Demonetisation: Will it lead to a corruption free India?

[Raji Ram]

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Demonetisation has made a few lakhpathis!

A man, thinking himself to be very clever, gave two lakh rupees in OHD notes to his cook maid and asked her to give it back later
in a few instalments. The cleverer cook coolly left the job, after depositing the money in her account! opcorn:

 

[vgane]

So it has not impacted the GDP adversely as widely predicted by naysayers!!


GDP at 7% in 3rd Quarter, Economy Weathers Demonetisation Shock

February 28, 2017
New Delhi: India's annual economic growth slowed to 7 percent in the three months through December, but will bring relief to the government as it shows the economy has weathered the demonetisation shock.

The GDP figure is lower than the revised 7.4 percent expansion in the previous quarter, but is still surprisingly well above the 6.1 percent predicted by many analysts.
The Central Statistics Office (CSO) also retained the growth forecast for the fiscal year ending in March 2017 at 7.1 percent.

Economic Affairs Secretary Shaktikanta Das said the numbers negate the "negative speculation" on demonetisation.
Meanwhile, the CSO has also marginally revised upwards the GDP estimates for the first and the second quarters to 7.2 per cent and 7.4 per cent.
India's growth was higher than China's 6.8 percent for the last three months of 2016.
The figures surprised economists, who had expected the economy to take a bigger hit from Prime Minister Narendra Modi's decision last November to outlaw old Rs 500 and Rs 1,000 banknotes, taking out 86 percent of the currency in circulation virtually overnight.

"Perhaps this data is not capturing the impact of demonetisation," Aneesh Srivastava, chief investment officer, IDBI Federal Life Insurance Co told Reuters. "I am totally surprised and stunned to see this number ... I believe that, with a lag, we will see an impact on GDP numbers."
The data also backs the RBI's assessment, which all along maintained the economic disruption caused by Modi's shock monetary therapy as a transitory phenomenon.
In a statement, the CSO said real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in 2016-17 is likely to attain a level of Rs 121.65 lakh crore, as against the first revised estimate of GDP for 2015-16 of Rs 113.58 lakh crore, released in January 2017.
"The growth in GDP during 2016-17 is estimated at 7.1 per cent as compared to the growth rate of 7.9 per cent in 2015-16," it said.
The 'agriculture, forestry and fishing' sector is likely to show 4.4 per cent growth in its GVA during 2016-17, as against the previous year's growth of 0.8 per cent.
The per capita net national income (current price) during 2016-17 is estimated to be Rs 1,03,818 showing a rise of 10.2 per cent compared to Rs 94,178 during 2015-16 with the growth rate of 8.9 per cent.
(With agency inputs)

http://www.news18.com/news/business...-figures-better-than-anticipated-1354399.html

 

[tks]

So it has not impacted the GDP adversely as widely predicted by naysayers!!


GDP at 7% in 3rd Quarter, Economy Weathers Demonetisation Shock

February 28, 2017
New Delhi: India's annual economic growth slowed to 7 percent in the three months through December, but will bring relief to the government as it shows the economy has weathered the demonetisation shock.

The GDP figure is lower than the revised 7.4 percent expansion in the previous quarter, but is still surprisingly well above the 6.1 percent predicted by many analysts.
The Central Statistics Office (CSO) also retained the growth forecast for the fiscal year ending in March 2017 at 7.1 percent.

Economic Affairs Secretary Shaktikanta Das said the numbers negate the "negative speculation" on demonetisation.
Meanwhile, the CSO has also marginally revised upwards the GDP estimates for the first and the second quarters to 7.2 per cent and 7.4 per cent.
India's growth was higher than China's 6.8 percent for the last three months of 2016.
The figures surprised economists, who had expected the economy to take a bigger hit from Prime Minister Narendra Modi's decision last November to outlaw old Rs 500 and Rs 1,000 banknotes, taking out 86 percent of the currency in circulation virtually overnight.

"Perhaps this data is not capturing the impact of demonetisation," Aneesh Srivastava, chief investment officer, IDBI Federal Life Insurance Co told Reuters. "I am totally surprised and stunned to see this number ... I believe that, with a lag, we will see an impact on GDP numbers."
The data also backs the RBI's assessment, which all along maintained the economic disruption caused by Modi's shock monetary therapy as a transitory phenomenon.
In a statement, the CSO said real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in 2016-17 is likely to attain a level of Rs 121.65 lakh crore, as against the first revised estimate of GDP for 2015-16 of Rs 113.58 lakh crore, released in January 2017.
"The growth in GDP during 2016-17 is estimated at 7.1 per cent as compared to the growth rate of 7.9 per cent in 2015-16," it said.
The 'agriculture, forestry and fishing' sector is likely to show 4.4 per cent growth in its GVA during 2016-17, as against the previous year's growth of 0.8 per cent.
The per capita net national income (current price) during 2016-17 is estimated to be Rs 1,03,818 showing a rise of 10.2 per cent compared to Rs 94,178 during 2015-16 with the growth rate of 8.9 per cent.
(With agency inputs)

http://www.news18.com/news/business...-figures-better-than-anticipated-1354399.html

This is wonderful news. Not sure what those economists who predicted doom and gloom are saying now.

Though I am not able to keep up with all the Indian political news on my own I find the contribution of members of this forum to be most useful. Thanks for providing timely news articles.

Another test of demonetization was results of state level elections. Any analysis available on that front? Thanks

 

[krish44]

All this GDP data is suspect.

The inputs from informal sector, small scale set up contributions are not counted.

They took the maximum hit due to demonetisation.

These GDP figures are preliminery and subject to revision.

Now These inputs are put out to help the ruling party in regional elections

 

[prasad1]

Prime Minister Narendra Modi’s government courted controversy this week, when it claimed the economy grew 7% in the October-December quarter and kept the forecast for FY 2016-17 unchanged at 7.1%, making India the fastest-growing among major economies.
To put it in perspective, the government’s estimate of 7% growth in the GDP in the last quarter includes a robust 8.3% growth in manufacturing output. The latter, in turn, is based on an assessment that both consumption and investment spending saw significant acceleration during this period – a claim that has left everyone puzzled.
How could consumption grow at a 10% pace in this period, compared to 5% in the previous quarter, when the government’s surprise move to squeeze out of the system nearly Rs 15 lakh crore in high-value notes left consumers with hardly any cash to spend? How could investment grow 3.5%, compared to a decline through the three preceding quarters, when demonetisation left businesses with no confidence to invest? How did the government end up estimating a robust growth in manufacturing output when its own data showed a contraction in industrial production in two of the three months making up the quarter? Above all, how could job cuts run into hundreds of thousands, while the economy was chugging along at a 7% pace?
It’s the statistics, stupid!

[FONT=&quot]As the definition goes, GDP is the broadest measure of the value of the goods and services produced in a country. That value is estimated on the basis of many assumptions, wherein lies the problem. The assumptions often turn problematic because of the inherent weakness in the way the Central Statistical Organisation (CSO) collates data. It doesn’t compile data on consumption, instead extrapolates the same from data on production. It doesn’t have any mechanism to collect data on production in the informal sector; it uses the data for the formal sector as a proxy. Demonetisation didn’t devastate the formal sector as much as it did the informal sector. There lies the first reason for the consumption numbers getting overstated.[/FONT]
[FONT=&quot][FONT=&quot]Second, the production data on [/FONT]formal[FONT=&quot] sector is based on the balance sheets reported by manufacturers. Companies, encouraged by the economic upswing through September and October, might have taken bigger orders on their [/FONT]books,[FONT=&quot] before [/FONT]demonetisation[FONT=&quot] was announced. Also, post demonetisation, there was a spurt in advance tax collections. Experts suspect this was a result of many firms, and even individual proprietors, inflating their earnings to convert their illegal cash holdings into legitimate money. In other words, the output of the formal sector could have registered high growth on paper, even though there was no offtake matching that incremental production.[/FONT][/FONT]
[FONT=&quot]The same explanation would apply to investment numbers, which appear clearly overstated given that credit offtake was hit hard as the only banks did during this quarter was to manage serpentine queues outside their branches and ATMs.

[/FONT]
[FONT=&quot]Third, there is the problem of channel stocking. Take the example of the automobile sector. In November, auto sales were up because the manufacturers had their dispatch and distribution schedule drawn up before November 8. Sales got hit at dealers’ end, but the figures concealed the impact, which showed in December — a contraction of 19%. The impact on auto production will reflect in the estimates when these are reported for the current quarter.[/FONT]
[FONT=&quot]Some analysts wonder if the CSO could have addressed these anomalies, especially in a situation especially when there is wide divergence in the performance of the formal and the informal sectors. Unfortunately, the CSO can’t change its methodology on its own; nor does it have the wherewithal to assess the informal sector separately.[/FONT]
[FONT=&quot]A day after announcing the estimates, the government chief statistician, TCA Anant alluded to some of these issues in interviews to newspapers. “Events such as demonetisation, which are a large policy change, are not assessed by single-quarter data. These have many effects and will take time to work their way through the economy,” he told the Business Standard. And he is right. The effects will take time to work their way through, especially when it comes to getting reflected in the official numbers on the performance of the broader economy.[/FONT]
[FONT=&quot]That said, Anant – a well-known economist who once taught at the Delhi School of Economics -- could have done well to add an advisory to last Tuesday’s announcement on the GDP estimates, saying these may see revisions in the time to come. Also, the government needs to be candid in acknowledging the impact of demonetisation as reflected in other sets of data. Sadly, that is not how Modi’s administration has chosen to respond, and that is why everyone is saying these numbers are too good to be true.

[/FONT]http://www.hindustantimes.com/colum...s-the-party/story-Htr5f8USRDrJuUvZdjFlmJ.html

 

[tbs]

All this GDP data is suspect.

The inputs from informal sector, small scale set up contributions are not counted.

They took the maximum hit due to demonetisation.

These GDP figures are preliminery and subject to revision.

Now These inputs are put out to help the ruling party in regional elections

hi

just a number.....no worth on it.....its media ....in reality....many died in bank queues...

 

[prasad1]

India had a poor reputation for statistics quality before the GDP revision. It just revised a GDP growth figure from 7.2% all the way down to 6.5% for Q415.There are other, crucial statistics practices, for example concerning rural electrification, that are clearly biased in the government’s favor. In this context, hiding past GDP looks like a continuation of previous behavior.
The central government is willing to offer such detail as revisions to the initial advanced estimates for future GDP growth. We obviously do not have measurements for the future yet, yet the government can generate a figure. What it cannot do is generate GDP for the past, when all measurements have been completed.
The GDP revision is a complex matter and the government has sound responses to some criticisms. But this part is simple: if you cannot even apply your own methodology to the past, why should anyone believe you can apply it properly to the present and future? The government is annoyed with ratings agencies for failing to see India’s progress. It should look in the mirror and properly document a basic element of that progress.
Most people from pluralist open societies want to see pluralist, open India do well. For now, however, India has the same level of economic credibility as a country like Vietnam (which publishes GDP results even before the year ends). World-beating growth? Maybe. Or maybe poorly founded quasi-propaganda.

http://www.barrons.com/articles/is-...beating-economy-1488769695?mod=trending_now_3

 

[Rudhran]

This is wonderful news. Not sure what those economists who predicted doom and gloom are saying now.

Though I am not able to keep up with all the Indian political news on my own I find the contribution of members of this forum to be most useful. Thanks for providing timely news articles.

Another test of demonetization was results of state level elections. Any analysis available on that front? Thanks

Some in this Forum predicted riots........LOL

 

[tbs]

hi

new movie in tamil is coming based on this subject....very soon...film production started by bharathi raja...lets wait and see..

 

[tks]

Some in this Forum predicted riots........LOL

The doom and gloom economy predicted by many due to demonetization did not happen. Even if some claim numbers are not accurate, the economic growth did not stifle the country as many had expected or even hoped for due to demonetization.

The next test is to see if people at large in India accepted the demonetization move. UP state and other victories for PM Modi's party affirms that people (including very poor) are in full support of the demonetization policy even while putting up with major but temporary set backs.

I think it is time various gurus (economists, elites, etc) who predicted catastrophe are fully discredited..

 

[Rudhran]

The doom and gloom economy predicted by many due to demonetization did not happen. Even if some claim numbers are not accurate, the economic growth did not stifle the country as many had expected or even hoped for due to demonetization.

The next test is to see if people at large in India accepted the demonetization move. UP state and other victories for PM Modi's party affirms that people (including very poor) are in full support of the demonetization policy even while putting up with major but temporary set backs.

I think it is time various gurus (economists, elites, etc) who predicted catastrophe are fully discredited..

Sir,

Agreed.

If one goes through the four hundred and sixty postings of this thread may see the expert opinion expressed by these Gurus who may be mostly naysayers. Now what happened....?

Now that the public have given clear mandate.

But these Gurus will not learn lessons.... from the jubiliation of BJP, consolation of Congress and isolation of AAP

 

[krish44]

Nothing really bad happened to the upper and well off middle class in economic terms. They did not suffer liquidity crunch beyond a week or so at least in delhi.

But it was the informal economy that got hurt.

This is not reflected in GDP data.

Workers got laid off and many had to return to their villages for a few months..

Otherwise india is a big country.

No action of the govt really hurts too much.

Most shrug off and move on.

 

[Rudhran]

It is a clear mandate of general public who are seeking a change of Government having fed up

They exhibited their faith on the BJP’s guaranteed promises on good governance, Economy growth, Employment opportunities, Pro-poor schemes etc etc

It has proved again that hard work and honest efforts do pay.

They are the best in judging.

 

[krish44]

some politicians do honest work and the poor pay thru the nose and suffer

 

[Rudhran]

some politicians do honest work and the poor pay thru the nose and suffer

It may be some thing like dubious political critics commenting in this Forum and poor readers spending their precious time reading them. LOL

 

[tbs]

hi

nothing predictable....like punjab ...clear mandate for congress...they fed up with akali bjp combined....even goa..

in up/uttarakand...change is inevitable...

 

[Rudhran]

[h=1]Assembly Election Results 2017: Poll results stamp of approval on demonetisation, say experts[/h][h=2]The note ban did cause chaos in the initial weeks, but later things smoothened and generally the electorate didn't mind it as is evident from the results, say experts.[/h]
Read more at: http://www.financialexpress.com/ele...pproval-on-demonetisation-say-experts/585190/

 

[vgane]

Electoral impact of demonetization well captured!!

 

[vgane]

 

[vgane]

 

[auh]

I'd like to state two things:

1) The election result in UP is not an approval of demonetization. Indian public in general is overawed by the Advertising campaigns run by the BJP in whatsapp, facebook and twitter. The poor man still suffers, and is put through much hardship.

2) Transactions in black still flourish. Regulations are only for the middle class while the rich swagger their power and have their way. A close colleague of mine told me that a recent land deal was registered at 80 lakhs approx while the original value was 3 crores (rest paid in black). So anybody harbouring notions of a black money free India can cool their heels now.

 

[vgane]

Noted economist Jagdish Bhagwati comes to the aid of demonetization & has said that it will lead to higher growth..True!! There will be a revival of sorts..Heady days ahead!!

Anti-demonetisation experts like Amartya Sen stand 'humiliated and exposed': Jagdish Bhagwati


PTI New Delhi

March 18, 2017

Globally acclaimed economist Jagdish Bhagwati on Friday said demonetisation will promote growth while Amartya Sen and other experts who denounced it stand "humiliated and exposed".

"On the effects of demonetisation on growth, I should say that I was the one economist who had argued (with my co-authors), from first principles, that demonetisation would increase, not diminish, growth," he said.

"And that is exactly what appears to have happened," he said further. "The Prime Ministers success in Uttar Pradesh has therefore meant that Amartya Sen and his friends who argued that demonetisation would hurt growth, have been humiliated and exposed as much as the Congress," Bhagwati told PTI in an email interview. He is a professor of Economics, Law, and International Relations at the Columbia University.

"After BJPs victory in Uttar Pradesh, indeed Prime Minister Narendra Modi is now in an even stronger position than when he was first elected resoundingly," Bhagwati said.

He also said that three things ought to be noted that made (Prime Minister Narendra Modis) current position unassailable. "First, he has finally decimated the Gandhi-Nehru dynasty, so the Congress is not merely on the ropes; they also lack currently anyone of stature who can rescue it from oblivion," he said.

Second, the Muslim vote no longer is a monolithic anti-BJP vote, Bhagwati said, adding, "I suppose that while BJP did not field Muslim candidates in the Uttar Pradesh election, surely Muslims were aware that the propaganda that Prime Minister Modi was anti-Muslim was an outrageous lie."

http://www.businesstoday.in/current...ll_article&utm_campaign=inshorts_full_article

 

[Iyyarooraan]

Govt said it collected Rs. 6k crore as black money by unknown yardstick. Is it flattering? May be for ModiJi's sympathisers.Most of it could be just household savings retrieved from unimaginable nooks and holes. Petty hawkers pockets are pinched. There is no talk about black money now. Where are lakhs of crores of BM. Only (deceptive perhaps) good outcome is ModiJi's supporters are happy. So far so good. Because it is a large chunk "conscious" people.

 

[Rudhran]

[h=1]Looking back at demonetisation: The concerns of its legion of critics have all been proven plain wrong[/h]Whatever else supporters and critics of the Indian government’s demonetisation exercise may disagree on, everyone will agree that the decision by Prime Minister Narendra Modi, on 8 November 2016, to remove from legal tender high denomination notes (HDNs) accounting for about 86% of the currency stock in value terms was a bold and unprecedented move. Indeed, it is arguably one of the great economic experiments in modern history and will be studied for years to come.

Given the disputes about the measure’s wisdom and success, however, it is time to take stock of what was said in the aftermath of 8 November and what has actually transpired since then.

Read more at: http://blogs.timesofindia.indiatime...-of-critics-have-all-been-proven-plain-wrong/

 

[Iyyarooraan]

There are number of Ramyanas from those period of least populated times. Similarly there will be umpteen number of history writers from the teeming billions, concocting stories in support of demonetisation. The man in the street knows it was just an egoistic exercise. Like they used thermocol to prevent evaporation of water off the river. Real Tuqluq culture.