This BBC article explains why Indian PM went for demonetisation (banning) of INR 500 & 1000 notes

http://www.bbc.com/news/world-asia-india-37974423?SThisFB%3FSThisFB

Why India wiped out 86% of its cash overnight

The article has some very interesting facts about this matter.

  • 14 November 2016
  • From the section India
An Indian resident holds 500 and 1000 Rupee notesImage copyright PRAKASH SINGH/AFP/Getty Images

India is in the middle of an extraordinary economic experiment.

On 8 November, Prime Minister Narendra Modi gave only four hours’ notice that virtually all the cash in the world’s seventh-largest economy would be effectively worthless.

The Indian government likes to use the technical term “demonetisation” to describe the move, which makes it sound rather dull. It isn’t. This is the economic equivalent of “shock and awe”.

Do not believe reports that this is primarily about bribery or terror financing, the real target is tax evasion and the policy is very daring indeed.

You can see the effects outside every bank in the country. I am in Tamil Nadu in the south of India and here, as in every other state in the country, queues of people clutching wads of currency stretch halfway down the street.

Indian people queue outside a bank as they wait to deposit and exchange 500 and 1000 Rupee notes in AmritsarImage copyright NARINDER NANU/AFP/Getty Images
Image caption Long queues of people wanting to exchange the old notes have formed across India

Mr Modi’s “shock and awe” declaration meant that 1,000 and 500 rupee notes would no longer be valid.

These may be the largest denomination Indian notes but they are not high value by international standards – 1,000 rupees is only £12. But together the two notes represent 86% of the currency in circulation.

Think of that, at a stroke 86% of the cash in India now cannot be used.

What is more, India is overwhelmingly a cash economy, with 90% of all transactions taking place that way.

And that is the target of Mr Modi’s dramatic move. Because so much business is done in cash, very few people pay tax on the money they earn.

According to figures published by the government earlier this year, in 2013 only 1% of the population paid any income tax at all.

As a result huge numbers of Indians have stashes of tax-free cash hidden away – known here as “black money”.

Even the very poorest Indians have some cash savings – maybe just a few thousand rupees stored away for a daughter’s wedding, the kids’ school fees or – heaven forbid – an illness in the family.

India's Prime Minister Narendra ModiImage copyright Dennis Brack-Pool/Getty Images
Image caption India’s Prime Minister Narendra Modi gave only four hours’ notice of the move

But lots of Indians have much more than that.

It is not unusual for half the value of a property transaction to be paid in cash, with buyers turning up with suitcases full of 1,000 rupee notes.

The size of this shadow economy is reckoned to be as much as 20% of India’s entire GDP.

Mr Modi’s demonetisation is designed to drive black money out of the shadows.

At the moment you can exchange up to 4,500 (£48) of the old rupees in cash for new 500 (£6) and 2,000 (£24) rupee notes.

There is no limit to the amount that can be deposited in bank accounts until the end of December, but the government has warned that the tax authorities will be investigating any deposits above 250,000 rupees (£2,962).

Breach that limit and you will be asked to prove that you have paid tax. If you cannot, you will be charged the full amount owed, plus a fine of 200% of the tax owed. For many people that could amount to be pretty much the full value of their hidden cash.

This is brave politics. Some of the hardest hit will be the small business people and traders who are Mr Modi’s core constituency. They voted for him because they believed he was the best bet to grow the economy and improve their lot. They will not be happy if he destroys their savings.

A notice regarding discontinued 500 and 1,000 rupee notes is posted at the entrance of a restaurant in MumbaiImage copyright PUNIT PARANJPE/AFP/Getty Images
Image caption Businesses will no longer take 500 and 1,000 rupee notes

Mr Modi says he is simply delivering on his pre-election promise to tackle corruption and tax evasion.

He says he warned that he would squeeze black money out of the system and had already offered amnesties to those who declared their black money holdings.

And, so far at least, the policy seems to be popular, in spite of the long queues and the fact that much day-to-day business in India has ground to a juddering halt.

Most Indians resent the fact that many of the richest among them have used black money to evade paying their fair share of tax and are happy to suffer a few weeks of what Mr Modi called “temporary hardships” to see them face justice.

They also recognise the benefits of drawing more people into the income tax net.

India has very low rates of tax compared to many other countries. The tax-to-GDP ratio – how much tax is raised as a proportion of the output of the economy – was 17% in 2013.

The average across the economies of the Organisation for Economic Co-operation and Development – a club of mostly rich nations – was over 34%.

Demonetisation is part of a wider project to draw Indians into the formal economy and to get them to start paying the tax they owe.

An Indian bank employee looks at deposited old denomination 1000 Rupee currency notes in a bank vault in AhmedabadImage copyright SAM PANTHAKY/AFP/Getty Images
Image caption There is no limit to the amount of old notes that people can deposit in bank accounts until the end of December

Curbing tax evasion is part of the agenda for the “aadhaar” scheme, a giant digital database designed to give hundreds of millions of Indians a unique ID, and of the new Goods and Services tax.

And reducing tax evasion can only be good for India. The more money it raises in tax, the more it has to spend on useful stuff like roads, hospitals and schools.

The more the country spends on public goods like that, the faster the Indian economy is likely to grow – or so the argument goes.

So the big question is: will it work?

Some economists have questioned the decision to introduce the 2,000 rupee note. They say if the policy is designed to force people into the banking system why issue a higher denomination note – presumably an even more convenient vehicle for black money transactions?

But the headlines about chaos and confusion are a bit misleading.

There have been virtually no reports of violence despite the huge disruption this policy has caused.

Samples of the new 500 and 2,000 rupee notes are displayed at the Reserve Bank of India headquarters in MumbaiImage copyright PUNIT PARANJPE/AFP/Getty Images
Image caption The new 500 and 2,000 rupee notes are in short supply and banks regularly run out of them

The queues are orderly and the worst you hear are the irritated mutterings of those whose days have been wasted standing in line.

But Mr Modi needs to be careful. The new notes are in short supply and there are not enough smaller denomination notes to go around, so the banks regularly run out of cash.

That cannot go on for long without irritation turning to anger.

But some queuing may be excusable, because in one regard the policy has already been a complete success: it came as a surprise to the entire country.

Think what that means. The government managed to plan this audacious policy, printing billions of new notes without anyone letting slip what was happening.

Reportedly, even senior members of the cabinet were not told what was being planned, for fear that if word got out the entire policy would be undermined. The hoarders would have time to empty their mattresses and launder their stashes into gold or other assets.

Keeping a secret of this magnitude in India, a country that thrives on rumour and gossip, is nothing short of a triumph and surely a reasonable justification for a few hiccups along the way.

Press release on Dual Citizenship

Dr Yadu SinghSydney, Australia

14th November, 2014

Press Release

Indian community in Australia starts an online campaign to urge Indian Prime Minister, Sri Narendra Modi, to grant dual citizenship to overseas Indians.

Spokesperson for the campaign and President of Indian Australian Association of NSW Inc, Dr. Yadu Singh said “It’s time that Indian government grants NRIs dual citizenship”.

He further said “There are an estimated 25 million non-resident Indians (NRIs), people of Indian origin (PIOs) and overseas citizens of India (OCIs) spread across more than 200 countries. Cumulatively, they contributed about $70 billion in remittances to India in 2013-14”.

“The recent changes in the PIO and OCI cards announced by Prime Minister Narendra Modi are welcome, but they do not meet the long-term demand of dual citizenship by overseas Indians”.

“The overseas citizenship card (OCC) falls well short of genuine dual citizenship. Many of us overseas Indians have been demanding genuine dual citizenship, with full political and economic rights in India on par with the rights enjoyed by Indian citizens. Former attorney general Soli Sorabjee was right in stating in 2005: “If we want to involve the diaspora, then we can’t deny them the right to vote or the right to occupy important office.”

Overseas Indians, whether they hold Indian passports or have foreign passports, have an emotional bond with India. That holds true for a majority of people of Indian heritage. When major democratic and developed countries like USA, Canada, UK and Australia have no issue with dual citizenship, there can’t be a real justification for India to treat its own people unfavourably.

The promise of dual citizenship was made by former Prime Minister Atal Behari Vajpayee in 2003. Since then there have been statements from senior politicians about them favouring dual citizenship. But the matter has not progressed further. Statements are not enough. The following actions should be taken: 1. Granting Indian passports (dual citizenship) to overseas citizens of Indian heritage with full political and economic rights 2. Granting of convenient voting rights to such dual passport-holding overseas Indians as well as overseas Indians with Indian passports (NRIs), which can be exercised either at the consulate, high commission or embassy premises in their country of residence and through postal or online facilities.

India should consider taking a cue from Australia’s repeal of Section 17 of the Australian Citizenship Act 1948 that took effect from April 2002 permitting dual citizenship.

Dr Singh also said “It is important for second and subsequent generations of Indians, besides first generation, to stay emotionally and politically connected with India. Dual citizenship will make it more likely that this will happen”.

Prime Minister Modi has the political capital, strength in the Parliament and the goodwill for/from the overseas Indians, who supported him massively, to get the Parliament to grant dual citizenship to Overseas Indians.

The campaign has just started from Australia. It has created great excitement in Indian community. It is gaining momentum and it will get enthusiastic support from Indian diaspora all over the world, particularly United States of America, Canada, UK and Australia. It will continue to be run until India sees merits in granting dual citizenship.

Dr. Singh said “I will make an appeal to PM Modi personally if there is an opportunity to meet him”.

Appeal is run via Change.org (https://www.change.org/p/the-honorable-sri-narendra-modi-appeal-to-grant-dual-citizenship-to-overseas-indians and Social media (www.facebook.com/IndianDualCitizenship)

Further comment: Dr Yadu Singh, dryadusingh@gmail.com +61 413 375 669

Opinion piece on dual citizenship in The Economic Times

Dr Yadu SinghIt’s time Indian government granted NRIs dual citizenship

October 31, 2014, 4:16 am IST in ET Commentary | India | ET

There are an estimated 25 million non-resident Indians (NRIs), people of Indian origin (PIOs) and overseas citizens of India (OCIs) spread across more than 200 countries. Cumulatively, they contributed about $70 billion in remittances to India in 2013-14. The recent changes in the PIO and OCI cards announced by Prime Minister Narendra Modi are welcome.

But they do not meet the long-term demand of dual citizenship by overseas Indians. The overseas citizenship card (OCC) falls well short of genuine dual citizenship. Many of us overseas Indians have been demanding genuine dual citizenship, with full political and economic rights in India on par with the rights enjoyed by Indian citizens. Former attorney general Soli Sorabjee was right in stating in 2005: “If we want to involve the diaspora, then we can’t deny them the right to vote or the right to occupy important office.”

Overseas Indians, whether they hold Indian passports or have foreign passports, have an emotional bond with India. That holds true for a majority of people of Indian heritage. When major democratic and developed countries have no issue with dual citizenship, there can’t be a real justification for India to treat its own people unfavourably.

The promise of dual citizenship was made by former Prime Minister Atal Behari Vajpayee in 2003. Since then there have been statements from senior politicians about them favouring dual citizenship. But the matter has not progressed further. Statements are not enough. The following actions should be taken: 1. Granting Indian passports (dual citizenship) to overseas citizens of Indian heritage with full rights including voting and political rights. 2. Granting of convenient voting rights to such dual passport-holding overseas Indians as well as overseas Indians with Indian passports (NRIs), which can be exercised either at the consulate, high commission or embassy premises in their country of residence and through postal or online facilities.

India should consider taking a cue from Australia’s repeal of Section 17 of the Australian Citizenship Act 1948 that took effect from April 2002 permitting dual citizenship.

(The author is a resident of Sydney, Australia)

http://blogs.economictimes.indiatimes.com/et-commentary/its-time-indian-government-granted-nris-dual-citizenship/ http://epaperbeta.timesofindia.com/Article.aspx?eid=31816&articlexml=Give-Us-This-Day-Our-Dual-Citizenship-31102014015034# OPED_Oct31_CAP

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Dr Yadu Singh, Sydney, Australia/4th Nov, 2014

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G20 Finance ministers meeting in Cairns, 20-21 Sept, 2014 made some very important policy decisions!

24rd Sept, 2014

G20 meeting of Finance ministers and Central Banks Governors on 20-21 Sept, 2014 at Cairns was an important meeting. It made many policy commitments, which, if implemented, will help the world economy significantly.

G20 is the group of 20 important nations comprising of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.

It has the 85% of the global GDP and 75% of the global trade.

This G20 meeting was chaired by Joe Hockey, Australian Treasurer. Indian Trade minister, Mrs Nirmala Sitharaman attended the meet. Reserve Bank of India Governor, Mr Raghuram Rajan also attended it. Finance minister, Arun Jaitley, could not attend it due to illness.

It has put out a communique at the end of the meet. Link is here: http://www.dailymail.co.uk/wires/reuters/article-2763870/TEXT-Communique-G20-Finance-Ministers-Central-Bankers-meeting.html

Salient outcome of the meeting:

  • More than 900 policy initiatives, most of them new
  • plans/policies to increase global GDP by 2% by 2018
  • Plans/policies add $US2 trillion to global economy by 2018
  • Plans to create millions of jobs
  • Plans/policies to boost infrastructure investment, with creation of database to match quality projects and investors
  • Labour market reform
  • Policies to curb tax avoidance and evasion ie  “black money”

Base Erosion and Profit Shifting (BEPS) action plan requires a commitment to finalising all action items in 2015. G20 meeting endorsed the finalised global Common Reporting Standard for automatic exchange of tax information on a reciprocal basis, providing an ability to tackle and deter cross-border tax evasion.  Information exchange on this will begin automatically between each other and with other countries by 2017,  subject to the completion of necessary legislative procedures.

Black money is a significant problem for many countries. India is a particular victim, but is not alone in this category.  Curbing black money and bringing it back should help the national economies and their people. It is reported (http://www.theguardian.com/global-development/2014/sep/03/one-g20-cracking-down-corruption) that “black money” costs poorer countries a trillion dollars annually.

These policy decisions are good, but only time will tell whether each country implements them fully. Past experience suggests that the implementation of such decisions is less than desired.

Based on information from G20 Information Centre of University of Toronto (http://www.g20.utoronto.ca/), Australia implemented only 69% of its commitments, China 50%, and Saudi Arabia only 47%, after last year’s G20 summit in St Petersburg. Obviously, it will be better if these numbers are in the range of 90-100% bracket.

IMF-OECD expertise will be available to the member nations to monitor implementation of these policy commitments.

G20 Leaders’ summit is due to be held in Brisbane on 15-16th Nov, 2014. Indian Prime minister, Narendra Modi is attending this meeting. This will be the first visit to Australia by an Indian PM in the last 26 years. Late Sri Rajiv Gandhi was the last Indian PM who visited Australia.

 

Dr Yadu Singh/Sydney, Australia

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Indian Australians as part of “Team Australia”!

Sydney, Thursday, 2014

Australian ParliamentPrime Minister, Tony Abbott, has rightly said recently that there is no point to migrate if people are not willing to put Australia, its interests, its values and its people first! Indian Parliament

He further said ‘You don’t migrate to this country unless you want to join our team, calling it “Team Australia”. He praised migrants for choosing to migrate to Australia, and exhorted them (migrants) to be proud of their heritage and culture.

I agree with him. I do not believe there would be many sensible people who will disagree with him.

Australia is a successful multicultural nation, just like The United States of America. Australia is our home, and we are very proud of Australia.

There is one little difference between Australia and USA, which has become quite important lately.

During 2009, when Indian students issues in Australia had saturation coverage in India, and India-Australia relations suffered, the then Federal Govt in Canberra did not deal with the issues in the most efficient way. Indian media calling Australia a racist country was not tackled properly and promptly. Australia depended solely on its diplomats to tackle it, instead of also utilising the Indian Australian community to help the Govt in dealing with it. It was well known that most of Indian Australian community did not share the views of Indian media. My friends and I made it very clear to Indian Govt and Indian media that we did not agree with their description of Australia as a racist nation. I took part in a debate “Ïs Australia a racist country?” with Daily Telegraph journalist, David Penberthy, televised in Sunrise programme of Channel 7, and wrote a Blog post “who is racist-Australia or Indian media?” https://yadusingh.wordpress.com/2010/01/10/who-is-racist-australia-or-indian-media/  Both were quite popular.

Many believe that The Rudd Govt officials should have utilized Indian Australian community prominently in dealing with exaggerated and imbalanced reporting against Australia in Indian media. They believe that things would have been easier to deal with if Indian Australians were also part of Australian Govt’s strategy to deal with it. After all, it would have been much more easier and effective if Indian media had dealt with Indian Australians here in Australia as well as in India, and heard that their description of Australia was not entirely correct.

Thankfully, things have moved on and relations between Australia and India are on the upswing. Australia and India have just concluded Uranium trade deal negotiations, and an agreement in this regard is likely to be signed when Prime Minister Tony Abbott visits New Delhi early next month.

Australia does have some people from Indian heritage in its diplomatic staff, but they are very small in numbers. Australia has not utilized the Indian Australian community in its outreach to India generally, even when this community is getting bigger by the day. Approx 500,000 people in Australia have Indian heritage. Former NSW Premier, Barry O’Farrell, used to rely on just one person of Indian heritage, who is his personal friend, but unfortunately did not have much to do with either India or Indian Australian community. Mr O’Farrell could have done better and taken a leaf from his counterparts from Victoria, who did, and do, include members of Victorian Indian Australian community whenever they go to India with Trade delegations. New NSW Premier, Mike Baird, has not been to India yet. Let us see, and in fact hope, whether he will be different from his predecessor in this regard.

If you compare all this with what USA is doing with similar visits to India currently, you will see that Indian Americans form prominent parts of such delegations.

http://timesofindia.indiatimes.com/india/For-India-outreach-US-brings-into-play-Indian-Americans/articleshow/39785133.cms

Nisha Desai Biswal, Arun Kumar and Puneet Talwar, who are all Assistant Secretaries and are of Indian heritage, accompanied US Secretary of State, John Kerry, Commerce Secretary, Penny Pritzker and Defence Secretary, Chuck Hagel respectively during their recent visits to India. Their presence certainly created quite a good amount of goodwill  and conducive atmosphere.

United States’ Presidential delegations to India have always included prominent Indian American businessmen and community leaders. This has not been the case with Australian delegations of similar nature.

It’s about time that Australian Govt leaders follow the examples set by their American counterparts, because not only it is a smart policy, but  it is lalso likely to accelerate the growth of Australia-India relations.

In addition, and as a bonus, it is also going to create a feeling that Indian Australian community is a vital part of “Team Australia”, with many potential electoral benefits to the ruling party in the area like Western suburbs of Sydney and elsewhere! 

Dr Yadu Singh

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Tamil Nadu politics can’t be the sole basis for India’s relations with Sri Lanka!

 

ImageOn 26th May, 2014, Mr Narendra Modi will take the oath for Prime Minister of India. Leaders from all South Asian Association for Regional Co-operation (SAARC) nations have been invited. Many, if not all, are attending this ceremony. Sri Lankan President, Mahinda Rajapaksa too will be in New Delhi for the event.

Tamil Nadu Chief Minister, J Jayalalitha of AIDMK and DMK president, M Karunanidhi have voiced opposition to Mr Rajpaksa’s invitation and presence in this ceremony.

Even though it is understandable, it should, and will not, be the only basis for India’s Foreign policy.

India is surrounded by countries, where China is trying to increase its influence, politically and militarily. India needs to work actively to counter it. India needs to have co-operative and friendly relations with these countries.

This is for the first time that SAARC leaders have been invited for an event of this nature. It is a great beginning. It is smart politics too because it creates better relations, and also creates camaraderie among the leaders.

India needs to create better relations in the region, which will be great for trade, investment and regional security. It will also help its anti-terrorism strategies.

India can not start seeing the relations in the region from one specific dimension, because relations with the nations are always multi-dimensional. No one segment of Indians or regions can be given a monopoly or veto to dictate India’s foreign policy. Populism alone is never a great basis for any policy, and Foreign affairs policy is no exception.

India’s relations with Sri Lanka are obviously multi-dimensional, and must remain so. Feelings from Tamil Nadu politicians alone can not, and must not, be allowed to dictate Indo-Sri Lanka relations.

I am intensely sympathetic to human right issues for Tamil population of Sri Lanka, and wish that Sri Lanka Govt works actively to address and remove those issues. It is imperative for a Govt of any country to work with the people of that country to remove issues in regards to human rights and dignity.

India has voiced its misgivings and concerns about human right issues in Sri Lanka on many occasions, and has been encouraging Sri Lanka to make progress in this regard. India, in my view, should continue to pursue these matters vigorously and sensibly with Sri Lanka, without resorting to Megaphone diplomacy.

There is no denying, in my view, that India will be more effective in ensuring better and fairer treatment of Sri Lankan Tamils, if it has friendly and co-operative relations with Sri Lanka and is fully as well as meaningfully engaged with Sri Lanka.

Dr Yadu Singh/Sydney/23rd May, 2014

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