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.


  1. عمليات التنظيف ونقل الاثاث ومكافحة الحشرات والعزل هي عمليات ضرورية جدًا ، وذلك للمحافظة على صحة أطفالنا ووقتنا من الضياع ولكن عملية التنظيف مرهقة للغاية وايضا النقل من مكان لاخر ، ويؤدي ذلك إلى الإهمال في الاهتمام بتلك العمليات مما يترتب عليها الكثير من التعب والأمراض ، لذلك نقدم لكم افضل خدماتنا كما نقدم العديد من الخدمات الاخري مثل
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    شركة مكافحة حشرات بالطائف
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