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India demonetisation fails to purge black money

102 points by happy-go-lucky 9y ago

revmoo 9y ago
Don't post paywalled content
amrrs 9y ago
It's one of the most expected outcomes. But still for the government to go ahead and do this was primarily two reasons: 1. PR: The current Indian Govt was suffering from Beefgate and PM Modi was criticised for not making any comments on it but touring the world. While Modi was seemed to be an economic reformer, nothing of that sort happened until that. Hence this Demonetisation came up to showcase "PM Modi has done that no one would dare to do" headlines. It's also notable that the Prime Minister himself appeared on Media and announced this, while a right approach would be the man who signs on the currency: RBI Governor to do. A PR win it was! 2. Digitisation: One of the big concerns with Digital Currency (a non-decentralised one) is that it's really really hard to be private anymore. We'd just end up as another data point in someone's table and that's exactly what happened. This was very well explained in the recent SAS Forum happened in Mumbai, India. Data Scientists of Income Tax dept wanted data for analysis but didn't have one and got what they wanted with Demonetisation. So, that's obvious! A win-win for govt!
- amrrs 9y ago
  Down voted for a relevant content!
lightedman 9y ago
>Subscribe to read Can we get an actual readable article?
- belltaco 9y ago
  Click on the 'web' link under the HN title.
ramshanker 9y ago
No scheme can eliminate the evils 100%. However, overall it had pretty strong positive impact on economy. Many of the roadside merchants who used to be exclusively cash only, have started accepting dizital payments. All those on-record transactions are now part of formal banking system, instead of earlier don't-bother-about-tax approach. Combine this with the recent roll out of GST, we are on a very progressive path and with good momentum.
- jitix 9y ago
  yeah I think thats the best outcome of the whole exercise. I went to India in the middle of that shitstorm and it was really painful to travel around. Currency exchanges/banks only gave 2000 rs notes the nobody wanted to accept.
- ShirsenduK 9y ago
  GDP is down from 7.2 to 5.7. Those roadside merchants will never pay tax as they don't make enough. Internet connectivity/density is a joke in this country. Everyone is using cash again and you have to still pay bribes. Its time we tell the Emperor; The Emperor has no clothes!
- rm2889 9y ago
  I'm not sure. Historically, Indian governments have been most undeserving of our taxes simply because they've misspent it and/or misdirected it to achieve their own means (corruption, buying votes etc). Saying "yes but this government is different" also doesn't hold water when you look at the massive farm loan waivers that were just granted, and more waivers are on their way. How do you think the waivers were funded? Through our hard-earned tax money. Who do you think the debtors will now vote for in the next election cycle? The current ruling political party ofcourse. Finally, there are a lot of disadvantages for being on a completely centralized digital payment platform from an individual liberty point of view. Imagine that a significant portion of your net worth is just a number stored in a "secure database" which falls under the jurisdiction of some government. Now image that you vocally disagree with the government's policies enough for the government to start taking notice. It becomes very very easy for the government to shut you up - all they have to do is strongarm the bank to freeze that number. Its not as hypothetical as it sounds as the Indian government has done this before. A large portion of black money was deemed to be held up by the bureaucracy - bribes paid by private individuals and corporations to government employees and politicians. Had demonetization been done along with a hiring freeze (and subsequent trimming down) of the bureaucracy, I'd have been more certain that the motives behind demonetization were to root out corruption. However, the bureaucracy is now larger and more powerful than ever under this government. Thus, the incentives to seek bribes still exits because of this power imbalance between the powerful bureaucrats and relatively week individuals.
noddy1 9y ago
https://webcache.googleusercontent.com/search?q=cache:1xf7GBcSCjMJ:https://www.ft.com/content/7dbe0e14-8d8a-11e7-a352-e46f43c5825d+ https://webcache.googleusercontent.com/search?q=cache:1xf7GB... utterly terrible idea. I was in india in Dec/Jan and the amount of chaos resulting from demonetisation was immense. The outcome was obvious - noone was ever going to let a high value bank note become obsolete. Worst case is you sell it for close to face value and some poor person stands in line for 6 hours to be able to deposit it. It really speaks to the masochistic nature of the indian people that despite the whole exercise being pointless and stupid, they still supported Modi here because his heart was in the right place. Sorry but when people were literally dying as a result of the chaos, having good intentions does not cut it.
Retric 9y ago
As far as I can tell this is simply what success looks like. Depositing the money is just phase 1 and worked as expected. Phase 2 is tracking back large or unusual deposits to find criminals. Phase 3 is to discourage other from trying to doge taxes in the first place. Even if they only catch say 5% of people and don't directly gain money from this exercise, the indirect effect of scaring that many people is huge.
brudgers 9y ago
I would not be surprised if one of the unstated goals was the removal of counterfeit high denomination notes from circulation. High denomination notes are the most attractive to counterfeit and such counterfeiting is often done by state level actors with budgets sufficient to produce high quality notes. The actual number of notes taken out of circulation is 1% of legitimate notes plus the number of counterfeit notes in circulation because the number of notes in circulation prior to the transition included counterfeit notes.
- codeN 9y ago
  It was actually one of the stated secondary goals, with an appeal involving such currency being used by terrorists. However 1. While a higher than usual fake currency was detected the total fake currency detected was roughly 1 in 100,000. So there wasn't a fake note problem in general circulation. 2. The new notes launched do NOT have any additional security features, and hence while there will be a latency in getting the fakes right, it will continue to be a problem(albeit a small one).
tryingagainbro 9y ago
EU is about to make their 500 EUR illegal http://www.bbc.co.uk/news/business-36208146 http://www.bbc.co.uk/news/business-36208146 in a sense. If you're a drug dealer or a politician (no need to add the corrupt label in certain countries) I can help you with a few of them ;) Yeah, making your cash illegal--it is unless you're willing to explain in year 2032 how you ended up with a 50 gallon drum full of 500 euro notes--will help. But in many countries where the government is corrupt and cannot provide the basic needs, IMO, they need to let the people try to make a living. Social contract: we cannot give you much, but we will not impede you as you try to feed your kids.
- qcoh 9y ago
  From the article you linked: "The ECB says the €500 banknote remains legal tender and will always retain its value."
  - tryingagainbro 9y ago
    Yeah BUT you can bet your last dollar or euro that they will ask questions if you show up at a local bank with a few 500 euro notes, 20 years from now. Lots of questions and reports to the police will follow. And they will not be accepted as "legal tender" to settle drug /illegal deals, so they are out, in a way.
    - jandrese 9y ago
      Wouldn't you be asked some pointed questions if you walked into a bank with a stack of 500s? I know in the US there are people who run cash based businesses (construction/landscaping for example) that end up having to make special arrangements with their bank to avoid getting the third degree every time they bring in a deposit.
- tristor 9y ago
  This is nonsensical. The only even remotely rational implication is that it makes crime more difficult because large sums of money weigh more and take up more space. If you're accepting cash to evade taxes at your business though, you can just accept a bunch of 100 EUR notes as easily as 500 EUR notes. The same article says they're considering banning the $100 USD note, after they'd already pulled $500 USD from circulation many years ago. I'm not a tax evader or a criminal and I've used $100 USD notes and 500 EUR notes during my travels simply out of convenience. It's ridiculous to implicate the users of these bank notes as criminals purely on the size of the denomination.
thisisit 9y ago
For people who can't access the link: https://archive.fo/ynouY https://archive.fo/ynouY I am confused with the article though. What would have been a successful result? That the all canceled currencies wouldn't have been exchanged or deposited? I am reading this link: http://www.financialexpress.com/economy/all-rs-500-rs-1000-banned-notes-back-rbi-annual-report/833916/ http://www.financialexpress.com/economy/all-rs-500-rs-1000-b... The wording is confusing at best: " nearly 99% of the high-denomination currency notes of Rs 1,000 and Rs 500 that had been withdrawn on November 9, 2016" My comprehension says all currencies withdrawn on the date - Nov 9, 2016, when demonetization was started has been returned.
- varunvkrishnan 9y ago
  "I am confused with the article though. What would have been a successful result? That the all canceled currencies wouldn't have been exchanged or deposited?" Yes - exactly - the assumption earlier was that a significant amount of money stored with the denominations that were de-monetised was "black"/unaccounted money. And this would not be deposited into banks due to fear of being scrutinized. If this had happened on a large scale and if the money had not been deposited - the liability of the exchequer would have reduced.
  - thisisit 9y ago
    That is assuming the whole stuff was done for the singular goal in mind. There could have been multiple reasons: a. End counterfeit money b. Make a list of hoarders as everyone depositing money needed to show identification. It is going to be interesting times ahead with the data they might have collected.
- pavanred 9y ago
  I guess question is less of was it successful but rather was it necessary and did the move do any good at all? One thing I can't understand is, when I look up all the countries/regimes/dictators in history that have tried demonetization, and almost always it was done for the same reason - curbing corruption, black money, counterfeiting etc., and generally it resulted in people losing confidence in the institutions/governments, no real dent in corruption, counterfeiting even decades later. Unless I missed something, it just puzzles me why we would try it now and expect a different result.
vthallam 9y ago
>Arun Jaitley, finance minister, on Thursday defended the demonetisation at a conference in New Delhi. He admitted that black money had come back into the banking system, but said that tax officials were combing through people’s accounts to identify and tax it. >He said: “The fact that money has got into the banking system does not mean that it is all now legitimate . . . The money got identified with the owner whom henceforth had been fixed with the liability of explaining that money and facing taxation on it. This is the important part, money coming back to the system doesn't mean people can get away with it. An elaborate exercise is going on and I read multiple stories where the tax dept is sending notices to people with dubious deposits. Also, This is always going to be a polarised debate. Digital payments certainly went up, people started using bank accounts. Yes, it's not significant, but change is really slow
- nkskalyan 9y ago
  Question is, was it worth it? Weren't there easier ways to increase Digital payments? Better ways to make people put money into banks? Was it worth killing people? http://www.huffingtonpost.in/2016/11/17/day-9-demonetisation-death-toll-rises-to-55_a_21608769/ http://www.huffingtonpost.in/2016/11/17/day-9-demonetisation...
  - anigbrowl 9y ago
    'Killing people' makes it sounds like they were shooting anyone who objected, but that article does do a good job of documenting the human cost of economic dislocation. The abrupt and absolute change appears to have given rise to numerous avoidable problems.
  - dman 9y ago
    Was it worth extending the status quo where around 1 percent of the population pays any tax at all because of the rampant black market economy? (12.5 million people paid any tax at all on a population of 1.23 billion, source - https://www.cnbc.com/2016/05/03/guess-how-many-people-pay-taxes-in-india.html https://www.cnbc.com/2016/05/03/guess-how-many-people-pay-ta...).
- gordon_freeman 9y ago
billturner 9y ago
There were a couple of interesting Planet Money podcast episodes on this from earlier this year: * part 1: http://www.npr.org/sections/money/2017/05/10/527803742/episode-770-when-indias-cash-disappeared-part-one http://www.npr.org/sections/money/2017/05/10/527803742/episo... * part 2: http://www.npr.org/sections/money/2017/05/12/528181998/episode-771-when-indias-cash-disappeared-part-two http://www.npr.org/sections/money/2017/05/12/528181998/episo...
gauravhp 9y ago
All Positive comments here are made by those who don't live in india and are influenced by massive propaganda machinery that ruling parting of india is running. As someone who actually lives in india, I am vouch that Demonetisation was a disaster of all sorts. Ruling party kept justifying this failure by shifting the goal posts again and again. Here is a piece which describes in detail, this monumental failure of indian government failure http://www.dailyo.in/business/note-ban-demonetisation-rbi-narendra-modi-arun-jaitley-black-money/story/1/19265.html http://www.dailyo.in/business/note-ban-demonetisation-rbi-na... See how shamelessly the ruling party shifted the goal posts trying to justify their pathetic failure http://indianexpress.com/article/india/demonetisation-rbi-annual-report-arun-jaitley-pm-narendra-modi-as-money-flowed-back-in-how-goalposts-were-shifted-4821566/ http://indianexpress.com/article/india/demonetisation-rbi-an...
- Bhilai 9y ago
  This sounds pretty accurate. Not sure why you are being downvoted.
- deleted 9y ago
  [deleted]
- splintercell 9y ago
  In November I predicted this to my Indian friends (who were quite excited by the new changes) that a rational Indian person shouldn't throw away their old black money, because this money would make a come back in a few years, when the new money starts to lose value due to inflation (Indian Rupee is inflated by the govt at a crazy rate, because that's how the govt funds itself in lieu of taxes). This would eventually reach to a point when new currency would die out in the hands of the old currency. Why? Because what Indian govt has done is not 'demonetization' rather they have announced that they would stop printing more old currency and start printing a new currency. But it's like USG issuing Bitcoin like currency (without the electronicy parts, but with the fixed supply, and anonymity of cash). In other words, the old Indian currency is the perfect black market currency created, and it will just keep gaining value over time as new currency keeps losing value. My prediction was for at least 4-5 years, but pleasantly surprised to have it come true in only a few years.
Bhilai 9y ago
General sentiment is that the BJP government did this to purge the black money held by opposition parties to win the UP (Uttar Pradesh) state elections. Demonitization exercise did not come as a surprise to most BJP insiders, who had already made arrangements to stash their black money away.
ge96 9y ago
That was pretty F'd haha "Hey guys! Guess what? Your money is worthless!"
CryptoPunk 9y ago
The black and grey market are vital checks against government corruption and repression. The people arguing that eliminating cash is good because it prevents people from hiding their financial activity are basically taking the stance that we'd be better off without privacy and trusting all of our information to government officials. It's a dangerous delusion.
kareldonk 9y ago
This is the new slavery. This kind of stuff is precisely why bitcoin was created. Taxation is theft and slavery.
- sctb 9y ago
  We can please do without the tedious talking points, like the guidelines ask: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html.
  - kareldonk 9y ago
    Nothing tedious about my comment
ijafri 9y ago
i don't think any real dude having enough money would keep it in a local currency when he can just buy euro bonds or foreign currency $ or Euro etc ... it i guess only had effected small fishes to some extent, but at the end of the day, the question remain did it help at all curb corruption. Corruption like water will pave its way in terms of monetarily. they will find a way out ... it's not big deal ... such efforts despite looking promising, will be futile. So my conclusion 'corruption' is not a monetary issue, it's a system issue, fix the system.... and in order to have a 'healthy' system just like we see in the 1st World, everyone makes at least what they deserve or can live good enough ... if not luxurious. after you give them reasonable good salary keep a check, and hire 'educated' people. This worked here in Pakistan, our traffic police 'was' most corrupt, Govt raised their salaries 3x .... no more bribe ... they inducted Graduate Students and trained!!! at least our Traffic police dudes are now at Lahore City of Pakistan ... corruption free!!
sifar 9y ago
It doesn't cease to amaze me how the finance minister can say these things with a straight face. Ofcourse this was the original plan all along, but since one cannot say that upfront to the people, one has to resort to all kinds of propoganda and hence the shifting of the goalposts from corruption/black money, fake currency to ultimately a cash-less society. The major sources of black money in cash(which is a very small % of the total black money) are from 1) capitalist - industry owners, builders 2) politicians/bureaucracy 3) SME - small & medium enterprises, doctors 4) Informal sector - smaller shops, daily labour By definition, 1) & 2) are not affected by this. Those that get mentioned in the news are mostly anecdata/propoganda. It is the 3) & 4) that are mostly hit by this which, alongwith the government, is one of the biggest employment generator. The wealthy among them get away by variety of means. 4) are the worst affected even though most of them don't earn enough to be taxed. All the talk of fighting corruption is doublespeak when, in the finance bill, they allowed for unlimited anonymous corporate donation to political parties The cost of printing & distribution of new notes was 80 Billion Rupees [0], up from 34 Billion Rupees the previous year. The amount of fake currency detected from all the notes which were returned was .... wait a minute ... 400 Million Rupees [0]. Though this was a statistical detection mechanism and even if you double the estimates, it is barely 1% of just the cost of printing new notes. To speak nothing of the economic destruction it caused. [0] https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx?year=2017 https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx...
kapilkaisare 9y ago
An article[0] on Medium, albeit a thought experiment, offers an interesting take on the demonetization program the Indian government adopted. Here's a snippet: "You [NDA/GoI] do two things — One, you neutralize the Congress with the only way you can neutralize their resources — Black money and Demonetization. Even if you don’t reduce their resources, you at least succeed in reducing their liquidity. You take a hit too but if you look at the damage you cause your biggest rival, this is a a shin graze." 0: https://medium.com/indian-thoughts/something-interesting-is-happening-in-indian-politics-and-its-not-right-wing-nationalism-1a775dbf6ffe https://medium.com/indian-thoughts/something-interesting-is-...
int-main 9y ago
Somebody explain it to me how common is it among people to keep black money in cash form? Wouldn't they rather have it transferred to an off-shore account or invest is something, say gold?

Don't post paywalled content

It's one of the most expected outcomes. But still for the government to go ahead and do this was primarily two reasons: 1. PR: The current Indian Govt was suffering from Beefgate and PM Modi was criticised for not making any comments on it but touring the world. While Modi was seemed to be an economic reformer, nothing of that sort happened until that. Hence this Demonetisation came up to showcase "PM Modi has done that no one would dare to do" headlines. It's also notable that the Prime Minister himself appeared on Media and announced this, while a right approach would be the man who signs on the currency: RBI Governor to do. A PR win it was! 2. Digitisation: One of the big concerns with Digital Currency (a non-decentralised one) is that it's really really hard to be private anymore. We'd just end up as another data point in someone's table and that's exactly what happened. This was very well explained in the recent SAS Forum happened in Mumbai, India. Data Scientists of Income Tax dept wanted data for analysis but didn't have one and got what they wanted with Demonetisation. So, that's obvious! A win-win for govt!

amrrs 9y ago
Down voted for a relevant content!

lightedman 9y ago

>Subscribe to read Can we get an actual readable article?

belltaco 9y ago
Click on the 'web' link under the HN title.

ramshanker 9y ago

No scheme can eliminate the evils 100%. However, overall it had pretty strong positive impact on economy. Many of the roadside merchants who used to be exclusively cash only, have started accepting dizital payments. All those on-record transactions are now part of formal banking system, instead of earlier don't-bother-about-tax approach. Combine this with the recent roll out of GST, we are on a very progressive path and with good momentum.

jitix 9y ago
yeah I think thats the best outcome of the whole exercise. I went to India in the middle of that shitstorm and it was really painful to travel around. Currency exchanges/banks only gave 2000 rs notes the nobody wanted to accept.
ShirsenduK 9y ago
GDP is down from 7.2 to 5.7. Those roadside merchants will never pay tax as they don't make enough. Internet connectivity/density is a joke in this country. Everyone is using cash again and you have to still pay bribes. Its time we tell the Emperor; The Emperor has no clothes!
rm2889 9y ago
I'm not sure. Historically, Indian governments have been most undeserving of our taxes simply because they've misspent it and/or misdirected it to achieve their own means (corruption, buying votes etc). Saying "yes but this government is different" also doesn't hold water when you look at the massive farm loan waivers that were just granted, and more waivers are on their way. How do you think the waivers were funded? Through our hard-earned tax money. Who do you think the debtors will now vote for in the next election cycle? The current ruling political party ofcourse. Finally, there are a lot of disadvantages for being on a completely centralized digital payment platform from an individual liberty point of view. Imagine that a significant portion of your net worth is just a number stored in a "secure database" which falls under the jurisdiction of some government. Now image that you vocally disagree with the government's policies enough for the government to start taking notice. It becomes very very easy for the government to shut you up - all they have to do is strongarm the bank to freeze that number. Its not as hypothetical as it sounds as the Indian government has done this before. A large portion of black money was deemed to be held up by the bureaucracy - bribes paid by private individuals and corporations to government employees and politicians. Had demonetization been done along with a hiring freeze (and subsequent trimming down) of the bureaucracy, I'd have been more certain that the motives behind demonetization were to root out corruption. However, the bureaucracy is now larger and more powerful than ever under this government. Thus, the incentives to seek bribes still exits because of this power imbalance between the powerful bureaucrats and relatively week individuals.

noddy1 9y ago

https://webcache.googleusercontent.com/search?q=cache:1xf7GBcSCjMJ:https://www.ft.com/content/7dbe0e14-8d8a-11e7-a352-e46f43c5825d+ https://webcache.googleusercontent.com/search?q=cache:1xf7GB... utterly terrible idea. I was in india in Dec/Jan and the amount of chaos resulting from demonetisation was immense. The outcome was obvious - noone was ever going to let a high value bank note become obsolete. Worst case is you sell it for close to face value and some poor person stands in line for 6 hours to be able to deposit it. It really speaks to the masochistic nature of the indian people that despite the whole exercise being pointless and stupid, they still supported Modi here because his heart was in the right place. Sorry but when people were literally dying as a result of the chaos, having good intentions does not cut it.

Retric 9y ago

As far as I can tell this is simply what success looks like. Depositing the money is just phase 1 and worked as expected. Phase 2 is tracking back large or unusual deposits to find criminals. Phase 3 is to discourage other from trying to doge taxes in the first place. Even if they only catch say 5% of people and don't directly gain money from this exercise, the indirect effect of scaring that many people is huge.

brudgers 9y ago

I would not be surprised if one of the unstated goals was the removal of counterfeit high denomination notes from circulation. High denomination notes are the most attractive to counterfeit and such counterfeiting is often done by state level actors with budgets sufficient to produce high quality notes. The actual number of notes taken out of circulation is 1% of legitimate notes plus the number of counterfeit notes in circulation because the number of notes in circulation prior to the transition included counterfeit notes.

codeN 9y ago
It was actually one of the stated secondary goals, with an appeal involving such currency being used by terrorists. However 1. While a higher than usual fake currency was detected the total fake currency detected was roughly 1 in 100,000. So there wasn't a fake note problem in general circulation. 2. The new notes launched do NOT have any additional security features, and hence while there will be a latency in getting the fakes right, it will continue to be a problem(albeit a small one).

tryingagainbro 9y ago

EU is about to make their 500 EUR illegal http://www.bbc.co.uk/news/business-36208146 http://www.bbc.co.uk/news/business-36208146 in a sense. If you're a drug dealer or a politician (no need to add the corrupt label in certain countries) I can help you with a few of them ;) Yeah, making your cash illegal--it is unless you're willing to explain in year 2032 how you ended up with a 50 gallon drum full of 500 euro notes--will help. But in many countries where the government is corrupt and cannot provide the basic needs, IMO, they need to let the people try to make a living. Social contract: we cannot give you much, but we will not impede you as you try to feed your kids.

qcoh 9y ago
From the article you linked: "The ECB says the €500 banknote remains legal tender and will always retain its value."
- tryingagainbro 9y ago
  Yeah BUT you can bet your last dollar or euro that they will ask questions if you show up at a local bank with a few 500 euro notes, 20 years from now. Lots of questions and reports to the police will follow. And they will not be accepted as "legal tender" to settle drug /illegal deals, so they are out, in a way.
  - jandrese 9y ago
    Wouldn't you be asked some pointed questions if you walked into a bank with a stack of 500s? I know in the US there are people who run cash based businesses (construction/landscaping for example) that end up having to make special arrangements with their bank to avoid getting the third degree every time they bring in a deposit.
tristor 9y ago
This is nonsensical. The only even remotely rational implication is that it makes crime more difficult because large sums of money weigh more and take up more space. If you're accepting cash to evade taxes at your business though, you can just accept a bunch of 100 EUR notes as easily as 500 EUR notes. The same article says they're considering banning the $100 USD note, after they'd already pulled $500 USD from circulation many years ago. I'm not a tax evader or a criminal and I've used $100 USD notes and 500 EUR notes during my travels simply out of convenience. It's ridiculous to implicate the users of these bank notes as criminals purely on the size of the denomination.

thisisit 9y ago

For people who can't access the link: https://archive.fo/ynouY https://archive.fo/ynouY I am confused with the article though. What would have been a successful result? That the all canceled currencies wouldn't have been exchanged or deposited? I am reading this link: http://www.financialexpress.com/economy/all-rs-500-rs-1000-banned-notes-back-rbi-annual-report/833916/ http://www.financialexpress.com/economy/all-rs-500-rs-1000-b... The wording is confusing at best: " nearly 99% of the high-denomination currency notes of Rs 1,000 and Rs 500 that had been withdrawn on November 9, 2016" My comprehension says all currencies withdrawn on the date - Nov 9, 2016, when demonetization was started has been returned.

varunvkrishnan 9y ago
"I am confused with the article though. What would have been a successful result? That the all canceled currencies wouldn't have been exchanged or deposited?" Yes - exactly - the assumption earlier was that a significant amount of money stored with the denominations that were de-monetised was "black"/unaccounted money. And this would not be deposited into banks due to fear of being scrutinized. If this had happened on a large scale and if the money had not been deposited - the liability of the exchequer would have reduced.
- thisisit 9y ago
  That is assuming the whole stuff was done for the singular goal in mind. There could have been multiple reasons: a. End counterfeit money b. Make a list of hoarders as everyone depositing money needed to show identification. It is going to be interesting times ahead with the data they might have collected.
pavanred 9y ago
I guess question is less of was it successful but rather was it necessary and did the move do any good at all? One thing I can't understand is, when I look up all the countries/regimes/dictators in history that have tried demonetization, and almost always it was done for the same reason - curbing corruption, black money, counterfeiting etc., and generally it resulted in people losing confidence in the institutions/governments, no real dent in corruption, counterfeiting even decades later. Unless I missed something, it just puzzles me why we would try it now and expect a different result.

vthallam 9y ago

>Arun Jaitley, finance minister, on Thursday defended the demonetisation at a conference in New Delhi. He admitted that black money had come back into the banking system, but said that tax officials were combing through people’s accounts to identify and tax it. >He said: “The fact that money has got into the banking system does not mean that it is all now legitimate . . . The money got identified with the owner whom henceforth had been fixed with the liability of explaining that money and facing taxation on it. This is the important part, money coming back to the system doesn't mean people can get away with it. An elaborate exercise is going on and I read multiple stories where the tax dept is sending notices to people with dubious deposits. Also, This is always going to be a polarised debate. Digital payments certainly went up, people started using bank accounts. Yes, it's not significant, but change is really slow

nkskalyan 9y ago
Question is, was it worth it? Weren't there easier ways to increase Digital payments? Better ways to make people put money into banks? Was it worth killing people? http://www.huffingtonpost.in/2016/11/17/day-9-demonetisation-death-toll-rises-to-55_a_21608769/ http://www.huffingtonpost.in/2016/11/17/day-9-demonetisation...
- anigbrowl 9y ago
  'Killing people' makes it sounds like they were shooting anyone who objected, but that article does do a good job of documenting the human cost of economic dislocation. The abrupt and absolute change appears to have given rise to numerous avoidable problems.
- dman 9y ago
  Was it worth extending the status quo where around 1 percent of the population pays any tax at all because of the rampant black market economy? (12.5 million people paid any tax at all on a population of 1.23 billion, source - https://www.cnbc.com/2016/05/03/guess-how-many-people-pay-taxes-in-india.html https://www.cnbc.com/2016/05/03/guess-how-many-people-pay-ta...).
gordon_freeman 9y ago

billturner 9y ago

There were a couple of interesting Planet Money podcast episodes on this from earlier this year: * part 1: http://www.npr.org/sections/money/2017/05/10/527803742/episode-770-when-indias-cash-disappeared-part-one http://www.npr.org/sections/money/2017/05/10/527803742/episo... * part 2: http://www.npr.org/sections/money/2017/05/12/528181998/episode-771-when-indias-cash-disappeared-part-two http://www.npr.org/sections/money/2017/05/12/528181998/episo...

gauravhp 9y ago

All Positive comments here are made by those who don't live in india and are influenced by massive propaganda machinery that ruling parting of india is running. As someone who actually lives in india, I am vouch that Demonetisation was a disaster of all sorts. Ruling party kept justifying this failure by shifting the goal posts again and again. Here is a piece which describes in detail, this monumental failure of indian government failure http://www.dailyo.in/business/note-ban-demonetisation-rbi-narendra-modi-arun-jaitley-black-money/story/1/19265.html http://www.dailyo.in/business/note-ban-demonetisation-rbi-na... See how shamelessly the ruling party shifted the goal posts trying to justify their pathetic failure http://indianexpress.com/article/india/demonetisation-rbi-annual-report-arun-jaitley-pm-narendra-modi-as-money-flowed-back-in-how-goalposts-were-shifted-4821566/ http://indianexpress.com/article/india/demonetisation-rbi-an...

Bhilai 9y ago
This sounds pretty accurate. Not sure why you are being downvoted.
deleted 9y ago
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splintercell 9y ago
In November I predicted this to my Indian friends (who were quite excited by the new changes) that a rational Indian person shouldn't throw away their old black money, because this money would make a come back in a few years, when the new money starts to lose value due to inflation (Indian Rupee is inflated by the govt at a crazy rate, because that's how the govt funds itself in lieu of taxes). This would eventually reach to a point when new currency would die out in the hands of the old currency. Why? Because what Indian govt has done is not 'demonetization' rather they have announced that they would stop printing more old currency and start printing a new currency. But it's like USG issuing Bitcoin like currency (without the electronicy parts, but with the fixed supply, and anonymity of cash). In other words, the old Indian currency is the perfect black market currency created, and it will just keep gaining value over time as new currency keeps losing value. My prediction was for at least 4-5 years, but pleasantly surprised to have it come true in only a few years.

Bhilai 9y ago

General sentiment is that the BJP government did this to purge the black money held by opposition parties to win the UP (Uttar Pradesh) state elections. Demonitization exercise did not come as a surprise to most BJP insiders, who had already made arrangements to stash their black money away.

ge96 9y ago

That was pretty F'd haha "Hey guys! Guess what? Your money is worthless!"

CryptoPunk 9y ago

The black and grey market are vital checks against government corruption and repression. The people arguing that eliminating cash is good because it prevents people from hiding their financial activity are basically taking the stance that we'd be better off without privacy and trusting all of our information to government officials. It's a dangerous delusion.

kareldonk 9y ago

This is the new slavery. This kind of stuff is precisely why bitcoin was created. Taxation is theft and slavery.

sctb 9y ago
We can please do without the tedious talking points, like the guidelines ask: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html.
- kareldonk 9y ago
  Nothing tedious about my comment

ijafri 9y ago

i don't think any real dude having enough money would keep it in a local currency when he can just buy euro bonds or foreign currency $ or Euro etc ... it i guess only had effected small fishes to some extent, but at the end of the day, the question remain did it help at all curb corruption. Corruption like water will pave its way in terms of monetarily. they will find a way out ... it's not big deal ... such efforts despite looking promising, will be futile. So my conclusion 'corruption' is not a monetary issue, it's a system issue, fix the system.... and in order to have a 'healthy' system just like we see in the 1st World, everyone makes at least what they deserve or can live good enough ... if not luxurious. after you give them reasonable good salary keep a check, and hire 'educated' people. This worked here in Pakistan, our traffic police 'was' most corrupt, Govt raised their salaries 3x .... no more bribe ... they inducted Graduate Students and trained!!! at least our Traffic police dudes are now at Lahore City of Pakistan ... corruption free!!

sifar 9y ago

It doesn't cease to amaze me how the finance minister can say these things with a straight face. Ofcourse this was the original plan all along, but since one cannot say that upfront to the people, one has to resort to all kinds of propoganda and hence the shifting of the goalposts from corruption/black money, fake currency to ultimately a cash-less society. The major sources of black money in cash(which is a very small % of the total black money) are from 1) capitalist - industry owners, builders 2) politicians/bureaucracy 3) SME - small & medium enterprises, doctors 4) Informal sector - smaller shops, daily labour By definition, 1) & 2) are not affected by this. Those that get mentioned in the news are mostly anecdata/propoganda. It is the 3) & 4) that are mostly hit by this which, alongwith the government, is one of the biggest employment generator. The wealthy among them get away by variety of means. 4) are the worst affected even though most of them don't earn enough to be taxed. All the talk of fighting corruption is doublespeak when, in the finance bill, they allowed for unlimited anonymous corporate donation to political parties The cost of printing & distribution of new notes was 80 Billion Rupees [0], up from 34 Billion Rupees the previous year. The amount of fake currency detected from all the notes which were returned was .... wait a minute ... 400 Million Rupees [0]. Though this was a statistical detection mechanism and even if you double the estimates, it is barely 1% of just the cost of printing new notes. To speak nothing of the economic destruction it caused. [0] https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx?year=2017 https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx...

kapilkaisare 9y ago

An article[0] on Medium, albeit a thought experiment, offers an interesting take on the demonetization program the Indian government adopted. Here's a snippet: "You [NDA/GoI] do two things — One, you neutralize the Congress with the only way you can neutralize their resources — Black money and Demonetization. Even if you don’t reduce their resources, you at least succeed in reducing their liquidity. You take a hit too but if you look at the damage you cause your biggest rival, this is a a shin graze." 0: https://medium.com/indian-thoughts/something-interesting-is-happening-in-indian-politics-and-its-not-right-wing-nationalism-1a775dbf6ffe https://medium.com/indian-thoughts/something-interesting-is-...

int-main 9y ago

Somebody explain it to me how common is it among people to keep black money in cash form? Wouldn't they rather have it transferred to an off-shore account or invest is something, say gold?