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Monday June 3rd, 2024

Demonetization is theft; India going cashless is a joke: Steve Hanke

ECONOMYNEXT – Demonetisation is always theft and its contradictory effect on the money supply, coupled with a negative confidence shock, will hurt Indian growth, a top international economist said.

"Demonetisation is, in principal, a mistake because it involves a theft – taking of private property by the State," Hanke told Rediff.com, a popular internet portal in India.

"As a practical matter, it is one of those bad Indian ideas that has been tried twice in the past in India, with two failures for the record books."

 
"It should be noted that the record books are filled with failed demonetisation (theft) programmes. For example, the bright boys in North Korea engaged in a demonetisation of the won in 2009, and like night follows day, it was a disaster and further fueled an expansion of North Korea’s underground economy."

Ironically, Indian Prime Minister Naredran Modi decided to demonetise (make worthless) large denomination rupee notes overnight, sending the Indian economy and the lives of ordinary Indians into a tailspin.

The ostensible reason of making paper money worthless was the failure of the Indian law enforcement authorities to combat corruption and a black economy.

"The reason for the massive underground economy and associated black money in India is because of government regulations, a weak rule of law and uncertain property rights," explains Hanke. "This state of affairs will be very hard to change."

India’s broad money supply has already taken a hit with economic activity, especially rural India taking a hit.

"Unless the Reserve Bank’s monetary policies and policies associated with commercial bank regulation and supervision can be altered to get broad money and credit to the private sector back on track, slower nominal growth is baked in the cake," Hanke warns.

In addition to domestic citizens, money changers in several Asian cities where there were a large number of expat Indians and their customers were badly hit, underlining the fact that the Indian rupee was a third world currency in which confidence was sadly misplaced, analysts have said (Sri Lanka should never again demonetise like India, giving reasons to trust the dollar: Bellwether).

"Demonetisation will do what it’s already been doing: It will throw a wet blanket on the rupee, which is a second-rate currency in any case," adds Hanke. "Ask any Indian whether they would prefer the rupee or the US dollar in their pockets."

Meanwhile, India’s government has tried to dress up the fiasco as a move to make the country cashless.

"The idea of India going cashless is a bit of a joke," says Hanke. "India has been one of the most cash-intensive economies in the world for many moons. Whoever believes that India can become cashless in the foreseeable future must believe in the tooth fairy." (Colombo/Feb13/2017)

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Water levels rising in Sri Lanka Kalu, Nilwala river basins: Irrigation Department

Sri Lanka Navy assisting in rescue operations (Pic courtesy SL Navy)

ECONOMYNEXT – Sri Lanka’s Irrigation Department has issued warnings that water levels in the Kalu and Nilwala river basins are rising and major flooding is possible due to the continuous rain. People living in close proximity are advised to take precautions.

“There is a high possibility of slowly increasing prevailing flood lowline areas of Kiriella, Millaniya, Ingiriya, Horana, Dodangoda, Bulathsinhala, Palinda Nuwara and Madurawala D/S divisions of Ratnapura and Kalutara Districts, up to next 48 hours,” it said issuing a warning.

“In addition, flood situation prevailing at upstream lowline areas of Ratnapura district will further be prevailing with a slight decrease.

“The residents and vehicle drivers running through those area are requested to pay high attention in this regard.

“Disaster Management Authorities are requested to take adequate precautions in this regard.”

The island is in the midst of south western monsoon.

DMC reported that 11,864 people belonging to 3,727 families have been affected due to the weather in Rathnapura, Kegalle, Kilinochchi, Jaffna, Mullaitivu, Kalutara, Gampaha, Colombo, Galle, Matara, Hambantota, Puttalam, Kurunegala, Kandy, Nuwara Eliya, Anuradhapura, Polonnaruwa, Badulla, Moneragala, and Trincomalee districts.

Meanwhile, the Meteorology Department stated that showers are expected on most parts of the island today.(Colombo/June3/2024)

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UNP gen secy defends call for postponing Sri Lanka poll, claims opposition silent

The UNP party headquarters in Pitakotte/EconomyNext

ECONOMYNEXT — United National Party (UNP) General Secretary Palitha Range Bandara has defended his call for postponing Sri Lanka’s presidential election by two years, claiming that his proposal was not undemocratic nor unconstitutional.

Speaking to reporters at the UNP headquarters Monday June 03 morning, Bandara also claimed that neither opposition leader Sajith Premadasa nor National People’s Power (NPP) leader Anura Kumara Dissanayake have spoken against his proposal.

“I have made no statement that’s undemocratic. My statement was in line with provisions of the constitution,” the former UNP parliamentarian said.

He quoted Section 86 of Chapter XIII of the constitution which says: “The President may, subject to the provisions of Article 85, submit to the People by Referendum any matter which in the opinion of the President is of national importance.”

Sections 87.1, 87.2 also elaborates on the matter and describes the parliament’s role, said Bandara.

“I spoke of a referendum and parliament’s duty. Neither of this is antidemocratic or unconstitutional. As per the constitution, priority should be given to ensuring people’s right to life,” he said.

“Some parties may be against what I proposed. They may criticse me. But what I ask them is to come to one position as political parties and make a statement on whether they’re ready to continue the ongoing economic programme,” he added.

Bandara claimed that, though thee has been much criticism of his proposal for a postponement of the presidential election, President Wickremesinghe’s rivals Premadasa and Dissanayake have yet to remark on the matter.

“I suggested that [Premadasa] make this proposal in parliament and for [Dissanayake] to second it. But I don’t see that either Premadasa nor Dissanayake is opposed to it. To date, I have not seen nor heard either of them utter a word against this. I believe they have no objection to my proposal which was made for the betterment of the country,” he said. (Colombo/Jun03/2024)

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300 of 100,000 trees in Colombo considered high risk: state minister

ECONOMYNEXT – Trees in Sri Lanka’s capital Colombo are being monitored by the municipal council, Army and Civil Defense Force as the severe weather conditions continue, State Minister for Defense Premitha Bandara Tennakoon said.

“Within the Colombo Municipal Council city limits, there are 100,000 trees. Of these, around 300 are considered high risk,” Tennakoon told reporters at a media conference to raise awareness about the current disaster management situation.

Not all trees required to be cut down he said. “We can trim some of the branches and retain them.”

The problem was that buildings in the vicinity of the tree had cut branches on one side, causing it to become unbalanced, the minister said.

New laws would be brought in so provincial/municipal institutions could strengthen enforcement of building codes.

“We don’t have a single institution that can issue a warning about a tree. Not one to tell us what trees can or cannot be planted near a road.

“Trees should be suitable for the area. Some trees have roots that spread and damage roads, buildings. When the roots can’t go deep, they tend to topple over.

“Now Environment Day is coming up, and anyone can go plant a tree by the road. We have to take a decision about this. We have to enforce laws strongly in future.” (Colombo/June3/2024)

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