Why surgical strike on pink currency?
The Reserve Bank has declared that the Rs 2,000 notes will be gradually withdrawn from circulation starting from September 2023. However, the existing Rs 2,000 notes will retain their status as legal tender. After the 2000 note was banned, many became incensed. However, allow us to clarify that the note ban this time is distinct from the note ban in 2016. Note replacement is what is happening here; demonetization is not. Subhash Chandra Garg, a former finance secretary, stated on Saturday that the discontinuation of the Rs 2,000 note is not a “huge event” and won’t have any impact on the economy or monetary policy. It was implemented to address the short-term cash deficit brought on by “contingent reasons.
Panagariya says there will be no direct impact on the economy:
Arvind Panagariya, a former vice chairman of NITI Aayog, claims that the economy won’t be directly impacted by the Reserve Bank of India’s (RBI) decision to recall Rs 2000 currency notes since they may be replaced with notes of smaller denominations for the same price. Will be delivered According to Panagariya, one plausible reason for the action is to make it harder for illegal monies to be moved. We won’t see any immediate effects on the economy from this, he said, according to PTI-language. Any quantity of Rs 2,000 notes will be redeemed for equivalent lower denomination notes or deposited. Therefore, the money flow won’t be affected. According to Panagariya, just 10.8% of the total quantity of currency in circulation at the moment is in the form of Rs 2,000 notes, and the majority of this sum is likely employed in unlawful operations. The RBI had already stated on Friday that the Rs 2,000 notes will no longer be in use. Up to September 30, these notes can be deposited or exchanged at banks. The RBI said in the evening that the present Rs 2,000 notes in circulation will be legal currency till September 30.
Benefits of the 2000 rupee note ban:
There are many advantages of taking 2000 rupee notes out of circulation.
1. Decision was taken to curb black money:
Former Deputy Governor of the Reserve Bank of India (RBI), R Gandhi, stated on Friday that the withdrawal of Rs 2,000 banknotes would significantly help in curbing black money, as many people are hoarding these notes. During the demonetization of Rs 500 and Rs 1,000 notes in 2016, Gandhi held the position of head of the currency department at the RBI. He informed PTI that removing these notes would not have any major impact on the payment system, as they are not commonly used for daily transactions. The majority of payments are now conducted through digital means.
2. Online payment will increase:
Those who previously made significant payments with 2000 notes can now use the online payment option. Once the 2000 note is no longer in use, there will be a rise in online payments. Even yet, there was a significant increase in online payments following demonetization in 2016.
3. People will avoid keeping cash at home:
The Indian government has recently put into effect strict procedures to prevent illicit money. Whether it was the demonetization in 2016 or the removal of Rs 2,000 notes from circulation currently, these moves have caused people to be afraid of keeping big sums of cash at home. It is expected that black money will become less common as a direct result.
4. Government revenue will increase:
The government may gain from the discontinuation of the 2000-rupee note by raising income taxes. Currently, cash payments are made to avoid paying taxes. Large cash payments were made simpler with the help of 2,000 notes. Large payments in 200, 100, and 500 note denominations, however, might be a problem. These individuals might choose the online payment option in such a circumstance. As a result, the payment will remain on file and no one will be able to avoid paying taxes.
5. Approximately 3 lakh crore will be released:
The measure, according to former Chief Economic Advisor Krishnamurthy Subramanian, will help wean off a large portion of the Rs 3.6 lakh crore in money that is circulating in Rs 2,000 notes. According to Krishnamurthy, “We saw throughout the majority of the raids that persons had concealed significant amounts of illegal money in Rs 2,000 notes. The 2000 note is becoming incredibly uncommon in transactions. Black money is primarily deposited there. The 80-20 rule indicates that only 20% of the overall circulation is owned by the 80% of those who possess Rs 2,000 notes. While 20% of those who deposit dirty money have 80% of the funds about Rs. 3 lakh crore.
6. Limit the production of false currency as well:
Rapid printing of counterfeit Rs 2,000 notes was also going on. This is due to how simple it would be to operate in the market. Its supply did not provide many issues. Since it has been outlawed, it seems obvious that all of the counterfeit Rs. 2000 notes in circulation will likewise be destroyed. Additionally, the printing of bogus notes will be significantly reduced.
7. These measures will also act as a deterrent against terrorism and money laundering:
When the 500 and 1000-dollar notes were banned in 2016, there was a significant halt to the funding of terrorism. Money laundering was also halted similarly. Two thousand rupee bills started to be utilized in this activity over time. The government has now severely impacted the funding and money laundering of terrorists through this.