Why is the 2000 rupee notes printed & circulated more than the much needed 100?

What can we the common citizen do to support demonetization?
Demonetization & GST- A ladder for Indian Economy
Demonetization & GST- A ladder for Indian Economy

It wasn’t until November 8th people start to discuss 2000 INR bank notes.  A pink sheet of art with some features that most aren’t aware of. In fact, many found it difficult to exchange the 2000 rupee notes over small purchases and unfortunately one couldn’t get grip on much needed 100 rupee notes from the bank because the 100 rupee circulation among the public was biased and those who have it started to hoard it. Certainly, a question aroused among the public, regarding the introduction of 2000 bank notes. Only bigger purchases might need a 2000 rupee note, what about an ordinary man in a ration shop to buy rice? Also if government need to currency notes why can’t they exchange it for newly printed 1000 and 500’s? The matter can be explained from different perspectives.  Let us run one by one:

  1. A progressive monetary renovation: Say a psychiatrist is treating a patient suffering from severe depression, probably the doctor will give medications to calm his mind initially and later move to more powerful approaches to suck out the root of depression. The similar tactic is been used here too. India is an economically sensitive country, any abrupt changes in the monetary setup might upset the public which will let chaos out. In order to avoid that Government tactically implanted Pradhan Mantri Jan-Dhan Yojana and other financial upgrades to guide public into proper fiscal setups in order to decrease the hardships after demonetization and it indeed just worked out. So their intention was very clear, rather than out bursting a reform they are putting bricks step by step.
  2. Accounting for future inflation: The effect of demonetization will take some time to benefit the economy. Till that, one can’t disregard the inflation the India might face. So in order to compensate that, higher denominations are introduced so that people have a minimum number of currencies to purchase maximum goods.
  3. Minimizing printing costs: Many wouldn’t have thought of this point. If RBI withdrew 1000 rupee notes and introduced same 1000 or much smaller 100, the printing costs would have gone way far than one could estimate. In the eco perspective, it was a waste of paper as well. Let us do a little math here. Costs for printing one 100 rupee note will be around Rs.1.3/- whereas the cost for printing one 2000 rupee note is estimated (rough) to be around Rs.3.9/-. One bundle of Indian bank currency has 100 pieces of notes, therefore one bundle of 2000 rupee will make 2 lakhs worth money with printing costs around INR 390/-. The same 2 lack rupees might take 20 such bundles of 100 rupee notes reckoning printing costs of INR 2600/-. Thus calculating the printing costs, higher denominations are always better.
  4. Guiding to a cashless economy: This might be an indirect effect, but still it will benefit both economies as well as the public. While 100 rupee starts to go scarce people will turn to cashless payment options like credit cards, debit cards etc. thereby limiting the need for paper cash for existence. This will help the Indian economy to set foot on next generation banking and this step will also ease the inevitable change that might be needed for such a change.
  5. Hundred might get a facelift in next phase: There is a chance that the much praised 100 rupee notes be recalled in the later future to replace with new currency having upgraded features. If so stacking 100 rupees into the economy will be a bad choice as far as printing costs are Also, the old hundred might get a facelift soon and there are rumors that India might turn to cotton currencies or plastic currencies like in the Us and Europe . If so, the 100 rupee note will be the first to get that makeover, so it is wise to leave them untouched for now.

While there are many issues existing with getting change for 2000, it shall be managed when new 500 rupee note gets frequent into circulation. Still considering the security features and other printing aspects, it is always a great decision for popularizing 2000 INR rather than printing new 100 rupee notes.

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