The effects of India’s Currency Reform?
 ‘Chaos’ say Analysts
http://www.nytimes.com/aponline/2016/11/18/world/asia/ap-as 

-india-currency-chaos.html?_r=0

By THE ASSOCIATED PRESS

NOV. 18, 2016, 2:36 A.M. E.S.T.

1.     NEW DELHI — The sudden withdrawal of 86 percent of India's currency has left  
cash in short supply, retail sales stumbling and wholesale markets in turmoil.

2.     That's just the immediate fallout from Prime Minister Narendra Modi's surprise 
 effort to stamp out corruption by making cash hoards in large denomination bills  
worthless. But what lies ahead could be even worse, some analysts say.

3.     "Basically, you've created chaos," said Steve H. Hanke, an applied economist  
at Johns Hopkins University in Baltimore and a global authority on currency policy. 
"India is a cash economy. It's not like Europe or the U.S. where everyone is running 
around with a credit card.

4.     That's not the world of India."

5.     "It doesn't look like this thing was thought through at all," he said.

6.     Every day or so, soothing assurances about India's overnight currency reform       
spill from the offices of top government officials.

7.     "Enough cash is available," Economic Affairs Secretary Shaktikanta Das said      
Thursday during a nationally televised press conference, as millions of people waited
 in hours-long lines. A few days earlier, the finance minister urged patience with what 
 he called "a period of inconvenience."

8.     But the decision to ban India's highest denomination bills, 500 rupee and 1,000 
rupee notes worth about $7.50 and $15, goes far beyond an inconvenience.

9.     India's economy has become one of the world's largest in recent years, but 
millions of businesses, and hundreds of millions of people, lack bank accounts and use
 cash to pay for everything from groceries to hospital stays to land purchases.

10.      The shadow economy — countless transactions hidden from the authorities — is 
 believed to amount to about a quarter of the country's gross domestic product.

11.      The government used a similar demonetization in the late 1970s. But it failed
 to curb corruption, and the underground economy has grown immensely larger since then.

12.      Plenty of Indians do use cash transactions to hide their wealth and avoid 
taxes— less than 3 percent of the population pays income taxes — and the authorities 
occasionally arrest businesspeople or corrupt officials with currency hoards that can 
fill trucks. But plenty more people use cash because of habit, poverty or a lack of 
easy access to banks.

13.      So instead of just aiming squarely at wealthy tax dodgers, the demonetization
 is also hammering the poor, the working-class and small business people whose lives
 have been turned upside down during the transition to new currency notes.

14.     Across India, people are waiting in lines that often form hours before banks 
open and last well into the afternoon, though the government has limited most 
withdrawals and currency exchanges to a maximum of $30 a day.

15.     "It is unclear whether this exercise will achieve any lasting results other 
than having created a national economic crisis, destroying confidence in the national 
currency and unleashing tremendous suffering for ordinary Indian citizens," Rajiv 
Biswas, Asia-Pacific chief economist at HIS Global Insight, said in an email.

16.     "This will have a direct negative effect on retail sales and industrial output
 during the coming weeks," Biswas said.

17.     A research report this week from the banking giant HSBC predicted that imports 
of consumer goods would fall, but added that could be offset by a spike in demand for 
gold, as unsettled Indians look for ways to store their wealth.

18.     In worst-case scenarios, the effects of demonetization could last for years, 
driving the country into recession and pushing Indians to keep their wealth in more 
stable currencies, such as the euro or U.S. dollar.

19.     "When you don't trust a currency and you don't trust a government you start 
using foreign currencies," said Hanke. "That's what this is going to do, I think: 
People will not trust the rupee."

20.     Raghuram Rajan, the former head of India's central bank and one of the country's
 most respected economists, warned in 2014 that demonetization programs can easily 
stumble.

21.    "It's not that easy to flush out black money," he said after a speech, while he
 was still the country's top banker. He added, "my sense is that the clever find ways"
 to get around currency overhauls.

22.    Rajan has instead suggested better monitoring of financial transactions, such 
as using government ID cards to track major purchases, and improved tax enforcement.

23.    Hanke was surprised that India would even try a demonetization program, given 
that its failure in the 1970s is well-known in currency policy circles.

24.    "They're usually done in some kind of crisis situation and panic," said Hanke, 
"and they ultimately have all kinds of negative unintended consequences."

http://www.nytimes.com/aponline/2016/11/18/world/asia/ap-as-india-currency-chaos.html?
_r=0
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HOW THE GOVERNMENT INDIA TO REMOVE THE EFFECTS-CHAOS- OF INDIA’S CURRENCY REFORMS AS 
CHAOS –ANARCHY  BEING EXPERIENCED AND PREDICTED BY THE ANALYSTS?
SIKH VICHAR MANCH QUESTIONED FOR THE CONVENIENCE OF INDIANS AND INDIA NOW.
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