[msdivy]

Originally Posted by Guite

It is tragic that many many people at the bottom of the social strata cannot withdraw 2000 rupees a day but few people at the top can gain lakhs and crores of new currency a day. Our system is totally flawed. It need thorough cleanup. But will it ever happen?

Not sure how 2K notes would have helped normal folks. The folks with black money have already converted their cash to 2K notes. If Govt is serious about black money, they must cancel 2K note. They must recall all 2K notes & replace with 100s. Before that, being wise after the event must plug all the sources of currency leakage in the chain (RBI, banks, ATM cash management companies).

Originally Posted by sammyboy

Everyday there is some news about crores being nabbed from someone or the other and mostly in new currency. Here we are, standing in line for hours, supporting the entire move and not letting our family and friends lose hope, Cheering every time we get 2k from an ATM . Stay strong, I tell myself. Corruption is so deeply engrained in our system that one almost feels like a fool, almost. Rant over .

To get to 1 lakh crore, IT/ED must raid 100 crores every day for next 1000 days. Don't see that happening. The current seizure is like a drop in the pond. But the sight of few wades of currency bundles in a gunny bag makes great press

Originally Posted by blacksport

I'd rather my doctor not pay income tax from the Rs 200 I pay him. If I pay by PayTM and make the doc pay Rs 30 to the govt, then he will happily add the 30 to the consulting fee. In fact, I am not punishing the doctor, but myself! No thank you.

Rs 200 is your doctor's income. He must pay tax on this income. He cannot add tax to his income again

On cashless options, I see some posts on PayTM & similar wallets. For me, PayTM is a startup company feeding on investor money, struggling to stay afloat. They are not sure of their revenue when funding stops. They have great payments technology but very poor grievance handling mechanism. They are in low margin business and now taking a hit on card & bank transaction charges. They are trying to create a walled garden, but experience tells people don't like walled gardens.

For me, the best cashless option is a credit card. Any innovation in simplification of card transactions will be beneficial and aid transit to a cashless economy.

Originally Posted by Samurai

Then I came to Bangalore in this weekend. Yesterday I saw long lines at HDFC bank, none looked poor.

Cost of living, consumption, avenues for spending & the population is more in cities.

[Samurai]

Last two weeks I was at my Rural office, and had to visit my 80 year old widowed mom in her village couple times. I withdrew money from my local branch, just one guy in the line when I showed up. The cashier gave me four 2K and twenty 100s as I requested, without any fuss. Then I visited my mom and asked whether she needed cash. She said no, she has enough for now. Then I took her to the bank for the life certificate, the bank was deserted (just 3 officials & no customers) and their ATM had cash.

And the rural/small town retailers are still demanding cash, reluctant to switch to digital payment because it will show their true income on the record, and make them liable to pay tax. That I found really tiresome. Some of the bigger shops have started installing card machines. One guy said he has applied and it will take 3 weeks to come because of the heavy demand.

Then I came to Bangalore in this weekend. Yesterday I saw long lines at HDFC bank, none looked poor. It is indeed puzzling how rural areas have recovered lot faster than cities. The long lines are obviously due to reluctance to switchover to digital payment. They are drawing white money and turning it into black.

[avira_tk]

Originally Posted by Samurai

Lots of assumptions here.... complained about it ever.

Do you know the real cost of paying low level workers with cash?.... Most poor workers don't know what they are losing by taking cash.

Theoretical economics? Yes... myth of theoretical economics[/url] before in the economics thread.

What is vast quantity? What is the percentage compared to bank channel? These days every news is sensational. Last month they claimed terrorists are already funded with 2K notes. Turns out they just had 2 notes.

You operate in a lightly regulated industry in an area which has enough banks, that doesn't represent the majority. The benefits apply only to about 5% of the population that is part of the organised economy, I'm talking about the rest about which you have no clue. The government also has a permanent casual labour pool who are paid no benefits, paid in cash no less. You lose nothing when cash is paid upfront, except a promise of a pension from a ponzi scheme that is subject to legislative whims.

Theoretical economics sounds funny to you, why don't you comment on the competition and regulations aspect if you have anything worthwhile to say.

Vast quantity is the amount of money recovered from one person that would have taken 4 years of daily visits to get for ordinary people. I hope that satisfies your excruciatingly high standards.

It's funny people talk about demonetization as if it will reduce corruption, just two days ago, there was an article about how the law has been modified to make prosecution practically impossible. Talk to someone in the real estate industry and see if they are able to get registration done without a bribe, same bribes, new notes and business as usual. This is called price taking in economics, theory and otherwise.

[sdp1975]

Originally Posted by sgiitk

As per personal information, no queues in Gwalior, banks are dishing out 24k per week, and the ATMs seldom have more than two or three people. Kolkata is also more or less normal, but this is not true of the hinterland.

My parents are in Kolkata , and I spoke to them 2 days ago. There are long queues at banks. My father visited a SBI branch , not for withdrawing cash , but for some other work. He had to return on seeing the long queue spilling from the 1st floor onto the road.

He also told me several construction and jewelry workers had returned back to West Bengal from other parts of the country.

Here in Bangalore , ATMs are dry - certainly in my neighborhood , barring the one in my apartment complex. My office ATM is always dry and runs out of cash in an hour of loading with long queues.

[ptushar]

Originally Posted by nowwhat?

How did you know? I actually had a bypass surgery last year .

I was expecting a serious comment and I see this. Brought an instant smile on my face. Well, the fact that you have a great sense of humour suggests that the surgery went very well indeed. May everything be fine with you for years & years to come.

Originally Posted by nowwhat?

Personally I am very curious to see the results of this experiment, but I think we will only get the correct picture by next year at the earliest. A lot will depend on how the economy responds, how much resolve the government shows to go after black money now that there is a money trail they can follow, whether Indians make the shift to cashless, whether UPI will blossom instead of being stymied by the banks who own it, whether RuPay terminals will proliferate in rural areas and so on.

Exactly. We will need to wait and watch how things pan out. The world is divided on the impact of this move and we will need to see how things go from here. If this turns out to be the ONLY move, then basically we go nowhere and things will limp back to what they were. But if this move is aggressively followed by cajoling/pushing/forcing people to adopt digital / cashless technologies which leave a trail for the IT folks to track then we can expect some dramatic results.

I really believe that India's UPI, Aadhaar and Rupay are serious game changers. The world is watching what we do with this. If these are integrated correctly and pushed hard into India then we have a potential to beat the best in the industry. The forces who have bled India like parasites and leeches will surely throw spanner at works, but as a nation we will need to be resilient and push on with the implementation. Yes, a few people will crib and cry and talk of inconveniences. But we will need to push on.

For my part, I have taken a stand that as far as practically possible, I will walk away from an only cash deal. Whether it's a vegetable vendor or a builder, unless they accept cashless mode of payments, they will not get my business. Well, losing my business may not be a huge deterrent to them, but as more and more people adopt this strategy, the change is bound to happen.

[srishiva]

If the banks get the remaining 2.5 lakh crores deposited into banks, it would be that the scheme failed to do what it was supposed to.

Black money has come back into the system. The plan was to render them useless. Blame the corrupt system. Netas in the govt thought they will out smart the Netas and their cohorts :(

Unless there will be raids and booking of officials and people who had black money, the scheme has un-necessarily created lot of problems. And this is exactly what the opposition parties in this country are hoping for.

This scheme was in no way required to bring about a cashless economy.

[sgiitk]

@sdp1975; My information was from our son in law as of yesterday evening. He has his office in Gillander's House, Burra Bazar area and lives in Alipore. So maybe we have a checkered scenario. Yesterday, was business as usual in Kolkata. Gwalior was my brother-in-law who has about three banks within easy walking distance.

[Samurai]

Originally Posted by avira_tk

I'm talking about the rest about which you have no clue.

Again, you are assuming a lot. This is why I hate discussing economics with people who don't use it as part of their every day job. For me it is bread and butter.

Originally Posted by avira_tk

The government also has a permanent casual labour pool who are paid no benefits, paid in cash no less.

Government always has one rule for itself and completely different one for private companies. I have had enough arguments with labour officers on such things.

Originally Posted by avira_tk

Theoretical economics sounds funny to you, why don't you comment on the competition and regulations aspect if you have anything worthwhile to say.

Theoretical economics is the name of an academic journal. In reality, anything that happens in marketplace is Economics. Over that I have to keeping learning all kind of rules and regulations on a regular basis. I have no choice, since different government departments keep visiting the office or send notices every few months to verify our compliance.

Originally Posted by avira_tk

Vast quantity is the amount of money recovered from one person that would have taken 4 years of daily visits to get for ordinary people. I hope that satisfies your excruciatingly high standards.

What has fraud got to do with demonetization?

This is the recurring problem in the thread, as well as earlier economics thread. Fraud is common place in any economic system. It doesn't disprove the economics of demonetization.

Let me give a physical example:

Demonetization is like dropping a cotton ball from a height, hoping that it will hit the bulls-eye target painted on the ground. All the fraud stories and the reluctance to go cashless, are like the air resistance and crosswind offered to that cotton ball. It will definitely slow down the cotton ball, and it might take longer to reach ground. It may also get blown sideways and not fall exactly into the bulls-eye painted on the ground. That means the intended effect may happen slower and be inaccurate too. That is the nature of any economic plan.

But you can't claim that gravity has been disproved due to this delay and inaccuracy. Only in a vacuum it falls straight and at the best speed.

Just like how cotton ball's travel towards the bulls-eye get affected by air resistance and crosswinds, the demonetization goal will be affected by frauds and reluctance to accept cashless economy. We can't have an economic vaccum where fraud and reluctance will be completely absent. As long as it doesn't blow too far from the target, it is not bad. We will know the full effect only after few months or even a year.

[sachinpk]

Originally Posted by srishiva

If the banks get the remaining 2.5 lakh crores deposited into banks, it would be that the scheme failed to do what it was supposed to.

Well not exactly. All it means is that a lot of people deposited their black money hoping that, they can still recover a part of it by paying penalties or using the expert advice of Chartered Accountants etc. Right now there is an amendment which is getting passed at Lok Sabha, which amends the IT act. By paying a stiffer penalty (50%), people can still "white wash" some of their ill gotten wealth. This is a money bill, so the Rajya Sabha can do diddly squat.

If the government expected every single black money holder to just "roll over & die", that is not going to happen. And I don't think government also wanted it that way. Crooks have made these money, so being crooks they will try more dirty tricks to retain their money. What I feel is that government wanted a good amount of Rs.500 & Rs.1000s to come into the banking system (which means that they now have an audit trail).

The only people who may not deposit the money are; people holding to counterfeit money. Or by people who cannot be exposed with such money (criminals, hawala operators etc.). Other wise every other chappie who can some how "cook the books" would try to escape using some legal provisions.

For me, the whole exercise seems to have multiple angles (to look at it).

• Making the favourite currency of anti-national elements like counterfeiters (and some friendly neighbourhood countries) invalid.
• Force lots of black money hoarders to expose themselves, and make their money accountable.
• Rather than jailing them (or shaming them), make sure that what is important for the government comes in. And that important thing is money/tax dues. Public humiliation, jail terms, hand cuffing are for the common people; don't think the government wants to do it.
• Re-jig the economy (and the way business is done), so that things get cleaned up. A lot of industries which relied on cash dealings, will have to change their operating procedures. Which also means loss of employment; as what was seen in Kerala.
• Cash less economy (low priority), perhaps only for high value transactions.

Unless there will be raids and booking of officials and people who had black money, the scheme has un-necessarily created lot of problems. And this is exactly what the opposition parties in this country are hoping for.

For this we would have to wait for the new year. My next hope lies in the primary co.op banks in a few states. I expect some fire work from that quarters pretty soon. I don't want to say that the current government did every thing 100% right. But with a very biased media, I also cannot rely on 100% of their reports as well. The truth lies some where in between.

[Chetan_Rao]

Amidst all the hullabaloo, has any one heard any mention of politicians and bureaucrats being investigated/prosecuted so far? And can anyone shed some light on what exactly were the amendments made to the Prevention of Corruption Act recently, and its implications? I'm skeptical of media reporting, and would rather get a reasonable non-partisan opinion on it, if possible/available.

I did give it a read here and here. It does prima facie seem like stacking the deck in favor of bureaucrats, but I'd rather let someone more qualified than me on this stuff comment before I form any firm opinions.

[blacksport]

Originally Posted by Samurai

Now you see that currency crunch is an intentional thing to pressure people to move into cashless transactions, especially for large transactions. The government wants you to get fed up of standing in line and start using card/paytm/UPI etc. So they should not increase supply of currency, it will defeat the purpose of demonetization entirely.

Tell me you fell for that crap. Truth is the govt is clueless about what to do now. As somebody put it rightly, the govt is riding a tiger and is not sure how to get down without being eaten. And every day they are dishing out new rules and new stories on what they intend to do with this exercise.

Seriously whoever thought that they can take on an economy that was built for decades with a ill thought money changing scheme is not just naive, but an absolute idiot.

As I said before lets wait till Dec 30, and hope they will give us the numbers, how much they collected, how much we lost due to reduced economic activity, and how much the govt had to spend printing new notes for this circus.

Originally Posted by msdivy

Rs 200 is your doctor's income. He must pay tax on this income. He cannot add tax to his income again

Rs 200 is his take-home. If he has to give the govt another 30%, he will bill it to me not reduce from his take home. Simple math.

[ptushar]

Originally Posted by blacksport

Rs 200 is his take-home. If he has to give the govt another 30%, he will bill it to me not reduce from his take home. Simple math.

Buddy. That is exactly the point being made. If he charges 200 then he is expected to pay 30% to the govt as tax. (not Rs 30, but 30% assuming that a doctor is in the highest tax paying bracket). So appx Rs. 60 (it will be a little less than that due to staggered tax brackets) is supposed to go to the government. He can take home Rs 140 and that is his money to spend.

If he wants to take home Rs 200, then he needs to charge you appx Rs 285.

That is the real math. And that is the right & legal ways to do this.

[Ferrari1976]

Originally Posted by ptushar

Buddy. That is exactly the point being made. If he charges 200 then he is expected to pay 30% to the govt as tax. (not Rs 30, but 30% assuming that a doctor is in the highest tax paying bracket). So appx Rs. 60 (it will be a little less than that due to staggered tax brackets) is supposed to go to the government. He can take home Rs 140 and that is his money to spend.

If he wants to take home Rs 200, then he needs to charge you appx Rs 285.

That is the real math. And that is the right & legal ways to do this.

And in case he needs to pay Service Tax, then he would have to add 15% more to 285!!! Essentially close to 50% will be added to his current non-taxed charges which he will recover from his patients!! But then considering that only 2% Indians pay income tax, it is high time this turns into a reality. We are assuming that all Doctors are cheats and they pay zero income tax. Reality will be a little mellow and Doctors will have to increase their fees by 20-25%.

[Chetan_Rao]

Originally Posted by ptushar

......If he wants to take home Rs 200, then he needs to charge you appx Rs 285.

That is the real math. And that is the right & legal ways to do this.

Not sure you're saying anything different than he is?

His point is the doctor will increase his prices to keep his take-home same as before so he isn't losing anything, while the end customer is paying nearly 30% extra to foot the bill for the doctor wanting to stay on the right side of tax laws, which is, reasonably speaking, none of the customer's business except to the extent of him not wanting to have anything to do with the said doctor.

The govt. gains, the doctor loses nothing, the end customer pays significantly more for a service that was cheaper earlier.

All of it legal of course, but the point in this instance is increased end-user expense, not legality (at the customer's end). The doctor should've acted legally in the first place, and will turn legal now without any loss or additional burden on his income. How is that fair to the end customer who ends up paying more of his legal TDS income so someone else can avoid taking a hit for his erstwhile illegal practices. Why is the service provider entitled to a free pass at the service user's expense?

[Dieseltuned]

Originally Posted by Samurai

Last two weeks I was at my Rural office, and had to visit my 80 year old widowed mom in her village couple times. I withdrew money from my local branch, just one guy in the line when I showed up. The cashier gave me four 2K and twenty 100s as I requested, without any fuss. Then I visited my mom and asked whether she needed cash. She said no, she has enough for now. Then I took her to the bank for the life certificate, the bank was deserted (just 3 officials & no customers) and their ATM had cash.

And the rural/small town retailers are still demanding cash, reluctant to switch to digital payment because it will show their true income on the record, and make them liable to pay tax. That I found really tiresome. Some of the bigger shops have started installing card machines. One guy said he has applied and it will take 3 weeks to come because of the heavy demand.

Then I came to Bangalore in this weekend. Yesterday I saw long lines at HDFC bank, none looked poor. It is indeed puzzling how rural areas have recovered lot faster than cities. The long lines are obviously due to reluctance to switchover to digital payment. They are drawing white money and turning it into black.

I agree with Samurai sir here. I was on a 10 day vacation to Kerala and never in those 10 days have i witnessed a Queue outside any ATM more than 2 people. Since Kerala is a tourist destimnation also famous among foreigners we also found a few of them standing in the ATM queue but as I said never more then 2 people. Almost all small village / town had a working ATM mostly from SBT.

There are no gains without pains and if by bearing a pain of a few months my nation will be benefiting then it is definetly worth giving it a shot.

Regards
Dieseltuned