar AnshumanPublication: The PrintDate: September 9, 2017URL: Central Vigilance Commission has also started an investigation into deposits made by government officials in the 50-day period after demonetisation was announced.The Central Vigilance Commission (CVC) has initiated a high-level probe into whether private banks received more cash for disbursal during the 50-day demonetisation exercise last year.In this connection, the CVC first approached the RBI to obtain disbursal details for the period between 8 November and 31 December, 2016. This data, however, only contained information of disbursal from the RBI to designated currency chests in respective cities from where all banks withdraw currency amounts.“The RBI usually designates PSU banks in different regions to act as currency chests. The complaint is that private banks were able to draw more currency than other banks from this point. So, we have started the exercise of collecting disbursal information from these currency chests to get a clearer understanding,” Chief Vigilance Commissioner K.V. Chowdary told ThePrint.Simultaneously, the CVC has also started a probe into deposits made by government officials in the 50-day period. The threshold kept was of deposits of Rs 10 lakh and above.In the first flush, the Central Board of Direct Taxes identified 90,000 government servants, including PSU employees, in this category.“But the CBDT told us that they have a software to filter the data better. They would provide us the filtered data by the end of this month or the beginning of next month. Then we would be able to further study it and see if there is any mismatch in income and deposits,” said Chowdary.The CBDT is still filtering the data with the help of a special software, which would now include the deposits made by the close family members of the government employees. To this end, the CBDT in its presentation to the CVC, conveyed that the software for the filtering process has been tested and would provide a more accurate picture of cash deposited by the employee and his or her family.Besides, the CVC is carrying out investigations against 40-50,000 senior PSU bank employees for different acts of alleged misconduct during that period.“They are at different stages of action. Many have been penalised and punished. We are only concerned with senior bank officials. But there are many in the clerical staff too, and they are being examined by the banks itself,” said Chowdary.Demonetisation: Most successful game changer for Indian economyAuthor: Sanju VermaPublication: The PioneerDate: September 17, 2017URL: a matter of fact, demonetisation has won the battle resoundingly on a whole host of fronts. Those who accuse the Government of shifting goalposts, reek of mala fide ignorance because economies and economic goalposts have always been fluid, dynamic and ever changing in contemporary times This is the first instance in India’s history when the Government and the people have fought shoulder to shoulder,” said Prime Minister Narendra Modi on the impact of demonetisation, thereby summing up its very essence. By far, demonetisation has been the most revolutionary and disruptive game-changer in India’s post-independent history. Its full impact in transforming India from a cash-driven economy to a digital economy is already showing tremendous results. Collating data, that is available in the public domain, makes it amply clear that digital transactions in all modes rose by 23 per cent to 27.5 million in May this year from 22.4 million in November 2016. The highest jump was recorded in Unified Payments Interface (UPI) — from one million per day to a resounding 30 million per day in the said period. A public sector bank, like the State Bank of India, for instance, recorded a solid 30 per cent jump in debit and credit card transactions alone in the said period. Transactions at point-of-sale (PoS) terminal, at merchant locations, surged to 328 million from less than 109 million by way of volume between November 2016 and May 2017. Again, demonetisation led to a massive scale-up in digital infrastructure with one million additional PoS terminals being added within just three months of note recall, thereby taking their total number to more than 2.52 million. Also, prepaid payment instructions (PPIs), including mobile wallets, registered a whopping 375 per cent jump at 342 million in March this year from 72 million pre-demonetisation. Needless to add, demonetisation has had pathbreaking attendant benefits. All thanks to the vision of one man who chose to defy stereotypes to tread a path that none would have dared to. And that man is none other than Prime Minister Narendra Modi, who, with his note recall move, carved out a new normal for India and its 1.27 billion strong populace. Naysayers, including a former Finance Minister, who perpetrated the 6,000 crore National Spot Exchange Limited scam, leaving 13,000 hapless investors in the lurch, and whose son is currently under the Enforcement Directorate’s (ED) scanner for money laundering, claims that demonetisation is a failure because 99 per cent of the notes that were declared illegal tender, are back into the banking system. So what if the 99 per cent of the Rs 15.44 lakh crore, that was demonetised, is back with the banks? Not all of that 99 per cent is white! Also, a large part of the money that is back with the banks is unaccounted for! This is evident from the fact that 18 lakh bank accounts are under the scanner of the ED, as money deposited is not in sync with the tax profiles concerned. Hence, critics of demonetisation seem to have completely missed the plot here. Again, individuals and entities, who deposited a total of more than two lakh crore rupees in cash during demonetisation, had never ever filed income tax return, Finance Ministry data revealed. Of a total of 22.22 lakh tax evaders, 21.12 lakh were individuals, 11,579 companies, and the rest comprised of firms (57,693), trusts, Associates of Person (AoP), Hindu Undivided Family (HUF), and Artificial Judicial Persons (AJPs). The Central Board Of Direct Taxes (CBDT) and the Financial Intelligence Unit (FIU) have identified two sets of people and entities. In the first set, they identified people who made cumulative cash deposits between two lakh rupees to Rs 80 lakh during the first 50 days of demonetisation, in which, a total of Rs 5.4 lakh crore of cash was deposited via 99.40 lakh transactions. In the second set, the super rich made cash deposits worth more than Rs 80 lakh, via 1.41 lakh transactions. The biggest success of demonetisation, therefore, is the fact that anywhere between two lakh crore rupees — Rs 5.4 lakh crore of money that was outside the ambit of the tax net and largely unaccounted for, is now a part of the formal banking system. In other words, gross domestic product (GDP) between 1.3 per cent to 3.6 per cent, that was outside the formal banking channels, is now very much a part of the formal taxation process. Also, while short-term benefits of note recall have been sweeping and significant, equally, the tectonic long-term impact in bringing the informal economy into the formal fold cannot be underestimated. Assuming the informal economy at 20 per cent of the GDP; and assuming the formal sector is taxed at an average rate ranging between 15-20 per cent, with demonetisation, once the informal and formal merge, the boost to GDP on this count alone could be between three to four per cent. Demonetisation results have already started showing — advance tax collections showed a growth of 42 per cent as on August 5 this year over the corresponding period in 2016-17. Growth in the number of people filing income tax returns rose by 25 per cent in the said period, with 56 lakh new tax payers coming into the tax net versus a prior period growth of only 9.9 per cent. Again, direct tax collections for April to July this year grew at 19 per cent versus an otherwise routine growth of 14 per cent in earlier quarters. It is no coincidence that post-note recall, low cost Current Account and Savings Account deposits (Casa) with banks went up by almost four per cent, thereby bringing down the overall cost and improving the cost to income ratio of the banks. This in-turn manifested itself in lower lending rates on home loans and personal loans. It is pertinent to note that the marginal cost of funds-based lending rate (MCLR) for most banks has come down from 9.15 per cent to eight per cent. A 50bps fall in interest rate on one crore rupees home loan for 20 years could lead to a savings of eight lakhs rupees over the tenure of the loan and a 100bps fall, a savings of a whopping Rs 16 lakh over the loan tenure! Again, between November 2016 and March 2017, deposits with the banks went up by Rs 3.5 lakh crore, aiding overall margins. Deposits in Pradhan Mantri Jan-Dhan Yojana accounts alone rose to more than Rs 6,4000 crore with 18 million new Jan Dhan accounts being added during this period. Besides Jan Dhan accounts, what critics conveniently forget is that Rs 80,000 crore of money was repaid in cash for prior period loans taken — Rs 10,700 crore cash came into bank accounts in north-eastern States and another Rs 16,000 crore came into regional rural banks — all thanks to demonetisation. Critics of the Modi Government need to take a hard look at the aforesaid numbers to realise the fact that the note-recall exercise, far from beings futile, as is being propounded by vested interests, is actually one that struck at the heart of corruption. Black money hoarders learnt the hard way that stashing piles of unaccounted notes under mattresses is unforgivable. The more underrated and yet significant positive aspect of demonetisation, however, is the perceptible shift from physical to financial savings, which is evident from the 142 per cent growth in insurance premium collected by the Life Insurance Corporation of India in November 2016 — a 50 per cent growth seen by private insurers, 18 per cent growth in assets under management by the mutual fund industry, with assets touching a new high of Rs 20 lakh crore between November 2016 and July 2017. More than 77 lakh new portfolios were added to the mutual fund industry, largely from tier-II towns and small investors in the financial year 2016-17 versus a little over 35 lakh portfolios that were added in financial year 2015-16 — a 120 per cent growth. Also, the fact that 2.09 lakh shell companies had their bank accounts frozen and names struck off from the Registrar of Companies list, is a glowing testimony to the clampdown on black money and illicit funding that demonetisation dealt a body-blow too. Of late, there’s been a huge brouhaha about the lower Reserve Bank of India (RBI) dividend for the year ended June 30 this year, at Rs 30,659 crore. Ignoramuses, frivolous economists included, say that the lower dividend is due to the huge costs incurred by the RBI, thanks to demonetisation. This is absolutely false. The cost of printing new notes was only Rs 7,965 crore. Lower dividend pay out by the RBI was primarily due to the rise in US bond yields. US one-year bond yields rose from 0.4 per cent to 1.2 per cent between July 2016 and June this year, while the US’s 10-year bond yields rose from 1.4 per cent to 2.3 per cent in the said period. Since, the RBI holds a large part of its forex assets by way of the US Government treasury bills; and since the RBI follows the mark to market (MTM) accounting practice, wherein assets are valued at current market price and not at the price at which they are bought, the rise in the US yields led to MTM losses, reducing the ‘surplus’ available with the RBI. Also, between January to June this year, the Indian rupee rose by almost five per cent. Appreciation in the local currency reduced the RBI’s income, as it had to sterilise the surge in overseas inflows by selling dollars and buying the rupee to prevent any further and undue rupee appreciation that could have adversely affected India’s competitiveness and terms of trade. Needless to add, this sterilisation came at a cost but the RBI had to do what it had to do! Excess rupee liquidity due to a surge in bank deposits also meant higher interest outgo for the RBI, as it had to pay banks between 5.75 per cent to six per cent for the money that banks parked with the RBI as a part of the reverse repo transactions conducted by the RBI. In effect, demonetisation did play a part but only an incidental one, in the lower dividend pay-out. Again, those harping about the Government possibly breaching its fiscal deficit target of 3.2 per cent for the financial year 2017-18, due to lower dividend received from the RBI, have totally missed the plot. The Government’s disinvestment agenda kicked off to a stellar start, with the Government collecting Rs 1,204 crore by selling 9.2 per cent stake in National Aluminium Company Limited, with Rs 250 crore coming from retail investors alone. Recently, the Government raised Rs 9,100 crore by divesting seven per cent stake in the National Thermal Power Corporation Limited. Also, public sector undertakings insurers, like the General Insurance Corporation of India and the New India Assurance, that will be tapping the equity markets soon, which should raise more than Rs 10,000 crore. And there is a lot more to come. Be it inflation, bond yields, tax revenues, bank deposits, financialisation of physical savings, lower home loan rates, falling property prices, closure of fictitious firms, disclosure of massive unaccounted wealth, et al, demonetisation has won the battle resoundingly on a whole host of fronts and those who accuse the Government of shifting goalposts, reek of mala fide ignorance because economies and economic goalposts have always been fluid, dynamic and ever changing, more so, in contemporary times.- (The writer is chief spokesperson for the BJP, Mumbai)Crackdown On Shell Firms Reveals Vast Money-Laundering After Notes BanAuthor: Akhilesh SharmaPublication: Date: October 6, 2017URL: month, the Finance Ministry froze the accounts of two lakh shell companies which it believes have no active business operations or activities.Among the top offenders of companies whose bank accounts were blocked last month by the government for illegal transactions and tax evasion was one that had more than 2,000 bank accounts, making it tough for tax officials to track transactions.Last month, the Finance Ministry froze the accounts of two lakh shell companies which it believes have no active business operations or activities. NDTV has learnt that in recent weeks, 13 banks have shared early information with the government on some of these dodgy companies. One had 2,134 accounts; another had 900 in its name; plenty had at least 100.The information supplied so far is the first installment of what banks are expected to purvey and is related to about 5,000 of the two lakh blacklisted companies. Data shows that between demonetisation being announced on November 8 and when they were identified in July as fronts, these 5,000 firms collective deposited about 4,570 crores and withdraw nearly the same amount, which suggests vast money-laundering.Many companies with multiple accounts showed a tiny balance on November 8 but after Prime Minister Narendra Modi's shock decision to outlaw high-denomination notes, the firms deposited and withdrew substantial tranches of money after which they returned to dormant accounts with no activity.In one bank, more than 3,000 companies with an abnormally high amount of bank accounts were identified. They had a cumulative balance of about 13 crores on November 8, 2016; after demonetisation was called, these companies deposited and withdrew about 3,800 crore, leaving a negative cumulative balance of almost Rs. 200 crore at the time of freezing of their accounts. A tax expert suggested that this shows reports unreported and untaxed income was converted into white money.It needs to be re-emphasized that this data is only about 2.5% of the total number of suspected shell companies that have been struck off by the government. Finance Ministry officials believe that further mining of data will unearth thousands of other such tax evaders.Banks provide shocking data relating to demonetization activities of suspected shell companiesAuthor: OpIndia Staff Publication: Date: October 6, 2017URL: a major boost to the crackdown on black-money, data from banks regarding the demonetisation period has just begun pouring in and the details have proved to be shocking.We had argued long back that a higher percentage of cash returning to banks during the demonetisation period was not actually a bad sign, and in fact could strengthen the hands of the Income Tax Department.“Black” money can turn “white” only once you pay taxes on it. As such, all the money deposited in banks will have to be explained by the depositors by showing the source of income (on which tax has already been paid) or, the depositors will have to now pay tax on these deposits. Further, since all the money has come into banks, there is a trail as to who deposited the cash. From here, it is a simple process of identifying the suspicious transactions and scrutinising them.The Government now is finally moving to this stage.After multiple crackdowns and using information from the banks, the latest set of data received by the Government is shocking. A press release by the Government of India stated that vital information had been received from 13 banks regarding the bank account operations and post-demonetisation transactions of some of the suspicious companies that had been struck off the Register of Companies earlier this year.It may be recalled that earlier this year, the government had advised banks to “put restrictions” on the operation of bank accounts of the 2,09,032 companies delisted by the Registrar of Companies. Most of these companies are suspected to be shell companies.The data received from the banks says that these companies had a meagre balance of Rs 22.05 crore to their credit on 8th November, 2016. However, from 9th November, 2016 i.e. after the announcement of demonetization, till the date of their being struck off, these companies had altogether deposited a huge amount of Rs. 4,573.87 crore in their accounts and withdrawn an equally large amount of Rs 4,552 crore. With loan accounts, there was a negative opening balance of Rs 80.79 crore.The release further speaks of specific cases:* One of the company reportedly had 2134 bank accounts, followed by others having accounts in the range of 900, 300 etc.* In one of the Bank, 429 companies having zero balance each as on 8th November, 2016 have deposited and withdrawn over Rs 11 crore and are finally left with a cumulative balance of just Rs 42,000 on the date of freezing.* Similarly in the case of another Bank, more than 3000 such companies, most having multiple accounts, have been located. From having a cumulative balance of about Rs. 13 crore as on 8th November 2016, these companies have deposited and withdrawn about Rs 3800 crore, leaving a negative cumulative balance of almost Rs 200 crore at the time of freezing of their accounts.The best part of all this is the fact that, the above is only the First instalment of data.As of now, the banks have provided data only for about 5,800 companies which is only about 2.5% of the total number of suspected companies. This indicates that this is just the tip of the iceberg and one can only wonder what the final figures would look like!It is expected in the coming days that the Income Tax Department will now start investigating these companies and it remains to be seen what action is taken against their promoters.Moonwatcher’s logicAuthor: Bibek DebroyPublication: The Indian ExpressDate: October 19, 2017URL: demonetisation with job losses is simplistic and naive.I loved the film 2001: A Space Odyssey. I have no idea whether people watch it any more. Stanley Kubrick and Arthur C. Clarke wrote the screenplay. The sequence is something like this.Arthur C. Clarke wrote a short story titled ‘The Sentinel’. The film was based on the short story. After the film and screenplay, Arthur C. Clarke wrote a book with the same title. The film and the book have a character named Moonwatcher. Moonwatcher was a leader of the man-apes and in the film, the role was played by Daniel Richter. (He wrote Moonwatcher’s Memoir, a book documenting his experiences during making of the film.)If you remember the film more than the book, Moonwatcher was the character who first picked up a bone as a tool and tool-wielding man-apes used them to beat back rivals. The name is never explicitly explained in the film and there is one particular quote about Moonwatcher that occurs only in the book, not the film. “Of all the creatures who had yet walked on Earth, the man-apes were the first to look steadfastly at the Moon. And though he could not remember it, when he was very young Moonwatcher would sometimes reach out and try to touch that ghostly face rising above the hills. He had never succeeded, and now he was old enough to understand why. For first, of course, he must find a high enough tree to climb.” With the transition from Homo Erectus to Homo Sapiens, this kind of deductive logic appeals to us.With the FIFA Under-17 World Cup going on in India, there is a lot of interest in football. Who’s the greatest footballer ever? People will have their own individual choices, but I suspect, Pele will figure on most lists. There is an anecdote about Pele. He gave his football jersey to a fan and his form suffered. Frantic, Pele asked a friend to retrieve the jersey from the fan. As soon as Pele got his jersey back, his form recovered. In reality, the friend had never been able to track down the fan or retrieve the jersey. Instead, he had simply given Pele a distinctly different jersey that Pele had worn earlier. Perhaps Pele’s sub-conscious had been affected. But he had also used deductive logic.Specifically, Pele had succumbed to a fallacy known as post hoc ergo propter hoc. If X occurs after Y, this is the temptation to deduce X must have been caused by Y. Before some logician corrects me, since I don’t know the exact sequence of the Pele events, it might also have been a similar, but slightly different fallacy — cum hoc ergo propter hoc. If two events occur together, this is the temptation to argue one caused another. Unlike the earlier fallacy, in this case, two events occur together, not one after another. A statistician would say both fallacies confuse correlation with causation.We may have forgotten, but the Union budget for 2016-17 had a proposal. If I withdrew from the corpus of EPF (employees’ provident fund), 60 per cent of the withdrawal would be taxed. Since this was widely opposed in Lok Sabha on March 8 2016, the finance minister announced this proposal would be withdrawn. Withdrawal of this proposal led to the creation of 6.3 million new jobs. You probably think I have gone nuts, but logic is logic. The CMIE (Centre for Monitoring Indian Economy) has a product titled ‘Unemployment in India, A Statistical Profile’. I need not get into the details of sample design and coverage. It’s there on the website, including assorted definitions.This has had five editions — January-April 2016, May-August 2016, September-December 2016, January-April 2017 and May-August 2017. In a country like India, household surveys are better indicators of employment than enterprise surveys. Based on CMIE household surveys, employment was 400.825 million in January-April 2016, 407.135 million in May-August 2016, 406.534 million in September-December 2016, 404.996 million in January-April 2017 and 404.580 million in May-August 2017. Based on this evidence, 1.538 million jobs were “lost” between September-December 2016 and January-April 2017. Based on the same evidence, 6.31 million jobs were “created” between January-April 2016 and May-August 2016. That loss of 1.538 million jobs has been ascribed to demonetisation, an event that occurred on November 8 2016. By exactly the same logic, the creation of 6.31 million new jobs must also be ascribed to something that occurred in the corresponding period. Hence, I chose the decision of March 8 2016, on withdrawal of the EPF provision.I haven’t trivialised the employment/unemployment issue, which is a serious one. Trivialisation is done by those who link demonetisation with the loss of 1.5 million jobs. This is no different from Moonwatcher’s logic, or that of Pele’s. However, since we are Homo Sapiens, we must also grant others extension of the same logical principle to illustrate how ridiculous the demonetisation and job loss causation argument is.You will argue that demonetisation on November 8 2016 was much more momentous than the EPF decision withdrawal on March 8 2016 and indeed, you are right. But that’s precisely the reason one shouldn’t reduce the debate to such simplistic and na?ve assertions. For instance, probe the 1.538 million job loss figure by disaggregating it, using CMIE. There was a 3.7 million “job loss” for males aged 15-19, compensated by “job gains” elsewhere. There was a 1.8 million “job loss” in UP, but 0.5 million “gain” in MP and 1.3 million “gain” in Rajasthan. Still plausible?- The writer is chairman, Economic Advisory Council to the PM. Views are personal.Demonetisation: A resounding successAuthor: Jayant SinhaPublication: Date: November 6, 2017URL: has provided Indian citizens an opportunity to reimagine not only their currency, but also their social mores, honesty, and compliance with law India was transfixed and transformed a year ago on 8 November, when Prime Minister Narendra Modi, in his resolute war against corruption and black money, demonetized Rs500 and Rs1,000 currency notes. The political verdict came swiftly with stunning wins for the Bharatiya Janata Party (BJP) in Uttar Pradesh and Uttarakhand, and rapid government formation in Manipur and Goa. The prime minister’s popularity reached new heights and his approval ratings soared to levels rarely seen in democracies. The people of India recognized that a surgical strike was required to curtail illicit activities and blessed demonetisation. Thus, in political terms, demonetisation has already proven to be a resounding success. On the other hand, in economic terms, a heated debate is under way whether demonetisation has been a success or not. Several reputed economists have pronounced their judgements on demonetisation. For instance, Dr Raghuram Rajan has mentioned that he believed that while there might be long-term benefits, the short-term economic costs of demonetisation would outweigh them and that there were alternatives available to achieve the main goals. He has chosen not to elaborate what he thought the long-term benefits might be nor has he quantified the short-term costs.Dr Manmohan Singh has estimated the cost of demonetisation to be 2% of gross domestic product. These quick assessments appear specious. Zhou Enlai, when asked in 1972 about what he thought the impact of the French Revolution of 1789 was, is said to have commented that it was too early to tell. When revolutionary changes take place, it takes years, decades, or even centuries before the impact of such transformations can be studied and commented upon.Note that we lack scientific data and thorough analytical studies on the economic impact of demonetisation. For any massively complex system, judging the impact of a large disruption requires careful understanding of influence channels, distilling its impact on multifarious variables and finally, measuring its bearing, if any, on a variety of outputs. An economy as varied as India’s is highly complex with multiple inputs, not-completely-understood dynamics, many agents and actors with different motivations, and finally, outputs which are not measurable with accuracy or certainty. It will take many years to filter out the economic impact attributable to demonetisation and, indeed, this bold move and its implications will, quite probably, be the subject of hundreds of dissertations. Consequently, any snap judgements will be coloured largely by ideology and opinion.Some data is beginning to emerge on how the economic trajectory actually played out as opposed to estimates of how the various models predicted that they would play out. Since demonetisation, the government has embarked on another ambitious bipartisan reform of consolidating various levies and taxes in different states into one comprehensive goods and services tax (GST): such a large reform intervention also creates its own changes in the economy. To appreciate the changes that demonetisation brought about, we need to carefully choose and measure the relevant short-term high-frequency indicators and a few emerging long-term indicators which point to the direction that the economy has since taken. High-frequency and quantitative indicators like (1) cash-to-GDP ratio, (2) volume of digital payments, (3) number of new registered taxpayers, and (4) estimate of “unaccounted for” money and the number of tax notices sent indicate that demonetisation has generated material changes. The cash-to-GDP ratio is now down to 9.7%, from 11.3% pre-8 November last year. This cash is now in the banking system which has helped swell the current accounts and savings accounts balances of banks: this will allow them to lend and invest more, and at lower rates. Digital payments, at Rs50,000 crore in the month of October 2017, are up 41% year-on-year. The finance minister has stated that 9.1 million taxpayers have been added to the tax net as a result of actions taken by the income tax department during fiscal year 2017. Further, the ministry of finance has indicated that between Rs3 trillion and Rs4.2 trillion is “unexplained” during the cash deposit rush post-demonetisation and hence has sent out 1.8 million notices to assesses: apart from the one-time benefit to revenue of such “declarations”, these moves could bring significant stock and flow of incomes into the tax net. This data shows that demonetisation has had a positive impact on the formalization of the economy, improving the tax base and hastening the use of digital payments. Consequently, it is quite plausible to argue that these effects, which will clearly have an ongoing GDP impact, could easily swamp the impact of a one-time 2% decline in GDP.Apart from these purely economic factors, there is another more profound behavioural change that has been accomplished. A new normal has been established—Indians are paying their taxes and moving towards a less-cash society. There is a pronounced trend towards tax compliance driven by the belief that the system is working to reward honest taxpayers even as it makes life difficult for those who have been used to evading or underpaying taxes. GST and the implementation of the benami transactions Act make it even more difficult for anyone in the economic chain to opt out of the taxation system. Massive reforms like demonetisation cannot be measured solely by using economic parameters but need to take into account the structural shift that such reforms induce in society. Societal and long-term economic changes are difficult to measure and require more reasoned, detailed, and patient analyses: this should increase our resolve to do deeper research rather than jumping to hasty, ill-informed conclusions. demonetisation has provided Indian citizens a unique opportunity to re-imagine not only their currency, but also their own social mores, honesty, compliance with law, and their willingness to change and adapt to a more transparent and New India. We should celebrate this New India.- Jayant Sinha is minister of state for civil aviation and a member of Parliament from Hazaribagh, Jharkhand. The views expressed are personal. I'll do whatever the govt tells me to do, says 80-year-old who became the face of Modi's shock reformAuthor: Rajesh DuttPublication: The Economic Times Date: November 6, 2017URL: became synonymous with helplessness and endless wait. If the long-winding ATM queue became a symbol of note ban, Nand Lal became its face. The 80-year-old retired army man broke down after waiting for four hours at a State Bank of India branch in Gurugram for not having got his cash. The picture of old, wrinkled crying Lal went viral, reflecting the helplessness of the poor who were hit the hardest by note ban. The crying Lal also became an icon for the critics of demonetisation who countered the government's claim that note ban targeted the rich who had hoarded unaccounted cash. Lal captured the immediate impact of note ban. ET Online met him to know how he felt about it a year later. One year of demonetisation: Read how India is holding up in our special coverage Lal lives alone in a rented 8x10 room in Bhim Nagar area of Old Gurgaon. His small room contains his few belongings-a trunk, a small bed, a plastic chair, a bucket, an ashtray, some water bottles and one portrait of god Ganesha. He came to India from Dera Ghazi Khan in Pakistan after Partition. He retired from army in 1991. He has an adopted daughter who is married and visits him occasionally. He takes pride in having served his country. He is hard of hearing and understands only when a question is repeated several times. What problem did he face in getting cash last year after demonetisation? Lal says he stood in the queue for long hours yet the bank refused to give him the amount of money he wanted. He says he needed the money to pay his rent and the monthly salary to his maid. Why did he break down? He says while he was waiting outside the bank, someone pushed him and a woman stepped on his foot. "Apart from this, I didn't face much problem," he says. Lal says initially he faced difficulty in getting cash but soon everything got smooth. "Now I send my maid to the bank and she withdraws money on my behalf and hands it over to me," the army veteran says. Lal says now he is happy with demonetisation. But was it a right decision? Lal says he would go with whatever the government decides as he has been a serviceman. A staunch nationalist, he says he has served in the army for 20 years and would abide by every decision of the government. "Whatever the government does, it is for the betterment of the country," the old and frail ex-soldier says with a wide grin. "I am a soldier, and I will obey whatever decision the government will take," he concludes. Demonetisation a foolish decision by Narendra Modi govt, says ChidambaramAuthor: Kritika BanerjeePublication: India Today Date: November 6, 2017URL: the Modi government over demonetisation, Chidambaram said that even a natural calamity would not heap so much misery as note ban did on people. Former finance minister P Chidambaram today said that demonetisation was a foolish decision by the Narendra Modi-led BJP government. Speaking at an India Today event on demonetisation, Chidambaram said that even a natural calamity could not heap so much misery as note ban did. "Families went hungry for days, small businesses were wiped out... over 100 people died standing in queues," the finance minister in the Manmohan Singh government said. Prime Minister Narendra Modi, in a televised address on November 8 last year, declared high-value currency notes of Rs 500 and Rs 1000 invalid. On BJP's big win in the Assembly elections in March this year, Chidambaram said it would be wrong to conclude that people voted only on demonetisation and instead argued that the BJP won only two of the five states conclusively, namely Uttar Pradesh and Uttarakhand. CHIDAMBARAM ON RAHUL, GUJARAT ELECTION With the Gujarat Assembly election round the corner, Chidambaram said that the Goods and Services Tax (GST) will be a major poll issue but the election "will not be referendum" on the new tax regime. He said people in Gujarat will vote on several issues such as atrocities on Dalits, the unmet demands of Patidars, farmer distress and incompetence of the chief ministers besides the GST whose faulty implementation has created "utter chaos". Chidambaram said that he would be the last man to predict which party would win in Gujarat. Congress rallies are attracting large crowds and there is a lot of unhappiness among different sections which is giving the Congress the confidence ahead of the crucial election, he said. On Rahul Gandhi's new avatar, Chidambaram said he feels that the Congress vice-president's speeches and tweets have acquired a new edge. Chidambaram said that nationally there is a "great deal of unrest and unhappiness" and he can see the change in social media and through his interactions with people. "BJP MPs have told me there is a mood change... but they don't believe they will lose the elections," he said. Demonetisation anniversary: Will Himachal, Gujarat polls be another referendum on note ban?Author: Kumar Shakti ShekharPublication: India Today Date: Arindam MukherjeeURL: the Opposition will observe November 8 as Black Day, the BJP has decided to counter it by celebrating Anti-Black Money Day. Come November 8 - the first anniversary of demonetisation initiative announced at 8 pm by Prime Minister Narendra Modi - the BJP-led NDA government at the Centre and the Opposition alike have decided to observe the day to suit their own political agenda. While the Opposition will observe November 8 as Black Day, the BJP has decided to counter it by celebrating the day as Anti-Black Money Day (Kala dhan virodh diwas).With the voters in mind, while the BJP seeks to showcase demonetisation as one of the major achievements of the Modi government in over three years of its term, the Opposition is trying its best to discredit the government and harm it to the maximum.GUJARAT AND HIMACHAL PRADESH POLLSPerhaps demonetisation would not have been raked up with gusto by the rival parties but for the upcoming Assembly elections in Himachal Pradesh and Gujarat. The hilly state of Uttarakhand goes to polls on November 9, just a day after the first anniversary of demonetisation move. The western state of Gujarat faces election in two phases, on December 9 and 14, the first phase taking place a month after demonetisation's first anniversary.The Opposition has sought to turn almost every election held after November 8 as a referendum on demonetisation. However, the BJP seems to have won most of them.The Opposition has again linked note ban with the Gujarat and Himachal Pradesh elections. With the economy slowing down and GST putting the traders to inconvenience, elections in these two states are the toughest challenge for the BJP post-demonetisation.If the BJP loses, the Opposition including the Congress will declare it as a referendum on demonetisation. Otherwise, the BJP will once again claim that demonetisation has been a runaway success.The only issue remains whether the Opposition will rake up demonetisation again in the 2018 Assembly elections such as in Karnataka, Madhya Pradesh, Rajasthan, Chhattisgarh and the 2019 Lok Sabha elections or the Gujarat and Uttarakhand Assembly elections would settle the matter once and for all?The Congress is in the forefront of the opposition parties' plan to protest demonetisation on November 8. With Congress vice-president Rahul Gandhi already calling it a "sad day", the party plans to hold a number of activities to buttress their point.The Uttar Pradesh (UP) unit of the Congress has announced that it would hold a candlelight march to protest the demonetisation initiative. The unit will also submit a memorandum to the Prime Minister's Office to demand compensation of Rs 25 lakh and job to the next of kin of the people who lost their life during demonetisation.Calling demonetisation as a "scam" which destroyed the country's economy, Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee has exhorted twitterati to change their profile pictures to black as a mark of protest. In fact, she has taken the lead by already changing her own DP (display picture) on Twitter.#Noteban is a disaster. On #Nov8BlackDay to protest against this scam that destroyed the economy, let us also change our Twitter DP to black pic.yrheSPiZE5- Mamata Banerjee (@MamataOfficial) November 6, 2017When PM Modi had announced the demonetisation initiative on November 8, the Opposition had viewed it with scepticism. While Banerjee had demanded its roll back, Delhi Chief Minister Arvind Kejriwal had apprehended that the Modi government's could lead to revolt by the people against the government. Kejriwal gave a call to "change PM, not notes".BJP EXTOLS POSITIVE OUTCOMEThe BJP and its government have always stood their ground on the demonetisation move. The BJP has extolled the positive outcomes of note ban.While campaigning in Himachal Pradesh on Sunday, PM Modi said that over 3 lakh companies have shut down after demonetisation. A probe into 5,000 such firms has found a fraud of Rs 4,000 crore even as investigation against others was still on.He said the Congress was "angry" at demonetisation as it was still feeling its impact. He cited it as the reason for the party's protests. Some people who faced the heat of demonetisation were still complaining and were planning to observe 8 November as 'black day', he added.Finance Minister Arun Jaitley has claimed that demonetisation has served all its three objectives - to squeeze cash economy, promote digital transactions in business and widen the tax base.BJP's claims notwithstanding, the jury is still out on the economic benefits of demonetisation. However, the BJP may have reasons to believe that note ban has so far helped it reap immense political dividends.A number of elections have taken place since the demonetisation drive was launched. And the BJP has won most of them. Be they Lok Sabha and Assembly bypolls, state, municipal and panchayat elections, the BJP has romped home victorious in majority of them.LOK SABHA AND ASSEMBLY BYPOLLSBy-elections to four Lok Sabha and eight Assembly constituencies in six states and one Union Territory were held on November 19 last year, just 11 days after Modi announced the demonetisation move. In the results which were announced on November 22, BJP and Trinamool Congress won two Lok Sabha seats each.In the Assembly by-polls, BJP and AIADMK won three seats each, CPI(M) got two while Congress and Trinamool bagged one seat each.The BJP did not lose any Lok Sabha or Assembly seat in these bypolls .ASSEMBLY POLLSThe BJP won UP election by a three-fourths majority. UP is the most populous state in the country with largely rural background. The impact of demonetisation was supposed to have adversely affected UP the most.The other four states - Uttarakhand, Goa, Manipur and Punjab - which went to polls in February and March also felt the impact of note ban. While the BJP also won Uttarakhand besides UP, it came second in Goa and Manipur. However, it went on to form government in the last two states.The BJP was a junior partner in Punjab and the previous government led by the Shiromani Akali Dal (SAD) was facing a massive anti-incumbency sentiment after 10 years of rule.The demonetisation initiative would have been listed as one of the most important reasons behind BJP's failure had the party lost UP or fared poorly in the other states.However, the Congress views the results in the Assembly elections as a defeat for the BJP. P Chidambaram told India Today on a special programme demonetisation that the BJP won only UP and Uttarakhand. He said the BJP lost Punjab while the Congress was the single largest party in both Goa and Manipur.MUNICIPAL POLLSThe BJP registered a historic win in Maharashtra municipal elections held in February. It won eight of the ten municipal corporations that went to polls. In Brihanmumbai Mumbai Corporation (BMC), the richest and most prestigious corporation in the country, BJP improved its tally from 31 last time to 82 this year in a corporation of 227 seats. It was short of Shiv Sena by just two seats.In the Maharashtra urban civic polls, the BJP's performance in the president council elections held on November 27, just 19 days after the demonetisation initiative, was also unprecedented. It emerged as the single largest party. It won more number of posts than it did the last time.The BJP's tally rose from 25 corporator seats in the previous election to 119. The Congress, which had won 150 corporator seats last time, managed to take a lead on 126 seats, thus ceding ground to rival BJP.In Maharashtra rural municipal polls, the BJP captured two municipalities and one taluka panchayat in local bodies elections, the results of which were declared on November 29. The BJP also maintained its lead on 23 out of 31 other seats of various municipalities, taluka and district panchayats, where by-polls were held.In the elections to the Municipal Corporation of Delhi (MCD) too held in April this year, the BJP retained all the three bodies.PANCHAYAT POLLSOut of the 37 seats on which local bodies by-elections were held in Rajasthan on November 29, 21 days after the demonetisation move, the ruling BJP won 19 seats while Congress was victorious on 14 seats. In fact, the two parties gained one seat each in the by-polls held for panchayat and municipal seats in the state.In the panchayat elections held in February in Odisha, BJP made unprecedented gains. Of the total 853 seats, BJP bagged 306 seats - an increase of 8.5 times as compared with its tally of just 36 seats in 2012. It added 270 seats to its previous tally.On the other hand, ruling BJD won 460 seats as against its victory on 651 seats in 2012, losing 191. Congress bagged just 66 seats against the 126 in the previous elections, losing 60. Demonetisation anniversary: 5 ways in which PM Narendra Modi’s move made India a better place for job creationAuthor: FE OnlinePublication: The Financial Express Date: November 7, 2017URL: anniversary: 5 ways in which PM Narendra Modi’s move made India a better place for job creationDemonetisation anniversary: Prime Minister Narendra Modi back in 2016 shocked the country with the introduction of Demonetisation on November 8. This much-debated move by the PM had garnered a lot of attention of well-versed economists in the country as well as from across the globe. To celebrate the first year anniversary of Demonetisation in the country, the Bharatiya Janata Party (BJP) will be observing November 8 as ‘anti-black money day’, while the opposition is all set to mark the occasion as ‘black day.’ According to Manish Sabharwal, the chairman of Teamlease Services and director on the Board of RBI, the move to scrape Rs 500 and 1000 notes had made India a better habitat for formal job creation. Here are five reason according to Sabharwal which prove that demonetisation solves the job problem in the country-1. Demonetisation reduced the amount of cash available with the citizens, which in turn increased the bank deposits somewhere between Rs 2.8-4.3 lakh crore. Sabharwal, as quoted by Indian Express, further states that is we assume Rs 3 lakh and apply an accepted 6 multiplier, then demonetisation, has created new lending capacity of Rs 18 lakh crore, which is 36 times India’s Central government allocation to primary education.2. With the introduction of Demonitisation, came the 7.6 crore new monthly digital transactions. Sabharwal in the report states that Demonetisation exploded the number of digital payments on UPI/Bhim from 1 lakh in October 2016 to 7.7 crore in October 2017.3. Demonetisation served as a catalyst for 3 lakh crore new financial savings. As quoted by Indian express, the eight months after note ban was introduced, the country saw a mutual fund inflows of Rs 1.69 lakh crore (up 1700 per cent) and the three months after demonetisation saw Life Insurance Premiums rising by 46 per cent. With greater financialization of savings, a virtuous cycle for formal job creation was formed.4. After the introduction of Demonetisation, interest rates were lowered by 2 per cent. Expensive loans and the increasing cost of money in the country has been crippling for India’s entrepreneurs. As quoted in the report, lowering interest rates is a policy priority and banks had been only passing on 50 per cent of lower policy rates to customers; in the year after demonetisation this has risen to 100 per cent. With this, formal job creation in the country needs the lower interest rates that come from macroeconomic stability, fiscal discipline, muted inflation expectations and an Independent Monetary Policy Committee.5. The move to introduce Demonetisation in the country was targeted towards the creation of a cash-less society as cash is the primary tool of corruption. As quoted in the report, Sabarwal says that corruption enables transmission losses between how the law is written, interpreted, practised and enforced while India’s move to high productivity enterprises needs moving from deals to rules. A less corrupt India is a more meritocratic India, Sabarwal adds.Why sequencing matters: Demonetisation, followed by GST, was the right prescription for inclusive economic growthAuthor: Raghbendra JhaPublication: The Times of IndiaDate: November 7, 2017URL: right sequencing of economic policies, while exceptionally important for the success of economic reform, is relatively neglected in popular discussion. For example, macroeconomic stabilisation of a country with high inflation, sluggish output growth and an overvalued exchange rate would require that the correction to the exchange rate precede stabilisation policy. Reversing this sequence would not yield the desired results. Former US Fed governor Ben Bernanke, in a lucid review of the interaction between exchange rate policy and monetary policy argues that floating (or at least flexible) exchange rates can function as automatic stabilisers and shock absorbers leaving monetary policy free to concentrate on its core responsibility of inflation and output stabilisation.A similar argument is relevant to the current debate in India on demonetisation and GST. Many seem to agree that GST is a good policy (although some might say that it was implemented too soon and that GST rates have yet to find their optimal levels) but some criticise demonetisation. An important point to understand here is that without demonetisation GST could not be a success.These two policies together and their sequencing has drastically reduced the size of the informal economy in India. As M Shahe Emran and Nobel laureate Joseph Stiglitz show in an important paper “On selective indirect tax reform in developing countries”, VAT (GST’s predecessor applied to goods only) in an economy with a large informal sector (like India’s) introduces a strong distortion between formal and informal sectors of the economy and hence reduces welfare.Apart from this, transactions could move into the informal economy whence tax collections would be sluggish. This has been borne out by Indian experience. VAT was introduced into India on April 1, 2005 and indirect tax revenues were stagnant in response. According to the ministry of finance’s Indian Public Finance Statistics 2014-15 Centre and state indirect tax revenue was 11.37% of GDP in 2005-06, 11.77% in 2006-07, 11.06% in 2007-08, 10.43% in 2008-09, 9.63% in 2009-10, and hovered between 10.53% (2010-11) and 11.57% (2014-15).It follows that it was essential to sharply reduce the size of India’s informal economy to make GST a success. By this logic, demonetisation should have occurred before the implementation of VAT in 2005. There is no gainsaying the fact that prior to November 2016 India had a very large informal economy. A key indicator of this was the overwhelmingly large proportion of transactions carried out using cash (the 2015 currency to GDP ratio was 12.51% for India compared to 9.34% for China, 7.38% for the US and 2.45% for Norway).According to a recent Bloomberg report India unearthed more than a billion dollars in illegal cash holdings from more than 2,00,000 shell companies post-demonetisation. This Bloomberg report also cites McKinsey & Co to suggest that in 2013 India’s black economy was nearly 30% of GDP. Clearly, the situation was unsustainable and had to be addressed.Gains from moving towards electronic modes of payment are compelling. Electronic payments and transfers provide an easy audit trail for governments to tax individuals and businesses and track illegal transactions such as money laundering, financing of crime, terrorism and drug smuggling. No wonder, some governments (eg Denmark), routinely discourage the use of currency notes. Businesses, too, benefit from a move from cash to e-transactions as there is evidence (from Australia) that people spend more when paying electronically.Electronic means of payment provide greater security of transactions despite the threat of cybercrime. Carrying large amounts of cash involves large risks of its own and fuels government inefficiency and corruption. A Time magazine report suggests that carrying out transactions by cash actually hurts the poor more than the rich, since it is harder to protect cash against theft, decay and natural disasters.Some have argued that since of the Rs 15.44 lakh crore worth of currency denotified all but Rs 16,000 crore came back into the banking system demonetisation was a failure. This argument is wrong. All bank deposits have enough information to identify the depositor. Large depositors can be pursued to check their legitimacy. According to an ET report, the CBDT has discovered unexplained cash worth Rs 3 lakh crore in bank accounts.Although the demonetisation programme was kept a well-guarded secret, the government had prepared the population well. Opening of a large number of Jan Dhan and other bank accounts ensured that ordinary people had an avenue to deposit their invalid Rs 500 and Rs 1,000 notes. Thus, a welcome byproduct was the sharp growth in financial inclusion, something that was talked about for decades but had remained elusive. By announcing a generous amnesty scheme for tax dodgers well before November 2016 the government ensured that those who wanted to come clean on their financial affairs had an opportunity to do so.Indian tax/GDP ratio is lower than that of many countries with comparable per capita GDP in PPP terms. Another major spinoff from the dual policies of demonetisation and GST has been the sharp increase in tax revenue and number of taxpayers (both direct and indirect taxes). Many areas urgently need public expenditure and the higher tax revenue will facilitate this.To conclude, demonetisation and GST have been momentous structural reforms in India. Although their implementation caused temporary hardships to many, faster, more transparent and inclusive economic growth lasting well into the future is now imminent.Lessons from demonetisation, according to Manmohan SinghAuthor: Manmohan SinghPublication: Date: November 7, 2017URL: impact of demonetisation aside, I also worry deeply about a creeping culture of erosion of institutions and their credibility, says former PM Manmohan SinghThe 8 November 2016 decision by the Prime Minister to extinguish nearly nine-tenths of the value of currency in circulation and render Rs500 and Rs1,000 banknotes worthless overnight was a misguided act of coercion that shocked and had an impact on every single Indian. It was an ill-conceived economic policy decision. Even if one were to take the purported economic motives of eradication of black money or enabling a digital economy at face value, arbitrary demonetisation was not the means to achieve those objectives. Contrary to belief, demonetisation was not a case of a “good idea, bad execution”. It was a fundamentally flawed idea. One year later, it is well established that the reckless decision caused enormous damage. Not just economic but social, institutional and reputational damage.Contrary to belief, demonetisation was not a case of a “good idea, bad execution”. It was a fundamentally flawed ideaThe economic impact of demonetisation is quite evident in the slowing of GDP growth and deterioration of other economic indicators. The precise quantum of the negative impact of demonetisation on economic output is both inestimable and unimportant. What is important is that the current economic slowdown triggered by a liquidity shock due to demonetisation was needless and entirely self-inflicted. Such a shock may be temporary in nature but can have a lasting damage on the weaker sections of our society and industry. A liquidity crisis often turns into a solvency crisis for the weak, as is borne out in data and stories from poorer households and small businesses that are struggling to recover from the damage to their livelihoods caused by demonetisation. It is said that money is an idea that inspires confidence. Similarly, a sudden withdrawal of money can dent confidence. Numerous surveys have shown that business confidence has plummeted. Stability and certainty are essential ingredients for a well functioning macroeconomy. Demonetisation has dented both. At a time when individual and regional economic inequalities in India are rapidly widening, measures such as demonetisation have only exacerbated such inequalities. Millions of our youth are being left out of economic development with limited access to jobs. Three-quarters of non-agricultural employment is in small and medium enterprises. Sectoral data from the Central Statistics Office has shown that sectors such as construction and small manufacturing have been hit the hardest post demonetisation.The father of our nation, Mahatma Gandhi, exhorted us to “recall the face of the poorest and the weakest” while contemplating policy decisions. Advice that was evidently not heeded in the decision to demonetise India’s currency. That demonetisation inflicted tremendous suffering on the weaker sections of our society is now indisputable. That the demonetisation idea was whimsical is well established. It is then only appropriate that the Prime Minister now graciously accept this monumental blunder and seek support from all to rebuild our economy for the larger good of the nation and her youth.It is also quite likely that economic growth measured in GDP numbers will now begin to recover from current lows but the nature of recovery is likely to be unequal and unhealthy. Any headline economic recovery may not adequately capture some of the permanent damage to the informal sector. Unequal and jobless economic growth are the twin challenges confronting our nation today. It is important we do not get distracted from these challenges. In a quest to construct a facade of justification for the demonetisation decision, there is a genuine risk of chasing wrong priorities for our nation. I am afraid that a pretentious pursuit of a ‘less cash economy’ to justify a fundamentally flawed act neither recognizes nor solves these twin economic challenges. It is imperative that we move beyond the rhetoric and politics of demonetisation and come together to find solutions to our challenges of employment and equality. But economic damage of demonetisation aside, I also worry deeply about a creeping culture of erosion of institutions and their credibility. A pretentious pursuit of a ‘less cash economy’ to justify a fundamentally flawed act neither recognizes nor solves the twin economic challenge of unequal and jobless economic growthThe India that awoke to freedom in 1947 was a geographical mass of impoverished humanity embarking on an audacious journey of self-governance and nation-building. Seven decades later, we are a proud, cohesive nation rapidly ascending the ladder of global power. This enormous rise of our nation has been built on the edifice of strong institutions, conceived, built and nurtured by our founding fathers and subsequent leaders. Legislative institutions such as the Lok Sabha and the Vidhan Sabhas, judicial institutions such as the high courts and the Supreme Court, the media, educational institutions such as our public universities, institutions of democracy such as the Election Commission, investigative institutions such as the Central Bureau of Investigation, economic institutions such as the Central Statistics Office, the Reserve Bank of India, the Securities and Exchange Board of India, cultural institutions and healthcare institutions have formed the bedrock of India’s steep ascent in the global stage.These institutions frame rules and ensure continuity, regardless of individuals in power. Institutions translate belief systems in a society into a set of procedures and processes that can stand the test of time and people. Independence, credibility and trust of these institutions is of utmost importance to India’s sustained growth and development. It is these institutions that ensure the nation is accorded greater importance than individual leaders. Any attack on an institution’s independence or credibility is a direct attack on the nation and her citizens. History is replete with lessons of the vitality of institutions for long term development of a society. Eminent economists and historians have documented in great detail, the pivotal role played by institutions that established and upheld justice and freedom, in the remarkable success of Western Europe and North America. Overriding institutions, circumventing consensus, and haste are what made the demonetisation decision possibleIndia’s demonetisation saga is also a saga of institutions and their entrenched place in our society. The Reserve Bank of India (RBI) is an institution of utmost importance with carefully nourished independence and credibility. The demonetisation decision was an impingement on RBI’s institutional authority. It is quite likely that RBI was not given a chance to exercise judgement or opine in the decision to demonetise currency. I am not insinuating complicity but am merely highlighting the importance of institutions to act as checks and balances to executive power. I have the utmost faith and confidence in the governor of RBI and sincerely believe that he will uphold the highest levels of integrity, trust and credibility of the institution in the remainder of his term. Recent incidents, such as the inexplicable delay by the Election Commission in its announcement of election dates for the state of Gujarat, further add to growing concerns about the solidity of the nation’s institutions. Institutions such as the Election Commission are the very foundation of our republic with a rich and storied legacy. Any attempts to thwart the freedom of such institutions portend grave dangers for the nation.The independence and integrity of the media, investigative institutions, educational institutions and cultural institutions are all being tested and subject to intense pressure. India today is experiencing a clash of the might of executive power against the resilience of its hallowed institutions. The leaders of India’s pantheon of stellar institutions shoulder an enormous responsibility to defend their institutions with all their might for the sake of the nation’s future. Every political leader is faced with a temptation to override institutional procedures in the garb of speed and efficiency. Leaders with a political majority even have the ability to fulfil those temptations. But succumbing to such temptations will be a betrayal of the sacrifices made by our freedom fighters and founding fathers in establishing the sovereign republic of India. It is indeed time to move on from demonetisation but not move away from institutions, procedures and processesI sincerely hope demonetisation was just an economic blunder and not a harbinger of institutional erosion. Overriding institutions, circumventing consensus, and haste are what made the demonetisation decision possible. Therein lies the lessons of governance and nation-building. A truly liberal society is one that strives to ensure that not even a single innocent is punished unfairly. The role of institutions is vital in ensuring such order. It is indeed time to move on from demonetisation but not move away from institutions, procedures and processes. Jai Hind!The author was prime minister of India from 2004 to 2014. One year after demonetisation, the government has data to show it workedAuthor: Shishir AsthanaPublication: Date: November 7, 2017URL: 99 percent of the demonetized Rs 500 and Rs 1,000 notes are back in the banking system. According to the RBI annual report Rs 15.28 lakh crore came back, out of Rs 15.44 lakh crore in circulation. The Narendra Modi government has been severely criticized for the dramatic demonetisation drive announced on November 8, 2016. Nearly a year later, the debate refuses to die down: Did NaMo’s DeMo work?As if to underscore its pursuit of the original goal, the government has decided to celebrate the first anniversary of the momentous event as Anti-Black Money Day.The opposition has said that demonetisation slowed the economy and brought hardship to the population at large. But the main data point that is being showcased by those opposing demonetisation is the number of high-value notes that have come back to the central bank. Over 99 percent of the demonetized Rs 500 and Rs 1,000 notes are back in the banking system. According to the RBI annual report Rs 15.28 lakh crore came back, out of Rs 15.44 lakh crore in circulation. In the early days of demonetisation, experts had estimated that nearly Rs 3 lakh crore of unaccounted money would not come into the system. Then Attorney General Mukul Rohtagi is on record saying that Rs 4-5 lakh crore would probably not find its way back.With only Rs 16,000 crore not returning, the Opposition and those against the entire exercise used this number to criticize the government. The government and its supporters were ridiculed on all available platforms for making the country go through so much pain for nothing.But the government knew that the money coming back in the banking system did not make it legitimate. The government through its own sources and media reports knew that tax evaders had managed to legalise their unaccounted money using ‘money mules’ to make deposits, buy gold and foreign currencies as well as make backdated high-value purchases.The onus was clearly on the government to prove that demonetisation was a success. Swallowing its pride, the government waited patiently for data to show up. One year down the line data has just started trickling in.The government’s crackdown on shell companies shows that around 35,000 of the 2.24 lakh shell companies deposited Rs 17,000 crore post the demonetisation drive only to withdraw it later, thus raising suspicions of ‘wrong entries’.In one such case an account with a negative balance just before the demonetisation day saw Rs 2,484 crore being deposited and withdrawn soon after. Other examples were also shared by the Finance Ministry and Corporate Affairs Ministry to showcase how the money entered the banking system.The Income Tax Department, which is responsible to track down the deposits, has rolled up its sleeves. It will start dispatching notices under the Income Tax Act to nearly 70,000 entities that deposited over Rs 50 lakh each in old notes into bank accounts but did not care to reply to data uploaded in their accounts or even file returns. A total of 2 lakh such accounts were identified; 1.3 lakh account holders have already responded to the inquiry.Assuming that the average deposit in the 70,000 accounts is at the minimum level of Rs 50 lakh then we are talking of Rs 35,000 crore of money that has entered the banking system but there is no money trail to it. This money is over twice the amount that went missing post-demonetisation.Apart from this, the IT department has identified 18 lakh cases which it believes feature suspect deposits. Out of this, around 12 lakh accounts have already responded. The focus is now on the remaining 6 lakh-odd accounts.The government is checking other data points which signal how unaccounted wealth could be used. One such is the sharp surge in overseas travel expenditure from USD 36.2 million in November 2015 to USD 246.6 million in November 2016.Further, post demonetisation, gold consumption shot up to more than double the normal monthly consumption. This was followed by gold prices in the unofficial market doubling. Exchange rates of dollar and euro had also shot up post demonetisation.Having faced criticism in the lead-up to the first anniversary of demonetisation, the government now holds all the cards in its hand. It will disclose the numbers slowly, probably as it collects more evidence but also because it wants to capitalise on the election season. No Proof Required: Demonetisation and its contents Author: Surjit S BhallaPublication: The Indian Express Date: November 8, 2017URL: was about both politics and economics. It is an acknowledged political success and early ‘returns’ indicate an economic success story as well.Today is the first anniversary of an unprecedented and bold political and economic experiment — demonetisation (DM). Nobel laureates are cited to suggest that this was an uncalled for, unneeded, and unnecessary experiment — one with magnificent costs and precious little benefits. Most economists, left and right, have argued that DM was a costly and ineffective exercise. Given this convergence, some have declared that there is no debate on the efficacy of DM — an economic version of “Jab miya bibi raazi to kya karega kazi”. Impeccable logic, which can only be proved wrong by empirics.As far back as November 19, 11 days after D-day, in an article in this paper, ‘Demonetisation — Big Bang or Big Thud’, I argued that increased tax compliance was the most important metric to judge the success or failure of DM. Curiously, but not at all surprisingly, political anchors who want to berate DM will mention everything in their fertile imagination to pronounce DM as demonic, but will not utter a single word about tax compliance. Fake news and flaky analysis was discovered in India considerably earlier than that in the US on D-day 2016.Let us now talk evidence. The table documents various aspects of the Indian economy pre- and post DM. The post-DM period is April to September 2017; the pre-DM period is the same period last year. Some data (for example, CMIE data on employment) are only available till August, and for such data the comparison is with January-August last year.As many have noted, the GDP growth slowdown happened well before November 2016. After hitting a high of 10.3 per cent for two consecutive quarters, 2015Q4 and 2016Q1, industrial growth, as measured by GDP accounts, was reduced to nearly half the rate (5.9 per cent) by September 2016. If one looks at the industrial growth and credit growth numbers in the accompanying table, they paint a very sorry, and sad, picture of the economy. Industry, which accounts for nearly 30 per cent of GDP, has been crawling for quite some time now. This crawl has been accelerated, and encouraged, by the RBI/MPC which has allowed real policy rates to rise from 1.1 per cent in December 2016 to 3 per cent in September 2017, and headed higher. Unless you are living in a pre-historic cave (like several members of the political Opposition who are the only ones cheering this inexplicable RBI policy), most people agree that interest rates affect demand, and hence, production. My plea to all those commenting on the growth slowdown caused by DM: Spare a tear for the countless poor and rich who have been made considerably poorer by a high interest rate policy. And note that during the year the MPC has been in operation, CPI inflation has averaged 3.1 per cent.A favourite reasoning of the Opposition opinionatti is that DM failed because all the cash got returned to the system. In my view, it is very positive that all the cash got returned because now the black money can be identified as black. This is up to the tax authorities and a legitimate legal process is underway. Only if the income tax authorities are with the anti-corruption programme will DM be a grand success. Everyone knows that the Indian tax authorities have been accomplices in tax evasion. If they change, India will change for the better, faster.Data for this fiscal year (April to September) suggests quite a large increase in tax compliance. Tax compliance is composed of two parts — new taxpayers and old taxpayers evading tax. If old taxpayers are now, post DM, paying significantly more, then DM might just have been the most creative and bold move to reduce corruption. (Tangentially, and this is to be discussed on another day, tax rates, like interest rates, should not be too high for reasons of both equity and efficiency).In its post-DM budget in February, the finance ministry had projected nominal GDP growth of 11.8 per cent, and direct tax collection (personal income and corporate taxes) to increase by 15.6 per cent. Unfortunately, and helped by the ultra-tight monetary policy, nominal y-o-y GDP growth (GVA growth at basic prices) during April-June 2017 was only 7.9 per cent, one of the six lowest on record (since 1996). Even with this low, low income growth, direct tax revenues have increased at a 13.5 per cent pace, very close to the targeted 15.6 per cent. This close correspondence is only possible because of a large increase in tax compliance.This is just one measure of the large increase in tax compliance that has already been observed. There is more to come, and don’t be surprised if India, because of DM, ends up with more direct tax revenue this fiscal year than it had planned for.Another knee-jerk criticism of DM is the “fact” that cash is king, again! The jugad ingenuity of the badmash Indian is back, and DM or not, corruption always pays in India. Look, we are using 90 per cent as much cash as we did before, phir aapne demon se kaun sa teer maara? Arrey bhai, look again. According to the trend, we are using about 20 per cent cash than before, or at a minimum, 10 per cent less cash. And the effects of a move to less cash (and therefore less corruption and less tax evasion) is not over.Yet another piece of “evidence” offered by the critics is the “fact” that after first increasing at a rapid rate (say in January 2017), the month-on-month increase has fallen. What is relevant is the y-o-y increase not the m-o-m increase; the y-o-y is also, in 2017, parallel to the logic of before and after DM. In 2016, before DM, cash transactions (withdrawal from ATMs) were increasing at a healthy 16 per cent rate; post DM, cash withdrawals are 8 per cent lower. Total digital payments were increasing at a solid 24 per cent pace before DM; now they are increasing at a 40 per cent pace.Let me end with two strikingly puzzling aspects about the Indian economy, pre- and post-DM. First, is the pattern of real wage growth in rural India. Real agricultural wages (Ministry of Labour nominal wage minus rural CPI inflation) grew at 0.1 per cent in 2016 (January-July) and a robust 4.9 per cent in 2017; non-agricultural rural wages show the same pattern — a 1.3 per cent decline in 2016 and a 3.4 per cent increase in 2017.The second puzzle is the pattern of employment and unemployment in India. The only recent available employment data for India is produced by a private data company, CMIE. Based on the data, a report came out in mid-July arguing that “1.5 million jobs were lost in the first four months of 2017”. This report was picked up as evidence that DM had surely not worked. It has been brandished about, Mark Antony-like (the will, the will), by the Opposition economists and politicians.The headline, and analysis, are misleading. What the author had done was to compare the change in employment between September-December 2016 and January-March 2017. This comparison, and analysis, was definitely not kosher, that is, it did not account for seasonality in employment. Fortunately, the CMIE data (posted on their website) allows one to compare like with like, that is, employment (and unemployment etc.) between January-August 2016 (pre DM) and January-August 2017 (post DM).The results are (pleasantly) shocking. Employment actually increased at a healthy rate post-DM — for the population aged 15-24, employment increased by 7 million, and for the age group 25-64, a healthy 12.7 million, or a rate of growth of 3.7 per cent, the highest over the last 35 years (previous years, NSS data).These are interesting times for the Indian economy. Lots of change, political and economic. Look before you leap to conclusions. Haste makes waste. Demonetisation was not a one year affair; but even 365 days later, there is precious little evidence to term it a failure — and considerable evidence to conclude that it was a radically successful policy.- The writer is contributing editor, ‘The Indian Express’, and part-time member of the PM’s Economic Advisory Council. Views are personal.Demonetisation, one year later. Success or failure?Author: Monika HalanPublication: Date: November 8, 2017URL: you look at demonetisation in isolation and the shock it gave to the Indian economy, it failed. But step back and see it as part of a larger plan to weed out corruption, a different story begins to emergeMost people have a “where I was” story about the night of 8 November 2016. Some of us also have a story on ‘how much money I had’ on the night that Prime Minister Narendra Modi invalidated 86% of Indian currency. I was just dragging myself back home after my Iyengar yoga class (those who join the Beginners will identify with my use of the word ‘dragging’), ready to eat some dinner and collapse. But of course, the team and I were up until midnight, reporting and writing on the biggest news of a personal finance journalist’s lifetime. How much money did I have? I had three Rs500 notes that day. Having moved to cards and then digital, I’d moved my household staff to bank accounts and electronic transfer of salaries some years back. Cash was needed for everyday buying of milk, bread, eggs, vegetables kind of stuff. The local Mother Dairy booth was accepting old notes for future purchases, so I was spared the lines to deposit my money. We all have our stories of what happened that night. This was mine.Apart from the personal shock to our money lives, demonetisation quickly became a huge political, social and intellectual battle. The battle lines got drawn deep in the ground and your pro- or anti-Modi stance decided where you stood on the demonetisation debate. I wrote a column one day after demonetisation in which I said that the step will raise the cost of black money, it will not eliminate it. That it is one step in a larger plan to go after corruption. You can read it here: bit.ly/2mmdYeZ. How does it look a year later? Modi gave four reasons for demonetisation: to curb corruption, black money, fake notes and terror finance. To judge the success or failure of demonetisation on these four metrics is almost impossible because demonetisation was one of the several weapons the government has deployed against these issues. But let me try and unpack them.Has there been a dent in corruption and black money? Anecdotal stories say that high-level corruption in the central government is gone, but the cancer of graft elsewhere in the system still thrives. It is unrealistic to expect the deep-rooted habit of graft to disappear overnight, but at least there is serious political will behind the anti-corruption war in India today. What of black money, or money on which income tax has not been paid? Black money is back in the system—talk to any builder (real estate is the biggest sump of black money and talking to builders is a quick way to figure out if cash deals are back) and they say it is as if demonetisation never happened. But they admit to the cash ratio going down and the fear factor lurking at the back of every deal.Look next at the data on currency in the system and digitisation. Reserve Bank of India data shows that currency held by the public is now down almost 10% as compared to last year. Currency in circulation is down by 17%, says the ministry of finance; this means that more than Rs3 trillion, which was earlier cash in circulation, is now part of the formal financial system. Financialisation of household savings got a hard push with demonetisation with assets of life insurance products and mutual funds showing an uptick post demonetisation, and cash-based real estate is still to recover.Digitisation of transactions is growing with the value of NEFT (National Electronic Funds Transfer) transactions rising from Rs9.5 trillion to Rs12.5 trillion over a year. Digital transactions leave a trail and the more India moves to such transactions, the bigger is the blow to black money.A metric to measure the impact of demonetisation on black money would be tax compliance. Rising tax compliance is a win for the war on corruption. A ministry of finance press release (you can see it here: bit.ly/2y9tRMr) says that the number of returns filed as of August 2017 was up almost 25% compared to an increase of about 10% a year ago. The Economic Survey puts the number of new taxpayers due to demonetisation at about 540,000 in FY17, with a possible rise in returned income at Rs10,587 crore. You can see the table here: bit.ly/2vtrq6W. These are clear short-term gains in tax compliance and will need a sustained effort to keep the momentum going.The government’s expectation that a chunk of the cash will not come back and therefore will hurt the corrupt disproportionately did not play out the way it was forecast. Almost all of the notes returned to the system as brazen operators found ways to game the system using a mix of dirty bankers, Jan Dhan accounts, poor people who lined up for them, shell companies and false invoices to justify the cash. A cat-and-mouse game began to catch the bad guys. The government changed track and used the money deposited to identify disproportionate assets. Deposit data was used by the tax department to identify people with cash deposits disproportionate to their previous tax returns. The May 2017 status report of Clean Money Operation of the income-tax department (bit.ly/2hONlzU) says that just under 1.8 million people were identified with such deposits; post-verification, over 900 groups were searched and undisclosed income of over Rs16,000 crore admitted. More than 400 cases have been referred to the Enforcement Directorate or Central Bureau of Investigation and 56 persons have been arrested. These are tiny numbers today, but it is a start. The box shows some examples of how different categories of people tried to launder money.As the news came that shell companies were being used to launder old currency notes, the ministry of corporate affairs began a crackdown that has resulted in about 224,000 companies being struck off the records for being inactive for two years. Most likely to be shell companies, or companies formed to avoid taxes and launder black money, these firms had their bank accounts frozen. Around 309,000 directors who were on the boards of companies that had not filed returns for three years have been disqualified. (You can read the report here: bit.ly/2zmRVgh). The same report mentions a preliminary enquiry showing that Rs17,000 crore had been deposited and withdrawn during the demonetisation process. It is small potatoes in a country where the parallel economy is supposed to be almost equal the formal one and the data in the years to come will show success or failure on this metric. A Mint news report says: “Heightened surveillance and a crackdown on black money has led to a three-fold increase in PAN (Permanent Account Number) registrations.” You can read the story here: bit.ly/2hMr1qA.What about terror financing and fake notes? In a 20 August 2017 Rajya Sabha written reply, Minister of State for Home Affairs Hansraj Gangaram Ahir said that demonetisation resulted in “significant positive impact on most theatres of violence in the country including stone pelting incidents in J&K (Jammu and Kashmir). Since illegally held cash forms the major chunk of terrorist funding, after the demonetisation, most of the cash held with the terrorists turned worthless. Demonetisation also led to instant extinguishment of Pakistan-printed high quality Fake Indian Currency Notes. It also adversely affected the hawala operators.” But this is government spin, is it not? Here’s the thing, we can’t be selective in accepting government data or information in written replies in Parliament. If we believe government data when the growth rates fall, we should equally believe it when the data shows a positive trend. Government claims can be verified, but we cannot paint all government data as fudged, or be selective with what we want to agree with. Google ‘stone pelting’ and see how the incidence of this form of attack against the armed forces in Kashmir has gone down drastically.So was Demo a success or a failure? Look at Demo in isolation and count the human cost of the few months without cash and the shock to the economy—it failed. Step back and see Demo as part of a larger plan to weed out corruption, with it being just one weapon in an armoury that has the freshly empowered the Benami Transaction Act, digitization of money, linking Aadhaar to benefits and transactions, the Goods and Services Tax (GST) and the Bankruptcy Act, and a different story begins to emerge.Narendra Modi took a huge political risk with Demo by doing something that would affect each person and not just one section and with that he pressed the reset button on corruption. For a deeply corrupt nation, any anti-corruption move has to be multi-pronged and results will take at least half a decade to play out. But the early successes are showing up in the data.The Tom and Jerry showThese are two examples from the 10 given by the tax department that give the methods adopted for conversion of unaccounted cash by various categories of people. Hyderabad-Based Doctor: The doctor was found to have deposited more than Rs11 crore in specified bank notes after 8 November 2016 in three bank accounts. During questioning, the individual could not provide any document to substantiate the source of the deposits, which was later admitted as undisclosed income. Prohibitory orders were initially placed on the bank accounts, which were later lifted and a sum of Rs7.50 crore was seized. Demonetisation also forced government employees to deposit unaccounted cash in their bank accountsGovernment employee in Bhubaneswar: A government employee was searched on the basis of information on unexplained cash deposits into the accounts maintained with various banks in his own name as well as in the name of his family members. Investigations also revealed that his wife, a homemaker with no ascertainable sources of income, had purchased land in Bhubaneswar by making a cash payment of Rs53 lakh, the sources of which could not be explained. A total cash of Rs2.28 crore has been seized in this case. The matter has also been referred to the state vigilance department.Source: Operation Clean Money Status report May 2017.- Monika Halan works in the area of consumer protection in finance. She is consulting editor Mint and on the board of FPSB India. She can be reached at monika.h@. Relflections on demonetisation, a year laterAuthor: Vishwavir AhujaPublication: Date: November 8, 2017URL: has presented the banking industry with significant long-term opportunities to scale up operations and strengthen customer servicesWhile demonetization came as a surprise, the silver lining is that it shifted our goalpost on innovation and customer service.There’s no denying that 8 November 2016, will go down as a watershed moment for our country. Demonetization not only had an impact on the citizens of India and the financial sector as a whole but also tested the ability and efficiency of the banking network. Responding to such a massive challenge was never going to be easy for banks, both collectively and individually.While demonetization conjures up images of long serpentine queues outside banks, the other reality was that of the staff spending many sleepless nights inside bank branches and offices, which several of my colleagues in the industry will vouch for.American scholar and author Brené Brown has rightly said, “Vulnerability is the birthplace of innovation, creativity and change.” In many ways, demonetization tested that theory within the banking industry. Take, for instance, logistics and cash management. Banks had to move large amounts of cash at breakneck speed to towns and cities where currency was scarce during this period. Even in extreme situations, the industry did not shy away from airlifting currency from towns where there was a surplus and efficiently moved money from state to state by air and road in record time.If reaching currency notes to remote corners was one problem, banks had to contend with another—updating the information technology (IT) systems overnight to cope with the gigantic task of managing the day-to-day transactions. Not only were the branch staff working long and arduous hours, reconciling cash collection with the ledger and tallying/counting it, the IT department also had to rejig the systems to adapt to the changing requirements on a day-to-day basis. This meant the banks had very little time to back-test the process and ensure smooth roll-out of services the next morning.Besides, banks had to make quick decisions to enable customers to attune to the temporary disruption in their business activities. For instance, our large business correspondent network in rural India helped us to disburse short-term cash loans to customers, as it was the only way they could receive new currency. Mobile point of sale (PoS) machines were dispatched to various locations to allow people to withdraw cash from their accounts.Another mammoth exercise was to drive people to use digital payment systems. Overnight, digital and fintech teams had to gear up IT systems to be able to process the explosion in online digital transactions. We were able to use the Aadhaar enabled payment system platform to provide immediate cash or loan facilities to millions of micro-finance customers who were hampered by the cash crunch.To ensure that more customers, particularly small businesses, embraced digital payments, banks encouraged the use of PoS machines. As a result, PoS machines doubled to three million in just one year since demonetization. While there is still a long way to go on the digital front, the important part is that more small businesses and merchants are opting for digital payments through PoS machines and mobile wallets than before. Online services such as United Payments Interface are further boosting digital payments. Demonetisation was a strong statement of intent to formalize the economy. A year on, it has presented the banking industry with significant long-term opportunities to scale up operations and strengthen customer services. In the years to come, we can expect an explosion of digital payment tools which will increase India’s digital footprint, accelerate financial inclusion and usher in transparency in banking operations. This, to my mind, are the big positives from demonetisation.Needless to say, demonetisation tested the banking system to the limits and the industry responded with military-like precision to accomplish the gargantuan task of remonetisation.- Vishwavir Ahuja is managing director and chief executive officer of RBL Bank Ltd.Demonetisation and the fight against black moneyAuthor: Satish Y. DeodharPublication: Date: November 8, 2017URL: demonetisation seemed to be madness, yet there was method in itBlack money is a catch-all phrase that represents the value of four kinds of transactions: a) transactions that are either unreported or under-reported to evade taxes—leading to lower government revenues, higher fiscal deficit, and/or inadequate delivery of public infrastructure; b) corruption, i.e., money that changes hand to curry favours in business deals and skirt administrative rules, resulting in allocation of contracts to inefficient firms, violation of safety and sustainability rules, and distribution of income in favour of certain personnel; c) transactions carried out in illegal goods such as narcotics, liquor, weapons, and human trafficking, which are welfare-reducing and remain unreported; and, d) payments for financing terror attacks and stone-pelting to destabilize country using counterfeit currency.A multi-pronged approach was needed for a decisive redressal of the black money issue. The government approached the issue with measures such as promotion of banking and digital payment habits, making laws to go after culprits of black money and shell companies, control counterfeit currency circulation, initiate implementation of GST as an efficient tax system, bring donations to political parties under the purview of banking system, get requisite information to act on individuals having unaccounted money in foreign banks, and, importantly, increase the efficacy of all these measures through a surprise announcement of demonetisation of high-value currency on 8 November 2016. From a very myopic world view, demonetisation seemed to be madness, for it had caused, expectedly, inconvenience to public for a certain period of time. However, statistics emanating from the latest Reserve Bank of India (RBI) report published on 30 August 2017 are very encouraging. Counterfeit currency worth Rs43.5 crore, the largest cache ever, was detected by the banking system during the fiscal year 2016-17. What has been detected is just that, the detected amount. A large chunk of counterfeits could not have been brought to the banks for it would have got detected. Further, the new currency issued by RBI to replace the demonetized one is also harder to forge. In fact, on 20 August, this newspaper quoted home minister Rajnath Singh as saying that incidents of stone-pelting in Kashmir had come down. While this one-time effort of demonetisation has given a big push to checking counterfeits, now this must be complemented by routine due diligence because, in the words of Wendell Phillips, “Eternal vigilance is the price of liberty.”demonetisation has also had a salutary effect on banking and digitized transactions. As per Right to Information (RTI) information sought from finance ministry by PTI, deposits in about 290 million Jan Dhan accounts had soared close to Rs65,000 crore by 14 June 2017. If government had not initiated Jan Dhan Yojana prior to demonetisation, this positive impact would never have materialized. Post demonetisation, the surge in deposits also compelled banks to lower lending rates since they were flush with cash in bank accounts. Moreover, those who were averse to using cash wallets had begun to use them for making payments for a host of products and services from Uber to barbers. As per the finance ministry note reported in this newspaper on 30 August 2017, by May 2017, there had been a 56% increase in digital payments amounting to more than 1.1 billion transactions.While the percentage of old currency notes that got exchanged was extremely high, in absolute terms, Rs16,000 crore did not return with RBI. Thus, black money equivalent of Rs16,000 crore got eliminated. Also, the cost of printing currency can be viewed as front-loading of retirement of notes, for the lifespan of currency notes in India, due to our unique handling practices, is low. Importantly, the surge in bank deposits has ended the anonymity of high value accounts. The RBI report mentions that more than 4.73 lakh high-value suspicious transactions were reported by banks and financial institutions during 2016-17, an unprecedented increase of more than 345% over the previous year.The passing of the Black Money Act and amendments to Benami Act just prior to demonetisation were strategic decisions. In addition, income tax department also dovetailed its Operation Clean Money in February 2017. By August 2017, data analytics by the I-T department resulted in Rs15,496 crore being admitted as undisclosed income, and, another Rs13,920 crore came in, by way of seizures. Further, 14,000 properties, each valued more than Rs1 crore, are currently under scrutiny as owners have not filed income-tax returns. Furthermore, there has been an increase of about 25% in income tax returns filed during the fiscal year 2016-17, and, an estimated 2.1 lakh shell firms have already been deregistered. Looking forward, implementation of GST has also provided the right incentive for businesses to get into the formal sector. Though there are teething problems, overall, GST has been well-received by the industry. Similarly, donations to political parties have also been brought within the ambit of formal banking. Finally, government’s efforts to get data from foreign banks have also borne fruit. Swiss authorities have planned for automatic exchange of information (AEOF) on financial transactions with the Indian government from 2018. All these pieces of the jigsaw puzzle are helping complete the big picture of the efforts to eradicate black money. But what about the decline in GDP growth rate to a tad below 6%? Of course, it was anticipated that the double-exogenous shock of demonetisation and transition to GST would cause short-run disturbance in economic activity. However, even today, India is one of the fastest growing economies, where the 2017 average expected GDP growth rates for advanced countries and emerging markets are only about 1.9% and 4.1%, respectively. In fact, the only time a demonetisation can be carried out is when GDP growth rate is high enough to absorb a temporary shock. It would have been unwise otherwise. Importantly, there are many long-term benefits of the multi-pronged approach to demonetisation, which cannot be evaluated in rupee terms. For example, there is immense value attached to the intangibles such as credible threat to forgery rackets and enhancing the national security milieu, a shift in the people’s mindset in favour of digital payments, a shift in the propensity of the informal sector to get into formal one, and the potential increase in tax base to finance public goods. Such long-term benefits are impossible to be captured in the current estimates of GDP growth rates.Though demonetisation seemed to be madness, yet there was method in it.- Satish Deodhar is professor of economics at IIM Ahmedabad. This article presents the author’s personal views and should not be construed to represent the institute’s position on the subject.RemonetiseAuthor: EditorialsPublication: The Indian Express Date: November 8, 2017URL: year after demonetisation, government must focus on the task of repairing and rebooting the economy.TODAY marks one year of the decision of the Narendra Modi government to withdraw high-value currency notes of Rs 500 and Rs 1,000 and extinguish 85 per cent of the value of the currency in circulation. It’s a move which, in many ways, led to sharp political divisions, hurt the economy, especially the informal sector and small and medium enterprises, fuelled a national debate. In a Facebook post on the eve of one year of demonetisation on Tuesday — which the government is projecting as “Anti-Black Money Day” — Finance Minister Arun Jaitley claimed that the decision of November 8, 2016 would be remembered as a watershed moment and that the country had moved on to a cleaner, more transparent and honest financial system.There’s been much sparring over the last year on the gains from demonetisation. The tangible benefits may be in the form of less cash in the economy, higher tax compliance — 1.26 crore new taxpayers were added to the tax base — and an initial spurt in digital payments which after the early momentum has seen a dip, indicating a reversal in trend with remonetisation. Some of the other benefits, such as a behavioural transformation, will be visible only over time.But what’s clear is that the decision to withdraw high-value currency notes has impacted the economy which was already slowing down in the run-up to November 8 last year — and that the brunt was borne by the unorganised sector, not bigger corporates. Former Prime Minister Manmohan Singh, who was prescient last year about the impact of the note-ban, has, in a signed piece in the Mint newspaper on Tuesday, written that contrary to belief, demonetisation was not a case of “good idea, bad execution” but a fundamentally flawed idea and a liquidity shock which could have a lasting impact on the weaker sections of society and industry. Singh also makes the point that it is time to move on from demonetisation, but not to move away from institutions, procedures and processes.Prime Minister Modi has expended much political capital on what he described last year as a “mahayagna against the ills of corruption, black money and fake notes and the grand sacrifice for cleansing our country”. A year on, there is much repair work to carry out for the government on the economic front — be it rebuilding state-owned banks, getting stalled projects off the ground, making it easier for entrepreneurs to do business and boosting private investment. That’s why it is important for the PM to now invest that political capital on rebooting the economy. Some of that has been on show recently. The decision to withdraw high-value notes last year was also a political bet by the PM. Over the next few quarters, and finally by May 2019, it will be revealed whether it was the right bet.Revolution that wasn’tAuthor: Pratap Bhanu MehtaPublication: The Indian Express Date: November 8, 2017URL: was part of a political imagination that is closer to a technocratic authoritarianism.Revolutions are often paradoxical things. In the minds of the revolutionary, they conjure up images of radical change. But reality is more recalcitrant. It makes a fool of the revolutionary, exacerbating those very things that the revolution seeks to change. Demonetisation has turned out to be no different. It was a populist measure, done in the name of the poor. But like many revolutions done in the name of the poor, it hurt them by extracting the highest price from them.It was a measure driven by an obsessive moralism more than a grasp of practical reality. The moralism forgot that “black” is not an inherent property of money. It is doubtful that the measure dented the complex webs through which plutocracies shield their money. Indeed, there is some evidence that new laundering mechanisms came into being as a result. It was a measure done in the name of transparency: Data that will help detect tax evasion. But citizen transparency turned out to be a shield to cloak political financing. While the citizens are being transparent to the state, political donations, through anonymous bonds, are being shielded ever more from public scrutiny. So this was a revolution in bad faith.Demonetisation created fantasies of a cashless economy. Digital payments are up somewhat, but cash is back with a vengeance. Demonetisation was supposed to accelerate growth. It might, on a time horizon where causally attributing growth to demonetisation will be an unfalsifiable claim. But in the short run, it dented growth perhaps by as much as two percentage points. The human cost of a two percentage point slowdown in GDP growth is high. Demonetisation was supposed to be revenge on intellectuals, those know-nothings who have held India back. Turns out the predictions of most of those “know-nothings” were not far off the mark.One can go on. It was supposed to result in a bonanza to government in the form of unreturned cash. Most of the cash came in, suggesting how little the purveyors of the scheme knew about how money functions. It was to usher in a utopia where everything, from terrorism to counterfeiting, ended. But when utopia did not arrive, the revolution changed the goal post, presenting modest statistical trends as success: The rising number of taxpayers, the amount of cash under scrutiny, the rise in digital payments. The trend line was heading in this direction anyway. But modest acceleration of these trends could have been achieved with much less callousness. The quantum of the increase in taxpayers or digital payments achieved could have been done by other means and at much lower cost. Formalisation was a desirable objective of demonetisation. But it underestimated the fact that informality was also a form of low-cost participation.Formalisation without preparation leads to exclusion. Demonetisation will probably lead to more state capacity in terms of its ability to investigate. But there is little sign that the main institutions of investigation are more credible, not merely more powerful. Most importantly, demonetisation was a revolution in one respect: Like all revolutions, it was an exercise in unprecedented state power (as this column argued ‘You have been warned’, November 17, ‘It’s a permanent Revolution’, November 26, 2016). Demonetisation was a revolution that turned the world upside down, only to find the world was the same again, only more so.There is no doubt that demonetisation seemed like a political watershed. It was, for a time, immensely popular for a variety of motives: Moralism, expectations of gain, schadenfraude at the possibility that some of the well-off might have to suffer. The sheer audacity of it was politically its greatest attraction. The fact that a government was willing to inflict supposedly short-term pain was taken as a sign of its unprecedented sincerity. As a civic matter, there was an unprecedented poignancy about the moment. The country, for the most past part, went along with the cause. It was a quiet but nevertheless mass mobilisation on an unprecedented scale. The people were willing to trust the prime minister, and he rode the wave with political aplomb, especially in the UP elections. It was not the economic experts who were wrong. It was our political assumptions that seemed, for a moment, shaky. The people did seem to respond to a call for sacrifice.The popularity of the measure posed a challenge for democracy. What did the popular support signify? On the other hand, anti-corruption movements, built on a general anger, speaking the language of virtue, often end up reinforcing authoritarianism. But in this respect, the reality has turned out to be more reassuring. The people were willing to cut the government an immense amount of slack. They were willing to trust a prime minister who asked for time. But it was a trust conditional on promises being fulfilled.This was not, in retrospect, blind faith. As it became clear that the promises were not fulfilled, the mood quietly started shifting; there is a great sense of a trust being belied. This may not immediately translate into electoral outcomes, but there is no doubt that the government’s stock of political credibility has fallen as the full consequences of demonetisation have become apparent. The RBI’s announcement that most of the cash had been deposited was, shorn of its technical complexities, seen as a sign that there was not going to be this windfall that could be distributed as largesse. The magnitude of the pain inflicted, the supply chains broken, the uncertainty around growth, have begun to dent the credibility of the government. The crystallisation of an alternative is always uncertain and takes time, but there is no question that the government is losing credibility on this issue, and therefore on its capacity to be able to control the narrative.Demonetisation was an ill-conceived step, a revolution that was not going to succeed, because it was, above all, an act of hubris. It was part of a political imagination that is closer to a technocratic authoritarianism: Combining great faith in technology with state power. The very limited success of demonetisation is reassuring in reminding us that reality takes its revenge on revolutionary hubris.But it does raise two questions: What of the underlying angst about corruption that demonetisation tapped into? Is that a political force or will it now devolve into a general cynicism? And second, will the failure of hubris lead to an intelligent humility or more hubris? There is reason to worry that revolutions don’t admit their own shortcomings.- The author is vice chancellor, Ashoka University. Views are personalPro-growth, pro-poorAuthor: N K SinghPublication: The Indian Express Date: November 8, 2017URL: unearthing black money, demonetisation has widened the government’s revenue base, giving it more resources for welfare projects.Black money is like a chameleon. Its multiple forms — in cash, real estate and gold, in tax havens, shell companies and benami properties — make its detection difficult. That is why when asked the reason for frequently changing goalposts after demonetisation, Prime Minister Narendra Modi replied, “One must distinguish between niti and rann niti.”The war against black money is a war for the poor. Constant revenue leakage impairs the state’s ability to provide improved infrastructure, security to life and property, rural roads, sanitation, healthcare amenities and growth opportunities necessary for an equitable and cohesive social order. No one recognises this more than PM Modi. This explains the government’s resolve for an integrated strategy to combat black money through a robust legislative and administrative framework, IT systems and processes that are better equipped to integrate and mine data. Exaggerating the transitional irritants of these measures almost amounts to celebrating black money.Apart from demonetisation, the government has constituted a Special Investigation Team (SIT) to unearth black money, enacted The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, to deal with black money stashed abroad, and amended the Benami Transactions Act, 1988 to enable the confiscation of benami property. Ripping away the mask of shell companies destroys their anonymity. The government has engaged with foreign governments to facilitate the exchange of information under various double tax avoidance treaties.The main objective of fighting black money is to improve tax compliance and broaden the universe of activity and transactions under the tax net. The early evidence after demonetisation suggests a meaningful increase in the tax base. The number of taxpayers increased from 55.9 million in 2015-16 to 65 million in 2016-17. There is, of course, a natural increase in taxpayers every year. But the 16 per cent increase in 2016-7 is unprecedented. There was also an almost 27 per cent surge in new income tax filers in 2016-17 — compared to 20 per cent in the previous year and 5 per cent the year before that. Direct tax collections between April and July 2017 increased by more than 19 per cent over the same period in the previous year. This is impressive since the nominal GDP grew by just 9.3 per cent in the April to June quarter.This broadening of the tax base has several macroeconomic implications. First, the extra resources it generates can be spent on important public goods and welfare programmes, including those pertaining to health and education. Public spending on health, education and physical infrastructure not only boosts economic efficiency and growth but also makes a deep dent on poverty and income inequality.Second, by broadening the direct tax base, a successful fight against black money reduces the reliance on indirect taxes. This is significant because indirect taxes are regressive, and should be modest in a relatively poor country such as India. The fight against black money, therefore, is also a battle to make the tax system more progressive. Third, a broader tax base — all else being equal — can result in authorities lowering tax rates, especially for those at the lower end of the income spectrum. Lower tax rates can then improve tax compliance, leading to a virtuous cycle of an ever-broadening tax base and lower rates.Fourth, by definition, black money stays out of the formal financial system. Domestically, it is either saved in unproductive physical assets (gold, real estate) or in currency-in-circulation. Consequently, the more the black money in an economy, the lower the formal financial savings. This will result in higher interest rates than necessary, or a larger than required current accounts deficit. Both are distortionary from a macroeconomic perspective. Indeed, the flood of deposits after demonetisation — and the fact that a large fraction of these deposits have remained with the banking system (because currency in circulation is lower in the new equilibrium compared to what it was before) — has boosted financial savings and asset prices. It has allowed for structurally lower interest rates, with banks slashing their MCLR rates by 90 basis points after the post-demonetisation influx of liquidity.Fifth, black money seeks alternative destinations through capital flight in the form of export under-invoicing or import over invoicing. Both widen the current account deficit and the balance of payments, thereby creating artificial stress on the external sector and the rupee.Broadening the tax base by mounting a fight on black money is, therefore, both pro-growth and pro-poor. Since the marginal propensity to consume is progressively higher at the lower end of the income spectrum, a rupee transferred from the rich to the poor also boosts aggregate demand, and therefore leads to growth.The direct tax base is likely to broaden because of various other government initiatives. The goods and services tax (GST) will undoubtedly broaden the indirect tax base. The value added tax that existed before this tax regime did not span the entire spectrum of the economy. Once taxpayers are in the net for indirect taxes, they will potentially also be in the net for direct taxes, thereby potentially broadening the direct tax base. The GST will enhance productivity, efficiency and growth in the long term. By helping mobilise more direct and indirect tax revenues in the medium term, it will also allow these resources to be used on merit goods, growth multipliers and reduce income equalitWaging a war on black money does come with the near-term costs. To the extent that small and medium enterprises were outside the tax net — and are also marginal job creators — there were bound to be short-term transition costs. But they pale in comparison to the expected medium-term benefits and larger social good.- The writer is former secretary, PMO and Ex-MP, Rajya Sabha.A year after PM Modi’s endorsement, Mumbai’s ‘Digital Dabbawalas’ bask in successAuthor: Manasi PhadkePublication: The Print Date: November 8, 2017URL: famous dabbawalas or tiffin-carriers of Mumbai: Source: Wikimedia Commons At the peak of demonetisation and the push for a digital economy, Modi had praised the Digital Dabbawalas initiative for embracing the latest technology.Mumbai: Soon after demonetisation last year, Prime Minister Narendra Modi tweeted praise for Mumbai’s famous dabbawalas for embracing the latest technology and providing digital services.At the time, Modi was expanding his narrative of a digital economy, and the ‘Digital Dabbawala’ foray fit right into it. Although the venture was launched much before demonetisation, Modi’s tweet and his digital narrative helped push the dabbawalas into the limelight.Going beyond ferrying lunch boxesThe ‘Digital Dabbawala’ offers services beyond the simple delivery of meals. After ferrying two lakh lunch boxes every day from customers’ homes to their offices and back, the dabbawalas also work in the evenings, offering door-to-door services for the registration of rental agreements, leave and licence agreements, and marriages to Mumbai’s citizens at a nominal price.It is a joint venture between the dabbawalas and Pune-based Anulom Technologies Pvt Ltd, a government-approved rental agreement service provider.Dabbawalas source clients, who register on the portal, create a draft agreement, and book an appointment online for their biometric verification. Dabbawalas then go to their houses with laptops and biometric machines, and register the agreements online.Jaising Pingle, the very first dabbawala to be trained in facilitating digital registrations, said: “Our venture had nothing to do with notebandi (demonetisation). I started working in 2015, and we launched our website for Digital Dabbawala a couple of months before demonetisation. Then, in November last year, the word ‘digital’ roused people’s curiosity, and the prime minister tweeted about us, lauding us.”Pingle said it brought ample attention on the venture from the government and the media, and their popularity grew.“Earlier, in one whole month, we used to have just four to five appointments,” he said.Today, 22 dabbawalas work for the digital venture, enabling the registration of about 400 agreements every month. They do this after 4.30 pm, once their lunch box duties are over.Anant Talekar, another digital dabbawala, said he’s glad he learnt his way around a laptop and a biometric machine last year. “One year down the line, things are going really well. We don’t have any work post 4.30 pm, and we can earn up to Rs 5,000-6,000 or more every month through Digital Dabbawala if we work part-time,” he said.“Being dabbawalas, we know all of Mumbai’s areas very well, and people trust us too,” he added.Digital push has reducedPrabodh Navare, managing director of Anulom Technologies, which also has operations in Pune, said the company’s Mumbai operations are entirely synonymous with dabbawalas, and all the revenue is shared with them.“Other than the 22 digital dabbawalas who execute the registration agreements, about a hundred more work to spread the word and get new customers,” he said. “Last year, there was a big surge initially. The official who heads Digital Maharashtra also spoke to us, saying we can enable the provision of more services through dabbawalas.”Navare, however, thinks that the push for offering digital services has slightly reduced since peaking post-demonetisation.“There is more focus on the other big important projects, such as smart cities and other infrastructure work. The focus on offering digital services has slightly reduced, which has impacted our ability to expand our offerings smoothly,” Navare said. Modi emerges unscathed from demonetization shockAuthor: Kiran Sharma And Yuji Kuronuma, Nikkei Staff WritersPublication: Asia.Date: November 7, 2017URL: economic toll, Indian prime minister solidifies his power base "November 8 is a sad day for India." With these words to reporters on Oct. 30 Rahul Gandhi, vice president of the Indian National Congress, set out plans for a nationwide protest against a decision by Prime Minister Narendra Modi that threw the country into chaos.Puran Chand Jain, a small-time stationery seller in New Delhi, has still not fully recovered from the shock on Nov. 8, 2016. On that day, Modi's Bharatiya Janata Party government suddenly announced the withdrawal of 500 and 1,000-rupee banknotes, removing from the economy 15.4 trillion rupees ($238.1 billion at the current rate) -- about 86% of the total value of currency in circulation."Soon after the note ban, my sales shrank to 20% of the total. It's been almost one year now, and the business has only reached 50% of the pre-demonetization level," said Jain, who is barely able to make a profit of 10,000 rupees a month. For an economy so heavily dependent on cash transactions, the announcement amounted to a major economic shock. The move quickly sparked a nationwide cash crunch, the worst the country has seen since independence from British rule in 1947.Serpentine queues"My business was heavily impacted," Shaji Hassan, a door-to-door kitchenware salesman in southern Kerala state, wailed in January. While Hassan's weekly sales shrank by 60-70% to about 5,000 rupees, most of his remaining customers bought goods on credit, leaving him with daily cash revenue of just 100 rupees. To keep his clients, he had no option but to borrow 25,000 rupees from a consumer finance company at interest rates of 18-22%.Jain and Hassan are among millions of people running cash-heavy small and medium sized businesses that are believed to have borne the brunt of demonetization.People were given until Dec. 30 to deposit the withdrawn currency in bank accounts. They were also allowed to exchange some of the banned cash for valid notes. But the government's action led to serpentine queues in banks and at ATMs across the country. In the first weeks after demonetization millions of Indians spent hours lining up in front of bank counters at the expense of work and productivity.Note ban fails Recalling the horrors she faced after demonetization, Rachna Rawat, a New Delhi-based mother of two, said it had become difficult to purchase essentials. "I had no cash to buy milk and vegetables, and vendors had no means to accept digital payments," she said, adding: "I couldn't even manage diapers for my then six-months old son.""Please bear with me for 50 days [till Dec. 30]," Modi said on Nov. 13, 2016, at a ceremony in western Goa state. "After that, if you find any fault in my actions, I'm willing to be punished."With this, Modi entreated people who were suffering from the acute shortage of cash to be patient. Contrary to his words, however, the chaos spilled over into the New Year.The prime minister's drastic step was aimed primarily at fighting "black money" -- unaccounted-for wealth and counterfeit currency. The government estimated that demonetized notes valued at between 3 trillion and 5 trillion rupees -- in circulation as untaxed cash -- would not return to the banking system because of fears of punitive action by the authorities.However, its expectations fell flat. About 99% of the banned currency made its way back to banks, according to the Reserve Bank of India's annual report, released in August. The main objective -- fighting black money -- proved to be a failure. "Since all the demonetized cash has come back, where is the black money?" said Congress spokesman Randeep Surjewala, who labeled demonetization "the century's biggest scam."GST woes"First, we suffered due to demonetization, and now there's GST (goods and services tax), which we still have not gotten used to," said Amit Narula, a clothes retailer in New Delhi. Rolled out on July 1, the "GST was an ill-prepared move. Traders still do not understand the complicated online tax filing processes, and the portal meant to facilitate us is riddled with technical snags."During 12 years as chief minister of Gujarat state, in India's west, Modi gained national fame by achieving one of the fastest economic growth rates in the country. People expected him to do the same for the nation. But the major policies he has implemented have turned out be economy-unfriendly. The GST regime subsumed more than a dozen older levies, but it entails online registration, tax filing and other formalities. Most traditional brick-and-mortar traders have yet to master the compliance framework. The multi-tiered GST structure -- 5%, 12%, 18% and 28% bands, with additional levies on items such as cigarettes and luxury cars --- has added to the confusion, triggering demands for a single rate.Demonetization and the introduction of GST have been blamed for an ongoing economic slowdown in India, which was until recently the world's fastest-growing major economy. In the April-June quarter, gross domestic product growth slumped to a year-on-year rate of 5.7%, the lowest in three years.The Modi government "fired two torpedoes [of demonetization and badly-implemented GST]," said Gandhi, whose party forms the largest national opposition to the BJP. "The economy somehow survived the first one, but the second one totally destroyed it." Gandhi's remark is an exaggeration, but there is a kernel of truth to it. Then-RBI Gov. Raghuram Rajan, an acclaimed economist, also cautioned the government about demonetization in February 2016. "Although there might be long-term benefits, I felt the likely short-term economic costs would outweigh them," Rajan recalled in a recently published book.The International Monetary Fund is currently projecting Indian economic growth of 6.7% for the year to March 2018 and 7.4% for the subsequent year -- 0.5 and 0.3 percentage points lower than its May projections, respectively. The IMF cited the "lingering impact" of demonetization and GST for the slower than expected growth.All this creates an impression that Modi's policy gamble failed terribly, deeply denting his image and that of his party. But has that been the case? Not really."Modi has done the right thing," said Uma Shankar, a New Delhi-based auto-rickshaw driver who is a staunch supporter of the prime minister's policies. "He is fighting against black money and corruption, and taking steps to improve [the] condition of the poor. Such bold reforms are bound to cause some disruptions initially, but eventually people like us will benefit." At first glance, this is a strange phenomenon. Modi's critics come mostly from the opposition parties and India's intellectual elite. Meanwhile, despite extreme hardship, the country's poor have cheered demonetization and remained mostly silent on GST, in part because they do not understand the tax regime.Their support is fueled by widespread anger among the "have nots" against the "haves." For nearly 300 million people living in extreme poverty, it was sweet revenge to see the rich minority, loaded with illegal money, running from pillar to post looking for a solution to demonetization. So Modi's star continues to shine, with support from the masses. In March, his Hindu nationalist party achieved a landslide victory in a state election in Uttar Pradesh, home to one-sixth of India's 1.3 billion people. It was backed not only by Hindus, the party's power base, but also by many Muslims. According to a "Mood of the Nation" poll conducted recently by the India Today Group, the ruling BJP-led alliance is supported by 42% of voters, up two percentage points from pre-demonetization levels -- well ahead of the 28% secured by the Congress-led opposition.Charismatic leaderModi is consolidating power within the BJP as well. Before demonetization, 81% of total BJP income came from unknown sources, including rich contributors who avoided tax, compared with 71% for Congress. Modi's move could therefore impact his party's funding adversely, but there has been little criticism of him from colleagues.Mihir Swarup Sharma, a senior fellow of the Observer Research Foundation, an Indian think tank, says it is "clear Modi has found his narrative for [the general election in] 2019: that he is the man who is cleaning up the country, physically, morally and spiritually. By definition, those who oppose him are dirty."Demonetization has further strengthened Modi's political stature. Voters see him as a leader capable of taking risky decisions, and retain faith in his government despite the failure of demonetization to reach its stated goals. The underlying mentality of Indian people is also serving as a tail wind for Modi's muscular leadership style. According to the latest survey by the Pew Research Center, 55% of Indians favor autocracy -- the highest level of support among 38 countries studied -- with 27% "very strongly [backing] a strong leader."Modi's bold policies appear to have an important and notable characteristic: Economic benefits are postponed to the future, but political benefits come to him today.A late October announcement by Arun Jaitley, Modi's finance minister, of a 2.11 trillion rupee recapitalization plan for state-run banks is also seen by political analysts as an aspect of BJP "realpolitik." By helping banks to write off bad debts, the administration is signaling to farmers and small businesses ahead of an important state election in Gujarat that banks will soon have greater capacity to lend.Opposition parties will observe the first anniversary of demonetization as "black day." The government, on the other hand, will mark it as the "anti-black money day." In a way, both are correct. With a political masterstroke, Modi has cemented his political power base, though Asia's third-largest economy is suffering, at least in the short term.Demonetisation was a black day for our economy, democracy, says Manmohan SinghAuthor: Mahesh LangaPublication: The Hindu Date: November 7, 2017URL: "Nowhere in the world any democracy has taken such a coercive step," he tells a group of traders in Ahmedabad. Former Prime Minister Manmohan Singh on Tuesday described November 8, the day demonetisation was announced by Prime Minister Narendra Modi last year, as a “black day for economy and democracy” and said the twin blows of demonetisation and implementation of the Goods and Services Tax (GST) were disastrous for the economy and “broke the back of businesses.”Addressing traders and businessmen in poll-bound Gujarat, Dr. Singh launched a scathing attack on the NDA government and reiterated his statement in Parliament that the note ban was “organised loot and legalised plunder.”“Demonetisation has proved to be mere bluster to reap political dividends while the real offenders have escaped. I repeat, this was organised loot and legalised plunder,” Dr. Singh said, a day before the controversial move’s first anniversary, which the Central government is celebrating as “Anti-Black Money Day.”‘Not the remedy’Acknowledging that the country needs to tackle the menace of black money and tax evasion, he said demonetisation was not the pill to be prescribed for the same.“One must remember that nowhere in the world has any democracy undertaken such a coercive move, withdrawing 86% of legal tender in one single swoop.”Dr. Singh stressed that none of the stated objectives of the currency ban had been achieved and yet the Central government, instead of drawing any lesson from its ‘monumental mistake’, went ahead and implemented GST, which has adversely hit the economy and the growth rate.“This twin blow is a complete disaster for our economy. It has broken the back of small and medium businesses in the country,” he said, citing how the textile industry in Surat and the ceramic plants in Morbi had been affected.Terming the GST a badly designed and hastily implemented tax system, he said the GST — as envisioned by the UPA — was supposed to simplify taxation, with a single tax capped at 18%, to make life easier for businessmen.“The current GST is a great departure from that vision. It has transformed into a complicated mess, with multiple slabs and rates as high as 28%, along with additional cesses,” he said, stressing that the government had ignored the advice of the Opposition parties in Parliament as well as in private consultations.Dr. Singh also charged the Modi government with “tax terrorism” in the name of fighting corruption in the country.“Along with demonetisation, GST has sown a deep-rooted fear of tax terrorism among the business community. At a time when the economy has slowed down considerably, despite favourable global macroeconomic conditions, the fear of tax terrorism has eroded the confidence of businesses to invest.”New low for investmentAccording to him, the growth in private investment is at a 25-year low, which is terrible for the country’s economy.Talking about his government’s achievements, Dr. Singh stressed that 140 million people were lifted out of poverty, a task no other democracy has achieved. He added that had Mr. Modi considered the wisdom of two great Gujaratis, Mahatma Gandhi and Sardar Patel, he would not have asked the RBI Governor to sign on the dotted line for scrapping the currency. Remember that crying retired soldier during demonetization? He has no complaints about itAuthor: OpIndia StaffPublication: Date: November 8, 2017URL: has been exactly one year today since Prime Minister Narendra Modi addressed the nation and announced demonetisation, declaring Rs. 500 and Rs. 1,000 currency notes illegal tenders. Like any reform, this garnered extreme reactions from either side of political spectrum. While most people hailed this as a bold move to curb rampant corruption, the opposition went all guns blazing to term demonetisation biggest blunder and failure of Modi government.Congress, which is on a fast track of losing relevance across the nation, spread lies about the move. Anti corruption crusader Arvind Kejriwal was caught spreading lies to hurt the demonetisation drive.Another good thing demonetisation did was to awaken the humanity in public at large. Everyone who stood in the line kept looking for a sob story to be shared on social media for political brownie points. One such story was of an 80 year old retired army man whose face streaming with tears became the ‘face of demonetisation’. Using this image, the opposition accused the Modi government of being anti-poor and deprived of humanity. The image, as it turns out, was taken out of context and peddled by propagandists to tarnish the image of the government.The image is back in circulation since past few days showing a united face of the Opposition.From Aam Aadmi Party’s Photoshop expert to Congress Vice President Rahul Gandhi, many shared the image. Fortunately, Nand Lal, the former soldier did not have a heart wrenching story about his tearful face. Yes, he stood in line for hours at an SBI branch, and broke down after not getting cash. A year later, it has been revealed that Nand Lal’s crying face was captured when he was pushed by someone and a woman stepped on his foot.This is how a picture clicked out of context became the face of impact of demonetisation. Lal is now happy with demonetisation, and as a staunch nationalist, for having served in the army for 20 years, he says he will abide by any decision of the government. Modi magic holds, people still back demonetisation: ET online surveyAuthor: ET OnlinePublication: The Economic Times Date: November 8, 2017URL: online survey conducted by to mark the anniversary of demonetisation showed significant support for Modi's controversial move.endless criticism of the shock decision to ban high-currency notes. Even though Modi seemed to have gained electorally from his decision, indicating popular support, he has been held responsible by a number of experts for job losses, bringing the GDP down and crippling small businesses with his ill-conceived move. Eminent economists such as former RBI chief Raghuram Rajan too has spoken out against the move. But after a year—enough time to see the results of demonetisation—more people support Modi on demonetisation than those who criticise him. One year of demonetisation : Read how India is holding up in our special coverage An online survey conducted by to mark the anniversary of demonetisation showed significant support for Modi's controversial move. In response to the question, 'Overall, how do you rate demonetisation?', 38% said it was a success. 30% said it had mixed results. Only 32% said it was a failure.A total of over 10,000 ET Online readers had responded to the survey. Only 26% thought demonetisation damaged the economy for longer term. 32% said it made the economy more transparent while 42% said it made the economy more transparent but with some collateral damage. On the impact of demonetisation on jobs—a hot-button issue for Modi critics—only 23% said it had a long-term negative impact on jobs. 45% said it reduced a number of jobs in the short term while 32% said it had no impact on jobs. 77% not seeing any long-term loss of jobs due to demonetisation shows that most of the people don't buy into the argument that demonetisation killed jobs. It's not clear if Modi has kept people by his side with his charismatic rhetoric despite failure of demonetisation or his opponents are plain wrong, but people don't see demonetisation as a decision that wrecked a growing economy. This is more evident from responses to the question, 'If Modi bans Rs 2,000 currency note, how will it impact the economy?'. 56% said it would hit black-money hoarders. 31% said it would bring down economic growth. 13% say it would adversely impact honest businesses. This means if Modi does another round of demonetisation, he is sure to have some popular support. Despite massive criticism of demonetisation and its impact by experts as well as common citizens, Modi has been able to convince people that he took this step in larger public interest and not due to any vested interest. In response to the question, 'What was Modi's real purpose behind demonetisation?', 71% said his purpose was to reduce black money in the economy. 15% said it was to get the votes of the poor while 14% said it was to divert attention from communal issues. The overall picture that the survey presents is this: demonetisation may have led to short-term pain but Modi did it in public interest and it has not ruined the economy. Popular support was evident from post-demonetisation elections in Uttar Pradesh in which Modi helped his party win a landslide victory. If people continue to support Modi on demonetisation, it means critics of demonetisation in the opposition parties are themselves damaging their electoral prospects by barking up the wrong tree.Demonetisation: A Historic SuccessAuthor: Publication: Thetruepicture.inDate: November 7, 2017URL: year back, on 8th November, 2016, Prime Minister Narendra Modi made an appeal to the nation to join him in standing up against the evils of corruption and black money. “There come moments in the history of nations when people feel the urge to be a part of a transformational movement for the country’s progress. Today is the opportunity for 125 crore Indians to join the Mahayagya against corruption, black money, terrorism and fake notes.”With these words, he kick-started the strongest-ever drive to purge black money out of India’s financial veins, allowing fresh blood to surge ahead, for a robust economy.Since then, a lot has been said about his historical move which may have proven to be a politically risky affair, if not for the persistent support of the public. It has been a year now since that bold, historic move. So, what has been achieved in this last one year? What have been the gains? Has the economy benefitted from this disruptive move? Have we, the people, benefitted from it?The True Picture presents a comprehensive analysis of the multiple changes that have taken place since that momentous night of 8th November, 2016. We have categorized these benefits under eleven pillars.Eleven Pillars of Success of DemonetisationPillar One: Black Money UnearthedPillar Two: Financial System CleansedPillar Three: Decline in lending rates by banksPillar Four: Drop in Real Estate PricesPillar Five: Increase in SavingsPillar Six: India becoming a less cash, more Digital EconomyPillar Seven: Greater Formalisation of EconomyPillar Eight: Crippling Blow to Anti-India ForcesPillar Nine: Substantial Fall in Circulation of High Denomination NotesPillar Ten: Detection of Fake Currency NotesPillar Eleven: Increase in Tax CompliancePillar One: Black Money UnearthedWith 99 per cent of the cash returning to the banking system, it has become exceedingly easier to detect unaccounted funds and black money. Some of the uninformed commentary has portrayed that as a demonetisation failure. However, the entire exercise caused unaccounted money to leave a trail, making it possible for the Government to uncover black money hoarders.Crucial Outcomes? Using advance data analytics, 17.73 lakh suspicious cases were identified wherein the cash transaction did not match the tax profile of the PAN holders.? A total of Rs 3.68 lakh crore in 23.22 lakh bank accounts are under investigation.? Other than that, additional 4.7 lakh cash transactions have been reported as suspicious by Banks and financial institutions.? A total sum of Rs 16,000 crore in high demonetized notes did not come back into the banking system.? In a startling fact, about 1.5 lakh (1,48,165) people deposited a total of around 5 lakh crore (Rs 4,92,207 crore) which is almost 1/3rd of total currency deposited, with an average deposit size of Rs 3.32 crore. Thus 0.00011% of India’s population deposited almost 33% of the total cash in the country. These accounts now have some audit trail and data analytics is being used to analyse many of these transactions.TakeawayAfter years of an almost free rein to black money hoarders due to lack of intelligence, demonetisation has allowed crucial insights to be gathered into suspicious transactions and deposits with the return of high denomination notes in the formal system. It has not only unearthed high amounts of black money but has paved the way for the creation of a clean economy in the longer run.Pillar Two: Financial System CleansedAs mentioned by Prime Minister Narendra Modi, closure of even one company used to lead to people coming out in streets in protest. But a crackdown on more than 2 lakh shell companies did not cause an outcry from any quarter. It shows that the companies were bogus and were being operated for the purpose of tax evasion. In fact, many of these companies had as many as 100 bank accounts each, in their name.One of the companies was found to hold as many as 2,134 bank accounts. In another startling instance, a company with a meagre balance of Rs. 63.60 lakh in all accounts put together on the day demonetisation was announced, was found to be depositing Rs. 18.23 crore while withdrawing Rs. 18.68 crore in the immediate days post demonetisation, while a company with a negative balance on 8th November 2016, came under the radar for depositing and withdrawing a sum of Rs, 2,484 crore post demonetisation.Further, based on the data received from banks, it was revealed that about 58,000 bank accounts of 35,000 companies deposited and withdrew Rs. 17,000 Crore post-demonetisation. The above examples bring forth the modus operandi of some of the shell companies caught during the investigation. The wide-scale purging of shell companies is a proof that demonetisation was an earnest step taken in the right direction to cleanse India’s financial system of its deep-rooted menace.The numbers show that the implications of demonetisation were huge, considering that it pushed the colossal financial system towards transparency, in one big sweep.Action Taken ? Rs 29,213 crore worth of undisclosed income was identified. Subsequent investigation, searches and raids by enforcement agencies led to admission of the huge sum back in the public coffers.? Till now, 2.24 lakh shell companies meant for money laundering purpose have come under the axe.? Benami Assets worth Rs 1626 crore were also seized and attached.TakeawayThe colossal web of shell companies, operating since ages, and a number of hawala transactions were laid bare. In order to manage black money, each company operated hundreds of bank accounts but remained under the radar. They would have continued to operate undetected and would have even expanded, if not for demonetisation.Pillar Three: Decline in lending rates by banksAs per RBI’s Annual Report, the Marginal Cost of Lending Rate (MCLR) declined from 9.3% in October 2016 to 8.5% in June 2017. As depicted in the graph flow, there is significant decline in the interest rates in the post demonetisation period: In addition, interest on home loans, auto loans and education loans have also come down, thus ensuring affordable credit and considerable improvement in the standard of living. With real estate prices falling, government introducing interest subvention scheme under Pradhan Mantri Awas Yojana and EMIs decreasing due to rate cuts, home buyers are enjoying a three-way bonanza.TakeawayPost demonetisation, the increased inflow of deposits in the banks led to a sharp fall in the lending rate by 100 basis points. Loans, including home loans, became cheaper, bringing relief to the common man. With more money in hand, the spectrum of choices has widened, thus, improving quality of life of a large section of society.Pillar Four: Drop in Real Estate PricesThe Economic Survey 2016-17, noted that the weighted average price of real estate in eight major cities fell after November 8, 2016. Elucidating on the impact of reduction in property prices, the report said:“An equilibrium reduction in real estate prices is desirable as it will lead to affordable housing for the middle class, and facilitate labour mobility across India currently impeded by high and unaffordable rents.”Real estate sector has been notorious for parking of black money, owing to strong inclination for cash transactions in buying and selling of property. Post demonetisation, it has got trickier to invest unaccounted money in real estate, leading to significant price correction.TakeawayWith real estate prices coming down in many places and stabilizing in most other markets, due to reduction in cash transactions and enhanced transparency post demonetisation, owning a home is no longer a distant dream for the middle class.Pillar Five: Increase in SavingsAs per the RBI Annual Report, there has been a rising trend in the gross financial savings in term of Deposits, Share and Debentures, Insurance funds and Provident & Pension Funds from 9 to 13.3 per cent of Gross National Domestic Income (GNDI) in 2016-17, which is an increase of approximately 47.8% as percentage of GNDI.In addition, there has been a steady rise in mutual fund investment, with the market value recording an all-time high of more than by Rs 17.5 trillion by end of March 2017. By end of September 2017, assets under management by mutual funds registered a further high of more than Rs 20.4 trillion, as depicted in the graph below:As can be seen from the graph above, the slope of the graph has increased significantly post 8th November, 2016. Demonetisation provided necessary encouragement to households to park their savings in financial assets. RBI estimates show that financial savings of households, which were stagnant around 10 per cent of GNDI for 5 years, took a 1 per cent jump to reach 11.8 per cent, in just one year, post demonetisation.Considering shares of investment in financial assets is higher in developed economies, it is a sign of the Indian economy maturing.TakeawayWith the increase in household financial savings, one is well-equipped to absorb any shocks in the future, leading to enhanced financial security. Moreover, enhanced institutional savings is a positive trend towards a stronger and more resilient economy.Pillar Six: India becoming a less cash, more Digital EconomyOne of the important benefits of demonetisation has been a remarkable behavioral shift towards digital payments. Since demonetisation, the number of digital transactions have registered an increase of 58 per cent, with the number of digital transactions recorded at 138 crore in August 2017, as against 87 crore in the same month of the previous year.An increase in digital transactions will help sustain transparency in the longer run. It has been noted the world over, a higher percentage of cash in circulation results in higher incidence of black money in the economy. A less cash regime is essential for creating a cleaner economy, eventually leading to rationalisation of prices of various goods and services as well as ensuring affordable housing, medical treatment and other such essential services.A look at the graphs below, would help us understand the positive trend in digital transactions post demonetisation:Debit Card at POSIn the graph below, the trend has almost plateaued since the starting of the financial year 2016. After demonetisation, debit card transactions at point of sale counters register a steep growth in terms of volume. It touches a record high of 41.55 crores, subsequently, again stabilizing as we move further in 2017.The critical point to note, here, is the significant shift to a higher base pre- and post-demonetisation. Without the intervention announced on 8th Nov 2016, the number of people enrolled in the digital project would have continued at a sluggish pace.Let us look at the graph below which is about change in the value of transactions – that is how much money people have spent on various point of sale counters.The graph below shows a similar trend, plateauing pre-demonetisation and then registering swift strides after November, 2016.If we look closely and compare the above two graphs before and after demonetisation, the rise in the number of debit card transactions was remarkably high but the upward slope in the value of transactions is less steep. This suggests that the horizontal base of the debit card transactions has widened to include more number of people undertaking small transactions.TakeawayMore than credit cards it is debit card transactions that point to the wider acceptability of digital payments as a habit. Jan Dhan accounts have put a debit card in almost every adult hand – 22.9 Cr RuPay cards as per latest available data. Demonetisation has played an instrumental role in expanding the reach of the digital mode of payments. A spike in volume and reasonable rise in value of transactions show more and more people transacting digitally to make small transactions, thus indicating enlargement of the base to include users from lower income groups. An example of how a large number of people are continuing to become part of the less cash, more digital mainstream can be assessed form just one example. Total transactions using the BHIM UPI app have increased from 16.8 million in August 2017 to 76.96 Million in October 2017 – a jump of almost 4.5 times in just three months.Mobile Wallets The following two graphs denote the increase in the mobile mode of payment post demonetisation.If we look at the above graphs, transactions made through mobile wallets have increased massively both in value and volume post demonetisation. There is a remarkable shift in base after November 2016, indicating extensive use of mobile wallets in making digital payments.TakeawayA huge revolution is getting unleashed at the bottom of the pyramid, with just a click of a button on one’s mobile. Demonetisation has helped fasten the pace of this technological change.Pillar Seven: Greater Formalisation of EconomyInclusion of the poor in the formal economy has a number of positive impacts, ranging from enhanced social security to protection of their rights. Demonetisation has given massive push towards formalisation of economy.Take, for instance, employee registrations under Employees’ State Insurance Corporation. Pre-demonetisation the increase in employee registration with the ESIC was taking place at a languid pace. However, in the subsequent months of demonetisation, number of registration recorded a steep rise, as seen in the graph below:In a bid to enable cashless transaction of wages, Payment of Wages Act was amended, leading to opening of 50 lakh new bank accounts and direct payment in bank accounts of workers.TakeawayDemonetisation has ensured more number of unorganised workers are brought into the formal economy and provided with social security net and various health benefits. This move has ensured better quality of living for poor and empowered them by removing the middlemen.Pillar Eight: Crippling Blow to Anti-India ForcesWith all access to funds choked, demonetisation struck a severe blow at the nefarious activities of terrorists and naxalites in the country.Stone-pelting incidents were drastically reduced by 75 per cent from the previous year. Payments to stone-pelters were significantly interrupted due to shortage of cash, impacting militant operations in the valley severely. As per data available, number of stone pelting incidents came down from 1071 in period 1st Nov, 2015 – 31st Oct, 2016 to 831 in period 1st Nov 2016 – 15th Oct 2017.Similarly, incidents of left-wing extremism decreased by more than 20 per cent as a result of demonetisation. The data shows decline in incidents of LWE from 6687(Nov’15 to Sept’16) to 5538(Nov’16-Sept’17).TakeawayDemonetisation led to clamping down on funds of disruptive forces who were financing India’s destruction with black money obtained through illegal means. Both militants in Kashmir and left-wing extremists were caught off guard and faced heavy fire from our armed forces, who made most of the opportunity created by the effect of demonetisation.Pillar Nine: Substantial Fall in Circulation of High Denomination NotesIn an interview with Aaj Tak during “Mumbai Manthan”, former Chairman of the State Bank of India Arundhati Bhattacharya put forth interesting bits of facts on consistent drop in percentage of small denomination notes in total cash circulation in the economy. In 2006, the percentage of SDN was at 56 per cent which fell to 28 per cent in 2009. In 2016, the percentage figure of SDN stood at mere 14 per cent.As the following graph shows, post demonetisation, there is reversal of trend with SDN steadily increasing to 27 per cent.On the other hand, there is a steep fall in the circulation of high denomination notes (HDN) post demonetisation, as seen in the graph below:The estimated value of HDN at the end of September 2017 stands at approx Rs 12 lakh crore. In a scenario where there was no demonetisation the value of these notes would have been around Rs 18 lakh crore. Thus, the HDN have been effectively brought down by about 6 lakh crores – which is almost 50 per cent of the current value of HDN in circulation.TakeawayThere is a proven correlation between high denomination notes in circulation and the incidence of corruption. Therefore, it was crucial that the rising trend of HDN in circulation be arrested and reversed as the demonetisation has shown to have done.Pillar Ten: Detection of Fake Currency NotesPresence of counterfeit currency in the system leads to artificial increase in money supply, causing inflationary pressure. It is also associated with financing of terror activities, smuggling, human trafficking and other such crimes and debauchery.The counterfeit data given in RBI’s annual report shows detection of 762 thousand fake currency notes, an increase of 20% since last financial year. Among these, majority of the counterfeit notes have been of Rs 500 (MG series) and Rs 1000, 41% and 33 % respectively.There has been no case of detection of high quality fake currency notes post demonetisation.TakeawayThe wide scale menace of circulation of fake currency notes has been curbed to a large extent due to demonetisation.Pillar Eleven: Increase in Tax Compliance Demonetisation has led to significant widening of the tax base with a record increase of 26.6 per cent in number of new tax prayers from 66.53 lakh in 2015-16 to 84.21 lakh in 2016-17. In addition, the number of e-returns filed increased by 27.95% from 2.35 in 2016-17 crore to 3.01 crore in 2017-18.TakeawaySignificant rise in tax compliance has led to higher government revenues which would translate into higher spending on public welfare and infrastructure creation as well as widened tax base, ensuring an equitable taxation regime.ConclusionThere were many unforeseen benefits of demonetisation as well. For example, on average, revenues of urban local bodies across the country increased almost 3 times after demonetisation, compared to the corresponding period of the previous year. Revenues of ULBs in Uttar Pradesh increased 4 times, revenues of ULBs in Madhya Pradesh and Gujarat increased almost 5 times.All of the above gains from demonetisation have been significant and as some of the data shows – identifying and annulling shell companies, collection of black money, permanently identifying accounts used to launder money and the historic shift in base of number of people using digital form of payments – demonetisation, with the hindsight of one year, can clearly be counted as a major success of the Narendra Modi government.Surat’s diamond industry regains shine after demonetisation blipAuthor: Maulik PathakPublication: Date: November 8, 2017URL: did deal a temporary setback to some diamond polishing units in Surat, but experts say the industry has regained lost ground The country’s diamond capital Surat continues to sparkle a year after the government’s demonetisation move.Demonetisation did deal a temporary setback to some small and medium units in the city, where more than 85% of the world’s rough diamonds are processed. However, industry experts say Surat quickly regained lost ground. Import of rough diamonds in 2016-17 was at $17.08 billion, against $14.04 billion in 2015-16, shows data from the Gems and Jewellery Export Promotion Council (GJEPC), supported by the Union commerce ministry. In fact, the imports in terms of value have been the highest in the last 10 years, according GJEPC. Exports of cut and polished diamonds in 2016-17 have also been higher—at $22.78 billion—against $20.66 billion a year ago.One of the main reasons Surat’s diamond industry survived the disruption is that about 95% of its clients are international; hence, cashless transactions made things much easier for them, said Laljibhai Patel, chairman of Dharmanandan Diamonds Pvt. Ltd. The company, with a turnover of about Rs6,000 crore, employs close to 7,000 people. Patel, who shot to fame after he bought a monogrammed suit which Prime Minister Narendra Modi wore during his meeting with US President Barack Obama in 2015 at an auction, said his company’s income increased after Demonetisation as many illegal businesses were forced to close down and their work was passed on to reputed firms like his. About 35-40% of the rough diamonds processed and polished in Surat are imported by clients and sightholders of global diamond miners including De Beers, Alrosa and Rio Tinto. The rest of the roughs are imported directly from Antwerp, Dubai and African nations.The 8 November 2016 announcement by Prime Minister Modi came at a time when the Surat diamond industry was closed for Diwali. The industry, which was facing a slowdown at that time due to subdued overseas demand, extended the holidays by about 15 days due to an acute cash crunch. Surat is home to about 4,500 diamond processing units that employ about 500,000 workers. “The small units faced issues of payments to workers due to cash crunch. This was also due to the fact that there was no proper infrastructure backup for cashless transactions and the worst affected were the diamond units in rural areas of Saurashtra,” according to Dinesh Navadia, regional chairman, GJEPC. While about a hundred-odd firms hold over 50% of the market share and their businesses remained largely unaffected, small units dealing in cash for payment to workers had run into trouble. According to Navadia, while many small units could not make timely payments to diamond workers (also called ratnakalakars), there was no production loss. On the brighter side, he said that many small firms that were earlier taking orders on others’ books now started their own companies. He said the diamond industry has since been affected by the Goods and Services Tax (GST). The main issue was the 3% GST on business to business trade. Diamond baron Savjibhai Dholakia, known for giving out cars and flats to employees as Diwali bonuses, said there was some initial impact in the overall diamond market due to Demonetisation. “For about a couple of months, there was some impact in the market, but overall business has been very good. Our company’s business has gone up since Demonetisation as digital transactions have made things smoother for us,” said Dholakia, chairman of Hare Krishna Exports. A diamond worker earns Rs10,000-50,000 a month, and at least 80% of this workforce is employed by the big companies.“About three thousand to four thousand workers did get affected by Demonetisation in the first two or three months. Some of them, who wanted to be paid in cash, even turned to other professions. But that is all a thing of the past now. The good thing is that all ratnakalakars today get PF (provident fund) and other benefits like a regular employee which many were not getting earlier,” said Jaysukh Gajera, president of Ratnakalakar Sangh, a union of diamond workers in Surat. Meanwhile, Surat’s scattered and unorganized diamond industry is planning to move into a common address, as construction work on the Surat Diamond Bourse (SDB), an international diamond exchange, is underway. SDB is a company floated by diamond barons who plan to invest Rs1.25 trillion to establish it in the next four years, according to the SDB website. After commissioning, SDB would generate additional business worth Rs90,000 crore annually, it claims. To be spread across 100 acres with 15 million square feet (sq. ft) of built-up area, SDB will house 10,000 offices for national and international traders. The purpose of the project is to draw buyers from across the world to Surat to plan and execute business transactions at one place. SDB is set to rival Bharat Diamond Bourse, located in the Bandra-Kurla Complex, Mumbai, spread over 20 acres with a total constructed area of 2 million square feet and 2,500 offices of various sizes. Discordant notes: a year after demonetisationAuthor: Puja MehraPublication: The Hindu Date: November 8, 2017URL: year after demonetisation, its effects have still not been quantified The National Democratic Alliance government is celebrating November 8, the anniversary of demonetisation, as Anti-Black Money Day. Cabinet Ministers will disperse to State capitals where they will elaborate on demonetisation’s numerous putative successes. The Prime Minister may be in Gujarat, which goes to polls next month. All day there is bound to be much speech-making. Evidence and analysis that tax officials have compiled is likely to be taken on board to add substance to political rhetoric. The bandobast details, released to the media in advance, suggest that the planning has been meticulous.In the days after more than 80% of the cash in circulation was removed via demonetisation a year ago, chiefly in the quest to stifle the black economy, the discourse turned so extreme and divisive, the goals were sought to be shifted so fast, that getting a fix on demonetisation became tough. So the anniversary is a good occasion to revisit the question: has the note-ban proved to be an effective policy tool to attack the black economy and control corruption? The flow of information recently from the Reserve Bank of India (RBI) makes some analysis possible.A few good cluesBoth former RBI Governor Raghuram Rajan and Deputy Governor R. Gandhi have, following their departures from the central bank, made a few things clear. One, the central bank’s recommendation to the government was that demonetisation would prove to be a weak weapon in the war on black money, and that superior policy alternatives were available for achieving the objective. Second, the government pressed ahead with demonetisation, overruling this expert advice.It appears the government was in fact out of its depth on the subject. The results from its counting of the returned notes show that the RBI did have a point. With 99% of the demonetised ?500 and ?1,000 notes back in the banking system, little of the stock of the black money in the country was evidently extinguished. Which means it was successfully converted into other forms, thereby delaying, if not altogether escaping, detection.Now, the tax authorities say that they are on the trail of the bank deposits made after November 8, 2016, and are investigating suspicious accounts.The amounts under investigation so far, however, constitute a drop in the ocean. Yes, demonetisation delivered leads, but establishing criminal evasion and ensuring that the corrupt are punished is a monumental effort. Plus, the tax department’s past record of proving evasion is unlikely to be giving offenders nightmares. The faulty system is skewed in their favour. Procedures are time-consuming; there are limitations of administrative and judicial capacity, handicaps the government seems to be grossly underestimating. It could well be years before any serious large-scale clean-up is accomplished, representing at best a promise of a deferred payback from demonetisation.Another challenge is that of measurement. Although the chief goal of demonetisation was to place a check on black money, the central theme of the Prime Minister’s policy agenda, the government has no official estimate of the size of the black economy. Unofficial estimates range from a third of the white economy to as much as the country’s GDP. Without an official estimate, it is impossible to meaningfully evaluate by how much demonetisation successfully down-sized the black economy, if at all.Some contradictionsThe agenda itself is fraught with contradictions. For weeks now, the rules requiring purchase of gold and diamonds (for ?2 lakh or less) to be linked to PAN (Permanent Account Number) are in suspension. Conversion of black money into gold and diamonds has gone on unencumbered. The window opened when the rules were taken down for a technical reason — they had to be reworded. No one knows how long this window will remain open.A year after demonetisation was announced, the questions seem to outnumber the answers. Electorally, voters may judge the policy in terms of intent rather than outcomes. Economists may quibble over the undue costs owing to the debilitating impact on the momentum of economic growth, even as damage to the vulnerable informal sectors remains unmeasured. The government’s spokespersons may extol the shrinking cash economy and growing digitisation. But an assessment of demonetisation on Anti-Black Money Day can be complete only if its deliverables on the state of corruption and the corrupt are established.Missing from the jumble of successes, data and analyses to be exhibited today will be conclusive proof of reduced corruption with evidence-backed answers to questions like: Are fewer bribes being paid and demanded than a year ago? Is corruption down? Are Indians evading less tax post-demonetisation? It would seem India is all set to celebrate what has probably not — can possibly not — actually be measured.- Puja Mehra is a Delhi-based journalistLove It Or Hate It, DeMo Changed The Rules Of The Money GameAuthor: R Jagannathan Publication: Date: November 8, 2017URL: primary success of DeMo is in the shock value itself, not its aftermath.Here’s an attempt to weigh the pros and cons in as neutral a fashion as possible.Thousands of words and air minutes will have been used up over the last few days trying to prove demonetisation (DeMo) a success or failure. The final word, unfortunately, is probably never going to be said with certainty. For the simple reason that everyone uses his or her own yardstick and bias to make a judgment call. Moreover, with the goods and services tax (GST) following DeMo in short measure, we can never know whether the downturn attributed to the sudden withdrawal of the old Rs 500 and Rs 1,000 notes on 8 November had a longer negative effect than presumed. We can’t now easily apportion the blame for the recent low Gross Domestic Product (GDP) print of 5.7 per cent in the June quarter between DeMo and GST.But the one thing that can be said about DeMo is that it woke everyone up. Nothing else would have announced to the world with such finality that black money isn’t kosher. Not least to Indians who have, so far, had a wink-and-a-nod relationship with the colour of the money they use. The primary success of DeMo is thus in the shock value itself, not its aftermath.But we can’t run away from more nuanced judgments, and so here’s an attempt to weigh the pros and cons in as neutral a fashion as possible.First, let’s be clear. The short-term impact has been negative. We have seen GDP growth down to 5.7 per cent in the quarter ending June, and CMIE estimates that 1.5 million jobs could have been lost due to DeMo in the January-April period. But this short-term assessment must be balanced by two facts: the downtrend began well before DeMo, and in June industry was destocking due to the oncoming implementation of GST from 1 July. The two shocks telescoped into one another, making it difficult to say the downturn was all DeMo’s doing.Second, DeMo impacted citizen psychology in two ways – one positive, one negative. When cash turned scarce in the first four months of DeMo, the average Indian’s psychology of shortage was triggered. Thus, consumers chose to save rather than spend, since there was concern that things may get worse. And even when cash returned, the normal Indian tendency to hoard cash easily returned. Indians have probably restocked on cash, thus making it seem that cash is still king. However, on the positive side, it is clear that a subtle message has gone through: using less cash is a sign of a clear conscience on the colour of your money. Today, when anyone asks for cash for higher-value transactions, we know what it is for. Another positive: when we hoard cash, the savings rate goes up and pushes interest yields down. This has had the upside of routing financial savings to financial assets, including stocks. What India lost in terms of GDP, it has gained in terms of asset values.Third, politically, DeMo benefited the Modi government, since citizens (and voters in UP, especially) saw it as an honest effort to attack big black money holders. This is why despite huge personal inconvenience and loss of incomes and business opportunities, DeMo was largely accepted as necessary. But one year down the line, as the economy still struggles to revive, people may be reassessing their earlier willingness to take the intent behind DeMo at face value. We will get an inkling about that in the Gujarat elections, where DeMo and GST have had the maximum impact.Fourth, it is also clear that DeMo failed in its short-term political-economy objective of trapping black money. Since 99 percent of the currency outstanding came back to the banking system, there was no easy bonanza available to the government by cancelling the legal status of the demonetised currency and seeking a fat dividend from the Reserve Bank as its liabilities came down. Figures of Rs 2-3 lakh crore being trapped outside banks proved to be a pipe dream. But, on the upside, the chances are no one will trust cash all that much as a store of black wealth. Belief in cash has taken a knock, not so much in terms of everyday transactions, but as a commodity hoardable in sackfuls.Fifth, it is possible to claim two medium to long-term benefits from DeMo – a broader tax base, and a faster shift to digital cash. There is some evidence that both these aims will prove right. The government claimed that more taxpayers are now filing returns, and advance tax collections for fiscal 2017-18 also look encouraging. But the scale of increase in both cases is not that significant for the taxmen to do cartwheels. The reality is that even GST could have caused a direct tax spike, since small businesses that report higher sales will also have to report higher incomes. So the rise in direct taxes may also be linked to a spike in higher reported sales and GST payments.Sixth, perhaps the biggest success of DeMo will be in the greater digitisation of the economy. While skeptics abound on whether the shift to non-cash payments is permanent, now that cash is no longer in short supply, the ground reality has changed post-DeMo, post-GST. The “nudge” provided by cash shortage was one thing, but post-DeMo banks are feverishly moving to digital platforms with a vengeance, giving lower priority to branches and ATMs in future. With the unified payments interface (UPI, including the Bhim app) now about to get a steroid boost and scan-and-pay systems to be made interoperable a few months down the line, payment systems will digitise faster than ever. GST will make formal businesses less willing to pay or accept cash, thus enhancing non-cash modes of transacting. With government payments – from MGNREGA to subsidies – shifting to direct cash payments into bank accounts, the predominantly cash-based economy is going to shrink whether we like it or not. We are on the cusp of a major explosion in digital and non-cash payments, and we can expect a hockey-stick pattern to growth. We should not be fooled by the fact that currently the data does not reveal this kind of jump. It is likely to happen sooner than later.Just as no one in 2003 could predict that India would hit some billion-and-odd mobile phone users in a decade, we are at the same inflexion point in non-cash transactions.Love it or hate it, DeMo changed the rules of the game, and therein lies its essential success even as it dragged the economy down. Talk Point: Demonetisation hasn’t even attacked 1 per cent of the black moneyAuthor: Arun KumarPublication: Theprint.inDate: Novemmber 8, 2017URL: a year ago, Prime Minister Narendra Modi announced an ambitious but enormously disruptive decision to invalidate Rs 1000 and Rs 500 notes, ostensibly to combat corruption, counterfeiting and terror funding. Demonetisation triggered public panic, slowed manufacturing, sent workers home and affected economic growth.The RBI said in August that 99 per cent of the cash was returned. But the move forced citizens to adopt digitisation at an unprecedented pace, in a country where 80 per cent of transactions were conducted in cash. And it helped the BJP win the election in UP.What has India gained and lost from demonetisation and what are the lessons learnt?Demonetisation was expected to tackle black economy. But the black economy has two aspects. One, it is the black wealth that gets stocked in 40-50 years, and second is the black income that is generated every year. The black wealth exists hardly 1 per cent in cash, and that too has come back. So, demonetisation hasn’t even attacked 1 per cent of the black money. What have we gained from demonetisation?We have gained nothing from demonetisation. It couldn’t manage to curb black money, it couldn’t manage to counter terrorism, and it couldn’t manage to stop counterfeit currency being circulated. Digitisation was happening automatically in the formal sector. It would have happened without demonetisation too. But for that we need financial literacy, better infrastructure, readily available machines and so on.What have we lost from it?It is the unorganised sector that provides employment to 93 per cent of people and contributes to 45 per cent of the output. If you see the various private studies conducted, we experienced a negative growth rate in that period. We saw a dip in the GDP and I don’t believe that the economy is even growing at 5 per cent. Apart from that, there are social costs that people bore. Marriages got postponed, people lost jobs so their children couldn’t go to schools, among others. It also hit the institutions as the credibility of the RBI and the rupee came into question. The Prime Minister didn’t reply in the Rajya Sabha and it has long-term effects on democracy. Moreover, with declining capacity utilisation, investment fell and in the long run, the country is caught in a recessionary situation. What are the lessons learnt?We learn that black money doesn’t mean cash. There is no one-shot solution to the problem of black economy. If black money is to be targeted, then we should attack its generation. If demonetisation was to be done, then we should learn from Europe where they had a pre-prepared demonetisation process and the system was ready.- Arun Kumar is a retired professor at JNU Talk Point: One should not hyper-analyse a particular shot fired in a warAuthor: T.S.R. SubramanianPublication: Theprint.inDate: November 8, 2017URL: a year ago, Prime Minister Narendra Modi announced an ambitious but enormously disruptive decision to invalidate Rs 1000 and Rs 500 notes, ostensibly to combat corruption, counterfeiting and terror funding. Demonetisation triggered public panic, slowed manufacturing, sent workers home and affected economic growth.The RBI said in August that 99 per cent of the cash was returned. But the move forced citizens to adopt digitisation at an unprecedented pace, in a country where 80 per cent of transactions were conducted in cash. And it helped the BJP win the election in UP.What has India gained and lost from demonetisation and what are the lessons learnt?Demonetisation was the first major formal recognition by the Government of India that the issue of black money needs to be tackled decisively, and that no country can move forward with a parallel economy. It was not meant to be a stand-alone project or programme – it was the first step towards addressing the issue, to be followed by diverse measures over time that would transform the Indian economy, society, and the quality of our democracy.In this country, sadly, life is cheap. Children are allowed to die like flies in hospitals. Citizens travel to Darbhanga packed like sardines for Chhath Puja. A farmer spends his days sweating in the 40-plus degrees Celsius sun for a monthly income of just Rs 3,000. This is a country where the top 0.1 per cent has more income than the bottom 50 per cent. Thus, it would be trivial to compare the hardship imposed by demonetisation with the immense medium/long-term benefits it could engender.The immediate political (incidental or main) objective at that time may or may not have been the neutralisation of Mayawati, in the need for victory in UP, post the debacle the BJP faced in Bihar. This point is not relevant.The Indian economy and society has to transform rapidly, if it has to survive. GST (with all its immature and undue-haste introduction), along with Digital India (broadband in 250,000 panchayats), focus on informal sector, education, health – this is the recipe which will undo the disastrous management of the country over the past 70 years. The unfolding package has to be seen in totality.One should not hyper-analyse a particular shot fired in a war. Demonetisation was the first shot, and a wake-up call for transformation. It remains to be seen if our politics will allow the country a chance.- T.S.R. Subramanian was a former Cabinet Secretary Demonetisation - What did we gain?Author: Publication: Thinkers-pad.blogspot.inDate: November 8, 2017URL: 8th November 2016 when Prime Minister Narendra Modi announced Demonetisation, some of us followed it up with long telephone calls, running upto midnight, calling this a bold move and a masterstroke from Narendra Modi. Not for a second was there a doubt about this. We thought it was a fantastic move which was very much needed in this country. And this was the very first reaction. Curiosity was building up since evening when a photograph of Prime Minister with Army and Navy Chiefs, Vice Chief of Air Staff & National Security Advisor, was released by the PMO's twitter handle. This was followed by a sudden meeting with the President of India and then with the Cabinet. Then came announcement of PM's address to the nation. We all anticipated something big is going to come up. But none thought of Demonetisation.Over the next few days, as execution of Demonetisation came into action, I began to reflect on the gap in massive implication of this policy and totally lackadaisical nature of its execution. I thought Prime Minister was just making a public comment that this impending exercise was not known to anyone and that in reality all Banking Systems, Vigilance bodies etc would be ready to get the program rolling. But unfortunately, Prime Minister was speaking the truth. There were indeed only a handful of people who were in the know of this pending move.But the great thing about Modi Sarkaar has been its ability to work in a dynamic response-based environment. As feedback comes the Govt makes changes to its stance and thereby manages to calibrate the effect of any weaknesses in the original move.A great effect of Demonetisation for me, personally, was that I started to look into RBI Data again, after a gap of 18years. As an Economics Graduate, and a very active one at that I used to run through RBI Bulletins and Occasional Papers on various aspects, in those days effect of Deregulation of Indian Economy was the key interest.I have watched Demonetisation quite closely. Not only did I spend time crunching RBI’s own data, I also maintained contact with Govt Employees, CAs, Businesspersons from MSME segment and other professionals whose industries are given to large-scale cash-based corruption. And as we complete one year of Demonetisation and as everyone will bring their own piece of review, I thought it would be good if I too used the occasion to express my opinion on the subject. I have planned to do a series of blogs to review this massive exercise. Lets go straight to the benefit of demonetisation. This is what everyone is more eager to know. We’ll discuss other issues later. Biggest gain of Demonetisation Forget data. Forget the data on achievement of 5 goals given by Modi Sarkaar for Demonetisation. People can always argue against the data based on their bias. The biggest gain of Demonetisation cannot be measured in numbers. Many people are bruised by demonetisation, some may be fatally injured as well. But yet BJP is winning elections, people are backing Govt. and the data cannot tell you why this is so. Look beyond data.The biggest gain of Demonetisation is mindset change. The fear of long arm of law. The difficulty a willing leadership can put defaulters into. The length that the Govt can go to. Today no tax evader, no corrupt babu is certain about the extent to which the Govt will go to punish the offenders. People may still be indulging in these offences, but the restlessness has increased and then number of people who have the heart to tolerate such restless are lower. Today, if Prime Minister's address to the nation is announced, people begin to worry what new anti-corruption measure are going to get announced. Tells you a lot about mindset change.People respect the Govt., because they believe Govt. has done what it was always supposed to do. Give a hard time to those who indulge in Economic Offences. You’ll be surprised to know that even the offenders respect it. Many indulged in it because that is what the environment prevailing prior to Demonetisation demanded of them. But now there is a promise of transparency, accountability, level playing field for all the players in the business. Narendra Modi has, in a single stroke, exhibited what a Prime Minister’s power is. Prime Minister never needed new Laws. Prime Minister only needed a Spine. People are in difficulty, they will complain about it, but that is only to force the course correction on execution by inviting the attention of the Govt. Even the mother needs the child to tell her that he is hungry.And let me tell you one thing, this is now a personal relationship between Narendra Modi and the people. It is THIS man in the chair of Prime Minister who has shown the Spine. And hence, it is THIS man that people will go the extra mile for. Any lesser mortal will fail to elicit similar response.India’s Reputation for Clean Business InternationallyThe world respects India a lot more today and Govt of India even more. Many Govts worldwide have considered Demonetisation but none have guts. Nobody thought their citizens will cooperate and everyone worried about elections. We should remember that Venezuela declared Demonetisation in the same period as India and the backlash was so heavy that they had retract the policy.In India, not only did the public cooperate, but BJP went on the win UP Assembly Election. It is symbolic of the level of faith Prime Minister Narendra Modi enjoys in Indian Democracy. Leaders world over know the net worth of their popularity in their country’s democracy and, therefore, understand the position of strength from which Narendra Modi leads India internationally. Moreover, to international businessmen, the intent of the Govt has become clear. They know that this Govt means business. The gain from this, is going to be tremendous. Diplomatically, National Security wise, and International Businesswise, expect a major jump over the coming few years. After BJP wins 2019 General Elections, the position of Narendra Modi will be bolstered so strongly, that I expect Donald Trump or Vladimir Putin or Xi Jinping to show tremendous respect to Indian Prime Minister and change the game on the negotiating tables worldwide.Other GainsDigital TransactionsDigital Transactions in the form of IMPS transactions has received a very solid push from Demonetisation. It created the correct atmosphere for its launch and delivered the objective flawlessly.IMPS stood at Rs.32,500cr for the month of November 2016. It has reached Rs.75,000cr for the month of October 2017. That is a whopping 130% jump in monthly transactions alone. For the year 2016-17, IMPS data stood at Rs.4.11 Lakh Crore. For the year 2017-18, it already stands at Rs. 4.47 Lakh Crore upto Oct 31, 2017 and I estimate it should clock another Rs.3.5 Lakh Crore, at least, in the remaining 5 months of 2017-18. That will be a huge 94% jump year on year. Tax BaseNotwithstanding Govt claims on current increase in Tax Base, the mere Bank Deposits made at the time of Demonetisation are bound to increase the Tax Base of India. That number may be minuscule but the Tax Base in India has been so minuscule for years that this will have significant effect in Tax Collection in near future. Also, the fear factor, that the Govt is strict, is going to ensure not only higher compliance from existing base, but submission of complete tax evaders to the Taxation system and therefore cause an increase in Tax Base. But yet, in terms of data at least, I don’t want to rely on any numbers at this stage. Common sense and Govt action clearly indicate this push.Having said that, Govt has to do lot more to increase tax base. But we leave that discussion for the Policy Pundits.ConclusionDemonetisation was surely not an exercise for the heck of it. A massive exercise can have massive failures too. But it can have massive gains as well. Numbers give a fleeting image of things. They are not going to tell you much. Read people’s mind, their attitude and the change in behavior.In the next piece, we shall discuss Impact on Businesses. India has changed, thanks to demonetisationAuthor: T.V.Mohandas PaiPublication: Theweek.inDate: November 7, 2017URL: was undoubtedly a big shock and a surprise. Suddenly 86 per cent of our currency ceased to be legal tender, a development never witnessed before in any modern economy. The reason was to drive black money out of circulation.For the last 40 years and more India has grappled with the issue of tax-evaded money, popularly known as black money. Many schemes had been tried with limited success. Black money is held in many assets—cash, gold, property and overseas assets. There have been many estimates of black money from 40 per cent of GDP to 20 per cent, but all admitted its existence in a large quantum. Governments passed many draconian laws to tackle this, but evaders laughed merrily to the bank and carried on. But never before was such a radical step tried.Now, one year from that date, what is the impact, was it the right decision? Yes, many people suffered due to lack of currency, many spent time in queues, there was a certain disruption of economic activity and there was a negative impact on people for a while. Yet the poor bore it well as they believed it was a fight against tax evaders and looters, the middle-class supported it for the same reason. The leftist malcontents tried to blow it up and failed miserably. If people were upset there would have been riots in many places in a country where a small spark can often lead to riots.Why was there so much of broad-based support from people? Indians were fed up with successive governments failing to tackle this menace. Successive governments created a system which rewarded tax evaders, smugglers, black marketers and many politicians, and political parties shared in the spoils because they needed black money for elections. Crony capitalists flourished because they could buy their way out. They were great risk takers, all with money from the banks never their own. They knew their political friends would bail them out when they got into trouble. Cronies became richer, the ordinary honest citizens suffered. India discriminated against the great majority of its people who were honest taxpayers and watched in dismay as tax evaders became richer, openly enjoyed an ostentatious lifestyle. They seemed to be above the law, too. Has demonetisation achieved its aim of exposing and prosecuting tax evaders. Well, black money held as cash has come back to the banking system. The government knows who made the deposits, where, and is now launching prosecution in very many cases. We need to wait for the results. Benami property holders are under scrutiny, overseas assets holders are being investigated. But income tax collections are up, many more people have filed returns and there is increased compliance. However, the larger benefit has been a change in the behaviour of tax evaders. Use of black money in real estate, trading and gold has come down. Prices in real estate have come down with the market turning sluggish as it is no longer a sink of black money. The impact is visible in cities with heavy concentration of black money like Delhi. Most people who dealt in black money seem to have reduced such transactions.There is a distinct change in attitudes, behaviour and transactions of the tax-evading class. To my mind this is the biggest transformation and economic benefit, as demonetisation has achieved what many failed laws could not achieve—change in behaviour! A booming stock market, led by heavy inflow of Indian capital is rewarding good corporates. Cronies are getting punished as investors know they are on the way to bankruptcy.Honest tax payers who bore the pain stoically are now convinced that finally government will respect and reward honesty and prosecute vigorously the tax evaders and enforce the rule of law. The benefit of demonetisation will be more visible in the future. Reforms in political funding will hopefully drive black money out. The GST will further expose tax evaders and transform India into a nation of honest tax payers and law abiding citizens.India has changed! The shock of demonetisation was needed to bring about a behavioural change.(The author is Chairman, Manipal Global Education. Views expressed are personal) Demonetisation was a defining moment in India’s journey to a less-cash economyAuthor: Nandan NilekaniPublication: Hindustan Times Date: November 7, 2017URL: that people can move money with ease, we will see services and products being built for the unseen majority. We’re already seeing an explosion of startups in cash flow-based lending According to political scientist John Kingdon’s policy window model, three things must align for an effective public policy: The problem, the solution and the political will.World over, digitisation and cashless payments have been recognised as the first steps to solve the challenges of financial inclusion and access to cheap credit, both essential to end poverty. In April 2016, the National Payment Corporation of India (NPCI) launched a pilot for the world’s most-advanced payments system, UPI (Unified Payments Interface). But it took four months for the first few banks to upload their UPI-enabled apps. At the end of October 2016, UPI had just over 100,000 transactions worth ?49 crore. In the case of digital payments, India knew the problem, and for once was ahead of the world in designing a solution. But it had not political priority. But demonetisation and the urgency to find alternatives to cash brought digitisation and cashless payments into sharp focus. Suddenly, ministers and bureaucrats started asking what they could do to unblock cashless payments. Incredibly, steps that would have taken years were completed in weeks. A 13-member committee was formed under Andhra Pradesh chief minister Chandrababu Naidu in December to suggest ways to push cashless transactions. The committee published its recommendations in six weeks; most of them were implemented quickly.Given the hesitant adoption of UPI, the Centre got NPCI to build, test and launch the BHIM app, all in less than four weeks on top of what is now UPI-BHIM. Telecom regulator TRAI cut the USSD charges (levied on mobile banking transactions) from ?1.5 to ?0.5, encouraging feature phone users to transact digitally. Aadhaar Pay was launched in April, enabling even those without a phone or debit card to transact digitally. The MDR ---- the fees that card networks charge on transactions ---- was dramatically lowered by 75% and 50% for transactions below ?1,000 and ?2,000 respectively. With a lower MDR for card users, BHIM app for smartphone users, BHIM-USSD for feature phone users and Aadhaar Pay for those with neither phone nor card, India laid the foundation for the world’s most advanced and inclusive digital payments system serving over a billion people – and all in less than six months. For the first time, three card networks ---- Visa, Mastercard and NPCI’s RuPay ---- came together to launch the Bharat QR, a virtual replacement for legacy debit cards and point-of-sale (POS) machines. The number of traditional POS machines, which reached 1.6 million in 20 years, jumped by 62% to 2.6 million in the six months from October 2016 to April 2017.In the same period, e-wallets went from 10 million to over 32 million transactions. Combined with other digitisation catalysts such as the 900% increase in mobile data consumption since the launch of Reliance Jio in September 2016, India suddenly became a hot bed of payment innovation. Domestic champions such as PhonePe are now competing with Google’s Tez on the homegrown UPI-BHIM platform. Whatsapp is expected to launch its payment product in the world on top of UPI-BHIM.This is because UPI-BHIM is revolutionary; you can see that story in NPCI’s numbers. From 0.1 million transactions worth Rs 49 crore before demonetisation, UPI-BHIM completed 76.7 million transactions a month (?7,057 crore) and is on track to cross 100 million by November-end. To put that in perspective, debit and credit card POS volumes are 377 million a month, a number India has taken 20 years to reach. UPI-BHIM will be a quarter of that in less than 20 months. On October 4, the Reserve Bank, which has played a stellar role in this digital transformation, issued guidelines for interoperable wallets using UPI-BHIM.This is just the start. UPI-BHIM 2.0 will have eMandates, which will ease collections and boost flow-based lending. In years to come, payments powered by UPI-BHIM will be dominant.Digital payments are only the first step. Now that people can move money with ease, we will see services and products being built for the unseen majority. We’re already seeing an explosion of startups in cash flow-based lending. These startups are enabling credit to individuals and small enterprises that could not access it before, based on their data. The business case is now in alignment with social objectives. All we can say is that innovators are finally building for Bharat.While November 8, 2016, is etched in our memories as the day we switched to cashless, it was just the start. Digitisation was always going to be a long process, and we still have a way to go. But, demonetisation was a defining moment in India’s journey to a less cash economy.Nandan Nilekani is chairman, Infosys Ltd, and former chairman, UIDAIThe views expressed are personal Digitisation of India’s economy is the success story of demonetisationAuthor: Rupa SubramanyaPublication: Hindustan Times Date: November 12, 2017URL: demonstrates that there was a structural break after November 8, 2016, with a permanent increase in digital payments and decrease in the relative importance of cashOn the first year anniversary of demonetisation, it’s important to ask if it accomplished its stated objectives. While it appears that the objectives of rooting out black money as announced by Prime Minister Narendra Modi on November 8, 2016, has not been realised, given that almost all of the Rs 15 lakh-crore of high value notes in circulation were returned, is there credible evidence that another goal, which was articulated in the weeks following the announcement, has been achieved? Has the goal of digitisation and moving away from cash achieved? Unfortunately, much of the analysis has been simplistic and misleadingly compares two data points before and after demonetisation. For the past year, I’ve been developing and updating a statistical model calibrated to Reserve Bank of India data, which tracks the evolution of digital payments with data going back to 2011 and right up to the latest available, August 2017.As articulated in a pair of research reports for Observer Research Foundation, a Delhi based think-tank, the model clearly shows that several key components of digital payments such as Point of Sale Debit and Credit (PoS) purchases, National Electronic Fund Transfer (NEFT), Immediate Payment Systems (IMPS) and mobile banking, are way above their pre-demonetisation trends. The model itself is based on positing a relationship between various digital payment modes and the total supply of money in the system, a standard approach in monetary economics. Clearly demonetisation disrupted the equilibrium the economy was settling into and pushed it away from cash toward digitisation. A simple eyeballing of the data tells a similar tale. A plot of currency in circulation as a ratio of broad money stock (M3; this includes more than physical money, currency and coins – bank deposits, mutual fund holdings, securities) clearly shows a big drop in the immediate aftermath of demonetisation and the slow increase thereafter, exactly as you would expect given that the liquidity crunch caused by the shortage of high-value notes slowly disappeared as the new notes came into wider circulation. But crucially, cash over M3 is settling into a new lower equilibrium than before: From 14% to 12%. That means one thing: less cash.Likewise, the data show a similar permanent increase in key components of digitisation.For instance, the PoS which had stabilised around 3% of broad money stock has now jumped up to 6%, while NEFT is above 10% and IMPS is above 0.5%, starting from a base of zero a few years ago. The model does not track Unified Payments Interface (UPI) both as it’s very new and therefore its behaviour is dominated by a natural upward trend starting from zero making it hard to disentangle the effects of demonetisation. Mobile banking reached an impressive high point of a little above 1% of broad money stock in May before falling back slightly the next month to just under 1%. Note that data starting July, which shows a big drop in mobile banking, is misleading and not comparable as the RBI explains it does not include corporate transactions.This raises the question: Is the jump in mobile banking largely driven by the corporate rather than the personal side? If so, this underlines the imperative for the government to continue its drive to nudge individuals towards digital and away from cash transactions. Apart from habit, technological limitations and poor mobile connectivity are a natural deterrent to switching from cash to mobile. For example, a single failed transaction which ties up a large amount of money for a long time could well put people off mobile banking. The bottom line of the research conclusively demonstrates that there was a structural break after November 2016 with a permanent increase in digital payments and decrease in the relative importance of cash. Whatever you may think of the original goals and whether they succeeded, it’s clear digitisation is one demonstrable success story of demonetisation.- Rupa Subramanya is an economist and author based in MumbaiThe views expressed are personalNote ban just an aspect, war on graft not over yetAuthor: Swapan DasguptaPublication: The Pioneer Date: November 12, 2017URL: after the Uttar Pradesh Assembly election earlier this summer, an Opposition stalwart confessed his intense bewilderment at having misread the public mood. Active in politics since the early-1970s and a veteran legislator both in the State Assembly and Parliament, he imagined that the demonetisation of November 8, 2016, would have generated a backlash whose intensity would have devastated the Bharatiya Janata Party. Certainly, media reports spoke of massive public inconvenience and mounting anger at the Narendra Modi Government. Yet, when the EVMs were unlocked, there was a landslide victory for the BJP and a complete decimation of those parties that had protested loudly against the peremptory scrapping of the Rs 1,000 and Rs 500 currency notes. “I can’t believe”, he told me, “I got it so wrong.” This veteran politician wasn’t the only one. Cutting across party lines — yes, there was intense nervousness within the BJP too — there was a feeling that Prime Minister Modi had overplayed his hand by undertaking an exercise that others had felt was too politically daunting. As the queues grew longer and the shortages of cash triggered exasperation and anger, the pundits saw parallels between Modi’s demonetisation and Napoleon’s Russia campaign. The expectations of imminent doom were also triggered by the scepticism of most established economists. In putting demonetisation to the test of public opinion, Modi took on the big guns of the Establishment and the core support base of his own party, and won quite resoundingly. Yet, the war has not ended. With the Goods and Services Tax adding another dimension to the reformist impulses of the Government and signs of a post-Modi vacuum in poll-bound Gujarat, the Opposition has sensed another chance to fell a Prime Minister who has a larger than life reputation and whose hold on the Government is near total. The first anniversary of demonetisation has come in handy to resurrect the debate and portray Modi as a reckless adventurist who must be stopped and reduced to a lame duck Prime Minister. What began as an attempt to muddy the waters of caste politics in Gujarat has quickly been elevated into a larger battle against Modi’s larger campaign to reshape the contours of public life. Every aspect of Government policy — from Aadhaar and GST to bullet train — has been dragged into the poll campaign, with economists and the media playing cheerleaders. The debate so far has centred on statistics. The fall in the GDP growth, the estimated job losses resulting from demonetisation and GST, the apparent slowdown in digital transactions and the fact that nearly 99 per cent of the scrapped bank notes found their way back as deposits have been cited as evidence of a flawed approach. Against this, the Government has retorted with claims of an additional 56 lakh new taxpayers, nearly 40 per cent accretion of direct tax revenue, the deregistration of some 2.24 lakh shell companies and 30 crore new accounts under the Jan Dhan Yojana to demonstrate the big strides towards a “much cleaner, transparent and honest financial system”. The debate over statistics and economic consequences is certain to be unending and fractious. However, at the political level, the debate is centred on a moral dimension. Modi has never lost an opportunity to drive home the point that following his bold measures, the dishonest are on the retreat and the generation of black money has begun to be rolled back. That he has also busted a business model whose competitive edge stemmed from the non-payment of taxes is also apparent. However, this fact is not being widely publicised for fear of giving offence to many traders and even professionals, particularly those in mid-sized towns, who were guilty of creating zero tax havens for themselves. In India, however, nothing is ever discreet. The most telling anecdotes about demonetisation were about the gloating among the poor that their inconvenience was nothing compared to the pain and harassment experienced by those who had many briefcases of unaccounted cash to launder. Their anxiety hasn’t gone away with the Government making it quite clear that post-demonetisation “the entire cash holding of the economy now has an address”. For those who have some explanations to give to the taxman, this Government is an irritant. To be credible, Modi has to be unrelenting in his desire to roll back the tidal waves of corruption and black money. And the more he is unrelenting, the greater will be the decibel levels of those who want the Opposition to succeed. In India, the quest for a brighter and more prosperous future has either involved Ram bharosa or sacrifice. It was Mahatma Gandhi who persuaded Indians that Swaraj wouldn’t come on a platter but had to be accompanied by sacrifice and even personal suffering. That, in his view, meant accepting lathi blows without retaliation and even giving up all relations with the Government. Thus lawyers were encouraged to give up their practice and students were asked to abandon their studies. Swaraj didn’t come instantly but did materialise as a consequence of cumulative sacrifice over a long period. Modi’s appeal to endure personal inconvenience for a larger, ethical cleansing of India had elements of the Mahatma’s message built into it. Despite the cynicism of our age, millions of Indians not only responded but did so without any civil unrest — what my Opposition friend could not fathom. Through demonetisation, Modi involved every Indian in the biggest Swachchh Bharat campaign crafted to date — a campaign that involves much, much more than getting rid of physical dirt. Demonetisation was merely an aspect — an important aspect — of the larger bid to make India a corruption-free and law abiding society. It was a battle. The war is ongoing. Note ban a mistake, even our 'Chhillar' has become Miss World: Shashi Tharoor's tweet backfiresAuthor: Publication: The Times of India Date: November 19, 2017URL: leader Shashi Tharoor's attempt at witticism on Sunday backfired, after he tried to play on newly-crowned Miss World 2017 Manushi Chhillar's surname, comparing it to 'loose change'."What a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!," Tharoor tweeted.'Chillar' is the Hindi word for 'loose change.'------------------------------------------Shashi Tharoor @ShashiTharoorWhat a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!4:26 PM - Nov 19, 2017------------------------------------------Tharoor's remark got him in trouble with the National Commission for Women, which accused him of degrading Manushi's achievement, and demanded he apologise.------------------------------------------CW @NCWIndiaNCW condemn the tweet of @INCIndia leader @ShashiTharoor. He degraded the achievement of daughter of #haryana and #India who got glory to the country. Will he call his own daughter chillar? He must apologize immediately. …5:45 PM - Nov 19, 2017 · Raipur, India------------------------------------------"@NCWIndia will summon @ShashiTharoor to commission on his derogatory and degrading tweet on our pride @ManushiChhillar She got fame and name to country by winning #MissWorld crown," it added.The former Union minister's remark also came under fire from many on Twitter, including veteran actor Anupam Kher, who asked him why he had "fallen so low."------------------------------------------Anupam Kher @AnupamPkher???? ???? ???? ????? ??? ??? ??? …4:40 PM - Nov 19, 2017------------------------------------------While several Twitter users slammed his comments, one asked him why he was "demonatizing his own value!(sic)."Another attempted to educate him about the community Manushi belongs to, informing him that it was a "brave community (Jats)," and asked him to refrain from making fun of it.------------------------------------------Shashi Tharoor @ShashiTharoorWhat a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!------------------------------------------Anuj Trivedi @trivedianuzzzSir, Chillarr are a brave community (Jats) please do not make fun of a community just for fun. You are a Tharoor not a Thor!! @cmohry @OfficeOfRG @DrKumarVishwas4:51 PM - Nov 19, 2017------------------------------------------In what may be perceived as possible damage control, Tharoor later put out a tweet appreciative of Manushi."What a terrific answer by this bright young woman -- a real credit to Indian values! #missworldmanushi," he tweeted, referring to her answer in the final round of the competition.When asked which profession in the world deserved the highest salary and why, Manushi had said, "Since I am very close to my mother, I believe a mother deserves the highest respect. When you talk about salary, I don't think it's just about cash, but it's the love and respect you give to someone. I think my mom has always been my biggest inspiration; mothers sacrifice so much for their kids. It is certainly that one profession which deserves the highest salary, the highest respect and love."Within a few hours of his first tweet, Tharoor took to Twitter again, this time to clarify that "no offence was meant" to Manushi. He also asked people to "chill.""Guess the pun IS the lowest form of humour, & the bilingual pun lower still! Apologies to the many who seem to have been righteously offended by a light-hearted tweet today. Certainly no offence was meant to a bright young girl whose answer i've separately praised. Please: Chill!," he wrote.--------------------------------------Shashi Tharoor @ShashiTharoorGuess the pun IS the lowest form of humour, & the bilingual pun lower still! Apologies to the many who seem to have been righteously offended by a light-hearted tweet today. Certainly no offence was meant to a bright young girl whose answer i've separately praised. Please: Chill!5:53 PM - Nov 19, 2017--------------------------------------Demonetisation Rollout Was Deeply Flawed, Says This Year's Nobel Prize Winner for EconomicsAuthor: Publication: Date: November 19, 2017URL: economist Richard Thaler said the move to introduce a Rs 2,000 note for the remonetisation exercise made the motivation behind the entire exercise “puzzling”. This year's Nobel Economics prize winner Richard Thaler thinks that the concept of demonetisation is good but the Narendra Modi government’s rollout of the note ban was “deeply flawed”. This emerged after a student of the US economist emailed him to enquire about his views on the whole exercise. Just after Thaler was announced the Nobel Prize winner, social media buzz was that Thaler had backed the Prime Minister’s crackdown on cash immediately after the November 8, 2016, announcement. But even then there was a damn-ing afterword, which suggested otherwise. In his emailed response to the student last month, Thaler said the move to introduce a Rs 2,000 note for the remonetisation exercise made the motivation behind the whole exercise “puzzling” and undercut the purpose, considering that the intention was to transform India into a less-cash society and crackdown on black money. The student, Swaraj Kumar, posted the exchange on his Twitter account. This was later retweeted by Thaler. Here's what Thaler wrote: “The concept was good as a move to a cashless society to impede corruption but the rollout was deeply flawed and the introduction of the Rs 2000 note makes the motivation for the entire exercise puzzling.”-------------------------------Rupa Subramanya? @rupasubramanyaThis is what @R_Thaler told @swarajkumar224 on demonetisation. Those sharing an old cherry picked tweet of Thaler’s do take note.-------------------------------Swaraj KumarHello Prof. THaler, First of all, Congrutulation on Winning the BOble Prize----------Thaler, Richard HWell, if you are going to do that let's make it this: The concept was good as a move to a cashless society to impede corruption but the rollout was deeply flawed and the itroduction of the Rs 2000 note makes the motivation for the entire exercise puzzling. Ok?-------------------------------Thaler, a Professor of Economics and Behavioral Science at the University of Chicago, won the Nobel Prize in Economic Sciences on October 10. In a tweet on November 8, 2016 — along with a link to a news article about demonetisation, Thaler had said, “This is a policy I have long supported. First step toward cashless and good start on reducing corruption.” This tweet was picked by some social media users to claim that the Nobel Laureate supported the move. But soon after being told by commenters that Rs 2,000 currency notes are to be introduced as a replacement, Thaler tweeted, “really? Damn”. Shashi Tharoor Tweets up Storm With Pun on Miss World Manushi ChhillarAuthor:Publication: Date: November 19, 2017URL: the tweet, Tharoor was targeting the Narendra Modi government and the demonetisation decision. But he had to face the ire of social media users, who thought it was not in good taste.Senior Congress leader Shashi Tharoor landed in a tweet storm on Sunday for his pun on Manushi Chhillar, who was crowned Miss World 2017 on Saturday. With the tweet, Tharoor was targeting the Narendra Modi government and the demonetisation decision. But he had to face the ire of social media users, who thought it was not in good taste. “What a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!” Tharoor wrote, equating Chhillar with its literal meaning – coins. ----------------------Shashi Tharoor @ShashiTharoorWhat a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!November 19, 2017---------------------- But Twitter was not impressed with his efforts, with many asking him not to make fun of the girl who made the nation proud. ----------------------Anjali @anjalimpmHow sexist and disrespectful and misogynistic to compare a woman to chillar...Is this the real @ShashiTharoor ?November 19, 2017----------------------Anuj Trivedi @trivedianuzzzSir, Chillarr are a brave community (Jats) please do not make fun of a community just for fun. You are a Tharoor not a Thor!! @cmohry @OfficeOfRG @DrKumarVishwasNovember 19, 2017----------------------Rishita Mishra @rishitamishrPlz don't make fun of the girl who made us proud... November 19, 2017----------------------Tiger Anand J Singh @Beingdaring1What the heck, Shashi! I know you are being sarcastic. But this sarcasm tastes really bad. I feel this demeans Manushi Chhillar!November 19, 2017---------------------- Tharoor also received summons from the National Commission of Women for the “derogatory and degrading tweet”. NCW chief Rekha Sharma said she had asked the Congress MP to tender an apology, but did not receive any response. Tharoor, eventually, did apologise. He said it was a light-hearted tweet and he meant no offense to Chhillar. “Guess the pun is the lowest form of humour, & the bilingual pun lower still! Apologies to the many who seem to have been righteously offended by a light-hearted tweet today. Certainly no offence was meant to a bright young girl whose answer i've separately praised. Please: Chill!” he wrote. ----------------------Shashi Tharoor @ShashiTharoorGuess the pun IS the lowest form of humour, & the bilingual pun lower still! Apologies to the many who seem to have been righteously offended by a light-hearted tweet today. Certainly no offence was meant to a bright young girl whose answer i've separately praised. Please: Chill!November 19, 2017---------------------- After the apology, NCW also reconsidered its summons. Speaking to CNN-News18, Sharma said it is good that Tharoor has aplogised, but she would still like to talk to him on the issue. “This is not a joke, it can’t be light hearted... will he say something similar about a girl from his family?” she asked.Shashi Tharoor uses Miss World Manushi Chhillar's name in anti-note ban pun, asks Twitterari to 'chill' in apologyAuthor: Ganesh Kumar Radha UdayakumarPublication: Indiatoday.inDate: November 19, 2017URL: later apologised for his remarks - which he tweeted. "Certainly no offence was meant to a bright young girl whose answer I've separately praised. Please: Chill!" he said."RT if you feel Rahul Gandhi and Shashi Tharoor have switched their Twitter accounts." That's how one amused Twitter user reacted when senior Congress leader Shashi Tharoor referred to the much-feted coronation of Miss World Manushi Chillar in a barb aimed at the BJP - and its decision to void over four-fifths of India's currency: demonetisation."What a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!" Tharoor said Sunday in a tweet.He later apologised, but didn't delete the tweet. Only days ago, the Thiruvananthapuram MP said demonetisation was "nanny-ism carried to an extreme." In January, he was detained during an anti-notebandi protest in his constituency.Here's the tweet he posted today.------------------------Shashi Tharoor @ShashiTharoorWhat a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!November 19, 2017------------------------Here's the apology.------------------------Shashi Tharoor @ShashiTharoorGuess the pun IS the lowest form of humour, & the bilingual pun lower still! Apologies to the many who seem to have been righteously offended by a light-hearted tweet today. Certainly no offence was meant to a bright young girl whose answer i've separately praised. Please: Chill!November 19, 2017------------------------ And here's a sample of reponses which unimpressed Twitter users posted before Shashi Tharoor apologised.------------------------Patla Adnan Sami @patla_adnanThis just shows how you look at women! Chillar is Manushi's Family name and not something to make fun of!November 19, 2017------------------------Aashey @789_aasheyThat was a pathetic tweet from Mr. @ShashiTharoor. He should apologize for this.November 19, 2017------------------------Tiger Anand J Singh @Beingdaring1What the heck, Shashi! I know you are being sarcastic. But this sarcasm tastes really bad. I feel this demeans Manushi Chhillar!November 19, 2017------------------------Akshaye Rathi @akshayerathiAs someone who looks upto you for your intellect, wit & conversational skills, I really think you could do better than this, sir.November 19, 2017------------------------BJP leader Sambhit Patra was among those who called for an apology. He said the comment was an insult to Haryana (where Manushi Chhillar is from), and that it reminded him Tharoor's "cattle-class" remark. The National Commission for Women said it would summon Tharoor.------------------------NCW @NCWIndiaNCW condemn the tweet of @INCIndia leader @ShashiTharoor. He degraded the achievement of daughter of #haryana and #India who got glory to the country. Will he call his own daughter chillar? He must apologize immediately. 19, 2017------------------------NCW @NCWIndia@NCWIndia will summon @ShashiTharoor to commission on his derogatory and degrading tweet on our pride @ManushiChhillar She got fame and name to country by winning #MissWorld crownNovember 19, 2017------------------------Tharoor had earlier praised Chhillar for her answer to a contest question on the profession that deserved the highest salary."A mother deserves the highest respect," was Chhillar's response. "It's just not about cash but also the love and respect that you give to someone. My mother has been a huge inspiration. it is the mother's job that deserves the biggest salary," she added.Tharoor said the reply was "terrific," and "a real credit to Indian values."Manushi Chhillar is the sixth Indian woman to have won the Miss World title. Priyanka Chopra, Yukta Mookhey, Diana Hayden, Aishwarya Rai and Reita Faria are the others.You're a class act: After Manushi Chhillar's response, Shashi Tharoor calls her beautiful, smart and uncommonly graciousAuthor: Vivek SurendranPublication: Indiatoday.inDate: November 20, 2017URL: Tharoor, in a new tweet, showered praises on Miss World Manushi Chhillar after she responded to his 'Chhillar' tweet with utmost grace.On November 18, Manushi Chhillar, a 20-year-old medical student who hails from Haryana, was crowned Miss World 2017. Indians reveled in the glory she brought home after long 17 years and many praised and congratulated her on Twitter. One among them were senior Congress leader and MP from Thiruvananthapuram Shashi Tharoor. He tweeted, "What a terrific answer by this bright young woman -- a real credit to Indian values!"-----------------------Shashi Tharoor @ShashiTharoorWhat a terrific answer by this bright young woman -- a real credit to Indian values! #missworldmanushi 19, 2017-----------------------Shashi Tharoor, however, did not want to lose a chance to slam the Narendra Modi-led BJP government's demonetisation drive.Tharoor, in another tweet, said: "What a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!"-----------------------Shashi Tharoor @ShashiTharoorWhat a mistake to demonetise our currency! BJP should have realised that Indian cash dominates the globe: look, even our Chhillar has become Miss World!November 19, 2017-----------------------This tongue-in-cheek remark, a pun on Manushi's second name 'Chhillar', upset Twitterati and the National Commission for Women.-----------------------Shashi Tharoor @ShashiTharoorGuess the pun IS the lowest form of humour, & the bilingual pun lower still! Apologies to the many who seem to have been righteously offended by a light-hearted tweet today. Certainly no offence was meant to a bright young girl whose answer i've separately praised. Please: Chill!November 19, 2017-----------------------Shashi Tharoor apologised soon after, but some Twitter users and the NCW were not convinced and wanted him to apologise again, 'properly'. Manushi Chhillar, on the other hand, took Tharoor's remark in the right spirit and responded to him with utmost grace, proving she's a 'chilled-out' person. Saying "let's not forget the 'chill' in 'Chhillar'", Manushi won hearts, again.-----------------------Manushi Chhillar @ManushiChhillarExactly @vineetjaintimes agree with you on this. A girl who has just won the World isn?€?t going to be upset over a tongue-in-cheek remark. ?€?Chillar?€? talk is just small change - let?€?s not forget the ?€?chill?€? within Chhillar ???? @ShashiTharoor 20, 2017-----------------------Pleased seeing her being a sport, Shashi Tharoor, in a new tweet, showered praises on her.Tharoor quoted Manushi's response tagging him and said: "You're a class act, Manushi Chhillar! Beautiful, smart and uncommonly gracious too."He also apologised to Manushi and her family again saying, ""Still, if any offence was caused to any member of your family, sincere apologies," and said that like every Indian, he is proud of her.-----------------------Shashi Tharoor @ShashiTharoorYou're a class act, @ManushiChhillar! Beautiful, smart & uncommonly gracious too. Still, if any offence was caused to any member of your family, sincere apologies. Like every Indian, I'm proud of you. 20, 2017-----------------------Maoist papers show how note ban didn’t hurt themAuthor: Dipankar GhosePublication: The Indian ExpressDate: November 23, 2017URL: postscript in the ‘balance sheet’, maintained by the Nelnar area janatana sarkar (“local government”), for 2017 states: “Note bandi ke dauran 2 lakh jama kiya manta (Deposited 2 lakh during note ban).”While the BJP-led governments at the Centre and state have claimed that demonetisation hit Maoist finances, documents recovered from the site of an encounter in Abhujmaad on November 7 show that they successfully exchanged demonetised Rs 500 and Rs 1000 notes adding up to Rs 2 lakh.D M Awasthi, Special Director General, Anti-Naxal Operations, Chhattisgarh, confirmed to The Indian Express that at least 20 pages of handwritten accounts, spanning several years, were recovered after the encounter in the jungles of Abhujmaad in Narayanpur district on November 7 in which six Maoists were reported to have been killed. A postscript in the ‘balance sheet’, maintained by the Nelnar area janatana sarkar (“local government”), for 2017 states: “Note bandi ke dauran 2 lakh jama kiya manta (Deposited 2 lakh during note ban).” While the year’s total expenditure has been put at Rs 46,720, there is a line which says that a sewing machine worth Rs 16,000 was damaged during an attack by security forces.The handwritten ‘balance sheets’, for 2013 to 2017, include sub-heads like expenditure incurred by the “vikas shakha”, “raksha shakha”, “school sanskriti shakha”, “jan sampark shakha” and so on. There are separate pages on expenditure incurred on “community infrastructure”, such as building of wells and small checkdams as well.Awasthi, however, maintained that demonetisation had adversely affected Maoist operations in Chhattisgarh. “It is true that Maoist groups would have exchanged some amount of the demonetised cash. They could have used villagers, forcing them to deposit cash in their bank accounts, as also contractors who they levy taxes from. After demonetisation, we had to deal with the situation sensitively, and did not make any arrests. But we did have information on certain bank accounts, details of which were given to the authorities concerned, and some money was seized as well,” he said.According to police data, post-demonetisation, the Chhattisgarh police seized banned notes adding up to Rs 1.05 crore from 27 people, including Rs 44 lakh from one person, across seven of the worst Maoist-hit districts in the state. “Although they would have exchanged some notes, and have an ecosystem that supports them in the region, I do feel that demonetisation affected their operations. We will compile data at the end of this year, and only then will we be able to say with certainty, but there is a sense that in operations in areas that were hitherto untouched, the Maoists are either avoiding an exchange of fire or preserving their ammunition. This is one indication of low finances,” said Awasthi.But some other police officers, who spoke to The Indian Express on condition of anonymity, said it was unlikely that Maoist finances had taken a huge hit after demonetisation. “Their lack of ammunition is possibly a supply chain problem as opposed to lack of funds post-demonetisation. While they would have faced some issues in terms of liquid cash in the beginning, and perhaps some effect, what people don’t understand is just how complicated the Maoist ecosystem is. In a wide area, spanning several districts, they hold sway over villagers. These villagers have largely always had an entirely cash economy… Now, when a poor tribal stands in line with a wad of notes he claims he has accumulated over his lifetime, how does one find out that it is not his cash,” said an officer.“This balance sheet is only of one janatana sarkar. Every Maoist organisation, from the special zonal committee to the janatana sarkar, has separate accounts and would have exchanged their notes. We cannot even begin to quantify the amount,” he said. Narayanpur district, one of the worst-hit districts in the country, has as many as 91 operational janatana sarkars, according to police records.Note ban, GST May have 'Reinforced' Growth Deceleration, Says Chief Economic AdvisorAuthor: PTIPublication: Date: November 29, 2017URL: a question about allegations by the Opposition that India is experiencing "jobless growth", Arvind Subramanian said three key job generating sectors are under stress. He, however, declined to comment further, saying there is not enough data to make an assessment.Chief Economic Advisor Arvind Subramanian on Wednesday said demonetisation and GST rollout may have "reinforced" the growth deceleration that had already set in.He also exuded confidence that "we will soon come out from these two policy experiments" and regain growth."I think that deceleration in growth, if you look at numbers, actually preceded before these two actions. I think that not just growth, but investment, credit, exports, industrial production, they all started decelerating sometime in the second quarter last year," he said during an interaction with media here today."So, it certainly began before. It's quite possible that these two steps (demonetisation and GST) reinforced the deceleration...I think we will soon come out from these two policy experiments and get back to the growth path," he said."GDP would bounce back with better credit growth, investment growth and growth in exports, as Indian economy has the potential to grow at 8 to 10 per cent. As GST is also stabilizing, it will also help in that," he said."I think that we still need to work more to reduce the compliance burden on SMEs. And these are being worked upon. It's an ongoing process," he said.On bringing petrol and diesel under the GST, he said ideally every thing should come under the new tax regime."I think that it's absolutely desirable objective that all that has been left out today should at some point come under GST...In principle, everything should come under GST, be it petroleum, electricity, real estate and of course, at some stage, alcohol," he said.To a question about allegations by the Opposition that India is experiencing "jobless growth", Subramanian said three key job generating sectors are under stress. He, however, declined to comment further, saying there is not enough data to make an assessment."Our employment data are not reliable enough to make a sincere assessment...Niti Aayog has come up with a new method of collecting that data. Once that happens, we will be in much better position to make an assessment," he said."In the boom period, three sectors did good -- agriculture, IT and construction. These were big job generators. I think in current environment, IT is under stress for bunch of reasons," he said, adding that same is the case with the other two sectors. "So, these sectors have to improve for job creation to pick up," Subramanian said.'Is Arvind Subramanian stupid,' Chidambaram asks PM ModiAuthor: TNNPublication: The Times of IndiaDate: November 30, 2017URL: Congress leader P Chidambaram on Thursday hit back at Prime Minister Narendra Modi, a day after the latter said that the Congress's demand that the Goods and Services Tax (GST) be capped at 18 per cent was a 'Grand Stupid Thought.'Chidambaram wondered if PM Modi considered other proponents of such a move - including Chief Economic Adviser (CEA) Arvind Subramanian - "stupid."-----------------P. Chidambaram @PChidambaram_INIf it is Grand Stupid Thought to argue for a cap of the tax rate at 18%, then CEA Dr Arvind Subramaniam and many other economists are stupid. Is that what PM is saying?9:35 AM - Nov 30, 2017-----------------Yesterday, at a rally in Gujarat's Morbi, the PM had said: "Some intellectuals and economists are misleading the country. Congress wants the same 18% tax on something as essential as salt and something as expensive as Rs 5 crore worth car. They want 28% tax on alcohol and costly cigarettes to be reduced to 18%. Do you want to sell cheap alcohol and spread cancer by selling cheap cigarettes. This is nothing but a Grand Stupid Thought. There can't be any bigger anti-poor and anti-middle class thought."Chidambaram further asked if the PM had read a 2015 report by a CEA-led committee that suggested a standard GST rate of 17-18 per cent, based on a revenue-neutral rate (RNR) of 15-15.5 per cent.He demanded to know why the normal GST rate couldn't be 15 per cent and the RNR plus rate on luxury goods be 18 per cent.HIGHLIGHTSChidambaram asked PM Modi if all those who suggest that the GST be capped at 18 per cent are "stupid," including CEA Arvind SubramanianHis comments came a day after PM Modi called the Congress's demand for capping of the GST a 'Grand Stupid Thought''Is Arvind Subramanian stupid,' Chidambaram asks PM ModiNEW DELHI: Senior Congress leader P Chidambaram on Thursday hit back at Prime Minister Narendra Modi, a day after the latter said that the Congress's demand that the Goods and Services Tax (GST) be capped at 18 per cent was a 'Grand Stupid Thought.'Chidambaram wondered if PM Modi considered other proponents of such a move - including Chief Economic Adviser (CEA) Arvind Subramanian - "stupid." ----------------------------------P. Chidambaram@PChidambaram_INIf it is Grand Stupid Thought to argue for a cap of the tax rate at 18%, then CEA Dr Arvind Subramaniam and many other economists are stupid. Is that what PM is saying?9:35 AM - Nov 30, 2017----------------------------------Yesterday, at a rally in Gujarat's Morbi, the PM had said: "Some intellectuals and economists are misleading the country. Congress wants the same 18% tax on something as essential as salt and something as expensive as Rs 5 crore worth car. They want 28% tax on alcohol and costly cigarettes to be reduced to 18%. Do you want to sell cheap alcohol and spread cancer by selling cheap cigarettes. This is nothing but a Grand Stupid Thought. There can't be any bigger anti-poor and anti-middle class thought."Chidambaram contradicts Ivanka's claim crediting PM Narendra Modi for reducing poverty in IndiaChidambaram further asked if the PM had read a 2015 report by a CEA-led committee that suggested a standard GST rate of 17-18 per cent, based on a revenue-neutral rate (RNR) of 15-15.5 per cent.He demanded to know why the normal GST rate couldn't be 15 per cent and the RNR plus rate on luxury goods be 18 per cent.Recommended By Colombia"Tax and spend is the credo of the BJP government. Example: when crude oil prices fell by 50%, prices of petrol and diesel remained the same," he wrote.The Congress has been very vocal in its criticism of the GST as it was conceived by the Modi government.The party's vice president Rahul Gandhi went so far as to call it a 'Gabbar Singh Tax'. He also promised that if the BJP did not reduce the tax rate to a flat 18 per cent, his party "will do it in 2019."Exchange of demonetised notes: Sharad Pawar says district cooperative banks to move SCAuthor: Abhiram GhadyalpatilPublication: Date: February 28, 2018URL: chief Sharad Pawar says some district central cooperative banks in Maharashtra will move Supreme Court if centre and RBI does not allow them to exchange demonetised notesNationalist Congress Party (NCP) chief Sharad Pawar on Tuesday said some district central cooperative banks (DCCBs) in Maharashtra would move the Supreme Court if the union government and the Reserve Bank of India (RBI) did not allow them to exchange the demonetised currency notes of Rs500 and Rs1000. Pawar said here at a press conference that he had made this suggestion to those DCCBs which had collected currency notes of these denominations after the announcement of demonetisation on 8 November, 2016, but which have not been allowed to exchange those notes with the legal currency with their depositors. He said the DCCBs in Maharashtra and states like Kerala, Tamil Naidu, and Uttar Pradesh were the backbone of rural economy and that DCCBs in these states might have been affected as well.Senior Congress party leader and lawyer P. Chidambaram had agreed to appear in the Supreme Court on behalf of the DCCBs, Pawar said, adding he would facilitate a meeting between the representatives of DCCBs and Chidambaram in Delhi when the budget session of the Parliament resumes. The NCP president cited a letter dated 30 January, 2018, written by the RBI to the DCCBs. “This letter says that RBI has sought reply from the government of India on demonetized currency notes and the government of India’s reply is awaited. Pending reply, the RBI has asked the DCCBs to consider the amount that they have collected as deposits by their depositors after demonetisation as loss and show it as such in their books of account,” Pawar said. Raising questions over the RBI letter, Pawar said this was not what the prime minister had said when he announced the demonetisation policy. He said the currency notes of Rs500 and Rs1000 would become pieces of paper and those who deposited them into banks would get those exchanged. “Now, the government and RBI have allowed scheduled commercial banks and the nationalised banks to exchange notes they collected after demonetisation. Even the urban cooperative banks have been allowed after some immediate follow up. Why have they singled out some DCCBs only? The deposits that the DCCBs collected were not made by Nirav Modi but ordinary rural depositors. It is their money which is locked up,” he said. The NCP chief, a known patron of Maharashtra’s politically influential cooperative movement, said a set of DCCBs had written to him that an amount of Rs112 crore in the form of demonetized currency remained with them pending clarification from the government and RBI. “I don’t have figures for all the DCCBs in the state but some have sent me the data. The Pune DCCB has Rs22.25 crore locked, Sangli Rs14.72 crore, Kolhapur Rs25.28 crore, and Nashik DCCB Rs21.32 crore. There are other DCCBs which have smaller amounts locked up,” Pawar said.Narendra Modi’s UPI massive success; Mastercard, Visa Inc lose market share in IndiaAuthor: BloombergPublication: Financial Date: March 26, 2018URL: card companies like Visa Inc. and Mastercard Inc. are losing market share to upstarts in the world’s most innovative payments market: India.Transactions through India’s homegrown Unified Payments Interface — which allows mobile apps run by retailers, airlines and other firms to take payment directly from bank accounts — reached almost half the value of debit and credit cards swiped at stores last month, central bank data show.The surge in UPI transactions has taken place since 2016 when the interface was set up by an umbrella organization of Indian banks. Mastercard, in contrast, has built up its business in India over three decades.“The introduction of UPI in August 2016 led to the creation of a wealth of new innovative payment solutions, and the adoption rates of UPI payments are truly spectacular,” U.S.-based Fidelity National Information Services Inc. said in a December 2017 report. UPI “opens up access to real-time by allowing payments to be directly integrated into external business applications,” it said.India’s payments system was alone among more than 40 countries tracked by Fidelity National to gain a top score of five for innovation and customer value. China’s Internet Banking Payment System scored two and Kenya’s PesaLink scored four. Criteria included round-the-clock availability, speed of settlement, and level of government or regulator support. Inc. and Jet Airways India Ltd. — the nation’s second-biggest airline by passengers — are among firms that have integrated UPI into their apps in order to take payment from customers. Ola, a local rival to Uber Technologies Inc., Big Bazaar, a chain of stores run by billionaire Kishore Biyani, and incumbent mobile wallet leader Paytm Mobile Solutions Pvt. are other users.Facebook Inc. is piloting a payments service in India with a UPI backbone for its WhatsApp Pay, which has already drawn comparisons with the way WeChat reshaped payments in China.“Payment integration into popular apps in India will drive the digital payments market to $1 trillion over the next five years,” Credit Suisse Group AG said in a report last month. “With 800 million bank accounts now linked, the bulk is mobile-transaction ready.”Currently, India’s payments market is worth less than $200 billion, dwarfed by China’s $27 trillion market that’s now opening up to global players.One challenge in India is the dominance of cash, which accounts for some 70 percent of the country’s total transactions by value. However, China transitioned to digital on the back of rising mobile and data penetration, and that process was hastened by e-commerce and social platforms, according to Credit Suisse. The same shift may play out in India, where data usage for 300 million Indian smartphone users rose to 5-10 GB a month from 1GB last year.Big BoomThe World’s big tech firms are getting into India’s Payments MarketEntrantsCurrent statsWhy get into payments?Samsung Pay80-100 million samsung smartphone usersTo ensure repeat sales in highly competitive smartphone marketWhatsApp250 millionWhatsapp users, 213 million Facebook usersTo increase user engagementGoogleMore then 300 million smartphone usersTo gether more intelligence on customersAmazon PayNumbers unavailable but competitor Flipkart has more then 35 million monthly active usersImprove user experience while retaining customer dateAdvances in India’s digital payments market picked up pace after Prime Minister Narendra Modi’s shock decision to invalidate 86 percent of the country’s currency in circulation.“While the effects of the demonetization event of November 2016 are now waning, it would be safe to conclude that the event has caused a permanent uplift in the share of non-cash transactions in the economy,” said Credit Suisse.Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.Cut the politics, D-Street says cash ban was worth it & why!Author: Tanisha SharmaPublication: The Economic TimesDate: September 4, 2018URL: you set aside politics, the last word on the efficacy of the demonetisation drive is yet to be said. The cash ban, announced in November 2016, caught the nation unawares, created a lot of hardships in its aftermath and slowed down economic growth. Those were collateral damage of an exercise meant to stamp out black money and corruption. In politics, and even in economics, the narrative took various shades ever since. And RBI’s annual report, released last week, showed 99.3 per cent of the banned notes actually returned to the system, which gave critics enough ammunition to call the cash ban an exercise in futility that cost dearly but earned nothing. It’s a bitter medicine forced down the throat of the nation, they say. Others call it a "carefully manipulated scam". Yet another school claims that the move put the economy back by a few years. Dalal Street analysts, who have the real pulse of the economy at any given point, have not been critical of demonetisation. Instead, they prefer to look at the cash ban’s fringe benefits, which may have a long-lasting impact on the economy. Though the initial blow of demonetisation was indeed brutal for the economy, the country has revived and the whole episode has impacted the country positively in terms of financial and growth front, says Anindya Banerjee, currency analyst, Kotak Securities. The prices paid by the public 18 months ago in the form of long queues and other inconveniences are all bearing fruit now, says he. The fruits he is referring to are these: a serious boost to financialisation of savings, big jump in income-tax compliance, a drop in counterfeit currency in circulation and faster digitisation of the cash economy. In a recent interaction with , Radhika Gupta, CEO, Edelweiss Asset Management, said rapid digitisation and demonetisation worked as a boon for the industry. “We believe that the story of financialisation of assets emerged post note ban in November 2016,” Gupta added. SBI Economic Research in a detailed analysis listed out the benefits, especially a major shift in Indians’ investment pattern –from physical assets to financial products. Jump in tax returns Thanks to Operation Clean Money, there has been a spurt in the number of income tax returns filed. Rising ITRs showed that a greater number of people have contributed to the government’s revenue. The number of returns filed as on July 31 stood at 3.43 crore against 2.24 crore during the same period of 2017-18, up 53 per cent. A simple exercise was carried out by the SBI economic research team to find out how much the government stands to benefit. A higher base is seen to contribute at least Rs 300 billion to the exchequer. Drop in counterfeit currency One of the major objectives of demonetisation was to crack down on the expanding universe of fake currencies. The quantity of such fake notes read 7.62 lakh pieces in 2016-17. The number showed a marked decline of 31.4 per cent post demonetisation, which was down at 5.23 lakh in 2017-18. Shell companies under watch The crackdown on shell companies intensified, especially after demonetisation. The Prime Minister's Office (PMO) has set up a high-powered team to mark out shell firms with dubious transactions. The Suspect List, which has been drawn up by SFIO, contains a total of 80,670 names. Bharatiya Janata Party spokesperson Sambit Patra said black money found an address due to demonetisation carried out in November 2016 and over five lakh shell companies were closed down, he said. Drop in circulation of high value notesThe value of high denomination currency in overall currency composition is 80.6 per cent, lower than the pre-demonetisation phase (86.4 per cent). As the RBI ramped up supply of Rs 500 notes in FY18, their share has almost doubled to 42.9 per cent. The bottom line is things are getting tougher for those to park their money in black. Furthermore, lower denomination currencies mean more convenient day to day dealings for the general public. Finance Minister Arun Jaitley has recently said the larger purpose of demonetisation was to move India from a tax non-compliant society to a compliant one. The debate has many threads that range from the pain faced by small time traders to formalisation of economy and the tag of fastest growing major economy that India now boasts of.Demonetisation a massive draconian, monetary shock: Ex-CEA Arvind SubramanianAuthor: Arvind SubramanianPublication: The PrintDate: November 229, 2018URL: former chief economic adviser talks of the ‘puzzle’ that demonetisation, despite imposing harsh economic costs, was cheered on by its victims.On 8 November, in a dramatic nationally televised speech that I watched in my room in North Block, the prime minister announced that the top two high-denomination currency notes of Rs 500 and Rs 1000 would cease to be legal tender; that is, they would no longer be accepted as a government-certified means of payment. It was an unprecedented move that no country in recent history had made in normal times. The typical pattern had either been gradual demonetizations in normal times (such as the European Central Bank phasing out the 500-euro note in 2016) or sudden demonetizations in extreme circumstances of war, hyperinflation, currency crises or political turmoil (Venezuela in 2016). The Indian initiative was, to put it mildly, unique. It presupposed an extraordinary amount of resilience in the economy, especially amongst the vulnerable, because it was going to be the first of two major shocks—along with the GST—to affect those in the cash-intensive, informal sectors of the economy.Two years on, demonetization still consumes the attention of the commentariat, in part because of the mysteries surrounding its origins. I have little to add to the economics of the D-decision beyond what was said in three economic surveys that I oversaw. I do have some new thoughts, or rather hypotheses, on two demonetization puzzles, political and economic.Puzzle 1: Why was demonetization so popular politically if it imposed economic costs? Specifically, why did demonetization turn out to be an electoral vote winner in the short-term (in the Uttar Pradesh elections of early 2017) if it imposed so much hardship on so many people?Today, the political perception of demonetization is confounded by a slew of economic and political developments that have occurred since November 2016. Clearly, many factors influence voters’ perceptions and hence affect outcomes, rendering any attempt to tease out cause and effect as unreliable. It is important, however, not to forget history as it happened. At the time (early 2017), the election in Uttar Pradesh—India’s most populous state and the world’s eighth-largest ‘country-that isn’t’—was widely seen as a verdict on demonetization, arguably the salient policy action of the government, personally and forcefully articulated by the prime minister.The demonetization experiment speaks to the more pervasive and fascinating global phenomenon of What’s the Matter with Kansas?, the title of a famous book by American historian Thomas Frank. This book explores the apparent paradox of citizens voting against their economic self-interest. For example, why do poor white males vote for the Republican Party and President Trump when the policy agenda either has no benefits to them (tax cuts for the rich) or is positively harmful (undermining Obamacare and welfare benefits more broadly)? That same question seemed relevant after the resounding victory of the NDA government in the UP election. This particular piece is an attempt to understand that result as a disinterested observer armed only with publicly known facts. It is not an explanation of the motives of demonetization, simply a post facto analysis of one apparently fascinating political outcome associated with it.How could demonetization that is supposed to have adversely affected so many Indians—the scores of millions dependent on the cash economy—be so resoundingly supported by the policy’s very (and numerous) victims? I offer the controversial hypothesis that imposing large costs on a wide cross-section of people (and the fact that the Rs 500 and not just the Rs 1000 note was demonetized increased the scope and scale of demonetization’s impact), unexpected and unintentional though it may have been, could actually have been indispensable to achieve political success.The canonical political economy model of trade explains the persistence of protectionism in terms of an imbalance between the gainers and losers. Protection—which raises domestic prices—helps a few domestic producers a lot while diffusing the harm among many consumers, each of whom loses only a little. Producers, therefore, have both an incentive and ability to lobby for protection, while individual consumers have little incentive to lobby against it. The demonetization case has been very different: hardship was imposed on many and possibly to a great extent, and yet they appear to have been its greatest cheerleaders.One answer to the demonetization puzzle has been that the poor were willing to overlook their own hardship, knowing that the rich and their ill-begotten wealth were experiencing even greater hardship: ‘I lost a goat but they lost their cows.’ In this view, the costs to the poor were unavoidable collateral damage that had to be incurred for attaining a larger goal.This is not entirely convincing. After all, the collateral damage was in fact avoidable. Anti-elite populism, or ‘rich bashing’, as the Economist put it, could have taken the form of other punitive actions—taxation, appropriation, raids—targeted just at the corrupt rich.Why entangle the innocent masses and impoverish them in the bargain? As I wrote in the Economic Survey of 2016–17, if subsidies are a highly inefficient way of transferring resources to the poor, demonetization seemed a highly inefficient way of taking resources away from the rich. Understanding the political economy of demonetization may require us, therefore, to confront one overlooked possibility— that adversely impacting the many, far from being a bug, could perhaps have been a feature of the policy action. Not necessarily by design or in real time, but in retrospect it appears that impacting the many adversely may have been intrinsic to the success of the policy.Puzzle 2: Why didn’t the draconian 86 per cent reduction in the cash supply have bigger effects on overall economic growth? To put this more provocatively, the question was not whether demonetization imposed costs—it clearly did—but why did it not impose much greater costs?Demonetization was a massive, draconian, monetary shock: in one fell swoop 86 per cent of the currency in circulation was withdrawn. Figure 1 shows that real GDP growth was clearly affected by demonetization. Growth had been slowing even before, but after demonetization the slide accelerated. In the six quarters before demonetization growth averaged 8 per cent and in the seven quarters after, it averaged about 6.8 per cent (with a four-quarter window, the relevant numbers are 8.1 per cent before and 6.2 per cent after).I don’t think anyone disputes that demonetization slowed growth. Rather, the debate has been about the size of the effect, whether it was 2 percentage points, or much less. After all, many other factors affected growth in this period, especially higher real interest rates, GST implementation and rising oil prices.I do not have a strongly backed empirical view apart from the fact that the welfare costs especially on the informal sector were substantial.As a monetary economist, though, what is striking is how small the effect was compared to the magnitude of the shock. There are many ways of seeing this. Figure 2 compares what happened to cash with what happened to nominal GDP. It is a stunning picture. Prior to demonetization, cash and GDP move closely together. Then, currency collapses and recovers (the dotted line), but through all of this, the economy seems to have been chugging along almost unmindful of the currency in circulation. You have to squint to see any downward movement of the solid black line (for nominal GDP) after demonetization: in fact, there isn’t, and all the downward blips reflect seasonality, which leads to a lower level of activity in the first (April–June) quarter every year.What could possibly explain this apparent resilience? A number of hypotheses need to be considered. First and foremost, it could simply be an artefact of the way that GDP numbers are created. In India, there are no timely measures of informal sector activity, so it is proxied by formal sector indicators. Normally, this is not a problem, since the two move in tandem. But when a shock like demonetization occurs that primarily affects the informal sector, relying on formal indicators to measure overall activity will overstate GDP.This hypothesis goes only a small way towards explaining the puzzle, since any squeeze in informal sector incomes would depress demand in the formal sector, and this effect should have been sizable.As a result, we need to search for other explanations. One possibility is that people found ways around the note ban, for example by continuing to use the Rs 500 note even after its use had been formally banned, so the currency shock wasn’t actually as big as conventionally measured. Another possibility is that production was sustained by extending informal credit: people simply agreed to pay their bills as soon as currency became available. Finally, to a certain extent, people may have shifted from using cash to paying by electronic means, such as debit cards and electronic wallets.Or, there may be other, completely different explanations that have eluded my understanding of demonetization, one of the unlikeliest economic experiments in modern Indian history.This book excerpt was published with permission from the book ‘Of Counsel: The Challenges of the Modi-Jaitley Economy’, written by Arvind Subramanian and published by Penguin Viking.Demonetisation pushed up direct tax collections: CBDTAuthor: Publication: The HinduDate: December 4, 2018URL: expects receipts to exceed the budgeted target this year, says chairmanDemonetisation was beneficial in terms of increasing the tax base as well as increasing direct tax collections, Central Board of Direct Taxes Chairman Sushil Chandra said on Tuesday.The government expects to exceed the budgeted target for direct tax collections this year, he added.“The gross rate of direct tax collections is 16.5% and net growth is 14.5%, which in itself shows that demonetisaton has really helped in widening the tax base, increasing the tax revenue, and also in deepening the tax base, which means that people who filed returns of ?10 lakh about two years ago, are now reporting more now, and even the people filing returns of more than ?1 crore are filing much more this year,” Mr. Chandra told reporters on the sidelines of a CII conference on tax.“We will definitely achieve the budget estimate for direct tax collections for the year,” he added. “The target is ?11.5 lakh crore and we are very hopeful that we will achieve this target. We have already covered 48% of the total budget estimate, and there will not be problem in achieving the rest.”Foreign assets disclosureMr. Chandra added that India had begun to receive information on an automatic basis from 70 countries regarding foreign assets and bank accounts held by Indians. “If anybody has not shown foreign assets or a foreign bank account in their I-T returns, the department will take action against them,” he said. ................
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