Demonetization – What next ?

Many have asked what next? Well, I haven’t really spent too much time on that yet but here are some immediate things that come in my mind. Feel free to add your suggestions in the comments section.

I see three kind of groups

1. Government (led by Modi)
2. Opposition political parties (led by nobody but everybody at same time)
3. General Public

Demonetization - Why many are still not convinced ?

 

Many are still not convinced because of following key reasons, in no particular order. There are many more reasons but I personally feel these are the critical ones.

1. Genuine Implementation Issues: I have already mentioned in my previous blogs that Modi government has completely messed up implementation. Whatever be the reason and whether they are justifiable or not, Modi has come across as extremely reactive in entire demonetization rollout. He has not made a good execution plan due to which comman man is sandwiched (and even dying) between Modi’s great initiative and the corrupt politicians, business folks, hawala operators and others arm-chair experts.

Demonetization – So what if I have black money. I evaded tax because system was corrupt. Do not equate me with corrupt politicians and leaders.

Following (in blue color) is direct copy paste from a long post I received on WhatsApp !

Please Read & Understand the Reality !

Why a Businessman Saved Taxes !

Govt. failed to provide constant Electricity, We bought Generators /Inverters

Govt. Failed to provide Water, We installed Submersible Pumps

Govt. Failed to provide Security, We hired own Private security Guards

Govt failed to provide Good primary Education, We admitted wards into Private  Schools

Demonetization – Many have already beaten the system?

 

Yes, looks like many have already beaten the system. They have

1. exchanged lot of un-accounted old 500 and 1,000 Rs notes in the initial days, utilizing service of folks willing to stand in long bank queues again and again (for a fee) until government mandated inking the finger (like what is done during voting in election)
2. deposited money in various other “poor” people accounts (again for a fee)

Demonetization – What’s the point of demonetization when most of the black money is hidden in different assets or in foreign banks ?

 

Black Money has to be seen in two different context.

1. Un-accounted cash in Indian currency notes
2. Assets bought by un-accounted money

  

Let’s look at both of them in detail.

Demonetization – Effect of change of currency notes size !

The real reason of why the new Rs 500 and 2,000 notes were changed is known only to Modi and his team. Even if they disclose it at a later date, politicians and large section of pubic might, as usual, will not accept it citing some or other reason. Nevertheless, we can as usual speculate on what change in note size means:

Demonetization - What about cost of printing and distributing new notes?

 

Many experts have aired their views on why demonetization is not sensible considering the high cost involved in entire logistics of printing and distributing the new currency notes in such a short time. Let’s try to understand how much it costs government and RBI to print these new notes.

Media reports says that logistics of printing new Rs 500 and Rs 2,000 notes itself is more than Rs 12,000 crores.

Why is Demonetization good for India ?

While this summary of Narendra Modi’s demonetization might not be fool proof without holes, logically and expectations per say, it does makes sense.

Modi current plan attacks following things

1.      Terrorism (be across border or internals like Naxals, Mafia, etc.,)

2.      Counterfeit (fake) Notes

3.      Black Money

4.      Economy

5.      Opposition - other “dishonest” political parties