Content

1 The real acute agonizing problems of India which must be

addressed before India dreams of “cashless western

society”.

i-iv

2 Demonetization / Operation note Bandi 2016 (Basic

Information)

1-8

3 Real Reason behind Demonetization 9-11

4 Remedial measures to reduce harassment & torture of

common man

12-16

5 Additional notes on Negative effects of Demonetization 17-24

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The Real Acute Agonizing Problems Of India Which Must BeAddressed Before India Dreams Of Cashless Western Society

1. Prison Population – 4 Lakhs (2,78,000 are under-trials)

2. Homelessness – 30 million

3. Crime – Rape doubled between 1990 -2010

4. Hunger – 194 million

5. Children – 7,60,000 new born die every year

6. Unemployment – 40 million now

7. NSDC –10 Lakh look for jobs every month12 Million look for job every year.2015-2030 365million will join workforces.

8. Below Poverty Line – 400 million

9. Slum Population – 100 million

10. Rural Households – Total 180 million73% of Indian households are Rural134 million are Below Poverty line69 million are rural land less.56% of rural households don’t own any land or property.50% of village house live on manual casual labour.92% of rural house run on less than Rs10,000 per month

11. Urban households – 11 crore total –300 million no ElectricityOpen defecation – 620 million (50% of India)186 MP’s/ 543 have criminal records.20 Lakhs live under railway Platform, road bridge.

12. 500 million workforce – 50% in Agriculture(4% have vocational / skill training)

13. Reverse Migration (5yrs)12 million Indian join Agriculture again every year.

14. Sanitation:-India Spends 0.2% on Sanitation(Pakistan 0.4% and Nepal 0.8%)

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NCRB Figure – in 20yrs (1995 -2015)1. 300,000 farmers committed suicide in India…2. 2000 Indian Farmers quit villages daily.3. 15 million farmers have moved to city slums between (1990-2015)4. India has 50% work force in Agriculture.5. 144 million are landless agric laborers in India.6. Only 50% land irrigated in India.7. 200 Million Live off Forest products.

Yet we forget our Agro foundation and want to “APE” the industrialEconomies.

NCRB Report1. According to WHO Indians are among the world’s most depressed.2. One Suicide every 40 seconds globally3. India in 2012 – 2,58,000 suicides per year (highest in the world)

Women’s Safety1. 100 Women raped daily in India2. 4rapes every hour3. Delhi – Highest (Rapes) 1636case in 2014.4. Delhi – 89 crimes against elders people (1 lakh POP)5. Delhi – Crime figures increases almost 100% every year.

Govt. Apathy:-No records of how govt. spent of Rs 44,000cr (acc to CAG)Times of India 27.07.15

Various ministries -led by health, agriculture and human resourcedevelopment -have released close to `44,000 crore over the past few yearswithout getting utilization certificates or accounts of grants given to statutorybodies and organizations, resulting in spending without any evidence of gainsflowing to the beneficiaries.

The concern has been flagged by the Comptroller and Auditor General (CAG) ina new report which pointed to over 44,000 utilization certificates which weredue at the end of March 2013 being pending even after 12 months.

Government don’t care for the suffering masses:-302/676 Total districts (50% of India) in drought in 2016 due to deficit rain. 18states affected, Only 6 have asked for central help in 2016. SC had to pull upstates.

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Farmer suicide thorny of caring govt.:- New Delhi, July 24: The Union agriculture minister has cited “love affairs,

impotency and barrenness” as some of the reason for farmer suicides in awritten reply to the Rajya Sabha that has the Opposition up in arms.

Quoting the National Crime Records Bureau data, the minister said overallfarmer suicides had halved from 11,772 in 2013 to 5,650 IN 2014.

Together the total number of farm related suicides would be 12,360 which ishigher than in 2013.

It is estimated that 52% of the 90 million rural agricultural households areunder severe debt.

Swach Bharat Abhiyan Comedy:- Government officials have been inflating the number of toilets built from

public funds across the country in rural homes and possibly siphoning offmoney and winning awards too for their extraordinary performance, theComptroller & Auditor General of India has indicated in its report submittedto Parliament.

As against UP’s 172% excess toilets built over the census numbers,Jharkhand stood at a whopping 326%, Madhya Pradesh at 277%,Chhattisgarh at 183%, Odisha at 199%, Tamil Nadu at 190% and Gujaratstood at 81%.

Nirbhaya Women Fund :– Nirbhaya for victim - 2013 (Dec 16, 2012 Gang Rape) 3000 crore not spent

since 2013 – SC asks why not spent on:- Relief & Rehab of Rape victims. One stop crisis centre in 653 districts (Only 14 setup) Witness protection prog. (as hostile witness) means 82% earns are acquitted.

National Food Sec Act Farce:- A bench of Justices Madan B. Lokur and N.V. Ramana said there would be

"utter chaos" and a collapse in the country's federal structure if the stateschose to violate a parliamentary enactment. The National Food SecurityAct is deemed to have come into force from July 5, 2013.

Foodgrain and mid-day meals should be given free of cost, the court said."A state government, by delaying implementation of a law... is effectivelyrefusing to implement it and Parliament is left a mute spectator.

SC Points out Lacunae of wasting funds

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Over the Last 35 yrs Rs.2.8 lakh crore was not spent ($42.6 billion) set asideto improve the lives of scheduled castes (SCs) and scheduled tribes (STs) byway of measures like mid-day meals, scholarships and crop insurance wassimply not spent.

The state of convictions in IndiaClose to half the people arrested for crimes under the Indian Penal Code andbrought to trial end up avoiding punishment. The states of Odisha, Assamand Bihar have the lowest conviction rate where nearly 90% of the peopleaccused of committing crimes are acquitted by courts. In contrast, 82%of the accused in Kerala are convicted.

a. Pollution and deaths in all major cities of India1. 15 lakhs die annually in India (China is only 7 lakhs) due to pollution

related diseases and 13 lakhs die due to indoor air pollution in India.2. Last 10yrs – 10crore trees cut in India to make roads/ highway but

Govt./ public replanted only one lakh trees.

b. Public’s hard earned money looted by banks:-Prasant Bhusan Affidavit in Supreme Court :-1. Total bad loans of all banks in India is $100 billion.2. 2015 (40,000crore) of corporate debt written off by state run banks.3. 30 state owned banks have written off 1.14 lakh crores (16.7 billion) as

bad debt in 2015. This is the biggest scam yet to be investigated.

c. Terror related violence in J&K has peaked to highest level in last 4yrs:-1. In 2016 – Incidents of violence increased 47%2. Killing of Terrorist – 300%,3. Casualties in Army increased 87%,4. Cease fire violations increased from 2015(405) to 2016 (437).

d. Pranab rings job alarmPresident Pranab Mukherjee today sounded alarm bells on the economy,saying India was witnessing jobless growth and that “Statistically enhanced”GDP growth would be “unsatisfactory”.“India is seeing jobless growth. Last year, employment generation was theleast in the last seven years. Mere statistical enhancement of the GDP is notsatisfactory,” Mukherjee, who was finance minister in the UPA government,said at the Founder’s Day celebrations of St. Stephen’s College.

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Points to Ponder upon:-Demonetization/ Operation Note Bandi 2016

November 28, 2016

A. What Herculean Task we Face (Basic Statistic):-

1. Cloud on Black ClaimHigh –Value notes in circulation on Nov. 8: Rs. 15.44 lakh crore

High- Value notes back with banks till Nov. 30*: Rs. 11 lakh crore (71.2%)

Against this combined figure, the percentage of cash that has already flowedback to the banks and kept with the treasuries works out to over 71 per cent.Such a high volume has been clocked with nearly a month more to go beforethe deposit window at banks closes on December 30. Select RBI counters willcontinue to accept the notes till March 31, according to the government so far.

Sources close to the government have been claiming that black money rangingfrom Rs 3 lakh crore to Rs 4 lakh crore was being held in high-value notes.

During the first demonetization scheme in 1946, nearly 94 per cent of thehigh-value notes had come back to the system, prompting the then governorof the Reserve Bank of India, Chintaman Deshmukh, to term it a failure.

Fake Currency .2. Between 8/11 to 30/11 60 people died due to clashes or strokes due to

demonetization.

3. Fake currency is a tiny amount:-668Cr - Only 0.002% of total currency - 1000rs1658Cr - Only 0.004% of total currency - 500rs

4. Fake currency only 400 crores which is only 0.028% of demonetized notes(total 15 lakh crores)

Is it worth it to harass100 crore Indians?

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Black Money .5. Only 6% of black money is hard cash (Rest in bullion real estate or foreign

currency) then why harass 100 Crore Indians?6. “The National Institute of Financial Management, a premier think-thank

working under the ministry of finance, had in a report on December 8, 2012,stated that the maximum black money was invested in real estate, followed byparking in offshore accounts, gold and bulling, and the least in cash,” headded.

7. IT base only 3% which translates to 14.55 lakh crores collected by ITdeptt. Needs be expanded – as long term measure. Why not done earlier?

8. Income Tax cash recovery is only 6% of all recovery (very poor performance ofIT Deptt.)

9. Total amount of 1000/500rs. In economy is 15 lakh crores1000 – 39% of Total Cash In the Country500 – 50% of Total Cash in the country

10. Congress Spokesperson Jairam Ramesh Said that only 2 Crore Indians usedcredit cards, and 92 per cent of the jobs were in the unorganized sector,which is sustained by cash payments. So only Aam Admi suffers.

11. Cashless is a dream: - India’s 100 million shopkeepers only 2% havemachines to accept debit card. Only 10% of merchant cutlets in India havePOS devices. Only 20% of India have internet access. 233 Million Indians haveno bank account (Price Water house report)

ATM Situation12. 2 Lakhs ATM in India run by only 2-3 Vendors. Why such Monopoly of only 2

vendors. From 8/11 to 21/11 50% ATM’S are shut why? To harass Aam Admi?13. 2 Crore rural Coop Banks in Bengal account holders not allowed to exchange

old notes due to RBI ruling.14. Urban Areas in India have 168 Lakh ATM Branches while rural areas have

only 37,000 for servicing 6 lakh villages.15. An ATM should service 2000 people at an average ATM can’t manage large

figures as shown below as to how many people each ATM has to service:-Bihar – 13,438, UP – 11,275, Jharkhand – 8984, Assam – 8834, Chatisgarh –8364, Rajasthan – 8148, All India Average – 5,855In above scenario, unplanned demonetization will effect ATM functioning formonths together.

16. Why rich are not standing in ATM lines:-

So Indians becomes BPL as suddenly allcash worth 85% becomes illegal overnight

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New startups like Wish up, Done thing, Book my Chotu offer services ofgetting someone else to stand in ATM lines. Their hourly charge is Rs100/-.These startups have seen a 200% increase in orders.However, FM Need not be happy if lines in front of ATM are shorter now(24/11). Its because ATMs are issuing only 2000Rs which nobody wants ormany ATMs are just remaining closed.

PRINTING

17. Bhartiya Reserve Bank note Mudran Pvt. Ltd. Can print only 138Cr. (1000notes) in a month. Thus it will need 3 months to print required notes.

18. 14 Lakh crores is the currency which went illegal if only 10 lakh crore notes ofnew 500/2000 are to be printed it would take 125 days to print 12.5 lakhbank notes.

19. Demonetization notes are 2200 Crore of 500/ 1000Rs. – Printing Press canproduce only 300 crores per months. Thus it will take 7 months to producesame amount.

20. Kenneth Rogoff, Economist (Curse of Cash) says that only 50% of India hasno bank accounts compared to 8% in USA. (210 Million still have no AdharCard and only 300 million Indians use internet so can’t make electronicpayment.)

21. In Bengal there are 8 lakh retail/ Medicine shops of which 2.5 lakhs arewholesalers. Wholesalers are not giving medicines in old cash. Thus medicinesupply is coming to a standstill.

22. Extremely difficult or almost impossible to quantify whether demonetizationadversely affected terror funding, Maoist funding or political party funding. Inany case cross border firing is continuing daily since 8th Nov demonetizationdate so no credit should be taken by central govt. on this vague ground.

23. Immediate effects:- 30-70% fall in FMCG sales 12% fall in automobileindustry 45% fall in two wheeler sale 20% fall in Real estate 80% fall inGems/ Jewellary 1% drop in GDP growth.

24. Former most dynamic RBI Governor R. Rajan removed as he was againstDemonetization and wanted comprehensive “tax reforms” instead.

25. (“Manmohan’s missile,” Nov 25). Singh declared that the government hadmade a “monumental management failure” in the implementation ofdemonetization, and called the move an “organized loot and legalized plunderof the common people.” He took to task the prime minister’s office, the financeminister’s office and the Reserve Bank of India.

26. Note blow to trust: Amartya SenAmartya Sen has described the Centre's demonetization move as "a despoticaction" that "undermines the entire economy of trust".

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Calling the demonetization "a relatively small fry in terms of dealing withblack money", he added: "It's a big, big disruptor of the economy.

We Indians would like the government to do something about black money,yet we would also like it to be intelligent and humane."

27. Bribes take e-wallet routeThe cyber crime section of the city police has come across complaints wherebribe was demanded on mobile wallets against SIMs issued to fake identities.

Smart TransferModus operandi

Step 1 – The bribe is demanded on mobile wallet, one or more phonenumbers are givenStep 2 – The bribe giver transfers the fund from his debit or credit account tomobile walletStep 3 – The bribe taker receives the fund, may be on multiple numbers asthere is a ceiling of Rs 10,000per transaction through mobile wallets.Step 4 – The bribe taker goes to department store, transfers the fund tostore’s account, gets money in hard cash, leaving 10% for storeStep 5 – He then throws away the SIM and changes the IMEI No. of the phone.

QUICK FACTS In 2014, the bank fraud section of detective department received over 600

complaints of fraudulent ‘mobile money transfer’ This doesn’t include the complaints received by 69 police stations.

There is belief that the SIM issued against fake identity is used only byterrorists. Now we suspect that many of these SIMs are used by corruptofficials for such transactions. Recently, the detective department trackedmore than 80,000 SIMs issued against fake identities. Police checked voterslist and found hundreds of fake documents against the names. Even theunique IMEI numbers of phones are frequently changed with easily-availablesoftware to erase the electronic footprints of such seedy transactions.

Bank officials found changing old to new notes worth Rs.30cr.

This move substantiates the fear among I-T sleuths that the bank managerswill collaborate with hawala operators in converting black money.

I-T sources side: “These two bank officials converted Rs.30cr worth oldcurrencies for newly minted Rs.500 and Rs.2000 from just one hawalaoperator. The bank officials took 30% commission in gold bars.”

National Highway Loss:-

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From 8th Nov. – Dec 2, 2016 National Highway authority of India will suffer aloss of 1,238 crores due to suspension of toll collection due to demonetization.

28. Frontline Dece 9, 2016 The mysterious absence of the 500 rupee note andthe emergence of the 2,000 rupee note, which nobody wants (ne want changeis the common refrain), resulted in the 100-rupee note being pushed to plugin the gap. That turned out to be impossibility as ATMs, now stacked withthese notes, ran out much faster than they were meant to. Common senseought to have instructed in the mandarins in the Finance Ministry that askinga currency that accounted for less than 10 per cent of the value of currency incirculation to fill the huge void caused by the withdrawal of a denominationthat accounted for one half of the value of all currency in circulation was liketrying to arrest the flow of water gushing from a broken reservoir with a littlefinger. This is what explains the desperate, almost daily, announcements bythe Union Finance Secretary of ever-increasing restrictions on withdrawalsand exchanges, including the classic one that marks the finger of everyexchanger queuing up at bank counters across the country. Thus, while thegovernment had mud on its face, citizens had ink on their hands.

Effectively', the 5O-day period that Modi has sought to restore a semblance ofnormalcy appears to be a pipe dream when set against these severe capacityconstraints. Even more damagingly, the introduction of the 2,OOO rupee notedemonstrates an utter lack of respect for elementary principles that governcurrency management in a large, poor and diverse economy like India. Inshort, it appears that the only reason for its introduction was the laterealization, after Modi decided to rush headlong, that this was a quicker wayto overcome a capacity constraint.

But even more amazing is the well-heeled are advising their much poorercompatriots in their hour of grave crisis to “Go cashless” as if there is no costto be incurred.

One recent advertisement urges us to pay our domestic workers using aservice provider’s e-wallet service, without warning us that they would have toincur a transaction cost when they encash what belongs to them.

Looking at the transaction from the worker’s point of view, the transactioncosts for encashing Rs.8,000(Which is what a domestic help in a large metromay be earning) would amount to a non-trivial sum of Rs.320. Reports in thewake of the crisis indicate that the cash-on – delivery option offered by e-commerce sites has collapsed from 50percet of all transactions to less thanone-third. This obviously indicates that even in online transactions, cashremains king.

Shadow Economy

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Farm AppealSince agricultural income is not taxed, some piled on to farmers who startedappearing in bank queues. Their claim? They had got cash (Old currency)after selling goods at the mandi before demonetization.

Party PoliticsPolitical parties can collect donations up to Rs. 20,000 without having toreveal who the donor is. A party can, therefore, say it had collected donationsin old currency prior to demonetization and demand that it be changed intonew currency by December 30.

Land DisposedA win-win deal for land owners: sell the land at inflated prices by acceptingpayments in old currency and using backdated documents, deposit the moneyin a bank, pay tax on the transaction that allegedly happened beforeNovember 8, and make it a sweet deal by giving the buyer a cash refund innew currency, after a few months.

Backdating BenefitsWith cooperative banks and credit societies still largely undigitised, backdatedfixed deposits entered through the back door, gladdening the hearts of bothblack money owners as well as those in whose names they deposited cash.Non-banking financial companies followed suit.

Prayer BonanzaFrom Mumbai’s Siddhivinayak to Mathura’s Govardhan, Temples overflowedwith anonymous donations in old notes. With temple hundis declared abovescrutiny, priests did brisk business converting black money into white for ahefty commission.

India Today Dec 5, 2016

D.K. JOSHIRural India, which accounts for 47 per cent of the GDP and 54per cent ofconsumption, is likely to be the worst impacted as people, given the pooraccess to banks, prefer to transact and receive their incomes in cash.

AROON PURIE"More than 80 per cent of India's labour force is employed in the informalsector which comprises an estimated 45 per cent of the GDP. Over 60 per centof India lives below the international poverty line of $1.9 per day. We are anunder banked economy. In rural and semi-urban areas where over a billionpeople reside, there are only 7.8 branches per lakh of population. There are738 million debit /credit cards in the country but only 6.7 transactions perindividual, compared to 260.8 for Korea. It's easy to imagine the scale ofdistress in the future. This is a huge social experiment where thiscompression of currency is trying to force-fit a cash-based economy intorelying on plastic or digital in one fell swoop

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The government obviously did not take into account its own lethargy andinefficiency in executing the scheme.

India Today Dec 5, 2016

Demonetization Becomes An OpportunityForeign exchange Black money hoarders have converted crores ofdemonetized notes into forex. Dollars are the most sought after currency. Adollar costs around Rs 120 - 140 in old demonetized notes. Even somediplomats are involved in this laundering process.

Hawala There are reports of people sending their black money abroad throughhawala dealers, who are again charging a high premium to park it in foreigncurrency in Dubai, Singapore and Malaysia.

Bullion the easiest way to launder money. Many have heavily invested theirdirty money in buying bullion, jewellery and diamonds which won’t attract tax.

Outlook Dec 5, 201629. India Inc rues lack of growth pill

Hindustan Business (Nov. 29, 2016)

During the first demonetization scheme in 1946, nearly 94 per cent of theimpounded cash came back to the system, prompting the then RBI governorChintaman Deshmukh to term it as a failure.

A senior private banker admitted that the speed at which deposits haveswollen after November 10 took everyone by surprise. This prompted the RBIto increase the cash reserve ratio to suck out excessive liquidity from themarket.

"If nearly all of the cash comes back, demonetization is a failure. The taxintroduced today, if it helps the Centre to mop up large revenue, may bepolitically construed as success," said an industry veteran.

Frontline December 9, 2016The Nuclear winter that Modi has unleash points to the rise of a particularkind of techno-utopian fascination that has a ready constituency among atiny section of the elites, which sees the world in its own image.

The Telegraph (30.11.16)“The truth is the government came up with a black money welfare scheme tohelp the corrupt. Pay 49.90 percent fine and turn your black into white. Modihas become the 50:50PM.”

Surjewala alleged: “The real face of the government lies exposed now. Whatthe government has done is reduce the penalty a black money hoarder is

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required to pay under Section 271 (1C) of the income tax act. Instead of 132percent, he will now have to pay 50per cent.

‘Modi’s friends were going to be hurt, so relief is provided. This is the resolveto fight black money. Pay 50 percent and have fun with the rest of the money.No prosecution, no worry. This Prime Minister has granted concession toblack money hoarders.”

30. Demonetisation marks return of petty regulation?Santosh Desai

Officialdom, which was reeling under the verbal assault of promises ofminimum government, has now reason to celebrate. For demonetization hasflung doors to endless vistas of petty regulation wide open. And as we allknow, there is no greater joy than petty regulation, for everyone gets to play.

The return of discretionary powers married with a really large canvas to playon, is a recipe for disaster. In the absence of meaningful deterrents againstcorruption within the bureaucracy, demonetization can potentially end upunwittingly being a significant sponsor of corruption and ironically , of blackmoney .

The government is trying to play God, and clearly this is a taxing job, nopun intended. It is no surprise that every day brings in a change; it is not onlybecause of poor planning, but also because planning for such a complexproject is virtually impossible.

The danger of institutionalizing distrust of all in order to punish a few is a realone. It would be a shame if the lasting legacy of big, bold reform were to besmall, pervasive and very stifling petty regulation.

Poor Broadband penetration can derail Digital India: TraiWhile the demonetization measure is acting as a catalyst in fuelling digitaltransactions, serious efforts are required to increase broadband connectivitybeyond the current level of 7%, Sharma said at an event on eGovernanceand Digital India, organized by industry chamber Assocham.Thailand’s broadband reach (connectivity) is estimated at 36%, Singapore’sat 98% and that of Malaysia at around 35-36%.

India has been ranked behind Sri Lanka and Vietnam in broadbandpenetration. “This is really a matter of concern…we are not in a great shapeas far as broadband penetration is concerned …Digital India will have toride on this infrastructure and if we don’t have robust and reliableinfrastructure, we are not going to achieve the objective of Digital India, adigitally empowered society and knowledge economy,”

B. Real Reason for Demonetization

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31. 9 lakh crore given as loans by banks till 2016 thus is thisdemonetization meant to save banks who are burdened with 9 lakh crorebad loans.

32. Black money abroad not included in the operation (gold hoarding us$)33. Amount of money which can be sent abroad increased from $ 75000 to $

250000 why? Is it to help big business?34. The high court had passed the order while upholding a PIL filed by an NGO,

Association for Protection of Democratic Rights, alleging that the Congressand the BJP had received crores in donations between 2007 and 2009 fromM/s Sterlite Industries India Ltd and M/s Sesa Goa Ltd, both Indiansubsidiaries of the UK-based Vedanta Group.The Centre's counsel, Binu Tamta, told the apex court during a brief hearingtoday that "in view of the amendments made to the FCRA, the contributionsreceived will not come under the ambit of 'violations'".

35. The government, instead, brought an amendment to FCRA in February2016 through the 2016 finance bill to avoid scrutiny,” Yechury said. Hepointed out that a provision was added with retrospective effect.“Representation of the People’s Act bars political parties from receivingforeign funds, but after this amendment, political parties can receive fundingfrom foreign donors which will bypass government scrutiny,” Yechury claimed.

36. Why 12 lakh crores deposited in September 2016 alone. Secret groups knewof demonetization.

37. Big defaulters of bank loans not named or action taken

38. Vijay Mallya left with 9000 crore and no action taken & citizens are beingthreatened now by depositing more than 2.5 lakhs will attract IT Raids. VijayMallaya and bank managers not arrested till now why?A token nonbailable warrant taken out which will never be executed.A token IT raid also held in BJP leaders Janardhan Reddy’s palace forspending Rs.500 crore on daughter’s wedding.

39. To ensure Aamadmi’s cash is kept in banks to give loans to corporate house(who will then send money abroad) a big hoax is promising 2.5lakhs measlyamount for marriages But conditions is that your caterer, decorator, iceCream vendor, Hired Taxi, light man must give in writing that they have nobank account is this possible? A cruel joke on marriage by myopic leaders.

40. Demonetization GambleRaghavan Jagannathan

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Consider the economy’s track record under Modi: while growth has revived,the 7% plus growth does not seem like 7%. This is evidenced by weakunderlying indicators, including low capital investment, overleveragedcorporate balance-sheets, a spike in bank bad loans, and a collapse in exports.Most important, the rising GDP numbers are nowhere reflected in new jobscreated.

This is the context in which Modi probably believes he needs to do more. Thecalculation may run thus: if demonetisation results in large amounts of Rs500 and Rs 1,000 notes remaining outside the system, RBI can write downthose liabilities and pay the government a higher dividend, perhaps as muchas Rs 1.5-2 lakh crore. Then there will be gains in terms of lower interestrates (already happening) and higher tax revenues as undisclosed incomesnow come to the taxman’s notice.

A Rs 3 lakh crore additional kitty in 2017 would be just what Modi needs torecapitalise banks, give every Jan Dhan account holder a cash payment(which will be touted as money extracted from black money holders), lowertaxes and increase investments in growth-enhancing infrastructure. The gainsmay look higher than the losses to him politically. Who knows, it just may payoff electorally by 2019, if not in UP in 2017.

41. Why the corrupt rich will welcome Modi’s ‘surgical strike on corruption’Jayati Ghosh (www.the guardian.com)

The most obvious steps – such as taking a strong line on the known illegalaccounts held in Swiss banks and tax havens, or ending the ability to holdshares without revealing your identity, or making funding of political partiestransparent – have simply not been taken.

So last week Modi did some more of the smoke and mirrors stuff that he is sogood at: a shock announcement in a blaze of publicity designed to show thathe is serious about ending corruption, even though the actual impact is quitedifferent.

In fact, only a small proportion of the funds received from illicit tax-evadingactivities is kept in the form of cash, and almost never by large players.

In any case, it also does nothing to control the source: not just bribery andcorruption, but also inaccurate invoicing by companies, under-reporting ofsales values and overstating costs, reporting non-existent transactions and soon. These don’t require cash: they are easier and faster using electronicmeans.

Ironically, the rich – more likely to be “cashless” – are relatively unscathed; itis the poor and the middle classes, hugely reliant on currency for dailyactivities, who are being battered.

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Pitfalls with Modi’s grand plan have been worsened by implementationineptitude. Not enough new currency has been made available, so cashmachines are empty and banks are stretched beyond capacity. People havebeen wasting hours in queues to collect small amounts of cash that areinsufficient for normal activity.

The lack of cash has reduced consumption and demand, which has had aknock-on effect on sales, traders’ incomes, production and employment.Traders are losing perishable stocks, daily labourers cannot find workbecause employers cannot pay in new notes, and small producers (whomostly don’t get bank loans) cannot get working capital from themoneylenders they rely on.

Farmers are in dire straits, some with freshly harvested crops thatcannot be sold, others unable to purchase inputs for the next sowingseason. They cannot afford to “bear the pain for 50 days”, as Modi askedin his emotional appeal, because they stand to lose everything for thelast crop and for the coming one.

Ironically, a flourishing black market has emerged for the old notes,trading at a 20% discount. Big players can get away with a small loss andplan on restarting their illegal activities once the new notes are fully incirculation, since nothing is being done about that.

No wonder, when the government claimed that its latest “surgical strike”would involve some collateral damage, the Indian supreme court said thiswas more like a carpet bombing.

Modi’s penchant for optics rather than substance was always annoying; butthis time it has acquired truly damaging proportions.

C. Remedial Measures to reduce harassment & torture of Common man:-

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42. Declare name of all those who made investments of over 5lakhs in gold,foreign exchange and bonds in light of Income Tax date showing that only6% of Undisclosed cash is in cash.

43. Just canceling 1000rs would have been enough. Comprehensive measuresshould have been taken on all illegal dealing in gold, foreign Currency Landdealing etc.

44. Banks should stay open 24hrs45. Banks were told to stock 100rs by RBI they did not do so.46. Calibration could have been done earlier.47. Cashless – how to protect plastic cards from hacking or data protection48. Veg. prices will soon go up drastically as all lorry transport movement on

State border has almost come to a standstill.49. In demonetization in 1978 there was 6000 crore worth of Rupees which was

demonetized. This time the worth of demonetized cash is 15 lakh crores.50. Then why govt. did not does any advance home work on after effects.51. Akodara Village in Sabarkanta distract is a digital village with 24hrs Wifi.

Even to buy 10Rs item villager sends SMS to Bank which debits the amounton getting grocery shopkeeper account number. 1200 villagers have bankaccount.

52. Jandhan Account has not reached all 6 lakh villages comprising 70% ofIndia as yet needs to look into this urgently.

53. Carnegie Endowment for peace (Washington) and center for Media studiesDelhi says 2014 Election cost was total 37000 crores spent by all politicalparties. By introducing state election funding this cost could also comedown.

54. If you are going to combat black money by measures like this one, it shouldbe accompanied with abolishing income tax and simplification of theindirect tax system because there are lot of duplications and unnecessarytaxes for small amounts.

The way is the German-French way to bribe senior officials of banks and getdata. Another way is the American method in which government arrestsofficials of foreign banks who don’t oblige with details. The fourth one is theUN resolution on corruption of 2005 in which one can pass a law saying allIndian accounts in 70 countries are hereby nationalized. Then the UN isobliged to help you get the money back. Egypt did it with Hosni Mubarak,Libya with Gaddafi and the Philippines with Marcos. (Unquote SubramaniumSwami)

55. Why RBI and Finance Minister are not concerned about:-a. Extreme Short supply of 500/2000 notes.

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b. Why private hospitals and coop banks will not accept old notes?c. Why no prosecution against anyone NOT accepting new 2000/- note.d. Why no IT/ED raid on 500 crore marriage of BJP leader Bellari Reddy in

Hyderabad. Marriage payments in old notes or new?56. If MPLAD scheme is ended today you get 20,000 crore for next 3yrs for

pumping into economy.

57. Govt. can add a cess on GST at rate of 0.1-0.3%. This cud be easily usedfor financing all polls of state & centre.

58. IT base only 3% which translates to 14.55 lakh crores collected by ITdeptt. Needs be expanded – as long term measure. Why not done earlier?

59. Income Tax cash recovery is only 6% of all recovery (very poor performance ofIT Deptt.)

60. Why centre is not making non acceptance of 2000Rs note asunlawful?

61. Audits of candidates’ and parties’ accounts must be made mandatory andthe tax exemptions they now receive be limited to funds that are traceable andtax-compliant. Most importantly, the EC’s powers must be enhanced toenforce such audits, along with punitive powers ranging from mild penaltiesall the way to disqualifications. It is amazing that the EC, arguably India’smost credible institution, does not have these powers.

62. Election scam: - Rather than expense caps, it is far, far more important toensure that campaign funds are from traceable, tax-compliant sources.Thus, the floor of Rs 20,000, below which political contributions can bereceived anonymously, must be drastically lowered. This is the singlegreatest window of abuse, with huge sums of black money being transactedwithout any traceability.

63. It is very surprising that the Anti corruption Lokpal Act 2014 has not beenconstituted by the central Govt. deliberately. The Supreme Court hascensured the Govt. for deliberately delaying setting up Lokpal.

64. Thus, Interest rates on fixed deposits have fallen drastically from 9.5% to6% Senior Citizens is the most effected Govt. should address this problemwithout delay.

65. Fate of 23 billion worthless notes:- one tone of damaged paper can generate660 KW hours of electricity with reduced emissions (china has done it inHenan province) 1.32 million KW of electricity is produced if 23 billion notes

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burnt which is equal to burning 4000 tons of Coal. So this is the only usefulfallout of great demonetization exercise.

66. The Great Indian ChemotherapyUltimately, we have to carry out tax reforms to simplify and streamline taxes.We also need trust – people need to feel the money they pay the governmentwill not be eaten up, but will be used for the country. Political parties stilldon’t need to show ID proof for donations below Rs 20,000, while a bank willink you and take your PAN card details for swapping Rs 2,000 of your ownmoney. This is a huge loophole. Parties can split any amount into units of Rs20,000 and attribute them to fictitious persons. Clearly anyone who donatesRs 20,000 will have some ID proof. Why not reform this?

By Chetan Bhagat

67. End the ChaosA new proposal to levy a penal 60% tax on disclosures of unaccounted cash isan improvement over current regulations which require defaulters to pay taxat a prohibitive rate of 200%, but the rate is still too high to attractsignificant deposits. Such a high tax rate has encouraged many to seek theservices of a new breed of money changers who charge a premium to convertthe demonetized notes into legal currency, widely estimated at around 30-40%.If the 45% rate of the earlier income disclosure scheme was to have beenchanged in the new scheme, it should have been lowered rather than raised tomake the scheme a success.

HERE’S A RUPEE FOR YOUR THOUGHTSKaran Thapar

Not only did it not, but the printing of new notes only happened afterSeptember 4, when Urjit Patel took over as RBI governor.Second, the government could also have ensured that the new 500- and2000-rupee notes were the same size, weight and thickness as the old 500and1000-rupee notes.

Third, the government should have permitted cooperative banks to exchangenotes and accept deposits of old ones.

Now, to the question of effectiveness. This, after all, is the raison d’etre of theexercise. Pronab Sen, the former chief statistician, says only 6% of blackmoney is held in cash.

However, a study in 2015, done by the National Investigation Agency, saysthat at any point of time only 4,000 million of counterfeit currency is incirculation. That’s just 0.028% of total currency. The study also says thisincreases by just 700 million a year.

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Now, Modi can turn kala dhan to Jan DhanSwaminathan’s Anklesaria Aiyar

The RBI may want to keep some of the windfall for contingencies. But Modican demand — and the RBI governor will surely agree — to hand over almostall the Rs 3 lakh crore to the government as a special dividend.

What will Modi do with this windfall? He can transfer a whopping Rs10,000 into each of 250 million Jan Dhan accounts that have been openedsince he came to power. This will absorb Rs 2.5 lakh crore, leaving Rs 50,000crore for other purposes like infrastructure. He could also hold a lottery todistribute part of this Rs 50,000 crore to all other citizens, giving every voter achance to benefit from the bonanza.

Maybe the un-encashed proportion of high-value notes will be only 10%, not20% as assumed so far. That will mean a lesser bonanza of Rs 1.5 lakh crore.That will still suffice to put Rs 5,000 into every Jan Dhan account, and leaveRs 25,000 crore for other uses.

The situation cries out for a stimulus to revive demand. Putting lakhs ofcrores into bank accounts of citizens will provide the classical economicremedy of a big demand stimulus. Poor people spend money fastest, sostimulating demand via Jan Dhan accounts will be good policy. Thegrowth shock of bungled demonetization can soon be offset by a consumerspending boom.

Cashless Economy-The best cashless economics are Sweden and South Korea. Indian Finministry bureaucrats should study these economies & implement their goodpoints instead of blindly trying to imitate them. (Classic case of crow trying tobe a peacock)

68. India Today (December 5, 2016)

AJIT RANADEDisclosures through RTI show that 80 percent of the electoral funding is fromunknown sources. Ideally, this whole exercise was to nudge people throughelectronic payments. Now, Parliament should pass a law mandating that alldonations be made digitally.

The next logical step should be to move onto benami properties and simplifyand reduce taxes. Make the interface with the taxman smooth. Reduce thepower of discretion with the government.

ASHOK GULATIThe stamp duty in real estate transactions has to be reduced from the current6-7 per cent to 3 per cent or less. Even income tax, on individuals and the

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corporate world, can be reduced somewhat to reward their honesty. Goldtransactions need to be brought under the electronic payment system.

ILA PATNAIKYes demonetization should be accompanied with rationalization andsimplification of tax. So long as there are multiple tax rates, tax exemptions,the problem of black money is unlikely to go away. The money would berouted towards agriculture as this sector is untaxed.

The RBI could have started issuing new Rs 500 notes, allowed the old notesto be exchanged and set a deadline after which the old notes would notremain legal tender. This is the strategy followed by central banks in othercountries.

69. Foreign Press critique:-New York times – Chaos in Banks BBC (Currency ban hurting pour)Guardian – (Why corrupt rich welcome Modis Surgical strike on corruption)Huntington post – (Death Toll rises) Aljazeera (Anger intensifies in India)Washington post (Panic & Anger on Money squeeze) Daily mail (Modis 56inch chest makes his mother line up) Financial Times (still chaotic)International Business times (India’s eco-growth takes a hit)

70. Conclusion:- The speech of ExPrime-minister Manmohan Singh clearlyclarifies that if we wait for long term benefits we shall all be dead by then2ndly, it is illegal nor to allow a citizen to take out his own money.

71. Historically India had the best fiscal system from Indus valley civilization tothe Mughals.

The trade practices, urban planning and land revenue system was so perfectthat Lord Macaulay felt that Indians could be made slaves only by destroyingour old systems & culture. Thus the more we ape the west the more we shallbecome slaves of western technocracy.

To become cashless means we are totally exposed to hackers virus’s,corporate houses, big business and corrupt techsavvy politicians.

Indian can then be destroyed by a flip of a key on the key board and becomeanother Greece or Venezuela overnight.

For this time, Arthakranti Group and adviser Ramdev have got it all wrong.

Additional Notes:-

6 JUGAADS BEING USED TO TURN BLACK INTO WHITE…

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Convert black wealth to white and cashA sampling of the techniques being used

FALL BACK ON FRIENDSThe easiest and most pervasive is the use of personal networks: friends, relatives,colleagues and the like. It’s simple. Check out who has less cash than he or she canlegitimately exchange. Ask that person to use the headroom to convert some of yourcash. For businessmen and labour contractors, this could mean asking their namesto the exchange

WHEN NBFCs PLAY FACILITATORHere, a person tells a willing non-banking financial company (NBFC) that he’s readyto hand over cash in exchange for an interest-free loan of an amount that is, say,20% lower than the cash being paid. The loan is interest-free for three years, withinwhich time a paper trail would be created to show that it’s been repaid. The 20% isthe cut the NBFC takes for putting through this fraudulent transaction

FOREX ROUTEGovernments, after all cannot demonetize other currencies. Hence, people arerushing to the grey market for dollars, euros and pounds. Once again they are readyto pay a sizeable exchange premium. The dollar has been driven up to aroundRs120 in these deals, sources say

REALTY TO THE RESCUEThe real estate sector is assumed to be badly hit by demonetization. And sources inthe trade say the unsold inventory is being bought by those seeking quickconversion of cash at rates prevailing months ago. As is common in realty, thesedeals are often settled at 70-30 or 60-40 ratios of white and black payments. It’sclear how this helps the buyer, but what does the builder get out it? Where is hisconversion charge? Partly, he gains from getting rid of unsold inventory. And partlyfrom sticking to old rates at a time when prices have fallen

PUMPING OUT THE CASHYet another route being used for laundering old cash is transporters. According toan industry source, permission to use old notes at petrol pumps has been used tothe hilt for this operation. Figures being thrown around run into tens of thousandsof crores, but even if these are an exaggeration, this is certainly a major conduit forcash

THE GOLD ROUTEThose with large stashes of demonetized cash hand in old Rs500 and Rs 1000 notesand get gold in exchange. Of course gold in these transactions is priced much

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higher than the official rate of Rs 30,000 or so. And in some cases is close toRs.50000 per 10gm, sources say. The premium is the charge for legitimizing thecash stash

TEMPLESDonations to temple trusts have jumped on backdated receipt of donations

NGOsDonations have spiked

SO, HOW DO THOSE WHO ACCEPT DIRTY MONEY ACCOUNT FOR IT?In many such transactions, there remains the issue of how the person or institutionreceiving the cash deals with it. How do they get it converted? In many of thesebusinesses, cash is a regular and legitimate part of their daily dealings. They canshow larger stashes by simply backdating transactions. Where that provesinsufficient, outsourcing of exchange to large armies of the unemployed for a feeremains an optionBut these two methods can hardly be adequate to fully account for the volumesinvolved. That’s where, a wealth manager says, the collusion of bank officialsbecomes crucial. Ultimately, it is they who have the wherewithal to soak up largevolumes of cash and hide it in the mountains of paper being generated every day bylegitimate retail customers coming to the branch to exchange old notes“There’s no way this can happen on the scale on which it is taking place withoutcollusion of bank officials”

What emerges then is that large chunks of black money will remain black, some ofthat will change hands – with the person offering the conversion getting a cut fromthose desperately looking for it.

Micro-ATMs, PoS devices under threat from cyber attacks?NEW DELHI: With the usage of micro-ATMs and POS counters witnessing a sharpsurge post demonetization, the country's premier cyber security agency CERT-In has cautioned customers, bankers and traders against skimming and malwareattacks on these systems and asked them to adopt high-end encryption to plugpossible breaches.

The CERT-In, nodal agency to combat hacking, phishing attacks and to fortifysecurity-related defenses of the Indian Internet domain, has issued two specificadvisories for micro-Automated Teller Machines (ATMs) and Point of Sale (POS)terminals.

The advisory states that as micro-ATMs work with minimal power and connect tocentral banking servers through a GPRS network, their security features need to bestrong+ and updated to check attempts by hackers who stealthily plan to stealprivate customer and bank data which leads to loss of their hard earned money.

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"Traditionally, data input into the POS system is in memory in clear text whichallows attackers, memory scrapers to be very successful.

"The way to minimize this risk is by encrypting the card data as soon as possibleand keeping it encrypted to the maximum extent throughout its life within thesystem. Point to Point Encryption (P2PE) could be used to address the issue ofencrypting data in memory," the advisory, accessed by PTI.

It explains that skimming is the theft of classified credit/debit card data.

"A thief can obtain the victim's credit card number using a small electronic devicenear the card acceptance slot and store hundreds of victims' credit card numbers,"it said.

A social engineering attack can be engineered at these facilities, it added, by gainingtrust of the owner as the fraudster poses as a member of staff.

"The fraudster would then ask the customer to check the card for damages. Thefraudster would have gained confidence from his prey using various tactics such asoffering assistance to the customer who perhaps would have tried to use the ATMwithout success or perhaps the customer who is not familiar with use of micro ATMmachine and requires assistance," it said.

72. As digital transactions surge experts warn of virtual thefts

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Barely a month after the recent ATM security breach that compromised dataof 3.2 million debit cards in India, the public has been forced to go cashlesswith debit card usage spurting by 300-400%.

SBI has seen debit card transactions jump to 1.2 million a day from 300,000after the demonetization announcement.

With a spurt in demand for PoS (Point of Sale) devices, there is also anincreased risk of unsecured PoS devises flooding the market. Experts suggestthat the use of unsecured portals, unverified mobile apps and e-orm-wallets,all can lead to financial data getting hacked.

“Also, with a rapid increase in hacked targeting mobile devices and newpayment methodologies, fraudulent apps appearing to be genuine pose aserious security threat. Hence, one must be extremely cautious beforeinstalling any unknown, unsigned app on their gadgets that are related topayments.”

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73. Making A Quick Black Buck: To really tackle dirty money thegovernment must take a hard look at India’s labour lawsDipankar Gupta

What is difficult to correct is the Industrial Disputes Act (IDA) which, quitecandidly and inadvertently, generates the maximum dirty money.

The main, and persistent, source of black money is the Industrial DisputesAct. Of all the founts of illegal wealth.

This is how it happens. The IDA allows management to fire workers at will ifthe unit has less than a 100 employees. Further, it need not paycompensation to those dismissed if they have served for fewer than 240 daysin a row.

It is almost as if the law is tempting entrepreneurs to keep their units smalland flip labourers before they have done 240 days on the job.

The worst offenders are the provisions regarding the numbers employed andthe duration of employment.

Together these keep workers informal and vulnerable to job insecurity.

The smart thing to do is to keep your head down, flog casual workers andamass big money.

There are just a few tricks one should learn, one for each threshold. The firstis to hire less than 100 workers. This releases employers from needinggovernment permission to fire anybody. Next, it should be second naturenever to keep an employee for more than 239 consecutive days. Stay belowthis bar and free yourself from paying compensation, or severance wages, tothe dismissed worker.

There is also a third. The Payment of Bonus Act applies only to those whoearn below Rs 21,000; get a rupee more and wave this entitlement goodbye.

As long as the existing laws stand, informal labour will dominate, makingblack money the perfect lubricant to turn the moving parts.

Demonetization may come and go. But unless we change our labour laws theurge to scratch that itch will stay, and so will black money.