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Economy and Business

Demonetization has so dominated the news that little attention has been paid to developments in the global economy and what they imply for India. Developing countries, which were growing rapidly even as industrialized countries slowed down after the crisis of 2008, are now slowing down. China is ready to accept growth going below 6.5%. What does this imply for us in the New Year?

 

Money is what money does”. In the days following notebandi or demonetisation of high-denomination currency notes of Rs 500 and Rs 1000 on November 8, 2016, which constituted 86 per cent of the currency in circulation, we find that this phrase has leapt out of the pages of a standard monetary economics textbook onto people's lips.

Money is what money does”. In the days following notebandi or demonetisation of high-denomination currency notes of Rs 500 and Rs 1000 on November 8, 2016, which constituted 86 per cent of the currency in circulation, we find that this phrase has leapt out of the pages of a standard monetary economics textbook onto people's lips.

 

After the concerns raised by the opposition and the farmers' organisation, the Union Minister of Food and Public Distribution Ram Vilas Paswan has finally announced that the zero-import duty on wheat is a short-time window to cool down the wheat price that is higher by 3 per cent as compared to three months ago.

After the concerns raised by the opposition and the farmers' organisation, the Union Minister of Food and Public Distribution Ram Vilas Paswan has finally announced that the zero-import duty on wheat is a short-time window to cool down the wheat price that is higher by 3 per cent as compared to three months ago.

 

Though it is not clear how much black money will not come back to the banking system after demonetisation, or how much black money the government will get by way of taxes in IDS-2, it would do well not to try and give this back to the poor via their Jan-Dhan accounts.

 

Indian Finance Minister Arun Jaitley says “India has to move towards the cashless society.” Cashless society? India? Last month’s demonetization continues to wreak economic havoc, and now defenders say it will pay off long-term by promoting digital-payment systems that increase efficiency and transparency. But why should Indians believe that officials exercising arbitrary power over their cash will keep their hands off a system that monitors every transaction?

 

Indian energy conglomerates, like ONGC Videsh Limited, are on a buying spree of energy assets abroad more particularly in Russia.  This is certainly a major achievement, as far as energy diplomacy is concerned.

Indian energy conglomerates, like ONGC Videsh Limited, are on a buying spree of energy assets abroad more particularly in Russia.  This is certainly a major achievement, as far as energy diplomacy is concerned.

 

The economic turmoil has been compounded by the fact that the government didn't print a sufficient amount of the new bills, lest word leak out as to what was about to take place. The new bills are also a different size than the old ones, creating a huge problem with ATMs. Even though India is a high-tech powerhouse, hundreds of millions of its people live in dire poverty. Many workers are leaving the cities to go back to their villages because so many businesses are closing. Countless companies are having difficulty meeting payroll, as they can't get the cash to do so. The real estate market has tanked.

 
The acute shortage of cash has driven up both the volumes and value of card transactions at point-of-sale (PoS) machines. Data from the Reserve Bank of India (RBI) shows the value of transactions in the first 19 days of December — for a sample of four banks — is up nearly 30% over the comparative period of November.  
 

The government’s demonetisation drive has seen fierce debates. Opposition parties, with the exception of the JD(U), are visibly confused. Their protest is directionless — a case of wanting to have the cake and eat it too. Each of them rails against black money but none has any formula. Bihar Chief Minister Nitish Kumar is an exception, supporting demonetisation with a demand for a strong law against benami property.

 
Civil society groups across Asia, Latin America, Oceania, and North America are upbeat on what they are calling the “definitive demise” of the Trans-Pacific Partnership (TPP), with Donald Trump becoming the President of the US.  
 


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