Former finance secretary Subhash Chandra Garg on Saturday said the withdrawal of Rs 2,000 notes is a ‘non-event’ and will have zero impact on the economy and monetary policy. He said the higher denomination currency note of Rs 2,000 was pressed into service at the time of demonetisation in 2016 due to “contingent reasons” to meet the temporary currency shortage.
With the rapid growth of digital payments in the last five-six years, Garg said the withdrawal of Rs 2,000 notes, which are actually replacement by other denominations, will not affect the total currency in circulation and therefore have no monetary policy implications. Will happen.
“Nor will it affect the operation of India’s economic and financial system. There is going to be zero impact on GDP growth or public welfare,” he told PTI.
In a surprise move, the Reserve Bank on Friday announced the withdrawal of Rs 2,000 notes from circulation but gave time till September 30 to the public to either deposit such notes in accounts or exchange them with banks.
It is easy enough to expect almost all the Rs 2,000 currency notes in circulation to be returned to the RBI and no one is likely to be put to any inconvenience or loss as these notes form a small part of the currency in circulation and are widely used during the day. are not used for -to-day transactions, he said.
Clarifying that the withdrawal of currency notes by the RBI is not demonetisation, he said, it is the government that has the authority to withdraw the legal tender status of currency notes, not the RBI.
The Rs 2,000 currency notes will continue to be fully legal tender, he said, adding that the RBI’s measures are largely an attempt to induce people holding these notes to replace them with other currency notes in circulation.
Garg, who was the economic affairs secretary and was in-charge of the coinage and currency division during the days of remonetisation, said the Rs 2,000 notes were not introduced as a deliberate measure, but as something that was readily available. Was.
He said the government might have approved the printing of Rs 2,000 notes a few months before demonetisation to introduce higher denomination notes.
He said that the fate of the Rs 2,000 note was decided even before its release and it had to make its way out at the earliest.
Garg said that soon after demonetisation, the process of reducing the circulation of Rs 2,000 notes had started.
He said the total value of Rs 2,000 notes was around Rs 7 lakh crore in July-August 2017, when it was decided in principle not to print more Rs 2,000 notes. March-April 2018 to deal with the shortage of mini notes at that time.
According to an RBI press release, the printing of Rs 2,000 notes was completely stopped in 2018-19.
He said that with the ban on the printing of such notes, the path to demonetisation of these notes was firmly secured and the government had decided to facilitate the withdrawal of Rs 2,000 notes in 2018-19 as usual in 2018-19. Printed much more Rs 500 notes than required.
The move to phase out Rs 2,000 notes in March 2023 has brought down circulation from a high of around 75 per cent in March 2017 to 10.8 per cent in March 2023.
According to ICRA, there could be a marginal improvement in bank deposits in the near future due to RBI’s move to withdraw Rs 2,000 notes. ICRA Senior Vice President Karthik Srinivasan said that this will reduce the pressure of increase in deposit rates and short term interest rates may also come down.
Vimal Nadar, head of research at Colliers India, said such measures further reduce/eliminate the potential cash component in high-value real estate transactions.
Nadar said RERA and demonetisation over the years have brought significant levels of transparency in real estate, mainly contributing to fair market pricing.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – PTI,