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Thursday, April 18, 2024

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Thursday, April 18, 2024

Demonetisation Again

By The Editor

Within a decade the process of demonetisation has started for second time with the Reserve Bank of India (RBI) announcement on the withdrawal of Rs. 2,000 currency notes from circulation. Congress spokesperson Pawan Khera said the ghost of November 8, 2016 has come back to haunt the nation once more. Though enough time is given to the people to spend and exchange their money with the banks yet no clear reasons were given leading to various speculations whether decision was economic or political. It cannot be denied that due to inflation and recession issuance of big value bank notes like the Rs. 500, Rs 1000, and Rs 2000 notes were very useful and convenient. Besides hoarding of money of lesser denominations is very difficult while on the contrary those of bigger denomination it is relatively easier and more comfortable. When the first demonetisation exercise took place on November 8, 2016 legal tender status of Rs 500 and Rs1000 bank notes was withdrawn by the government creating panic and confusion among the public. Raghuram Rajan who was governor of RBI when Prime Minister Narendra Modi took over in May 2014 had different views and opinions on demonetisation and so resigned his job two months before the announcement.

After Raghuram Rajan’s exit the deputy governor of RBI Urjit Patel took over who oversaw the process of demonetisation but however resigned on December 11, 2018 nine months before expiry of his term. The action caught the public by surprise who had to face lots of problems and difficulties. Quite a number of economists and even sections of the bureaucrats then were apprehensive and objected to this short-sighted and ill-conceived plan with hidden agenda. They maintained that cash is not the only mean for black money but also investment in real estate, gold and property. During this period the middle order businessmen and lower class people had to undergo numerous problems and crisis. Sensing that economic turmoil might further aggravate the government had no alternative but to re-introduce the Rs 500 note and the public is optimistic that the Centre will also re-introduce the Rs 1000 note as well.

Latest announcement on banning of Rs 2000 notes and giving ample time of up to four months to withdraw them from circulation has led to reactions from medium and small shopkeepers who are hesitant in accepting Rs 2000 notes on the plea that they do not have change. Food delivery boys refuse to accept Rs 2000 notes if customers opt for cash on delivery. Petrol pump do accept the notes but on condition that customers’ fuel bill exceeds Rs 1000 and some petrol stations display boards to the effect. Multi-brand showrooms however accept cash payment of Rs 2000 notes cautiously. Jewellery and electronics shops are taking good advantage even remaining open on Sundays while at the same time taking enough precautionary measures and this time people have become wiser.

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