Kindly tell us about the data on better tax compliance and the breaktrough achieved in unearthing black wealth Mr FM ?

The positive side of  the stupid act of demonetization was that  gradual transition from cash to cashless economy would ultimately help track the electronic transactions and that will make it difficult to avoid income , property and general sales tax leading to  better and higher tax compliance, enhanced tax revenue and ease the budget constraint in the long run.

The finance Minister is now duty bound to tell the following:
To what extent   the increase in the number of bank accounts and the number of transactions undertaken has led to higher tax compliance and also to what extent the authorities have taken firm action against many crooks whose real economic faces have been revealed at margin while many whales have been freely looting the country without paying taxes?

How much black money have been unearthed?

Long ago and not so long ago Miss Jayalalitha received $ 3 lakh  through bank draft only and did they find out who was the sender?
Is the Govt serous in tackling the black wealth and tracking down the anti nationals, namely   the non tax payers and black wealth holders   ?

Why is that the Govt has not bothered to transfer the gains of the oil price fall in the recent years and like a thief it has pocketed in lakhs of crores? will GST bring any difference? what is the fun in service tax? which service is rendered by whom?


there are a lot of  questions which common man wants to ask  and kindly don't treat him as antinational because he is more patriotic than you and your colleagues. 

Decoding of the final match between India and Pak 2017- defeat sometimes help to know where we actually stand

The only certainty in life is uncertainty .when things go wrong as they usually do and the unexpected happens you ask the question  Why Me?.It is human nature  ;In the arena of sports a team on a particular will be on song  and do well  .It so happened that for Pak both semi final and final days were extremely benign and the God conspired the hardworking team  No regrets.

while  the Hockey conferred glory the cricket  the much adored deity  disappointed.When pakistan piled up a massive total the highest in the tournament here was a golden opportunity for the in form batsmen namely Rohit sharma and Shikkar Dawan to compete and complement with each other in scoring the largest run for individual glory as also for the champion  trophy..But alas they were not destined to be!

The wise and benevolent destiny for Pak  sealed it in a different way.The truth of the matter was simply that after batting incredibly well they did not forget the essentials of the game that they must bowl exceptionally well in a more intimidating way so that the opposition would meekly submit and surrender  .
In  less than 2 overs India was 2 wickets down for a solitary run on the board.I switched off the TV and went out to resume my reading..As I was too eager to see the  contest between two rivals I restarted and the score read 55/5.I did not bother to watch the game  and the middle order meekly surrendered in a more humiliating way .cricket is not a war but in this case it is more than that .that is how pak always look at and get motivated.

Today morning only i saw the final score in the news paper..The nature of the massacre was  more insulting for a side which is supposed to have a strong  batting line up on paper..the vulnerability and the weakness of the team on the batting terrain was fully exposed ...Losing is not the problem .Only one team can win  but there must be honour in defeat...congratulations to Pak team fpr performing well and giving shock...When I wrote Last time about bulldozing of England by Pak I never imagined that , that was only the rehearsal for the final onslaught. 

Meditating on demonetization = a few fundamentals 4

From the above it will be obvious and apparent that  in any given time period the whole economic activity  depends upon among others on the amount of money supply allowed by the RBI, the proportion in which the general public would like to hold currency and deposits and the scale and speed with which the commercial banks can create credit depending upon the demand.Central bank's monetary policy and the government's fiscal policy together will have a far greater impact on the health of the economy

This is the reason why Alfred Marshall told long ago that money and banking is the center around which the economic science clusters.The current phase of money and banking  especially after the exit of Raguram Rajan is not that pleasant to  look at .
Going back to the motives of holding money we shall say that Transaction demand for money is the primary motive .Milton Friedman captured this spirit by saying that money is a temporary abode of  generalized purchasing power.This also further means that before using the money for transaction money has to rest in the wallet or Almira and there fore medium exchange function pre supposes that money must also serve as a store of value pending its final disposal IN GOODS OR FINANCIAL MARKET,

Keynes introduced the precautionary and speculative motives for holding money.We always keep some money extra to carry out some unexpected purchases or go on unplanned short trip or to take care of the members of the family falling sick..That is precautionary demand for money.

The speculative motive is important in the sense that  it is held to take advantage of the fluctuations in the interest rate in the future or any favorable movement in stock prices.It is sufficient to understand that as compared to the active transaction demand for money  this idle demand for money is the asset demand for money which will be more active in the financial market..speculation is an intelligent anticipation of future events and  many scrupulously gamble on the future interest rate, exchange rate and stock prices.

The liquidity preference  ie the decision to sit on the cash and not to spend will rise in times more uncertainty.For instance in times of depression of falling prices and rising unemployment and plausible bank failure  and low expected profit both the firms and hoousehold would like to be in cash ie remain liquid and take time to invest in real assets or consumer spending at a future date.Here comes the role of money to the present and the future in uncertainty.
there is also another motive that I coined while delivering a lecture at the central university of Hyderabad long ago.I called it as Sukh ram's suitcase demand for money..Some of you can recall that he was caught with 4 lakhs or crores in asiut case at home and he declared that it was party money and not his personal fortune..Now people hold in thousands and lakhs of crores.Basically it is the politicians ill gotten black money looted from the people and exchequer..During elecion time and or when illegal or illicit trade is conducted in collusion with the criminal elements in society  the politicians might find themselves with more cash before it gets siphoned off to swiss accounts or converted into real estates or gold biscuits

meditating on demonetization few fundamentals 3

We have seen that money is primarily a medium of exchange and that there must be sufficent money supply in the country to facilitate the transaction processes in many markets.It shall not be neither excessive nor fall short of the output GDP as it is called , that we generate.If too much of money is chasing too few goods that will be inflation- state of rising prices and that if output outsmarts limited money supply deflation will set in .the real economy will suffer and unemployment will set in..Keynes told that inflation is unjust and deflation is inexpedient...By taking away 85 % 0f money supply and not replacing it by new usable notes Mr Modi's Government  caused a great damage  to Indian economy not to speak of many devastating economic and social consequences which we shall explore in the text.

Narrowly defined. money supply in a country is equal to currency plus bank deposits.People have their preference either to hold cash or bank deposit. It is their will or choice .you cannot compel anyone in what form one should hold ones wealth.So there is a currency deposit ratio at any given time.It has greater implications for the economy.

Since we introduced the term bank let me brief about it when I taught pre degree students in Mahe college near Tellicherry  I learnt Hart definition of bank which I will try to collect from memory:
A bank or banker is a company or person carrying on the business of  accepting  moneys and collecting draft subject to the obligation of honoring cheques drawn upon him from time to time to the extent of capital available on his current account .

You would have read in the newspaper that both the state bank and some other private sector banks have introduced stupid regulations on keeping huge minimum balance and also levying tax on withdrawls...I can call this only as a rascalised behavior.

More on this later.We must educate them that we have lent money to the banker without which he cannot do business He borrows from us shot and lend the  money long and make a profit.We all know that given the high inflation rate in our country foolishly we keep the money in the bank and now we are charged  and taxed in all possible ways   we are living in troubled times indeed.

I should tell one technical point here .The money supplied by the RBI , our central bank is called base money or high powered money  because the commercial bank creates more money out of this base money or high powered money.In this sense depending upon the cash reserve ratio ie depending upon the amount of cash that they keep with themselves to meet the cash drain everyday and also the statutory requirements of cash to be kept at the central bank  the bank can manufacture  credit money and give push to the expenditure stream of the economy..Thus money plus credit govern the expenditure side of the economy.Mr Modi's govt punctured this crucial chain ..There were too much old currency notes outside but very little new notes inside  and they also went into hoards given the criminal role of some bankers not all So they all choked the economy to death for a few months atleast  
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Meditating on demonetization : why do we hold money? fundamentals 2

why do we hold money ? The pre- keynesian economists opined that money is basically a barren asset and will not yield any interest when kept idle .therefore they concluded that all the money pumped into the  the scale , the speed and ariety of economy must be held by the public (and also Banks) and the money is meant  for undertaking transaction ie in a predomintlya cash economy and our country is one where many people are poor  people do keep  cash  to buy many things.Money held for buying things is  called transaction demand for cash-.
 Then what is transaction?.
This is a basic concept.We must bring the concept of market and buyers and sellers.Here I can give a lengthy poem written by R A MUNDELL on goods and market  I think i hae already put that in my blog earlier and try to locate it .All of you know there are many markets ranging from fish to flower and a wide range of economic activities take place in a variety of markets.Buyers and sellers giggle and bargain for a better price..The price signals what to produce and where to produce and transport cost  and the type of taxation ruling in a country also matters most while talking about transactions.Market is not merely a geographic location but  connected by a network  of institutions and individuals and the market is now more international than domestic.Earlier the domestic demand used to determine the supply but now the whole indigenous production machinery is geared  keeping into account both national and foreign demand.Even when business is basically domestic many develpments overseas do affect us .
therefore the scale, the speed and the variety of transactions that take place in the real economy eventually determines the economic health of the country .In the circular flow of production process we do import raw materials semi processed goods and final goods from other countries and likewise others also buy from us.
So money is a medium of exchange oiling the wheels of exchange like a lubricant...this simply means there must be enough quantity of money in circulation to facilitate exchange in so many markets  ;otherwise for want of money the real economy will suffer..We started with the question why do we hold money but  in the process we did explain some other related macro aspects of the market and about exports imports and taxes in a rudimentary way .Now imagine when Mr Modi removed nearly 85% of money supply at one stroke without having any sensible strategy to replace by new notes how much the real economy would have bleed ed and suffered?

Meditating on Demonetization- a few fundamentals 1

we shall begin with Money what is that ?It is a classic invention to eliminate the insurmountable difficulties of barter namely the absence of double coincidence of wants.Crowther's book An Outline of Money will gie a good narrative on the evolution definition and functions of money .The couplet
Money is a matter of functions four
A medium measure standard and store.
In the early stages the role of money was performed by many commodities and eventually gold and silver settled themselves as commodity money and then came Representative paper money..Gold was still the ultimate and currency notes represented them.ie money was convertible into gold.That was the period of gold standard in its purest form and we shall not bother about its further incarnation like gold bullion standard and gold exchange standard where progressively the conversion of paper into gold was diluted /molested to conserve the limited gold stock.

At long last fiat money replaced the convertible money..ie the paper was no longer represented gold or any valuable collateral It was legal tender because government said so .You woul have noted the sentence on the currency note   i promise to pay a sum of rupees......to the bearer on demand attested by the governor of central Bank ( in our country it is RBI)...thus money became a promissory note by the federal government-an IOU...It was accepted as money because it was guaranteed and decreed by the bank? govt  that it was money  ie by decree or order it was money and everyone accepted it  and this general acceptability by the general Public is an important feature of the fiat money economy.here htere is an implicit accountability  on the part of RBI  to keep the value of money reasonably stable ie controlling price rise which means  the inflation level must be moderate.As is well known the fiat currency system had an inflationary bias on a secular basis...currently in some developed countries like Germany (read EU now) inflation control has been accorded  the most important place.
Going back to the story on money as IOU like the promissory note  I must say now precisely  this promise was broken by Mr Modi the PM on that fateful day night November 8 2016..His words intent tone language appeared to be more populist and resembled like a savior to save the poor.It is a great iron that the stupid masses then and thereafter did not internalize  the economic common sense that it was virtually a  war against the poor .

Meditating on Demonetization;Introduction .

Ever since he sidelined the senior BJP leaders  and declared himself as the Prime ministerial candidate  Mr Modi has remarkably changed the contoures and fortunes of BJP as also his personality as an authoritarian individual centralizing all the powers under his feet and the collective leadership of the party has been thrown to the dustbin and more important in the pleasant company of his party president he   captured power in most of the key states By any standard is  a great achievement and given the servility of politicians and political game changers it is also not surprising that money craving vultures have switched sides.Earlier this was the case when congress had the  monopoly power and many jumped into that bandwagon ..here the consolidation is swift and intimidating.

Three years after power at the centre only states like Punjab,Bihar. West Bengal, Kerala TamilNadu and Pondicherry  remain resilient to BJP ‘s invasion.To what extent  the drastic measure of Demonetization  which we prefer to call as political thunderbolt was instrumental for this transformation of power  is still unclear. Indeed there was an expectation of backlash but quite surprisingly  this populist measure which really caused real suffering to the informal economy was also a factor which made the poor to emerge as a new constituency for the rightist urban business mania based political party.

I am a least politicized person and basically a student in International economics. I was also one of the well wishers of Modi in 2014 as we wanted  a break from the monopoly of Congress and its corruption. Even in my wildest dream I never imagined that there was an another side or face to Mr Modi.More about this later.

As a citizen of the country and having some interest and intelligence in monetary and macro economics  

I articulated my views in facebook and conferences.I had the privilege to think aloud and lecture on this issue in some colleges and universities .Lecture notes are scattered in different places and This exercise is meant to collect them  and compile in order that  a monograph might evolve at a distant date.There may not be any connected and continuous stream of thought but nonetheless  each blog will have some subtitle and capture the flavor of the subject.My immediate task is to assimilate and bring them under a common roof.I am not an empirical economist but rather an intuitive student having only love for the subject as also the country..Indeed my  patriotism is not confined to the narrow nationalist wall and in typical Ancient Tamil spirit I consider myself as a world citizen like Kanian Poongkundranar who told long ago  Every nation is my nation and all countrymen are my kith and kin. 

Three years after Modi; Mr PM awake, arise and listen to good economist ;cow can wait

Growth statistics is never free from any controversy.As expected the political thunderbolt of demonetization has had a deleterious fall out on growth.As if to add insult to the injury comes bad news from Washington that  the seven percent growth rate of the government is  manipulated  one and that the actual growth rate is around 5.5% only argues Prof Vijay Joshi an economist of Oxford university
While participating that  in the discussion on saturday he made a pertinent observation that government has unleashed this higher number of 7 %  in order to enthuse  and reassure that the economy os ok under the present circumstance.He says and challenges that in no sector7% growth could be shown.Exports and imports have stagnated.The organized  formal sector has witnessed the decline in jobs.
Manufacturing sector has grown in a stagnant fashion.Bank advances to industrial sector has declined in the reccent years.More particularly capital goods sector has shrunk and stagnated In 2011 Investment constituted 34 % of of our GDP and thad has remarkably declined to 24%.It is difficult to believe that GDP  is growing at 7 % every year  
If the present trend continues for the next 25 years you cannot reach the 7% growth To achieve this rate everyone has to work in a united way.On a sustained long term basis it is difficult for a democratic country like India to register 7 to 9% growth rate.
In recorded economic history only three nations namely China,South Korea and Taiwan have attined this on a sustained basis/Although Modi's government is  functioning well it has not given the importance to education and health that they deserve.
In this respect the oxford university professor reminds the policy makers that Amarthya Sen matters most  a point that I have highlighted in one of my student's Phd thesis

Hello sir what is your Law ( sattam )?Ananda vikatan asks?

Let me take some time  and translate a few sentences from the editorial of Ananda Vikatan on the recent measures of the centre affecting the cattle farmers and the economy.

The unshakable faith of India is that it is the land of different languages,ethnicity, climate and a variety of cultural habits and customs.the announcement of the centre seems to shake this foundation - its multicultural tendancies and diversity. In dietary habits there is nothing like superior or inferior and it is antidemocratic to impose it on anybody.

Without debating it in Parliament or  having formal consultation with state governments Modi;s Govt has brought this measure.It shows its keenness to implement the Hinduthuva rather than showing its faith in the institution of democracy/
ther are many problem ares  like education health, poverty alleviation and agriculture and insted of devoting attention to all these crying issues and other pertinent problems confronting  the society the centre has chosen to wage a cultural invasion by raking up this controversial issue.

It is time those who had faith in the multicultural diversity of India and  brotherhood raised their voice and expressed their note of dissent.