DEMONETISATION

Counter against not enough money in atms, etc.

Indias currency economy, at 12% of gross domestic product, has been abnormal by any
standards. It not only showcases the scale of corruption, but also tax evasion by all and
sundry. Compare this with Malaysia at 8%, the US at 7.8% and Mexico at 6.7%.
What could be the new normal? That will be known on the auspicious day RBI Governor
Urjit Patel decides to break his silence on the number. Its being pegged by some at 8.59% of GDP to begin with, going down further subsequently.
From all appearances, the government and RBI were ill-prepared for the entire exercise,
but in all probability this may be a deliberate crash course aimed at forcing a rigid
cash-based system into digital mode.
Eventually, CIC (cash in circulation) will normalise as economic activity reverts to
normal, said Suvodeep Rakshit of Kotak Institutional Equities. Though from a longterm perspective, the move towards a cashless economy and low and stable inflation
will reduce the need for high CIC.
With no floor defined, your deposit may draw tax notice
The taxman may be within his rights to slap notices and demand 60% tax on all cash
deposits made in banks since April this year as recent amendments to the Income Tax
Act do not specify any threshold for scrutiny on cash deposits, say industry experts.
A depositor receiving a notice has to explain the source of cash. The changes in the law
were brought about to tax unexplained cash deposits at higher rate. The government
had initially mentioned about a threshold of Rs 2.5 lakh which was not intended to be
questioned; however, that cannot by itself be a blanket 'exemption' and has to be
reasonable in the context of income and the drawings of the depositor,"
Modi to 'Amazonize' $400 billion in state bids across India
Prime Minister Narendra Modi plans to move all government purchases, from paper
clips to power plant turbines, to an Amazon-like online marketplace that could
eventually be worth a fifth of the countrys $2 trillion economy.
The e-market is at the center of Modis key reforms: Digital India, aimed at increasing
the ease of doing business in the notoriously red tape-heavy country, Make in India,
which seeks to boost the domestic manufacturing industry, and demonetization, which is
attempting to tackle unaccounted cash and corruption. Modi, whose cabinet assigned
$16.5 billion in Dec. 2014 for a three-year digital push, needs the plan to sustain Indias
7 percent-plus growth rate.
The platform isnt very different from Amazon or its local rivals Flipkart or Snapdeal in
look or design, allowing users to choose from products listed alongside photos and
detailed specifications. It even allows them to compare prices offered on the
marketplace with those on rival websites. What differs, though, is the scale and scope of

change it can bring.

challenge: But with only 20 percent Indians able to access the internet, the government -Indias biggest employer -- faces the challenge of training staff across the country to use
the digital marketplace. Departments as diverse as finance, municipal corporations,
police, hospitals and post offices, some located in villages where regular power failures
make internet access difficult, are expected to be involved.
It is designed to leave a digital trail that will allow unprecedented openness in a nation
ranked 76th on Transparency Internationals 167-nation corruption index. Bureaucratic
delays and corruption were cited as among the biggest obstacles to business in India by
the World Banks 2014 Enterprise survey.
Brazen issue: bold and without shame
Double whammy: double set back
Forbearance: tolerance, extreme patience
RBI governor: Urjit Patel
The Centre for the Monitoring of the Indian Economy (CMIE) estimates the transaction
cost of demonetisation will be Rs 1.28 trillion. Nearly half of that will be borne by
enterprises. Unless the government actually unearths black money totalling over Rs 3
trillion, the entire exercise will have been in vain.
Declaring unaccounted money through pradhan mantra garib kalian yojna,
http://economictimes.indiatimes.com/wealth/tax/how-to-declare-unaccounted-moneyunder-the-new-garib-kalyan-yojana-and-the-watch-outs/articleshow/55708834.cms
Government rolls out incentives to encourage digital transactions
0.75 % discount on digital purchase of fuel, 0.5% dic on monthly and seasonal
suburban train tickets, from jan 1, online rail ticket buyers to get upto 10lakhs accident
insurance free. 8% discount/credit on new LIC policies bought online via its portal.
Government will waive service tax on debit and credit card transactions of up to Rs 2,000 in a bid to promote digital
transactions amid cash crunch following withdrawal of old Rs 500 and 1,000 banknotes.

Uttar Pradesh seems worst affected by the demonetisation crisis. Its political fallout now
threatens to derail BJPs chances in the big battle of 2017 if the situation persists into
the new year. Delhi with 1.2 cr people has 9,070 ATMs while Maharashtra with 11 cr
population has nearly 25,000 ATMs.

Demonetisation: Cash crunch brings auto industry to a screeching halt

Maruti Suzuki, Hyundai Motor, Honda Motor, Mahindra & Mahindra, Ford Motor and Renault-Nissan have scheduled
shutdowns stretching from a week to as much as 15 days over this month and the next. While Maruti and Hyundai
Motor India said these were as per previous plans and not a result of demonetisation, the likes of Honda Cars India
and Mahindra are suspending production for several days to correct inventory as demand is slow and their products
are moving out of dealerships at a slower than ..

Demonetisation completely stalled the market for a couple of weeks, which led to
increased inventory and the only way to correct the inventory is through production cuts
and plant shutdowns. Instead of giving higher discount later (to clear inventory), carmakers and dealers want
to end the year with adequate inventory to start the New Year on a better note financially.

An investigation by the IT department has revealed that dormant Jan Dhan accounts are now flush with funds. Bengal
now has second-highest deposits in the poor mans accounts. Since West Bengal lacks big industries and big
businesses, the cash accumulation in Jan Dhan accounts show involvement of the political parties.

Well, Modiji has shown the way to the world how to tackle terrorism by way of demonetisation. Terror-hit countries all
can now emulate Indias demonetisation to easily solve the problem of terrorism, Thackeray said addressing a rare
press conference in New Delhi on Thursday. Right in the beginning we had said the demonetisation should not
cause hardship to people. Modiji said everything will be fine after 50 days. Thirty days have gone. Now wait for 20
more days for ache din,

FED MOVES IMPACT ON EMERGING MARKETS

any action by the country's central bank to influence the money supply has repercussions on the global financial
markets. (US federal reserve)

2. How does Fed's decision have an impact on EMs?

The US has been a major source of capital for emerging markets. The link has strengthened all the more since 200809 when the Fed launched its monetary stimulus known as quantitative easing (QE) and cut rates to near-zero.

Thanks to a series of QEs since then, emerging markets have received billions of dollars.The monetary stimulus has
been withdrawn and now the Fed is in the process of raising rates. Thi .. Higher US interest rates tend to depress the
values of emerging market currencies against the dollar. This comes at a time when many EM economies are already
weakening and their currencies have already slumped against the greenback. The Fed's rate hike has the potential to
start a currency drag.
3. Why should it affect foreign capital flows into EMs?

If the Fed raises rates, it could result in money flowing back to the US, resulting in strengthening of the dollar. A
stronger dollar is likely to deter FIIs from making fresh investments. So, in theory , a series of rate increases by the
US Fed is not good news for EMs like India.

Banking sector health improving on

better recoveries:
Loans to be cheaper as RBI relaxes the cash reserve ratio norm.
The banking sector's health is improving as bad loan accumulation has slowed and provision coverage has improved
than in the previous quarters. Moreover, the demand for relaxation of rules is also coming down, the Reserve Bank of
India's deputy governors said on Wednesday.
"The formation of incremental NPA (non performing assets) has decelerated, the provision coverage ratio at the
system level has slightly improved and, compared to the last year, in this half year, the recoverie .. have been better
and write-offs have reduced to some extent
While fresh addition to gross NPAs stood at 17% in the March-June quarter, the percentage of fresh bad loan addition
fell to 8% at the end of the September quarter. Industry estimates suggest that the total bad loans in the banking
system crossed Rs 7 lakh crore at the end of the September quarter.
Mundra said that the stressed sectors, including metals, iron and steel, power and infrastructure, continued to cause
pain to the banking system. "As in the past, the NPAs continue to ..

AXIS BANK CMD

The move to reduce cash has already initiated a series of adjustments in household, consumer, investor and
depositor behaviour, with a sharp rise in non-cash transactions. Over the long term, access to formal finance will
increase, drawing tiny businesses into the formal economy . This will increase transactional efficiency and cost of
capital will fall secularly. The Reserve Bank has preferred to look through the short-term hit on growth, betting that the
disruption will set in motion a multitude of changes which will take India to a sustainable higher level of growth.

fmcg
With unsold inventory piling up with wholesalers, who mostly deal in cash to supply to traditional trade, and
consumers spending less due to liquidity crunch, fast-moving consumer goods (FMCG) makers are bracing
themselves for a short-term blip in sales. FMCG companiesa re cutting down production by 10-20%.. While makers of
discretionary products such as chocolates and biscuits are hit the most as consumers look to preserve cash in hand
and are spending mostly on necessities, others too are feeling the heat.
Companies have started aligning production with demand. The cut in production will be dynamic based on real-time
demand analysis and will be across categories. We have to resort to such a strategy till the situation normalises since
consumers are postponing their purchases, Emamis Agarwal said.

Traditional trade, which account for about 72% of FMCG sales, typically transact in cash and at present more than
two-thirds of kirana stores are having a hard time buying stocks from consumer goods distributors. With the squeeze
on both purchases and sales, business is down for nearly 70% of the neighbourhood outlets in the past few days,
market researcher Nielsen said in a report on demonetisation last week.

"Demonetisation of high value currency note initiated by the government is a positive move for the economy and
industry and will lead to better transparency and compliance in the medium to long run. This will be beneficial for
organised FMCG players creating a level playing field," Dabur Ltd said a regulatory filing.
Elaborating on the impact, the company said it will vary across channels and geographies and stress is highest for
wholesalers and small town grocery shops, who are facing a severe liquidity crisis and are de stocking.

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