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India's demonetisation of Rs. 500 and Rs. 1000 notes

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Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#51

Post by sandGorgon »

uiri wrote: post #35
h43k3r wrote: post #6

For international readers: Rs 500 and Rs 1000 are the highest denominations notes in India. Other available denominations are Rs 100, 50, 20, 10. This is such a major move to curb black money in the history of Indian Politics and Economy

1 USD is ~Rs 66. That is a staggering difference in purchasing power! I would guess that the only note in the US with a similar reputation which is still issued would be the $100. Notes larger than this ($500, $1000, $5000, and $10 000) have been discontinued since 1946 and actively destroyed by the Federal Reserve since 1969. Isn't there a concern that those who were using these high denomination notes just switchin…

The consumption market is India. The terrorism target and hawala money laundering targets are India. You destroy the market...the support structure will fall in line.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#52

Post by solutionyogi »

I am originally from India, living in NYC for last 10 years.

Black money is a major problem in India, it's directly fueling This is an ingenious way to handle the problem at its root. I don't know how Government is going to handle this transition in a country as big and diverse as India. Personally, I prefer the rip-off-the-band-aid approach. The only thing I disagree with is the ATM daily/weekly withdrawal limit (10,000Rs/20,000Rs). I think this withdrawal limit is too low and would inconvenience lot of folks. I am not even sure what these low withdrawal limits are supposed to achieve.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#53

Post by bonzini »

vmarsy wrote: post #36
nish1500 wrote: post #23

Earlier quoted context omitted.

28 of the latter make up an average Indian's monthly income. It's more significant than $100 is for Americans.

Meanwhile you only need three 500€ bills to make up for the average European income. (And 500€ is 36651 rupees.) Those 500 and 1000 rupees are the largest denomination bills in India, but you need almost 10 times more of them to make up for the respective average income.

In fact, the same is said in Europe about the absolute uselessness of 200 and 500 euro bills. I have only held a 200 euro bill once, and never a 500, but also thanks to the Schengen area it is trivial to (illegally) being insane amounts of money to Switzerland. This is why the EU was pressuring Switzerland to abolish bank secrecy.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#54

Post by josu »

h43k3r wrote: post #6

For international readers: Rs 500 and Rs 1000 are the highest denominations notes in India. Other available denominations are Rs 100, 50, 20, 10. This is such a major move to curb black money in the history of Indian Politics and Economy

Just to add to your comment, the highest denomination note in India is worth just $1.5USD.

According to the Global Findex by the World Bank [1] 47% of the Indian population doesn't have a bank account. And only 22% of the population have debit cards.

I don't know, this seems too extreme to me. Certainly 500 euro notes or 100 dollar bills are very useful in dark markets, but the Rs 1000 note was just worth $15USD. This may end up being just a temporary recall and they will reissue 500/1000 notes in a couple of years.

[1] http://datatopics.worldbank.org/financialinclusion/country/i...

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#55

Post by parennoob »

aub3bhat wrote: post #32

This is the boldest and probably most brilliant move by any Indian politician since liberalization of economy in 1990s. Having said that, another way of understanding this is that as of today both old 500 Rs and 1000 Rs notes have been "probabilistically devalued". For anyone in middle class and below the value essentially remains the same (other than a small devaluation due to effort required to get them exchanged),…

I agree, this is a good first move to get black money that is stored as cash out and taxed. Some forms that still remain are:

* Gold

* Money funneled into "agricultural income" (which is tax free)

* Large properties in metros that are bought and left empty (which raises rates sky-high for ordinary middle class people trying to buy a house there)

However, this move is brilliant in that it removes cash as an intermediary for these transactions, i.e. if a builder is demanding Rs. 50,00,000 for a house "above the table" + Rs. 30,00,000 cash (which he won't declare), then that extra 30,00,000 becomes useless as of 31 Dec.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#56

Post by Cerium »

blevinstein wrote: post #20
hyperion2010 wrote: post #5

Strange part about this is that they are going to issue new 500 and 2000 notes as per > 8:32 pm: A new series of Rs. 500 currency notes and Rs. 2000 currency notes will be brought into circulation. Pulling current notes I can understand, but the problem is that the denomination allows people to move lots of money in a minimal amount of space, so replacing them isn't really solving the problem.

500 rupees = $7.52, 1000 rupees = $15.05 These are not large denomination bills.

Currency conversions are largely irrelevant to most people's daily life. What matters more is how much you get paid, the cost of house, food, and transportation.

Always think in terms of local currency or you will do much worse than getting down-voted. As my wife says about Chinese currency: "You have to respect the RMB!"

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#58

Post by amzpix »

josu wrote: post #54
h43k3r wrote: post #6

For international readers: Rs 500 and Rs 1000 are the highest denominations notes in India. Other available denominations are Rs 100, 50, 20, 10. This is such a major move to curb black money in the history of Indian Politics and Economy

Just to add to your comment, the highest denomination note in India is worth just $1.5USD. According to the Global Findex by the World Bank [1] 47% of the Indian population doesn't have a bank account. And only 22% of the population have debit cards. I don't know, this seems too extreme to me. Certainly 500 euro notes or 100 dollar bills are very useful in dark markets, but the Rs 1000 note was just worth $15USD. Thi…

The highest denomination note of INR 1,000 is worth about USD 15.

Re: India's demonetisation of Rs. 500 and Rs. 1000 notes

#59

Post by pharke »

h43k3r wrote: post #8
hyperion2010 wrote: post #5

Strange part about this is that they are going to issue new 500 and 2000 notes as per > 8:32 pm: A new series of Rs. 500 currency notes and Rs. 2000 currency notes will be brought into circulation. Pulling current notes I can understand, but the problem is that the denomination allows people to move lots of money in a minimal amount of space, so replacing them isn't really solving the problem.

It is. To get new notes, you will have to submit the old notes to the bank. In that case, you will have to declare the money to the Income Tax department. And if the sum is huge, a criminal enquiry will be started by IT department. Also this will at once curb all the fake note issues.

Isn't this exactly the issue addressed by money laundering? Would this not simply force a large number of people into dealing with organisations or individuals who can convert their existing stockpile of (no longer valuable) cash into a smaller pile of cash that still has buying power? A naive approach would be to 'hire' a large number of people to cash in amounts of notes that would be just under the level considered suspect by promising them a cut of the exchanged money. I'm sure there are existing criminal networks that could achieve such schemes (or better thought out ones) within the window of Nov 10 to Dec 30.
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