We are 17 days away from Prime Minister Narendra Modi’s 50-day deadline to end the worst effects of the scrapping of 86 per cent – by value – of India’s currency. In the chest-thumping, hand-wringing and controversy that has ensued since the announcement on November 8, 2016, there has been an absence of facts on the question of re-monetising India.
An extrapolation of 2016 Reserve Bank of India (RBI) data on the capacity of Indian printing presses and currency distribution indicates that, at current rates, the Prime Minister’s deadline will not be met. Getting adequate money to banks and ATMs nationwide will depend on how many bank notes the government wants to put back into circulation.
If the government wants to introduce Rs. 9 lakh crore ($135 billion) – or 35 per cent less money than it pulled out – it will take up to May 2017, and if it wants to reintroduce the entire Rs. 14 lakh crore ($210 billion) that it withdrew, that could take up to August 2017.
The crux of the problem is change, specifically the Rs. 500 note, which India’s presses cannot, currently, print in adequate numbers.
Here are the facts:
The RBI has four presses at Dewas (Madhya Pradesh), Nashik (Maharashtra), Salboni (West Bengal) and Mysuru (Karnataka).
* The printing capacity of these presses is roughly 2,670 crore (26.7 billion) notes a year, according to the RBI’s 2016 annual report (page 90). Or roughly 7.4 crore (74 million) notes a day
* If the presses worked three shifts a day instead of two, their daily production capacity could be raised to 11.1 crore (111 million) notes a day
* However, less than half of the machines in the presses have the ability to print the security features required for high-value notes (Rs. 500 and above)
* This means that even if all the machines that print high-value notes in all four presses printed only Rs. 500 rupee notes 24 hours a day, we would at best be able to print 5.56 crore (55.6 million) Rs. 500 notes every day
* This translates to about Rs. 2,778 crore ($418 million) in value printed every day in Rs. 500 notes
Before the announcement of demonetisation, the government had already arranged for the printing of 200 crore (2 billion) Rs 2,000 notes, or roughly about Rs 4 lakh crore ($60 billion) in value. So, these were the first set of notes to be circulated. This is why there are so many pink notes in circulation.