Friday, November 11, 2016

Be careful in what you wish for

"Do the best you can, and don't take life too serious."
— Will Rogers (American, 1879-1935)
Word for the day
Syncretism (n)
The attempted reconciliation or union of different or opposing principles, practices, or parties, as in philosophy or religion.
Malice towards none
People who found 45% tax under IDS prohibitive, are now pleading with government to take 50% and let them account for their hitherto unaccounted cash!
First random thought this morning
The opposition parties, especially Congress and CPI-M are making the most puerile comments on the step to demonetize high denomination notes (HDNs). The argument of inconvenience to daily wage earners coming from Rahul Gandhi & Prakash Karat's mouth is most preposterous.
They are the people who organized maximum bandhs in the country. It is only in the past one decade that people have understood their game and stopped responding to their bandh calls.
The Congress and SP are perhaps responsible for most curfews in the country. The arguments made by P. Chidambaram, who is most responsible for complicating the tax compliance procedures, are clearly pervert.

Be careful in what you wish for

"May you get what you wish for", is one of the three popular Chinese curses. It cautions people to be careful in what they wish for; because they might just get what they wished for and realize that the thing they desired is not what they actually wanted.
Persistently chiding PM Modi to fulfill his election promise of recovering black money from the rich and putting them in the account of poor, the opposition leaders would have never imagined that their this wish may actually come true - that too so soon.
One is hearing numerous stories about how the cash rich people are distributing their unaccounted money to the poor. A builder in Varanasi reportedly has given away 2.5cr worth of 500-1000 notes to street dwellers over night.
Many people are renting the Jan Dhan bank account of their servants & their family members, by promising to share as much as 20% of the cash deposited in such accounts. There are many reports suggesting that people have approached poor farmers to help them in converting the color of their black money. Taking advantage of good monsoon, a farmer can show higher than usual income this year and deposit the money in their bank account.
Redistribution of wealth on such a massive scale is unprecedented. The steps like abolition of privy purse, nationalization of banks, insurance companies and coal miners, etc. all resulted in transfer of money from select rich to the government. Education cess might have enabled the government to fund the education of poor kids. But this is as direct a transfer as it could be - Rich people eager to share their wealth with poor directly and apologetically!
Assuming that the government may have sounded BJP and NDA allies to go light on cash, the opposition parties are the biggest victims of this masterstroke. PM Modi has made them pay for his promise of wealth transfer.
The equity market is worried about the impact of demonetization on consumption. I find the fear somewhat misplaced. Though consumption may indeed suffer for few months, it would be much higher next year as the propensity to consume is much higher at the lower quartile of the pyramid where the redistributed wealth will find shelter. A lighter balance sheet of RBI (assuming 20% reduction in currency stock), may provide space for larger public sector spending and lower rates.
Moreover, those arguing for a midterm decline in consumption may be mistaking washing machines, motorcycles, smart phones, TV, etc. for discretionary items. Trust me these are no longer discretionary items in most cases. Those who are not able to buy in cash will buy on credit.
At last, in my view, the government should make this demonetization process constitutional. All HDNs should be mandatorily demonetized every 10years to effectively control of menace of black money without any inconvenience to the common man.

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