NITI Aayog Vice Chairman Arvind Panagariya says that the RBI’s determination to withdraw ₹2,000 forex notes from circulation will not have any perceptible effect on the economic system.
| Photo Credit: AP
The RBI’s determination to withdraw ₹2,000 forex notes from circulation will not have any ‘perceptible effect’ on the economic system as any such notes returned will get replaced by both equal money in decrease denomination notes or a deposit, former NITI Aayog Vice Chairman Arvind Panagariya has mentioned.
Mr. Panagariya additional mentioned the probably motive behind this transfer is to make the motion of illicit cash tougher.
“We will not see any perceptible effect on the economy. Any currency in ₹2,000 notes returned will be replaced by either equivalent cash in lower denomination notes or a deposit. So money supply will not be impacted,” he advised PTI.
Also learn: Opposition slams authorities over RBI’s withdrawal of ₹2000 notes
Mr. Panagariya famous that ₹2,000 forex notes characterize solely 10.8 per cent of the money at the moment within the palms of the general public and doubtless most of it’s getting used for illicit transactions.
The Reserve Bank of India on Friday introduced withdrawal of ₹2,000 forex notes from circulation, and present notes in circulation can both be deposited in financial institution accounts or exchanged by September 30.
The financial institution notes in ₹2,000 denomination will proceed to be a authorized tender, the RBI had mentioned in an announcement.
Asked whether or not the general public will face inconvenience because of this transfer, the eminent economist mentioned many voters in all probability have no ₹2,000 notes since few transactions happen in these notes.
“For those who do, inconvenience will not be beyond an extra trip to the bank. Even that can be avoided by exchanging ₹2,000 notes when visiting the bank for some other transaction,” he mentioned.
Asked is there’s a want for ₹1,000 forex notes, Mr. Panagariya mentioned, “As of now, I do not see a need to issue ₹1,000 notes as citizens have become used to transact in notes of ₹500 or lower denomination.”
Explaining additional, he identified that per capita revenue within the U.S. in 2021 was $70,000 and its highest denomination word is $100. This provides ratio of per capita revenue to the best denomination word at 700.
In India, per capita revenue in 2021 was roughly ₹1,70,000.
“For the same ratio of per capita income to the highest denomination note as in the U.S., our highest denomination note would have to be ₹243. So, ₹500 note as the highest denomination note would seem to be about right for us, given that we are still more of a cash economy than the U.S.,” he mentioned.
The RBI began printing ₹2,000 notes in November 2016 after Prime Minister Narendra Modi scrapped high-value ₹1,000 and ₹500 notes in a single day.
He opined that one lesson of November 2016 demonetisation was that tracing black cash is extremely tough.
“The most you can do is to make future illicit transactions more difficult by eliminating high denomination notes,” he mentioned.
