NITI Aayog Vice Chairman Arvind Panagariya says that the RBI’s decision to withdraw Rs 2,000 notes from circulation will not have any direct impact on the economy. , Photo Credit: AP
RBI’s decision to withdraw Rs 2,000 currency notes from circulation will not have any ‘direct impact’ on the economy as any such notes returned will either be replaced by equivalent cash or deposits in lower denomination notes, ex NITI Aayog Vice Chairman Arvind Panagariya has said.
Mr. Panagariya further said that the possible motive behind this move is to make the movement of illicit money more difficult.
“We will not see any direct impact on the economy. Any currency in the returned Rs 2,000 notes will be replaced either by equivalent cash or deposits in lower denomination notes. Hence the money supply will not be affected,” he added. ” They said. PTI,
Mr Panagariya said that ₹2,000 currency notes currently represent only 10.8 per cent of the cash in the hands of the public and most of it is probably being used for illegal transactions.
The Reserve Bank of India on Friday announced the withdrawal of ₹2,000 currency notes from circulation, and the existing notes can either be deposited in bank accounts or exchanged till September 30.
The RBI had said in a statement that Rs 2,000 bank notes would continue to be legal tender.
When asked whether the public would face inconvenience due to this move, the eminent economist said that many citizens might not have Rs 2,000 notes as some transactions take place in those notes.
“For those who do so, the inconvenience will not go beyond an additional visit to the bank. Even exchanging Rs 2,000 notes can be avoided when visiting the bank for some other transaction,” he said. Is.”
When asked if there was a need for Rs 1,000 notes, Mr Panagariya said, “As of now, I do not see the need to issue Rs 1,000 notes as citizens can transact in Rs 500 or less denomination notes.” have become accustomed to.”
Elaborating further, he pointed out that the per capita income in the US in 2021 was $70,000 and its highest denomination note is $100. This gives the ratio of per capita income to the highest denomination note at 700.
In India, the per capita income in 2021 was about ₹1,70,000.
“For the same proportion of per capita income in the US and the highest denomination note, our highest denomination note should be ₹243. Therefore, ₹500 note as the highest denomination note would seem correct to us, given that that we are still a more cash economy than the US,” he said.
The RBI started printing ₹2,000 notes in November 2016 after Prime Minister Narendra Modi demonetised higher denomination notes of ₹1,000 and ₹500 overnight.
He said one of the lessons from November 2016 demonetisation was that black money is incredibly difficult to trace.
“The most you can do is make future illegal transactions more difficult by eliminating higher denomination notes,” he said.