India politics thread

[Shiva87]

The Indian government last night made all existing Rs. 500 and Rs. 1000 notes illegal tender in a move to tackle the rising problem of black money in India.

With official figures showing the 'alternate' cash transaction market at about 23% of all transactions in the economy (with unofficial estimates as high as 40-50%). This move is expected to have a hugely positive impact on the overall health of the Indian economy.

The transition to the new notes might be tough for 3 months, but it is what was needed. Discuss here!

 

[Giant Midget]

Could you explain how this move actually works? I haven't read too much into it, but everyone's comments so far have been very positive. Just curious to see the actual mechanics

 

[VorZakone]

It's just PR if you ask me.

 

[Shiva87]

Could you explain how this move actually works? I haven't read too much into it, but everyone's comments so far have been very positive. Just curious to see the actual mechanics

Sure, I'll help clarify:

1. Most of the black market transactions were in cash - Rs. 500 to Rs. 1000 notes. Therefore, about 80-90% of the black/ undisclosed funds were held in these denominations.
2. Effective midnight yesterday, these notes are now 'illegal' tender for transactions (other than government hospitals, petrol pumps and few essential services)
3. Central bank is issuing a new 'type face' Rs. 500 note and a completely new Rs. 2000 note.
4. All government and private banks & government post offices will accept deposits of the Rs. 500 and Rs. 1000 notes in circulation. But these will be against verified identity and tax documentation.
5. If there are large deposits in tax accounts which did not have previously disclosed income or substantial cash-in-hand - these will alert the tax authorities and in all likelihood initiate revenue investigations + penalties.
6. Effectively, there is no issue if you hold these notes validly. But, if these are not a part of your disclosed income, these notes may well be worth nothing.

This is a short summary! Hope it helps.

 

[Moonred]

It's just PR if you ask me.

And why is that?

 

[Shiva87]

It's just PR if you ask me.

Not really. Its been coming for a while. The current government is a PR machine, but this move does have many people trying to figure out things. Its hard to imagine how big a problem this was unless you are here right now.

 

[Akshay]

It's also a move against counterfeiting, as the new notes are supposed to be harder to counterfeit. The black money will simply be reset but the fear of such a move being repeated may prove to be a deterrence in the future.

 

[Varun]

It's a great move and tbf, it's great to see a government finally doing something rather than just talking the talk like it has been the case for ages.

It's also a move against counterfeiting, as the new notes are supposed to be harder to counterfeit. The black money will simply be reset but the fear of such a move being repeated may prove to be a deterrence in the future.

What do you mean?

 

[Witchking]

It's a great move, but the poor and weekly wage workers who might be paid in 500 and 1000 rupee notes need to be helped to make sure that they do not lose out on their hard earned savings, the nearby post offices and banks need to have a friendly attitude in this or this all goes tits up.

On a positivie note, this one step has killed a lot of black money and fake notes used by terrorists out there which now can be printed on the new notes which should be out for circulation shortly. I am hoping it all goes smoothly, it will be a little inconvinient for everyone but it's worth it.

 

[Akshay]

It's a great move and tbf, it's great to see a government finally doing something rather than just talking the talk like it has been the case for ages.

What do you mean?

Businesses and people will be forced to report and turn in most of their current black money stock, but I think they'll go back to those transactions within a few months and the black money will start to build up again.

 

[VeevaVee]

Great that the reaction is so positive too. Hopefully it works in the long run.

 

[Moby]

A really massive and a bold step by the government - given the amount of business class families are going to be hit due to this and would be pissed off at them - and the way it was announced should make it pretty effective. Finally great to see an Indian govt that actually takes an action and isn't just all talk.

 

[OB]

Businesses and people will be forced to report and turn in most of their current black money stock, but I think they'll go back to those transactions within a few months and the black money will start to build up again.

This is what i think too. The black money will surely come back. And then you can't keep making notes illegal tender again and again.
This has caused inconvenience to the normal person. Let's see how the bank's and ATM's go about with all this from tomorrow.

What are they going to do with all the fake notes that happen to be with the common man unknowingly. I doubt the bank would deposit them, or exchange.

 

[Varun]

Businesses and people will be forced to report and turn in most of their current black money stock, but I think they'll go back to those transactions within a few months and the black money will start to build up again.

Which is the goal really. Also forces people to think twice before accumulating black money again now that the risk is known.

 

[Moby]

6. Effectively, there is no issue if you hold these notes validly. But, if these are not a part of your disclosed income, these notes may well be worth nothing.

Yes. As someone who belongs to a working class family where every rupee has been earned from honest hard work, I couldn't be happier and more supportive of this.

 

[crappycraperson]

, but I think they'll go back to those transactions within a few months and the black money will start to build up again.

This is obvious but if some businesses lose any kind of money this time they will think twice before evading taxes again. At the end of the day no Govt in the world can stop people from breaking any law. Only thing you can do is be seen to be proactive in curbing this menace. That will ultimately bring down the number of people willing to do evade paying taxes.

 

[kps88]

Also forces people to think twice before accumulating black money again now that the risk is known.

They'll just horde gold instead.

 

[Moby]

This has caused inconvenience to the normal person. Let's see how the bank's and ATM's go about with all this from tomorrow.

It has but I'm more than happy to go through small hardships for a couple of days for the greater good. Most are.

 

[OB]

They'll just horde gold instead.

True. Most of the black money would hardly be in notes of Rs500 and Rs1000. It's in gold, investments, foreign currency etc.

 

[Moby]

This is obvious but if some businesses lose any kind of money this time they will think twice before evading taxes again. At the end of the day no Govt in the world can stop people from breaking any law. Only thing you can do is be seen to be proactive in curbing this menace. That will ultimately bring down the number of people willing to do evade paying taxes.

Yep, there's no doubt it will bring down the amount of black money being circulated, whichever way you look at it.

And, in any case, it is obviously better than doing absolutely nothing at all, which has been the case so far. People need to realise how it's a no brainer.

 

[Shiva87]

They'll just horde gold instead.

Its not like gold is easy to get for large sums in the market today. There is a lot of imports/ customs checks and compliances. To buy gold in black, you'll need a sellers who are willing to deal in huge cash sums again. Its rebuilding a market that's just crashed. So, at least it will take 5-6 years (if not more).

With increased tax transparency, this will get more and more difficult.

 

[Moby]

True. Most of the black money would hardly be in notes of Rs500 and Rs1000. It's in gold, investments, foreign currency etc.

Like I said even if doesn't erase all illegal earnings - it obviously won't - it will still make a pretty good difference which is infinitely better than making no difference. It's basically this attitude of 'doing anything wont change it anyway so feck it' that has been counter productive and has held everything back for decades. Need to absolutely get rid of it. One step at a time. And this is a big one.

 

[Shiva87]

Businesses and people will be forced to report and turn in most of their current black money stock, but I think they'll go back to those transactions within a few months and the black money will start to build up again.

And how do they explain the disclosure? The goverment offered the income disclosure scheme with 50% tax on black money. Now the penalty is 300%. So if they do disclose (or try to bring it within their official books), they are also risking paying thrice from their earned income.

Edit: Penalty has been clarified at 200%

 

[kps88]

Like I said even if doesn't erase all illegal earnings - it obviously won't - it will still make a pretty good difference which is infinitely better than making no difference. It's basically this attitude of 'doing anything wont change it anyway so feck it' that has been counter productive and has held everything back for decades. Need to absolutely get rid of it. One step at a time. And this is a big one.

Overall, I'm a fan of this idea and support it, mainly for the reasons you mention. At the same time, I think it's important we don't go too far in the other direction and blindly support any policy in the name of "something is better than nothing". Nothing wrong with holding the government to a higher standard than that. It's far too early to tell whether this will make a big enough difference to have been worth the hassle and implementation.

 

[Akshay]

And how do they explain the disclosure? The goverment offered the income disclosure scheme with 50% tax on black money. Now the penalty is 300%. So if they do disclose (or try to bring it within their official books), they are also risking paying thrice from their earned income.

Yep, they will suffer no doubt. I still suspect they will use common people in schemes to turn the money in instead of doing it themselves. It is a good move but I'm not sure how much lasting effect there will be on black money.

 

[Varun]

True. Most of the black money would hardly be in notes of Rs500 and Rs1000. It's in gold, investments, foreign currency etc.

Not true. For the absolute majority of those involved in black money, it's stocked in cash for most parts. Gold and investments are part of the mix ofcourse but the bulk is still cash.

In any case, it's not as if a step like this will simply eradicate black money from the country. A problem that big can never be solved in 1 step. A step like this is a welcome start though.

Even though my immediate family is entirely working class, my extended family is almost entire business class and the sheer amount of cash they stock up is absolutely incredible. There's no doubt this is a big kick in the balls.

 

[adexkola]

Which is the goal really. Also forces people to think twice before accumulating black money again now that the risk is known.

I think it is a brilliant idea in the short run. Going forward, what's preventing black marketers and corrupt fecks from stashing away foreign currency or gold?

 

[adexkola]

And how do they explain the disclosure? The goverment offered the income disclosure scheme with 50% tax on black money. Now the penalty is 300%. So if they do disclose (or try to bring it within their official books), they are also risking paying thrice from their earned income.

Wait. If you turn in dirty money you have to pay 300% tax?

 

[bleedred]

Wait. If you turn in dirty money you have to pay 300% tax?

Well there was a voluntary disclosure scheme earlier in the year, when it was 50%, but after that 300% is more like a fine.

 

[The Man Himself]

Apart from the benefits of this move and the proactive approach of Govt, what amazed me was how secretive and then sudden it all was. BJP spokesperson too had no idea about this. Nalin Kohli said that when he received SMS about PM public address at 8 and PM meeting President at 8:30 at night, he had no idea what it can be about. Of course RBI and few select people and functions must have been involved but it has been carried out very well. Given the jugaad (I don't know if there is an appropriate English word for it :P) we Indians expertise in, any leaks of the move or trying to do it step wise over the course of many months would have defeated the purpose.
Yesterday when I saw alert on phone of PM's sudden address, I hastily switched on TV and when Modi said it is serious issue with a very serious face, I was shitting it, thinking that he may be resigning having had enough of our system! Should have known better though.

Thinking back now, there are dots to connect. Right from having scheme to have bank accounts for everyone, to linking it to Aadhar card to the voluntary scheme for people to declare undeclared money, this was coming. Modi had also given final hint/warning towards end of September saying, "you still have time to declare your wealth by 30th Sep. If you don't, don't blame me for what happens next."

Now hoping the execution happens with minimal discomfort. Particularly the very poor people will need to be guided. We have too many cnuts who will try to fool them by spreading hoax/false news. Hoping the well functioning machinery like presence BJP has in many states is used to educate such people. The educated people can do their bit to help out the maids, cooks etc at our houses. I did so both for my cook and maid.

 

[Akshay]

Apart from the benefits of this move and the proactive approach of Govt, what amazed me was how secretive and then sudden it all was. BJP spokesperson too had no idea about this. Nalin Kohli said that when he received SMS about PM public address at 8 and PM meeting President at 8:30 at night, he had no idea what it can be about. Of course RBI and few select people and functions must have been involved but it has been carried out very well. Given the jugaad (I don't know if there is an appropriate English word for it :P) we Indians expertise in, any leaks of the move or trying to do it step wise over the course of many months would have defeated the purpose.
Yesterday when I saw alert on phone of PM's sudden address, I hastily switched on TV and when Modi said it is serious issue with a very serious face, I was shitting it, thinking that he may be resigning having had enough of our system! Should have known better though.

Thinking back now, there are dots to connect. Right from having scheme to have bank accounts for everyone, to linking it to Aadhar card to the voluntary scheme for people to declare undeclared money, this was coming. Modi had also given final hint/warning towards end of September saying, "you still have time to declare your wealth by 30th Sep. If you don't, don't blame me for what happens next."

Now hoping the execution happens with minimal discomfort. Particularly the very poor people will need to be guided. We have too many cnuts who will try to fool them by spreading hoax/false news. Hoping the well functioning machinery like presence BJP has in many states is used to educate such people. The educated people can do their bit to help out the maids, cooks etc at our houses. I did so both for my cook and maid.

There was also what seemed a throwaway remark in some interview few weeks back where he said 'what if we carried out a surgical strike against black money also?'. No one paid it any heed because there weren't even rumors of something like this. The secrecy really has been incredible.

 

[Edgar Allan Pillow]

I think it is a brilliant idea in the short run. Going forward, what's preventing black marketers and corrupt fecks from stashing away foreign currency or gold?

It's still a highly regulated foreign currency market. Very difficult to convert large sums of money. Also gold is not as easily tradeable over the counter as cash.

Anyway this move will serve to wipe out and start off with a clean slate.

 

[Moby]

what amazed me was how secretive and then sudden it all was.

The secrecy really has been incredible.

Agreed. This was really clinically done.

Came out of absolutely nowhere.

 

[Witchking]

This one step might also throw the UP elections in to a mess as from what i read, a lot of elections are fought on black money and hard cash. He really would have been planning this from a long time, maybe from the Jan Dhan Yojna. Really good step. Other than Rahul Gandhi, Arvind Kejriwal, Mamta Banerjee (real surprise) not many have anything negative to say.

Just saw on twitter that a sack full of 500 / 1000 notes were found near a dustbin, not sure how true though.

 

[Moby]

Other than Rahul Gandhi, Arvind Kejriwal, Mamta Banerjee

Such an esteemed group of individuals.

Just saw on twitter that a sack full of 500 / 1000 notes were found near a dustbin, not sure how true though.

Well people are trying to get rid of as much as invalid currency as they can. Over here last night they were selling 1000 notes for 500 and 500 ones for 200. Made me chuckle.

 

[podurban2]

The Indian government last night made all existing Rs. 500 and Rs. 1000 notes illegal tender in a move to tackle the rising problem of black money in India.

With official figures showing the 'alternate' cash transaction market at about 23% of all transactions in the economy (with unofficial estimates as high as 40-50%). This move is expected to have a hugely positive impact on the overall health of the Indian economy.

The transition to the new notes might be tough for 3 months, but it is what was needed. Discuss here!

That's great to hear. Will this in any way make corruption easier to prevent/track?

 

[Varun]

I think it is a brilliant idea in the short run. Going forward, what's preventing black marketers and corrupt fecks from stashing away foreign currency or gold?

Foreign currency is quite well regulated. Not easy to convert large amounts especially for the common man who deals in black money. Gold stockpiling has been discouraged for a while with various steps being taken to curb it. Also, as with any investment done in black money, it doesn't give you full whack return as cash would. In any case, people will still indulge in it, this step won't solve that completely. What it definitely does is create a big problem for them now and discourage them from indulging in kt again because people will lose huge sums.

 

[The Man Himself]

RBI said that banks will remain open on Saturday/Sunday (presumably only this one) as well to cover for the closing of today and/or tomorrow. Good step in reducing possible immediate short term discomfort/panic. Otherwise this Friday would have been crazy at banks.

 

[Moonred]

Faced some minor inconveniences while trying to get cigarettes and the illegal weed market is down. Small price to pay and hopefully it gets me to quit now

 

[ColvaleGoa]

BIG GAME!! Food for thought??

Did Mukesh Ambhani already know about this currency change? He invested billions in Jio & made it free till Dec 30th? Ironic...
& now,the currency exchange will only be allowed till Dec 30th & from Jan 2017 he will start getting returns all in white money!!
a real masterstroke by a visionary businessman or a trick by a fraudster...
only time will tell..
no wonder the Present RBI governor was a financial advisor to Ambani's Reliance group & an inside man..!!
Conspiracy Theories!
WHAT A GAME...Hats off !