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Rupees 2000 notes hoarded as black money: Is quick demonetization needed with flaws of earlier one removed

It refers to currency-crunch generated because of Rs 2000 notes not coming back to banks. It is clear that these much-criticised notes have become a convenient parking place for hoarders of black money, thus killing the very purpose of demonetisation of earlier notes of Rs 500 and 1000 on November 8, 2016. Instead of fearing from criticism, Prime Minister can announce a sudden demonetisation of Rs 2000 notes also as a caution that such steps can even be frequent in case those playing in black money do not do away with their business of creating parallel economy of black money.

Unlike earlier demonetisation of November 8, 2016, any such fresh demonetisation will not practically affect commoners because ordinary people avoid accepting Rs 2000 notes and as such these may not be in plenty with commoners. Moreover government will not to do any preparations like massive currency-printing like was done earlier because currency in other denominations is available in plenty. It is significant that undesired denomination of Rs 2000 was a compulsion to meet instant demand of currency after demonetisation was announced on November 8, 2016. However past experience of faulty implementation of demonetisation should make government announce any voluntary-disclosure-scheme announced simultaneously with announcement of demonetisation.

But at the same time to prevent habit of currency-hoarding, concentration to restrict currency-circulation should be for larger amounts rather than petty amounts. Maximum cash-withdrawal from banks by an individual should be restricted to rupees 96000 to be gradually reduced to Rs 50,000 per month. Even stricter steps should be taken to have vigil on cash withdrawals by companies and private firms.

Subhash Chandra Agrawal

(The views expressed by the author in the article are his/her own.)

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