Demonetisation, De Notifying specific Currencies

We have crossed one third of the 50 day limit set by our PM to bring back to normality the disturbances caused by de-notifying the Rs. 1000 and Rs. 500 Notes.

Before I delve into the pros and cons of this action as a sequel to my earlier blog, I have a declaration to make. I had no serious issues at business and personal. I am likely to be affected as I am planning to sell a flat and the real estate price as per some opinion may correct a tad lower.

It is clear to me now that this move is going to bring in a major transformative change in administration and banking as per governmental practice. Cash payments and handling is going to be a big challenge and it is clear that anyone who dare indulge in it must be prepared for severe punishment including spending time in Jail. How this will be done needs to be seen.

Another major development is the use of the receipts to the government exchequer. I tend to agree with the view that the liability cannot be extinguished as the 'Promise' by Governor is not time bound.

So technically, even after a couple of decades I can seek exchange and RBI cannot deny it. They may harass me and try to dissuade me - but they cannot say No to the exchange. That being the case the liability will remain in the books of RBI.

So the amount that will be available to the government is the punitive tax(50% last I heard of!) if it is announced and accepted by the persons who have deposited their excess cash and the withheld amount. Nothing more.

Banks in the meanwhile will make merry as they have huge deposits in savings account which is the cheapest form of borrowing. So rate cut is imminent and so is the lowering of interest costs on borrowings. Other than that we have to wait for the New Year and additional measures that may be taken by the government to react.

I still am hopeful that the move will turn out to be a big positive. Having observed politics for a while, though from a distance, I would like to be on the side of willy politicians like Nitishji. He is for Demonetisation and he has his ears to the ground where 23% persons of our country and mostly poor people reside!

Indian economy, was running too much on cash. The only tax payers, had to shell out much more because many didn't pay. How do we correct this? A major benefit, through demonetisation, should result in better tax compliance. Till Nov retail margins in most of the segments included a large portion of the evaded Sales Tax. When would this be corrected and how? The only methodology is to ensure better compliance. But to start you need to disrupt and send a shocker. And that is one of the missives in this act. I would hold my comment on demonetisation till the next year's budget, when the full impact and the follow through actions must start showing. To trash at this stage is premature. Changing course of the Tax compliance of India's size needs time and efforts. Some of these could be minor with disruptions at the core. GST and Demonetisation, I believe are together and I would wait for it to pan out.

Meetings and Discussions

In the course of a days work, it is but natural that we have meetings, where many diversified persons sit together brain storm to arrive at solutions and hand out decisions. Some use the opportunity to get appraised of themselves of the happenings. It is also a place some use to exhibit their authority and superiority.

After such sessions participants mind plays its own tricks as each perceive the exchanges during such sessions in their own way. For some it doesn't matter what others think; but others brood over it.

I belong to the latter category, especially if some one sounds condescending on the actions attributable to me and that too without a reason.

Condescending actions and words always get to me - yes they hurt me and affects my performance.

To overcome this, I am trying the latest trick advised by an expert - express your feelings in a Blog - write it down. Share it with friends and do not expect a feed back.

So how do I pay back. I don't. But will act to win back the confidence and then move on with life. I guess, I do not want to attend such sessions, with or with out putting in place the remedy.

US Elections and my take on this.

Mr. Donald Trump, has swept the elections and is the President Elect. Congratulations to the winner and the graceful looser Ms. Hillary Clinton. 

First thing which appeals to me is the smooth handing over of the power that ensues this landmark result. Indications are that the powers will shift smoothly - but outside rumblings may be heard for a while. 

Now - I didn't really enter the predicting race. But yes I would have voted for Clinton because I am sucker for the news paper reports, which glorified all the negatives of Trump, while glossing over that of Clintons. And yes; my favourite paper 'The Economist' vote was also for Clinton. 

But the Electoral College voters, had other plans. And analysing the result, I feel that this great country, US of A, might as well do with an alternative narrative. 

Why would I say this? 

• Donald Trump is not an unknown entry as the press would like us to believe in handling of the administration.  For anyone who has been close to power it must be abundantly clear that winner attracts many and to succeed further you must choose correctly, your advisors, your executives and administrators. For a start he has a solid deputy, who has already started doing the rounds in Washington power corridors. 
• White minorities; yes they are becoming one if you discount the so called well off ones; are not taken care of post world war II. They have been silently loosing ground to the Post Nazi world and they are being increasingly lead to believe that the Jews have taken control power at Washington D.C. This is a view which has many followers and I for one have reasons to believe that this cannot be just wished away. 
• And I find that Donald Trump is a doer. He has not given us indication that he is a fence sitter. Since he was not of the administration or has never been in politics directly, he could afford to be callous. As a rank outsider, he could promise to fix things. But a look at his personal track record, would show that this guy, is capable of going to great extent to achieve what he believes must be done. And that is good. We have to hope that he moderates his actions and goes about overhauling the defunct, badly failed bipartisan approach through intelligent but firm manoeuvres. You couldn't have expected that of a Clinton administration. 
• There has been excessive build up of inequality in the name of globalisation. Like the delinking of Gold and currency notes, today product pricing has lost all significance to production costs or the raw materials costs. Be it health care pricing or the cell phone pricing or the data analysts software pricing, you are able to get away nearly with astronomical margins. This is attributable to the globalisation efforts where very few have their way. And that is not a good thing. 
• Competition has to be back - but in a different way. Many are affected by the subsidy element brought in to the consumerist nation, by manipulating the currencies. It is time some one broke the system and brought in some order. 
• Immigration is also an issue. First you encourage private institutions to fund their own costs and to build their revenue open up the immigration gates combined with consumer loans - educational loans. So the locals are kept out of the system. How can this survive?
• Bank rolling of global corporations to kill competition through M&A have been the trend for decades now. And each move takes away more jobs and leave that much poorer. Small investors are replaced by algorithmic trades, where nano seconds matter. So the belief that Capital markets know best may not be true in many cases.  
• And the fight between Sunnis and Shias have been killing millions and the super power has not condemned it. Yes both deserve condemnation and as the President Elect, has declared though ominously, it is time that the entire clan belonging to the religious sect require a close examination. 

So I would wait for the alternative to play out. I believe that the President Elect has mastered the art of manipulating the electorate to reach here. The manipulator he is, I am sure that he knows that the electorate would dump him if he were to not move towards those changes which he has promised albeit not to the full extent. So let us wait for a Changed US of A.

US Elections and My take

Mr. Donald Trump, has swept the elections and is the President Elect. Congratulations to the winner and the graceful looser Ms. Hillary Clinton. 

First thing which appeals to me is the smooth handing over of the power that ensues this landmark result. Indications are that the powers will shift smoothly - but outside rumblings may be heard for a while. 

Now - I didn't really enter the predicting race. But yes I would have voted for Clinton because I am sucker for the news paper reports, which glorified all the negatives of Trump, while glossing over that of Clintons. And yes; my favourite paper 'The Economist' vote was also for Clinton. 

But the Electoral College voters, had other plans. And analysing the result, I feel that this great country, US of A, might as well do with an alternative narrative. 

Why would I say this? 

• Donald Trump is not an unknown entry as the press would like us to believe in handling of the administration.  For anyone who has been close to power it must be abundantly clear that winner attracts many and to succeed further you must choose correctly, your advisors, your executives and administrators. For a start he has a solid deputy, who has already started doing the rounds in Washington power corridors. 
• White minorities; yes they are becoming one if you discount the so called well off ones; are not taken care of post world war II. They have been silently loosing ground to the Post Nazi world and they are being increasingly lead to believe that the Jews have taken control power at Washington D.C. This is a view which has many followers and I for one have reasons to believe that this cannot be just wished away. 
• And I find that Donald Trump is a doer. He has not given us indication that he is a fence sitter. Since he was not of the administration or has never been in politics directly, he could afford to be callous. As a rank outsider, he could promise to fix things. But a look at his personal track record, would show that this guy, is capable of going to great extent to achieve what he believes must be done. And that is good. We have to hope that he moderates his actions and goes about overhauling the defunct, badly failed bipartisan approach through intelligent but firm manoeuvres. You couldn't have expected that of a Clinton administration. 
• There has been excessive build up of inequality in the name of globalisation. Like the delinking of Gold and currency notes, today product pricing has lost all significance to production costs or the raw materials costs. Be it health care pricing or the cell phone pricing or the data analysts software pricing, you are able to get away nearly with astronomical margins. This is attributable to the globalisation efforts where very few have their way. And that is not a good thing. 
• Competition has to be back - but in a different way. Many are affected by the subsidy element brought in to the consumerist nation, by manipulating the currencies. It is time some one broke the system and brought in some order. 
• Immigration is also an issue. First you encourage private institutions to fund their own costs and to build their revenue open up the immigration gates combined with consumer loans - educational loans. So the locals are kept out of the system. How can this survive?
• Bank rolling of global corporations to kill competition through M&A have been the trend for decades now. And each move takes away more jobs and leave that much poorer. Small investors are replaced by algorithmic trades, where nano seconds matter. So the belief that Capital markets know best may not be true in many cases.  
• And the fight between Sunnis and Shias have been killing millions and the super power has not condemned it. Yes both deserve condemnation and as the President Elect, has declared though ominously, it is time that the entire clan belonging to the religious sect require a close examination. 

So I would wait for the alternative to play out. I believe that the President Elect has mastered the art of manipulating the electorate to reach here. The manipulator he is, I am sure that he knows that the electorate would dump him if he were to not move towards those changes which he has promised albeit not to the full extent. So let us wait for a Changed US of A.

De Monetization

After 4 years and reading, listening about this singular unilateral act of demonetization I am convinced that it was a disaster and the worst part; most in government is sidestepping the acknowledgement of the failure of this move. Sorry state and bad times. 

Initial post 12/11/2016

Notes Demonetization  

The Big Announcement  

I was fortunate to notice the pop up at 8 Pm on 8/11/16, when the message read ‘Live Address of the Prime Minister now’. Being totally taken off guard, I switched channels and started listening to our PM. In his chaste Hindi, he was building up the case for a big announcement. My expectation was that he would announce a war or some other major initiative.  

But out of the blue came this announcement of Demonetization. He went on to share the details at length to show that he and his administration has gone to great details to minimize the impact.  

But after listening to him I was not convinced. I realized that this was a big event in our country and this surprise action will hurt many – some intended and many undeserving. First of all my thoughts went to the cash I have for tomorrow’s journey and quickly realized that I need not worry as I will be going to office and then only catch the flight. Geetha, my wife was very exited. She felt that this is the act and would punish those who have avoided taxes and who have generated unaccounted money. For this, she felt that a little bit of discomfort for most of the unaffected must be accepted.  

I was not convinced. My initial reaction was - couldn't the government found  better way to do this. Is this a political move to eliminate cash so a to facilitate victory in Punjab and UP election? Would this really punish all those intended or the guilty would find methods to circumvent this as well? 

My collegaues in the office were all very exited and they said 'wow - great thing'. The taxi driver in Mumbai from UP, had mixed feelings. He said it will not work and it will put all poor people in trouble. I heard that my vegetable vendor who has a bank account was charging up to Rs. 200 to convert the odd Rs. 500 rupee savings the house maids might have kept inside for emergency.

My feelings as I write this after almost 18 hours after the big announcement and reading about it in the papers is mixed.  

The move will hurt some for whom it is intended and will not impact the big fish. Common man and women will bear the brunt and that is a bad move. Economy will be severely hurt as consumer goods transactions will significantly drop. Major expenditure avenues of the economy which operate in cash – Agri commodities, Marriages and such celebrations, interior decoration, Tourism, logistics etc will suffer.  

And to make it successful, further measures are needed – especially tightening of raising of cash, stopping hawala transactions and ploughing back assets from Benami holdings back to circulation.  

By late afternoon I saw a news flash that any deposits over Rs.2.5 lac would be liable for scrutiny by Government and they may deduct 30 to 120%. That is comforting. 

What would I do differently? I would announce it at 8:00 in the morning of a lazy second Saturday instead of late night on Tuesday. I would recall the banking the staff and open for emergency exchange of notes on the same day by late afternoon. And yes I would introduce mobile exchange vans. I would allow eCommerce firms to accept limited cash – say Rs. 5000 per address for which an old count exists and so on so forth.  

I m holding the final verdict and would like to see follow up actions in the next few weeks before changing my opinion. For the moment though I feel that this is an I'll advised move. 

And yes – it is a wakeup call for all of us. Our PM can take big risks and we better be on the right side of law always.  

I had posted a link of this blog in my Facebook page and I list some of the comments for reference:

@ Selva Muthukumar: Sir excellent. You are right. 
Reforms and regulations are needed immediately in real estate, construction sector and also entertainment industry. Or else same cycle will be repeated after six months.
Transaction tax on cash withdrawal is a must.

@Suhashis Chowdhry Well written Gopu and fully agree. I think even the biggest of Modi detractors will grudgingly admit that the ostensible objective of removing black money from the market is laudable. However, one inescapable truth remains. 1) The methodology is ill advised 2) it will not remove the majority of the black money. To compound matters, it emerges that, the execution too could have been planned better. With a majority of the ATMs shut on account of lack of cash and huge queues in front of banks, the principal objectives will be very soon forgotten. I will, of course wait for credible statistics to be informed of the success of this move

@Swarna Kalayan 

Uncle,
Change is always difficult and everyone have their own views on how it can be done. And here we are talking about a change that affects 1.2 billion people.
If someone thinks that there is political gain and doubts PMs' integrity, I am really curious.

No politically motivated person with dig such a grave for himself. Only a true patriot will do this keeping the only think in mind. To improve the country. 

No normal politician has functioned so far keeping countries benefits in mind. Everyone has always worked in a way to make sure they get re-elected the next term to make more money. 

Especially with some of the major states going for election he still took a chance to come up with this. 

After he gave time to declare in disclosed income, IT records shows only 55000 Indian have an income of more than 1 crore. Is that believable? 

Immediate suffering is there, but tell me when the common man doesn't suffer in India. But this suffering will definitely benefit the common man in terms of value for his hard earned money. 
If persons hoarding black money doesn't declared, this still serves the purpose as the inflation will come down. Real estate will have "Real" pricing. 

History has proven that chance has not happened without hardship. If China has developed people of china have had their share of sacrifices. 
Every country that has developed the citizens have had their share of sacrifices.

Lastly I want to ask- why is the corrupt business man or the black money hoarder never blamed for this situation? Why only someone try to clean it is blamed? Is it because the classes system is so rooted in us that the we blame the cleaner for the bad smell and not the person who creates it in the first place.

And my reply: Dear Swarna Kalyaan I note that you have strong views and also like many of us believe in what is reported through the press. Let me just say this. Press, both Pro Modi and Against, have their own axe to grind. There are many incidents which are taking place reportedly which are working to defy this move. I have a self declaration to make here. I am not affected nor any in the family. I wasn't luckily inconvenienced. So, I also wish that this move bring forth the desired effect. And mark my last paragraph on the blog - "And yes – it is a wakeup call for all of us. Our PM can take big risks and we better be on the right side of law always." Let us wait and see

De Monetization

Notes Demonetization  

The Big Announcement  

I was fortunate to notice the pop up at 8 Pm on 8/11/16, when the message read ‘Live Address of the Prime Minister now’. Being totally taken off guard, I switched channels and started listening to our PM. In his chaste Hindi, he was building up the case for a big announcement. My expectation was that he would announce a war or some other major initiative.  

But out of the blue came this announcement of Demonetization. He went on to share the details at length to show that he and his administration has gone to great details to minimize the impact.  

But after listening to him I was not convinced. I realized that this was a big event in our country and this surprise action will hurt many – some intended and many undeserving. First of all my thoughts went to the cash I have for tomorrow’s journey and quickly realized that I need not worry as I will be going to office and then only catch the flight. Geetha, my wife was very exited. She felt that this is the act and would punish those who have avoided taxes and who have generated unaccounted money. For this, she felt that a little bit of discomfort for most of the unaffected must be accepted.  

I was not convinced. My initial reaction was - couldn't the government found  better way to do this. Is this a political move to eliminate cash so a to facilitate victory in Punjab and UP election? Would this really punish all those intended or the guilty would find methods to circumvent this as well? 

My collegaues in the office were all very exited and they said 'wow - great thing'. The taxi driver in Mumbai from UP, had mixed feelings. He said it will not work and it will put all poor people in trouble. I heard that my vegetable vendor who has a bank account was charging up to Rs. 200 to convert the odd Rs. 500 rupee savings the house maids might have kept inside for emergency.

My feelings as I write this after almost 18 hours after the big announcement and reading about it in the papers is mixed.  

The move will hurt some for whom it is intended and will not impact the big fish. Common man and women will bear the brunt and that is a bad move. Economy will be severely hurt as consumer goods transactions will significantly drop. Major expenditure avenues of the economy which operate in cash – Agri commodities, Marriages and such celebrations, interior decoration, Tourism, logistics etc will suffer.  

And to make it successful, further measures are needed – especially tightening of raising of cash, stopping hawala transactions and ploughing back assets from Benami holdings back to circulation.  

By late afternoon I saw a news flash that any deposits over Rs.2.5 lac would be liable for scrutiny by Government and they may deduct 30 to 120%. That is comforting. 

What would I do differently? I would announce it at 8:00 in the morning of a lazy second Saturday instead of late night on Tuesday. I would recall the banking the staff and open for emergency exchange of notes on the same day by late afternoon. And yes I would introduce mobile exchange vans. I would allow eCommerce firms to accept limited cash – say Rs. 5000 per address for which an old count exists and so on so forth.  

I m holding the final verdict and would like to see follow up actions in the next few weeks before changing my opinion. For the moment though I feel that this is an I'll advised move. 

And yes – it is a wakeup call for all of us. Our PM can take big risks and we better be on the right side of law always.  

I had posted a link of this blog in my Facebook page and I list some of the comments for reference:

@ Selva Muthukumar: Sir excellent. You are right. 
Reforms and regulations are needed immediately in real estate, construction sector and also entertainment industry. Or else same cycle will be repeated after six months.
Transaction tax on cash withdrawal is a must.

@Suhashis Chowdhry Well written Gopu and fully agree. I think even the biggest of Modi detractors will grudgingly admit that the ostensible objective of removing black money from the market is laudable. However, one inescapable truth remains. 1) The methodology is ill advised 2) it will not remove the majority of the black money. To compound matters, it emerges that, the execution too could have been planned better. With a majority of the ATMs shut on account of lack of cash and huge queues in front of banks, the principal objectives will be very soon forgotten. I will, of course wait for credible statistics to be informed of the success of this move

@Swarna Kalayan 

Uncle,
Change is always difficult and everyone have their own views on how it can be done. And here we are talking about a change that affects 1.2 billion people.
If someone thinks that there is political gain and doubts PMs' integrity, I am really curious.

No politically motivated person with dig such a grave for himself. Only a true patriot will do this keeping the only think in mind. To improve the country. 

No normal politician has functioned so far keeping countries benefits in mind. Everyone has always worked in a way to make sure they get re-elected the next term to make more money. 

Especially with some of the major states going for election he still took a chance to come up with this. 

After he gave time to declare in disclosed income, IT records shows only 55000 Indian have an income of more than 1 crore. Is that believable? 

Immediate suffering is there, but tell me when the common man doesn't suffer in India. But this suffering will definitely benefit the common man in terms of value for his hard earned money. 
If persons hoarding black money doesn't declared, this still serves the purpose as the inflation will come down. Real estate will have "Real" pricing. 

History has proven that chance has not happened without hardship. If China has developed people of china have had their share of sacrifices. 
Every country that has developed the citizens have had their share of sacrifices.

Lastly I want to ask- why is the corrupt business man or the black money hoarder never blamed for this situation? Why only someone try to clean it is blamed? Is it because the classes system is so rooted in us that the we blame the cleaner for the bad smell and not the person who creates it in the first place.

And my reply: Dear Swarna Kalyaan I note that you have strong views and also like many of us believe in what is reported through the press. Let me just say this. Press, both Pro Modi and Against, have their own axe to grind. There are many incidents which are taking place reportedly which are working to defy this move. I have a self declaration to make here. I am not affected nor any in the family. I wasn't luckily inconvenienced. So, I also wish that this move bring forth the desired effect. And mark my last paragraph on the blog - "And yes – it is a wakeup call for all of us. Our PM can take big risks and we better be on the right side of law always." Let us wait and see.