- There was this nice joke circulating on whatsapp saying how post demonetisation, number of economists had risen. This was shown via a graph. It is all so confusing at the moment. Don’t bother. Read this interview of Prof Arun Kumar whose work has been on black money. He says we have made progress and should tread slowly on such tricky matters. He discusses things like black income, black wealth etc.
Manas Roshan: Do you think the Modi government’s decision to demonetise large currency notes will curb the flow of black money or illegal wealth?
Arun Kumar: This will demobilise the stock of black wealth or a part of it, but it will not stop the flow. Because for that you’ve to stop black income generation. What happens in an economy is that you have an income, which you save, and savings are what accrue to form wealth. Income needs to be distinguished from wealth, and black money should be distinguished from black income. Black money is only a small part of the black wealth that has been accumulated.
MR: Can the effect of such a move be quantified?Data released by the Reserve Bank of India(RBI) in 2016shows that over 80 percent of the currency in circulation is in the form of Rs 500 and Rs 1000 notes, which is about Rs 13 lakh crore.
AK: Of Rs 13 lakh crore, at least half would be used in businesses: petrol stations, railway stations, airports, etc. What may be held in households may be only 5-6 lakh crore [rupees]. Now, assuming that the top 3 percent of the population owns much of the black wealth, that would amount to only Rs 1.5 lakh held per person. So the immobilised cache of black money is just Rs 2-3 lakh crore.
According to my calculation, which will be out in [the journal] the Economic and Political Weekly, the black economy increased to 62 percent of the GDP [gross domestic product] by 2013, which is Rs 90 lakh crore [A 2014 National Institute of Public Finance and Policy report estimated that domestic black money was equal to 70 percent of the GDP—approximately 90 lakh crore].That’s why my estimate was that the black “money,” or cash component, immobilised is only 3 percent of the total black income generated this year.
Black income generation will continue because there are a large number of mechanisms by which it is generated, which may or may not depend on cash circulation.
- The number of deaths attributed to the move is the saddest part. Govt should have taken this into account. No policy can justify people’s deaths. It is a sad shame that this too has been politicised with some saying this is underrepresented and other saying it is media cookbook. The government should itself go to all the families and figure the truth and share with us.
- A Banker’s struggle to manage crowd
- This banker’s live updates from a rural bank on his experiences will move you. We have been way too insensitive towards all this. It is easy to say just a few days of trouble. Their loves are already so full of trouble. This has hit the marginal in one of the worst possible ways.
- There are two kinds of cashless stories from the rural areas. One which is thriving as it is totally digital. Another is just collapsing as there is neither digits nor cash (P Sainath piece). The first one is where we aspire to be and second one is the broad reality. (Outside India, there is Zimbabwe as well being cashless!)
- Poor are the hardest hit
- Delhi Police Intimidating a reporter for recording unrest at a bank
- This is positive. No stone pelting on forces in Kashmir after demonetisation.
- This blog had pointed robbers looting RBI cash from train in Chennai. As they were old notes, they too need to be exchanged!
- As India runs out of and runs for cash, the opulent weddings continue. To rub salt in wounds, this wedding is attended by leaders from both ruling and opposition party!
- At the same wedding, a thriving cash economy in old notes
- Rs 2000 notes offered for Rs 1.5 Lakh on eBay
- Cashless in Delhi: Animals feel pinch as donations dip
- Netas using co-operative banks for backdated FDs, DDs
- Hoarders jack up prices of essential commodities
- Demonetisation reveals severe lack of financial literacy (this is less to do with lack of financial literacy. You remove 86% of currency from any financial literate economy, things will be the same).