RBI’s action endorses need of Arthakranti!

On 22nd Jan 2014, RBI announced about withdrawal of all currency notes issued prior to 2005. As reported in all media, it has been understood to be a move ‘to counter black money and to weed out fake currency circulating through the system’. (News in Media)

In that context, here are some important points to be considered:

-          In one way, this is good news. Represented in action, there seems to be RBI’s agreement on the point that issuance of vulnerable currency notes has resulted into rise of black money and fake currency

  • This demonstrates that it is practically doable to remove large amount of currency notes from the economy.

About weeding out fake currency:

-          Fake currency is no doubt harmful; it not only damages economy but also facilitates even more damaging anti social and anti national activities like terrorism. More on that can be read at ‘How fake currency funds terror’. However there are some very logical yet critical aspects of fake currency as given below, which are never discussed!

-          What facilitate printing fake currency is ‘high value denomination’ currency notes.

  • Average cost of printing a note is  = about Rs. 3 to Rs. 4
  • And there is also some cost involved in bringing that into circulation through illegal means => so total cost may go up to Rs. 30 to Rs. 40.
  • Then it is evident that there is huge benefit in printing fake currency notes of denomination 500, 1000 and even 100. That’s why of the detected fake currency in recent years, about 99% of it is in denominations of 100, 500 and 1000.

So RBI’s move to remove the vulnerable currency is definitely welcome, however more needs to be done because since 2005 the amount of Rs. 1000 currency notes has gone up by 20 times, from Rs. 964 billion to Rs. 19051 billion

Currency_1000

As long as these high denomintation currency notes are there, we are in vulnerable condition. This clearly endorses rationality of the demand about removal of high denomination currency notes as per Arthakranti proposal!

 

‘How this will be effective?’ can be read from the short paper (abridged version of research report), it can be downloaded from this LINK.

5 thoughts on “RBI’s action endorses need of Arthakranti!”

  1. There is some countries in Asia following this system already and they are collecting revenue through their service basis only.

  2. RBI should ask people to deposit all such money in bank account only. This way black money will be recovered. There should be no exchange of Note to Note , it has to be used through any bank account only.

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