Issuance Of Rs 2000 Note—A regressive step?
Oct 24, 2016

Author: PersonalFN Content & Research Team

Between 1938-1946 and 1954-1978, Rs 10,000 notes were in circulation. While there has been a growing demand to discontinue even Rs 500 and Rs 1,000 notes, the RBI and Government hold contrary ideas. RBI, based on its assessment of currency needs in the system, advises the Government on printing money or discontinuing circulation of notes of a particular denomination.

The Hindu Business Line, on October 21, 2016, published news that the RBI has been in the process of introducing Rs 2,000 bank notes into circulation. "The Reserve Bank of India has very nearly completed preparations for introducing this new high-value currency, sources said. The notes have already been printed, and their dispatch from the currency printing press in Mysuru has commenced", the newspaper brought out.

Although the news remains unconfirmed, neither the Government nor RBI has denied any such development either. Read in one way, issuance of Rs 2,000 notes would help RBI cut costs. Read in another, it may give rise to social evils.

Let's take a closer peek:

Positives

If RBI introduces Rs 2,000 notes, they will make your wallets lighter. Apart from that, India would save on costs associated with supplying currency notes. To print the Rs 1,000 note, the RBI shells out Rs 3. This excludes the logistics costs. Issuance of Rs 2,000 notes would further improve the cost-value proportion. But benefits end right here.

Negatives

Circulating high denomination notes not only gives rise to chances of black money formation but also exposes a country to the threat of fake currency. It's rather simple and cost effective to re/produce counterfeit currency of high denomination. Do you remember, until recently many shopkeepers were wary of accepting the Rs 500 note as there was a possibility of these being fake. Then imagine what would happen if counterfeit Rs 2,000 currency notes were in circulation. High-value notes raise the inflationary risks significantly.

At present, Rs 500 and Rs 1,000 notes account for 86.4% of total Rs 16.41 lakh crore in circulation. The introduction of the Rs 2,000 note would further marginalise the proportion of other currency notes in the whole pie. This leaves us with some serious questions unanswered.

For whom are these notes being issued?

High value notes become ready facilitators for tax evaders and those who carry out illegal activities.

Many households in India have their monthly savings well under Rs 2,000. There would be far fewer families who might spend Rs 2,000 in a single transaction. Proponents of high-denomination bank notes often argue that many merchandise trades in India happen in cash because shopkeepers lack the facility of card swiping machines and thus cannot encourage plastic money. They also suggest that the literacy rates are still too low to expect the extensive use of plastic money. Still, the question remains—how are Rs 2,000 notes going to help?

Perils of issuing high denomination currency notes…

High denomination bank notes encourage high-value cash transactions
They also promote under-the-table dealings
And their further circulation in the economy can be highly inflationary

The harsh reality is, such high-denomination notes will only help the politicians who buy votes, shopkeepers and businessmen who create black money by selling goods for cash, and bureaucrats who get their palms greased. All these put together, channelise money into gold and real estate markets, inflating prices and depriving the genuine buyer. Aren't these social evils?

PersonalFN believes, the Government who says it is serious about curbing the black money circulation will understand the disadvantages of issuing high-denomination currency notes and reconsider its decision.

Otherwise, promoting payment banks, running an Income Declaration Scheme (IDS), linking Aadhaar numbers with Income Tax Returns (ITRs) and bank accounts would mean little. It would be the case of taking one step forward and two step backwards.

The negatives of bringing Rs 2,000 notes into circulation far outweigh the benefits of cost saving. Hopefully, the RBI and Government would avoid being penny wise, pound foolish. Else, we might end up burying our heads in the sand on the issue of black money.

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Comments
sunil@hitachi.co.in Nov 04, 2016 In today's modern word with robust banking infrastructure and various virtual money options like paytm, the currency specially high value in circulation has no meaning and should be restricted. The introduction of high value currency has no merits and will only support tax evaders and black market. All high value transactions should be thru banking channel and no cash should be allowed to be used. For smaller transactions, virtual banking/mobile banking can be used. If the intentions are right then only formal banking or virtual money like Paytm should be used and currency usage should be restricted. But if the intention are bad then there is no bright future for country....
hcp@recruitguru.com Nov 07, 2016 Still , there is Hope Someone is supposed to have said : " A Government can only prevent BAD things from happening : it cannot make GOOD things to happen " But , NDA government is proving that someone wrong ! Under its DIGITAL INDIA initiative , just look at all these WONDERFUL / GOOD things that are actually happening : * Aadhar based Unique Identification * Jan Dhan Bank Accounts needing ZERO deposits * UPI ( Unified Payment Interface ) / RuPay * Digital Locker * Unified Mobile App for New Age Governance And a host of other initiatives that will change the boundaries of our ECONOMY in next 2 years But the greatest CHALLENGE continues to evade the WILL of the POLICY MAKERS , viz: " How to permanently eliminate CORRUPTION and BLACK MONEY ? " Despite the fact that , there is a , SIMPLE / SUPER-FAST / SURE and CHEAP solution , " hiding in plain sight " ! Viz : Replace existing Rs 500 / 1000 , paper Currency Notes with new / plastic currency notes , embedded with RFID micro - sensors ( one fiftieth the thickness of a human hair ) , announcing their presence to IT / ED , if concentration exceeds Rs 1 crore in any ONE square meter area , anywhere in India ! Question : Is there a POLITICAL WILL to implement this ? { Short Answer : NO / Long Answer : Ask Shri Narendra Modiji } And if anyone has ANY DOUBT as to the feasibility / practicality of my suggestion , let him read following news report which appeared in Economic Times ( Nov 6-12 / 2016 ) : ------------------------------------------------------------------------------------------------------- ARROW SMART SHIRT Arrow is first off the block with a " Smart Apparel in India " - simply called the Smart Shirt Available in multiple colors , the shirt has a programmable NFC tag embedded in the left sleeve cuff You download the free Arrow Smart Shirt app from Google Play on your phone and set up your profile The initial set up requires you to connect your social media accounts , choose your favorite app , song and playlist You can then use the app to configure the NFC tag on the shirt to perform a function - it could be to share your Contact Card , switch your phone to vibrate mode , start playing your favorite song or launch an app - you can re-programme the tag as and when you want to perform a different function Just tap on the left sleeve and you are notified with a slight vibration when the NFC tag is configured as well as when it performs the preset function Over time , we found it easier to tap on the shirt than unlock the phone and then navigate the menu to perform various functions Granted , it's a very basic application of smart functionality , but it does help in making some routine tasks faster ------------------------------------------------------------------------------------------------------- This frugal application of embedding a NFC tag ( basically , a RFID sensor ) in a washable cloth shirt ( selling for Rs 3,000 ) , might earn Arvind Group , a few hundred crores of rupees in next 5 years Apparently , even that small amount of revenue , is a big enough deal for a Private Sector company to innovate / experiment But , if my suggestion is implemented , that might bring into the productive ECONOMIC MAIN STREAM , Rs 50 lakh*crores worth of BLACK MONEY , within ONE YEAR ! Cost of RFID sensor ? 10 paise per piece of that plastic Currency Note ! Implementation time ? 6 months from the word " GO " ! What about its POLITICAL IMPLICATIONS ? 400 + seats for BJP in 2019 Lok Sabha Election ! I am still hoping that Shri Modiji will seize this OPPORTUNITY of a NATION's LIFE TIME ! ------------------------------------------------------------------------------------------------------- 07 Nov 2016

Comments

sunil@hitachi.co.in
Nov 04, 2016

In today's modern word with robust banking infrastructure and various virtual money options like paytm, the currency specially high value in circulation has no meaning and should be restricted. The introduction of high value currency has no merits and will only support tax evaders and black market.

All high value transactions should be thru banking channel and no cash should be allowed to be used. For smaller transactions, virtual banking/mobile banking can be used. If the intentions are right then only formal banking or virtual money like Paytm should be used and currency usage should be restricted. But if the intention are bad then there is no bright future for country....

hcp@recruitguru.com
Nov 07, 2016

Still , there is Hope

Someone is supposed to have said :

" A Government can only prevent BAD things from happening : it cannot make GOOD things to happen "

But , NDA government is proving that someone wrong !

Under its DIGITAL INDIA initiative , just look at all these WONDERFUL / GOOD things that are actually happening :

* Aadhar based Unique Identification

* Jan Dhan Bank Accounts needing ZERO deposits

* UPI ( Unified Payment Interface ) / RuPay

* Digital Locker

* Unified Mobile App for New Age Governance

And a host of other initiatives that will change the boundaries of our ECONOMY in next 2 years

But the greatest CHALLENGE continues to evade the WILL of the POLICY MAKERS , viz:

" How to permanently eliminate CORRUPTION and BLACK MONEY ? "

Despite the fact that , there is a ,

SIMPLE / SUPER-FAST / SURE and CHEAP solution , " hiding in plain sight " !

Viz :

Replace existing Rs 500 / 1000 , paper Currency Notes with new / plastic currency notes , embedded with RFID micro - sensors ( one fiftieth the thickness of a human hair ) , announcing their presence to IT / ED , if concentration exceeds Rs 1 crore in any ONE square meter area , anywhere in India !

Question :

Is there a POLITICAL WILL to implement this ?

{ Short Answer : NO / Long Answer : Ask Shri Narendra Modiji }

And if anyone has ANY DOUBT as to the feasibility / practicality of my suggestion , let him read following news report which appeared in Economic Times ( Nov 6-12 / 2016 ) :

-------------------------------------------------------------------------------------------------------

ARROW SMART SHIRT

Arrow is first off the block with a " Smart Apparel in India " - simply called the Smart Shirt

Available in multiple colors , the shirt has a programmable NFC tag embedded in the left sleeve cuff

You download the free Arrow Smart Shirt app from Google Play on your phone and set up your profile

The initial set up requires you to connect your social media accounts , choose your favorite app , song and playlist

You can then use the app to configure the NFC tag on the shirt to perform a function - it could be to share your Contact Card , switch your phone to vibrate mode , start playing your favorite song or launch an app - you can re-programme the tag as and when you want to perform a different function

Just tap on the left sleeve and you are notified with a slight vibration when the NFC tag is configured as well as when it performs the preset function

Over time , we found it easier to tap on the shirt than unlock the phone and then navigate the menu to perform various functions

Granted , it's a very basic application of smart functionality , but it does help in making some routine tasks faster

-------------------------------------------------------------------------------------------------------

This frugal application of embedding a NFC tag ( basically , a RFID sensor ) in a washable cloth shirt ( selling for Rs 3,000 ) , might earn Arvind Group , a few hundred crores of rupees in next 5 years

Apparently , even that small amount of revenue , is a big enough deal for a Private Sector company to innovate / experiment

But , if my suggestion is implemented , that might bring into the productive ECONOMIC MAIN STREAM , Rs 50 lakh*crores worth of BLACK MONEY , within ONE YEAR !

Cost of RFID sensor ? 10 paise per piece of that plastic Currency Note !

Implementation time ? 6 months from the word " GO " !

What about its POLITICAL IMPLICATIONS ?

400 + seats for BJP in 2019 Lok Sabha Election !

I am still hoping that Shri Modiji will seize this OPPORTUNITY of a NATION's LIFE TIME !

-------------------------------------------------------------------------------------------------------

07 Nov 2016