Demonetization Impact - How it is enabling the users?

I could not stop myself from writing this; hence, here is the post. This is important because of its relations to demonetization.

For any dairy shop (who delivers milk to all households plus over the counter sales), the most important customers are those whom they deliver pre determined milk at customers' houses. They are bulk customers and they also order other essentials like bread, ghee, paneer, curd, sweets, cold drinks etc but it happens seldom. However the payments come in a lag of 1 month. These book sales are over and above the counter sales where customers buy dairy items as per daily needs.
After demonetization, I advised my dairy person to go digital, either go for paytm or swipe machines. Also I made him understand how his sales would increase and how customers would also be happy as they get debit/credit card loyalty points which are encashable.
Today when I went to pay the last month bill, I carried a cheque with myself and was pre-determined that I won't pay cash. I asked him how he will take the payment and asked if he would prefer taking a cheque which he agreed. It was a surprise for me as he got opened a new current account in next door bank, #corporationbank. When he said that he got a swipe machine too, I was thrilled. He got the mini swipe machine (GPRS enabled POS without print options, size of man's purse) by #corporationbank . I asked in detail about the cost and he said the bank would charge of Rs 600-700 per month with a facility of minimum Rs 100 transaction.
Then definitely my next question was, "did sales increase". His answer was a big "YES". It went up by 15-20% within a week. Now understand how it increased. We all agree that to a certain extent we have become tech savvy and prefer to pay through card. All his customers started ordering his other items like bread, curd, cold drinks, ghee and other dairy items over the phone, mind it earlier the same customers including me used to buy from their respective nearby shops and used to pay in cash. Overall the average monthly bill of all "over the home" customers will increase. Banking transactions will go up.

Now why I am writing this post? Many of my friends and known accomplices have been complaining tooth and nail about the difficulties Indians are facing even if he/she are not facing any problem post demonetization. Yes the govt should have been better prepared but don't forget it's a bold step which will have positive impact in longer term. And there would be lakhs of similar story throughout India, crores of additional banking transactions and lakhs of additional income tax payees which will enable the government to reduce the tax rates in future.

I am happy to see these changes in my lifetime and am contributing in whatever way I could by giving the right advise and enablers. Let us all come together and build a new nation.

#digitalpayment #demonetization #deshbadalrahahai #yourcontribution

Race to the bottom – logical but funny reason for negative interest rates

Since the crash of commodity prices specially crude oil which has contaminated other commodity assets with downward spiral, the whole world is staring at 2008 repeat; at least they are talking about the letter, ‘R’ i.e. Recession. This may be far from true but few nations like Japan and much of Europe who are experiencing low inflation and weak growth, there is a “race to the bottom” in which their respective central banks vie to reduce interest rates further into negative territory.

The reasons might be very logical but the most binding is that there will come a point at which it makes sense to transfer bank deposits into cash, as the rate of negative interest outweighs the cost and inconvenience of holding and transacting into bank notes. 

And here comes the funny part which holds true logically. The storage cost for gold is 0.2% or so of its value per annum; however, the cost of securely storing and moving large piles of cash is likely to be higher than of gold, because in most currencies, the value of banknotes storable in a given space is much lower. Capital Economics guesses that this cost could be around 1.5-2%, implying a lower bound on deposit rates as low as -2%. In practice, the lower bound is likely to vary between countries. The table depicts the picture clearly. 

Whatever be the consumers’ move, the government’s intention is to make people spend and let the economy grow.

Happy Investing :-)