Affects of Demonetization.

·        Hello there !!

·        After going through the expert's opinion on the current Demonetization I could gather the following for  a brief read. 

·        · Economic experts say Commodity transactions and general cash market transactions are likely to feel an immediate impact. Unorganised sector, including small trade market activities, will remain volatile in the short-term.The largest impact of the government’s move will be in the unorganised sector, which isn’t represented in the markets.

·        ·       All experts agree that Real Estate will be one of the most affected sectors .This industry is known to entertain cash transactions of large magnitude. More loans given out increases the  broad money supply and creates inflation. With less potential buyers in the market and fewer people having white money, the demand for the land goes down and drives down its price.Experts said the primary market will not be impacted but resale market will feel the pinch. 

·        ·       Other experts and leading personnel in the field is of the opinion that it may cause some pain in the short-term, but the long-term outlook for the industry looks positive.  Along with real estate regulatory law, GST and Real Estate Investment Trusts would further improve transparency and increase investor confidence in the real estate market. 

·        ·       Some experts state that it will not have any impact on the primary residential segment as the buyers in this sector are driven by mortgage. The impact will be felt in the secondary market and the unorganised developers community where there are  cash dealing. Overall there could be downward pressure on prices, which will boost demand.  

·        ·       Some jewellery experts  felt that the Indian jewellery market will be the worst hit with the ban on Rs500 and Rs1000 currency notes.  About 70-75 per cent of jewellers in the country are unorganised. But 25 per cent of the organised jewellers are contributing more than 80 per cent business. India is the world's largest gold consumer and imports a sizeable chunk of its total annual consumption of around 900-1,000 tonnes

·        ·       Banking experts state that since banks are the back bone of this entire process they are  also the biggest beneficiaries. Post complete exchange of currencies, banks should benefit from higher deposits and transaction volumes, lower cash handling costs and greater acceptance of digital channels. There are likely to be secondary benefits for the insurance, asset/wealth management companies through higher financial savings. The Nifty closed 1.31% down, Bank Nifty closed higher by 0.09% giving a confirmation of the same. 

·        ·   Some experts say the entertainment, restaurants sector could be affected . One of the most common areas, where undisclosed income is utilised, is the entertainment and restaurant industry. There are plenty of restaurants that accept Credit and Debit Cards, however the road side dhabas and other unorganised sector will be affected, since a majority of the transactions are in cash form in here .People may not opt for entertainment and eating out in the short term in the same scale they did earlier. 

·        ·       Other sites are of the opinion that beauty parlours could be affected since this  booming industry  works largely on cash. In the past few years, beauty parlours have mushroomed on almost every street of urban and semi-urban India. Although  larger, organised parlours  accept credit and debit card payments, most parlours transact mainly in cash because it is often seen as a luxury spending fuelled by unaccounted income. 

·        ·        Some experts say tourism could be hit as  favourite foreign tourist destinations of Indian people like Thailand, Singapore, Malaysia, Maldives, Hawaii, Vietnam, Sri Lanka, Nepal, China, Indonesia and Dubai will see a negative impact in tourism revenues as all black money sponsored trips will come to a halt. Indian Local Tourism will also get affected as they lose large chunks of the pay-in-cash-only clientele. Illegal foreign currency conversion is also reported to be badly hit because they were big acceptors of Rs500 and Rs1000 denomination currency.  

·        ·        Experts state that Luxury items will have a drastic negative impact. The Majority of the people spend their undeclared income on such products. It is likely that all luxury segments like clothing, electronics, luxury car, furnishing and allied business will take a hit. Media and hospitality industries are also likely to get affected.

·        ·       Some sites say that , sectors that  will have a low impact are the – Pharma, FMCG, Education, Agriculture, Hospitals, Energy and Telecommunication.

·        ·       There is a Whats app joke going the rounds: When PM Modi says  “My dear country men,  in a national address, all of us gets goose bumps and the shivers.  What will he do next ? 

'Demonetization'

Hello there !!

Something on the topic everyone is affected by in India.

"I know the forces up against me, they may not let me live... they may ruin me because their loot of 70 years is in trouble, but I am prepared,"  PM Modi  in an emotional speech in Goa.

Demonetization is the act of stripping a currency unit of its status as legal tender. Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit. It is a   step in which a currency unit’s status as a legal tender is declared invalid. A recent example of demonetization occurred when the nations of the European Monetary Union adopted the euro. In order to switch to the euro, authorities first fixed exchange rates for the varied national currencies into euros. 

When the euro was introduced, the old national currencies were demonetized. However, the old currencies remained convertible into euros for a while so that a smooth transition through demonetization would be assured. Countries like Zimbabwe, Fiji, Singapore and Philippines  have opted for currency demonetisation.

According to a blog by  Raja Mitra (RM) the purpose of demonetization' is to :

1.To shakeup the stock of unaccounted money hoarded as cash.

2. To project as a bold & effective step against 'black money' ( term used for unaccounted money in India) and about unearthing it, during campaigns for elections.

But it has its advantages and disadvantages also。

Pros:

1. Shakes up the stocks of 'unaccounted money' hoarded outside the banking system as cash.

2. Disrupts the cycle of hoarding of unaccounted money as cash by individuals or organizations for a certain period of time.

Cons:

1. Does not shake up or control big-ticket corruption largely.

2. Without various systemic changes, rationalizations of tax structures, controls & regulations and the effective implementation of these, does nothing to control the generation & 'circulation' of unaccounted funds over the mid-term.

3. Causes major disruption & losses in the short-term to small & cash-based businesses and wage workers & the extent of daily transactions for these individuals & businesses.

4. Does not affect unaccounted funds circulating in the real-estate & property sector, parked in assets like gold, silver & diamonds, unaccounted funds going out of the country and round-tripping its way back into the country as FDI. Does not address or redress the root causes of why so many Indian banks have run up such huge 'NonPerforming Assets' (NPAs)

A handful of national currencies such as the U.S. dollar and the euro have achieved global status as reserve currencies and are extensively used in international trade transactions. The euro has supplanted the national currencies of a number of nations that comprise the European Union. The national currencies of some countries such as the United Arab Emirates are pegged or fixed to the U.S. dollar.

In India’s case, the move has been taken to curb the menace of black money and fake notes by reducing the amount of cash available in the system. It is s not the first time the Government of India has gone for the demonetization of high-value currency. It was first implemented in 1946 when the Reserve Bank of India demonetised the then circulated Rs 1,000 and Rs 10,000 notes. The government then introduced higher denomination banknotes in Rs 1000, Rs 5000 and Rs 10000  eight years later in 1954 .

The  Morarji Desai government demonetized these same notes in  January1978.  The move was enacted under the High Denomination Bank Note (Demonetisation) Act, 1978. Under the law all “high denomination bank notes” ceased to be legal tender after January 16, 1978. People who possessed these notes were given a weeks time  till January 24 the same year to exchange the high denomination bank notes. But then the  currency of higher denomination was barely in circulation, unlike the Rs 500 and Rs 1000 note today which is in possession by rick pullers also.

PM held a midnight meeting on Monday with his high financial officials and it was decided that the use of old denomination notes would be extended to 24th Nov midnight, in particular places like government hospitals, petrol bunks etc.  Banks were advised on Sunday to increase the Cash Withdrawal limit at ATMs from the existing Rs 2000 to Rs 2500 per day in the recalibrated ATMs. The weekly limit of Rs. 20,000 for withdrawal from Bank accounts has also been increased to Rs 24,000 and the limit of Rs 10,000 per day has been removed.

The Opposition have banded together against the demonetization, with the Congress and Arvind Kejriwal accusing PM Modi of leaving ordinary people in trouble . The Congress and Bengal Chief Minister Mamata Banerjee's Trinamool will meet today to plan a united attack in Parliament. Ms Banerjee  to arch rival CPM's Sitaram Yechury yesterday to form a consensus to attack the government.

But as per the common belief  and opinion of  analysts, this bold  move has been  broadly welcomed. Saying that even if consumer spending will likely dip in the short term as the new notes make their way into circulation,  it will be a big boost to the GDP in the long term. The European Union and other world economic bodies have also welcomed the move.

Assam Tea

Tea gardens of Assam

Hello there !!
Let's have some tea. 

The state of Assam is the world's largest tea-growing region, lying on either side of the Brahmaputra River, and bordering Bangladesh and Myanmar. This part of India experiences high precipitation; during the monsoon period, as much as 10 to 12 inches (250–300 mm) of rain per day. The daytime temperature rises to about 96.8F (36 °C), creating greenhouse-like conditions of extreme humidity and heat. This tropical climate contributes to Assam's unique malty taste, a feature for which this tea is well known.

The state of Assam (name derived from ‘Asom’, meaning one without equals), which includes the northern Brahmaputra valley, the middle Karbi and Cachar hills and the southern Barak valley, is home to the single largest contiguous tea growing region in the world. The region goes through extremely humid summers and heavy rainfall from March to September. Assam is also home to India’s largest tea research center, which is located at Tocklai in Jorhat, and is managed by the Tea Research Association.

Tea plantations in Assam grow the Camelia Sinensis var Assamica variety of the tea plant. Assam is the only region globally where tea is grown in plains, and also the only other region apart from Southern China, which grows its own native tea plant. Tea from Assam has a rich, full-bodied, deep amber liquor with a brisk, strong and malty taste, making it ideal for the early morning cup. Second flush orthodox Assam teas are extremely popular for their distinctive taste and bright liquor. Orthodox Assam teas have been registered as a geographical indication (GI) in India.

Assam tea is a black tea named after the region of its production, Assam,  this tea, most of which is grown at or near sea level, is known for its body, briskness, malty flavour, and strong, bright colour. Assam teas, or blends containing Assam, are often sold as "breakfast" teas. For instance, Irish breakfast tea, a maltier and stronger breakfast tea, consists of small-sized Assam tea leaves. 

According to a site called teabuddy.wordpress.com, there are two  kinds: Orthodox and CTC, both named after the manufacturing process used to create them. The leaf used from the bush (Camelia Sinesis) is the same in both cases.  Quality leaf is determined by the pedigree and health of the tea bush and by careful hand-plucking. But like wine, tea manufacture is a fine art involving years of experience, in-depth know-how and often closely guarded secrets. The crucial step in making black tea is to allow the juices in the rolled fresh leaves to darken from contact with the air. Tea makers call this process “fermentation,” although, technically, it is “oxidation.”  The dark substances that form while the tea leaves are exposed to the air is produced by the chemical reactions of the tannins in the tea.  The leaf is spread out and left to wilt, losing some moisture, stiffness and much of its weight. Then it’s rolled, exposing essential oils to the air and thus starting the oxidation process. When the leaves have transformed sufficiently,  they are “fired,” dried over heat to stop the oxidation process.

The four grades of Orthodox black tea are: 

1. Flowery Orange Pekoe (the small leaf next to the bud). 

2. Orange Pekoe (the second leaf next to the bud).  3. Pekoe (the third leaf next to the bud). 4.  Souchong (the fourth leaf next to the bud).

TGFOP (Tippy Golden Flowery Orange Pekoe) is the highest grade of Orthodox Assam, hand-processed in small quantities at the finest plantations. TGFOB fetches top prices in the Arab world. It is drunk “pure” without milk. At the bottom of the barrel are the Fanning’s and Dust. This is the tea that go into tea bags. Tea Dust is also what is boiled in milk and spices to create Indian street chai.

CTC TEA: At the start of the 20th century when tea drinking caught on in the UK,  British tea companies started experiments in Assam and the CTC method invented and used to the increased volume of tea. CTC is the acronym for Crush, Tear & Curl.

It describes the factory process used to make the tea which is similar to that of orthodox tea manufacture but instead of the leaves being rolled as a final stage, they are passed through a series of cylindrical rollers with hundreds of small sharp “teeth” that Crush, Tear, and Curl the leaf into tiny little balls.

CTC tea gives double the cup page for the same weight as orthodox. For example one Kg. of CTC tea yields around 500 cups compared to 250 cups from Orthodox. The quality of Orthodox, however is better than CTC as the coarse leaf is discarded at the time of manufacture by shifting.

Pekoe simply denotes the size of the tea particle. The smaller the particle size the quicker and stronger the brew. Large whole leaf teas tend to brew slower and lighter and have more subtle flavors than small leaf teas.

More in next.

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