With the recent decision of the Prime Minister on 8th November to end the validity of Rs. 500 and Rs. 1000 notes, the debate over black money has come to the fore. In India, black money is just a parallel economy. Most of the people who buy car, land, flat, gold and other "luxuries", go through this route. In this country, the jobs in real estate sector are primarily because of black money. So interesting right !! A situation which is a severe problem is reason for employment for many. Am I praising black money? No, Not At All. What I mean is something really very different, and that is the reason for this long post.
The real estate sector is driven by black money and perhaps that is the reason that it is simply not affordable. For a good for nothing type of 2 BHK flats one has to shell out 30 lakhs in average cities or places which are really at the extreme of the big cities. In Mumbai and Delhi one has to shell out 1 crore for two 9X10 room 2 BHK flat. Its simply ridiculous. Coming back to employment, the situation is simply amusing. The labourers who work day and night don't even get what is called minimum wages. The engineers who work on these sites, they simply blame themselves for the choice they have made. The bonus and the hike they get in their salaries is as high as 10%, but what is actually 10%, its nothing but a mere Rs 3000 hike. But in the other room, a few people mint heavy profits. The margin at which a flat is sold depends on the agency which has built it. A bad agency sells at a margin as high as 50% and if its reputed one, then the margin is at-least 100%. All this happens because they know that their customer have money, black or white, it doesn't matter.
The situation for land deals is even worse. There are many small towns whose land price are higher than that of Metropolitan cities. The land in my hometown are costlier than Patna, which is supposed to be the capital city of the state I belong to. All these purchase are made through black money which subsequently changes to black economy. The root is so strong that black economy is present in almost every home which is in middle class onward. Hardly any retailer pays taxes, the extremely rich have their own means to siphon off the money so that they can avoid taxes, the rest comprise of the government employees and private sector employees. The government sector employees have their cuts. The only category which can claim itself to be better than the others is the office going middle class which works with private sector.
Although I don't praise the recent demonetisation by Mr. Prime Minister but I do support it. There is a huge difference between praising and supporting. When I say I praise it, I mean I am assuming that it is going to solve almost all of the problems, which in my views would be a foolish mistake. But when I say I support it, it means that I assume that it won't worsen the problem of black money but definitely it will control it to some extent. The question is : to what extent and at what cost? For the first part, for now I can only say that if this step is not going to be followed by a proper taxation, the all this will go in vain and I can also say that it will definitely bring down corruption. It can be noticed well in the crash in the price of flat and lands by almost 30-40% across this country. Deposits in banks have spurred to 11 lakh crore (estimated money was 15 lakh crore which was in form of Rs. 500 and Rs. 1000) and it is already estimated that interest rates are going to go down. If interest rates are going to go down then it will be easier for the industry to take loan and repay them as the margin of profit in most of the businesses remain unaffected.
All easier said than done. The other point which I have not discussed is very important and crucial : "At what cost?". Definitely, the cost is heavy. The poor are the one who have been hit the hardest. They stand in queue, they are not getting paid as their employer doesn't have money, still many of them don't have a bank account, they don't have any black money but are still being punished indirectly, they are losing jobs, they are not able to sell their goods because they can't accept credit cards and the list goes on and on. Certainly, the government should have bothered about them more but does Mr Modi had other option regarding demonetisation. I don't think so because if he could have announced it earlier, then this program would have turned out to be a gimmick, if he had announced it after making preparation then there are chances that the news would have leaked out. Either ways there were hardships which had to be faced.
In my opinion what the government should learn from this whole exercise is the presence of very poor logistics in our country as the number crunch in logistics has not only taken a toll on the bank employees but also the logistic employees who are working round the clock. The government should look towards this very very crucial factor.
The real estate sector is driven by black money and perhaps that is the reason that it is simply not affordable. For a good for nothing type of 2 BHK flats one has to shell out 30 lakhs in average cities or places which are really at the extreme of the big cities. In Mumbai and Delhi one has to shell out 1 crore for two 9X10 room 2 BHK flat. Its simply ridiculous. Coming back to employment, the situation is simply amusing. The labourers who work day and night don't even get what is called minimum wages. The engineers who work on these sites, they simply blame themselves for the choice they have made. The bonus and the hike they get in their salaries is as high as 10%, but what is actually 10%, its nothing but a mere Rs 3000 hike. But in the other room, a few people mint heavy profits. The margin at which a flat is sold depends on the agency which has built it. A bad agency sells at a margin as high as 50% and if its reputed one, then the margin is at-least 100%. All this happens because they know that their customer have money, black or white, it doesn't matter.
The situation for land deals is even worse. There are many small towns whose land price are higher than that of Metropolitan cities. The land in my hometown are costlier than Patna, which is supposed to be the capital city of the state I belong to. All these purchase are made through black money which subsequently changes to black economy. The root is so strong that black economy is present in almost every home which is in middle class onward. Hardly any retailer pays taxes, the extremely rich have their own means to siphon off the money so that they can avoid taxes, the rest comprise of the government employees and private sector employees. The government sector employees have their cuts. The only category which can claim itself to be better than the others is the office going middle class which works with private sector.
Although I don't praise the recent demonetisation by Mr. Prime Minister but I do support it. There is a huge difference between praising and supporting. When I say I praise it, I mean I am assuming that it is going to solve almost all of the problems, which in my views would be a foolish mistake. But when I say I support it, it means that I assume that it won't worsen the problem of black money but definitely it will control it to some extent. The question is : to what extent and at what cost? For the first part, for now I can only say that if this step is not going to be followed by a proper taxation, the all this will go in vain and I can also say that it will definitely bring down corruption. It can be noticed well in the crash in the price of flat and lands by almost 30-40% across this country. Deposits in banks have spurred to 11 lakh crore (estimated money was 15 lakh crore which was in form of Rs. 500 and Rs. 1000) and it is already estimated that interest rates are going to go down. If interest rates are going to go down then it will be easier for the industry to take loan and repay them as the margin of profit in most of the businesses remain unaffected.
All easier said than done. The other point which I have not discussed is very important and crucial : "At what cost?". Definitely, the cost is heavy. The poor are the one who have been hit the hardest. They stand in queue, they are not getting paid as their employer doesn't have money, still many of them don't have a bank account, they don't have any black money but are still being punished indirectly, they are losing jobs, they are not able to sell their goods because they can't accept credit cards and the list goes on and on. Certainly, the government should have bothered about them more but does Mr Modi had other option regarding demonetisation. I don't think so because if he could have announced it earlier, then this program would have turned out to be a gimmick, if he had announced it after making preparation then there are chances that the news would have leaked out. Either ways there were hardships which had to be faced.
In my opinion what the government should learn from this whole exercise is the presence of very poor logistics in our country as the number crunch in logistics has not only taken a toll on the bank employees but also the logistic employees who are working round the clock. The government should look towards this very very crucial factor.
