Posts Tagged Indian Economy

The Politics, Populism and Downsides of Surgical Strikes Against Cash Transactions

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There’s no doubt that there is a good deal of anger at the ground level, against tax evaders and people who are making merry and enjoying the luxuries of life based on unaccounted funds. This anger & resentment is particularly strong among the salaried classes, wage earners and even the ‘have-not’ sections of society. Given that this anger has built up over many years, it is easy to tap into this and exploit it, using a mixture of tall promises, popular fables built up over the years ( ‘ will bring back all the unaccounted funds parked in Swiss banks & distribute it among the people’), jingoism and hyper-nationalism.

I find that the support for this has been coming from sections of NRIs, the salaried classes and wage-earners and of course the bhakts across all sections of society. Some of them, like the NRIs are of course not affected at all. The salaried classes, particularly the urban middle classes are among the least affected immediately as they have recourse to privileged treatments in banks (relationship banking is still active ) and a variety of electronic transfer of funds and transactions which is what I gather the dusted-out and much-hyped term, ‘cashless economy’, refers to .

You lost the war, the battle and me

Prof. Prabhat Patnaik on Demonetisation

Some of the support is based on brainwashing, deluded thinking and sheer hypocrisy even. For example, I find several folks I definitely know to be dealing in substantial ‘unaccounted funds’ and ‘tax evasions’ routinely as an integral part of their businesses extolling this ‘courageous and radical’ step taken by Modi-ji. They are possibly doing so because a) it is the right thing to say during these times b)they owe their allegiance to the right-wing, conservative, Hindutva proponents who are in power and have taken this step, soon after surgical strikes of a different kind against public enemy no.1, Pakistan.
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I have little doubt that they have found a way to convert their ‘unaccounted cash funds’ already, using mules who have been apparently costing around 10% and hosts of ‘convertors’ who have seized on this business opportunity and who started doing business initially for 30 – 40% of the amounts put up for conversion and are now operating even at 20% – 25%, owing to heightened competition among their ranks. Shaking up the stocks of ‘unaccounted cash funds’ one-time, which as per every informed estimate is a relatively small percentage of the total ‘black money’ in circulation, achieves little other than mindless populism. The pain, by all informed estimates, far outweighs the gain.

Why Demonetisation Won’t Help to Minimise either Black Money or Corruption

Modi’s Money Mess

India’s Strange Cash Problem – NYT

Demonetisation is a Large Shock to the Indian Economy with Little Impact on ‘Black Money’ Generation

Economics is a nuanced and rather complex subject and many experts & analysts have weighed in on the pros & cons of this move and the way it has been implemented so far and the net impacts, almost invariably, are quite negative according to almost all of them. Besides the shock-and-awe to farmers, traders, small businessmen, retailers, daily wage earners and the poorer sections of society is real and very visible even now. If some folks are blinded by ‘bhakti’ and choose not to take cognizance of these realities which does not tie in with their beliefs and ‘bhakti’ that is their problem, and not ours.

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I am not sure about the political gains & losses of this move either. Leaving aside all other sentiments & political angles, Brexit and the election of Donald Trump in recent times make little or no sense economically, among other things. Yet the proponents of Brexit, Trump and Erdogan have managed to tap into some deep-seated resentments, fear, anger and below-the-surface prejudices and biases even for stunning electoral gains in the short-term at least. Modi’s politics & promises are pretty much in the same vein.

Narendra Modi Takes A Great Leap Backwards – Mao Would Approve

Apna Paisa Funny Money

Demonetisation Has Turned India into the World’s Fastest Slowing Economy

Modi Has Brought Havoc to the Indian Economy – The Guardian

Cash is King (Facebook Post)

Why Demonetisation Will Not Eliminate Black Money or Corruption

There’s heightened consciousness & debate now, particularly after the victory of Donald Trump against all odds, about ‘fake news’ and the need to flag them off as such and curb them. While Facebook, Google and some others are trying to come up with a technology and AI based solution to the problem, no safeguards are possible I suppose against fake promises and lemons sold by ambitious politicians to their base and to large sections of the unsuspecting masses, for votes and for grabbing the levers of power, of course.

P. Chidambaram on the Demonization of Cash

Raja Mitra

 

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