Script gone wrong: RBI takes demonetisation hit and government gets a cut
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    Script gone wrong: RBI takes demonetisation hit and government gets a cut


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    The Reserve Bank of India’s (RBI) announcement this Thursday to halve its dividend payout to the government has once again put demonetisation under the spotlight.

    It was earlier expected that there would be a big windfall for the RBI, from the government’s November 8 decision to scrap currency notes held in denominations of Rs 1,000 and Rs 500. The argument was a sizeable part of these high-value notes, estimated at about Rs 3 lakh crore, were dodgy cash (read as black money) and would not return to the system. The amount could be written off from the liability of the central bank, which could then transfer this ‘windfall gain’ to the government either through higher dividend or some other means. The government, in turn, could use this money to build infrastructure, capitalise banks or invest in other growth catalysts.


    This hopeful script, however, has gone horribly wrong. It now appears that most of the cash held in such high-value notes might have returned to the system, although the RBI maintains that it still counting the demonetised notes.

    Worse, the RBI’s announcement coincided with the release of a research report by the State Bank of India (SBI) — the country’s largest — that severely undermines the government’s earlier claim that the impact of demonetisation would inevitably subside in a few months and make way for accelerated growth.

    Demonetisation has hit exports hard, especially in sectors that are import-intensive. It also dampened consumption spending, keeping imports and demand for foreign exchange subdued and helping the rupee appreciate.

    http://www.hindustantimes.com/opinio...nTA9AwSjJ.html
    Last edited by prasad1; 12-08-2017 at 06:45 PM.
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    At last ll are conceding that demonetisation was a disaster.

    Now growth has plummeted,GDP is headed close to 6.5%.

    Recession is more likely.

    There are no takers for bank credits.

    Many companies are headed for bankruptcy.

    Unless rural economy picks up, consumer spending goes up either due to better farm output or money in hands of people thru pay revision in govt sector, growth will

    remain stalled.

    One can write off exports as rupee has become over strong at 64 rs to dollar.

    Until 2018, we cannot expect much from the economy.

    Best sit on whatever cash one has and wait for some recovery .
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    System lighter by Rs. 3.5 lakh crore of cash: Survey
    Says demonetisation also has increased digitisation across the board; all economic indicators have returned to normal and filing of income tax returns has gone up

    Demonetisation has reduced Rs. 3.5 lakh crore of cash from the amounts available in the system before, and digitisation has increased across the board, even among the poor, says Volume II of the Economic Survey .

    The volume, tabled in Parliament on Friday, noted that while the informal sector suffered initially from demonetisation, all indicators, such as two-wheeler sales and demand for MGNREGA work, had returned to normal. It found that while the number of income tax returns had increased sharply, the average income declared had not risen commensurately.



    “In levels, and as a share of GDP and money, there seems to have been a sharp and equilibrium decline in the use of cash: as of July, the holding of cash is about Rs. 3.5 lakh crore (20%) less than what might have been the case had pre-demonetisation trends prevailed, consistent with the calculations presented in Volume I,” it said.

    “Of course, a definitive judgement can only be passed if current levels of cash relative to GDP persist over time but, so far, reliance on cash appears to have declined sharply,” the Survey added.

    Three categories

    The report also said that the effect of demonetisation on the digitisation of transactions could be divided into three categories: the poor (who are largely outside the digital economy), the less affluent sections (who have acquired Jan Dhan accounts and RuPay cards), and the affluent (who are fully digitally integrated via debit and credit cards).

    “It is clear that there has been a substantial increase in digitisation across all categories,” the Survey noted.

    “And even though the immediate post-demonetisation surge has moderated in some cases, the level and pace of digitalisation are still substantially greater than before demonetisation.”

    The report found this to be true for Aadhaar-enabled payments, which serve as an indicator for the poorer sections of society, Rupay cards for the intermediate category, and credit and debit card transactions for the affluent sections of society.

    Greater growth

    “The growth of taxpayers post-demonetisation was significantly greater than in the previous year (45% versus 25%),” the Survey said.

    “The addition amounted to about 5.4 lakh taxpayers or 1% of all individual taxpayers in just a few months. It is, however, interesting that the average income reported of the new taxpayers — Rs. 2.7 lakh — was not far above the tax threshold of Rs. 2.5 lakh, so the immediate impact on tax collections was muted.”

    The report analysed the effect of demonetisation on the informal sector via two proxies — demand for MGNREGA work, and two-wheeler sales — since the economic indicators collected by the government themselves do not include data from the informal sector.

    Rapid decline

    “A proxy for the informal sector effects is two-wheeler sales, which showed a rapid decline following demonetisation but has, after more than six months, almost returned to pre-demonetisation levels,” the Survey added.
    The Survey’s detailed calculations show that while demonetisation resulted in a contraction in demand for MGNREGA work in the first four weeks following demonetisation, demand normalised by the tenth week, and subsequently grew sharply.

    This effect was particularly prominent for less developed States, which saw a 63% increase in demand for MGNREGA work after the tenth week.
    http://www.thehindu.com/todays-paper
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    hi

    each and every action has equal reaction will be there....newton's third law in physics..
    asato maa sadh gamayaa, tamaso maa jyotir
    gamayaa, mrityor maa amritham gamayaaa..
    om shanti, om shanti, om shanti...upanishad
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    the demonetisatin has affected the common man only. He has to attest Adhaar card, Pan card etc. to lose his personal freedom even though he is non tax payer.
    I do not understand under what basis Mukesh Ambani is giving free mobiles by collecting Rs.1500/- as security deposit. The amount will not attract GST. He will collect huge amount that too without any tax. How the government is keeping silent in this aspect?
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