Thursday, 29 December 2016

Demonetization Opinions

Modi was able to generate euphoria with his charismatic speeches and enjoyed numerous foreign jaunts in the last 30 months without doing anything on the ground. Now he is under pressure to manage economy properly, reduce budget deficits, rescue crumbling banks, pace up reforms moving at snail's pace and he finds no way. Even though everyone knows demonetization doesn't solve any problems and its results are unpredictable, Modi, advised by some quacks, resorted wildest gamble only to win forthcoming elections in UP, Punjab etc, followed by Rajya Sabha, President & Vice President elections. Giving undue importance to secrecy and without any preparation for this gargantuan task, he announced demonetization like a dictator keeping aside all democratic processes, he shot in his foot and instantly landed in a ditch. Now he is digging it further. It was a massive man made economic disaster with informal economy (45% GDP share & 90% job share) standstill and millions of people are without livelihood and costed few lakh crores towards expenses and GDP lost. With none of his stated objectives viz. black money, corruption, fake currency and terrorism funding are achievable, he quickly shifted goalpost to "cashless economy" which is at least  two decades away in the absence of robust rural infrastructure and reliable cyber laws. While upper classes are busy with agents exchanging their black for a fee, middle classes merrily enjoying life with plastic cards, poorer classes having lost their livelihoods were compelled to stand in bank queues for exchanging currency. Supreme Court remarked that "discontinuing of higher denomination notes appears to be carpet bombing and not surgical strike". Instead of recognizing failed operation and taking corrective steps Modi unleashed raids signalling establishing police raj and destruction of institutions and are detrimental to our democracy. His audacity is visible in his remorselessness for 100+ deaths of elderly people & women in bank queues. Ironically, Modi's ascendance to power in 2014 is characterized by his campaign expenses of about Rs.10,000 crores funded by his industrialist friends albeit in black money and today BJP is the most cash funded party in India, for which no sources or accounts disclosed. In the end, this too will pass just as another hollow exercise, but Modi will have gained attention, which he loves. Today, stunned Indians stare to see their nation's economy destroyed, institutions crumbled and democracy in peril.
            (Click on the heading for original article)
By Manmohan Singh
Prime Minister has said that we should wait for 50 days. Well 50 days is a short period. But for those who are poor and from the deprived sections of the society even 50 days torture can bring about disastrous effects. The way this scheme has been implemented is a monumental management failure, and in fact, it is a case of organised loot, legalized plunder of the common people.

In India, black money makes for bad policy
By Kaushik Basu in New York Times
Demonetization was ostensibly implemented to combat black money, counterfeit currency, corruption, terrorism financing and inflation. But it was poorly designed, with scant attention paid to the laws of the market, and it is likely to fail. Tackling corruption goes beyond currency, cash or even banking. Demonetization's economics is complex and the collateral damage is likely to far outstrip the benefits. In a country like India, where the illegal economy is so intimately intertwined with the mainstream economy, one inept government intervention against shadow activities can do a lot of harm to the vast majority, who are just trying to make a legitimate living.

Demonetization is a foolish step
By Arun Kumar
Demonetization is a tool for economic surgery when currency has totally lost its value by replacing with a new currency created. But India is not in that situation and all our macro-economic indicators were reasonably good. Black money is not a parallel economy. Black economy and white economy are largely intertwined in India. This move, which is supposed to impact the black economy, is affecting the white economy terribly. Black economy has been growing for 70 years, can’t be solved overnight. There is no magic wand. What you could have done immediately is to bring accountability in the system. One man is trying to deliver on something that is undeliverable, against the advice of everybody else. That’s not how you run such a complex country like India. If I were there I would have asked 100 people.

IMF supports demonetization but cautions transition
Gerry Rice, Director, International Monetary Fund
We support the measures to fight corruption and illicit financial flows in India. Of course, given the large role of cash in everyday transactions in India’s economy, the currency transition will have to be managed prudently to minimize possible disruption. I am just saying that when countries make these kinds of move, which is not exceptional — countries do this quite often — the transition needs to be managed very well.

I.G Patel, RBI Governor on demonetization ordinance 1978
From Patel’s memoirs
“such an exercise seldom produces striking results. Most people who accept illegal gratification or are otherwise the recipients of black money do not keep their ill-gotten earnings in the form of currency for long. The idea that black money or wealth is held in the form of notes tucked away in suit cases or pillow cases is naïve. And in any case, even those who are caught napping or waiting will have the chance to convert the notes through paid agents as some provision has to be made to convert at par notes tendered in small amounts for which explanations cannot be reasonably sought. But the gesture had to be made, and produced much work and little gain.”

Demonetisation is a despotic action that undermines trust
by Amartya Sen
The demonetization of currency was a despotic act as the government broke the promise of compensation that comes with a promissory note. Demonetization goes against trust. It undermines the trust of entire economy. Only an authoritarian government can calmly cause such misery to the people - with millions of innocent people being deprived of their money and being subjected to suffering, inconvenience and indignity in trying to get their own money back. At one stroke the move declares all Indians - indeed all holders of Indian currency - as possibly crooks, unless they can establish they are not.

Demonetisation isn't new and has been tried before with limited success
By Raghuram Rajan
The clever find ways around demonetization. It is not that easy to flush out the black money. I would focus more on the incentives to generate and retain black money. My sense is the current tax rate in this country is for the most part reasonable. We have a reasonable tax regime. There is no reason why everybody who should pay taxes is not paying taxes. I would focus more on tracking data and better tax administration to get at where money is not being declared. I think it is very hard in this modern economy to hide your money that easily.

Jumping in the well is also very radical, committing suicide is also radical
By Arun Shourie
While the stated objective may be good, the idea was not well thought out. The government had not anticipated the distress that would be caused by doing away with 85% of Indian currency. Small and medium enterprises, the transport sector, the entire agricultural sector. It's not possible to reach six lakh villages. They did not think about this?  It is about being carried away by a big idea, getting into a self-image that I have to do some surgical strike. Therefore every week you see them saying - its been a week, a month, I have to do something. Jumping in the well is also very radical, committing suicide is also radical...if you want to make a beginning, make a beginning on reforming the tax administration.The cash clean-up would not get to the heart of the black or untaxed money problem. People who hold this black money or black assets don't hold it in cash. He did not think India was ready to move to becoming a cashless economy.

Demonetisation won’t have lasting benefits
Larry Summers, Former U.S. Treasury Secretary
Former U.S. Treasury Secretary Larry Summers has said that the Narendra Modi government’s demonetization move would not have any lasting benefits. Terming India’s demonetization move as one of the “most sweeping change in currency policy that has occurred anywhere in the world in decades”, Mr. Summers said, “…For the government to expropriate from even a few innocent victims who, for one reason or another, do not manage to convert their money is highly problematic.” “We strongly suspect that those with the largest amount of ill-gotten gain do not hold their wealth in cash but instead have long since converted it into foreign exchange, gold, bitcoin or some other store of value. So it is petty fortunes, not the hugest and most problematic ones, that are being targeted,”

India's Demonetization Is A "Massive Man-Made Disaster"
By Jayant Bhandari
Should a single person have the authority to flip a switch and bring all trade, transactions, indeed the entire economy to a halt? Modi suffers from worst possible type of corruption: an insatiable desire for personal glory at any cost, an extremely deep moral and spiritual corruption. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility.  What a crazy idea it is to have a State monopoly on money. Cash is not trickling down. The poorest 50% of India’s population, who have no reserves, are the worst affected and are going hungry. A vicious cycle has been set into motion by Modi and unpredictable problems and unintended consequences are bound to surface incessantly. Modi, in his permanent search for personal glorification could easily impose a state of emergency or go to war with Pakistan. This demonetization will go down as one of the most naïve, least thought through policy decisions ever, a massive man-made disaster.

What India has done to its money is sickening and immoral
Steve Forbes, Forbes Staff
India's government perpetrated an unprecedented act of demonetization, that is not only damaging its economy and threatening destitution to countless millions of its already poor citizens but also breathtaking in its immorality. People will always find ways to engage in wrongdoing. Terrorists aren't about to quit their evil acts because of a currency change. As for the digitization of money, it will happen in its own good time if free markets are permitted. And the best cure for tax evasion is a low-rate tax system. India is the most extreme and destructive example of the anticash fad. There's no misunderstanding what this is truly about: attacking your privacy and inflicting more government control over your life. What India has done is commit a massive theft of people's property without even the pretense of due process--a shocking move for a democratically elected government.

Modi has brought havoc to India
The Guardian, Editorial
Demonetization was justified as a move designed to fight corruption and target people who have been black money. Many initially saw the withdrawal of banknotes as a price worth paying to eliminate graft. The short-term impact of “demonetization” has been dramatic: the $2 trillion Indian economy will shrink. The rich will not suffer, as corruptly acquired fortunes have almost all been converted to shares, gold and real estate. But the poor, who make up the bulk of the nation’s 1.3 billion people, will lose out. They don’t generally have bank accounts and are often paid in cash. For them, getting to a bank and queuing for hours will cost money and time they don’t have. In less than a week the policy has reportedly claimed more than a dozen lives. The government says that it will take weeks to sort out the problems. The scale and speed of Modi’s scheme has more in common with the failed experiments of dictatorships which led to runaway inflation, currency collapse and mass protests. Slower, incremental reforms do not make headlines. They do not instantly hit the war chests of political rivals in upcoming state polls. Mr Modi, a Hindu nationalist, was for a decade an international pariah over his alleged role in the mass murder of Muslims in a region he once administered. He wants to be known for something else. President-elect Trump offers an opportunity to recast himself. Two years ago Mr Trump’s svengali, Steve Bannon, described Mr Modi’s victory as part of a “global revolt”. But a looming cash crunch and an administrative crisis makes it look like the revolt might start at home.

Demonetisation shock has hit the poorest the most
The Wire, Editorial
For the last few days the world is watching the bizarre spectacle of millions of Indians waiting in long, unending queues to recover their own money from banks, post offices and ATMs even as the government at the Centre remains firmly in denial about the untold hardship to the poor. Some senior citizens have died of exhaustion standing in queues for hours on end. It is almost certain that the economy will slowdown further in the short to medium term and there could be more joblessness. Modi has further upped the ante by suggesting he could take more harsh measures in the future. The PM would have truly walked the talk if he had attacked the nexus between the big business and politics which truly nurtures the black money ecosystem. BJP is the most cash funded party these days. If Modi wants his drive against black money to have credibility he must demonstrate he can go after the big fish and cause them immense pain. So far the pain has been largely borne by the ordinary people. The next few months will make it clear whether he has bitten more than he can chew.

Modi’s attempt to crush the black economy is hurting the poor
The Economist
Consumer spending was the one thing really driving this economy, and now we are looking at a negative wealth-effect where people feel poorer and spend less. RBI failed to warn the impatient Modi that there were not enough new notes to replace old ones. It has issued a bewildering blitz of complex and sometimes contradictory instructions to banks. Its governor, Urjit Patel, has been perplexingly silent. Its reputation for probity, competence and independence is in tatters. Such a fiasco could spell disaster for the government in power. Particularly so for a party that sailed into office on promises to boost growth, provide jobs and encourage investment. Modi’s opponents have blasted his policy as obtuse, destructive and downright criminal. Modi has shifted the goalposts. What started as a ‘surgical strike’ on black money is now called the dawn of a cashless society. Pivotal elections in India’s largest state, Uttar Pradesh, loom early next year. But if more cash does not soon appear, Modi’s future may look very different.

The country is in an uproar
The Diplomat
This move has left the biggest chunk of black money untouched – the stacks that lie in undisclosed accounts in Swiss Banks. The argument provided for why this move was announced and administered overnight is that it denies hoarders of black money the chance to dispose of it. While that may appear to be sound logic, it has also apparently impacted the banking system’s ability to ensure a smooth transition. The rural poor, women who do not inform their families of hidden stashes of cash, refugees who lack the requisite documents, socially ostracized communities like transgender communities and sex workers – are other immediate victims. This is in addition to the fact that reports indicate that the government may have over-estimated the existing levels of connectivity to banking. Modi, in a rhetorically rich speech, requested the nation for 50 days to launch this self-labeled war on black money. He asked the people to make short-term sacrifices in the interest of long-term gains. Both the activist and the non-activist sections of social media have equally raved about or ripped apart this rhetoric. While it is too soon to declare whether the long-term gains are indeed forthcoming, the “short term” sacrifices have been more than significant and immensely painful.

The debate is about nationalism and patriotism
The Huffington Post
The debate is no longer about demonetization, whether it works or not, but has been transformed into a debate is about nationalism and patriotism. Plastic is the new patriotism in cashless India. PayTM is the new khadi. Your debit card is your new charkha with which to spin the dreams of India Shining. No one can defend black money, not even those who hoard it. By making it a debate about nationalism, the government tries to cleverly sidestep a more contentious issue of demonetization. Once patriotism could accommodate a spectrum of opinion. Now patriotism is about uniformity of opinion, preferably the government's opinion. Any difference of opinion is tarred quickly as anti-national by the troll brigade. Modi, born after independence, represents an India that has benefited from the sacrifices of its forbears but has little appetite for sacrifice of its own. Rahul Gandhi has never understood that mind shift. He still sells the sacrifice of the Gandhis, way past its expiration date, oblivious to the fact that no one cares about that anymore. Modi, astute politician that he is, understands that his job is to sell success, not sacrifice, with the minimum of sacrifice required at least from its voters. And now suddenly his voice choked with emotion, reminding the nation of his many sacrifices and asks voters to bear with the woes of demonetization. It's no longer a debate about the merits of demonetization or the problems of its implementation. It's about nationalism, jawans and aged mothers. And which spoiled corrupt anti-national naysayer dares to be seen on the wrong side of that argument?

Demonetization cures the disease but kill the patient
By Ramesh Thakur, The Japan Times, Opinion
Disruptive technology can unleash creative forces through destructive impact on an industry that exists in a stable equilibrium of vested interests. Will demonetization cure the disease but kill the patient? By withdrawing 86 percent of circulating currency the Indian government burned down its economic house in order to eradicate the pest of corruption? Such shock therapy in a major economy is without precedent, so no one can predict the long-term structural impact and the full range of intended, pernicious and perverse consequences. The policy is an attack on the Indian way of doing business. Has a single parliamentarian, let alone Cabinet minister, stood in line to exchange currency notes? Demonetization attacks the stock without touching the flow of black money. The move also confuses the black with the informal economy by conflating cash with black money. India’s formal and informal economies are not quarantined from each other, but form a seamless value chain. Almost one-third of the working capital of small businesses comes from the black economy. Can that lost capital be replenished with fresh credit? Shock therapy without institutional transformation enlarges government while minimizing governance; more government equals more corruption. Demonetization cements the Indian government’s reputation for capricious and arbitrary economic actions. It could denude political rivals of substantial cash assets for fighting the forthcoming elections in Uttar Pradesh, India’s most populous state. Another governance pathology is the failure to tell friends from foes and a stubborn refusal to listen to contrarian voices from people of goodwill with the requisite expertise. Instead the government’s default mode is to attack any criticism as somehow anti-national or pro-corruption.

Policy intention and implementation are inseparable
By Rhea Karuturi, The Stanford Daily
The question hardest to answer: Can you separate the intention of a policy from its implementation? And what does that mean in the context of an underfunded government riddled with corruption and charged with a sprawling population united by their diversity? How do we reconcile Modi’s aspirations for a cashless economy in India with the sheer number of people in the economy leading a hand to mouth existence? We need big ideas, bold moves and the audacity to hope. But that doesn’t justify this kind of policy, which writes off the suffering of millions as collateral damage when that suffering could so easily be avoided. And while this policy may make the government wary of large changes, what we don’t need is another political era defined by meek bandaids for gaping wounds. What we need from the Modi government is for them to keep dreaming but to do it better: and to do the hard work of making those dreams work with the reality we have.

There is an empathy deficit
Monishankar Prasad, Author and editor for Alochonaa
The unbanked and informal economy is hard hit. The poor do not have the access to structural and cultural resources to adapt to shock doctrine economics. The poor were taken totally off guard and the banking infrastructure in the hinterland is rather limited. The tech class has poor exposure to critical social theory in order to understand the impact on the ground. There is an empathy deficit.

Modi has shot himself in the foot
By Swaminathan Aiyer
The fact is that you are creating a problem for 100% of the people to catch the top 0.1% of the people. There is going to be huge distress and uncertainty especially for informal economy, poor and peasants who are totally cash dependent. Modi is gambling that there will ultimately be such a positive thing saying I have cracked down on black money and counterfeiters that it will offset the distress being caused to the public. It is a very risky political gambit, causes a lot of pain to everybody and will backfire on Modi. The ultimate problem is much deeper one that we are pathetically impotent in stopping illegal transactions of various kinds. This is very adroit move with political risk, senseless and sure to backfire. Modi has shot himself in the foot and India lost.

Demonetization: Wheels within the wheels
By Ajith Pillai
The recent demonetization drive by the Narendra Modi government is a classic “bolt out of the blue” event that stumped the nation. Providing a rationale for the largest cash culling operation in the world is difficult unless one quietly accepts the official thesis that it was a surgical strike against black money when no more than five percent of unaccounted wealth is in cash. Demonetization was supposed to be a fight against black money but now it seems like a war against the people. All conclusions drawn are limited by the fact that the prime minister took the decision keeping even his cabinet and top bankers in the dark. The only objective demonetization has served is in neutralizing counterfeit currency which funds terrorist groups of about Rs 400 crore and secrecy served no purpose. Cash culling has been projected as a fight against illegal wealth because of its popular appeal. Modi has been reiterating that those who oppose the government are with the evil forces behind black money. BJP hopes to score a moral political victory by projecting few lakh crores of unreturned money as black money disabled. In the past one year, public sector bank NPAs and bad loans doubled compelling former RBI governor Raghuram Rajan recommending a clean-up of the banks through recovery of bad loans by even taking over the assets of defaulters allegedly close to the ruling dispensation. Post demonetization, the defunct money that the common citizen has returned to the banks will be what rescues the banks and not any black money. Banks find themselves in a happy situation where they can consider delaying action against errant corporate houses and big business responsible for the NPAs.

The situation has gone from bad to worse
By MS Sriram, IIM Bangalore in
In a single announcement, the prime minister Modi declared 86% of the currency as not being legal tender and faith in the currency was fundamentally shaken. The secrecy of the operation has completely prevented adequate preparation. The extent of the exercise for replacing 86% cash has not even been thought through. In short, we are in a massive mess. In shortage times, human tendency is to conserve, hoard and not circulate. We have never seen a real run on the bank in India. What we are witnessing now is a unprecedented run on the banking system and is the worst man-made disaster. Right now, the ones who are celebrating the assault on black money, terrorism and counterfeits and pontificating that we should bear a bit of pain for a great gain are the ones who are in the electronic economy. Imagine the service providers whom we are bypassing are the ones who are not in the digital economy, and are losing business. They are very large in number and they either have to work, or stand in long queues for getting their own legitimate hard-earned cash. The digital divide was never more stark. The informal economy people are patient, and are making informal arrangements in the supply chain.Would the system be able to infuse enough circulation before the informal arrangements and faith breaks apart? This experiment will see much bloodshed and several heads will roll.

Delhi’s planners double down on their ‘cashless society’ blunder
By Wall Street Journal
In a cashless society the state has far greater means to harm the public, both through inept policies and abuses of power. Cashless society is suspected at creating economic devastation and usurping of an individual's economic liberty. Sweden may be the best model for cashlessness, as only 2% of transactions use cash. But Sweden has low corruption in government, reliable legal protections, high social trust and advanced financial and technological infrastructure. India has none of that, but it does have government officials with radical plans to reshape a society in which half of the population doesn’t even have a bank account. Indians would benefit from access to digital finance, which can cut transaction costs, make credit more affordable and channel state aid directly to citizens, bypassing sticky-fingered bureaucrats. The government can help by liberalizing financial regulation and improving telecommunications infrastructure. But it should also respect citizens who want to keep at least some cash. Imposing a “cashless society” is antithetical to economic liberty.

Patriotism is the last resort of the scoundrels;
Pseudo patriotism is the last resort of the incompetent.

What is money?

Money is such a multi-faceted and all-pervasive element of our system, that our capability to obsess about one aspect of it prevents us developing a proper appreciation of what it actually is.

Our monetary system is based on fraud. Can you and I write checks “drawn on ourselves”? Of course not. We have to back them up with value. The Fed does not. So, the mighty US dollar is not backed by gold or silver or anything at all; it’s simply an accounting trick ... Paul Rosenberg

How does a monetary economy differ from one in which trade occurs by barter? This ruled out gold being money, since gold is a commodity that anyone can produce for themselves with a bit of mining (and a lot of luck). So even though gold is really special and incredibly rare, it is in the end, a commodity: an economy using gold for trade is really a barter economy, not a monetary one.

A true monetary economy is inconsistent with the presence of a commodity money. A commodity money is by definition a kind of money that any producer can produce for himself. But an economy using as money a commodity coming out of a regular process of production, cannot be distinguished from a barter economy. A true monetary economy must therefore be using a token money, which is nowadays a paper currency ...  Augusto Graziani

In a credit economy at the end of the period some agents still owe money to other ones, a final payment is needed, which means that no money has been used. So to be money, the token given in exchange for a good must be accepted as a final payment, but this carried the danger that whoever produced the token might be able to “get something for nothing”.

Graziani's three basic conditions that had to be met for something to be called “money”:
  1. money has to be a token currency (otherwise it would give rise to barter and not to monetary exchanges);
  2. money has to be accepted as a means of final settlement of the transaction (otherwise it would be credit and not money);
  3. money must not grant privileges of seignorage to any agent making a payment.
The only way to satisfy those three conditions is to have payments made by means of promises of a third agent, the typical third agent being nowadays a bank.

So money is fundamentally the promise of a bank to its customer, and a monetary payment is the transfer of that promise from one customer to another. 

Monetary payment must therefore be a triangular transaction, involving at least three agents, the payer, the payee, and the bank.

Firms are present in the market as sellers or buyers of commodities and make recourse to banks in order to perform their payments; banks on the other hand produce means of payment, and act as clearing houses among firms. In any model of a monetary economy, banks and firms cannot be aggregated into one single sector.

In reality it is simply the nature of a monetary economy: money is simply a third party’s promise to pay which we accept as full payment in exchange for goods. The two main third parties whose promises we accept are the government and the banks.

Sunday, 25 December 2016

Moody's rejects ratings upgrade lobby by Modi

  • India's current rating by Moody's stands at Baa3, the lowest investment grade, a notch above junk status.
  • US-based agency, Moody's, declined to budge citing concerns over the country's debt levels and fragile banks.
  • Winning a better credit rating on India's sovereign debt would have been a much-needed endorsement of Prime Minister Narendra Modi's economic stewardship, helping to attract foreign investment and accelerate growth.
  • Moody's said India's debt situation was not as rosy as the government maintained and its banks were a cause for concern.
  • India has been the world's fastest growing major economy over the past two years, but that rapid expansion has done little to broaden the government's revenue base.
  • At nearly 21% of gross domestic product (GDP), India's revenues are lower than the 27.1% median for Baa-rated countries. India is rated at Baa3 by Moody's, the agency's lowest notch for debt considered investment grade. A higher rating would signify to bond investors that India was more creditworthy and help to lower its borrowing costs.
  • India's debt-to-GDP ratio has dropped to 66.7% from 79.5% in 2004-05, interest payments absorb more than a fifth of government revenues.
  • The ministry attempting to impress that the government's resolve to contain the fiscal deficit at 3.5 per cent of GDP in the current financial year didn't impress the agency.
  • Diron had told local media that a ratings upgrade for India was some years away, depending on the progress on reforms.
  • Diron said that, not only was India's debt burden high relative to other countries with the same credit rating, but its debt affordability was also low. She added that a resolution to the banking sector's bad loan problems was "unlikely" in the near-term.
  • Moody's on November 16 affirmed its Baa3 issuer rating for India, while maintaining a positive outlook, saying the government's efforts had not yet achieved conditions that would support an upgrade.
My View:
Trying to influence for better ratings, whether deserving or not, is not uncommon but definitely is beneficial to the nation. Attempting to influence rating agencies without taking any pragmatic corrective steps and getting deeply involved in petty politics is unbecoming of leader of the nation. Ask a farmer and he will tell you, fields tilling, irrigating, seeding, cultivating, applying fertilizers and harvesting in a sequential manner over a certain time only will result in good harvest. Nothing can be achieved overnight. In a country with 125 crore people, diverse cultures and saddled with illiteracy, poverty, belief systems and spread over 600,000 villages development is a slow process. In the process inflicting injuries on the lowest strata is immoral and must be avoided. Above all principles of democracy and constitutional obligations should never be given go by.

Friday, 23 December 2016

Success and Failure

Success is the accomplishment of an aim or purpose.
Failure is lacking success.
While succeeding is important, the road map to success is even more important.
Success as a result of illegal & immoral means is worse than failure.

Ingredients of success
  1. Vision & goal definition.
  2. Tenacity and perseverance.
  3. Research, planning & resource mobilization.
  4. Developing sound business model.
  5. Due diligence and risk mitigation.
  6. Timing and luck.
  7. Execution.

Managing success
  1. Managing success is harder than handling failure.
  2. Neither success nor failure are permanent. 
  3. Hard work is the only path to true success.
  4. Elation of success or depression of failure are unnecessary.  
  5. Identify and acknowledge contributors for success and reward them.
  6. Never let ego destroy business. 
  7. Take time to celebrate success and pay attention to the lessons it offers.
  8. Eliminate wastage and optimize costs.
  9. Innovation to stay succeed.

Lessons from failure
  1. Failure is never the end of road. It is just a turn.
  2. Reshape values and redefine priorities
  3. Become more compassionate.
  4. Improve perspective on finance.
  5. Revisit approach and realize true friends.
  6. Realize that success isn’t everything.
  7. Re-envision goals.
  8. Become more passionate about mission.
  9. Develop a deeper sense of community.
  10. Learn to never give up.

Resolve to be honest at all events; and if in your own judgment you cannot 
be an honest lawyer, resolve to be honest without being a lawyer. 
Choose some other occupation ... Abraham Lincoln

The progress towards the goal will be in exact 
proportion to the purity of the means. As the means so the end. 
It is not the end that we can work with but only means ... Gandhi 

My View:
Both success and failures are a myth. They are simply results of choices, actions and luck. Results are never in our hands nor predictable. Otherwise, we will not see so many great people fail in the history. What is in our hands is preparation, mitigation of risks and execution. Rest is luck. Ironically, money reflects success. Money is important for comfortable living. But there are many things which money can't buy. Peace & happiness has nothing to do with money. They are mindset. Many poor people live happy and meaningful lives. In this world, no good man has ever made a fortune. The more morals and ethics are compromised they more one can make money. In most cases enrichment is consequence of destruction of ecological assets. People succeed with inside advance information of government policy changes which is a punishable crime in any democracy and reflects its association with crime, corruption and bribery. With all ills of the society there are ample opportunities for good and honest people to do business and earn decent income.

Monday, 19 December 2016

Venezuela: Riots forces suspension of demonetization until Jan 2, 2017

Dec 19 2016 : The Times of India

Venezuelan President Nicolas Maduro suspended demonetization of the country's largest denomination bill, which has sparked unrest, until January 2. The surprise pulling out of the 100-bolivar note from circulation this week -before new larger bills were available -led to vast lines at banks, looting at scores of shops, anti-government protests and about four deaths.

Maduro blamed a “sabotage“ campaign by enemies abroad for the delayed arrival of three planes carrying the new 500-, 2,000 and 20,000-bolivar notes. “One plane, contracted was told in flight to change direction and go to another country ,“ he said.“There's another which was not given flyover permission.“

The 100-bolivar bills, officially out of use since Thurs day and worth just 4 US cents at the black market currency rate, can now be used until January 2. Many Venezuelans had found themselves without the means to pay for food, gasoline or Christmas preparations in a country already reeling from an economic crisis.

About 40% of Venezue lans do not have bank accounts. Adding to the chaos, Venezuela has the world's highest rate of inflation, which is set to hit 475% this year, meaning large bags of cash must be humped around to pay for basic items.

“We have a government utterly stupid and destructive in economic management, whose only goal is to keep power at whatever price,“ said opposition leader Julio Borges. Maduro had justified the demonetisation move as a way of strangling mafia on the frontier with Colombia. He has also closed border crossings with Colombia and Brazil until January 2.

My View:
Venezula was suffering from low oil prices and hyperinflation despite percapita GDP of $10,000+ and its currency has become worthless which warranted demonetization. However demonetization with out new bills to replace was monumental mistake that lead to chaos and people starving for food and supplies. Blaming external forces for failures is meaningless. By inept planning & implementation, demonetization has compounded the problems instead of solving any ills.

Maduro emulated Modi with demonetization surprise and with out replacement supplies and it boomeranged on his face. 

Indian exercised unusual patience in queues despite 100+ queue deaths so far despite cash supply situation not improving in 50 days. Past is no guarantee for future, Modi should remember and accelerate mitigation measures.

Demonetisation brings manufacturing to a halt

Auto Spare Parts Sector Takes Beating
Dec 19 2016 : The Times of India (Hyderabad)

About 30,000 units manufacturing auto mobile spare parts and about the same number of agro based industrial units have shut shop post-demonetisation with orders drying up. About 1.5 lakh MSME units (all segments) lined up along Jeedimetla, Balanagar, Shahpur, Maheswaram, Adibatla, Quthbullapur, Dulapally , Kukatpally and Cherlapally are on verge of shutting down operations after facing huge losses over the past one month. Also small players in retail textile, food processing and plastic industry are also bearing the brunt of demonetisation.

Despite the announcement that banks can give upto Rs.50,000 to commercial establishments, banks are not giving that amount. “The worst hit among the lot are the micro units with turnover of `10 lakh to `50 lakh. Also MSMEs across segments are hit badly. In most of these units, the workers are hired on a daily basis.“ added Gowra Srinivas, senior vice president, Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry .

Since the `micro' industry completely runs on cash, be it placing of orders, transportation, payment to workers or purchase of raw materials, units have seen between 50 to 70% loss of production over the month.“I am unable to pay to my labourers as none of them have bank accounts. They are refusing to come to work, forcing me to suspend operations,“ said Shaik Hussain, accessory manufacturing unit owner from Balanagar.

“With production at the manufacturing units dipping, the supply has gone down. Moreover, even the transportation network which operates only on cash is hit. In the whole process, I am unable to supply to my clients. I have not only lost a number of orders but even reputation in the process.“

My View:
The overall impact could be well over 1,000,000 people. Modi & Co wants brings these people into formal economy and tax them. What a ridiculous idea! 

While they don't pay income tax only they pay all indirect taxes levied on consumption. Even if Modi & Co decides to tax them, it will be meager which produces much work and little gain.

Modi as leader of the nation should realize the realities of the nation before heeding to the funny advises of economic pundits living in ivory towers about avenues to maximize tax revenues.

Sunday, 18 December 2016


Patriotism is defined as love for or devotion to one's country. Frequently compared or contrasted with nationalism which is also loyalty and devotion to a nation; especially a sense of national consciousness exalting one nation above all others and placing primary emphasis on promotion of its culture and interests as opposed to those of other nations or supranational groups. The difference between patriotism and nationalism is that the patriot is proud of his country for what it does, and the nationalist is proud of his country no matter what it does; the first attitude creates a feeling of responsibility, but the second a feeling of blind arrogance that leads to war.

Some famous quotations are:
  • When a nation is filled with strife, then do patriots flourish ... Lao Tzu
  • Patriotism is the last refuge of a scoundrel ... Samuel Johnson
  • It is but refusing to gratify an unreasonable or an insolent demand, and up starts a patriot ... Robert Walpole
  • No man can be a patriot on an empty stomach ... William Cowper
  • There are seasons in every country when noise and impudence pass current for worth; and in popular commotions especially, the clamors of interested and factious men are often mistaken for patriotism ... Alexander Hamilton
  • Guard against the impostures of pretended patriotism ... George Washington
  • Patriotism is supporting your country all the time, and your government when it deserves it ... Mark Twain
  • Patriot is the person who can holler the loudest without knowing what he is hollering about ... Mark Twain
  • Patriotism is the virtue of the vicious ... Oscar Wilde
  • Patriotism consists not in waving the flag, but in striving that our country shall be righteous as well as strong ... James Bryce
  • True patriotism hates injustice in its own land more than anywhere else ... Clarence Darrow
  • Patriotism is not a short and frenzied outburst of emotion but the tranquil and steady dedication of a lifetime ... Adlai Stevenson
  • Patriotism is looking out for yourself by looking out for your country ... Calvin Coolidge
  • A patriot must always be ready to defend his country against his government ... Edward Abbey
  • No matter that patriotism is too often the refuge of scoundrels. Dissent, rebellion, and all-around hell-raising remain the true duty of patriots ... Barbara Ehrenreich
  • Heroism on command, senseless violence, and all the loathsome nonsense that goes by the name of patriotism - how passionately I hate them! ... Albert Einstein
  • Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and the success of liberty ... John F. Kennedy
  • Patriotism is when love of your own people comes first; nationalism, when hate for people other than your own comes first ... Charles de Gaulle
  • If we love our country, we should also love our countrymen ... Ronald Reagan
  • I saw courage both in the Vietnam War and in the struggle to stop it. I learned that patriotism includes protest, not just military service ... John F. Kerry
  • Unless our conception of patriotism is progressive, it cannot hope to embody the real affection and the real interest of the nation ... Jane Addams
  • I don't want to see the military falling. I want to see the military rising to dignified heights of professionalism and true patriotism ... Aung San Suu Kyi
  • Dissent is the highest form of patriotism ... Howard Zinn
  • Real patriotism is a willingness to challenge the government when it's wrong ... Ron Paul

Patriotism is the last refuge of the scoundrel; 
Pseudo patriotism is the last refuge of the incompetent.

My View:
Modi invoking patriotism following fiasco due to his senseless demonetization to cover up his unauthorized decision is nothing but tyranny. His cabinet ministers, BJP MPs, several opposition leaders and even media were suppressed in raising dissent for the fear of being branded as anti-nationals by Modi with unchallenged grip on the country.Propaganda that cashless transaction as a solution with out any infrastructure or public awareness is a diversionary tactic from the man made economic disaster.

Ironically, middle class educated and salaried classes who were in complete disconnect with poor, peasants and rural masses were solidly behind Modi with blind belief that desired results will be achieved despite crores of people confined to queues for over 40 days for their meager cash needs and queue deaths nearing 100 and informal sector grounded.

From the above quotes it clear that dissenting, challenging and fighting tyrannical government which destroyed the nation with its ill conceived, secretly unveiled and unscientific demonetization is patriotic, but not silently co-operating. Modi not taking experts into confidence for bailing out the national chaos with corrective measures and blindly going in the same wrong direction with increasing speed is nothing but insanity. 

All political parties and people should unite and dislodge Modi from seat of power and save the nation from his authoritarian regime, otherwise we will find ourselves ten years backwards with democracy and institutions facing extinction.

Singing national anthem has nothing to do with either patriotism or nationalism.

Cashless economy will be a disaster

Cash is empowerment, freedom, privacy & security.

Cashless society is at least 25 years away for fulfilment of following requirements:
  • Basic education
  • Banking education
  • Technology education
  • Smartphone requirement
  • Electricity for charging
  • Internet or 3G connection
  • Net Banking wareness
  • App to be downloaded
  • Knowledge about secure operation
  • Privacy and security cyberlaws
  • Grievance redressal knowledge
  • Awareness of perils
  • Cost Benefit analysis
  • Above all mindset
Fully cashless society would mean the end of privacy . There would be a digital trail of every action you take through your purchases and transfers. In the absence of robust privacy laws and data protection in India, it is a big worry every week as we hear stories of hacking.

A fully cashless society could mean the end of dissent. The government can use any data it gathers against you. Even if you commit no crime, there is much you may be embarrassed by. What's more, they could make any opponent a pauper with one keystroke, freezing your bank account while they investigate alleged misdeeds. Just the fact that they have this power could have a chilling effect on dissent. Would you want government men have that much power on you for presumptive reasons?

It is a myth that an advanced society must necessarily be cashless. In Germany more than 80% of transactions are in cash, as citizens safeguard their privacy and freedom. In the US, 45% of transactions are in cash. Even in advanced, wealthy & small countries like Norway & Singapore cashless transaction are just 60% only. In India, 600 million people have no bank account, and less than 20% of all Indians have a smartphone. Internet penetration is iffy. Trying to make India cashless is akin to putting a bullock cart in an F1 race.

Technologies, like any App, imperil our privacy. But those actions are voluntary, and we can choose to avoid them. That is the crux. Coercion towards cashlessness with deprivation of currency implicit in the demonetization is ridiculous. A cashless society would only be good if we evolve towards it, not if we are forced into it.

Digital payments involve transaction costs, are unreliable because of infrastructure issues. After demonetization who would trust an Indian banks and RBI? The beneficiaries of forced cashlessness are not consumers, but vested interests like banks and payment companies. This might be the largest redistribution of wealth from poor to rich in the history of humanity.

When the demonetization was announced, Modi & BJP said it was meant to attack black money and counterfeit currency. Once it became clear that those reasons were nonsense, they tried to change the narrative into a cashless economy. Within a fortnight of that, they are already backtracking and saying they meant `less cash' instead of `cashless'. The truth is that the demonetization was a humanitarian disaster that is crippling our economy, and no matter how many times Modi and gang try to rationalize it, it cannot be done. These men will stop trying when they cannot justify any more, they will distract.

The best government is that governs least.

My View:
Anything by force undermines individual freedom & rights guaranteed by constitution. When people see reason, benefits, security, affordability etc they themselves will adopt to cashless transactions voluntarily. Until then it is only a commodity with a price and government has no right to promote any body's business on its citizens forcibly. 

How government will enforce tax compliance is altogether different issue. This is no right way.

Saturday, 17 December 2016

Modi's personality analysis

Like any other urban middle class person, wielding all comforts of education and in disconnect with poor and rural masses of India, I too believed that Modi will  eradicate most evils pulling down progress of our nation which is predominantly poor, illiterate, agriculture based and living in villages with meager facilities & comforts, despite certain doubts about his vision and understanding about India.

His traits broadly are:
  • Great public speaker.
  • A natural leader and authoritative commander. 
  • Self confidant and arrogant person.
  • Ruthless, headstrong and adamant. 
  • Not given a single fudge in his career.
  • Makes most of all PR opportunities.
  • Jack of all trades and master of none. 
  • Thinks that he is right all the times. 
  • Doesn't dwell over past mistakes.
  • Plans to minute details. Tough minded. 
  • Emphasis more on his administrative works.
  • Focused on productivity and best use of time. 
  • Solution important than the process. 
  • Maximum follow-up.
  • Figures out the relevance of a very small detail.
  • Focuses on the long term structural reforms.
  • Tweets are always to the point. 
  • Cares about his party members. 
  • Doesn't care about critics.
  • Judgmental and have tendency to learn from his mistakes. 
  • No real friends.
  • Makes no bones of his RSS inclinations etc.
  • Bent on dismantling of the Nehru-Gandhi-Congress names from government schemes.
Modi's surprise & unprecedented demonetization move on Nov 8, 2016 was hailed not only in India but around the globe as a daring step towards eradication of black money, fake money, corruption & terror finances and some countries mulled similar exercise in their countries to eradicate social ills. But his hidden objectives are purely political and aimed at disarming political opponents to win next year's several elections hands down and establish BJP's authority at invincible position and destroying Congress completely, despite insignificant achievements so far and sagging economic parameters. His hobnobbing with businessmen & industrialists from western India with questionable integrity doesn't portray him as selfless leader dedicated to the national interest.

With in days demonetization, resultant chaos and is a total failure with economists analyzing none of the stated objectives are achievable with this move and in fact impacted economy greatly with informal sector completely grounded. Even western media moved by public sufferings and bank queue deaths touching 100 declared the move as cynical and warned of serious damages if unmitigated. Instead of announcing corrective steps to mitigate problems faced by public, arrogant Modi demanded patriotism from public to suffer 50 days ordeal and long term results will pour in gradually which anyway are un-quantifiable. He avoided any kind of questions both inside and outside parliament. High pitch campaign for cashless payments as a solution to remonetization failure was seen as diversionary tactic in the absence of preparedness and is not even 50% even in small, wealthy & developed nations. With no serious steps taken, sufferings are likely to ease ony after two months and normalization after six months and economic restoration is two years away.

Patriotism is the last resort of the scoundrel.
Pseudo patriotism is the last resort of the incompetent.

My View:
Modi pretends to be a benevolent dictator and pretends to Lee Kuan Yew of India. But unfortunately LKY stands much much taller than him with simplicity & public interest way above personal or political interests. In a populous, poor, developing and complex democracy like India saddled several social ills, democracy is the only way, even though results are slower. Commonsense tells that any change must be slower, steadier, gradual and seamless. Sudden decision will result in confusion and chaos and must be avoided at any cost. Devoid of sense, Modi resorted to illegal & secretly planned demonetization, taken the nation & world by surprise and instead of making surgical strike against black money, he carpet bombed the whole economy and also shot in his own foot. His action without any mandatory process compliance and approvals is totally authoritarian and falls short of a Prime Minister of the world's largest democracy.

Modi suffers from worst possible type of corruption; an insatiable desire for personal glory at any cost; an extremely deep moral and spiritual corruption. Modi belongs to the line of autocratic ideologues rather than the western tradition of revolutionary neo liberalism, or marxist rationalism. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility. He might not have taken any bribes in recent years but there is no way he could have risen to his position without having made massive and horrendous economic & moral compromises.

While his inept handling of Godhra rites & killings is an indelible black spot with many western countries including USA denying him visas, he was also rumored collecting 4% kick backs on all contracts awarded to successful bidders during his 10+ years as Gujarat CM.

Thursday, 15 December 2016

Generic Medicines saves money

A generic drug is identical--or bioequivalent--to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.  Although generic drugs are chemically identical to their branded counterparts, they are typically sold at substantial discounts from the branded price. The term may also refer to any drug marketed under its chemical name without advertising, or to the chemical makeup of a drug rather than the brand name under which the drug is sold.

The FDA requires that generic drugs must be as high in quality, and as strong, pure and stable as brand-name drugs. Generic drugs use the same active ingredients as brand-name drugs and work the same way. They have the same risks and the same benefits as the brand-name drugs. Generic versions of brand medicines are usually at a savings to consumers of 30% to as much as 80%. By asking your doctor or pharmacist if there is a generic version of your prescription, you can reduce your health care costs while receiving the same quality of care.

Trademark laws may not allow generic drugs to look exactly the same as another drug already on the market. For that reason, the color and shape of a generic pill may be different than the brand-name. Sometimes it will have a different coating or flavor. These "inert ingredients" also are carefully considered by the FDA. Differences in taste or appearance do not affect the drug's safety or effectiveness.

Branded generics are not always as affordable as a true generic. By sporting a brand name, some consumers may incorrectly assume that the branded generic is a higher quality product than a true generic, but that is not usually the case. However, branded generics may be less expensive than the original brand.

Generics sold under license from the patent holder are known as authorized generics. An authorized generic is an exact copy of the brand name version authorized by the original patent holder of the drug product. An authorized generic is a prescription drug that is produced by a brand company and marketed as a generic under a private label. It is identical to the branded product in appearance (shape, color, markings) and unlike a generic, the authorized generic has exactly the same inactive ingredients.

In most cases, generic products become available after the patent protections afforded to a drug's original developer expire. Once generic drugs enter the market, competition often leads to substantially lower prices for both the original brand-name product and its generic equivalents.

Generic drugs sales accounts for 88% of the the total drugs sales, in USA.

Recently, a generic medical shop was opened in my neighborhood in Hyderabad and my family's monthly medical bill has come down to one third i.e from Rs.3,000 to Rs.1,000. As a retired person, monthly saving of Rs.2,000 is impressive.

Tuesday, 13 December 2016

Narcissist & Self Aggrandizement

Narcissism is the pursuit of gratification from vanity or egotistic admiration of one's own attributes. Narcissism is a long-term pattern of abnormal behavior characterized by exaggerated feelings of self-importance, an excessive need for admiration, and a lack of understanding of others' feelings. Narcissists ruthlessly pursue the aggrandizement of the individual self, even at the price of diminishing others and at the risk of sacrificing the interpersonal bond.

Hotchkiss's seven deadly sins of narcissism are:
  1. Shamelessness – In a healthy person, shame is processed in a normal manner, whereas narcissists have difficulty processing this feeling in a healthy way. Narcissists also tend to inflict shame on other people.
  2. Magical thinking – Narcissists tend to perceive themselves as perfect and flawless. The distorted thinking and illusion that causes narcissists to feel this way is referred to as magical thinking.
  3. Arrogance – Arrogance and a disregard for other people’s feelings are typical characteristics of narcissism. Narcissists often have a low self esteem which they try to relieve by insulting or degrading others. 
  4. Envy – Due to their sense of being superior to others, narcissists may feel insecure when faced with another person’s ability, which they may try to belittle by demonstrating contempt or dismissal of it.
  5. Sense of entitlement – A sense of being perfect and superior means narcissists often expect to receive favorable treatment and for people to admire and agree with their opinions or actions. A person who flouts their authority, the narcissist will proceed to demean them in front of others. 
  6. Exploitation – This refers to the narcissist’s tendency to exploit others and show no regard or empathy for their emotions or interests. This often occurs when the other person is in a subservient position, and this subservience is often only assumed rather than real.
  7. Lack of boundaries – Most narcissists fail to understand their boundaries and recognize that other people are individuals rather than extensions of themselves. The narcissist fails to recognize the independence of the other person.

  • are not aware their thought patterns are inappropriate
  • think about themselves without taking the perspective of others
  • believe they are unique and special (they have something you don’t)
  • think of themselves in highly positive ways
  • are self-important
  • fantasize about power and fame
  • feel entitled to have whatever they want
  • exploit people's 'weaknesses and vulnerabilities'
  • are indifferent to other people’s needs (callous)
  • overrate their intelligence (exaggerated belief in self-importance)
  • are focused on maintaining power and control
  • perceive themselves as superior to others
  • manipulate, manipulate, manipulate

All these traits contribute to the narcissist’s illusion that he or she controls reality. That financial success or fame is the result of their extraordinary and superior capabilities. However, the appearance of taking responsibility for their success is countered by attributing failure to others. They blame a partner for an unsuccessful task outcome.

Narcissists also regulate strategically self-concept positivity in several ways. These include outward displays of self-importance, fantasies of fame and power, and negative affective reactions to perceived self-threats. Finally, narcissists are described as having poor interpersonal relationships. 

Narcissistic relationships are characterized by a sense of personal entitlement, exploitation of the partner, indifference toward the partner’s needs, and a dearth of genuine love. Narcissists will not only implicitly derogate others in the process of maintaining positive self-views but narcissists also explicitly derogate others. 

Narcissists are predicted to be more rigidly self-enhancing.

Healthy narcissism is a structural truthfulness of the self, achievement of self and object constancy, synchronization between the self and the superego and a balance between libidinal and aggressive drives (the ability to receive gratification from others and the drive for impulse expression). Healthy narcissism forms a constant, realistic self-interest and mature goals and principles and an ability to form deep object relations. A feature related to healthy narcissism is the feeling of greatness. 

Thursday, 8 December 2016

Modi's failures

Modi ascended to power in 2014 riding on the tsunami of anti-incumbency of scam ridden Congress led UPA. While Modi is still drawing huge crowds abroad with his charisma and is darling of upper middle classes which are in complete disconnect with lower classes, peasants & rural population is a colossal failure in India during the past two and half years, despite favorable crude oil prices at less than one third of its peak prices. Their argument that "those who governed us for 60 years should not ask for an appraisal in merely 24 months" is untenable.

Here is the list of failures:
  1. Industry stagnating and exports are falling consistently.
  2. Inflation especially food inflation is rising.
  3. Job creation dismal. Textiles, leather, metals, automobiles, gems and jewellery, transport, information technology and the handloom sectors together created just 135,000 jobs during 2015, 67 per cent lower than 421,000 jobs that were added in 2014, the last year of the Manmohan Singh government.
  4. Make in India remains a slogan only.
  5. Bringing back black money in Swiss banks etc in 100 days remains a shallow promise.
  6. PSU Bank's NPA doubled from Rs.2.86 to Rs.5.71 lakh crores in the past one year, due to default by corporate's close to ruling BJP. Improving liquidity or recapitalization needed urgently for banks remain operational.
  7. Despite crude oil prices falling by 70% from its peak prices, consumer sale prices were reduced by just 15%. GOI retained 85% advantage to itself by increasing excise duty etc.
  8. Riding on the wave of low oil prices, Modi government hasn't made any meaningful impact on Indian economy so far.
  9. The BJP had promised to increase the Minimum Support Price (MSP) at the rate of cost of production along with 50 per cent profit. Agricultural sector is in distress with  no hike in Minimum Support Price (MSP) for farmers.
  10. The biggest failure, however, is the mishandling of the agriculture and drought situation across the country and the continuing neglect of agriculture. While Modi promises to double agricultural incomes, it is yet to be seen how he will achieve that target. Agricultural growth rate has fallen from about an average of 3.7 per cent per year under UPA to just about one per cent in Modi's tenure.
  11. The drought situation was totally neglected. The drought manuals and rules by the government itself said that water trains and tankers are to be pressed into service as last resort and number of steps ought to have been taken before reaching that step which the government at the centre and state missed. Lack of seriousness by the government of India in assessing and mitigating the drought situation and crisis worsened afflicting nearly 33 crore Indians across several states. Drought is, perhaps, the only natural calamity one can plan against in advance, unlike floods and earthquakes. National Disaster Management Authority manual on management of drought speaks of "drought mitigation" as part of public policy and not just drought relief but this was clearly lost on the Modi government.
  12. All schemes are being renamed and repacked with reduced central contributions passing on the burden on states. They are unable to conceive any new sensible scheme so far on their own.
  13. Cross border firings and ceasefire violations in Jammu & Kashmir are at a high.
  14. Modi's Pakistan policy and his foreign policy is defective. It has been driven by style over substance, adventurism over analysis; by self projection, vanity and petty domestic political calculations over larger interests. The ministry of external affairs has been more like a tour operator or logistics handler, and not a source of policy and executive inputs. Modi's relentless foreign travel remained pleasure trips burdening exchequer.
  15. Income Declaration Scheme (IDS) remained a big failure, despite tough talk.
  16. Demonetization of big notes of Nov 8, 2016, except for its secrecy in unveiling failed to achieve any of its stated objectives viz. black money, fake money, terrorist financing & corruption except causing disruption to civic life in all segments especially informal economy, agriculture and rural economy apart from causing innumerable difficulties for common man for exchanging old notes or withdrawing their own cash from banks. About 70 people died standing in bank/ATM queues and 15 bank employees died due stress and long work hours continuously. Manmohan Singh had rightly remarked that "I do not disagree with the objectives but the process of demonetization is monumental mismanagement and is a case of organised loot and legalized plunder of the common people".
  17. Failed to recover Rs.8,000 crores lent to King Fischer Vijay Mallya who has absconded and banks have just written off as bad loans.
  18. GST bill still incomplete.
  19. Swachh Bharat, Yoga, LPG subsidy give up & Cashless transaction campaigns, even though good, doesn't deserve that much high decibel campaigns.
  20. Smart Cities & Digital India projects are yet to take off from the ground despite announcements a year ago.
  21. Has not fulfilled many of the AP Reorganization Act 2014 commitments or BJP promises of 2014 election campaigns to Andhra Pradesh. Whatever little has been done was with delay of two years reducing its impact and results.
  22. Diverting lot of money for his pet project Ahmedabad - Mumbai bullet train which serves only rich & upper middle classes with ticket price of Rs.3,000.
  23. Many agreements and concessions for enriching richer people but nothing for poor or rural population.
  24. Modi and his Cabinet colleagues foreign trips cost the exchequer Rs.567 crore during 2015-16, an increase of more than 80% from the previous year Rs 269 crore. This is besides the over Rs.500 crore spent by his bureaucrats on their foreign travel.
  25. Reliance has resorted to stealing gas from ONGC gas fields during 2009-11 to the tune of Rs.12,000 crores. Against the consultant recommended claim of ONGC for Rs.30,000 crores Modi passed orders on Reliance to pay up Rs.10,000 crores recently. This was contested in courts by Reliance.
  26. Recollect BJP's political failed adventures in Uttarakhand and Arunchal Pradesh to usurp power leading to a suicide by an innocent Ex-CM in Arunachal Pradesh. It was rumored that BJP spent Rs.15 crore per MLA crossing in intense horse-trading.
  27. NDA and all state governments are spending lots of money on advertisement campaigns while doing very little on the ground.
  28. While Assam's BJP win can't be termed as endorsement of Modi's government, Delhi & Bihar's defeat is a clear rejection for Modi. In all the five states that went to the polls recently, BJP dropped its vote share since 2014, and minus Assam. Even the Congress party scored nearly twice as many Assembly segments compared to the BJP. The Modi tsunami is now withdrawing back to the sea and those who revelled when it hit the coast are now in a real danger of being drowned by it.
  29. Artificial JNU controversy on nationalism is another black spot on Modi.
  30. Modi government seemed more keen on confrontation than conciliation in order to get tricky legislation's passed. Consequently, very little has actually got done on the development and economic front.
The reason for the victory of Narendra Modi was the tremendous support he got from first-time young voters and floating voters who saw him as the best alternative then may very well change their opinion come 2019 and that is the nature of a fence sitter who isn't ideologically wedded to what the BJP represents.

Patriotism is the last refuge of the scoundrel but in the case of Modi's government, pseudo-patriotism is the last resort of the incompetent.

My View:
The last two years, if seen in totality, offer very little for the Modi government to gloat about. Modi government harping on the past that Congress hasn't done anything is futile. While Congress was certainly bad, they never meddled with the lives & livelihood of poor & peasants. In the absence of strengthening Lok Pal & RTI bringing Politicians, Bureaucrats, Judiciary & Businessmen under its purview, granting autonomy and teeth to CBI, CVC  & ACB etc and no steps to enforce transparency & accountability, Modi's talk about elimination of corruption & black money etc is shallow and is a mere lip service. Modi should do something for the nation with sincerity of purpose evident rather than blaming Congress for all the ills of nation even after two and half years of ascending to power. It sounds nice only during first quarter and second quarter but sounds awkward in the 10th quarter. Above all, Modi government in collision course with Supreme Court regarding judges appointment matters for prolonged periods of over an year doesn't august well irrespective of merits.

Tuesday, 6 December 2016

Cashless Transactions: Perils

Modi government had failed completely to provide replacement new cash consequent to demonetization of Rs. 500 & Rs.1000 notes on Nov 8, 2016. Instead of accepting the blunder and plunder, Modi relentlessly campaigning for cashless transactions as solution to cash shortage with an eye on increasing government tax revenues is a cruel joke on gullible Indians. Cash in circulation shrinkage is a hidden agenda item. These have devastating effect on overall economy and impacts employment growth.

Cashless transactions exposes innocent citizens to its perils of cheating and hacking apart from hidden costs ultimately payable them apart from privacy rights violation. The sudden push to cashless economy via demonetization is an arm twisting tactic in contrast to promoting technology for comfort & convenience. Anything by force is despicable in a civilized and democratic society.

The perils of cashless transactions are many:

  • Data security breaches.
  • Chips embedded on the cards reduces fraud on swipe machines, but it's not clear how much.
  • Chips embedded on the cards don't help prevent online frauds.
  • PoS machines are expensive and unaffordable for small traders.
  • Every transaction will be loaded with 0.75%-2% charges payable either by merchant or customer.
  • Going cashless means all your purchases are traceable and your privacy is up for grabs. 
  • When governments have information they may attempt to use it in ways that are not fully vetted by due process.
  • Since electronic payments can be traced, but constant government monitoring could turn everyone into a potential suspect, creating distrust between government and citizens.
  • There are a number of cultural rites that we use cash for today, small donations, tips, religious contributions, and gifts. It's a lot more meaningful to give cash than a piece of plastic.
  • It will be a fallacy to equate the ability of ordinary Indians to use a mobile phone with their willingness to replace their purse or wallet with their phone.
  • Technology adoption is a complex process. Government orders or currency shortage can't force people to adopt to a new technology. Adoption of any new technology needs necessary infrastructure, awareness among citizens and their willingness to accept the change. 
  • A favorable regulatory environment is also a prerequisite.

India is utterly unprepared at this point of time for switch to cashless economy: 
  • Out of 139 countries ranked in the Network Readiness Index (NRI), India stood at 91. On two counts - availability of infrastructure and level of skills among people - India ranked even lower (114 and 101 respectively). In terms of individual use of information technology, India's rank was 120 out of 139 countries.
  • China got an overall rank of 59. Singapore topped the global ranking. 
  • One third of the Indian population is still illiterate and a third of our youth are not enrolled in secondary education. Technology penetration is pathetic - only 15% households have access to the Internet and mobile broadband just reaches a few.

People take to new technologies when they see clear benefits, trust the providers, find it convenient and can afford it. The mobile wallet is a long way from fulfilling these basic criteria. As things stand now, cashless transactions is going to be an urban phenomenon.  Rural population adopting cashless transactions is decades away.

My View:
Informal economy including agriculture provides employment to about 90% population and is 55% of GDP that are mostly either unskilled or semi skilled without any meaningful qualification. This sector is 100% dependent on cash for all its transactions. Majority of the people are with earning far below Rs.250,000 per annum which is income tax free limit. It is important  to note that income tax (direct tax) is one among many other taxes (indirect taxes) collected by government. All sections of people pay all indirect taxes. Informal section pays very less income tax. Modi government attempting to shrink cash in circulation and weaken informal economy seemingly appear "in larger interest of the nation" but organised sector is not in a position to provide such a large number of jobs to unskilled or semi skilled people with relocation issues. Cashless transactions is an attempt to collect taxes from this section is futile. Collecting small tax from large number of people is an uphill task and at the end expenses far outstrip the income apart from promoting corruption. For Indian informal sector, cash economy benefits far outweigh meager cashless economy benefits. 

Friday, 2 December 2016

Chandrababu Naidu talks rubbish with Bankers

My View:
Everyone knows that Bank employees are seized with a single task of exchanging old notes with new notes and and are working daily around 12 hours instead of 8 hours but non supply of required quantities of new notes by RBI is exposing them to anger of public waiting in queues for several hours, for the past 25 days. At this juncture while Narendra Modi appreciated their efforts but AP CM Chandrababu Naidu pulled them for not working on Saturdays and Sundays to issue the RuPay cards. This has compelled bankers making revolting statements that they are not subordinates to state governments and are bound by RBI & their bank regulations. Ironically they stopped attending CM's review meetings but were represented by junior officers only to mark attendance.

Naidu, if he has guts he should point out at Centre & RBI for not supplying enough replacement cash for distribution, rather than pressurizing them to work on Saturdays & Sundays. His contention is that people are suffering and he doesn't care for bankers sufferings is deplorable. People are not suffering because of any act of God but for the mindless act of Modi and senseless support by Naidu and trying to score big on cashless transactions.

Naidu must stop cheap tactics thrashing others to showoff as a big man. Instead he should do big things to present himself as big man. If he is courageous & principled he should hit back at Modi for landing the nation in this imbroglio.

Vegetable farmers, first victim of demonetization driven deflation

Vegetable farmers are the first victims of demonetization resulting in cash deprivation consequently destroyed the markets deflating its prices due to disturbance in demand supply mechanisms because it is entirely cash driven. Only metro cities vegetable markets survived because of some availability of cash to support these markets.

Already, real estate, cinema production and construction workers are work less or job less since a month. When the work will resume and how many will get back their jobs is a mystery. Informal sector dependent casual workers, many are is disarray without work and income.

In coming days/weeks many more stories will get unfolded, the innocent victims of mindless Modinomics.

My View:
Demonetization is a well known mechanism used in many countries for tackling corruption, black money & fake money. Secrecy is important for getting good results but without proper preparation and mechanism to replenish cash into system with minimum pain to people of the country is nothing but audacity and insanity and reflects hidden objectives rather than sincerity of the purpose.

Modi, with just on hand 20% replacement cash printed in worthless Rs.2000 denominations and failing to foresee the necessity of re-calibrating ATMs to dispense the new currency notes has resulted in 86% cash sucked out and printing new notes & replenishing is at least 2-6 months away, has just botched up Indian monetary system and if it does't collapse he should thank his stars.

Wednesday, 30 November 2016

Demonitization 2016: Arrogance, Audacious & Atrocious


Democracy in its true sense is rule by people. Principles of Democracy are: (1) a political system for choosing governments through free and fair elections; (2) involves the active participation of citizens in politics and public life; (3) protection of the human rights of all citizens; (4) rule of laws and procedures apply equally to all citizens.

The fundamental characteristic of a democratic state is accountability and transparency. Political and official classes finds ways to undermine this principle for personal benefits and are destroying the society. Without accountability and transparency, democracy will die and autocracy erupts.


In the history, only unstable economies mostly ruled by dictators resorted to this kind of desperate step and never could really make intended gains. Our own 1978 experience of demonetization of higher value notes amounting to just 2% cash in circulation was disastrous since it produced zero gains, and resulted in spurt in gold demand forcing RBI release its gold reserves. In a stable democracy like India when all economic parameters are positive there is absolutely no justification for demonetization of very large amounts of currency i.e. 86% cash in circulation with complex and undesirable effects. The solutions to problems highlighted by Modi has roots and solutions lieing else where but not in demonetization. No economist would recommend this kind of suicidal step.


I.G Patel was governor of RBI 1978. He was not happy about the government's move. Patel observed that “such an exercise seldom produces striking results. Most people who accept illegal gratification or are otherwise the recipients of black money do not keep their ill-gotten earnings in the form of currency for long. The idea that black money or wealth is held in the form of notes tucked away in suit cases or pillow cases is naive. And in any case, even those who are caught napping or waiting will have the chance to convert the notes through paid agents as some provision has to be made to convert at par notes tendered in small amounts for which explanations cannot be reasonably sought. But the gesture had to be made, and produced much work and little gain.”


In the past demonetization has been thought off as a way of getting black money out of circulation. It is often cited as a solution. My sense is the clever find ways around it. They find ways to divide up their hoard in to many smaller pieces. You do find that people who haven't thought of a way to convert black to white, throw it into the hundi in some temples. I think there are ways around demonetization. It is not that easy to flush out the black money. Of course, a fair amount may be in the form of gold, therefore even harder to catch. I would focus more on the incentives not to generate and retain black money. My sense is the current tax rate in this country is for the most part reasonable. I would focus more on tracking data and better tax administration to get at where money is not being declared. It is very hard in this modern economy to hide your money that easily. (Raghu Ram Rajan was RBI governor till Sept 2016 and it is rumored that he didn't like this Modi's demonetization and silently exited declining second term).


World Bank Chief Economist and India’s former chief economic advisor Kaushik Basu said that the Narendra Modi government’s demonetization drive was not ‘good economics’ and that the damage it causes will be greater than its benefits. “GST was good economics; the demonetization is not. Its economics is complex & the collateral damage is likely to far outstrip the benefits,” Basu tweeted on Friday Nov 11, 2016. Basu was the CEA in the Finance Ministry from December 2009 to July 2012.


On Thu Nov 24, 2016, former Prime Minister Manmohan Singh criticised, in Rajya Sabha, the Narendra Modi government over its surprise move to demonetize Rs.500 and Rs.1,000 currency notes. In uncharacteristically strong words, the mild-mannered Singh called demonetization "organised loot and legalized plunder," adding that it was a "monumental management failure." Dismissing the government's defense that in the long run demonetization would be good for the country, Singh said, "For those saying this is good in the long run, it reminds me of John Keynes' words, 'In the long run we are all dead'."


The Section 26 of the RBI Act, empowers the Union Government on the recommendation of Central Board to declare that “any notes issued by the Reserve Bank will no longer be legal tender.”

Union government on November 8, 2016 in exercise of this power passed the order demonetizing Rs. 500 and Rs.1000 currency notes which constituted 86% of total currency in circulation of Rs.17.65 crores amounting to Rs.14 lakh crores.

Demonetization by law was done in 1978 by an ordinance followed by Act, which demonetized 2% of the then existing currency.  The move was directed at freezing the secret funds of politicians, especially Indira Gandhi’s Congress. This provided an opportunity for parliament to debate before passing the Act. Modi's executive order even though legal has deprived Parliament, its right to discuss and vote the Act. Ironically Modi Govt doesn't have majority in Rajya Sabha and this executive route is undermining principles of democracy on such a major issue with devastating impact on all classes of people of India. Hence it is undemocratic even though legal. The move even though stated to eliminate black money, fake money, corruption and terrorists money has underpinnings of UP & Punjab elections in the coming few months.


Article 21 reads as: “No person shall be deprived of his life or personal liberty except according to a procedure established by law.”

The Supreme Court reiterated that the “right to life” included the right to lead a healthy life so as to enjoy all faculties of the human body in their prime conditions. It would even include the right to protection of a person’s tradition, culture, heritage and all that gives meaning to a man’s life. It includes the right to live in peace, to sleep in peace and the right to repose and health.


In a major step to check black money, Prime Minister Narendra Modi on Tue Nov 8, 2016 announced demonetization of Rs 500 and 1000 currency notes with effect from midnight, making these notes invalid in a major assault on black money, fake currency, terrorist money and corruption.

Economists opined that demonetization at best empties some of the stocked black cash and black money generation, corrupt practices and terrorist operation which uses regular banking channels for receiving money will remain unabated. Black cash is just 6% and fake currency is less than 0.03% of cash in circulation and doesn't justify huge expenditure of over Rs.12,000 crores for printing replacement expenditure alone and its complex impact on economy is unpredictable. Black cash hoarders will find numerous ways to convert sacrificing a portion of it. Demonetization is resorted to in countries which are in financial imbroglio, as a desperate attempt by autocracies but never in stable democracies. And results are usually different. Demonetization of 86% cash in circulation is likely have major impact on all sectors of economy with unknown dimensions.

The new currency with no additional security features, fake currency printers will be back into business in no time, with in maximum of 5-6 months.

The stated objectives has nothing to do with demonetization are fake and unstated objectives are political i.e. UP & Punjab elections in coming few months followed by Rajya Sabha and President & Vice President elections.


Black money from business transactions by concealing income from legitimate activities and corruption bribes, foreign exchange violations is one thing and black money earned by criminal activities such as extortion, smuggling, mafia, hawala, crimes, terrorism, etc is a different thing. In case of second, it is a crime on society and must be handled with iron fist eliminating them at sight. In case of first thing, from where most black money comes from, corruption bribes and income concealing and evasion of income tax and such black money is not that bad, as much as dramatized by Modi, as long as that is in circulation with in India. The only bad about black money is that government loses income tax revenue and apart from that loss it is as good as white money for the economy. Black money going into real estate and bullion becomes dead. Black money sent out of the country in hawala foreign currency and hoarded in foreign banks impacts our economy. Black money hoarded in foreign countries by manipulating imports & exports also impacts our economy. Therefore Modi should have focused on Swiss & foreign bank accounts, foreign exchange transactions for fairness rather than carpet bombing the whole nation where any gains could be less and complications disastrous.


Even though this exercise started about 6 months ago with full secrecy, RBI Governor Raghu Ram Rajan was skeptical about this exercise which defied economists perceptions. Not to confront with Government on this matter he declined 2nd term and silently exited in Sept 2016. Since UP & Punjab elections are fast approaching Modi wanted demonetization to be completed before start of EC's model code of conduct and take political advantage of its perceived success. Hence urgency to print replacement currency in two months. The only option was 2,000 notes. Any other combination of notes required up to six months. However this strategy got bombed on 1st day of cash exchanging in the absence of supporting lower denomination notes. Thus monetary system got destroyed. Adamant in neither revoking nor suspension of demonetization, Modi opted for immediate printing of Rs.500 & Rs.100 notes which would take 6 months for completion. Thus his hidden objective is very clear. His eyes are on UP & Punjab elections and the fact that November is overlap month for agriculture --kharif produce marketing & rabi season's seeding at its brisk, safeguarding farmer's interests was was given a go by for his perceived political gains. Farmers and informal sector are unorganized and supports 90% of employment and contributes 65% of GDP with no protection and financially very weak and compromising their interests is an unpardonable offence on society and is impeachable.


Terrorists fake money is quite dangerous but its quantity never exceeded Rs.500 crores in any year as per RBI data which amounts to 0.028 percent of cash in circulation of Rs.17.65 lakh crores and being a minuscule quantity doesn't justify demonetization with huge expenses and complex effects on economy. USD & EURO etc has all types of money in their monetary system but they never ever demonetized.


Except printing part requirement of Rs. 2000 currency notes as replacement for demonetized Rs.1000 & Rs.500 notes, no other preparations were under taken only to maintain utmost secrecy within two months time frame. Rs.2000 notes faced instant rejection in market due to shortage of lower denomination notes of Rs.100. Printing whole currency replacement in Rs.500 & Rs.100 was started immediately from Nov 10, 2016 and is likely to take 6 months for completion. Machinery problems compounded woes. ATMs dispensing capacity got limited to Rs.100 notes only with capability reduced to less than 10% by value since new notes are of different dimensions. Re-calibration ATMs is estimated to take 2-3 months. No other effort was made to assess voluminous activity of logistics, storage, methodology for exchanging, checks & balance, audit and vigilance were given a go by. India being predominantly cash market and with shortage of cash all sectors of economy came to a grinding halt. Cashless transactions were less than 2% overall and about 10% in urban and elite segments. The result is end less queues at ATMs & Bank branches for several hours only to exchange Rs.4000. This is the result of mindless compression of an demonetization activity from 12 months to just 2 months. There is no sector which is not abruptly hit. Agriculture & informal sector suffered most. Markets closed, trucks stranded on highways. By third day situation has gone out of control and government remained mute spectator except issuing procedure amendments 14 times in 10 days indicating panicky situation. Printing Rs.500 & Rs.100 notes of required quantities which started on Nov 10, 2016 and its distribution is likely to get completed in next six months.


By end of first day of cash exchanging it was very clear about the holes in implementation and gross underestimation of its wide ranging impact made Delhi bosses realize that situation is out of control and they have no remedies on hand and can't suspend the scheme nor revoke it. In both cases it would be a bigger mistake. An empathetic people's leader would do anything even sacrifice his life for mitigating poor people's hardships. But expecting such things from Modi and his gang is too much to expect. Modi quickly ordered 6 months time frame printing of Rs.500 & Rs.100 notes. While Jaitley stated the situation would ease in about 20 days, Modi announced in a public meeting that it would take 50 more days. Panicky management started at MoF, and demonetization managers amended the procedure  14 times in 10 days exposing themselves that they didn't have any pre-decided plans to face eventualities. RBI Governor appeared on TV after Modi's TV announcement on first day and thereafter disappeared making it clear that he is not in-charge of these operations which is his legitimate duty.


By  end of 3 weeks, 75 people died while standing long hours in queues. About 13 bank employees died while on duty due to stress and heart attacks so far. Modi hasn't uttered any consolation to their families.


Rural India & agriculture supports 65% of nations population and together with informal sector provides livelihood for 90% people of the country and rest 10% is organised sector. Cash is the dominant medium exchange in rural, agriculture & informal sector with over 95% transactions. Demonetization has brought this segment to a grinding halt with little exchange availability and meager exchange arrangements especially during kharif & rabi overlap busy time. Govt started focusing exchange facilities to this segment only after 15 days by which time damage is done. Banning co-operative banks and restricts on exchange & withdrawals compounded  the problem.


While urban elite were saved of these troubles due to cash less transactions using debit/credit cards, on line payment & shopping systems. Urban people depending on cash were hard hit & were helpless except patiently waiting their in ATM/Bank queues for exchanging cash. Modi & others talking of promoting cashless payment systems for tracking transactions in future is seen as diversionary tactics knowing fully well that banks & internet reach is very limited in rural segment and also small traders cant set up PoS machines for reasons of economy & viability. Other important factors are education levels, unfamiliarity, low level of privacy, legal protection from cyber criminals etc which indicate cashless society is a distant dream. Even in developed countries like US & Europe cash exists in high denominations of USD 100 and EURO 100. The economy is very complex, and money is the medium of exchange that allows the economy to function. Doing without cash overnight is very costly. The highest cash less transactions in any country is 60% and in India it is just 2%. With very low level of connectivity and bank's reach in rural segment, low educational levels, low awareness, poor privacy & cyber laws, cashless society is only a matter of academics & publicity and is a distant dream. Cashless transactions cannot be imposed on society which will construed as favoring some equipment maker or service provider. Its costs should be brought down and promoted highlighting that these transactions are safe and guaranteed and overtime they would increase significantly. Once people see benefits, affordability & safety, they will have it and use it. Otherwise never.


Banks reach in villages is limited to just 17% while 83% were serviced by rural co-operative banks. For unjust reasons Central Govt has banned usage of these banks for currency exchanging operations. With scheduled banks and post offices only the progress of currency exchanging is going at snail's pace in villages. This has resulted in most rural population not provided with new currency for exchanging for first 15-20 days. After that priority was accorded in view of brisk agriculture operations. But damage was already done to them.


Now, two weeks later, the situation is getting much worse, and more desperate. It is obvious that Modi single handedly took the decision to ban the banknotes, with most people in his cabinet and virtually all in the central bank oblivious to his plan. There is virtually no visible opposition to the enforced ban, for any politician who opposes the ban risks having his own misdeeds and they are all corrupt brought to the public space by Modi. A true demagogue, Modi, has already convinced the gullible, salaried middle class that anyone who opposes the ban is hiding corrupt money and is anti-national. With every passing day, it has not only  become clearer that the ban was of no use to eradicate hidden cash, but has also inflicted deep, wide and irreparable damage to the society.  The economy is rapidly moving toward stagnation.  The lives of literally hundreds of millions are in deep chaos. But so far most people seem to still carry a favorable opinion of Modi, backed by cult-like “intellectual” climate created by the salaried middle class (who lack critical thinking and reasoning capability), and supported by the international media and institutions, people who are sitting in western cities have no clue about the realities on the ground. But all this will change as the stories of personal suffering should eventually start to dominate over the propaganda reality does have a way of catching up. Even if Modi eventually goes, a new demagogue will take his place.

  • The biggest beneficiaries of this move are going to be Indian Banks. The increased liquidity will lead to increased credit lending and most of this won't necessarily go to to the common man but to big corporate's who are starved for cash. 
  • The black money hoarders from hereon will start converting their Indian currency into USD’s and Euro’s (via hawala) thereby, causing fiscal implications and making 'hawala' market flourish.
  • Agriulture and informal sector, hitherto being funded by cash with public will now be starved of cash and with little access to bank funding will shrink its operations.
  • Any gains to central government will to for banks capitalization, which are saddled with huge NPAs. 
  • Losses to centre & states due to lower revenues due to consumption shrinkage are permanent and will adversely effect development & welfare activities. Consumption based industries and services will have big impact on their revenues and survival.
  • The Rs.2,000 new notes will make future black money operations easier and aid corruption easy to manage.
  • All bank mortgages are mostly real estate which are value inflated as well. Now with fall in real estate prices to 50-60% levels, NPAs will rise and banks will see under recoveries and mortgage liquidation will entail huge losses to be written off.
  • This move will definitely increase funds into banking system but will drain available funds from informal sector and will adversely effect its operations.
  • By end of two weeks, GDP loss projected at 3 lakh crores, GDP growth -3%, 5 lakhs jobs gone, State govt revenue losses of Rs.2,000 crores per state  per month and many more.
  • Turbulence in economy could impact imports & exports and result in diminishing foreign exchange reserves.


Most people particularly the salaried middle class still seem to have a favorable opinion of Mr. Modi. They have been indoctrinated in India’s extremely irrational and superstitious society to believe that this demonetization will somehow alleviate corruption and that anything but support of Modi’s actions is anti-national and unpatriotic. Public education and the mass-media have become instruments of propaganda. Complexity and the diversity of options that technology brings make an irrational thinker extremely confused, forcing him to seek sanity in ritualistic religion. This has happened despite the explosion in information technology. The cult-like status Modi enjoys in India is the result of a lack of self-responsibility among Indians, their hope that despite massive inherent contradictions, the pain that corruption imposes on Indians can be got rid of through a magic wand without self-reflection, or without them giving up corruption themselves. Modi’s biggest support comes from the salaried middle class, whose members are mostly unaffected by the ban and who can't see anything beyond self comfort, self glory and self enrichment. Hence the middle class can claim to occupy the moral high-ground, albeit on the back of other people’s suffering.


Modi suffers from worst possible type of corruption; an insatiable desire for personal glory at any cost; an extremely deep moral and spiritual corruption. Modi belongs to the line of autocratic ideologues rather than the western tradition of revolutionary neo liberalism, or marxist rationalism. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility. He might not have taken any bribes in recent years but there is no way he could have risen to his position without having made massive and horrendous economic & moral compromises. No account has been disclosed for his 2014 election expenses which are believed to be over Rs.5,000 crores. Most of the people Modi hobnobs are Gujarati businessmen who are notorious for corruption and black money. Common man is unseen in his proximity, never.


Cash is the thread that weaves relationships, transactions and commitments. For the proper functioning of society, it is absolutely crucial that people have a liquid medium of exchange, the essential lubricant to effect trade in today’s complex economy. All transactions except for barter, which has emerged in many parts of India, can no longer take place, for the monopolistic money instrument, India’s fiat currency, has been paralyzed by Modi. Should a single person have the authority to flip a switch and bring all trade, transactions, indeed the entire economy to a halt? As it stands, money is now dead in India. The death of money amid a lack of respect for property rights has been sudden and will very likely be catastrophic. Both at home and abroad the only topic of conversation for Indians is the currency ban. Should this be all people are communicating about? Human beings were destined for higher things in life, not merely for the task of protecting themselves against the State.


Corruption in the Indian society has prevailed from time immemorial in one form or the other. Earlier, bribes were paid for getting wrong things done, but now bribe is paid for getting right things done at right time. Further, corruption has become something respectable in India. Social corruption like less weighing of products, adulteration in edible items, and bribery of various kind have incessantly prevailed in the society. Corruption started with our opportunistic leaders who have already done great damage to our nation. Today there is no body in India who hasn't done corruption or dealt with black money in some form or other.


In India there is extreme fundamental reluctance to pay taxes and avoid at any cost is practiced by all classes, wealthy & poor, educated & illiterate, irrespective of individual ethics, culture and morality. This tax avoidance is a habit & culture and is a result of past kings and rulers unjustly taxing public, ruthlessly collecting levies & taxes and spending nothing for their well being and even today the same feelings prevail with rural people and urban poor grossly neglected. Now a days, the wide spread corruption in politics, administration & businesses justifies their thinking and continuing habits. The unfair taxing by government especially on petrol/diesel and liquor is another aberration. With complexity of problem it is long way to go for voluntary compliance of tax obligations by its citizens in India. Tax reforms, toning up tax administration and awareness creation even though time consuming are the keys. Any other way will be futile. With corruption and black money in all walks of life like cancer in the entire spectrum of economic activities, is it possible for (1) changing the people's outlook, (2) elimination of corruption and black money and (3) make people pay up all taxes, over night, is the question to ponder? Today's exercise aimed at tax compliance alone might get boomeranged.


Modi instead of accepting mistakes and regretting wrong decision with gross mismanagement of implementation, he should have retracted and restored status quo ante Nov 8th to save crores of people from facing disaster. Instead he exhibited helplessness and asked people for bearing the pain for 50 more days but failed to say why they should bear pain for no fault of theirs. He did not see reason when Manmohan Singh pointed out that 50 days is a small period for strong people but for deprived and suffering masses 50 days could mean disaster. He tried evoke patriotism which makes sense only during war times and postwar reconstruction periods. Apart from these, threatening public that many more stringent actions will be taken for black property owners, benami holders and bullion hoarders etc doesn't auger well with his stature as PM. He forgot the fundamental rule of any democracy is that any policy should never hurt honest man at all. Instead he declared all Indians as suspected crooks and to prove that they are not. While almost all Indians are involved in tax evasion and black money but real hoarders of black money & wealth may not exceed a million worth catching and troubling. Unable to go behind them he had carpet bombed whole nation troubling 130 crore people. He conveniently forgot about his election promise and commitment to bring back entire black money from Swiss and other foreign banks with in 100 days, which is estimated at Rs. 28 lakh crores. His revengeful attitude is not in nation's interest or public interest but only indicates his anger for failure of IDS scheme few months ago. This kind of revengeful attitude leads him to nowhere. He shamefully says that in long run this demonetization would be beneficial but none bought his argument. This was countered by Manmohan Singh "in long run we are all dead". Lacking humility and empathy for suffering masses, he is unfit to be PM.


Despite colossal failure of Modi's demonetization media was soft on Modi rather afraid of Modi and used toned down story lines. There are no Ramnath Goenka's and Arun Shourie's left in media. Media barons are primarily businessmen with profits first anything next. The direct feed back through an App which gave him 93% marks was manipulated by framing questions which has only one answer. Also salaried middle class wielding credit cards, smart phones and cars etc which are blindfolded by Modinomics and responded to most for this feedback failed to reflect either factual situation or pulse of the people. Western media initially rallied behind Modi's surprise decision but as public miseries become prominent started criticizing Modi & Co for inept planning, implementing and causing avoidable miseries to public.


The essence of democracy is its transparency and accountability. Had it been by an ordinance followed by a bill, there would have been debate & voting in parliament. Modi avoided this by an executive order. Consequent debates on adjournment motions in parliament, PM is under no compulsion to reply. His ministers replied without substance. Modi is not attending parliament this session at all. Under pressure, he attended Rajya Sabha on one day just for 2 hours and without uttering a word he went away. But he went on addressing public meetings highlighting black money & fake money are demons about to swallow the nation and he averted the disaster.


Excepting few, none were aware of brewing of this demonetization move. Some days before pictures of Rs.2,000 notes bundles were seen in social media but demonetization was not expected at all. On Nov 8, 2016 cabinet meeting was summoned an hour before Modi's announcement, all were asked to deposit mobiles at security and Modi informed them about the decision and proceeded to make announcement on TV. After an hour after TV broadcast was completed, the cabinet meeting was concluded. Same thing at RBI HQ between RBI Governor and CEO's of all Banks. Thus demonetization has neither Parliament approval, nor ordinance promulgated nor cabinet's prior approval. It was singularly Modi's decision in violation of constitution, laws, usurping powers and spirits of democracy thrown to winds and indicates eruption of autocracy.  RBI Governor's brief appearance on TV only once and subsequently all PR was handled by MoF officials makes RBI irrelevant confirming fears of destruction of Indian institutions the cornerstones of Indian democracy. Modinomics replaces economics in India.


Within few days of announcement by Modi, BJP president Amit Shah asked BJP MPs from UP to initiate high pitch campaign in UP about benefits of demonetization and received shocking replies from MPs. Where is the money to erect hoardings? Public are suffering and if they go there they would be chased like mad dogs. How to reach public? Calling a public meeting will entail lots of expenditure? Who would bear that? He was told bluntly that at the moment BJP is zero in UP. In next few months if some good happens they can hope to deposits and nothing more. Only Lord Ram can save BJP in UP. When Amit Shah reported this to Modi, his arrogant reply was that I have lots of Astras with me. In 2014 did these MPs won on their own? I only made them win? Later BJP MPs in RS stopped attending house and BJP was compelled to issue whip to maintain quorum. See the pathetic condition of ruling party post demonetization.


In the last week's bye polls in several states, while the results were not much different, what is significant is that BJP's loss of its its vote share of over 10%, especially in the backdrop of Modi's demonetization resulting in utter chaos in the entire nation. As things unfold in coming weeks BJP's losses could be much higher and game changing.


The sucking out 86% of cash from the system and replacement going on at snail's pace, and normalization is about 6 months away, the consumption and luxury spending has shrunk and effecting informal sector badly. Rs.2,000 notes simply proved worthless without supporting Rs.500 and Rs.100 notes adequately. Millions of people are without work since 3 weeks, The fears are that not every body will be able to get back their jobs. At least a million jobs will vanish. Agriculture sector is stunned and deprived of cash all their operations standstill despite good monsoon. With no help forthcoming they are bound to suffer economically. Violent fluctuations in inflation, consumption and demand patterns will effect financial sector and government revenues badly. Restoration of supply chain systems, especially of perishable commodities is an uphill task. The initial gains by Banks and govt agencies will not last long. The only plus point noticeable is that Municipalities, Water Boards, Electricity companies etc could recover their most of their outstanding amounts from people effortlessly.


Printing costs are: Rs.2,000 note Rs.5.00  | Rs 1,000 note Rs 3.00 | Rs 100 note Rs 1.20 apiece. Demonetization replacement currency printing costs are expected to be about Rs.12,000 crores for printing Rs.2,000 notes alone. Logistics, warehousing, handling, disposing old notes, incidental expenses extra. Such a huge expenditure requires prior parliament approval unless an emergency situation arises, executive doesn't have authority. PM at centre and CM at state levels are simply monarchs and doesn't care for the values or rules. Height of insanity to entail such a huge expenditure and massive work with huge risks with uncertain results, especially in a good going economic scenario.


Contrary to government expectations none of the black money hoarders turned up to surrender their black cash which would attract total tax of 90% at prevailing rates. Instead it is being broken into pieces and converted into future white money by loaning workers or poor people with up to 30% commissions apart from bullion and foreign currency. Alarmed with this government came out with income tax amendment bill with 50% tax and 25% 4 year interest free bank deposit leaving just 25% cash with the hoarder. None will be impressed with 25% cash on hand and another 25% cash back after 4 years. Instead govt should have made it flat 50% tax and 50% cash left for the hoarder for voluntary compliance. Extinguished cash may at best touch Rs.1 lakh crores while initial estimates stood at Rs.4 lakh crores.

  1. Only insufficient Rs.2,000 notes were printed without supporting Rs.500 & Rs.100 notes.
  2. No additional security features
  3. ATMs recalibration for dispensing different size new notes was forgotten.
  4. Co-operative banks banned and rural sector left with no cash for over 3 weeks.
  5. No arrangements were made in rural side.
  6. No additional arrangements at Banks and Post offices resulted in mile long queues.
  7. No foolproof accounting mechanism for cash exchanges.
  8. Lack of vigilance.
  9. No arrangements for storage & disposal for old cash at banks.
  10. Many more...


Demonetization of 14 lakh crores of cash spread across entire nation and among 50-60 crore people is a gigantic task and required time frame is at least 12 months. Only secrecy and printing of insufficient Rs.2,000 notes, nothing else has been taken care of. Apart from the above mentioned loop holes, busy agriculture season was not given any thought and timing was worst and rural & informal sector took severe beating. Black money hoarders exchanging with the help of agents for a cut had heyday resulting in unabated illegal exchange of old notes with new notes for 30% cut. The result, financial benefit to government in the form of extinguished black cash is likely to get reduced to less than 25%, thus wiping out the entire benefit to nation and stunning Modi. These are the results of compressing 12 months schedule to 2 months by Modi. Absence of additional security features in new Rs.2,000 notes didn't make fake currency printing very difficult and fake currency is likely to resurface in next few months.


Well thought over, well planned and well implemented demonetization itself is unlikely to get desired results simply because of its effects in complex economy is hard to understand. This demonetization with numerous defects in all fronts got bombed on the first day of exchanging cash and the hope of government to get financial benefit of Rs.4 lakh crores of extinguished cash by Dec 30, 2016 is is fast receding. At the end the maximum benefit may not exceed 25%, making it a worst exercise with huge expenses with minimum gains but impacting economy very hard.


“A man is known by the company he keeps” -- Aesop
Modi's best friend is the Great Indian Gas Robber, Mr. Mukesh Ambani, who robbed natural gas from adjacent ONGC gas fields to the tune of more than  of Rs.11,000 between 2009-2011 and liable to pay nearly Rs.30,000 crores. Reliance Industries Ltd maintains that all its operations had been undertaken in accordance with the development plan approved by the management committee which had government representatives holding veto powers. ONGC Chairman Dinesh K Sarraf under pressure from ONGC independent directors  moved the court against RIL as A1 and MoPNG (Ministry of Petroleum & Natural Gas) as A2. Curiously MoPNG is 70% shareholder in ONGC. Now our Modi passed orders recently asking RIL to pay up just Rs.10,000 crores with out mentioning compounding amount, penalties, interest etc., where as joint USA consultant appointed by RIL & ONGC earlier confirmed the robbery and advised ONGC to make a claim of at least Rs.30,000 crores, 3 years ago during UPA regime. Incidentally, Mukesh Ambani is the largest borrower from consortium of banks to the tune of Rs.187,000 crores out of which about Rs.150,000 crores invested in Reliance Jio and is threatening the viability of operations of BSNL, AIRTEL, IDEA, VODAFONE & AIRCEL which has together invested Rs.300,000 crores. While TRAI should have clipped wings of Jio & Ambani for violation of fair trade practices, remained a mute spectator. Another friend, Gautam Adani is the sponsorer of Modi's PM candidature expenses of over Rs.5,000 crores in 2014. Modi has many more friends like this.


Manik Sarkar, Tripura CM has rejected to be part of a committee of Chief Ministers to examine the impact of demonetization and suggest transition to a cashless economy saying that he does not support the demonetization and accused the central government of having announced the notes ban "without making alternative arrangements" and putting "crores of people, especially the poor, in a serious awkward condition". Nitish Kumar, Bihar CM, despite his initial welcome for demonetization, is not among those chief ministers who are slated to be part of the on demonetization effects and cashless economy. Curiously, Sharad Yadav opposed demonetization. This is a game plan to fizzle out political opposition for demonetization, while people are suffering.

  • Demonetisation move declares all Indians as possible crooks, unless they can establish otherwise, says Amartya Sen. Both, the idea and the way it was implemented, was akin to a “despotic action” and betrayed the “authoritarian nature of the government”. Reacting to the government’s claim “Good policies sometimes cause pain, but whatever causes pain – no matter how intense – is not necessarily good policy.”
  • Arun Shourie mocked the claim of demonetization of high-value currencies being a radical measure, stating that jumping into well or committing suicide is also radical. It was not a "thought-through" exercise. This is a strike not on black money but on legal tender of India, its currency. This is a strike on cash transactions, he told a news channel in an interview.


India faces a highly uncertain future. A vicious cycle has been set into motion by Modi and it may not end well. Unpredictable problems and unintended consequences are bound to surface incessantly. Modi, in his permanent search for personal glorification would do anything. His adventures might as well end up in a war with Pakistan and will be disastrous for our fragile economy. This demonetization will go down in the history as one of the most naive, least thought through policy decisions ever, a massive man-made disaster. Anything worth talking about our economy is at least two years away.

In a good democracy, any new policy or action by government has no right to trouble or harm even a single honest man. The larger good of the nation concept is always followed by compensatory payments usually severally times the inflicted loss but in this case it is one sided deprivation of individual rights, harassment and humiliation.

My View:
The beauty of democracy is its respect for individual privacy and property rights. The need of the hour is to strengthen our independent institutions and anti corruption agencies. Corruption and black money are thriving in India because of low risk and high profit. The systems should be modified to make corruption a high risk and low profit activity. Promoting system of incentives and disincentives for tax compliance and eliminating high value cash transactions and reforming tax administration even though a slow process, but over years produces lasting results. 

Inflicting harassment on crores of Indians to catch few lakhs of black money hoarders is not only insanity but also subverting the individual rights guaranteed by constitution.

In India or else where, the higher the social status the bigger crime one can commit with impunity. If a ordinary person resorts to even jaywalk on the street he would be caught and fined instantly. But Modi destroying economy just for whims and fancies no body will be able touch him, not to talk about criticizing & impeaching him. Modi with near zero democratic attitudes and visible dictator tendencies is dangerous to our society. The earlier the country gets rid of him, the better. Modi and Jaitley have know no knowledge of finance & economics and not taking guidance of experts prior to taking such a major decision is unpardonable and dumping India in chaos. My sense is that this could be the end of aggression by Modi and lose his grip on political India similar to that of Rajeev Gandhi's decline after Bofors scandal leading to his defeat in the next general election.