The Game got ‘Interesting’
By: Amit Bhushan Date: 9th Nov. 2016
The steps towards the drive against Black Money with some unprecedented steps have made the Game interesting for sure, decisive well the jury may not be out still…
The proposed steps for sure cause a disruption in the black economy. In so far as the economies are segregated, such steps should help support the White economy to expand and take benefit out of these steps. So one should see revival of bank credit as the White economy expands to fill the opportunity vacuum. Of course there should be rise in Cards, wallet, UPI based and other electronic transactions. Fluctuation in prices of property and bullion metals as people holding these and wanting to liquidate the same will have to reassess positions and make painful decisions.
The ability of bank to expand the electronic payment mechanisms in a smooth and fast manner will hold the key. This may include measure to support domestic electronic payment transactions from mobiles, UPI or Cards to be initiated in one vernacular and ending in another. Otherwise which some element of Cash comfort for the population will continue to hold sway and there will be need to distribute the new notes faster so that these legitimate transactions can continue to be processed. Also there will be need to roll out electronic accounting tools to be adopted and other advisory support for those operating mostly in Cash markets like Brick-clins, Catering, Mom & Pop stores amongst others to shift to electronic record maintenance and payments. The ensuing GST on the back of the ‘Currency’ shock should help the sales teams to innovate ways to persuade prospective customers to initiate some of the bold measures. To be effective, this may require mobilization of all Tom, Dick, Harry and their dog to persuade people to make a shift and be more tax compliant. Of course dealing with various departments and inspectors for these newly ‘expanded’ businesses for compliance rather than avoidance, with those inspectors not having much incentives will be challenge and ‘call centres/resolution mechanisms’ may be needed for the same both at center and state authorities level. The political disconnects here may pose herculean challenges for those ready to make such a shift.
However those holding sway over the White economy also maintain a hold on the black economy as is quite often the case. The true segregation lies only in case of hawala operators, businesses operating in totally clandestine manner, corrupt officials, political parties etc. where large value monetary exchange may happen. Most businesses operate by sinking themselves only partially in the black. In such cases, disruption in operations may need to have a relook at overall operations. Examples can be in Real Estate sector, bullion, education, hospitality or even SME manufacturing set up etc. Those anticipating a significant loss may behave erratically while a few may not find themselves in a position to transform themselves smoothly to alternate structure and still have viable operations. The measures could be a significant disruption though the jury may not yet be out.
The measures that need to be seen is how the government allows the insurance companies accepting cash premiums to deposits. How would cash transactions of say petrol-pumps/medicine stores be monitored for excess Cash deposits and till what time old note will be accepted from them? Monitoring of Cash deposits from Charitable trusts especially religious trusts and NGOs. What if bank defaulter’s recovery team come up with or are confronted with the ‘old notes’ specter amongst others. This may include handling legal challenges with the need to ensure that there would be no abrogation or dilution of such a move in effective manner.
Finally the success of the measure would lie in faster expansion of the White economy rather than mere disruption of the black economy. This may require that new risk takers to emerge from the shadows to fulfill the opportunity vacuum from the black economy and measure to support the same. In the short term (say an year or two) though, challenges are likely and measures to support people to take up the challenges need to be looked into.
By: Amit Bhushan Date: 9th Nov. 2016
The steps towards the drive against Black Money with some unprecedented steps have made the Game interesting for sure, decisive well the jury may not be out still…
The proposed steps for sure cause a disruption in the black economy. In so far as the economies are segregated, such steps should help support the White economy to expand and take benefit out of these steps. So one should see revival of bank credit as the White economy expands to fill the opportunity vacuum. Of course there should be rise in Cards, wallet, UPI based and other electronic transactions. Fluctuation in prices of property and bullion metals as people holding these and wanting to liquidate the same will have to reassess positions and make painful decisions.
The ability of bank to expand the electronic payment mechanisms in a smooth and fast manner will hold the key. This may include measure to support domestic electronic payment transactions from mobiles, UPI or Cards to be initiated in one vernacular and ending in another. Otherwise which some element of Cash comfort for the population will continue to hold sway and there will be need to distribute the new notes faster so that these legitimate transactions can continue to be processed. Also there will be need to roll out electronic accounting tools to be adopted and other advisory support for those operating mostly in Cash markets like Brick-clins, Catering, Mom & Pop stores amongst others to shift to electronic record maintenance and payments. The ensuing GST on the back of the ‘Currency’ shock should help the sales teams to innovate ways to persuade prospective customers to initiate some of the bold measures. To be effective, this may require mobilization of all Tom, Dick, Harry and their dog to persuade people to make a shift and be more tax compliant. Of course dealing with various departments and inspectors for these newly ‘expanded’ businesses for compliance rather than avoidance, with those inspectors not having much incentives will be challenge and ‘call centres/resolution mechanisms’ may be needed for the same both at center and state authorities level. The political disconnects here may pose herculean challenges for those ready to make such a shift.
However those holding sway over the White economy also maintain a hold on the black economy as is quite often the case. The true segregation lies only in case of hawala operators, businesses operating in totally clandestine manner, corrupt officials, political parties etc. where large value monetary exchange may happen. Most businesses operate by sinking themselves only partially in the black. In such cases, disruption in operations may need to have a relook at overall operations. Examples can be in Real Estate sector, bullion, education, hospitality or even SME manufacturing set up etc. Those anticipating a significant loss may behave erratically while a few may not find themselves in a position to transform themselves smoothly to alternate structure and still have viable operations. The measures could be a significant disruption though the jury may not yet be out.
The measures that need to be seen is how the government allows the insurance companies accepting cash premiums to deposits. How would cash transactions of say petrol-pumps/medicine stores be monitored for excess Cash deposits and till what time old note will be accepted from them? Monitoring of Cash deposits from Charitable trusts especially religious trusts and NGOs. What if bank defaulter’s recovery team come up with or are confronted with the ‘old notes’ specter amongst others. This may include handling legal challenges with the need to ensure that there would be no abrogation or dilution of such a move in effective manner.
Finally the success of the measure would lie in faster expansion of the White economy rather than mere disruption of the black economy. This may require that new risk takers to emerge from the shadows to fulfill the opportunity vacuum from the black economy and measure to support the same. In the short term (say an year or two) though, challenges are likely and measures to support people to take up the challenges need to be looked into.