Cash is an insignificant component of black assets

Old notes for new is not game-changer.Cash recovery has been only 6% of the undisclosed income seized from income tax evaders, according to data from tax raids from 2012-13 onwards.

What shouldn’t shock us is to learn that the poorest 58% own about 1% of India’s wealth. What do you expect when over a quarter of India lives on daily wage earnings that average Rs.272.

when 1 in 10 people survive on less than $2 a day. Inequality is trapping hundreds of millions in poverty; it is fracturing our societies and undermining democracy,” .

The report said that between 1988 and 2011, the incomes of the poorest 10% around the world increased by an average of just $65 per year, while those of the richest 1% grew by an average of $11,800 a year—182 times as much.

Where is the infrastructure for a cashless economy?

Life thrown into disarray :More 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.

in urban and rural areas, affecting a population of about half the unorganized labor sector of 415 million persons, who are estimated to be daily wagers.only 10% households reporting an Internet connection at home, and only 22% households having one member with access to the net, ‘Digital India’ is far from becoming a reality yet.

In the poorer states like Bihar, UP, MP, Orissa and Assam the teledensity is about 50%. The ATM density is about one for every 10,000 as opposed to one for every 3-4000 in the states like Tamil Nadu and Maharashtra with superior banking networks. Only 20% of the ATMs are in the rural areas. Development here is highly desirable, but it will take many years.


Can digital transactions help? According to the RBI, there were 26.3 million credit cards and 712.4 million debit cards in the country by the end of August this year. This is a sizeable number. But, apart from cards held by offices and shops, there are people with multiple bank accounts who have more than one such card each. Many members of one family would also be having such cards.

While the government claims the move towards a cashless economy will flush out terrorism, curb tax evasion and stem the flow of black money, in reality it has ended up compromising people’s privacy, freedom of choice and given the state unprecedented control over their lives.

REF:many articles



No objective achieved:

Has the surgical strike got a bonanza for the government?

Has the surgical strike ended counterfeiting?

Has the surgical strike ended corruption?

Has the surgical strike ended terrorist funding?

Is there a justification to introduce 2000-rupee notes?

Ans: None at all.

Facesaver:MGNREGS to see record spending as demonetisation drives demand for work.MGNREGS data show demand for work in rural India surges as demonetisation pushes migrant labourers to return home.(increase in MGNREGS Fund in  2017 will not undone the distruption it make in many lives in first place)mgnregs

A drastic overhaul of direct taxes—rates, thresholds and exemptions—is overdue. The next wave of strong growth will not gather pace till bank balance sheets are cleaned up and politically influential business groups are forced to cut their excess leverage.

Ref:Many Articles


Disruptive for India

The government has provided no official explanation behind the note ban that is backed by hard data. what followed was chaos — amateur execution and shabby planning contributed to mile-long queues, ATM machines that had not been recalibrated for the new 2,000-rupee notes, banks that ran dry before mid-day, panic-induced hoarding and broken supply chains.death

It is not just the large corporations and big investors, but the spending ability of the common man — vegetable vendors, meat sellers, small food stall owners, taxiwallas — to buy goods and avail services is critical in a consumption-driven economy. When spending doesn’t happen on the ground, the resultant shock wave goes up to the layers above and reflect in the corporate earnings and, finally, macro-economic numbers.

The small but significant institutions that cater to the bottom of the pyramid — such as hundreds of cooperative banks across the country and microfinance institutions — are nearly paralysed due to the demonetisation exercise.

Thousands of small and medium enterprises and start-ups are hit badly. These segments too are key contributors to the economy by way of spending and contributing to the production chain

Those utterly ruined

Who are those who were utterly ruined? — The labourer who was laid off in industrial hubs like Tiruppur, Surat, and Moradabad. The daily wage earner who could not find work in farms or mandis or on construction sites. The self-employed, selling flowers or fruit or pav-bhaji, whose customers vanished for several weeks. The artisan plying his trade (carpenter, electrician, plumber) who got no calls. The small businessman whose sales fell by as much as 80 per cent. The truck owner and truck driver whose trucks were idle for several weeks. with death in queue . Fall in commodity prices for which there will be no compensation; tragic deaths, the number of which is more than 100,

not even a natural calamity could have wreaked such havoc across the country. Pensioners suffer as banks still struggle without smaller notes.

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who are the losers? — The average person who was compelled to make several visits to the bank to withdraw money from his own account. The person with a few old notes who had no access to a bank branch (because of distance) and exchanged her notes at a discount. The homemaker who had to scrounge for money to provide at least one meal a day for her family. The patient who had to forego his treatment at a hospital because he did not have money in his hands. The student who got his meal at the langar in the neighbourhood gurdwara. The farmer who could not buy seeds or fertilisers or hire labour and took a hit on productivity.

Worse is yet to come.

Who gained:

India’s richest 1% hold 58% of country’s total wealth: Study by rights group Oxfam ahead of the World Economic Forum (WEF) . showed that just 57 billionaires in India now have same wealth (USD 216 billion) as that of the bottom 70 per cent population of the country.

PSU banks write off Rs 1.54 lakh crore bad loans.

Corruption Has Increased In Last One Year As India Slips To 79th Rank In The Global List. The better connected send it abroad. According to Global Financial Integrity (GFI) India has exported an average of $46 billion each year for the past decade.

If ATMs are dry, where’s the raided stash coming from? . Based on the search and seizure of new bank notes in crores from the homes of bureaucrats and the well-connected, now we know why.

Ref:Many Articles


Economist Take on Monumental mismanagement

Under the leadership of former Prime Minister Dr. Manmohan Singh, a renowned economist and a former governor at the Reserve Bank of India (RBI), he unleashed the economic revolution with that landmark budget in 1991 opening up the Indian economy and ushering prosperity for the nation .India benefited the most from globalization. With its slice of global GDP moving up from 3.6% in 1990 to an estimated 7.3% by 2016.our GDP had grown around 3 times during the last 10 years. This was despite having global economic crisis. But we seldom acknowledge this fact. he thinks the country’s gross domestic product (GDP) could fall by about 2 percent in the aftermath of the demonetisation exercise being implemented .Dr. Singh said,  to name any country where people have deposited their money in the bank but they are not allowed to withdraw their money,”. When asked about strong words like organised plunder” and “legalised loot”, “Well that is what the common people feel, they feel that way. “he said.

Decline in the GDP, as Singh warned, would mean slow economic activity across sectors including agriculture, manufacturing and services, which are the core areas that contribute to the national income. The problem is when economic activity slows down, it will have a direct impact on millions of jobs, retail consumption, corporate earnings, real estate and construction activity. An economic slowdown would thus impact each one of us, no matter what you do for a living.

And Singh isn’t the only one who have warned about the impact of demonetisation on economy. According to Thomas Rookmaaker, director in Fitch’s Asia-Pacific Sovereigns Group, “the impact on GDP growth is clearly going to be negative in the short run and depends to a large extent on how long the cash crunch is going to take.”


Nobel laureate Amartya Sen said on the decision to demonetise currency was taken hurriedly without thinking about its consequences. “So far economics is concerned; I find no reasoning behind this decision. It will have adverse effects,”

If we are to have prosperity and political freedom, we must also have economic inclusion and a level playing field. Access to education, nutrition, healthcare, finance, and markets for all our citizens is a moral imperative, precisely because it is a precondition for sustainable—and democratic—economic growth.-RaghuramRajan

“In this backdrop, there is a non-trivial risk that a near-term consumption shock could have a more pronounced second order negative impact in this cycle, even with some countercyclical policy response,”

International Criticism:

India Has Committed A Massive Theft Of People’s Property’: Steve Forbes On Demonetisation. This bout of Nazi-like eugenics -has the government engaged in something so immoral,”.


Ref:Many Articles


Under Rajan, RBI adopted Consumer Price Index (CPI) as an important indicator of inflation, despite the government’s opposition.RaghuramRajan, has been conferred with the Central Banker of the Year award for the year 2016.As the Governor of RBI, he successfully brought down retail inflation from 9.8 percent in 2013 to 3.78 percent in 2015.he says I would focus more on tracking data and better tax administration to get at where money is not being declared.

97% banned notes said to be deposited in banks. Banks have received Rs14.97 trillion ($220 billion) as of 30 December, the deadline for handing in the banned notes.

YV Reddy, BimalJalan (two former governors of RBI) stoke debate on steady erosion of RBI autonomy. If I Were at RBI, I’d Have Withdrawn From Demonetisation Implementation: Y.V. Reddy. Currency in circulation contracted by 4.3% in the week to 6 January, indicating that the introduction of new notes has been Slow.

RBI admits Government called the shots on demonetisation.RBI approved Modi’s demonetisation bid hours before his announcement.In response to an RTI query, RBI said information on how many members favoured or opposed Modi’s demonetisation move isn’t ‘on record’.Were Jaitley, economic advisor consulted before demonetisation? RBI does not answer the RTI query. The Reserve Bank of India has refused to answer a query seeking information about the pre-demonetisation consultation process bracketing an RTI petition as under ‘seeking opinion category’. System not yet ready for cashless economy, RBI Governor tells PAC.RBI is reconciling the numbers provided by banks against the actual cash stashed in currency chests. Cooking up the fiscal deficit numbers : Growth deficit and the fiscal deficit. The budget is likely to overestimate the expected revenue and the absolute level of the permissible fiscal deficit.

An ATM at a village in (Khargone district) dispensed two ‘one-side blank’ currency of the new Rs 500 denomination. MP farmers get ‘genuine’ Rs 2000 The image of Mahatma Gandhi was missing from the notes because of a “printing error”, the farmers were told. Banking and police sources told that many such defective, yet genuine, currency notes were in circulation . Government’s own agencies estimated the quantity of FICN as Only 0.02% of the currency in circulation is fake currency.

Only 2304 billion worth new currency is printed between 8/11/16 & 13/01/17 (66 days).Find how much time needed for balance 8189 billion?.no additional security feature is added to the new notes than what is existing.

“The RBI has lost a good deal of its most prized asset — credibility. What is a holder of a rupee supposed to think of the worth of the RBI governor’s promise to pay the bearer a promised sum on presentation at anyplace where such notes are meant to be exchanged? Clearly the RBI governor has lost face and the institution has had its credibility whittled down.”

Ref :Many Articles


Cost of failure:

India’s ICDS program is the largest in the world and which keeps India just above sub-Saharan Africa in the infant mortality and life expectancy at age 5 index. The shortage of cash has hit this programids

Layoffs and unemployment: Demonetisation: 35 per cent job losses, 50 per cent revenue dip, says study by largest organisation of manufacturers, The study, conducted by AIMO, has also projected a drop in employment of 60 per cent and loss in revenue of 55 per cent before March 2017.Bank credit growth slowest in decades; Demonetisation effect, say economists. Growth of bank credit fell to a multi-decade low of 5.1% for the fortnight ended Dec 23.SBI chief economist SoumyaKanti Ghosh said credit growth was the lowest in over 60 yrs.

About 33 per cent of all employed persons are casual labourers (estimated at 15 crore). Suddenly, they found themselves without work because those who employed them could not find the money to pay wages.IDFC Bank to merge lending divisions, trim workforce.HDFC Bank lets go of 4,500 employees in Q3, may go slow on hiring. As tourists stay away from India, 50 mn livelihoods at risk. Cracker city Sivakasi shorn of its sparkle . Flower farmers’ income falls by 70%.Demonetization effect: Labourers skipping meals to survive. The long-term benefits of the move are yet to unfold, but thousands of unorganized workers, especially women, have become ‘cashless’. Out of cash, a dying textile town goes silent .Indian textile industry is challenged by falling exports, low productivity and rising prices.Tourism.JPG

the cost demonetisation will not end soon for all, especially for the common man, the unorganised or informal workers, the small businessmen, the retail traders, and the small and micro industrialists.

Why unemployment could be the cost of war against corruption?.Even if the first-order pain of demonetisation—the absolute lack of cash—is easing, the second- and third-order pains born of supply-chain problems, production cutbacks and so on are still to be felt. Demonetisation takes toll on investment, manufacturing.

Ref:Various Artiicle


With the demonetization dust settling, there are a few observations worth noting

According to the Budget papers, the size of the GDP at the end of 2016-17 will be about Rs 150 lakh crore. One per cent of that will be Rs 1.5 lakh crore. The cost of new notes will be about Rs.42000 crores and the loss of GDP will be around 2% or about Rs.3L crore. India is no longer the world’s fastest growing large economy.

Economic activity is taking a beating. IT WILL TAKE 5 YRS TO GET BACK ABOVE 7% GDP GROWTH SAYS CMIE.“Before the demonetisation shock, the Indian economy was expected to gradually accelerate its real GDP growth rate from 7.5% to over 8% per annum,” Mahesh Vyas, Managing Director at CMIE wrote in an article. “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% any time during the coming five years.”


New Investments fall sharply: New investment proposals have declined sharply since the demonetisation announcement; manufacturing contracted in December, show PMI data

 Factory output plunges. Core sector growth declines, which could weaken industrial output. Employment generation in manufacturing companies was negative at -5.2 per cent in 2014-15 compared to 3.2 per cent in 2013-14.Monthly services activity worst since 2008.Cash-intensive sectors hit. Credit growth plunges in key infra sectors: RBI data. The power sector, which accounted for almost 55 per cent of the infra credit demand, saw a contraction of 10.4 per cent in November — down from a decline of 4.8 per cent in April 2016.


Financial distress is a bigger cause of farmer suicides than crop failure.

Bank credit to the infrastructure sector, which had been steadily sliding over the first eight months of the current financial year, has recorded its sharpest contraction of 6.7 per cent in November. Auto sales at 16-year low in December as demonetisation take toll. Economic growth much weaker than what headline numbers show.


India GDP growth rate estimates do not take into account negative impact of demonetisation but do reveal some significant fact. Demonetisation takes toll on investment, manufacturing. Foreign flows hit 2008 lows.

Foreign investors have pulled out a whopping Rs 71,652 crore from Indian markets since November 2016 as demonetisation.

Demonetisation lead to over 30% fall in Smartphone sales in November in top 50 cities: IDC.

Demonetisation impact: ‘Housing sales may see 20-30% decline in 2017.

Axis Bank reports 73% drop in Q3 net profit; fresh slippages at Rs 4,560. Worst is yet to come.

REF:Many Articles.