India Abolishes Old Bills: Cracking Down On Serious Corruption And Tax Evasion

As most of India's economic pactions are conducted through low pparency cash pactions, tax evasion is widespread among businesses and residents in India.

India's tax revenue accounts for only 17% of GDP, far below the average of other countries by more than 5%.

In addition, only 5% of India's personal income tax is paid, while nearly 85% of the economic activity is outside the modern tax system.

Therefore, the abolition of the large sum of 500 rupees and 1000 rupees in India hopes to force business and personal paction payment activities to be carried out through the banking system and the electronic payment system, thus making it easy for the entire economic paction to be open and pparent.

India's prime minister Modi (NarendraModi) announced a policy that shocked the country and the whole world, namely, the abolition of 500 rupees and 1000 rupees, and the issuance of 2000 rupees.

Its purpose is to crack down on black market and money laundering activities, crack down on serious corruption and tax evasion in India, and establish a modern bank account currency system.

In India, the current economic activities are basically carried out through cash payment, and more than 90% of their trading activities are done through cash payment.

In the currency circulation of the whole country, cash pactions account for 14% of GDP, and in many countries, it is generally not more than 5%.

In India, 90% of India workers do not sign employment contracts through contracts. In addition, 45% of India's output is traded through informal channels.

Due to the current circulation of money in the market in India, 500 rupees and 1000 rupees account for more than 85% of the money in circulation. Therefore, the India government suddenly announced the abolition of large bills and immediately caused serious shortage of cash in the market. In the case of insufficient supply of small denominations, India's financial market immediately plunged into a liquidity crisis, resulting in a sharp fall in the India rupee exchange rate and the stock market, and asset prices were shrunk in full.

In the past two weeks, India residents have poured money into the banks to make the Bank of India.

Unable to run, the people went to the bank to draw money for a long queue.

At the same time, many people can not withdraw money due to the limit of only 4000 rupees per day (400 yuan). As for the new banknote, the government does not intend to print it sooner, so as to achieve the effect of combating corruption.

However, after the abolition of the two largest banknotes, the market immediately plunged into a liquidity crisis, which caused many economic activities in India to be severely hit, and even some of the economic activities had to stop.

The supply chain of many commercial activities has to wait until the market liquidity returns to normal.

Many people and enterprises suffered heavy losses.

From small daily necessities to trading of bulk investment products.

For example, housing and land pactions, in the past are mainly cash payment, when the market cash liquidity suddenly plunged into a crisis, the price of real estate fell immediately, many real estate companies face bankruptcy crisis, and banks and financial companies to recover loans are very difficult.

Also, on the evening of November 24th, Modi held a special meeting to require banks to punitive tax on accounts of 250 thousand rupees (about 25 thousand yuan or more), with a tax rate of 60% of deposits.

According to reports, at present, about 60% of India's old banknotes are not exchanged for new banknotes.

This also means that the holders of old banknotes are suffering heavy losses.

It is estimated that this policy will allow

This year (as at the end of March 2017), the economic growth rate dropped from 2015 in 7.6% to 4.1%, while the economic growth forecast for the second half of the year (October 2016 to March 2017) sharply decreased from 6.4% to 0.5%.

According to AmbitCapital, India's economy has shrunk and India's profits have dropped by 40%.

Singer, the former Prime Minister of India, who has always been cautious and cautious, has rarely attacked modi's new policy. He believes that the policy of abolishing big bills is organized and legalized robbery.

However, the economic policy of India's prime minister Modi to abolish the big bills is a huge political gamble, which will cause serious damage and harm to the India economy in the short term. However, this policy will not only outweigh the disadvantages, but will also have a profound impact on the long-term development of India's economy.

Because this policy will not only severely crack down on corruption and money laundering, but also bring huge changes to India's personal income tax system and currency operation.

These changes are indispensable conditions for the sustained and healthy development of modern economy.

What is more important is the abolition of large bills.

It is also the most important way to redistribute social wealth in India.

Although the economy seems to have shrunk the wealth of the entire society, the proportion of the vast majority of people's wealth will rise in full.

This is also a major revolution in the redistribution of social wealth, which is a matter of the people's mind.

In the long run, these conditions will provide the largest source of power for India's future economic growth.

It can be said that if the success of Modi's action is successful, it will bring a new look to the India economy, and the Chinese government can not belittled it.

Moreover, the outcome of the abolition of the big currency policy in India remains to be seen, especially in terms of long-term impact.

But this has great inspiration to the Chinese government. At present, China's economic life is also facing a series of problems, and this problem is often difficult to solve, because it can not or dare not touch the intricate interests, for example, the real estate tax has been studied for more than ten years, and so far, no result has been achieved.

The problem is that they dare not want to touch vested interests.

If so, many economic problems in China can only be endlessly and more and more serious.