Demonetisation: Can govt provide some numbers?

An extrapolation of 2016 Reserve Bank of India (RBI) data on the capacity of Indian printing presses and currency distribution indicates that, at current rates, the Prime Minister’s deadline will not be met. Getting adequate money to banks and ATMs nationwide will depend on how many bank notes the government wants to put back into circulation.

If the government wants to introduce Rs 9 lakh crore ($135 billion)–or 35% less money than it pulled out–it will take up to May 2017, and if it wants to reintroduce the entire Rs 14 lakh crore ($210 billion) that it withdrew, that could take up to August 2017.

The crux of the problem is change, specifically the Rs 500 note, which India’s presses cannot, currently, print in adequate number.

As on November 30, 2016, less than 10 crore (100 million) Rs 500 notes were printed and ready (or two days worth of printing), according to an RBI source, quoted in Mint.

We arrive at the crux of the problem: India needs to print at least 681 crore (6.81 billion) Rs 500 notes. In Scenario 2, the Rs 500 requirement is for 1,181 crore (11.81 billion) notes. However, the peak printing capacity of the presses is 5.56 crore (55.6 million) notes a day–or 0.8% of what it should be.

At this rate, we will take anywhere between 122 days and 212 days to print enough Rs 500 notes. Given the fact that the RBI started printing Rs 500 notes in earnest after November 30, 2016, printing all the required 500s will be completed only on March 10, 2017 (Scenario 1), or July 8, 2017 (Scenario 2).

Taking into account the time taken for cash transportation and the speed at which banks can push out the money, calculations indicate that complete disbursal of Rs 9 lakh crore can happen in early April 2017.

smArtha wrote:If they were able to purge 10% i.e. about 1.5 lakh crores that can be counted as acceptably successful scheme. They will reap tax revenue - one time on the now disclosed but prior undisclosed money and continuous one on the deposits and other investments made with the deposited amounts. My guesstimate is another Rs. 1-2 lakh crores from that. 

In any case, why should Govt provide any numbers now - before the deadline of Dec 30? The earliest any numbers should be expected is by end of Jan 1st week. It takes that long in India to collect all information through proper channels and consolidate.

smArtha wrote:If they were able to purge 10% i.e. about 1.5 lakh crores that can be counted as acceptably successful scheme. They will reap tax revenue - one time on the now disclosed but prior undisclosed money and continuous one on the deposits and other investments made with the deposited amounts. My guesstimate is another Rs. 1-2 lakh crores from that. 

In any case, why should Govt provide any numbers now - before the deadline of Dec 30? The earliest any numbers should be expected is by end of Jan 1st week. It takes that long in India to collect all information through proper channels and consolidate.

garam-kuta wrote:

smArtha wrote:If they were able to purge 10% i.e. about 1.5 lakh crores that can be counted as acceptably successful scheme. They will reap tax revenue - one time on the now disclosed but prior undisclosed money and continuous one on the deposits and other investments made with the deposited amounts. My guesstimate is another Rs. 1-2 lakh crores from that. 

In any case, why should Govt provide any numbers now - before the deadline of Dec 30? The earliest any numbers should be expected is by end of Jan 1st week. It takes that long in India to collect all information through proper channels and consolidate.

this is turning out to be a colossal blunder. forget about your 10% (1.5 lakh cr) figure. it will be less than 50,000 cr and much less if the remaining marginal amount of black money comes back in the amnesty scheme. the govt will get only 50% of that money. so total benefit will not be even 50,000 cr in optimistic scenario. that's why the govt started shifting the goal post and talking about cash less society. it will not be surprising if the black money that is unearthed will be close to 0.

now, lets look at the costs. TN govt alone expects a loss of tax revenue of 3,000 crores. all the govts put together (states and central) are expected to lose 1 lakh crores in taxes (sales and VAT etc). assuming a 10% sales tax, the actual loss of economic activity means 10 times that. add the stock market losses and loss of productivity of people standing in queues at bank instead of working, the losses to the daily wage workers (the poor don't pay much in sales taxes so this loss is not reflected in tax losses to govts), the rupee losing its value against $ ever since this announced and the resulting loss to the economy, the foreign and domestic investors  stepping back and postponing their investment decisions and all that this stupid move is going to cost the economy, upwards of 10lakh crores.
the cost is >>>>>>>>>>> any expected benefit in your most optimistic estimate.

smArtha wrote:

garam-kuta wrote:

smArtha wrote:If they were able to purge 10% i.e. about 1.5 lakh crores that can be counted as acceptably successful scheme. They will reap tax revenue - one time on the now disclosed but prior undisclosed money and continuous one on the deposits and other investments made with the deposited amounts. My guesstimate is another Rs. 1-2 lakh crores from that. 

In any case, why should Govt provide any numbers now - before the deadline of Dec 30? The earliest any numbers should be expected is by end of Jan 1st week. It takes that long in India to collect all information through proper channels and consolidate.

this is turning out to be a colossal blunder. forget about your 10% (1.5 lakh cr) figure. it will be less than 50,000 cr and much less if the remaining marginal amount of black money comes back in the amnesty scheme. the govt will get only 50% of that money. so total benefit will not be even 50,000 cr in optimistic scenario. that's why the govt started shifting the goal post and talking about cash less society. it will not be surprising if the black money that is unearthed will be close to 0.

now, lets look at the costs. TN govt alone expects a loss of tax revenue of 3,000 crores. all the govts put together (states and central) are expected to lose 1 lakh crores in taxes (sales and VAT etc). assuming a 10% sales tax, the actual loss of economic activity means 10 times that. add the stock market losses and loss of productivity of people standing in queues at bank instead of working, the losses to the daily wage workers (the poor don't pay much in sales taxes so this loss is not reflected in tax losses to govts), the rupee losing its value against $ ever since this announced and the resulting loss to the economy, the foreign and domestic investors  stepping back and postponing their investment decisions and all that this stupid move is going to cost the economy, upwards of 10lakh crores.
the cost is >>>>>>>>>>> any expected benefit in your most optimistic estimate.

There are many back of the envelope calculations going around. Let's wait for the official nos in January.