Shortage of new notes: Several discrepancies emerge in RBI, Govt figures

Several new and large discrepancies have emerged in the stated positions of the Reserve Bank of India (RBI) and the government on the printing and distribution of new currencies following the demonetisation of Rs 1,000 and Rs 500 notes on November 8.

These discrepancies include a highly unlikely surge in the supply of high-denomination notes in two days. They also show substantial divergence in figures given by the central banker and those given by the government in Parliament. And finally there's an unexplained hiatus in the supply of notes for 11 days.

Either parliament has been misled, or claims about the supply by the RBI are flawed.

Let's look at the figures in chronological order:

On November 28, the RBI issued a press release saying that the public had withdrawn Rs 2.16 lakh crore in new notes from accounts or ATMs till November 27. As RBI chose not to give any break-up of this amount, it is fair to assume that some of this was in lower denomination notes of Rs 100 or less.

However, according to a written reply to a question in the Rajya Sabha, the Minister of State for Finance, Arjun Ram Meghwal, categorically stated that, by November 29, a total of 1,608 million pieces (160.8 crore) of Rs 2,000 denomination and 156 million (15.6 crore) pieces of Rs 500 had been supplied -- a total of 1,764 million pieces (or 1.76 billion) amounting to a little over Rs 3.29 lakh crore. The minister's reply came on December 6.

There are two significant points to note here:

One, that the government's number implies that the currency disbursal had shot up by over Rs 1.13 lakh crore in just two days. This, when the RBI had supplied Rs 2.16 lakh crore in 17 days till then -- at an average of only Rs 12,700 crore a day.

Moreover, Meghwal's number pertained only to high denomination notes, whereas the RBI number was a mix of all denominations. In other words, the discrepancy between the two sets of numbers would have been even higher if the minister's reply in Parliament had included the smaller denomination currency notes disbursed till November 29.

Now things begin to get even more curiouser.

On the day the monetary policy was announced (December 7), the RBI revealed a new set of disbursal figures. The Deputy Governor of RBI, R. Gandhi, said a total of Rs 4 lakh crore had been disbursed as of the previous day.

Of this amount, Rs 1.06 lakh crore was in smaller denomination currency notes, according to Gandhi, while the rest -- Rs 2.94 lakh crore -- implicitly, was by way of high-denomination notes.

This figure of Rs 2.94 lakh crore, which was announced seven days after the date of disbursal given in Parliament reply, is substantially less than the amount of Rs 3.29 lakh crore mentioned in the minister's written statement about supply till November 29.

Yet again, on December 12, Gandhi, while speaking to reporters, said that a total of 1.7 billion notes of higher denomination of Rs 2,000 and Rs 500 had been issued to the public till December 10.

That means, a full 11 days after Meghwal's reply that 1.76 billion high-value notes had been disbursed by November 29, the RBI was stating that the notes given out had been less or at best the same -- if one assumes that he was giving a rounded-off figure of 1.7 billion.

Was the disbursal or printing of new notes stopped from November 29 to December 10?

How does the RBI square with these discrepancies?

Further, the government has been talking about the printing presses working overtime. Economic Affairs Secretary, Shaktikant Das, told Doordarshan in an interview on December 17 that 80 per cent to 90 per cent of the currency being printed a few days after the demonetisation date was of Rs 500 notes.

According to Meghwal's information, the amount of Rs 500 notes supplied till November 29, a full 20 days after demonetisation, was only Rs 7,800 crore (15.6 crore notes).

In comparison to the value of notes that were demonetised -- Rs 8.58 lakh crore -- the new Rs 500 notes amount to less than one per cent (0.91 per cent).

If we take Gandhi's words at face value, then, even on November 10 -- more than a month after demonetisation came into effect -- there was not much change.

Of course, the Rs 2,000 notes, which the Economic Affairs Secretary has said were being printed for "months" are considerably more in circulation.

The value of such notes supplied on November 29 was Rs 3.21 lakh crore (160.8 crore x Rs 2,000) -- almost 47 per cent compared to value of Rs 6.86 lakh crore (of Rs 1,000) demonetised. But Rs 2,000 notes are not easy to spend and have created a bottleneck in the cash economy.

Again, according to Gandhi's information, till December 10, there seems to have been no change even in the Rs 2,000 notes circulated.

The shortage of notes, it seems, would continue much beyond the 50 days that the prime minister has mentioned.