Demonetisation: How Black Money Has Become White

It is now apparent that demonetisation would cause much distress and reduce our GDP in the near term. But what is not clear is how long the negative effects would last. Positive effects like greater tax collections would be experienced as a gradual increase in tax collections . Meanwhile many in the villages and sick people in ques would have died of lack of ability to cope with this extra stress. Why are we so callous to the poor in our society? Even when we talk of development,we talk of only industries and smart cities. In fact there is diminishing utility of investment in our urban areas,as the world is buying less and less of our goods, even as our factories are working at 70% capacity utilisation. Exploiting our natural resources like rain water and providing better facilities in our villages will develop more Indians and put more financial resources in their hands to buy goods made by our existing factories

I write this to check the understanding of Mr. Pradip Shah, whose comment appears as the most recent one.

a) What is the problem for black money holders if the money remains black, as long as it is legal tender? Demonetisation does NOT make NEW cash illegal tender. He will continue to park his black money in the EXISTING avenues, which continue to be available
I think Mr. shah's point is that the money remains black.
I guess what Mr. Vivek intended to say was that the new black money (legal tender) is usable, as much as it was before demonetisation

This happens to be a moderated site, so dont know how much of what we write really becomes 'white'.
Yet, couldnt resist the temptation to respond, especially wondering about those comments such as 'clarity of thought and expression is commendable'

On the employer paying advance and bonus in old notes, I guess the exercise would pass on the burden of exchanging them to the employee and is an indirect means to convert them to legal tender, not necessarily white. What happens to this money, post 31-Dec actually depends on the thoughts, power and systems used by the employer. If there is no payroll and all is in cash, then this payment just gets adjusted and the employer has his notes converted to new either from new source of cash (if any) or in the bank account with less withdrawal (towards salary) later. The latter would mean, the employer switched from cash transactions to cashless which can help detect both the income increase and spend (salary) decrease

The demonetisation decision by P.M. Modi wanted to upset the political parties sitting on a lot of cash.and put them into some form of disadvantage in the forth coming UP elections. According to the RBI Governor the decision was deliberated. Surely it may have been discussed that the opposition could create a disruption in Parliament and this could disrupt the GST process.
The RSS has not been happy with GST and the FM was successful in the passing of the bill in the last session. He would have surely objected to demonetisation and seen the risk to GST. Therefore it is plain to see why the FM was left out. Mr. Modi who in his heart does not want to implement GST has now an opportunity to blame the opposition disruptions of Parliament on the delay in implementation of GST.
It is another matter that the decision makers have not thought out the implementation and the consequences to the economy.
The country and countrymen are suffering.

So your great Mr Vivek Kaul writes stories based on stories he hears over the internet. :) and you send out your recommendations biased o these stories.

If the black money has turned into white, they are also brought in income tax. You will see this in time to come

It would be really sad if this exercise ends up with just inconveniencing the general public and we are back to where we started and that the black got converted to a new form of black.
There have been some raids, confiscation etc., but if people who made large violations are let go scot-free then it would make a large dent in the usefulness and credibility of this exercise.
One need not chase all of them, especially the smaller ones, but they could be put in a watch mode. If these people mend themselves and show signs of reform, that in itself is a good achievement. By and large, the majority would comply, if they know that the is system is credible, trust worthy and unbiased. I think many do not want to comply to a corrupt system or one that lacks credibility.

Low value, high volume cash transactions like buying vegetable, meat, grocery, provisions, local travel etc are still alive with old notes changing hands for goods/services procured.

As on this day, buying goods with old Rs. 500/- notes was still going on. I have seen this in provision shops, meat shops and even in a Arts and Craft exhibition in Chennai. Till Dec 31, old notes can be deposited. So what if who does deposits it.

Demonitisation has many goals. Reduction of black money is just one. Unaccounted money finds its way into the mainstream. Though reduction cash in the economy is a benefit for the banking system, the offenders get away. If future the unorganised sector will get converted to some degree into organised sector.

The clarity of thought and expression is commendable.
We are all heavily investing in this mammoth exercise of remonetization by way of the hardships being endured. It's hard to imagine all this would be frittered away. I would imagine the Government and the Opposition would play their roles willy nilly to ensure those gaming the system now will play a heavy price in due course. By and by politicking and posturing would become muted. Data Analytics backed by a strong digital infrastructure would play a critical role in taking the whole exercise to its logical conclusion and institutionalising a more ethical universe of economic activity. Human resources for all this would not be wanting either.
It is a safe bet that kicking and screaming the tax cheats would change their wicked, wicked ways. It is a question of time, patience and determination. That is all. Whatever needs to be done will be done based on expanding loops of learning. Critics and supporters alike would feed and enrich this collective process of learning. It won't hurt to be positive of the outcome in the medium to long term, unless, of course, one really has to face the music because of one's own shady shenanigans. Even such people are not being put to the guillotine, after all! Only their black money and black wealth would say a painful and lingering goodbye to them.

Dear Sir,

Sorry to say that your knowledge of "white", "Black" and process of its conversion is abysmally poor. Let us examine each case referred to in your analysis.

(b) Rs. 50,00 to employees - since employer has paid black money, it can not become white as on today as he is not getting anything today. At the time of salary falling due in future, naturally employer will withdraw cash from bank and keep with him as there is no question of paying it to employee again. So what was black remained black.

(c) When did buying US$ from illegal market become white? Strange logic. Buyer of US$ is paying black money in INR. In turn, he is getting US$ which is black and illegal currency.

(d) If any amount deposited in bank account becomes white this country would not have the problem of black and white. Everybody would have deposited black money in the bank and enjoyed. Life is not simple as you make out to be.

(e) Jan Dhan Account - Once again the case of poor knowledge. By depositing money in some ones bank account it does not become white for either of the party. What happens is that instead of money lying with some one at his home gets deposited in the bank account of some other person. How will it change the colour of money?

Please update yourself thoroughly.