I bet some people will think this is good news. Of course it is good news for digital payments providers. For all the other 99,99999999% of the population, including the users of digital payments, it is horrible news.
When most of a country doesn't have access to digital payments, lack of cash is a problem. Although to be fair, the poor aren't the ones trying to buy things with large denomination notes anyway.
More than 50% of the population of India doesn't have a bank account. A large percentage of Indians use an open field as a bathroom and have trouble getting access to clean water. How does this help them in _any_ way?
Hold on, let me spend time walking 10 miles to a bank and sign up for electronic payments instead of tending my field and barely making enough to survive on. Yeah, while this is great for India's banking industry to get some growth, I hardly see the benefit for the significant rural population that does not have easy access to a bank nor any of the supporting infrastructure that is required to support electronic payments.
you mean most of them who are required to be provided bank accounts under various govt scheme prior to demonetization. or perhaps you mean all 1 Billion mobile subscribers who dont have access to an electronic payment platform, Right? /s
Is it good for them tomorrow, likely not but what about six months from now? you get side benefit of being able to track transactions and tax avoidance.
Anecdotal experience, but all my relatives and many of my friends are happy with this ban as it is a step against corruption. My parents got income tax notice after this ban which shows they are even monitoring bank accounts now, and this is when my parents didn't have a single penny in black money. A lot of people are willing to stand in queues. Modi promised to take steps against black money/corruption and he did take a step against it, so alot of people are happy with him. Modi being a polarising figure will always have people discrediting each and every single move taken by him.
Corruption by whom? This is a consolidation of power into payment services and government surveillance. Make no mistake the corruption is simply moving up.
Cash hasn't been banned in India. Only ₹500 and ₹1000 denomination currency notes have been scrapped. Replacement currency notes (₹₹500 and ₹2000) with new design are being disbursed at banks and ATMs. I don't think there's any consolidation of power into payment systems have been happening.
And, government surveillance for online transactions should be similar what is being done in western countries ;)
1: ₹500 , ₹1000 consists of 86 % of cash in circulation by value, that in effect almost a full ban.
2: Try getting that ₹2000 changed with any shop on street.
3. I have yet to see any of the ₹500 in any ATM in Bangalore, it still not well circulated
4. If anyone thinks ppl keep bulk of their ill gotten wealth in cash they are idiots, sure this affect few % of the wealth of rich corrupt people that was in cash, however it impacts the poor 100x more. I can't pay my maid's salary because I don't have the any kind of notes, while I can manage fine using cards, she doesn't even have a bank account, remember > 50% of India is not banked.
I will not consider anyone poor if he spends more than Rs. 500 per day. This figure is correct on weekly basis. Rs. 500 per week. Poor people earn at most Rs. 250 per day. keep that in mind.
Having a fixed deposit of bank account is better for them anyway, because they don't have to worry about income tax dept asking for tax from them. I know they aren't educated enough to do the paper work. But trust in Banks is good thing because it will cut down middle man and they will directy get benefite from the schemees which means less scams irrespective of who is in govt.
Street vendors see Rs 500/1000 note once in a while.
Consolidation of power & government surveillance is horrible and there is no doubt about it. But it is something only people living in developed countries like US feel insecure about. In developing countries like India there are far more severe problems to tackle. Developing countries should first focus on eliminating corruption at the lower level. Imagine the suffering of people who have to pay 100 bucks to get a document from a government office. The pain & suffering from low level corruption is far more severe than feeling insecure about government snooping.
Now, to be fair, 99.99999999% of the population is everyone except about an eighth of a person, so even that last person would be getting a pretty raw deal.
This is certainly a promising sign. A few years back I consulted for a company trying to make a push into the Indian market and the payments piece pretty much killed us. Dealing with HDFC became a daily nightmare and the amount of bureaucracy and red tape involved was soul-destroying. Based on my (very) limited knowledge of Indian payments, my guess is HDFC probably still sits behind these new solutions but if they can somehow streamline the process and shield customers from most of the BS I really hope they flourish.
This is true. I worked briefly on a startup idea to disrupt the payment services in India but gave up after the amount of red tape involved. In India banks want to control everything that is related to/about money. Banking is full of red-tape controlled by big banking houses in India. Company like Airtel & Vodafone couldn't push their mobile based payment systems for larger adoption. It is amazing to see how paytm got wider adoption and lobbied the bureaucracy and government to pave way for payment banks. But still the amount of investment that is required to get into payment services in India even as a payment bank is enormous. Startups in no way can compete with this without having VC's backing them right from the beginning.
tbh I'm reading the opening anecdote about soda hawkers and roadside egg vendors accepting PayTm and thinking last time I was in India and R500 and R1000 notes were legal tender, I wouldn't have expected those guys to have accepted the large denomination notes (no change), never mind digital payments...
This is a huge move and in the end will benefit India in a big way. Basically by banning cash you are making transactions much easier to track. In turn this kills a lot of black market activity and stamps out corruption. By doing this India is making a move toward creating stronger protections toward businesses in the way of contract law and and intellectual property. This makes it much more favorable to innovation (your IP is more protected because the government is stronger)
But what happens when there is a major disaster? How will people pay if there is no internet/electricity etc.? At least with cash you can plan ahead...also what are the poor people to do?
I guess the linked Bloomberg article doesn't make it clear?
Cash hasn't been banned in India. Only ₹500 and ₹1000 denomination currency notes have been scrapped. Replacement currency notes (₹₹500 and ₹2000) with new design are being disbursed at banks and ATMs. It would take few more days to stabilize, that's all.
Thanks! I was responding to the comment by saying that banning all cash wouldn't be necessarily good...but yeah the article does make it sound like all cash would be banned...
I pray that this never happens in the United States. Money is the most powerful thing in any modern society. When transactions are controlled and surveilled then what can stop total control by a determined government?
The black market is a bogeyman. I hope others see this as well.
So is the case in India. Cash transactions aren't banned. The linked article title is misleading. Existing ₹500 and ₹1000 currency notes are being replaced with new ₹500 and ₹2000 ones.
The US did this after WWII, that's why you can't get a bill bigger than $100 anymore. It was done over 20 years. The rule that any cash transaction over $10k must be reported goes back to 1970.
To you, maybe. Maybe you haven't seen how insidious and prevalent corruption is in India? But everyone I've spoken to over the past 3 weeks, who are all solid middle-class, has been for it.
I am assuming a lot of people are coming into the thread reading the title and not the article. All cash is not banned in India. Only a couple of denominations have been demonetized and are being replaced by their newer counterparts.
This has happened in India before without issues. The current problems exist because of the scale at which it is being done and the short period of notice given.
Digital payments are taking off because there is a shortage of currency for the amount of money being demonetized. This is not a move made by the Indian government to push surveillance or other nefarious purposes.
Unlike some people, I prefer to take the current state of facts at face value until further proof has been provided. Without proof, this is speculation at best and conspiracy chasing at worst.
You mean less useful and smaller denominations, not "newer". They are trying to make cash unappealing to use by requiring more bills to carry out a transaction.
If the government came and said "Because terrorists drive cars between the hours of 1pm-3pm, we are banning all car use between those times." You wouldn't say they replaced the current driving rules with newer ones, you'd be upset you couldn't drive between 1pm-3pm and instead had to use a less efficient means to carry out your business.
The government is unjustly punishing the whole class because some individuals made the decision to break the rules, and as punishment, it is now harder to maintain financial privacy. Yay. Just what I wanted, less privacy in the age of everything is in a database and everyone is on a list.
>You mean less useful and smaller denominations, not "newer". They are trying to make cash unappealing to use by requiring more bills to carry out a transaction.
They removed Rs500 and Rs1000 from circulation, yes. A newer _Rs2000_ is already in circulation and a newer Rs500 soon to follow. So this statement is inherently wrong.
> If the government came and said "Because terrorists drive cars between the hours of 1pm-3pm, we are banning all car use between those times."
The govt actually said "Because terrorists drive fake cars of model A and B, we're making it illegal to drive A and B on the roads. Anyone who has a legit model can take it to the manufacturer to get it replaced by a newer model." I'd still be upset about the discomfort, but at least the example used would be more accurate.
> The government is unjustly punishing the whole class because some individuals made the decision to break the rules, and as punishment, it is now harder to maintain financial privacy. Yay. Just what I wanted, less privacy in the age of everything is in a database and everyone is on a list.
It is currently estimated that just 1% of Indians pay their taxes [1]. I don't have any views on whether there will be a drop in financial privacy (since I see the govt tracking bank accounts, which they were always able to do), but I'll be glad to see that number rise from a paltry 1%. Also, cash transactions aren't outlawed, so you're more than welcome to keep you transaction "private" if you please. There are talks of a cap to cash transactions, but nothing has really materialized yet.
And finally, I'm not for or against the measures the govt is following. I'm glad _something_ is being done, but am also skeptical about how effective it will be in the long run. It will depend on what additional measures the govt. brings to curb further accumulation of black money with the new denominations, and the ability to buy and hoard assets bought by said black money.
Because the initial move to take the denominations out of the currency pool was to fight transactions and earnings which were not being taxed correctly. So unless you're willing to claim that being able to better apply taxes to individuals is a nefarious purpose, it's just not really true.
Then how do you catch people who deposit hoards of black money and get away without paying taxes? If banks don't ask for ID, then this whole exercise becomes pointless.
I assume you were trying to reply to me. Yes that is the case because India does have a huge problem with people not paying taxes, taking bribes and other illegal activities. So this may be a necessary step taken to acheive that.
There are more clear cut cases of the Indian government trying to create a surveillance state. Trying to group this under the same category just creates unnecessary noise.
Just to set the stage: India is highly polarized on this issue. A lot of discussions around govt policies right now end up in heated debates. Loosely speaking, liberals aren't very much in favour of the right-wing govt in power and often criticize every major policy announcement, not always based on merit.
The majority of working-class people in India are going through a phase of love and adulation for the ruling party and the Prime Minister, so any public opinion on social media against the establishment is met with intense opposition.
The news media aren't helping decipher the actual state of reality. Much like the US elections, Indian media fuels the polarized population with provocative news stories, and "alt-media" outlets publish opinions and fake news as facts. Many accuse major media houses of unfairly favouring the right-wing govt (much like Fox News in the US) due to connections of the govt with business houses that run them.
The demonetization move comes at a time when political parties are gearing up for elections in major states. From extravagant political rallies to feasts, a lot of aspects are funded by cash. Politicians have a history of hoarding cash for elections and "buying" votes from the poor. The demonetization issue was also promoted as a way to deal with a fake-currency printing industry allegedly being run in arch-rival Pakistan. This bodes well with the "Nationalism Wave" promoted in recent years.
> The news media aren't helping decipher the actual state of reality. Much like the US elections, Indian media fuels the polarized population with provocative news stories, and "alt-media" outlets publish opinions and fake news as facts. Many accuse major media houses of unfairly favouring the right-wing govt (much like Fox News in the US) due to connections of the govt with business houses that run them.
Is this really true? The mainstream media houses are all helmed by pseudo-liberals that have in the past been very biased towards the Congress Party.
Shall we say we have left-leaning and right-leaning news channels, and depending on your personal inclination (read: echochamber), you could be accusing the liberals on left-wing newsmedia as "pseudo-liberals" (often accused of being anti-national too!), and disagreeable newsmedia as favouring the govt?
So, can you edit your original post to be politically correct (read: non-echochamber)? Instead of just mentioning a certain inclination that you may not agree with, you can just say left-wing/communist media hasn't been in favour whereas right-wing media is in favour of this move?
This may have been a good idea, but it is terribly implemented. Especially, notes of denomination 500 should not have been banned with immediate effect.
In general many poor people, even in cities, do not have bank accounts and face lot of issues when opening such accounts. Sometimes bank require a "reference" from an existing customer to open an account. Sometimes many such poor families (say 20 families - think of it as a big landed area with 20 small houses) live together at a single address, paying rent for a single room, and the banks will refuse to open so many accounts under a single address. Their are several such smaller issues that crop up when trying to open an account that are not well known and that only the people in a particular city or locality face.
These people cannot deposit their savings since they don't have a bank account to begin with. And they definitely have savings in Rs 500 denomination since 500 is nowadays often used in the markets. Essentially, this ban has hit hard the common people. The very rich are hiring others to do the transactions and exchange of money. The lower middle class and poorer sections are left wanting for cash. Hence, good idea, but bad implementation.
In general many poor people, even in cities,
do not have bank accounts and face lot of
issues when opening such accounts.
Sorry, but I absolutely can't stand when I see these kinds of arguments, because everyone reading this would believe this to be true apriori.
Check this article from Feb 2015. Only 23k families were without a bank account. In a country of 250m families! In the last two years I think they opened 200m - or something like that - accounts. http://www.business-standard.com/article/current-affairs/nea...
Agree about it not being very well managed, specially the ATM calibration issue.
But I have no doubt, it would massively help in making digital payments mainstream. Already since 9 Nov, digital payments have overtaken credit/debit cards as stated in this article. Possibly it would even make India an even bigger market than China.
It would also fight tax evasion - right now India borrows 60b$-70b$ every year - when coupled with tax reforms like GST which is set to kickoff next year. Btw, since last few years you need to supply an Tax Id whenever making transactions of more than 1k$ in cash, so this step fits in perfectly with that as well.
There's some short term pain, but the medium/long term gains massively outweigh it.
I don't know where they get those statistics? Do they include the daily wage working families? I have several near my own home (in a city) and none of them are able to open bank accounts.
Not sure. The only explanation I can think of is that they don't have Aadhar being illegal migrants or something like that. Or that the bank they are visiting is mismanaged - for which someone should file a complaint.
Btw, you can tell them that they get a full savings account at post offices as well. If they have some savings, it's better for them since interest is higher for families with BPL cards.
I see a lot of commenters bring up privacy viz. tracking transactions and tax avoidance. Now I'm all for respecting people's privacy; but I also don't see why the govt. shouldn't be able to detect and extract what is legally owed to them.
Raghuram Rajan, the ex-RBI governor was in favor of tracking transaction data too (and wasn't in favor of demonetization), especially since he felt that the tax rate in India is already reasonable compared to other Industrial nations. [1]
So instead of ending the discussion at "It invades people's privacy, full stop", can we talk about ways of ensuring greater chance of collecting taxes? Maybe examples of how other countries have successfully tackled it?
67 comments
[ 2.7 ms ] story [ 141 ms ] threadThe whole thing seems like a clear win to me.
Hold on, let me spend time walking 10 miles to a bank and sign up for electronic payments instead of tending my field and barely making enough to survive on. Yeah, while this is great for India's banking industry to get some growth, I hardly see the benefit for the significant rural population that does not have easy access to a bank nor any of the supporting infrastructure that is required to support electronic payments.
Is it good for them tomorrow, likely not but what about six months from now? you get side benefit of being able to track transactions and tax avoidance.
A lot of good people would consider that to be the opposite of a benefit.
And, government surveillance for online transactions should be similar what is being done in western countries ;)
2: Try getting that ₹2000 changed with any shop on street.
3. I have yet to see any of the ₹500 in any ATM in Bangalore, it still not well circulated
4. If anyone thinks ppl keep bulk of their ill gotten wealth in cash they are idiots, sure this affect few % of the wealth of rich corrupt people that was in cash, however it impacts the poor 100x more. I can't pay my maid's salary because I don't have the any kind of notes, while I can manage fine using cards, she doesn't even have a bank account, remember > 50% of India is not banked.
You are partially correct but govt has to start from somewhere. As you know they are also going to attack "Benami" property.
http://indianexpress.com/article/india/india-news-india/blac...
http://timesofindia.indiatimes.com/city/meerut/Sedan-caught-...
http://economictimes.indiatimes.com/wealth/whip-cracked-on-b...
> it impacts the poor 100x more
I will not consider anyone poor if he spends more than Rs. 500 per day. This figure is correct on weekly basis. Rs. 500 per week. Poor people earn at most Rs. 250 per day. keep that in mind. Having a fixed deposit of bank account is better for them anyway, because they don't have to worry about income tax dept asking for tax from them. I know they aren't educated enough to do the paper work. But trust in Banks is good thing because it will cut down middle man and they will directy get benefite from the schemees which means less scams irrespective of who is in govt.
Street vendors see Rs 500/1000 note once in a while.
Plus, Average Indian Spends $1.8 Every Day.
https://en.wikipedia.org/wiki/Poverty_in_India
https://www.saddahaq.com/average-indian-spends-18-every-day-...
http://www.hindustantimes.com/india/family-day-how-indian-fa...
http://timesofindia.indiatimes.com/india/Spend-Rs-32-a-day-G...
You should also understand that opposition is trying to create panic, so people protest againt current govt.
> she doesn't even have a bank account
Help her create a bank account + tempt her with interest she will be getting + there is no risk of anyone robbing her savings
By people dealing in cash to avoid paying tax.
Yes!, that's why they shouldn't be focusing in disturbing people's lives and increasing banks and government power and surveillance!
As it turns out, they are replacing those denominations with equal or higher currency values.
[1] http://www.pri.org/stories/2016-11-23/indias-crisis-over-ban...
Not sure why they would be a obstacle to a payment system.
Cash hasn't been banned in India. Only ₹500 and ₹1000 denomination currency notes have been scrapped. Replacement currency notes (₹₹500 and ₹2000) with new design are being disbursed at banks and ATMs. It would take few more days to stabilize, that's all.
The black market is a bogeyman. I hope others see this as well.
To you, maybe. Maybe you haven't seen how insidious and prevalent corruption is in India? But everyone I've spoken to over the past 3 weeks, who are all solid middle-class, has been for it.
This has happened in India before without issues. The current problems exist because of the scale at which it is being done and the short period of notice given.
Digital payments are taking off because there is a shortage of currency for the amount of money being demonetized. This is not a move made by the Indian government to push surveillance or other nefarious purposes.
what makes you think that?
If the government came and said "Because terrorists drive cars between the hours of 1pm-3pm, we are banning all car use between those times." You wouldn't say they replaced the current driving rules with newer ones, you'd be upset you couldn't drive between 1pm-3pm and instead had to use a less efficient means to carry out your business.
The government is unjustly punishing the whole class because some individuals made the decision to break the rules, and as punishment, it is now harder to maintain financial privacy. Yay. Just what I wanted, less privacy in the age of everything is in a database and everyone is on a list.
They removed Rs500 and Rs1000 from circulation, yes. A newer _Rs2000_ is already in circulation and a newer Rs500 soon to follow. So this statement is inherently wrong.
> If the government came and said "Because terrorists drive cars between the hours of 1pm-3pm, we are banning all car use between those times."
The govt actually said "Because terrorists drive fake cars of model A and B, we're making it illegal to drive A and B on the roads. Anyone who has a legit model can take it to the manufacturer to get it replaced by a newer model." I'd still be upset about the discomfort, but at least the example used would be more accurate.
> The government is unjustly punishing the whole class because some individuals made the decision to break the rules, and as punishment, it is now harder to maintain financial privacy. Yay. Just what I wanted, less privacy in the age of everything is in a database and everyone is on a list.
It is currently estimated that just 1% of Indians pay their taxes [1]. I don't have any views on whether there will be a drop in financial privacy (since I see the govt tracking bank accounts, which they were always able to do), but I'll be glad to see that number rise from a paltry 1%. Also, cash transactions aren't outlawed, so you're more than welcome to keep you transaction "private" if you please. There are talks of a cap to cash transactions, but nothing has really materialized yet.
And finally, I'm not for or against the measures the govt is following. I'm glad _something_ is being done, but am also skeptical about how effective it will be in the long run. It will depend on what additional measures the govt. brings to curb further accumulation of black money with the new denominations, and the ability to buy and hoard assets bought by said black money.
[1] http://www.cnbc.com/2016/05/03/guess-how-many-people-pay-tax...
So why do you need ID when changing the notes? It looks like move to approximately sum up who had how much money in cash.
By forcing people to exchange cash, they're forcing people to declare untaxed income, which will be taxed at a higher rate.
There are more clear cut cases of the Indian government trying to create a surveillance state. Trying to group this under the same category just creates unnecessary noise.
The majority of working-class people in India are going through a phase of love and adulation for the ruling party and the Prime Minister, so any public opinion on social media against the establishment is met with intense opposition.
The news media aren't helping decipher the actual state of reality. Much like the US elections, Indian media fuels the polarized population with provocative news stories, and "alt-media" outlets publish opinions and fake news as facts. Many accuse major media houses of unfairly favouring the right-wing govt (much like Fox News in the US) due to connections of the govt with business houses that run them.
The demonetization move comes at a time when political parties are gearing up for elections in major states. From extravagant political rallies to feasts, a lot of aspects are funded by cash. Politicians have a history of hoarding cash for elections and "buying" votes from the poor. The demonetization issue was also promoted as a way to deal with a fake-currency printing industry allegedly being run in arch-rival Pakistan. This bodes well with the "Nationalism Wave" promoted in recent years.
Is this really true? The mainstream media houses are all helmed by pseudo-liberals that have in the past been very biased towards the Congress Party.
In general many poor people, even in cities, do not have bank accounts and face lot of issues when opening such accounts. Sometimes bank require a "reference" from an existing customer to open an account. Sometimes many such poor families (say 20 families - think of it as a big landed area with 20 small houses) live together at a single address, paying rent for a single room, and the banks will refuse to open so many accounts under a single address. Their are several such smaller issues that crop up when trying to open an account that are not well known and that only the people in a particular city or locality face.
These people cannot deposit their savings since they don't have a bank account to begin with. And they definitely have savings in Rs 500 denomination since 500 is nowadays often used in the markets. Essentially, this ban has hit hard the common people. The very rich are hiring others to do the transactions and exchange of money. The lower middle class and poorer sections are left wanting for cash. Hence, good idea, but bad implementation.
Check this article from Feb 2015. Only 23k families were without a bank account. In a country of 250m families! In the last two years I think they opened 200m - or something like that - accounts. http://www.business-standard.com/article/current-affairs/nea...
Agree about it not being very well managed, specially the ATM calibration issue.
But I have no doubt, it would massively help in making digital payments mainstream. Already since 9 Nov, digital payments have overtaken credit/debit cards as stated in this article. Possibly it would even make India an even bigger market than China.
It would also fight tax evasion - right now India borrows 60b$-70b$ every year - when coupled with tax reforms like GST which is set to kickoff next year. Btw, since last few years you need to supply an Tax Id whenever making transactions of more than 1k$ in cash, so this step fits in perfectly with that as well.
There's some short term pain, but the medium/long term gains massively outweigh it.
Not sure. The only explanation I can think of is that they don't have Aadhar being illegal migrants or something like that. Or that the bank they are visiting is mismanaged - for which someone should file a complaint.
Btw, you can tell them that they get a full savings account at post offices as well. If they have some savings, it's better for them since interest is higher for families with BPL cards.
Raghuram Rajan, the ex-RBI governor was in favor of tracking transaction data too (and wasn't in favor of demonetization), especially since he felt that the tax rate in India is already reasonable compared to other Industrial nations. [1]
So instead of ending the discussion at "It invades people's privacy, full stop", can we talk about ways of ensuring greater chance of collecting taxes? Maybe examples of how other countries have successfully tackled it?
[1] http://www.newindianexpress.com/business/2016/nov/10/the-cle...