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The author is a known critic of the demonetization policy. This was a complicated decision and it is still unclear whether it worked or not. I personally know a

The author is a known critic of the demonetization policy. This was a complicated decision and it is still unclear whether it worked or not. I personally know a lot of business owners and merchants who really hate Modi for this move - which I feel is a good sign given these are the very people who kept the so called black money hidden from the govt and were negatively affected. Of course, the GDP would fall given economic activity got affected at the grass roots level. That said, there were some benefits 1) people would think twice before hoarding onto cash and keep it hidden from the govt 2) more people would use banking facilities as the govt basically forced a lot of people to create bank accounts and deposit cash there for easy tracking. Also, there are long term tax benefits for the govt too given now it has a snapshot of who exchanged how much black money (in old notes) with the new notes. As such, the answer isn't black or white here.

voltooid 9y ago
Maybe it would have been more widely received, if the country in general had been prepared more for digital transactions. When electricity supply is often unstable (especially during and after natural disasters as the one that struck the south east coast last year), it did not make sense to roll out this measure when it was rolled out.
- candiodari 9y ago
  You are confusing the purpose of the demonetization. You might think it is to improve the economy. False. You might think it is to make payments more fluid and fast. False. Modernization ? No. You might even think it is a corrupt measure to make the banks richer. False. It is to get the people making the decision reelected. It is to give the government party control of the spending of other political parties that might replace them [1]. This decision had a very specific aim, and achieved exactly that aim. In very predictable fashion it did a ridiculous amount of economic damage to the country in the process, but that shows nothing more than what the priorities of Mr. Modi are. It was very well received (judging by voting afterwards) and further cemented the current party into power. That was the purpose. That aim was achieved. Why was the timing what it was ? It was election time ... [2] Immediately before this "make or break" (dixit BBC) election BJP suddenly made itself the only party capable of doling out cash and other direct political favors in that state. Coincidence ? No. [1] https://www.forbes.com/sites/timworstall/2016/12/17/this-is-clever-indias-political-parties-can-deposit-old-notes-with-no-tax-investigation/#4f0663d57c92 https://www.forbes.com/sites/timworstall/2016/12/17/this-is-... [2] http://www.bbc.com/news/world-asia-india-39228615 http://www.bbc.com/news/world-asia-india-39228615
  - sremani 9y ago
    This is conspiracy theory masquerading as a political strategy. The judgement on demonetization should be withheld for couple of years, the banks while accepting old cash collected substantial amount of information before giving new cash. This is going to be a busy year for tax man in India and so will be the next one. Even though most of the money made back into system, there are enough breadcrumbs to triangulate bad actors and black money. Expect some drastic policy changes with real estate, corporate taxation and gold.
    - mos38 9y ago
      Like indian traffic and indian traffic cops, there weren't ever enough tax men to enforce anything too strictly even before all this new data was collected. But I agree in general that it takes things in a positive direction long term. The digitization allows for more automation and wider enforcement. Its going to take some time to settle. Hope the opposition doesn't complicate the story with mindless hysterics.
    - wtmt 9y ago
      > Expect some drastic policy changes with real estate, corporate taxation and gold. Nope. I don’t expect any changes on real estate or corporate taxation, except to help people who have/control them become richer and have even more lax regulation. A lot of real estate is held by politicians of all political parties. So there’s no reason they’d shoot themselves in the foot. One “maverick” Prime Minister cannot overrule hundreds of others with vested interests, however clean or idealistic he may project himself to be. As for corporates, the NDA government is highly favorable to them. The tax rates are set to decrease as announced a couple of years ago anyway. Gold is probably a slightly easier target. It has already seen restrictions before, which means the rich and powerful likely don’t hold too much of it or transact a lot with it.
    - kamaal 9y ago
      >>The judgement on demonetization should be withheld for couple of years How many? 10? 20? After than what happens? People stop taking bribes? Start paying taxes? Drive around Bangalore anytime during day light. See how many policemen are standing every 1 km negotiating bribes from motorcycle/car users. Go for property registration anywhere, go see what is the going rate for a single registration... Things like Demonetization changed/changes NOTHING. You need to change people. And that is next to impossible in India. >>Even though most of the money made back into system 0 Black Money came back into the system, as per the government's own admission. >>Expect some drastic policy changes with real estate, corporate taxation and gold. So we learn nothing from the mistakes? Only thing this will do, is make millions of people jobless. Destroy family incomes, disrupt their ability to provide for their families and put the economy in tremendous strife. For any policy to work, People need to cooperate. In India its basically every one, all the time optimizing only for personal profit. The only thing you will end up doing in this set up is harming a lot of innocent people, and end up providing immunity training to the crooks.
mknits 9y ago
LOL. Looks like you're sucking Modi's dick. It is perfectly clear to everyone that it DID NOT work at all. Govt removed 1000/- notes and introduced 2000/-, the biggest irony of supposed anti-corruption move. And how many of corrupt people, and among them include most MLAs, MPs etc. were caught hoarding black money? ZERO. I personally know a lot of people, popularly called as BHAKTS, no matter what logic you give them, they remain illogical and keep sucking Modi's dick.
- sctb 9y ago
  We've banned this account for repeatedly violating the guidelines. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
TheArcane 9y ago
> it is still unclear whether it worked or not. Didn't they report that almost all the cash came back - proving that there was basically no black money returned and the only people they inconvenienced was ordinary citizens with their hard-earned cash reserves?
- sudhirj 9y ago
  All the cash coming back was one thing, now everyone has to file their income tax returns, which is when it gets interesting. There’s going to be a lot of people filing tax returns for the first time, and a lot of explaining to do.
  - crdoconnor 9y ago
    Black money largely isn't held as large stacks of suspicious looking cash - that's a Bollywood trope. It's invested domestically in real estate, art, gold, or other assets, or held offshore, either in the form of freely convertible currency or other assets, which is why 98.96% of the cash was returned. I strongly doubt a significant number of criminals openly advertised their possession of black money by returning it themselves. Modi's ploy was an unmitigated failure.
    - xapata 9y ago
      If criminals didn't turn in the cash, then it evaporated, which is just as good. No?
      - crdoconnor 9y ago
        No. Just 1% of the cash evaporated, as opposed to 33% as Modi predicted, and majority of that was probably just due to loss or unlucky circumstance. For such a disruptive event, that's pathetic. The only winner was the banking system, who saw one of their major competitors (cash), hobbled. Modi now seems to be saying that this was the point all along.
        9y ago
sifar 9y ago
Even after a year, calling whether it worked as unclear is being naive or ignorant. Would you say ripping off 80% of your code base and rewriting it was a good idea if you are still unclear about the benefits ? To wit, you can't go back to the old code base also. I so wish GRR Martin had put this in GoT. Then most Indians would have been aware of it. I'll repeat it here once again. Not all black money is in cash. Not all cash is black money. A major portion is in real estate, gold, businesses and other financial assets. Cash is just ~8-10% of the economy. Most people with unaccounted cash had access to networks which would launder it for them. Even if you have a digital trail, the justice system is not digital. Sure some would have to pay up, but a majority would have enough accountants/lawyers to avoid the taxes. People complaining about black money in India, forget that the relatively low consumer prices that they enjoy is partly due to black money. If one wants the SMEs to pay their taxes, the consumer should be ready to pay more in price. People want low prices, low taxes and no black money/corruption. Well, pick any two. >> 1) people would think twice before hoarding onto cash and keep it hidden from the govt Or they could change the govt :).
- product50 9y ago
  Of course not all black money is in cash. However, because of this move all assets which are known carriers of black money including real estate, gold etc. also took a hard hit. Additionally, the thinking is that people would be more careful dealing in cash going forward. And I would abstain from using absolute stance like you are using. I think this move definitely falls into the grey territory.

voltooid 9y ago

Maybe it would have been more widely received, if the country in general had been prepared more for digital transactions. When electricity supply is often unstable (especially during and after natural disasters as the one that struck the south east coast last year), it did not make sense to roll out this measure when it was rolled out.

candiodari 9y ago
You are confusing the purpose of the demonetization. You might think it is to improve the economy. False. You might think it is to make payments more fluid and fast. False. Modernization ? No. You might even think it is a corrupt measure to make the banks richer. False. It is to get the people making the decision reelected. It is to give the government party control of the spending of other political parties that might replace them [1]. This decision had a very specific aim, and achieved exactly that aim. In very predictable fashion it did a ridiculous amount of economic damage to the country in the process, but that shows nothing more than what the priorities of Mr. Modi are. It was very well received (judging by voting afterwards) and further cemented the current party into power. That was the purpose. That aim was achieved. Why was the timing what it was ? It was election time ... [2] Immediately before this "make or break" (dixit BBC) election BJP suddenly made itself the only party capable of doling out cash and other direct political favors in that state. Coincidence ? No. [1] https://www.forbes.com/sites/timworstall/2016/12/17/this-is-clever-indias-political-parties-can-deposit-old-notes-with-no-tax-investigation/#4f0663d57c92 https://www.forbes.com/sites/timworstall/2016/12/17/this-is-... [2] http://www.bbc.com/news/world-asia-india-39228615 http://www.bbc.com/news/world-asia-india-39228615
- sremani 9y ago
  This is conspiracy theory masquerading as a political strategy. The judgement on demonetization should be withheld for couple of years, the banks while accepting old cash collected substantial amount of information before giving new cash. This is going to be a busy year for tax man in India and so will be the next one. Even though most of the money made back into system, there are enough breadcrumbs to triangulate bad actors and black money. Expect some drastic policy changes with real estate, corporate taxation and gold.
  - mos38 9y ago
    Like indian traffic and indian traffic cops, there weren't ever enough tax men to enforce anything too strictly even before all this new data was collected. But I agree in general that it takes things in a positive direction long term. The digitization allows for more automation and wider enforcement. Its going to take some time to settle. Hope the opposition doesn't complicate the story with mindless hysterics.
  - wtmt 9y ago
    > Expect some drastic policy changes with real estate, corporate taxation and gold. Nope. I don’t expect any changes on real estate or corporate taxation, except to help people who have/control them become richer and have even more lax regulation. A lot of real estate is held by politicians of all political parties. So there’s no reason they’d shoot themselves in the foot. One “maverick” Prime Minister cannot overrule hundreds of others with vested interests, however clean or idealistic he may project himself to be. As for corporates, the NDA government is highly favorable to them. The tax rates are set to decrease as announced a couple of years ago anyway. Gold is probably a slightly easier target. It has already seen restrictions before, which means the rich and powerful likely don’t hold too much of it or transact a lot with it.
  - kamaal 9y ago
    >>The judgement on demonetization should be withheld for couple of years How many? 10? 20? After than what happens? People stop taking bribes? Start paying taxes? Drive around Bangalore anytime during day light. See how many policemen are standing every 1 km negotiating bribes from motorcycle/car users. Go for property registration anywhere, go see what is the going rate for a single registration... Things like Demonetization changed/changes NOTHING. You need to change people. And that is next to impossible in India. >>Even though most of the money made back into system 0 Black Money came back into the system, as per the government's own admission. >>Expect some drastic policy changes with real estate, corporate taxation and gold. So we learn nothing from the mistakes? Only thing this will do, is make millions of people jobless. Destroy family incomes, disrupt their ability to provide for their families and put the economy in tremendous strife. For any policy to work, People need to cooperate. In India its basically every one, all the time optimizing only for personal profit. The only thing you will end up doing in this set up is harming a lot of innocent people, and end up providing immunity training to the crooks.

mknits 9y ago

LOL. Looks like you're sucking Modi's dick. It is perfectly clear to everyone that it DID NOT work at all. Govt removed 1000/- notes and introduced 2000/-, the biggest irony of supposed anti-corruption move. And how many of corrupt people, and among them include most MLAs, MPs etc. were caught hoarding black money? ZERO. I personally know a lot of people, popularly called as BHAKTS, no matter what logic you give them, they remain illogical and keep sucking Modi's dick.

sctb 9y ago
We've banned this account for repeatedly violating the guidelines. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

TheArcane 9y ago

> it is still unclear whether it worked or not. Didn't they report that almost all the cash came back - proving that there was basically no black money returned and the only people they inconvenienced was ordinary citizens with their hard-earned cash reserves?

sudhirj 9y ago
All the cash coming back was one thing, now everyone has to file their income tax returns, which is when it gets interesting. There’s going to be a lot of people filing tax returns for the first time, and a lot of explaining to do.
- crdoconnor 9y ago
  Black money largely isn't held as large stacks of suspicious looking cash - that's a Bollywood trope. It's invested domestically in real estate, art, gold, or other assets, or held offshore, either in the form of freely convertible currency or other assets, which is why 98.96% of the cash was returned. I strongly doubt a significant number of criminals openly advertised their possession of black money by returning it themselves. Modi's ploy was an unmitigated failure.
  - xapata 9y ago
    If criminals didn't turn in the cash, then it evaporated, which is just as good. No?
    - crdoconnor 9y ago
      No. Just 1% of the cash evaporated, as opposed to 33% as Modi predicted, and majority of that was probably just due to loss or unlucky circumstance. For such a disruptive event, that's pathetic. The only winner was the banking system, who saw one of their major competitors (cash), hobbled. Modi now seems to be saying that this was the point all along.
      - 9y ago

sifar 9y ago

Even after a year, calling whether it worked as unclear is being naive or ignorant. Would you say ripping off 80% of your code base and rewriting it was a good idea if you are still unclear about the benefits ? To wit, you can't go back to the old code base also. I so wish GRR Martin had put this in GoT. Then most Indians would have been aware of it. I'll repeat it here once again. Not all black money is in cash. Not all cash is black money. A major portion is in real estate, gold, businesses and other financial assets. Cash is just ~8-10% of the economy. Most people with unaccounted cash had access to networks which would launder it for them. Even if you have a digital trail, the justice system is not digital. Sure some would have to pay up, but a majority would have enough accountants/lawyers to avoid the taxes. People complaining about black money in India, forget that the relatively low consumer prices that they enjoy is partly due to black money. If one wants the SMEs to pay their taxes, the consumer should be ready to pay more in price. People want low prices, low taxes and no black money/corruption. Well, pick any two. >> 1) people would think twice before hoarding onto cash and keep it hidden from the govt Or they could change the govt :).

product50 9y ago
Of course not all black money is in cash. However, because of this move all assets which are known carriers of black money including real estate, gold etc. also took a hard hit. Additionally, the thinking is that people would be more careful dealing in cash going forward. And I would abstain from using absolute stance like you are using. I think this move definitely falls into the grey territory.