Demonetisation again?
There are signs of another currency ban coming
Is the Central government quietly planning another round of demonetisation? A large number of people believe the Rs 2,000 note will be scrapped. Now the talk has reached Parliament too.
The Opposition in Rajya Sabha today asked Finance Minister Arun Jaitley to clarify whether the government has decided to scrap the newly launched Rs 2,000 note. However, Jaitley did not respond even as many Opposition members insisted for clarification from him.
Recent weeks have seen a shortage of Rs 2,000 notes which many attribute to hoarding. Cash, especially black money, is easier to hoard in Rs 2,000 notes as notes of lower denominations need more space.
Also, most people find the note cumbersome as it is not easy to change.
The supply of Rs 2,000 notes from the RBI has declined. There might be a deliberate plan to limit the supply of these notes. The RBI rushed to print Rs 2,000 notes immediately after demonetisation was announced in November last year and that supply may have reached a level that the central bank is not comfortable with now. This may be a conscious strategy to curb the new supply of high-value notes and print more low-value notes.
There are reports that the Reserve Bank of India has stopped printing the Rs 2,000 currency notes altogether and will not be bringing new notes in the current financial year.
What has further fuelled rumours of another round of demonetisation is the government launching Rs 200 note. With more Rs 200 and Rs 500 notes in circulation, the common people will not be impacted much by a ban on the Rs 2,000 note. The ban will be an effective step against black cash as demonetisation of Rs 2,000 currency note will hit hoarders more than the masses.
Rs 2,000 note had an important purpose when it was launched after demonetisation in November 2016. It was meant to ease the shortage of money supply. Now there is no such need.
If the government plans to increase supply of lower denomination notes such as Rs 500 and Rs 200 and restrict supply of Rs 2,000 note, it is quite possible that these steps would lead to demonetisation of Rs 2,000 note.
The Opposition in Rajya Sabha today asked Finance Minister Arun Jaitley to clarify whether the government has decided to scrap the newly launched Rs 2,000 note. However, Jaitley did not respond even as many Opposition members insisted for clarification from him.
Recent weeks have seen a shortage of Rs 2,000 notes which many attribute to hoarding. Cash, especially black money, is easier to hoard in Rs 2,000 notes as notes of lower denominations need more space.
Also, most people find the note cumbersome as it is not easy to change.
The supply of Rs 2,000 notes from the RBI has declined. There might be a deliberate plan to limit the supply of these notes. The RBI rushed to print Rs 2,000 notes immediately after demonetisation was announced in November last year and that supply may have reached a level that the central bank is not comfortable with now. This may be a conscious strategy to curb the new supply of high-value notes and print more low-value notes.
There are reports that the Reserve Bank of India has stopped printing the Rs 2,000 currency notes altogether and will not be bringing new notes in the current financial year.
What has further fuelled rumours of another round of demonetisation is the government launching Rs 200 note. With more Rs 200 and Rs 500 notes in circulation, the common people will not be impacted much by a ban on the Rs 2,000 note. The ban will be an effective step against black cash as demonetisation of Rs 2,000 currency note will hit hoarders more than the masses.
Rs 2,000 note had an important purpose when it was launched after demonetisation in November 2016. It was meant to ease the shortage of money supply. Now there is no such need.
If the government plans to increase supply of lower denomination notes such as Rs 500 and Rs 200 and restrict supply of Rs 2,000 note, it is quite possible that these steps would lead to demonetisation of Rs 2,000 note.
