Thursday, August 31, 2017

Links of interest (2017-08-31) : Effectiveness of demonetization in India; Electoral constituencies in Nepal

How effective was demonetization in India?


The main objectives of the demonetization shock on 8 November 2016 were: “(i) flushing out black money, (ii) eliminate Fake Indian Currency Notes (FICN), (iii) to strike at the root of financing of terrorism and left wing extremism, (iv) to convert non-formal economy into a formal economy to expand tax base and employment and (v) to give a big boost to digitalization of payments to make India a less cash economy”

The latest RBI annual report 2017 says that the value of IRs500 and IRs1000 notes that were returned was IRs15.3 trillion versus IRS15.4 trillion in circulation before demonetization. This means almost 98.9% of the invalidated notes were returned back to the RBI by 30 June 2017. So, if pretty much all of the invalidated notes were returned back, then does this mean ‘black money’ was not flushed out as touted? In a way, yes! However, the government is also investigating IRs1.75 trillion deposited in banks after demonetization. The hefty penalty, if sources are not substantiated, would mean higher one-off revenue for the government later on. Digitization and formalization of the economy got a boost. RBI detected 762,072 fake notes (valued at IRs430 million) in 2016/17 compared to 632,926 fake notes in 2015/16.  

The RBI sees rosy prospects for FY2018, thanks to favorable monsoon (boosts rural demand and lowers food inflation); strong urban demand coming from income boost due to upward revision in house rent allowance to central government employees and the possibility of implementation of wage revisions at state level; reforms to lower the cost of doing business that will increase investment; faster project implementation; higher credit demand following low interest rates post-demonetization in the case of stress-free corporates; etc. It points to slow industrial output growth and low fixed capital formation as concerns for the economy along with challenges to resolving highly indebted corporates and public sector banks. 

It expects GVA growth of 7.3% in 2017/18. Headline inflation is expected to be between 2.0% and 3.5% in H1FY2018, and 3.5% and 4.5% in H2FY2018 (prospect of wages and compensation increase, and farm loan waivers driving some part of the upward trend). Here is a good review of the economy in FY2017 (an earlier related blog here).



Constituency Delimitation Commission (CDC) finalizes 165 electoral constituencies


CDC in Nepal carved out 165 first-past-the-post electoral constituencies for House of Representatives and 330 constituencies for provincial assembly. Of the total 165 electoral constituencies, 78 are in 20 Tarai districts which make up 47.27 percent of the country’s total geography. CDC gave 90% weight to population and 10% to geography (after ensuring that each district has at least one constituency). Province 3 will have the highest number of constituencies with 33, followed by Province 2 (32 constituencies), Province 1 (28) constituencies), Province 5 (26 constituencies), Province 4 (18 constituencies), Province 7 (16 constituencies) and Province 6 (12 constituencies).

The CDC was formed on July 20 to complete its task within 21 days. Its term was extended by 15 days on August 16. The new constituencies carved out by the CDC cannot be altered for another 20 years and the CDC recommendations cannot be challenged in any court of law, as per the constitution.

Meanwhile, federal and provincial polls will be held simultaneously in two phases in November 26 and December 7. 


Rasuwagadhi-Kerung becomes int’l crossing point


The Rasuwagadi-Kerung border point, the only trade route currently in operation between Nepal and China, has been upgraded to an international crossing point. Citizens from other countries besides Nepalese and Chinese can travel across the border.

No comments:

Post a Comment