Rama Krishna Sangem
DeMo 2 or second demonetization of Rs 2,000 notes has come as a surprise, if not shock for us all. Though some public figures are asking for it, none guessed it would come so soon -within seven years after it was brought in. RBI (Reserve Bank of India) has announced the decision on May 19, 2023, afternoon.
Unlike the earlier demonetization of Rs 1,000 and Rs 500 notes, on November 7, 2016, this time, the blow appeared soft, mild. Reason? it hasn’t come from a political executive – Prime Minister Modi (who suddenly appeared on TVs and announced the move), but from RBI which usually takes such decisions matter of factly.
Many are not ready to believe that it is a political decision, unlike the earlier one – which is definitely a political move by PM Modi, who claimed it would curb black money and stop terrorism etc. Then, the Government estimated at least 30 per cent the currency in circulation (around Rs 17 lakh crore) was black, but 97 per cent it came back to banks. Sad thing is that at least 100 persons had died standing in queues at banks to exchange their notes or of shock.
This time, the announcement came from RBI, the competent authority, and it came at a time when PM Modi is in Japan to attend to G-7 and Quad summit leaders meeting. Still, the timing of deadline to exchange Rs 2,000 notes in banks – September 30 – is something to do with the commencement of elections to some state assemblies and Lok Sabha polls early next year.
Reasons for doubts
Ruling BJP suspects that the regional and opposition parties which are in power in some of the states which go to polls – Telangana, Rajasthan, Madhya Pradesh, Chhattisgarh, among others – are flush with funds to bribe voters. Local BJP leaders told their national bosses that these parties can spend Rs 4,000 to Rs 10,000 per vote or a family, if necessary.
For example, in a recent internal report, Telangana BJP leaders told their top brass that ruling TRS won Munugode assembly by-poll last November by splurging money on voters.
Even in Karnataka, where Congress came to power just now, BJP fears the same would happen. It is not that BJP doesn’t do such things, but they can disarm the opposition from distributing money to voters. Transporting cash in large bundles days before polling is risky, as central and state police would put check-posts all over. We see, huge amounts of cash being seized during elections.
There is every ground to doubt that the BJP ruled Centre has used RBI to flush out Rs 2,000 notes, before the polls.
There are reports that they may bring in Rs 1,000 notes later, after the LS polls.
What’s Clean Note policy?
The reason given by RBI for DeMo2 is to implement its Clean Note policy. This means, RBI wants to keep in circulation enough quantity of currency notes in good shape, newly minted, crisp, not old and soiled ones.
If they want to do it, they can as well do it without scrapping Rs 2,000 notes altogether – I mean, printing the same quantity of these notes – may be worth of Rs 2.8 lakh crore, – which is less than 3 per cent of the total volume and value of the total currency in circulation. We can exchange them with new ones just as we do in case of Rs 200 or Rs 100 notes!
When Rs 2,000 notes are already out of widespread circulation, there is no need to be panicky and scrap them totally.
Now, neither RBI nor the Centre can say that this decision is meant to to prevent or confiscate black money as the earlier DeMo disastrously failed to do the same.
Loss of credibility of our currency
Constant scrapping of currency notes is not for the image of the country. While claiming India as the bright spot of global economy and wooing foreign investments, we cannot afford to create fears among public over validity of one or the other currency denomination.
If it is Rs 2,000 notes today, tomorrow the government can scrap Rs 500 notes, as already some experts (are they?) suggesting. These moves will definitely create confusion among public and lead to loss of credibility of our RBI and currency. No developed nation like the US or the UK has done like this.
Unbearable cost of printing of Rs 2,000 notes cannot be a ground for their scrapping. That may be a marginal cost, compared to its overall activity. Particularly at a time, RBI has indicated that it would given Rs 87,000 crore as dividend to the Centre this year.
But, people will definitely suffer this time too, banks will see rush in their branches in the next 130 odd days, till September 30. Can we expect RBI to explain what they have achieved by this scrapping of Rs 2,000 notes at least a few months later?
