VR Logo

Demonetisation Blog: The Great Whitening has begun

Value Research's notes and comments on the demonetisation saga: updated regularly

Demonetisation Blog: The Great Whitening has begun

The Great Whitening has begun

November 29, 2016

There’s a lot of noise about whether demonetisation will ‘succeed’. This is true both among the bubble-resident intelligentsia of the Lutyens Delhi as well as ordinary people discussing things amongst each other. The first type are arguing how will they know whether it’s succeeding or failing while the second type have no such worries. They know the deal is done.

How do they know? Everyone is taking debit cards, accepting Paytm and giving bills. Businessmen friends are running scared, meeting CAs, arranging to clean up books, worrying about (!) whether they can go all-white this year or whether they will have to wait till next year. There is fear--real fear--among cash trading types about what Modi will do next.

There were serious discussions about whether to burn all non-explainable cash now, or to wait till Dec 29 for some miracle. The amnesty that was announced yesterday is being seen as a mini-miracle.

Our advice, confess everything, pay the penalty and invest the remaining money in a good equity mutual fund! You’ll earn back all the tax paid and all the penalty and the cesses in a decade at most.

And it will all be tax free. LEGALLY TAX FREE! Go back and read that sentence again LEGALLY TAX FREE!

The funniest thing is that unlike Value Research Online readers, the kalaa dhan crowd had no freaking clue that it was possible to earn tax free returns on investments in India!

Talk about financial illiteracy!

Is something wrong with Delhi?

November 29, 2016

Of course, we know what smart alecs across the country will answer to that--there’s hardly anything that’s right with Delhi. But we’re talking about ATM queues, shortage of cash in banks and earlier, the crowd of note exchangers. Anecdotal evidence suggests that all these are much worse in Delhi and the NCR region than in other metros.

It’s possible that we too are suffering from the general Delhi Derangement Syndrome (DDS) that the entire media suffers from. Or it’s possible that there so much more black money in Delhi that banks are genuinely much more crowded here. A huge chunk bureaucracy is resident here so they are surely taking care of their own.

Or, maybe it’s just an impression. Perhaps valueresearchonline.com readers who have been in Delhi and other cities in recent days could comment about their impressions?

Rs 1000 vs Rs 500 notes

November 28, 2016

It seems that many of the shops and services that are still accepting old currency are accepting only Rs 500 notes but not Rs 1000 notes. This seems to have nothing to do with availability of change because they are doing this even when no change is required. For example, in Delhi, petrol pumps will accept four Rs 500 notes for 2000 rupees worth of petrol but not two Rs 1000 notes. There seems to be no logic and no official explanation for this. Does anyone have any idea why?

The real impact of demonetisation

November 28, 2016

Wild guesses (can’t call them estimates) on the GDP impact of demonetisation are flowing thick and fast from the usual suspects. Read Dhirendra Kumar’s column ‘The real impact of demonetisation’ to understand why you must not pay any attention to them. The real impact will come from future behaviour change and that has already begun.

Black and White

November 28, 2016

A lot of eminent intellectuals have concluded that demonetisation will fail/has failed. For example, Kaushik Basu, erstwhile Chief Economic Advisor to the UPA. He did so in an op-ed in The New York Times, which generously printed this piece on the front page. You can read it here: https://goo.gl/2kP6m0. By choosing to get this op-ed done by a UPA functionary, the NYT is not even pretending to be balanced any more. Or maybe it never was.

On how this supposedly great American newspaper conducts itself, read this amazing piece by a former employee of the newspaper: https://goo.gl/JLkTfb

Banks’ stream of useless SMS going strong

November 27, 2016

Banks too firmly believe in the sarkari principle of giving out as little information as possible. And that seems to include their own staff in the branches, who are the ones who are bearing the brunt of the hard work. We’ve spoken to a number of managers, public and private sector, and they’re all complaining about having no foreknowledge of incoming cash. Random amounts of cash arrive at random times, precluding any planning or giving useful information to customers.

There is no fresh thinking about how to make things easier for customers. For example, using SMS to inform customers about ATM stocking. Banks know customers’ addresses, and know which ATMs are nearest. They also know which ATMs customers use the most. How about sending by SMS some useful information like when cash will be filled in the nearest SMS?

Instead, we have a stream of routine rubbish of the ‘We’re ever here to help you’.

Play your role

November 26, 2016

‘All the world’s a stage and each must play a role…’ As far as demonetisation goes, there are four major players:

  1. Narendra Modi, who decided to do the whole thing
  2. Law abiding, tax paying citizens, who are going through pain of queueing up and adjusting
  3. Black money holders of different kinds, who will now pay about 50 per cent as tax
  4. The Finance Minister and his crew, whose job it is to ensure that everything goes as smoothly as possible.

Of these four, no marks for guessing who has failed miserably. By now, there’s no use pretending that there isn’t something seriously wrong with the implementation of the demonetisation. It’s possible that the production and induction of new notes is going at a reasonable pace--after all, there is no benchmark for such an exercise.

However, we, the public, simply don’t know anything. Mr Jaitley and his crew are sticking to the time-honoured babu principle of keeping everyone in the dark.

Demonetisation reveals severe lack of financial literacy

November 16, 2016

Because of demonetisation, a lot of Indians are having conversations about money, black and white, that they never did earlier. And it’s showing a big gap in the financial knowledge of otherwise educated people. Read Dhirendra Kumar’s column ‘Demonetisation reveals severe lack of financial literacy’.