WILL HE, WON’T HE? Rumours swirl about another demonetization by PM Modi, now of Rs 2000 currency note


NEW DELHI: Will Prime Minister Narendra Modi come up with another big Demonetization exercise – this time, to scrap the Rs 2000 notes his previous government introduced and bulk-produced immediately after the November 2016 Demonetisation of high-value currency notes of Rs 500 and Rs 1,000 denominations? 

Rs 2000 notes are now the largest stocked and massively hoarded item in the black market.

Reports on Friday said some financial entities have advised their staff to avoid accepting the Rs 2,000 notes, as there is a scare about scrapping the currency note anytime now. There are reports that blackmoney  stockpile and movement now largely centered around Rs 2,000 notes. The government is aware of this, and might likely act in ways as to give a new shock to the black money hoarders.

“These financial firms have also directed their accountants to deposit cash balances of Rs 2,000 notes in banks,” a report said. True, the government has made no statement or given any hint about a fresh bout of demonetization yet.

Notably, former economic affairs secretary SC Garg stated in a policy document that people were apparently hoarding black money in easy-to-handle Rs 2,000 bundles. A bundle of this currency would mean a stock of Rs two lakh; and 50 bundles would mean Rs one crore. A small hand-held briefcase can, thus, be carrying as high as Rs 3crore or more. He also made it clear that scrapping of this high-denomination note will not cause any disruption in the market.

He said the Rs 2,000 bank notes accounted for about one-third of the currency notes in circulation in value terms, but are less visible in day-to-day transactions. “A good chunk of Rs 2,000 notes are actually not in circulation, having been hoarded. Rs 2,000 note, therefore, is not presently working as a currency of transaction,” Garg said in the policy note.

Notably, PM Modi who announced the demonetization of high-value currency in 2016 November drew flak later for the problems it caused. There were long queues before bank branches to deposit old notes and get new ones. There was a shortage of new notes, as printing of new Rs 500 and Rs 2,000 notes in bulk took time at the printing centres. Transport of the money in a jiffy was also another problem, though helicopters were employed for their reach to major cities. Also, the new notes were of a different size that the existing ATM machines could not dispense with these notes. 

The markets suffered due to lack of currency notes for daily use. Even labourers were seriously hit as their masters did not have money in hand to pay them. The secrecy with which the step was implemented led to problems in the execution of the plan by the finance ministry then headed by Arun Jaitley, and the RBI. In other words, there was no advance planning, for feat that the hoarders of high-value notes will play their games and defeat the government’s purpose, namely to check black money hoarding and circulation.

Several people have now turned black money into gold and put them in bank lockers. In the case of a likely demonetization of the Rs 2,000 notes, this could happen, though receipts are now a must for purchase of gold from shops. With no proper system of evaluation in place, bank managers also colluded with black-money holders in their attempt since 2016 to turn black into white though dubious channels. –IHN-NN

INDIA HERE AND NOW www.indiahereandnow.com email:indianow999@gmail.com

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