Stories
Slash Boxes
Comments

SoylentNews is people

posted by on Thursday February 16 2017, @09:23AM   Printer-friendly
from the invest-in-gold dept.

[Ed note: Updated to include actual examples of how some Indians dodged the clampdown. --martyb]

On November 8, 2016, India's Prime Minister Narendra Modi in a shock decision declared all 500 and 1,000 rupee notes to be "worthless pieces of paper" from midnight onwards. This surprise demonetisation sucked out 86 percent of cash from circulation, ostensibly in an attempt to flush out unaccounted wealth, or "black money".

More than one billion Indians had less than eight weeks to return all of their old notes. For the nation's largely cash-based society, this unprecedented move induced a period of chaos. Banks scrambled to keep up while lines trailed out their doors and around street corners. Life's basic daily transactions screeched to a standstill as people struggled to withdraw cash, causing immense stress and even death in some cases.

[...] "As far as my business is concerned, we were never affected, nor are we going to be affected," says Sunil*, a young businessman with garment factories on the suburb outside of New Delhi. Though he had stored hundreds of thousands of rupees in untaxed cash, he claims demonetisation left him without any significant losses.

[...] He contacted his suppliers and purchased fabrics in advance, all in 500 and 1,000 rupee notes worth $7.4 and $14.8 respectively. He said that for him, this was "the main source of getting rid of old currency notes".

Of Sunil's 400 employees, many are low-paid tailors and labourers that normally receive cash payments. He decided to give them all hefty cash advances, also in old notes.

[Continues...]

[...] Uraaj*, a casino manager who was sitting on a substantial stack of untaxed cash, says he paid the trusted members of his house staff six months in advance as one way to dispose of his money.

In situations where there are pronounced power dynamics between employers and employees, it can be difficult for a labourer to refuse advance payments. "It’s actually like indentured servitude. You are kind of sugar-coating it when you say, I’m paying you in advance for three months," says Udayan Baijal, a Delhi-based filmmaker.

[...] Some people seized the opportunity to pay off debts in cash. Ramya Pothuri, a 20-year-old singer-songwriter from Mumbai, had not received payment for months from the restaurant where she performs weekly. After demonetisation, the restaurant manager "dumped 40K on [her]" in old notes.

"At first, I was like, no," she says, "because I didn’t want to go to the bank and stand in that line. But I knew that if I didn’t take that cash then, it would take ages for me to get paid".

Other black money hoarders paid professionals to change their currency. Ashish*, who works for a political party, claimed he sent 3 million rupees to his contact within a bank, who exchanged the currency for a 35 percent commission.

*Names have been changed to protect identities.

Could a better designed demonetisation tactic help elsewhere?


Original Submission

 
This discussion has been archived. No new comments can be posted.
Display Options Threshold/Breakthrough Mark All as Read Mark All as Unread
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
  • (Score: 1, Interesting) by Anonymous Coward on Thursday February 16 2017, @12:40PM

    by Anonymous Coward on Thursday February 16 2017, @12:40PM (#467764)

    I've wondered if the all this applies to the fatcats in India.
    Why not just keep your cash stash in Pounds, euros, or Dollars?

    Starting Score:    0  points
    Moderation   +1  
       Interesting=1, Total=1
    Extra 'Interesting' Modifier   0  

    Total Score:   1  
  • (Score: 1, Informative) by Anonymous Coward on Thursday February 16 2017, @02:23PM

    by Anonymous Coward on Thursday February 16 2017, @02:23PM (#467786)

    Most likely because the official exchange rate is far below the black market rate, and the black market does not have enough supply of foreign currency, so exchanging it via official channels would be worse than paying actual tax.

  • (Score: 2, Interesting) by Anonymous Coward on Thursday February 16 2017, @03:00PM

    by Anonymous Coward on Thursday February 16 2017, @03:00PM (#467805)

    I've wondered if the all this applies to the fatcats in India.
    Why not just keep your cash stash in Pounds, euros, or Dollars?

    You are correct, most of the shady rich have their wealth in other forms - foreign currency, real-estate, gold.
    But the outright criminals do keep a lot of cash on hand because they didn't really need to launder it.

    The biggest problem though is that poor people don't use banks. So all of their money was in cash.
    They got fucked the hardest by this surprise policy change. Kinda the way it usually works when rich people make unilateral decisions for everybody.