Monday, November 28, 2016

Decision On Indian Currency demonetization?

As per NIPFP; Black Economy which is 60 to 70% of GDP come to anywhere b/w 93 to 97lakh core and only 3 to 6% is hoarded cash. Meaning hoarded cash comes to only 3 to 6 lakh cores while the govt. has cancelled 15 lakh cores of cash. But cancelling high-value currency solves the problem?
Now statistical reports says first 6 days withdrawals were 12k Core as opposed to deposits of 86K crore.
There are multiple questions with that logic; this assumes that a good chunk of the cash that’s coming in or in circulation is black money?
An assumption which economists say it’s simply not true?
Out of this at least 50% would be with businesses and not with the households!
Point is cash is overall a very small component of Black Money.
There is no evidence to suggest that black money is purely held in cash or driven largely held in cash.
There seems to be a lot of evidence to suggest that black money is held in other asset like gold and real estate.There are evidence that is it invested in various sectors like education and health; what it does it put some sand in the wind so things can slow down.
Do you think govt. has taken risky step!