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  • Category: Miscellaneous

    What is the inference from Reserve Bank of India data on demonetisation?

    The Reserve Bank of India in its annual report disclosed that 99.3% of the Rs 500 and Rs 1000 currency notes withdrawn from circulation in November 2016 were returned to the banks. According to the RBI report, after verification and reconciliation, the total value of the Rs 500 and Rs,1000 as on November 8, 2016, the day before note ban came into effect, was Rs 15,417.93 lakh crore. The total value of the withdrawn notes returned from circulation was Rs 15,310.73 lakh crore.
    After the demonetization, the RBI spent Rs 7,965 crore in 2016-17 on printing new Rs 500 and Rs 2,000 and other denomination notes. This is more than double the Rs 3,421 crore spent in the previous year by the RBI.
    The Government has emphasized the demonetization as a step that would curb black money, corruption and check counterfeit currency. The RBI report said that "Compared to the previous year, there was an increase of 35 percent in counterfeit notes detected in the denomination of Rs 100, while there was a noticeable increase of 154.3% in counterfeit notes detected in the denomination of Rs 50. The counterfeit notes detected in the new Rs 500 and Rs 2,000 notes during 2017-18 were 9,892 and 17,929, against 199 and 638 respectively in the previous year.

    The public was put through a lot of hardship and some lives were also lost while waiting in the ATM queues. What is the inference from this report?
  • #647456
    Basically, the author wants to know the benefits of demonetization when 99.3% of the notes returned to the system. Let us list out the benefits of demonetization for the benefits of skeptics.

    (a) More taxpayers: Nearly 1 crore people were added to tax net and the 26% rise in filings is not proportional to GDP growth or population growth. Fighting black money starts with eliminating at source — get people to pay taxes. With 99.49 lac new tax returns filers, income tax returns increased by 26% in 2017-18.
    (b) Less shell companies: A key way the black money is moved around is through shell companies; those businesses that don't run any business. By tracking the money coming back to the RBI, lakhs of shell companies were cornered. Attack on black money distribution. Over 2 lakh shell companies are being struck off from records in 2018-19.
    (c) Less gold: Most of us know that black money moves around through gold, real estate etc. and not a lot through currency. However, it is the currency that leads to gold. Demonetization along with many other transparency measures has made India get down from the gold rush.
    (d) Real estate valuation drop: Most of us know that most of the black money goes around is real estate transactions. The real estate market had a big drop, especially with cash transactions. The Indian real estate is coming closer to reality in terms of valuations.
    (e) Tax amnesty scheme: Government gave a one time option for people to come clean by taking a 50% cut on what they deposited in the bank. Thousands of crores of rupees have got through that scheme and that once again led to reduced black money. India has launched a new tax evasion amnesty scheme to flush out black money.
    (f) Money to other Government bodies: Using the demonetization move, many local Government bodies and even religious institutions accepted the older notes and they got all their past due paid at one go. Demonetization has seen a six-time jump in Gujarat municipal tax collection (this is just an example).

    All these have been the direct impact on black money and these have been achieved by demonetization.

    "If you are killed in action, you go to Heaven. If you win, you rule this Earth (as beautiful as Heaven). That is why, O son of Kunti, take a firm resolve and fight!"-- Shrimad Bhagwad Gita

  • #647458
    Yes. This demonetisation resulted in some benefits. The money lying in underground rooms and under the bed has seen the light. That money is in banks now. The money is available for utilisation. It is not a dead wood now. More tax payers. Similarly many other benefits are there and almost all those were listed out in the above response.
    always confident

  • #647461
    I thought that this thread did not interest any of the members. I am expecting one more response after which I will respond.
    " Be Good and Do Good "

  • #647469
    I am not boasting myself, but I am not at all surprised in the outcome of things as data dished out now.
    I would like to quote some excerpts from my posts in the GD on demonetisation initiated on 8 November 2016.

    Excerpts quote:

    "The present action, though may get applauds for Modi for the time being, will result only in causing hardship to ordinary , honest tax paying public."
    "At the maximum, the present measure can give a small temporary shock treatment and killing some amount of money in circulation. But it will not serve as a permanent solution. "
    "My take is that the present measure will kill the black money kept as currency notes by the small and medium type black money owner. That quantum may be a meagre fraction only . Such black money does not have much damage potential other than avoidance of tax of few crores in all-India level. However govt has yet to collect tax arrears many hundred times that from sources known."
    "Let us be clearly aware that the counterfeit currency is made by an inimical country and its establishments or its friendly establishments bent upon only to create problem to India. We should also be cautious and aware that they have many sources to fund their machinations. They may not mind the small shock of loss a few thousand cores i.e. only cost of material and distribution. I do not believe that the counterfeit currency in circulation is as huge or terrifying as made to believe.
    So the aim of stopping counterfeit notes will not succeed just by this measure."
    "Other than black money the other claim which actually impressed the common man is regarding eradication of counterfeit currency. Here also there is a great fallacy i understanding and miscalculation. Huge amount (if govt claim is correct) of counterfeit money is already in circulation, which even ordinary bank people are not able to distinguish. That money is in the public domain and with people having legitimate income. Now when these people who would have got some such notes quite unknowingly as wages or as in normal transactions, will exchange them at banks. That means they are now becoming white money and coming in the market. The maximum that can now happen is the counterfeit currency that is not yet distributed will become dead. Definitely the quantum of that will not be equal to the cost of printing and exchanging new notes
    The claim that counterfeit cannot be made for the notes now launched has to be proved by future."
    "So the present measure is more symbolic and a for sending a strong signal that THIS GOVT CAN ACT. There can be a small respite of flow of counterfeit notes. That is all. "


    I do not claim to be prophetic. I was only down-to-earth realistic in my analysis.

  • #647484
    Actually we do not know what were the intentions of PM Modi and RBI who imposed demonetization of high currencies and the people had hell of the time for nearly 6 months to get in to normalcy. But one thing has been increasingly become clear now that we cannot do any purchase or sale without the knowledge of the government. Either to in real estate 60 percent black money and 40 percent white money were given for purchasing any property. And now entire proceed is given as white amount and thus the government is hugely benefited. According to FM nearly 18,00,000 new tax payers were in frame now and they would be paying varied tax that amounts from normal to big amount. And those who are defaulters either too were also in the lens of the government. So with Notebandhi , the government tax structure and base has been increased.
    K Mohan
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • #647955
    The Reserve Bank of India data clearly indicates that the exercise of demonetization is a failure. The Prime Minister himself is not referring to demonetization anymore. With 99.3% of banned currency back to the banks, the black money claim is not valid anymore. There is a slight increase in the taxpayers. This includes 1.18 crores of the salaried class added during the 2017-2018 financial year as per the Income Tax Department sources.
    Everyone knows that the black money is in the real estate. So far no action has been taken in this regard.

    " Be Good and Do Good "

  • #648035
    [Response removed by Admin. Read forum policies.]

  • #648039
    The demonetization has created a fear in the minds of erring people that anytime such thing can be exercised by the Govt and then the unaccounted cash in hand will be a difficult thing to explain.

    Addition of about 1 crore new tax returns is a testimony to this. We should also try to understand that the black money was not with one or two people but it was spread throughout the system in a complicated way.

    RBI data can not give the true picture as a large amount was already streamlined by the people in different accounts in their own innovative ways. There was a huge sale of gold by the jewellers and they deposited the old currency in their accounts.

    Many accounts got huge amounts during demonetization and Govt has yet to question these people about the source of money.

    Demonetization was not a futile exercise. It has converted many dishonest persons as honest overnight.

    India is a highly populated country and many lower class people were benefited by a casual tip of Rs 2000 or so for no service rendered.

    Even the ordinary people who had no money in hand rushed to banks for deposit or conversion. From where that cash came and became white in one go?

    It was a game of volume. People could not understand it in its totality.

    Knowledge is power.

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