It appeared that there was a sudden jerk in the evening of November 8 when the Prime Minister announced annulling of the legal tenders of Rs500 and Rs1000 as a bold step. It was professed to eradicate fake currency, terrorist money and black money. So, many chronic maladies were meant to be eradicated at one stroke. There may have been consternations in the hearts of those who have plenty of money slashed away, but the average Indian thought something historical had happened. Fifty days were held out for implementing various types of measures in different permutations and combinations. By the use of the executive fiat, the right to property of the depositors stood eclipsed. The currency that was a legal tender had inscribed on it “I promise to pay the bearer …” with the signature of the Governor of the Reserve Bank of India. This promissory note, held as a trust, stood betrayed. Strangely enough, when you went to the bank or the ATM, they dished out Rs2000 note. In average transactions in day-to-day existence, there was insufficient quantum of change with the providers of goods and services. This caused a dislocation in the smooth functioning of the economy. Assurances of permissible limit of withdrawal amount were varied by the stroke of the pen. Rs500 notes were not available to the required extent. Though one could draw Rs24,000 per week from one’s own account, most of the banks did not have sufficient funds and, therefore, rationed out the currency. Many had to wait for days to get their quota on rationed money.
It is going to be a month from the date of announcement of the de- or re-monetisation. One is getting the odd feeling that the Government deliberately wanted to reduce the number of currency notes (even of Rs500 denominations) so as to subserve the obsession regarding going over to a cashless economy.
No economy in the world is cashless. About 50 per cent of the totality of the activities in India is in cash. A changeover to the so-called cashless transactions cannot be by throttling methods. There is a definite need on the part of the Government and the RBI to have sufficient number of notes in circulation. Reportedly, somewhere around September 2016, the printing of Rs2000 notes commenced. Currency printing can be undertaken by the RBI at four different places, Maharashtra, Madhya Pradesh, Karnataka and West Bengal. The units in Maharashtra and MP are old ones and their capacity/efficiency is limited. The other two at Karnataka and WB are reported to have the capacity of almost four times.
Around April 2016, the country had Rs16, 28,000 crore in notes of different denominations. Out of that, 12,17,950 crore worth of currency was in 1000 and 500 rupee notes. The rest of the notes were of lower denominations of Rs100, Rs50, Rs20 and Rs10. The number of Rs 500 notes was 1,660 crore of pieces of a value of Rs8,30,000 crore. Rs1000 notes were of the total value of Rs5,80,000 crore and such currency were around 580 crore pieces. In order to print Rs2000 notes of equivalent value, one would be required to print 294 crore pieces. It is reliably learnt that Rs2000 notes were printed in Karnataka and WB. Reportedly, the capacity of these units is 2 crore pieces a day, bringing the total of two units to 4 crore pieces a day. Printing the notes, bereft of the ancillary activities, would take at least three months. The other related activities like sizing them, numbering them, packing them, etc., would require an additional month or so. By this requirement of time, all the Rs2000 notes could be in the market by the end of December. But November itself threw up a problem. Rs500 notes printing could not be commenced by the beginning November when only the design could reach the security printing press. Before November ended, the RBI found fault in many of the Rs 500 notes printed in Maharashtra, and the printing was, therefore, confined to Mysore. In effect, therefore, the Rs500 notes printing will be effectively resumed around the end of December. This necessitates further consumption of time and delay in Rs500 notes being available in sufficient quantities. It would almost become May 2017 by the time al the Rs2000 notes are printed and available to the market.
The dire scarcity of Rs500 notes has been having a crippling effect. Printing out 1,660 crore pieces of Rs500 notes, if printed at one press like Mysore, would call for a time span of quite a few months ranging over two years. The entire rigmarole relating to Rs 500 notes in the market will linger till around last quarter of 2018. Reportedly, from November 20 onwards, printing of notes is going on in Maharashtra (Nasik), MP (Dewas) and Karnataka (Mysore). Going by a rough rate of a delay printing of three and a half crore pieces of notes (of which the Rs500 notes being of 544 crore pieces), it could possibly be achieved by the end of May 2017. If the WB unit is pressed into service, it will be printing more than 5.5 crore pieces a day. Out of the total of 1,660 crore pieces, it would take about another eight months to achieve a target of around 1,111 crore pieces. Replacing of all the Rs500 notes would, on account of the constraints of printing and distribution, extends up to a delayed date of January 2018.
Reliable sources also say that the Government expected that 30 per cent of the notes would not return to circulation. The task of printing would have accordingly reduced by 30 per cent. But before the November-end, around 65 per cent of the old 1000 and 500 rupee notes have come back into circulation. One could reasonably expect about 90 per cent to return into circulation. It almost looks like a situation of stifling the economy for an unbearably long period of suffering leading to inevitable economic decline. There is another aspect that requires attention. The security presses are busy printing the 500 and 2000 rupee notes. The notes of Rs100 and below may not be printed at all. This will further accentuate the currency drought.
The impact of these trends is already felt by the common man. In Surat, power looms are almost closed for half a day. Spinning mills are inoperative in around 60 per cent cases because of the cash crunch. Engagement in daily wage employment has had a shrink. The agriculturist is having an acute cash crunch, both in procurement and disposal of Kharif crop and the preliminary and preparatory arrangements for the Rabi crop. The initial total starving of the entire cooperative sector has shaken the backbone of the rural economy. Banks of all categories are in a helpless mood and not in a position to hold the hands of the needy.
Difficult days are ahead. Whether in the bargain we would have lost irreparably or we would have gained much more than our loss, the suffering is inevitable. The process is on. The entire edifice is functioning by executive fiat without any legislative intervention. That is not a happy thing for the future of the society; and what is not good for the future is not good for our youths. Prime Minister Modi has appealed to the youths in particular to digitalise our day-to-day transactions so as to make our economy cashless. The transformation will come in layers and through an evolutionary process, for it can prevail and sustain itself if it is based on a consensus or a clear majority. It required my teacher Prof Amartya Sen to call the adventurous measures of de- or re-monetisation “unintelligent” and “despotic”. These are not words coming from an irresponsible person. In his interview to the media, he has more than explained his viewpoint. Prof Sen also refers to the “role of trust” in a capitalist economy or, for that matter, in the context of any economic structure. The betrayal of “trust” by a draconian amputational measure would require a long period of healing. But, meanwhile, the youths in particular should organise themselves into action-groups to protect their future and contribute to the reorientation of economic activities. We must ensure that prosperity and progress are regained. For such a task, the involvement of all of us is an inevitable requirement. It pinches all of us. And this also concerns all of us!
(The writer, a Senior Advocate, is a former All India Service officer, a former diplomat, a former editor, a former President of Orissa High Court Bar Association and a former Advocate General of Odisha. jayantdas@hotmail.com)