The real reason behind demonetization

The Indian government cities various reasons for demonetization, namely to reduce

• black money
• terrorism financing
• duplicate currency

These may be side benefits of demonetization, but the real reason of demonetization is totally different. The real reason is that BJP should win upcoming elections.

In India, crores are spent during elections. If a politician does not spend this amount, he/she will likely neither get a party backing nor win. A major part of this amount is spent in cash. BJP has eliminated ₹500 and ₹1000 notes a few weeks before election and allowed only a paltry sum to be withdrawn as cash from bank accounts. It is likely that BJP has made cash arrangements before making the public announcement of the ban.
So now BJP has the cash, but all opposition parties have no cash. How will the opposition parties conduct rallies, gatherings, etc. The opposition's life blood has been sucked out by making their cash unusable and accounts frozen.
So BJP has a major advantage in upcoming elections.

However, BJP leaders probably did not foresee a side-effect of demonetization. Lot of poor and middle-class people are impacted by this decision. They are facing hardships. So these voters may be driven to cash-starved opposition.

Demonetization is BJP's gamble. No single opposition party can now face BJP. All opposition parties have to get together and then fight BJP in coming elections. Only time will tell whether this gamble of Demonetization benefits BJP or not.

Withdraw maximum cash possible every week

In India, people can withdraw cash maximum ₹24,000. This limit will likely not be removed. The limit may change over time, but Indians will never be allowed unlimited cash withdrawals from their a/c.

If Indians are allowed unlimited cash withdrawals, then black money will return in a few years. The government's demonitization effort will go waste. So the limits will never be removed.

Indians should

• Withdraw maximum cash permitted every week.
• Open bank a/cs for every family member e.g. children because the limit is for each bank a/c.
• Pay by check/card/mobile wallet where ever possible.
• Use cash where electronic payment is not possible or inconvenient.
• Learn crypto-currency like Bitcoin because these cannot be tracked or restricted by governments.

A move towards cashless society is preferred by governments because

• It leads to more taxes. Cash transactions are easier to hide.
• It reduces imports of gold/silver. (Gold/Silver are usually purchased in cash). This makes the local currency stronger.
• Small crimes are reduced because less cash is being circulated.
• If more currency in in bank deposits the government can steal more from citizens via inflation.
• The government can confiscate the wealth of its citizens anytime easily.

How should city transport be?

No matter how many roads are buit in a crowded city, the roads have a traffic jam. So here I will mention one possible solution to solve traffic needs of a city.

1. The city will have buses and shared taxis.
2. When a passenger is about to start a journey, a mobile app will tell him the nearest pick up point. The passenger may need a short walk to this pick-up point.
3. The passenger will board the bus / shared taxi.
4. If there is no direct route to destination, the passenger may have to change bus/shared taxi.
5. The passenger will be dropped off near his destination. The passenger may need a short walk to his actual destination.

The above method

• May involve the use of trains/metros
• Each vehicle will be tracked by GPS
• The passenger will be charged for his rides electronically, since the mobile app tracked the ride.
• Will save fuel because it will increase the occupancy rate in buses/cars.

For more details see video

Indian mobile wallets will not get popular

If I am using Paytm (one mobile wallet in India) and you are using FreeCharge (another mobile wallet in India), then I cannot pay you using my mobile wallet i.e. mobile wallets are not inter-operable.
Imagine if a Vodafone (one telecom operator) customer could not call Airtel (another telecom opeator) customer in India. Then mobile calls would never be popular.

If Indian government wants to go cashless, then it must ask every Indian mobile wallet company to make their app inter-operable with others. So a Paytm user can pay a FreeCharge user.

Without having proper infra-structure / rules in place, cashless will remain a dream.

How rich Indians are converting currency from black to white?

A rich person has say ₹10 crores in demonetized notes of ₹500 and ₹1000. He will ask his servant (say driver) to deposit the currency in his savings account. After the deposit is made, the driver will buy, on paper only, say an expensive painting for nearly ₹10 crores. Thus almost the entire amount will be transferred to an account controlled by rich person.
The driver will asked to leave the city. The income tax people will not be able to find the driver easily.

The black ₹10 crores has been converted into nearly ₹9.5 crores white. The driver and bank officials have been paid nearly ₹50 lakhs bribe. The rich person has not done anything illegal i.e. he has only sold something for ₹9.5 crores. So the rich person, with black money, cannot be prosecuted easily.

How to do demonetization or demonetization 101

Here is a dummies guide for demonetization. A few weeks before demonetization:

• Issue rule that all tolls booths, petrol pumps, buses, railways, city restaurants, post offices, etc have to accept payment by credit/debit cards, mobile wallets, etc; in addition to cash.
• Raise the limits on mobile wallets.
• Issue rule that while purchasing any item, the buyer has a choice to pay by card, mobile wallet, etc.
• Allow road side shops to load mobile wallets with cash and vice versa.
• Upgrade ATMs so that they can dispense new notes.
• Print enough new notes and disburse them at the start of demonetization
• Allow foreigners coming and people going abroad unlimited exchange at international airports, as long as they show their passport and ticket.

As soon as demonetization begins

• Customers can go their banks any time for deposit/withdrawal/exchange
• Foreigners and senior citizens only allowed in other banks for first 2 days.
• Women also allowed in other banks for next 2 days
• After 4 days, men can also exchange in other banks.

The Indian government did not plan the demonetization well. It is causing problems for citizens. By planning well, the demonetization would have been a lot smoother for the poor.

Modi will fail to clean black money

Modi has made ₹500 and ₹1000 notes illegal. He says that this will reduce black money. I think not. Black money will come back with a vengeance within few years.
The conditions that cause black money remain as before. If black money was generated before, it will be generated after the notes are banned.

If Modi really wanted to eliminate black money, he would

• Eliminate income tax and wealth tax.
• Put a charge of say 10% on cash withdrawal from banks.
• Put a charge of say 0.1% on all electronic transactions.

This will immediately permanently eliminate all black money. Since there is no income/wealth tax, all money is white. There will never be a black money problem, ever in India.

But a dishonest person will never take these steps, because

• A dishonest politician wants to steal from poor / middle class; not his rich friends.
• If there is a flat tax then the politician's friends will also have to pay taxes. That is not acceptable to corrupt government.
• Using the sword of income tax, a corrupt government wants power to harass his opponents.

Queues outside banks will continue till Dec 30

Rich people, with black money in cash, are willing to pay ₹500 for a cash exchange of ₹4,000.
The government has permitted a cash exchange of ₹4,000 per person till 30-Dec. Rich people are paying poor people to stand in queue outside bank. On paper, the poor person is exchanging ₹4,000; but of this ₹3,500 goes to the rich person.
The poor person stands outside one branch on day one; another bank on day two; and so on. Each day he/she will try to stand outside a different branch/bank.

So queues outside banks will never subside. They will continue till the last day of 30-Dec. If the government extends the deadline by one month, the queues will continue for one more month.

How can India go cashless?

For a country to go cashless, there should be one payment method accepted everywhere e.g. Using Google pay or Apple pay in London.
In London, while boarding a train (called tube), the passenger holds his mobile near a wireless device. After getting down at destination, the passenger again hold his mobile near similar device. The charges of the rail travel are automatically deducted form his chosen form of payment i.e. MasterCard, Visa, etc. While boarding a bus in London, the passenger shows his mobile to a wireless device and charges for the travel are automatically deducted. A cup of coffee, purchased at local tea stall, can be paid via mobile. Malls expect payment with mobiles. All cabs (called black taxis) accept payment via mobile.
In India say Mumbai for example, there is one card for electronic payment in buses. There is a separate card for electronic payment while traveling in metro rail. While traveling by regular rail, there is a separate card or mobile app. Auto rickshaws and cabs (yellow taxis) in Mumbai accept only cash.
In India, not only does each city/state have different forms of incompatible electronic payment methods, but multiple electronic payment methods exist within the same city. Also, many agencies accept only cash. So, for convenience, most people just pay by cash throughout India.

If India has to move towards a society with limited cash, then

• All transports (bus, trains, metros), toll stations, post-offices, petrol stations, etc must accept payment from mobile wallet e.g. Paytm.
• Since multiple mobile wallets exist in India, they should be inter-operable i.e. one person, using Paytm mobile wallet, can pay to another person, using Airtel Money mobile wallet.
• There should be no extra charge while using mobile wallet, just like there is no extra charge while using cash.
• The existing transaction limits for mobile wallet payments should be raised significantly.
• People should be allowed to charge their mobiles wallets with cash and withdraw cash from their mobile wallets.

India cannot go completely cashless. No corrupt country can go cashless. Bribes are the engine oil that makes the corrupt economies run. Making a corrupt country totally cashless, will cause its economy to come to a stand-still.
Totally cashless society is a dream of governments. It has not yet been achieved anywhere in world. So how can India become totally cashless?

India bans existing ₹500 and ₹1000 notes

The official reason for this ban is to curb black money and eliminate fake notes from the system. These reasons are fake

• Indian government since Independence is trying to eliminate black money. So why is there a need to ban notes now? The reason is clearly fake.
• Fake notes could have been eliminated by announcing a future date (6 months in advance) before actually banning the notes. So even this reason is fake.

The government says it will bring new ₹500 and ₹2000 notes. But these will take many months (maybe years) to come into main stream circulation.
The real reason for banning these notes is that the government wants to squeeze more taxes from people. It becomes more difficult to hide transactions when people are forced to use electronic payments.

So the Indian government will deliberately delay mass scale printing of new ₹500 and ₹2000 notes. Indians should

• Start using mobile payment apps (like Paytm), instead of cash.
• Hoard food items as in short run shortages may develop.
• Withdraw as much cash as possible from banks.
• Load multiple currency transaction apps (Paytm, FreeCharge, MobiKwik, Airtel Money, Vodafone M-pesa and Oxigen Wallet) on your mobile and distribute transactions among them.
• Protest against government's decision to ban cash by voting for opposition parties in coming state elections.

Removal of a currency from the market is deflationary. There will be job losses in private sector. The stock market will fall. Real estate prices will fall.
To combat this deflation, the government will reduce interest rates (and reserve ratios for banks) by a huge percentage. Expect your EMI to get lesser, but this may not be of net benefit for most people because inflation will rise.

If you have a lot of black money in cash, then

1. Buy physical gold/silver at your local jeweler.
2. Gold is about ₹31,500 for 10gms, but you will have to shell out a much higher amount e.g. ₹50,000 while paying cash.
3. The jeweler will likely bribe some officials to convert the black money to white. Hence this huge margin over official gold/silver price.
4. You can sell gold/silver for cash a few months later, when enough new cash has entered the system.

You will likely lose a huge percentage of your black money, thanks to Modi.

Renunciation

Renunciation is NOT

• Living in solitude
• Eating once a day
• Any external appearance e.g. shaving head, wearing special clothes, etc.
• Chanting some special scriptures.
• Meditating with closed eyes.
• Allowing others to insult / harm you.

In fact, all above forms of renunciation are likely to cause more harm than good, when unaccompanied by a mental maturity.

Real Renunciation is living in peace with oneself. The person may live in solitude or in a crowd. The person may eat any number of times a day. The person may not wear any special clothes. The person may not know scriptures. The person may not meditate with closed eyes. The person may use violence for self-defense.
Real Renunciation is difficult because it involves giving up of wrong ideas and accepting the Truth about oneself.
Real Renunciation is difficult. Fake renunciation (living in solitude, etc) are relatively easy.