The RBI’s resolution to withdraw ₹2,000 foreign money notes from circulation won’t have any ‘perceptible impact’ on the financial system as any such notes returned will probably be changed 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 seemingly motive behind this transfer is to make the motion of illicit cash tougher.
“We won’t see any perceptible impact on the financial system. Any foreign money in ₹2,000 notes returned will probably be changed by both equal money in decrease denomination notes or a deposit. So cash provide won’t be impacted,” he informed PTI.
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Mr. Panagariya famous that ₹2,000 foreign money notes symbolize solely 10.eight per cent of the money presently within the fingers of the general public and doubtless most of it’s getting used for illicit transactions.
The Reserve Financial institution of India on Friday introduced withdrawal of ₹2,000 foreign money notes from circulation, and current 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 a press release.
Requested whether or not the general public will face inconvenience as a consequence of this transfer, the eminent economist mentioned many voters in all probability don’t have any ₹2,000 notes since few transactions happen in these notes.
“For many who do, inconvenience won’t be past an additional journey to the financial institution. Even that may be averted by exchanging ₹2,000 notes when visiting the financial institution for another transaction,” he mentioned.
Requested is there’s a want for ₹1,000 foreign money notes, Mr. Panagariya mentioned, “As of now, I don’t see a have to concern ₹1,000 notes as residents have change into used to transact in notes of ₹500 or decrease denomination.”
Explaining additional, he identified that per capita revenue within the U.S. in 2021 was $70,000 and its highest denomination be aware is $100. This provides ratio of per capita revenue to the best denomination be aware at 700.
In India, per capita revenue in 2021 was roughly ₹1,70,000.
“For a similar ratio of per capita revenue to the best denomination be aware as within the U.S., our highest denomination be aware must be ₹243. So, ₹500 be aware as the best denomination be aware would appear to be about proper for us, provided that we’re nonetheless extra of a money financial system 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 troublesome.
“Essentially the most you are able to do is to make future illicit transactions tougher by eliminating excessive denomination notes,” he mentioned.