Out From Circulation….

RBI had stopped printing 2000 notes from 2019 itself. The notes which are in circulation, how long will they last, they will get spoiled now, constantly changing hands. 

That’s why the government has announced that the it will not send 2000 note in circulation. Whoever has it, if he wants to keep it, keep it. Now what is the problem with this?

People will feel, and it is quite a guess, guesswork that the government can announce any day in the next day that this note will no longer be ‘legal tender’, so they will deposit it in the bank, return it. 

There will be some commotion, not much because 2000 notes have not been printed for four years, not much is in circulation either. 

But people feel that whatever note they are taking, they will have to deposit it in the bank at the end, so who will take this headache, that’s why there will be a tussle.

This is different from demonetisation. Yes, if people have to panic then who can stop them. 

Even the bank will not open all its cards. So, the cap of 20 thousand that he has imposed, or else he will get KYC (Know Your Customer) done, is for this. 

Demonetisation was done because the number of fake notes ie counterfitting had become very high. 

Due to this, there was a huge increase in terrorist activities and it was becoming difficult to control it. 

Counterfitting was not difficult because the same note had been running for years, so it became easy to fake it. Now let’s understand the game of notes. The whole game is of trust.

The Rs 100 note that the government is giving, what is it basically…it is just a piece of paper. The government which is calling it ‘legal tender’, the citizens who are taking it, giving it, the only reason for this is that we have faith in it, due to the constitution, we all are considering it equal to 100 rupees. 

After all, what do we say in the constitution too, just remember the Preamble. We say that we surrender to the Constitution. So, all the people i.e. the entire public of India is its signing authority, it is the party.

Now, understand the game of fake currency. When your neighboring country is promoting terrorism, or its economy is weak, then the value of your note increases. 

In such a situation, those who work for ‘number two’ get down to making fake notes. For this reason, the government had suddenly demonetised the high value notes in 2016 itself. 

This time demonetisation has not happened, the legal tender is as it is. The government has simply said that it will not print these notes any more, will not bring them into circulation and has given four months time to the people who want to deposit or exchange these notes in banks.

In what terms do you want to see the result of demonetisation, that too is a matter of market. 

If it is being said that all the notes that were in circulation and have come back were legal money, then it is a good thing. 

Those who are citizens here, they returned. The one who was not even in your count, where will he come from? So, criticism is strange at this point. 

After this, there was a lot of decrease in the incidents of receiving fake notes, terrorist incidents.

Jammu and Kashmir is especially a classic example of this. There the incidents of stone pelting became zero. Anyway it is difficult to quantify. We can co-relate. 

For example, there was an incident of demonetisation, then there was a decrease in terrorist incidents, so we can add it.

Now why the demonetisation of 2016 happened, why 2000 notes were brought, then why are they being removed, to understand these things a little history will have to be explored. 

There were two issues in what was done at that time. First of all, we cannot revive this issue immediately. If we remove 1000 or 500 notes overnight, then we will have to revive such high value notes. 

Therefore, the second high value note given by the government along with 500 was of 2000. Hence, bring higher denomination notes. Its logic was that the money, which is a huge amount, should not be scattered here and there.

Second, the emphasis of the government was on digitalisation. That’s when UPI came and it was a game-changer. In developed countries, there are no higher denomination notes. Most of the transactions there are digital. Daily transactions are done with small notes. 

Now the logic is that if 2000 notes are still used, then it will promote black money again. That’s why, gradually the government stopped printing those notes while printing them less. After this, people’s trust gradually increased and digital transactions increased. 

Today you are seeing transactions through UPI. Even the vegetable vendor or paanwala is taking payment from him. Transactions up to five rupees are being done through UPI only.

Now it should be known that what is the benefit of this? Circulation of money is very important for the economy, rather it is mandatory. 

For example, if you took Rs 500 and put it in the piggy bank, then no business happened. On the other hand, if you gave that 500 to your driver, that driver bought a ticket in the cinema hall, the ticket seller got his mobile recharged and the person who recharged his mobile bought vegetables. 

So, that Rs.500 passed through 5 hands and its value became five times i.e., Rs.2500. GDP is calculated on this basis, that is why it is beneficial to have currency in circulation (i.e., money in circulation).

Understand from this that where the transaction of the big notes will take place. They will not be used in day to day activities.

 Hence, there is a fear of them being hoarded or used in real estate or in illegal activities. In the beginning also, the government did not want to bring high denomination notes, but since they had suddenly announced, they had to use 2000 notes to get all the money back. Now that is coming to an end.

Ultimately, the government’s goal is to take transactions to digital mode on the lines of developed countries in India and keep the value of notes in cash to a minimum. 

The reasoning behind this is that if people have high-denomination notes, they start hoarding and storing them. The aim of the government is to keep more and more money in circulation, so that the economy is boosted. 

The smaller the denomination of the note, the more it will be inclusive of those people who do not have a lot of money. Tomorrow if even a poor rickshaw puller comes into your economic circle, then it will be called your success.

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