This article is timely and shows the real reason why our PM did what he did....Will this lead to elimination of corruption?....It may take time...The common man has to face difficulties initially...May be this ushers in a new India...At least the intention is noble!!
Thu, Nov 10 2016. 04 08 PM IST[h=1]We did say we wanted less corruption[/h]For decades, the honest have felt like fools in a nation that runs on graft. The complicity, and active encouragement, of the political leadership gave feet, legs and body to this parallel economy
Monika Halan
Some of us in India have paid, what I call, the ‘honesty tax’ for decades. Our money is salaried, there is nothing on top, we pay our taxes, keep our accounts clean, pay for large spends by card, do real estate deals in white and become the guys who obey traffic signals while others in bigger cars zoom away with a smirk. We pull out our cards and carry home our small shopping bag. The guy in the next aisle pulls out a brick of cash and thumbs out a lakh in notes to take home the high-value gadget. We drive our Maruti home with the EMI (equated monthly instalment) sitting in the backseat, the luxury SUV guy comes with a sack of cash and scrapes our car out of his way. We wait to buy a house with white money, don’t get the choice set, pay more and end up feeling like losers for being honest.
For decades, the honest have felt like fools in a nation that runs on graft. The complicity, and active encouragement, of the political leadership gave feet, legs and body to this parallel economy. There is a saying that in any organisation 25% of the people will be honest, always; 25% will be corrupt, always; and the middle 50% will look at the boss and do what he does. The political boss has spoken in India finally, giving teeth to the war against corruption by making currency notes of Rs500 and Rs1,000 worthless overnight.
Why will this help? It makes the current stash of undeclared cash useless. Those who did not take the government seriously and did not declare their unaccounted income by 30 September, by paying a 45% tax plus penalty, now see a 100% loss rather than a partial loss. Those who converted their cash into gold, art and real estate—the three sumps of black money—will sit on their assets for a while. When they do sell, the deal is likely to be completed electronically rather than in cash. With buyers unable to pay with old stashes of cash, how will the sellers sell? They will either barter or be forced to use a bank to route the money. Barter may work: in 2008, during the financial crisis, certain kinds of art became currency, after the price inflation in gold made it a bubble. Something similar may happen here too. Is it the end of black money? No. This is about raising the cost of keeping unaccounted for cash. There will be an underground market for sure: already you hear of a Rs1,000 note selling for Rs300 in the Mumbai grey market, but it just gets tougher to keep it black. (Part 2 in next post)
http://www.livemint.com/Money/WTRdjKNoA2OCsI0cWquYxN/We-did-say-we-wanted-less-corruption.html
Thu, Nov 10 2016. 04 08 PM IST[h=1]We did say we wanted less corruption[/h]For decades, the honest have felt like fools in a nation that runs on graft. The complicity, and active encouragement, of the political leadership gave feet, legs and body to this parallel economy
Monika Halan
Some of us in India have paid, what I call, the ‘honesty tax’ for decades. Our money is salaried, there is nothing on top, we pay our taxes, keep our accounts clean, pay for large spends by card, do real estate deals in white and become the guys who obey traffic signals while others in bigger cars zoom away with a smirk. We pull out our cards and carry home our small shopping bag. The guy in the next aisle pulls out a brick of cash and thumbs out a lakh in notes to take home the high-value gadget. We drive our Maruti home with the EMI (equated monthly instalment) sitting in the backseat, the luxury SUV guy comes with a sack of cash and scrapes our car out of his way. We wait to buy a house with white money, don’t get the choice set, pay more and end up feeling like losers for being honest.
For decades, the honest have felt like fools in a nation that runs on graft. The complicity, and active encouragement, of the political leadership gave feet, legs and body to this parallel economy. There is a saying that in any organisation 25% of the people will be honest, always; 25% will be corrupt, always; and the middle 50% will look at the boss and do what he does. The political boss has spoken in India finally, giving teeth to the war against corruption by making currency notes of Rs500 and Rs1,000 worthless overnight.
Why will this help? It makes the current stash of undeclared cash useless. Those who did not take the government seriously and did not declare their unaccounted income by 30 September, by paying a 45% tax plus penalty, now see a 100% loss rather than a partial loss. Those who converted their cash into gold, art and real estate—the three sumps of black money—will sit on their assets for a while. When they do sell, the deal is likely to be completed electronically rather than in cash. With buyers unable to pay with old stashes of cash, how will the sellers sell? They will either barter or be forced to use a bank to route the money. Barter may work: in 2008, during the financial crisis, certain kinds of art became currency, after the price inflation in gold made it a bubble. Something similar may happen here too. Is it the end of black money? No. This is about raising the cost of keeping unaccounted for cash. There will be an underground market for sure: already you hear of a Rs1,000 note selling for Rs300 in the Mumbai grey market, but it just gets tougher to keep it black. (Part 2 in next post)
http://www.livemint.com/Money/WTRdjKNoA2OCsI0cWquYxN/We-did-say-we-wanted-less-corruption.html
