Anil Khadloya's Thoughts !!

Income Tax - Boon or Bane !

2020-09-27T20:42:00.012+05:30

Enough has been said about how successive Indian governments have failed to take care of honest taxpayers. Far from taking care, successive governments have been taxing them further and further.

And then, the classic case of double whammy wherein government tax gains on investments made by savings that were already taxed ! Capital gain taxes on equities is a classic example of “double taxation / double whammy”

Doesn’t government understand that such lopsided and at times stupid policies on taxations are the very reason public take up unethical means of saving tax because tax payers believe that government will not do anything for them and non-tax payers / corrupt folks will continue to enjoy !

How to address it?

There are many ways of fixing it but knowing our finance minister (FM), anything that FM will try to fix this will only worsen things 😊

Government themselves are aware of few bold steps but are they willing take such steps? One such measure is to eliminate personal income tax (including all sorts of capital gains) completely.

Personal Income Tax collection in financial year 2019-20 was Rs 4.3 Lakh crore against a target of Rs 5.6 Lakh crore (link to this data provided at end of the post). Government needs about Rs 5.6 Lakh crore to compensate abolishing of income tax. How can that be achieved?

What can government do to compensate for eliminating personal income tax?

Population and GST:

India’s population is about 140 crores (1,40,00,00,000). Assuming everyone (including infants or senior citizen) is buying something or other,

We need an additional GST of Rs 3,000 (average) per person to match actual income tax of Rs 4.3 Lakh crore. For Rs 3,000 additional GST per person, at lowest GST slab of 5%, everyone (on average) needs to spend Rs 61,500 additionally per year (Rs 61,500 *5% GST = Rs 3,075)
To match expected income tax of Rs 5.6 lakh crore, we need Rs 4,000 (average) additional GST per person. For Rs 4,000 additional GST per person, at lowest GST slab of 5%, everyone (on average) needs to spend Rs 80,000 (Rs 80,000 *5% GST = Rs 4,000) additionally per year

Obviously, this is a theoretical model. “Poor” will spend less and “rich” will spend more. Government need to encourage folks to spend more (across various GST slab items) and one way of doing that is by allowing individuals to have more dispensable income. By eliminating income tax, government will help in increasing individual’s purchasing power.

Plug the leakage:

All said and done, tax payers money is being poured into loss making PSUs. Take a decisive call on PSU making loss for many consecutive years. Either hand over to experts who can turn around them, albeit with some tough decisions or shut them down
Continue with disinvestment process
Eliminate corruption at all level in government departments, public will comply automatically
Be pragmatic with policies, to ensure 5G auctions are meaningful etc.,

Some more pragmatic ones like:

Introduce higher slab GST for “premium” products

Currently if tax slabs can be based on individual’s annual income, then GST also can be based on the purchasing power of an individual
Poor folks will not be affected by higher GST on premium products because poor folks anyhow cannot afford and do not buy premium products. If they can, they are not poor

Replace all sorts of capital gains with one-time tax

For equities (share market) increase STT by (say) 1% or 2% but completely eliminate all kinds of short term and long term capital gains
Similarly, for real estate introduce equity market’s type STT at (say) 2%

ALL e-Commerce purchases (irrespective of amount) involving Cash-On-Delivery to attract an additional tax of (say) 5%
For someone to purchase anything online, they need to have laptop or desktop or tab or smart phone etc., which means they have mechanism to pay digitally (through UPI or net banking or cards or wallets etc.,). If such individuals do not want to pay digitally, tax them
Any cash transaction more than (say) 5,000 Rupees in stores, shops, restaurants. etc., to attract an additional tax of (say) 5%
Any donations of more than 1,000 Rupees to political parties to attract a “cash transaction” tax of minimum 10%
Any withdrawal or deposit of more than (say) Rs 10,000 in a day or (say) Rs 50,000 in a month should attract 1% cash transaction tax
You got the point, tighten noose around cash transaction. Tighten GST compliance at all level and minimize cash transactions, that should check corruptions to great level
Stop printing 2,000 Rs currency note immediately. Announce that 2,000 Rs note will be out of circulation from (say) 1st July 2021. Political compulsions (like Bihar elections) can delay the announcement to late November 2020 but take this bold step. People should have about 6 months to deposit all their 2,000 Rs notes in banks. Do not introduce Rs 1,000 currency note, let Rs 500 be the largest denomination currency note

Point is, income tax can be scrapped and that amount can be “recovered” via many other ways. Feel free to add your thoughts in the comments section below.

What will happen all those tax saving investment schemes. What if public stop saving or taking insurance !

While it was good earlier to link various investment options like PPF and insurance products like life insurance, medical insurance etc., to tax benefits, there is lot more awareness now than earlier. General public knows that they need insurance and need to make long term investments. Moreover, government already has introduced insurance for all saving bank account holder. If needed, similar bank linked products can be introduced for long term savings also.

There are ways and means of ensuring and (if required) enforcing basic insurance and long term investment plans, hence this should not be the reason to continue with income tax !

Opposition will cry, people will protest:

What’s new? Irrespective of which political party is in power and who is in opposition, most of the times opposition political parties job is to oppose anything and everything. There would be hue and cry all around, politicians will instigate public, mobilize mass and probably create riots. Deal with it. If government can implement these properly, they do not have much to worry about, as common man will see benefits immediately

Will eliminating personal income tax eliminate black money?

First, this post is not on how to eliminate black money. Second, eliminating black money is impossible. Black money will continue to exist because

Few/many individuals and corporates and politicians etc., etc., are corrupt. Nothing can change them. No matter what you do, they will continue to find new ways of corruptions and creating black money
Many of government policies will continue to push “honest” folks to indulge in corruption and black money

Though Abolishing income tax and tightening noose around cash transactions will lead to better compliance, government should not stop with that. Government need to be innovative to continue to find ways to tighten it’s noose around corruption. For that, they need a good finance minister 😊

Summary:

Government has been saying that more money in citizen’s hand means they will spend more, there by improving economy and GST. Without going into merits/demerits and assuming this to be true, abolishing of personal income tax will leave tax payers with more money in hand to spend. This will give much required boost to economy. Such a boost to economy will improve money circulation in market, resulting in additional GST collections and feel good factor

Less than 2 % of India’s population pays income tax. Government is spending lot of money in ensuring compliance from these meagre 2% population. Abolishing income tax will lead to

increase in disposable income in hands of individuals, which would in turn lead to increase in purchasing power of all such individuals. This is expected to increase domestic consumption and provide much needed up-lift to our economy
Government machinery that’s freed up from income tax and related departments can focus time and energy on fighting corruptions and other better / more productive activities

Finally, income tax or not, nothing will be a sustainable model if our population continue to grow at current rate. Let's keep population issue aside, for a different blog :)

(https://www.bloombergquint.com/economy-finance/direct-tax-collection-falls-even-after-advance-payouts)

Mythology - Part 2

2020-02-02T18:43:00.005+05:30

After my previous post on Indian mythology (http://khadloya.blogspot.com/2019/10/mythology.html), many asked how to go about educating their children, why certain section of people always have issues with introduction of Indian mythology in education and professional lives, why is there a perception that younger generation wants to distance themselves from India mythology, how close are new age authors like Amish Tripathi, etc., writing to the Indian epics

It took some time to find time to pen my thoughts, here you go:

How to enlighten kids on Indian mythology on my own:

Apart from parents and grandparents themselves educating the children, I believe following are few other easiest and fastest way:

Amar Chitra Katha (ACK): ACK comics continues to be the best source on Indian mythology. Adults too find them captivating. ACK had the knack of breaking down large events into small and simple comic book fashion story telling. Buy them in stores or online or lend from libraries, your choice, but do not miss it. From my own personal experience, some of the prominent collections are

“Mythology Collection”: This collection contains 71 volumes of ACK comics, with various events from Indian Puranas and Epics.

“Valmiki’s Ramayana”: This “box set” is a collection of 6 volumes covering Ramayan

“Mahabharata”: This “box set” is a collection of 3 volumes, covering birth of Pandav’s and Kaurav’s, going on all the way till Kurukshetra war

“Panchatantra”: Don’t forget to pick up comics or story books on Panchatantra. Market is flooded with books on Panchatantra, pick your choice. Again, ACK has an excellent collection.

TV Serials: Ramanand Sagar and BR Chopra were the first to bring Ramayan (78 episodes) and Mahabharath (94 episodes) respectively to house hold via television in late 1980’s to early 1990’s. Buy DVDs or watch on you-tube, your choice, but these are excellent source of information about these epics. You-tube also has excellent collection on other snippets from these epics / Panchatantra

What Next?: After completing the above mentioned ACK books and TV serials, one can search for books on other Indian epics / mythology / heroes / rulers etc., on their own. ACK itself has a vast collection, search online for list of ACK comics. There could be video games (PC or console) based on Indian mythology. There could also be online certification courses 😊. Check out online if you are seriously interested. Should you have any recommendations, feel free to add in the comments section below.

Why resistance to introduce Indian Epics in education and other wake of life?

Lot has been written and discussed about this, including in mainstream media like News channels and newspapers. I’m not going to include any link in my post, you can search on internet on your own.

My views are simple:

Indian epics are extremely ancient, well rounded with all-inclusiveness from ages. While current Indian citizens come from different wake of life, with different ethos bringing in lot more vibrancy in our country, it is completely un-fair to equate rich and ancient Indian culture with newbies and then talk of stopping awareness of Indian epics because few others do not relate to it or they will get hurt!

Most of the individuals associate and respect what they follow or believe but that does not mean they should come in way of letting Indians know of Indian epics and mythology in India. That’s absurd.

Folks should stop giving everything a religions angle. They ought to accept Indian epics and mythology existed even before birth of many other civilizations or believers or religions. All-inclusiveness does not mean forgetting Indian mythology to make few others comfortable. If Indians do not take care of their ancient epics and mythology, who will?

Politics: Leave the politics to politicians. They have their own compulsions, ideologies, vote bank politics, etc., Politicians (doesn’t matter ruling party or opposition party or multitudes of wannabe parties) will continue to indulge in politics, don’t take up their job.

Also, the new age fad of not believing / not caring / rebellious streak / mimicking everything that is “cool” or from west also has become a roadblock. As stated earlier, many of these folks probably know everything about Game Of Thrones, Lust Stories, Sacred Games, Avengers, Friends etc., but has an aversion to our own Vedas, Ramayan, Mahabharath, Bhagwat Gita, Panchatantra or even the relatively recent ones like Vikram and Betal, Tenali Rama , etc., etc., If this new or old generation does not believe in out epics, mythology, events, so be it. Instead of looking for reason in everything, enjoy these ancient epics as any other “fiction” like Harry Potter or Game of Thrones but do not become an hindrance to knowing and letting others know what our parents, grand-parents and great grand-parents grew up with!

Most of our educational textbooks still glorify invaders who destroyed India or have more stories written by folks with no connection to India. Until our education system changes to give atleast equal (if not more) importance to writers with connect to India and talk about Indian epics / mythology, Indian rulers, history of ancient India etc., Indians will never understand and most importantly respect Indian mythology, epics and cultural values.

What about new age authors spinning their tales on Indian epics and mythology?

Simply Awesome! Some of the authors spinning their own version of fiction around India epics have done a great job. Works of Amish Tripathi on Shiva Trilogy, Ram Charita Manas and Shatrujeet Nath’s Vikramaditya Veergatha have been great reads. Having said that, let’s try to understand “Fan Fiction”

As per Wikipedia (https://en.wikipedia.org/wiki/Fan_fiction), Fan fiction is a type of fictional text written by fans of any work of fiction where the author uses established characters, settings, or other intellectual properties from an original creator as a basis for their writing. Fan fiction ranges from a couple of sentences to an entire novel, and fans can both keep the creator's characters and settings or add their own.

Fan fiction is rarely commissioned or authorized by the original work's creator or publisher and is rarely professionally published. It may infringe on the original author's copyright, depending on the jurisdiction and on such questions as for whether it qualifies as "fair use". Attitudes of authors and copyright owners of original works to fan fiction have ranged from indifference to encouragement or rejection. Copyright owners have occasionally responded with legal action”.

New age authors are doing a great job in spreading awareness on their own version of Indian mythology but they depict the events differently and many times, creating completely new events which contradicts with the way we always knew our epics. It makes sense for them to change the events from traditionally known version because no one is going to buy their novels/works if they re-tell events the same way ACK comics has been depicting or Ramanand Sagar / BR Chopra has already covered them.

Also, we no longer have Valmiki or Ved Vyas or their legal representative or acknowledged descendants of any of the stake holders around to raise any concerns 😊. The new age fan fiction writers in India have taken the creative liberty of churning out fan fictions with their own interpretations. They have valid arguments that no one “owns” these ancient epics but can they write commercial novels on Marvel’s characters like Iron Man or Captain America or Avengers etc., or can they write commercial novels on DC characters such as Super Man, Bat Man etc., without being sued by battery of lawyers

I’m not against these authors. I have read many of these new novels and have loved their story telling style. Also, if the law of land allows it, they should definitely go ahead with their works but perhaps they can do lot more than just writing one liner like “… these are work of fiction or their imagination and has nothing to do with epics the way we know…”.

Perhaps, they should include reference to the original work, the version most of us know, by calling out books or novels or other reference materials on our epics.
Perhaps, they also need to create awareness and keep their audience engaged on the original epics on their social media handle (like Twitter or Facebook or Instagram etc,).
Question is, will the new age authors do any of these or anything else to propagate Indian epics the way we have known it for ages? Probably not cause there is no gain for these authors and moreover, they probably might lose if they ask readers to read something else for a more authentic version!

Still, if you do nothing and keep waiting for government or someone else to enlighten your kids or next generation on our epics/mythology, millennials and next generation will soon forget the ancient epics the way we know and current (and future) fan fictions will become more authentic version of the epics 😊. Remember, knowingly / un-knowingly every such new author has their own “bias” that will influence their writing. This “bias” is not about right or wrong, it is more about what twist they provide to the events and how good or bad it is from the traditionally known version.

Online Shopping Giants (Flipkart / Amazon / etc., ) vs Local Stores

2019-10-20T15:47:00.005+05:30

This post is not for or against flipkart / amazon / other online shopping portals ….. or jobs they create or destroy etc., It is more on what the local shop-keepers / retailers can do to sustain themselves against plethora of such online shopping sites. For that, let’s understand the reason why consumers prefer to buy online

Why consumer buy online?

Among others, following three come across as top reason to buy online

Discounts: Most of the items are almost always sold at discount. On top of that, sales promotion (based on deep discounts) are huge hit. Despite “recession” in India, recently Amazon and Flipkart sales generated Rs 19,000 crore in just 6 days. It is a different story that they continue to mount losses, their combined cumulative losses being much more than thousands crores of Rupees
Product Range: Without doubt, no local retailer (however big he/she is) can have a produce range as diverse and large as these online giants. There are crores (millions) of products listed by these giants online.
Convenience: Consumer can browse through crores (millions) of products, whenever they want (24x7), compare these products on various parameters, go through ratings and reviews provided by other buyers and order these products (from wherever they are) to be delivered at their door step. If product is not good or not to their liking, there are options to return or exchange. What other service does a customer need?

What local retailers and shop-keepers are trying?

Among other options, demanding from government for a level playing field (in terms of eliminating the deep discounts that these online giants provide) has been the most vocal demand so far.

Is this a viable solution? Can government really do (or want to do) something meaningful?

Even if government comes up with something, what’s the guarantee there won’t be an innovator tomorrow who will disrupt the entire ecosystem again?
Forget new innovator, why will flipkart or amazon accept “defeat” so soon. They haven’t been pumping billions of dollars and continue to mount billions in losses just to pack bags or mellow-down as soon as government intervenes. For sure, Flipkart and Amazon are going to be around for long and will continue to disrupt the traditional model with lot more innovations
Do not forget that though price (i.e. deep discounts by amazon and flipkart) is one of the major factor, off late it is not the only factor to shop online. By now, consumers are used to the comfort, range, convenience, etc., that online shopping provides. Even if government restrict deep discounts, there is no guarantee that everyone will turn away from online shopping.

For those who can recall, similar discussions / debates / sentiments where seen during the initial days of super markets like Big Bazaar, Spencer’s, Reliance Fresh, D-Mart, More, etc., What happened? Nothing. These super markets (or departmental stores or hyper markets, whatever you call it) still continue to run their own versions of sales, backed by the deep pockets of various super rice - millionaires and billionaires.

What can local retailers and shop-keepers do?

I feel it is time for local retailers to provide same experience that these online shopping sites provides. For obvious reasons, they, as an individual, cannot take on these online giants. These online giants are backed by folks having deep … deep … very deep pockets and can survive despite massive losses over consecutive years. Instead, all Indian local retailers and shop keepers should join hands and collaborate better.

Retailers and Shop keepers already have local and national level federations. At all India level, they should join hand and form their own one single online portal to sell items. This proposal portal should provide all the comfort and features (and much more) that amazon flipkart provides.

“Buy from locals vs buy from online giants backed by non-Indian corporates” appeal and awareness has been doing rounds for long time now. There are still many consumer who will buy from this proposed online store (even if items are not as cheap as on existing online giants) as long as this portal can emulate the “product range”, “convenience” etc experiences that flipkart/amazon provides.

Proposed portal should have checks and balances to avoid monopolies, say

Seller should have a registered shop in India. Portal is not to replace stores but to provide stores means to sell online also
Once a product is chosen, consumer can buy from local sellers only. i.e. buyer from any given locality will be shown seller in order of proximity based on distance, by street followed by pincode followed by area followed by city followed by state etc., etc.,
De-list / black list a seller if his overall sales are at losses for two consecutive years
And so on

You get the point, these folks should sit together to design and take it forward

Who will fund building and maintaining this online site?

For Initial Development: Pool money from members to build technology platform. Assume there are 10 lakhs registered members across India and each contribute Rs 500, you have Rs 50 crores, more than enough to develop an excellent world class portal and host it on powerful servers
For Regular Maintenance: Each member pay Rs 10 per month for keeping the platform up and running. 10 lakh members will generate Rs 1 crore per month, which is lot of amount for maintenance. Or this can be a small flat fee from all (say Rs 1) + small % of sales (so that sellers who couldn’t sell anything need not be burdened with cost of maintenance)

Again, you got the idea, numbers could be tweaked to arrive at appropriate business model.

What’s the catch?

Biggest issue is to get all local sellers across India to collaborate and come under a single platform. Is it easy? No. Is it impossible? Again no. Start small, at city or state or region level etc., Many will join as soon as they see the success of this platform.

Is this the only solution?

Perhaps, there are other viable options worth evaluating. Yes, local stores and retailers are getting impacted due to online shopping but pointing figure at perils of technologies, disruptive innovations, demerits of open economy cannot be the only solution. Time for store keepers also to get innovative

Point is, eliminating deep discounts alone will not be sufficient to turn away buyers from amazon flipkart. Rather than individuals having to go to stores, these giants have brought stores to their finger-tips. Consumer will not turn away from this experience soon.

Awareness (or lack) of our epics / mythology …

2019-10-11T15:27:00.007+05:30

Recently, Social Media was on fire with trollers coming hard on Sonakshi Sinha because she couldn’t answer a simple question. She was asked by Amitabh Bachchan (host of KBC - Kaun Banega Crorepati), “According to Ramayana, Hanuman fetched Sanjeevani booti (herb) for whom?”

Sonakshi’s father (Shatrughan Sinha), family (Uncles - Ram, Lakshman, Bharat and Brothers - Luv and Kush) are named after key heros of Ramayan. Home she grew up is named “Ramayan” and still she struggled to answer a simple question from Ramayan and chose a life line to sail through.

Many other/different videos surfaced on social media after this incident, where it was obvious that many teenagers and youth had no clue about key characters and events of Ramayan and Mahabharath.

It is both disappointing and alarming that many of the later generations has no clue about our history, culture, mythology, epics, fables … (whatever else you want to call it). These folks probably know everything about Game Of Thrones, Lust Stories, Sacred Games, Avengers, Friends but nothing about Vedas, Ramayan, Mahabharath, Bhagwat Gita or even the relatively recent ones like Vikram and Betal, Panchatantra, Tenali Rama , etc., etc., And then there are lots and lots of other epics, fables, stories from every region, state etc.,

This need to be fixed, simply because Indians cannot be not-aware of their culture, epics, mythology and think it is OK to forget them for whatever reason. Questions is, who has to do what to fix it.

Who can’t fix it?

Grand-parents are no longer around (because city and corporate life forces many parents to live away from their parents) to impart this wisdom. In this fast paced world, parents has no time to teach their kids.

TV, movies or any other such medium cannot teach kids because current age parents (and subsequently kids) taste and viewing habits are completely different. It is worth highlighting that there is nothing wrong with individual’s choice on what they want to view on electronic media

Social media cannot impart any knowledge as folks (including yours truly) talk about it only when some incident happens, then gradually every one catches on new incident and move on

Then who can fix it and more importantly how?

It has to be fixed by government, both state and central. Similar to nursery kids being mandated to learn alphabets (in English and/or mother tongue) and basic numbers,

Primary section students should have key events as a chapter/lesson of their language text books every year. Obviously, different episode/events every year in a proper chronological order. I used to have cultural courses during my primary days in CBSE curriculum, which I do not see nowadays

Senior and senior secondary students should mandatorily have entire Ramayan, Mahabharath etc., as course content, like a complete novel etc.,

Indian language (i.e. English) books still has heavy dose of stories and content from non-Indian author. Nothing wrong in that but slowly there has to be a good balance of Indian and non-Indian content. Indian content should be majorly oriented towards these epics.

Why is this important?

Every other country takes great interest in ensuring their citizen know, love and respect their culture, why should India shy away? Many countries has a common culture/ancient history and share their culture, epics, mythology etc., with many other countries and hence there are more than one country to take care of preserving and educating masses.

What about India? India has been a peaceful country, never been a barbaric invader or colonial ruler and we never invaded any country with intent of imposing our culture on them. No other country shares our rich ancient history/culture with us that they will do anything to preserve and spread our culture. Hence, if Indians will not take care of this, who will?

Last but not the least, how to sustain?

These cannot be a one-time learn and forget thing, i.e. learn in school for marks and then do not care. While there can be many avenues, some that I can think of right-away are:

All higher education entrance tests, professional courses, job / other such tests (be by state government or central government) ranging from any clerical or mass railway recruitment to doctors to IAS entrance exams etc., needs to include these epics/mythology also

Govt, with aid of large corporates (or extend corporate’s CSR scope) to run monthly or quarterly online / offline quiz and programs on these EPICS

All News-papers to mandatorily include a page or two covering stories and snippets from our EPICs and other mythology / fables

and lot more

Demonetization – What next ?

2016-12-18T00:23:00.003+05:30

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

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

Let’s see what each of this group should do….

What should government do?

As everyone expects by now, Modi should not stop with #DeMonetisation, he should continue the clean-up act broadly classified into following categories (in no particular order)

1. Donation to political parties:

a. This is the mother of all scams !! All donations to political parties are tax free and PAN card of the donor is not required for donations less than Rs 20,000. Political parties have an avenue to convert their corruption money into white by donating their corrupt money to themselves, albeit in various lots of less than Rs 20,000

b. Modi should ban ALL cash donations or atleast mandate any donation more than Rs one thousand to be via any of the banking (be online or card or e-wallet or UPI etc.,) channels

c. Also, donations to all political party need to be taxed at 30%. No discussions or debates on this. There should be no tax exemptions to either the receiver or donor
d. You can sign the following petition if you are interested. https://www.change.org/p/political-parties-of-india-must-accept-donations-only-thru-cheques-or-e-mode-let-s-make-india-cashless?recruiter=636685775&utm_source=share_petition&utm_medium=copylink

2. Agriculture income:

a. This is one more large scam ! Entire agriculture income is tax free and this again has been an avenue for politicians and other corrupt leaders to convert their black money into white

b. How many of you remember the in-famous incident of Amitabh Bachan trying to be a farmer? (http://timesofindia.indiatimes.com/city/lucknow/Amitabh-is-a-big-farmer-in-UP-now/articleshow/6193892.cms).Though it was taken to court and court declared Bachans are not farmers but then this just shows folks are always eager to misuse tax exempt on agriculture income

c. Modi should bring agriculture income under tax net – say anything less than 10 lakhs per annum should be tax free and anything more than 10 lakhs per annum has to follow existing Income Tax slabs and rules. Don’t worry about the uproar that this will cause, actual poor and needy farmers anyhow do not have a profit of more than 10 lakhs per annum !
d. You can sign the following petition if you are interested. https://www.change.org/p/tax-agriculture-income-exceeding-rs-10-lacs?recruiter=636685775&utm_source=share_petition&utm_medium=copylink

3. Currency Notes:

a. Gradually but sooner than later, eliminate all high denomination notes by banning all new 2000 notes completely, do not introduce any new 1000 rupees notes ever and control the amount of new 500 notes in circulation and eventually banning new 500 notes also. I have covered about this in my first blog (http://khadloya.blogspot.in/2016/11/Demonetisation17.html) how this will help. For smaller transactions, lower denomination notes will always be there

4. Real-estate:

a. There are lots of be-nami property throughout India. In simple terms, be-nami means owner name and the person financing purchase of the property are two different individuals. This is one of the many sources of corruption and black money. Let’s not get into methodology (social media has been busy for many days on how exactly and precisely can govt address this) but hope that Modi takes action on this without much delay

5. Other assets like gold and other precious gems:

a. Again there are many debates on social media on how to address this. It is not easy to un-earth existing gold etc., but is relatively easy to address in future.

b. Modi can continue to take steps to re-cycle existing gold and introduce measures to ensure only jewelers and associates deal in gold bars, individuals should be banned from buying physical gold (in bar forms) beyond a quantity.

c. Remember, we are no longer a large producer of gold and lot of money (mostly in US Dollars) goes out of country to import gold.

6. Cash less economy:

a. Continue to introduce measure like no transaction charges, more security for online or card transactions, tax and other incentives, etc., to promote an economy which is less dependent on cash.

b. Introduce tax on withdrawals from banks, say tax on withdrawal of more than Rs 10,000 in a single transaction, tax on withdrawal of more than Rs 25,000 in a week etc., etc.,

c. Cash of lower denominations will always be there to take care of road side vendors or transactions of (say) value less than Rs 5,000. For anything else, whatever be the reason, mandate non-cash channels

d. Make Akadora, (http://www.businessinsider.in/Akodara-Indias-first-digital-village/articleshow/55414926.cms) as a model. In this village, all transactions above Rs 10/- (yes, all cash transaction above ten rupees) is cashless.

e. PS: Cashless does NOT mean elimination of ALL currency / coins. Everyone knows this is impossible in India. Cashless mean less and less dependence on cash !

7. Budget:

a. It goes without saying that Modi is expected to pass the benefits of demonetization to the common people. He need to lower the taxes at earliest. He need to announce various new schemes to uplift the economy

b. Also, if Modi is confident on himself that he will take more measures (on lines of what is mentioned above), he should pass more benefits to common man in advance. If not, public will not have anything to continue to trust him and opposition parties will repeat what British did, divide and rule !!

8. Party workers: Ask your party workers to

a. not hoard cash

b. do not go to bank or ATM un-necessarily

c. help folks in rural India to deal with current crisis, exchange their 2000 notes with small denominations that you can get from petrol bunks, temples, and lot many other places that are affiliated to you (as an individual or party)

d. conduct camps to educate rural folks on how to reduce dependencies on cash. This is feasible, there are example of entire village (like Akadora in Gujarat) being cashless

9. Do not worry about election

a. Modi should not worry about election. He is expected to lose the forthcoming state elections and that’s good. That will either ensure he is grounded and implements things after planning well or that will determine him to do better things. Either way, if he implements all above measure with complete honesty and integrity, he will automatically win in future. Is this (sort of) paradox !!

b. Even if does not win, implementing the above 8 or 9 things means he is leaving a rich legacy ! This battle against #BlackMoney and #Corruption is not about who wins or loses elections, it is all about a better India.

If everything mentioned above (and many more such measures that government or you can suggest) is implemented with complete honesty and integrity, then there is nothing left for anyone else to do J . Alas, world is not fair and things are not so straight forward. Modi is not perfect and hence there is a strong role for opposition and public in a democracy to ensure government is accountable and does not falter !

What should opposition / political parties do?

I can’t ask political parties to stop playing politics on this because they will never stop doing that J. No matter who says what, politicians (again does not matter who is in ruling and who is opposition) will continue to spread rumors, will continue to divide society, will continue to spread negativity for selfish reasons and will continue to create hurdle.

Opposition parties know demonetization and other measures will yield results, their fear comes from following.

Irrespective of how good they are to tackle their black money, they will have to devise new methodology to generate and spend black money in future.
They are afraid that if Modi goes whole nine yards, their future is in danger. We covered this also in my first blog. (http://khadloya.blogspot.in/2016/11/Demonetisation17.html)
Not getting credit. Our opposition is famous for snatching credit for any good work that happens and here only Modi is getting credit (or beatings, however you want to see), mainly because opposition themselves are not seen doing anything on helping the cause.

I think opposition can do two things

Stop dividing the country. In their zeal to find chink in government’s armor, everyone is just shooting from their mouth. If this continues, there will be further polarization in the country!!
Modi is definitely not a saint, he has his own scars and opposition should ensure Modi do not become a bigger scamster. For that, opposition need to ensure above (and many more such) measures are taken properly and effectively. Do not just keep shouting and yelling and screaming. Question is, do they have the guts to do same ?

What should an individual do ?

There are many kinds of individuals, I’m focusing on following three kind of individuals

1. Business folks, who are not necessarily corrupt but the system forced them to avoid tax.

a. We have already covered this in detail my one of my previous blog (http://khadloya.blogspot.com/2016/12/Isevadingtaxcorrpution.html). These folks have lot to gain if Modi really delivers. These folks should focus on how to get these things done.

b. Following is what they can do immediately

Stop going to banks and ATMs un-necessarily
Reduce dependency on cash - leverage online banking, UPI, e-wallets etc.,
Stop worrying and stop hoarding cash
Start spending, your money is safe in bank. There are current challenges in withdrawing from bank but your money in bank will not disappear
Do not get swayed by false negativity. Think on your own and act accordingly. There is no one solution fits all. Most of you are smart and have already managed the crisis J
Start adapting to the changes, if you do not adapt you will become nobody
Start petitioning (via social media, RTIs, online and offline petitions etc.,) or follow any way that you are confident and believe in, to ensure government implement your suggestions, including the measures listed in the top of this blog.
Do not underestimate the power of social media !!

2. Professionals, many of who are honest tax payer

a. Just because your tax (TDS) was deduced even before you getting salary does not mean that everything is OK. If you do nothing, who will stop spread of corruption? Political parties will not because there is no concept of clean politics and clean politician!!

b. Wake up and start petitioning (via social media, RTIs, online and offline petitions etc.,) or follow any way that you are confident and believe in, to ensure government implement your suggestions, including the measures listed in the top of this blog.

3. Rest of the genuine individuals who need money but cannot take out of bank

a. Modi has not thought through and messed up the implementation. Corrupt individuals added to the woes by converting old notes to new for a commission, there by diverting new notes to other influential people. Hold on for few more days, things should stabilize soon.

b. Beyond all this, ensure your voice is heard so that no such un-planned activities are taken up in future. Eve if you are not able to get hold of your own money because corrupt bank officials and others are directing it elsewhere, continue to make noise so that such loopholes are plugged in future schemes. Do not lose hope though, pile up the pressure on Modi to deliver on all fronts

If you intend to use online / social media tools, following links are of some help. Don’t get bogged down telling this is waste, they will not listen etc., etc., . They might listen… they might not listen… but still go ahead and log in your suggestions. It does not take much effort and time, you can do it while sitting on a cosy sofa / char or wherever you are. J Remember, it was mainly social media (along with public dissatisfactions with other parties, which is true everywhere) that made a newbie CM of Delhi !!

https://www.mygov.in/group-issue/suggestions-invited-union-budget-2017/

https://www.change.org/p/political-parties-of-india-must-accept-donations-only-thru-cheques-or-e-mode-let-s-make-india-cashless?recruiter=636685775&utm_source=share_petition&utm_medium=copylink

https://www.change.org/p/tax-agriculture-income-exceeding-rs-10-lacs?recruiter=636685775&utm_source=share_petition&utm_medium=copylink

https://www.mygov.in/

If you are up for game, go ahead and start your own petition at https://www.change.org/. You might like to search whether such a petition already exists before starting a new one.

PS: Even though demonetization is not making as much news/noise as earlier, there are many more questions that have been asked to me on demonetization and I intend to answer them at my own pace. Watch out for few more updates

Conclusion:

Either join the movement and do (or continue to do) something to make a difference or stop blaming government after government for failures. If you do not grab the current opportunity, sooner or later, we will start again hearing scams after scams every day…..

Modi is not necessarily a saint but he has dared to do something different. He failed the implementation big time and it is upto us (the janata, the public, the comman man) to ensure Modi continues to take more measures and remain accountable. Constructive public involvement is key to keep a democracy healthy and accountable.

Demonetization - Why many are still not convinced ?

2016-12-10T11:56:00.004+05:30

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.

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.
Time taken to replace all old currency notes: Many of the media report (with detailed calculations) have shown that it can take upto May 2017 to replace all of old 500 and 1000 notes. This has been run as “breaking news” by various media again and again. Rightfully and as expected, this has scared the comman man.
Lack of quick benefits/results: We no longer have the patience to wait for anything. We want results overnight. Many with vested interest are downplaying long term results of these initiatives, scaring others and playing with public emotion due to which folks are simply going berserk and restless.
Indian mentality: I dare to term this as Indian mentality because many of us have grown up (based on our ecosystem and surroundings) to be an expert and critic of everything, trying to always find fault than working to resolve that. We (be general public or media or anybody on the street) are always pessimistic than optimistic and feel extremely proud to sit back, relax and find fault with anything and everything and probably expect someone else to fix it. Nothing wrong in that and it is great that people have found fault but more often than not, what you do with that defines you. Sadly, many simply twiddle thumbs and soothe own’s ego by finding loop holes and mistakes in a plan that other so called leaders and experts missed
Politicians: Politicians, as usual, are playing politics and not making any progress. Media report says ruling government is open for a debate (without a vote) and opposition is just yelling and screaming without making any sense because they want to simply vote this plan out without waiting for results. Opposition is missing a golden opportunity to corner government and force them to take effective steps. Opposition themselves know that demonetization and other such initiatives will yield results over a period of time and not immediately but then politicians also knows very well how to create a frenzy in India.
Media: Most of the media continues to do it job, just their job definition is to always shows and report what is not working again and again and again and again.. and again as “breaking news”. In the war of TRP and their own definition of democracy, these folks have dropped ethics and social causes from their system many years ago

One can add many more reasons on top of above but the bottom line is Indians are more eager to hear bad news than good news. Many keep changing TV channels, newspaper pages, WhatsApp and Face book posts to see what is bad at the moment. This is what all politicians (doesn’t matter who is in ruling or who is in opposition), media and other experts have figured out many years ago and accordingly performs their part well to play with our emotions.

Go read my first blog on demonetization on how this should not be just last step but one of the initial step toward checking terrorism, counterfeits, corruption, organized crime etc., etc., There is never going to be a foolproof system and there will always be experts (be terrorist or politicians or other corrupt individuals or even a comman man on the street) to find loopholes and break the system. It does not mean that no one should do anything to fix, fixes will be in multiple steps. There is no one fix for all our problems. Irrespective of what your expertise says, if there was one fix for all solution, someone (including judiciary and you yourself) would have already pushed for such reforms.

All said and done, what is the worst that will happen if this demonetization and other subsequent scheme fails? Our economy will take longer time to recover, we will never vote BJP back into power which means it will be again a congress government in one form or other! Black money will continue to flourish (be due to corruption or evading taxes). With congress being back in power, we will again go back to days of hearing a scam everyday, some of which (like 2G and coal scam) would be more that lakhs crores !! We will again yell and scream that government is looting us and not doing anything to eliminate corruption, completely forgetting that someone dared to put his political career and entire goodwill at stake in November 2016 to do something!

Imagine if this was the ecosystem during Mahatma Gandhi time, we might not have attained independence at that time easily because everything he (and other freedom fighter says or does) would have been critized by media, oppositions, everyone on the street and we public would have happily spread the negativities on social media without joining in the good causes.

Conclusion:

Each one of you have been yelling and screaming over last many years that government is not taking any big or bold step to overhaul our system and if Modi has dared to do something, everyone wants to bring him down, probably because folks wants results overnight, do not want to come out of their comfort zone and are not OK to sacrifice. If this continues, no other leader (be politician or otherwise) will ever dare to do anything because they will be afraid that they will fail even before they start.

Continue to crucify Modi on a badly executed plan but do not write off the intentions so early. It is in our hands whether we want any scheme to succeed or not. Positive public participance can make a poorly planned scheme a great success, similarly no or negative public participance can fail miserably a well-planned scheme.

I still feel that in the longer run, we have not much to lose but lot to gain, if Modi continues his cleanliness drive with complete honestly and integrity. Our focus should be to ensure and compel Modi to take many more such measures to address corruption and many other issues.

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

2016-12-02T18:59:00.002+05:30

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

Govt failed to give admission to our children as all seats given to SC/ST & other Quotas, We had to admit our children into Private Schools & Colleges with heavy fees & capitation structures

Govt. Failed to provide Good Hospitals, We saved our lives by paying heavily to Private Hospitals

Govt. failed to provide good Transportation, We had to buy Cars & two wheelers for us & staff

Apart from all these, for each and every work to be done in Govt Departments, all staff from Peon to topmost Officers needed to be illegally bribed to get our legal works & needs done !

What the Tax Payer gets in Return at the retirement, when he needs most to survive ??

Nothing, no social security. But instead all his life his hard earned income resource is used by government to distribute subsidies and free distribution among masses to buy free votes.

Like Western developed Countries if Indian Government could provide all the above why would anyone save taxes ?

We All know that the Major Tax revenue of Taxes are eaten by Government Officials and Politicians (billions of Dollars are lying in foreign Banks). A manufacturer works at a margin of between 2% to 10%,

whereas government needs 30% of his income to cover it's expenditures. How fair it is to all??

That's the reason no one wanted to pay Taxes.

We saved Taxes for our Necessities, for our own old age, for our safety, security and this phenomenon is

the sign of failure of a government of the state in discharging it's own functions fairly and efficiently.

Government alone is responsible for this.

Businessman is not a "Thief"

Businessman is not a "Defaulter"

Businessman is not an "Accused".

He provides Job to Hundreds & thousands of People.. He pays multi Taxes... He works hard to pay salaries, rents & taxes ... He is the Backbone of our Economy ! Don't Break the Backbone of the Country !

Try to correct the whole corrupt system, the businessman will automatically correct himself

I have received many questions on above lines and I do not deny it completely.

For obvious reason, there is no official list of scams, just google “top scams in India” and you will see them running into lakhs of crores of rupees. Do remember that these are the scams that were found out (and probably will never be proved), there are lot and lot more scams that is not known, which itself can run into another few more lakhs of crores !!

However the beauty is that answer for the above question lies in the question itself. (“…Try to correct the whole corrupt system, the businessman will automatically correct himself…”)

Is demonetization not a step to tackle corruption? Corrupt leaders are already yelling and screaming on top of their voice, they are hit big time and no matter how much they try, it is not easy for them to convert all their ill-gotten cash worth lakhs of crores into new currency notes overnight. As worst case, even if corrupt leaders found ways to take care of their cash pile, I ask again, is demonetization not an attempt to tackle corruption?

It is hoped that Modi will take more measures (like hopefully banning cash donation to political parties, less-cash economy etc., ) to continue tighten the noose but nevertheless no matter what I say or think, we (including myself) will not be convinced until we see what else Modi does and based on that what the results are. So let’s wait and watch how things unfold in near future.

Let’s address the original question of tax evasion differently. Where does black money generated from evading taxes go and what is the fallout of it?

This un-accounted (black) money of so called tax evaders / business men (and not necessarily corrupt politicians) is mainly used for

- Paying capitation fees

- Paying donation for kids school admission

- Paying dowries

- Paying bribes

- Paying to mafia, naxals, organized crime etc.,

- Paying for large value items without bills/receipts

- Etc.,

Most of whatever money people save by avoiding tax gets wasted in “paying” for one or many of the above item. These and many more such payments via black money continues to inflate prices and results in huge inflations year after year. This is a never ending vicious cycle !

Yes, most of these payments are because someone has demanded this money but they are demanding because they know there is un-accounted cash with people. Imagine if EVERYONE starts paying for the above items in cheques or credit/debit cards or online money transfers etc. Everything will be out in open. If nothing else, do you think our judiciary will allow this to continue?

I have said again and again, we will never be completely corruption and black money free. Individuals will continue to find ways to beat the system, they will continue to innovate to remain corrupt. Let’s hope government and judiciary also continues to innovate (be pro-active or re-active) to beat these corrupt individuals in their own game. Government / judiciary will win some, loose some but then continuous attempt has to be made and for continuous attempt to happen, someone has to take THE FIRST STEP. To me, demonetization is that first step !

Finally, beyond all this, what is there for you to loose? You are not a corrupt leader to have lakhs of crores of black money. Whatever you have, you have either already taken care or know how to handle it. In next few years, if Modi or any other government does nothing to check corruption, it will not take much time for you to find ways to accumulate black money again by evading tax !

So, take a gamble and support this demonetization and any other such initiatives that has good potential of checking corruptions. If everything fails, you can any time go back to older ways of evading tax and get rich again in no time!

Demonetization – Many have already beaten the system?

2016-12-01T14:29:00.002+05:30

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

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)
deposited money in various other “poor” people accounts (again for a fee)
Jan Dhan accounts itself reported a deposit of about Rs 64,000+ crores until 25^th Nov 2016. Not all of these account holders can act ignorant of the ramification of what they are doing as many of these folks are getting paid for letting others deposit in their account. This just goes on to say that “poor” folks not necessarily mean non-corrupt
taken the risk of depositing un-accounted money in bank, they either will declare it later and pay tax or wait and watch if income tax folks can really catch them
found other ways (as per media reports) of exchanging or trying to exchange old notes

This means two things

Corruption is deep rooted (doesn’t matter whether you are rich or poor) and individuals have already found ways to beat the system. Worst part is, many of the black money runs the risk of remaining as black money post completion of this entire demonetization exercise. This goes on to prove that continuous mass movement is required to checkmate corruption, let’s rejoice that Modi has risked everything and dared to take the first step.
Windfall that government was expecting from unreturned money might no longer be as high as Rs 3 lakh crores.

a. As on 28^th Nov, against the total demonetized currency valuing about Rs 14 lakh crores, about Rs 8 lakh crores (in form of old 500 and 1,000 Rs notes) are already deposited/exchanged in the banks. We have one more month to go and everyone is keeping an eye on how much more money (in form of old 500 and 1,000 notes) will get deposited in banks. http://timesofindia.indiatimes.com/business/india-business/60-demonetised-notes-already-accounted-for-RBI/articleshow/55675856.cms

b. I think this has forced the government to come out with a new amnesty scheme. Apart from other things, this new amnesty scheme has a 4 year lock in period for 25% of the deposit. Next government (Modi or the new PM if Modi loses next Lok Sabha election) will have to take care of paying back this 25% of the deposit to individuals after 4 years from now. Opposition cannot openly fault this amnesty scheme, though they know that they will have to bear the brunt (of paying back 25% of deposits) if they come back to power later J

Does this mean that demonetization was not an effective move ?

Current indicators shows that a sizeable portion of black money might remain black, which is not good for economy in the longer run. Still, it is too early to take a stance, let’s wait till 30^th Dec 2016 to understand things better.

Only reason I’m posting this blog (and not waiting till 30^th December 2016) is because too many folks kept on telling me that demonetization has failed as those who evaded tax or were hoarding cash have found ways to address their black money problem.

I still believe demonetization has already met with huge success as it has already taken care of other critical issues like terrorism, naxals, mafia, other organized crimes, counterfeits, etc., etc., which we covered in earlier blog (http://khadloya.blogspot.in/2016/11/Demonetisation17.html). Need of the hour is for Modi government to continue to take measures to ensure these do not surface again soon and in large numbers.

Also, let's not assume that Mod government will stop with demonetization, more so now because if Modi cannot show large scale results, his political career is at stake. Do expect Modi to take further steps (be to unearth benami properties or push towards a less cash economy etc., etc.,) in near future to not only address corruption and black money but also to cement his position as a mass leader.

I still continue to be optimistic !!

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

2016-11-29T12:25:00.003+05:30

Black Money has to be seen in two different context.

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

Let’s look at both of them in detail.

1. Un-accounted cash in Indian currency notes

A large and sizeable part of black money remains in form of un-accounted Indian currency notes. If there was no un-accountable cash, there would be no black money and hence no un-accountable assets from such black money. Un-accounted cash exchange hands but does not vanish

To illustrate further,

Let’s assume person A has un-accounted cash at a given point of time and he/she buys a property (land or flat) from person B using un-accounted money.
Let’s further assume that sometime later person B buys gold from person C using this un-accounted money.

Now, when demonetization move is announced, person C is sitting on a pile of un-accounted cash. He/she has to either deposit (and pay penalty / tax, if applicable) or dispose/destroy it or find some other means.

While it is true that, for now, person A and person B have escaped and only person C is caught but let’s be happy that atleast person C is caught. This itself is a good start. We have seen in one of my earlier blog (http://khadloya.blogspot.in/2016/11/Demonetisation17.html) that such un-accounted (“unreturned” or “missing” ) cash itself is expected to be more than Rs 3 lakh crores.

There are indeed ways and means to catch person A and B also and hope Modi government does something on that front very soon.

Even if people found ways to beat the current system and deposited most of their black money into banks via others (like Jan Dhan Yojna accounts, etc.,) this is still a good move to ensure money is brought out into main economy.

2. Assets bought by un-accounted money

Yes, it is true that a much large portion of “proceeds” from black money remains in form of various assets, either in India or abroad. Some assets (like benami properties in India) can be un-earthed more easily than some other assets (like gold, precious gems, art works, etc., etc.,).

Honestly, when exposing ALL unaccounted assets within India itself is not easy / possible, there is no easy solution to get back assets hidden abroad for now. All these assets hidden abroad has happened over many decades under previous governments. I do expect Modi to make these assets less meaningful by taking certain measures and hope that government continues to take measures to bring them back soon.

For now, let’s be happy with Rs 3 lakh crore windfall that government is expected to get from currency notes itself, this itself will provide a huge boost to our economy and benefit common man immensely. Let Modi continue to take other measures to address other un-accountable assets

One such measure could be to ensure all real estate properties (be lands or buildings) are accounted for, to do so is difficult but not impossible ! Such a move will expose most of benami properties. Other hope is banning all large denomination notes in near future. If there are no large notes, one cannot sell their assets like land or gold or anything else (be in India or abroad) for Indian currency notes easily. They will still find some other means and ways of utilizing these assets but it will not be in form of easy liquidity

Conclusion:

Just because many of the un-accounted proceeds are either abroad or in form of various non-cash assets does not mean that we should do nothing to check corruption and black money. If nothing else, let's start a new era with Rs 3 lakhs crores (or whatever the final amount happens to be) windfall that government is expecting.

Let's not assume that Mod government will stop with demonetization, let's work towards ensuring demonetization succeeds and then ensure Modi take further steps in near future to minimize accumulation of such un-accounted assets in future.

If we cannot fix all issues of past, let’s atleast ensure they do not continue to repeat in future !!

Demonetization – Effect of change of currency notes size !

2016-11-27T18:20:00.003+05:30

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:

Negative impact:

Yes, change in note dimensions have impacted the public massively as many ATMs are still closed, waiting for the technicians to change the ATM machine plates to accommodate new 500 and 2,000 notes.
If the ATM were functioning, as promised by government, by 10^th or 11^th Nov 2016 then most of the crowd and long queues in banks would have been taken care of. Lack of ATM has deprived people’s ability to withdraw and use their own money in India’s cash based economy. This definitely has not gone down well with public as they see government not prepared for such a massive exercise.
Lack of ATM readiness has given more fire power to opposition and media, allowing them to focus on the plight of comman man rather than focusing on merits/demerits of demonetization.

Overall, change in new currency note size was neither planned nor executed well by government. If ATM had been functioning, people would have got a positive message that government had planned well and taken care of common man before embarking on such a huge journey of demonetization.

Positive impact:

Still, rather than speculating why the note dimensions were changed and why it was not handled properly, I would like to focus on how note dimension change helps in longer run.

Change in dimension (reducing the size of the new 500 and 2000 notes) reduces the cost of printing. To quote-unquote from below mentioned economic times page, "..... It is cheaper to produce. Smaller notes mean less colour and more notes per sheet, it helps reduce cost and also allows the Reserve Bank of India (RBI) to print more notes in a lesser time. As per estimates, around forty Rs 2,000 denomination notes can be printed per sheet of paper instead of 32 or 36 previously for the Rs 1,000 denomination notes... "

http://economictimes.indiatimes.com/news/economy/policy/smaller-bank-notes-are-cheaper-to-print-in-note-economy/articleshow/55570768.cms

Let us assume that note dimension were not changed. In such scenario,

Everyone (including Terrorists, Naxals, Hawala operators, Mafia, Counterfeits, corrupt politicians / bureaucrat s and many other crore’patis) could decide to hide their un-accounted cash / black money till next election. They will not deposit their un-accounted money in the bank now, thinking that if others (mainly corrupt politicians, if any) are sitting on larger pile of cash, why not wait and see what they do if and when they win Lok Sabha election. Due to this, deposits in banks would have been be much lower than what is being experienced now.
If Modi government does not win next Lok Sabha or any other Lok Sabha election in future or even if BJP wins but Modi is kicked out and no longer PM, it will be relatively easy for a non-Modi led government to unite with other so called “corrupt” politicians / people to legalize and bring back old Rs 500 and Rs 1,000 notes.
In future, new non-Modi led government can direct RBI to start printing new 500 and 1,000 Rs notes exactly matching the old ones. This way, everyone’s black-money (running into lakhs of crores) will become “valid” again. Public cannot distinguish between old and new notes as government purposefully will print new notes exactly same as old notes.

If above is allowed to happen, money power and corruption will again rule the country and will also be a big boost to terrorism, counterfeits etc.,

Conclusion:

With the new currency dimension changed, it will be a stupid and non-justifiable move by any government to change all ATM machines again to support old 500 and 1,000 Rs notes. Forget public, I strongly believe our legal system will see through and courts will not allow this to happen.

In essence, knowingly/unknowingly, Modi is not only not fighting corruption and black money now but is also ensuring that it does not re-surface again easily in future (in form of revival of un-accounted old 500 and 1000 Rs notes) irrespective of whether he is in power or not !

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

2016-11-26T16:57:00.003+05:30

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.

http://www.thehindu.com/business/printing-new-notes-to-cost-rbi-more-than-rs-12000-crore/article9320924.ece

Now let’s assume (for discussion sake) that we need another Rs 8,000 crores for distribution and all other related expenses till last mile coverage (banks, ATMs, mobile micro ATMs, etc.,), transporting back and disposing of the old Rs 500 and 1,00 notes etc.,

12,000 + 8,000 adds to total cost of Rs 20,000 crores. There could be additional cost for the bank employees and all others supporting this initiative getting paid for working overtime. Just for discussion sake and to drive home the point, let’s double these expenses from Rs 20,000 crores to Rs 40,000 crores to ensure the critics do not have anything else to pick upon.

Now, is it just justifiable to incur cost of upto Rs 40,000 crores to recall old Rs 500 and 1,000 notes ?

Answer is yes. RBI, government, other banks etc., can deduct this Rs 40,000 crores from Rs 3 lakhs crores that is expected to come from un-returned notes. Even if un-returned note is less than 3 lakhs crores, it definitely will be more than Rs 40,000 crores that RBI and others are expected to incur!

http://m.economictimes.com/news/economy/finance/from-note-ban-government-eyes-rs-3-lakh-crore-windfall/articleshow/55471650.cms

Dip in the economy in near future is just a short term effect, do expect the economy to flourish once everything stabilizes and new measures kick in.

Topic closed! No need to even ponder on the additional benefits of check-mating terrorism, counterfeits, mafia, organized crime, corruption, black money, etc. etc.,

Why is Demonetization good for India ?

2016-11-17T21:47:00.002+05:30

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

Let’s look at each one of them one after another

Terrorism:

Most of our terrorism is because of the

- Support terrorist get inside India but backed by Pakistan, support from handlers in India who are paid (obviously in cash of Indian currency notes) by Pakistan and other such sympathizers

- Naxals sitting on large pile of hoarded cash, that they looted or took from villages or given to them by sympathizers

In just few hours, their entire cash pile is now crap. They cannot deposit these notes, terrorist handlers cannot go to banks to exchange or deposit. Even if they exchange or deposit via others, it will be a miniscule amount. More than hating India, handlers in J&K and elsewhere and naxal supporters in villages get paid to do these jobs.

You might have seen that there has been no agitation in J&K for few days now. Just to prove govt wrong, these terrorist could mount new offense in immediate future but logically their backbone is broken with this demonetization.

Terrorist and their backers will take some time to recover and device new modus operandi. They will definitely bounce back. Hopefully, by then Modi (or new govt in future) will have a better way to tackle that.

Counterfeit (fake) Notes:

It has been said again and again by various Indian governments in the past and present that Pakistan has been continuously printing Indian currency to de-stabilize India economy and fund terrorist activities within India. Mainstream media also says there are dedicated printing press in Pakistan that prints fake Indian currency notes and brings in country via pores Nepal and Bangladesh border. With demonetization, this has taken a huge hit. All fake notes are nothing more than pile of shit now. Pakistan (and internals who print fake notes in India) cannot overnight print freshly to create a pile of new fake currency notes. They anyhow will take some time to tweak their machines to print the supposedly counterfeit safe new 2000 and 500 currency notes.

Counterfeits will definitely bounce-back but they need time and by then (hopefully) Modi will ban new high denominations notes also (detailed in below section).

Pakistan, with their economy, cannot fund terrorism in India with their own money (unless China supports them now more than ever). This is be a huge gain for India. Again, Pakistan will take some time to recover and device new modus operandi. Hopefully, Modi (or new govt) will have a way to tackle that later

Black Money:

Modi should create shortage of currency by no longer printing new 500 and 2000 notes once current cash turmoil settles down in a week or two. Then gradually Modi should declare these new 500 and 2000 Rs notes also illegal. This time, as there is not much black money in market, he will give them LONG time (say 6 months) to exchange big notes with 100 Rs notes but I hope this to start soon (may be by mid-2017 itself) or so.

Soon, India will not have large denomination notes and such shortage of high denomination currency will force people to go cashless way which is not impossible. Almost everyone has or can afford a smart phone now. Those who are really really poor, who do not understand smart phone or credit card, anyhow cannot afford costly items and for them 100 Rs notes are sufficient. Even for them, let’s for discussion sake, assume Modi finds a solution.

Such shortage of large denomination notes will also be a huge setback for fake currency as cost of printing 100 rupees fake notes and logistics of circulating in India via various countries will not be economical causing a dent on terrorist, hawala and counterfeits.

Also, lack of big notes will reduce black money. I mean you will not carry 30 bundles of 100 rupees notes to buy 100 grams of gold or 300 bundles of 100 rupees note to buy a plot or home or pay college fees etc., !!

Obviously, people will find some alternatives later. Hopefully, Modi (or new govt) will have a way and will to tackle that later J

Economy:

I believe if done well, this is the master stroke. Modi will get loads of money in two ways

One, taxes from the un-accounted money being deposited. We are talking of 200% penalty on the tax that was avoided. For un-accountable deposit of (say) Rs 6,000 crores, back hand calculation says tax + penalty is Rs 5400 crores !!

Two, all “unreturned” or “missing” money. RBI says about 14 lakhs crores worth of 500 and 1000 notes have been scrapped and about 3 lakhs crore are not likely to be returned (i.e. these 3 lakhs crores of black money will not be exchanged for new notes or deposited in banks and becomes rubbish). After all deadlines, RBI will transfer this 3 lakhs crores as it is and entirely to govt.

http://m.economictimes.com/news/economy/finance/from-note-ban-government-eyes-rs-3-lakh-crore-windfall/articleshow/55471650.cms

Now imagine what govt can do with such surplus money for general public? Reduce/eliminate income taxes, increase subsidies for poor folks for two years, give one time thank you bonus to all bankers for their support, take care of poor in many other ways, spend on infrastructure and other areas there by giving a flip to economy, setup R&D units to compete with European and Americans on advanced technology, strengthen border etc., etc.,

This money is huge surplus for govt which all of us have confidence in Modi that he will spend on our benefits & improve economy. If he does not, he will not win next election and his own party and allies won’t allow that J

Our banks all of a sudden have HUGE ….. HUGE ……. I mean real HUGE cash deposit. Within initial couple of days, banks had received 1.5 Lakhs crore of cash deposit, we have 40+ more days to go. This is just a start. Not everyone will withdraw everything immediately that they had deposited. Banks will reduce interest rates (for both saving and loan).

If loan interest is reduced and real estate price crashes (due to lack of black money), many will be willing to take home loans to buy new homes thereby improving economy. So on and so forth for many other industries/sectors, giving a boost to economy.

With low interest rates on your savings and deposits, public will invest more in other venues like shares (say via MF), real estate’s etc., and that will give a good boost to industry. I’m sure govt and SEBI will continue to strengthen norms to ensure public do not get cheated easily. FII will have more confidence in India and invest more.

In longer run (if all is done well) economy will get a good push because prices will come down.

Why many opposition parties worried?

First, like any other initiative in India, job of opposition party is to oppose. This is not a new trend and has been happening for many decades now, irrespective of which party rule and which party sits in opposition, be in state or central govt. Opposition party immediate job is to oppose, they will think of merits later. Period.

Second, we always believed that many of these politicians and political parties are sitting on huge black money. Even if many of their loots are in swiss banks or elsewhere or in other assets (gold, real estate etc.,), they still are sitting on huge pile of cash that they need under short notice for polls, bribing voters during election, bribing their supporters to arrange strikes/bandhs, etc., etc., All these cash pile which they “worked” so hard over many decades to generate is worthless now!

Third, in next two budgets if Modi bring out policies favoring masses like reduces taxes, pass on all these benefits to general public in one way or other, give a flip to economy etc., etc., (because of the lakhs of crores of Rs govt expected to get from demonetization) other parties will not have any future. They are finished. PERIOD.

Fourth, no political party (perhaps except BJP and their allies if Modi cheated) has cash to bribe voters in future elections. All money in swiss bank cannot be converted to Indian currency overnight J

In a way, Modi is taking away all ill-gotten (black money) from these politicians, Modi is expected to spend this money on the welfare of comman man and these politicians who are yelling and screaming now will not get any credit for this (they cannot go around saying this is their black money).

Opposition is aware of these and in fact they are aware of many other scenarios which you and I are not aware of. That’s why opposition is afraid of demonetization and hence causing hue and cry. No one is able to find fault with this plan, they are simply saying that common man is affected. Their survival is at stake now. Opposition is not fighting for comman man, opposition is fighting for their own survival !

Does this mean all previous governments were very bad?

Definitely and absolutely no ! Previous governments did lot of good work, that’s why we are far better than many others countries.

All said and done, our strong democracy, strong opposition and strong public support ensured our govt did lot of good for people and we did not become worse and did not become beggars like our neighbor country who is always seen begging from America and China for everything.

It is just that along with good work, previous governments ended up doing lot of bad things as well - does 2G scam ring any bell ! There were just too many scams to track at one point of time. It is just that some of the bad things (like corruption and black money) grew over a period of time and started becoming too big to handle. Corruptions and black money menace took such monstrous proportions that drastic steps are required to manage it.

Why me and why not get Lalit Modi, Vijay Mallya & others who have crores and crores of black money?

Lalit Modi and Vijay Mallya’s of the world flourished, cheated Indians during the previous congress led government regime. These cases are getting much highlighted now because opposition is doing an excellent job of reminding current govt that they are unable to fix the mess created by previous congress led govt !

But nevertheless, point is not that. It is a completely valid argument as why not catching those who have absconded and let’s hope govt is doing right things to haul them back to India but then how long are we going to keep leaving in the world of telling first do this and this and this and then come to me ! Let’s get out of legacy and think of moving forward for this demonetization move. It does not mean we will not push govt and authorities to haul these fraudsters back to India, we will continue doing that.

All this is ok, what is in it for me?

If you are still asking this question I’m puzzled but not surprised. Let’s look at just few scenarios.

If someone goes for a medical college admission next year, college cannot ask 25 to 40 Lakhs cash!! Nobody will have that much of cash!! College cannot simply increase the fee beyond a point (as govt / court will not allow) which means cost of medical education will come down drastically. Same analogy applies for all school and colleges, bringing down the era of donations and capitation fees. This saving from the so called capitation fee is applicable to everyone.

You can extend such discussion to other areas like real estate, hospitals, jewelry, dowry etc., etc.,

We already covered that govt has huge cash now which they will spend to improve economy. Take example of China, they generated huge economy in manufacturing and then spent that money on upgrading their infrastructure and R&D.

If we move towards cashless economy, tax collection (GST) will be better there by giving govt more money to spend

Also, with public not having huge currency at home and govt expected to take measure to control exposure to gold (let’s reserve a post for that for a later day), thieves will not have anything easy to steal in homes. Break in homes is expected to come down, a huge boost for law and order and police and governance and general public J

What about common man getting affected?

Yes, common man is affected. They were affected when political parties instigated numerous strikes, bandhs, shut down for some or other reason. Many of these were for many consecutive days.

Yes, common man was affected when goons supporting political parties went on rampage/arson destroying private and public properties

Yes, common man was affected when political party after political party did nothing to curb corruptions (but only encouraged as they had to fill their coffers) and we continued to hear scams after scams for many years

Yes, common man was affected when there were riots on name of caste, religion, state bifurcation etc., etc.,

Yes, common man was affected in many such ways but common man did nothing that time. It is just that common man is forced to do something now and it is not easy for anyone to come out of their comfort zone.

Here, comman man is one who has NEVER hoarded any money, never cheated monetarily (it doesn’t matter whether govt is/was good or bad) always gave or asked receipt/bill for everything and does not have any black money. Those who have black money and running helter-skelter now is NOT a comman man.

Real comman man is indeed affected now BIG time because of the long queues in banks and ATMs and yes it is unfair on them. Comman man is indeed affected because of disruption in their plans, be it marriage, regular business, tourists, long hours by bankers and police, large section of public who are daily wagers and so on and so forth.

But then look at the big picture. If all done with good intent, future is bright. We did not receive independence from british within a day or two because of one or two individuals. It was a mass movement spread across many years. Similarly, demonetization act to check corruption, black money, etc., etc., also needs to be a mass movement.

I would want everyone (including opposition) to focus on making demonetization success now and be vigilant to ensure govt does not “eat” away these surplus cash or does any malpractices. Opposition and individuals are welcome to level charges against govt, we need strong opposition and alert public to keep check and balances on govt but at this stage it should not be at cost of NOT doing demonetization.

Last but not the least, fortunately/unfortunately our common man always had a short memory and will forget about these long lines and losses they incurred/incurring soon, more so if they start seeing and realizing the benefits of these hard days

If common man did not had short memory, political parties (be Congress or BJPs or SPs or AAPs or any other Tom Dick and Harry calling themselves as political leader) can never ever ever win any election. They would have been penalized by common man ages ago !!

Now what I think went wrong on demonetization:

This was supposed to be a top secret and supposedly only 10 folks knew of entire plan. If Modi had invited some panel of expert to talk of pros and cons, you and I know that this would not have been secret and the entire operation would have been waste

The current issue of long Qs and cash crunch is probably because of so called educated folks trying to stand in bank queue again and again and/or asking others to stand in queue again and again to exchange notes !

To give a better perspective, during elections entire voting (for any given region) gets done in a single day (say) between 8 AM to 6 PM. Many places gets a turnaround of 60% to 70% or even 80% within a day. If Indian public had not visited bank more than once to exchange notes, this entire activity of exchanging would have been completed in a couple of days and not more than a week (max) !! Please remember, 4,000 Rs exchange is supposed to be a ONE TIME offer for emergencies and not per day limit (as clarified by Jaitley later). Rest all money is supposed to be deposited in bank and to be withdrawn from bank as needed.

Even if there is a shortage of new currency in bank, if no one goes again and again to exchange or withdraw un-necessarily, this entire exchange + deposit activity should not take more than couple of weeks and can be done in an orderly way

Changing new note dimension also backfired, probably because they didn’t knew that ATM has “plates” that has to be physically replaced to put new 2000 Rs notes as it is of different dimension !!

All said and done, govt did not do a good job, never took into consideration the cunningness of black marketers / corrupt folks, had no contingency plan and is forced to put up a brave united front to tide over. Most of it is past now, hold on for few more weeks and normalcy will return soon

Conclusion:

For a country of India size, involving varied demography and large cash based economy, corruption and black money that flourished over decades cannot be fixed overnight. Any solution would have been fought by corrupt politicians, corrupt bureaucrat, corrupt business man etc.,

Demonetization is a good move on longer run, assuming Modi executes it well and honestly. Even if Modi does not win next election, he has created the framework for next govt and public to take this movement forward.

Do remember that corruption and terrorism can never be eliminated. Attempts can be made and should be made to minimize them though. Who would have thought such demonetization was even possible?

I’m not necessarily a big Modi fan but I’m big fan of this demonetization plan if it is done well till completion and with complete honesty and integrity.

Now if Modi also becomes another disappointment like Kejriwal, we all can join in yelling at Modi later but then what after that? As usual close our eyes and as usual wish and pray that someone else fixes our problem!

For now let’s be optimistic and support the guy who did something that no one else dared!

For this demonetization initiative, #IAmWithModi.