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RE: The War on Cash Rages On in India and Venezuela

in #money8 years ago (edited)

Hi,

. India has now banned 500 and 1000 rupee notes, though the government has also assured the public it would print a 2000 rupee note to replace the smaller denominations. Unfortunately, that has yet to happen and – given India’s track-record – may not happen.

This statement is incorrect and somewhat misleading. The ground level situation is different. Rs.2000 notes have been produced and supplied in many cities including mine (I live in a smaller tier-2 city) from the time this policy came into place. Withdrawing cash from atms isn't hard at all. But there is a daily limit imposed on ATM withdrawals and weekly limits on cash withdrawals from the bank. Which I hope will be lifted soon.

Production of the new Rs. 500 note has been ramped up and the short supply should fade away in the next few weeks. There is a cash crunch in ATMs in the metro cities but things have improved a lot and as with any major change, there will be some chaos initially. This was also due to the fact that new notes are of a smaller size and every ATM needs manual re-calibration to accept new notes-delaying the supply and redistribution aspects of it.

The implementation has not been in-line with public expectation unfortunately and the supply could have been ramped up to build a bigger buffer prior to the announcement but to say the government is off-track would be going too far!

There are pros and cons to such a move. Given the population of my country it will take some time for things to settle down. Because, India has always had a HUGE parallel cash economy or black economy.

Cash crunch resulting in demonetisation has certainly helped fight crime, especially reduce instances of rioting which in the past was funded largely by those in power hoarding vast sums of unaccounted Black money to be spent at their whim and fancy.

Although there are ways to get around this cash crunch for some people and ways to convert black money into white etc. It's not a major issue right now. Personally I think the implementation needed to be better and daily wage labourers, business that run on cash and many amongst the poorer classes would suffer or have suffered from lack of availability of larger denominations and those without access or knowledge of modern banking, especially in some rural areas.

But the government is ramping up efforts and so are the bankers to reach out to the rural areas and improve banking there. Things are improving at a good pace and in urban areas you won't need cash to get about your daily needs if you have a debit or credit card-which we all do, multiple cards and bank accounts are quite common!

I came back to India on the 1st of December, and it was only yesterday I needed cash to pay a local business owner who only accepted cash. I've withdrawn a total of 4000 Rupees from an ATM which is roughly 59 USD in the last 16 days I've been home.

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I was on holiday in India during the demonetization announcement. I think you are espousing the typical middle class Indian's thoughts on this. Frankly, they're the most insular, unsympathetic people I have ever met(many of which are my family members). If as you say, there isn't much of a problem why are there still queues at the banks? Why have people changed their spending habits? And have you actually tried spending a 2000rs note? According to people I know there and from what I saw when I was there, many vendors still won't accept it! Outside malls and hotels, it is almost impossible to spend on card - that will obviously change but in the short term the problems with a cashless society arise.

As for corruption and crime, they have gone up since the announcement! To get large amounts of money deposited into banks, backhanders have been placed. In short, I think this move will turn out to be a disaster and you've got your head in the sand, think of the average man in this scenario.

I wrote about my experiences and the potential problems here:

https://steemit.com/bitcoin/@drkarl/in-the-midst-of-indian-demonetization

A resteem of the article would be nice @dollarvigilante :)

So you had a holiday here. Big deal!

I live here, I also run my business here and fortunately I have no unaccounted assets or any kind of black money and ergo the experience has been easier for me and my family!

The extent of the problem resulting from this move varies from city to city. I was in Delhi for the first two days when I landed back after SteemFest and yet with 110 Rupees in my wallet I've managed to go about my work without complaining about it for 2 weeks! Bigger cities given the huge population has certainly felt the cash crunch.

Cash for redistribution was initially in short supply, the loopholes in the system were perhaps being exploited by those in power. But mostly, ATMs werent' calibrated to accept the new size of the notes and the banks have had trouble dealing with the huge demand for cash.

You and I are not insiders and without any hardcore conclusive proof, your presumptions about some of things you've outlined in your post will remain just that!

Infact, I also landed in India with similar amounts of INR as you carried on your trip which was completely worthless when I returned home. But with some patience, it took few mins to make a deposit on a deposit machine at my bank's branch and I withdrew money from an ATM without a queue in the evening one day after I came back to my hometown. I agree while that doesn't speak for the larger population or their problems, many people have followed protocol and managed to get things done without too much of a hassle.

Sometimes, the best thing to do when you are facing any problem is to be calm and not panic and create a sense of panic in others. That's not what most people do, especially when they have the a lot of time and access to social media they write senseless comments to create a sense of worry amongst each other!

It's unfortunate that you've had a rather negative experience and you were here in the midst of it but so were my family and friends and people went about their business and got things done! Sure it was difficult for the initial couple of days but then its gotten easier and easier from there.

No economy can be completely cashless, least of all India. The government's move may not yield the anticipated result in the long run and could be termed short sighted as well. At many levels it is poorly conceived but what powers do I have as a citizen. I couldn't even stop the current government from being voted in with my vote during the elections. I dont know where you live, but amongst all the things you've experienced here did you realize what our population size is like? It's huge and every government wants to exercise it's control over it's citizens. One way or the other it happens.

They've made various policy changes without taking the masses from all classes into confidence resulting in much panic and angst. Also, everyone was caught off guard! Sucks to be a tourist in a foreign country for sure!

Unfortunately there's nothing you or I can do about it. But ofcourse, feel free to continue to sit behind a computer in a different country with no real day-to-day connection with India and rant all day long about your negative experiences here while the rest of us who actually live here go about our lives normally and do the best we can with whatever we have!

As for corruption and crime, they have gone up since the announcement!

Where do you get these stats from? Are you making these up out of thin air? Based on hearsay from your friends back in India? slow clap

In my state alone over 30 cases and $150 million worth of hoarded cash has been seized by the tax officials. People have been caught laundering money. Those who amassed vast sums in new currency notes through illegal channels are being caught almost everyday now. As we enter into the 2nd month of demonetisation things are much better.

Corruption was always there at every level of the society, led by the political parties and yet the vast majority of the country blindly voted for the current regime. Do you really think the government itself is corruption free to begin with? Tell me one government that's free of corruption in the world today and isn't screwing their citizens.

The common man in India has always been taken for a ride. I don't like it but it's true. I see you highlighting problems and providing no solutions! So you asked a guy in Sisha/Hookah bar about his experience? Kinda funny and as you would know it doesn't represent the whole picture.

I meet local business owners daily during my interactions here and many of my friends operate small to medium scale businesses. My local barber who's business runs entirely on cash is still running his business with a smile and without any problems whatsoever as demonetisation hasn't affected him as must as the media would want us to believe it has affect the poorer sections of the society.

You were in India for a total of 9 days of demonetisation and you've a lot to say about things today, considering it's almost already a month since you've left India!

As far as the common man is concerned, they don't need our pity. The government has failed to help them in the past and also people from privileged classes of society such as yourself!

Their lives go on and those who live on hand to mouth dont even earn as much as a 500 rupees in a day for the need to exchange anything which sadly is even more unfortunate.

Sure, the unsympathetic middle class you are talking about exists in India and everywhere else in the world! They may not be the best of the lot. But, maybe it's your insecurities as an NRI (assuming you are of Indian origin) makes you have an hateful approach towards the 'typical Indian middle class'. Who knows what your prejudices or biases might be. I'm glad you don't live here, I'm sure you feel the same way. Frankly, People who need to get their shit done, probably don't care about your perspective on how you feel they are or go about their lives!

Human beings will do whatever it takes to survive or protect their belongings (legal, illegal, right or wrong is for everyone else to decide) and that's the fact whether we like it or not. So kindly keep your holier than thou attitude to yourself!

Thank you very much!

Thanks for the response. I completely understand that people look after themselves in times of crises. In fact, I completely understood the behaviours I witnessed. I get it, you do whatever you have to do in times of crises. And no doubt,I would be the same, you get on with your day to day life.

It's the action of the government that simply don't make sense to me, I outlined the problems that were very foreseeable and we will see how they pan out. The reasons for which they did it I'm still unclear, at first it was black money, corruption and to stop terrorism etc. And now it's digitizing cash.

You wanted solutions?Why not reduce the tax rate? If the government's stated goal is to reduce tax dodging, increase their revenue, then won't the public be less likely to engage in black market transactions? My general point being, there were other avenues they could have gone down before taking
this drastic action.

I say all this with Indian connections, I visit regularly and have a fondness for the place. I wrote that blog post as many aren't aware of what has happened over there - I left open ended questions of the potential problems I saw.

Btw this demonetization action has happened before in Soviet Russia and it doesn't end well -
https://sputniknews.com/business/20110202162419049/

PS Can we be friends? ;)

@drkarl I've been travelling a lot lately and missed on replying to this. For all we know this move could possibly be a well contrived scam of some sorts. Could we have done without this move certainly. Has this changed anything; bureaucracy, red tape, corruption... no major impact so not really. So the real picture is something we'd never know in the present...

PS Can we be friends? ;)

Ofcourse we can! This was just a healthy debate. :)

That sounds overly harsh on you personally @firepower. It was never intended to be that way, accept my apologies.

Please accept mine too! Cheers!

That sounds overly harsh on you personally @firepower. It was never intended to be that way, accept my apologies.

Gentlemen, I've just had the pleasure of enjoying a fair and rational discussion (thanks to both of you) regarding a situation which I have followed for the last month and a half. A situation from which I am far displaced and wholly reliant on anecdotal reports and sensationalized click bait targeted at financial geeks like myself.
Polite, erudite, and revealing, I feel privileged to be a witness to your exchange.
My sincere thanks going out to each of you.
Respect.

I believe We ARE seeing the beginning of a financial crisis. The question is will you wait until the NEWS (OR OLD!) tells you it until you do something. It is not directed at anyone specifically. If you agree, then great. If you dont, we will see who was more prepared.


We are already in a financial crisis. Forewarned is forearmed.Yes, @keithwillshine

One way to prepare is to choose sound, honest money.

What do you think?

Great work and article.

Much appreciated (and likely needed) perspective from someone actually living in the area. Given the scale of India's population I'm sure the stories of this new financial paradigm vary quite widely...
Enjoyed dinner with you the last night of Steemfest, glad the economic situation is relatively stable for you at home.
Take care brother.

All good here. Life goes on no matter what in this country or pretty much everywhere I take it. It was great hanging out with you. Hopefully soon in the US of A my friend! :)

Looking forward to it! 🙂