Cost of demonetisation for India Inc: Stranded trucks, unpaid workers, cancelled bills

Like millions of Indians fed up with corruption and counterfeiting, Vimal Somani cheered Prime Minister Narendra Modi's shock move to replace all high-value banknotes. Two weeks on, his business is being hammered by the ensuing cash crunch.

Sales at Somani's aluminium foil maker, Rockdude Impex, have fallen by roughly a quarter in the past week, and the cash shortage that followed the "demonetisation" drive has left his supply chain in tatters: his trucks are stranded with no money for fuel, workers won't load goods for free, and distributors can't pay up.

Modi's move on Nov. 8 was aimed at cracking down on corruption and flushing out funds stashed away in India's "black economy". But the cancellation of 500 and 1,000 rupee notes ($7.3 and $14.7), more than 80 percent of currency in circulation, threatens to push Asia's third-largest economy into a liquidity crisis.

Consumer spending makes up 56 percent of India's $2 trillion economy. But with just the small stock of smaller Denomination notes available and a struggle to get hold of new bills, consumers are holding back.

The government has acknowledged that the disruption would last weeks because of delays in note printing and technical problems with ATM machines, but Modi has made a plea for patience until Dec. 30. The government said it could not have printed new notes or recalibrated cash machines in advance for fear of the move leaking out.

Meanwhile, supply chains at small, medium and even larger companies are breaking down, underlining just how much corporate India - not just the shadow economy - relies on hard cash.

"The entire supply chain has broken," said Somani, who employs 150 people across India from his base outside Mumbai.

Problems at Rockdude go from its network of suppliers to its 1,500 distributors and 150 stockists. Its sales team, spread from Delhi to Nagaland in the east and all the way to the south, is rapidly running short of cash to promote a planned new product, even for the rickshaw rides they use to travel.

Revenues have frozen, Somani says, but fixed costs continue, including wages. These are paid online, but his staff cannot get access without being given time off to queue at the bank.

"We are cutting production," he added. "If this goes on for two more months, then it will hit us very badly."

An executive at a mid-sized hair oil manufacturer, a beauty staple in India, said sales had crumpled as consumers simply stopped buying shampoos and lotions. Wholesale markets, which operate in cash, are shut. Distributors have no cash.

"We are planning to extend some discounts to the distributors so that they at least replenish the amount of stocks they are selling, instead of not buying from us at all," he said.

"We are cutting production every day," he added.

Like many of the businessmen interviewed by Reuters, he declined to be named, given the sensitivity of the issue.

CASH CRUNCHED

In the year to March 2017, the cash crunch is estimated to pull down India's gross domestic product (GDP) growth from last year's 7.6 percent by as much as 4.1 percentage points. Brokerage Ambit Capital says it does not rule out a contraction in the October-December quarter.

Corporate operating profits are tipped to fall by as much as 40 percent in the current quarter.

People ranging from taxi drivers and street hawkers to big consumer goods firms have seen their earnings plummet by as much as 80 percent in the first week of the swap alone, according to some analysts' estimates.Read more

Another set of rules: Govt limits bank exchange from Rs 4,500 to Rs 2,000

It also allowed withdrawal of upto Rs 2.5 lakh from bank accounts for the explicit purpose of weddings

The government, on Thursday, announced another set of changed rules as queues continued to day eight of its demonetisation drive. It reduced the limit of over-the-counter exchange of old notes for new ones to Rs 2,000 per person from Rs 4,500 earlier.

The centre has also given the option to its lower level employees up to Group C to draw an advance of Rs 10,000 from their November salaries.

Besides, it relaxed the weekly withdrawal limits for farmers and Agriculture Produce Market Committee (APMC) traders.

It also allowed withdrawal of up to Rs 2.5 lakh from bank accounts for the explicit purpose of weddings.

“To enable larger number of people to get benefit, with effect from Nov 18 the existing limit of Rs 4,500 will be reduced to Rs 2,000. This will be once per person. The usage of indelible ink continues. The move is to ensure that a larger number of people reach the exchange counters,” Economic Affairs Secretary Shaktikanta Das said at a media briefing.

To questions that this move implied a shortage of cash with the banks, Das said that that was a wrong assumption and that there was enough money in the system.

Central govt employees can get salary advance in cash

Das said that central government employees up to group C, including those of state-owned companies, military, railways and para-military organisations, will be given the option of taking salary advance up to Rs 10,000 in cash, which will be adjusted against their November salaries.

What's in to for farmers?

Given that crop sowing has slowed down at the commencement of Rabi Season due to a cash crunch, the centre will now also allow farmers farmers to draw Rs 25,000 per week against farm loans sanctioned or Kisan credit cards to meet their expenses. Farmers can also withdraw the same amount per week from their own accounts. Read more.

Has demonetisation stopped stone pelting, curbed terror financing in J&K?

In the last few days after PM's daring move there hasn't been stone pelting on security forces.

Defence Minister Manohar Parrikar has hailed the government's demonetisation decision and said it has let to decline in stone-pelting incidents in Jammu and Kashmir.

"Earlier, there were rates: Rs 500 for stone pelting (onsecurity forces in Kashmir) and Rs 1,000 for doing something else. PM has brought terror funding to zero," Parrikar said.

"In the last few days after PM's daring move there hasn't been stone pelting on security forces. I congratulate PM for it," Parrikar said.

According to a report in Deccan Herald, the incidents ofstone pelting have declines in the Valley ever since Prime Minister Narendra Modi scrapped Rs 500 and Rs 1,000 currency notes across the country.

While police handouts on the situation in the Valley stated that no incidents of stone-pelting were reported from anywhere in the past few days, officials said a major reason behind the sudden decline in violence was that the "money channels" of inciting violence have been sealed.

In the past, several complaints had cropped up that separatists were paying stone-pelters and other anti-national elements in big currency notes. Apart from taking on corruption, black money; the step by the Modi government has resulted in peace and calm in the Valley.

Security analysts believe that Kashmir will remain largely calm in the coming days as miscreants will run short of money to keep their network operational.

For the last four months, the Valley was brought to a standstill but now things are falling back into place with people carrying out their daily chores, schools being opened and students appearing for exams.

Barring a few law and order incidents at some places, hundreds of vendors put up their stalls at the weekly flea-market in the city on Sunday while banks across Kashmir witnessed a rush of customers in view of the demonitisation of 500 and 1000 currency notes, bringing some semblance of normalcy in the unrest-hit Valley.

Normalcy ceased to exist in Kashmir due to unrest triggered by the killing of Hizbul Majhideen militant Burhan Wani since July 8.

However, there has been increased movement of people and public transport, except buses, in Srinagar in the last month. Apart from private vehicles, auto-rickshaws and inter- district cabs were also plying in large numbers.

Defying separatists' call for protest, 95 per cent students appeared for class 12th board exams in Kashmir on Monday. About 94.88 per cent of the total 31,964 students appeared in the examination, an official of Jammu and Kashmir Board of School Education (BOSE), which conducts the examinations, said.(more)

Comedian Kapil Sharma questions PM Modi's 'acche din', alleges he had to pay bribe

Comedian Kapil Sharma questions PM Modi's 'acche din', alleges he had to pay bribe

Comedian and actor Kapil Sharma on Friday morning hit out at Prime Minister Narendra Modi's ‘acche din’ slogan, after he alleged that he had to pay a bribe to a Brihanmumbai Municipal Corporation (BMC) official.

Sharma, of 'Comedy Nights With Kapil' fame, took to twitter to vent his ire. Shooting off two tweets, the comedian alleged that despite paying Rs 15 crore in income tax for the last five years, he had to pay Rs 5 lakh as a bribe to a BMC official to set up his office.

• KAPIL ✔@KapilSharmaK9

I am paying 15 cr income tax from last 5 year n still i have to pay 5 lacs bribe to BMC office for making my office@narendramodi

5:53 AM - 9 Sep 2016

• 5,2605,260 Retweets
• 7,0737,073 likes

• KAPIL ✔@KapilSharmaK9

Yeh hain aapke achhe din ? @narendramodi

6:14 AM - 9 Sep 2016

• 2,6732,673 Retweets
• 3,7313,731 likes

Business Standard could not independently verify whether or not Sharma actually did pay the bribe.

Sharma did not name the BMC official either.

However, the extent of Sharma's frustration was clear as he tagged the prime minister in both his tweets.

His second tweet asked the prime minister whether this was what he had meant when he had promised the people ‘acche din’ (good days) — which was the 2014 General Elections slogan of the Bharatiya Janata Party. (more)

CEO Poll: Modi govt meets expectations of India Inc on reforms

CEO Poll: Modi govt meets expectations of India Inc on reforms

With the Narendra Modi government completing two years in office, an overwhelming majority of the 50 chief executive officers (CEOs) surveyed by this newspaper said the government has met their expectations on economic reforms. The average rating was seven out of 10.

In a nationwide survey conducted by this newspaper over the past three weeks, CEOs said a number of steps taken by the government - bringing down the corporate tax rate, clearing the retrospective tax mess and a new bankruptcy law - have made it easier to do business in India. They also appreciated initiatives like Digital India and the Swachh Bharat campaign. When asked about the positives of the government, CEOs cited better foreign relations, taming inflation and bringing down corruption in governance as top achievements.

ALSO READ: Narendra Modi: Governance and that Hindutva image

"I think there are perceptible signs of improvement in the ease of doing business. We have also seen some important policy changes, like the Bankruptcy Code Bill, the National Intellectual Property Rights Policy and the Startup India policy, which are reflective of this government's intent to enable economic growth. What we need now is a bigger push in the investment policy in manufacturing to make it viable for Make in India to succeed," said Kiran Mazumdar-Shaw, chairman and managing director of Biocon.

ALSO READ: Report Card: Two years of Modi Government

Sajjan Jindal, chairman of JSW Steel, said, "During my travels abroad, I clearly see that government's diplomacy has led to a rise in India's stature at the global stage."

Among the negatives, CEOs cited the inability to build consensus on the goods and services tax, inability to tackle the black money issue, and inability to handle the Opposition. Chairman of Videocon Industries, Venugopal Dhoot said the stability of the rupee and increased spending in infrastructure are indicators of good governance. "India is the only country in the world growing at 7.5 per cent according to the International Monetary Fund (IMF). This shows our economy is on the right track," said Dhoot. Read more.

Ruckus in RS as Manohar Parrikar speaks on AgustaWestland deal

Despite opposition from the Congress, Defence Minister Manohar Parrikaron Wednesday told the Rajya Sabha that he only wanted to give chronology of the events with regard to corruption in the Rs 3,600-crore sale of 12 VVIP choppers to India.

"This matter is not of today, this pertains to year 2002. I just wanted to inform the House, the chronological order of events, without any comments on them, so that the House is aware of when it took place and what happened," Parrikar said in the Upper House.

"Whether they want or don't want, it is for them (Congress)," he added amid uproar in the upper house.

Parrikar, who met Prime Minister Narendra Modiyesterday, had earlier on Monday said that his address in the Parliament would include how and when necessary clauses or provisions were relaxed to suit the company.

Leader of the Congress in Lok Sabha, Mallikarjun Kharge, has accused the Centre of pursuing a politically motivated campaign to defame the grand old party through the AgustaWestland copter scam.

Meanwhile, former Indian Air Force chief S.P. Tyagi is being grilled for the third consecutive day by the Central Bureau of Investigation (CBI) at its headquarter here in connection with alleged irregularities in the Rs. 3600 crore VVIP chopper deal.

As per reports, the former IAF chief is said to have told the CBI yesterday that he met senior officials of Finmeccanica, the parent company of AgustaWestland, while negotiations for the purchase of VVIP choppers were going on.

He also told the interrogators that he had met Finmeccanica's Chief Operating Officer Georgio Zapa in New Delhi on February 15, 2005.

The CBI yesterday quizzed the former IAF chief on the four firms which he and his wife set up after his retirement from service.Read More.

India improves ranking at 76 in global corruption index

India has been ranked at 76th position in public sector corruption out of 168 countries in the Transparency International Corruption Perceptions Index 2015, improving its slot from 85 in 2014 and 94 in 2013.

Although corruption is still rife globally, many countries improved their scores in the 2015 edition of the corruption index, a Trasparency International statement said on Wednesday.

Overall, two-thirds of the 168 countries on the 2015 index scored below 50 points on a scale from 0 (perceived to be highly corrupt) to 100 (perceived to be very clean).

Anti-corruption crusader Subramanian Swamy risks wrecking tax reform

Subramanian Swamy, the anti-corruption crusader in Prime Minister Narendra Modi’s Bharatiya Janata Party, has vowed to send opposition leaders Sonia and Rahul Gandhi to jail, denting already faint hopes of political compromise on the key Goods and Services Tax (GST) Bill.

Fresh developments in a three-year-old fraud case brought by Swamy have overshadowed attempts to bridge the political divide in search of an elusive deal that would create a tax union in Asia’s third-largest economy.

For Subramanian  Swamy, taking down a dynasty synonymous with the founding of modern India is a bigger immediate priority than passing the GST that has in any case been years in the making.

He says he has the tacit support of Modi, and powerful Finance Minister Arun Jaitley has also voiced his approval.

Swamy, who has said the mother and son deserve to go to jail, said in an interview that the GST would not help the economy. Fighting corruption, which he says has drained $1.5 trillion out of India, would.

“The cause I am fighting for is far greater because that’s where the cancer is,” said the 76-year-old Harvard-trained economist and ex-cabinet minister, whose strident Hindu identity politics has attracted a fanatical following.

Swamy met Modi on Thursday and said the prime minister voiced no objections to his case against the Gandhis. Senior aides to Modi say that he sympathised with the case.

“Modi-ji has always wanted to pursue legal cases against the Gandhi family,” said one. “This case could end the Gandhi supremacy, and that is good for us.”

Modi has tried to undermine the Gandhis since trouncing Congress at the ballot box last year. At the same time, he has pushed for economic reforms, including the GST, which the government says could add up to 2 percentage points to the size of the economy.

In his case, Swamy accuses the Gandhis of fraud, cheating, misappropriation and criminal breach of trust in acquiring the assets of a company that had published the National Herald, a newspaper founded by Rahul’s great grandfather Jawaharlal Nehru.

He alleges that, through a series of debt and equity deals, a shell company that Sonia and Rahul controlled acquired property worth about $300 million after paying just $75,000.

The Gandhis deny wrongdoing and allies say the deals caused no financial harm to the Congress party.

SWAMY VS GANDHIS

Irked by Swamy, Congress lawmakers have accused Modi’s government of waging a “political vendetta” against the Gandhis. The Rajya Sabha, where Modi needs Congress support to pass the GST, has been disrupted all of this week.

While there are still a few days for GST to be passed and it has been listed for debate next week, the angry mood in Congress and daily protests mean chances of that happening are fading.

Congress national spokesman Sanjay Jha said the political wrangling had “neutralised” Modi’s meeting with Sonia Gandhi on Nov. 27, their first since he became prime minister in May 2014, to seek a way forward on the GST.

Swamy, who merged his small political party with Modi’s in 2013, is best known for successfully running a legal campaign against the last Congress government over a multi-billion-dollar spectrum-allocation scam.

In a blog post late on Thursday about the case, Jaitley backed Swamy and criticised Congress for disrupting parliamentary business because of it.