With reference to A K Bhattacharya’s “By dint of a notification” (November 14), although appreciative of the Modi government’s decision to stamp out black money hoarded in the currency notes with denominations of Rs 500 and Rs 1,000 the author rakes up three key areas of concern in terms of its real impact in the economy. He expresses doubts about the efficacy of such a step towards completely eliminating black money generation while identifying other sources such as real estate and elections apart from over-emphasising on the need to create incentives for people to use more plastic money or electronic wallets. He also questions the government’s decision to grant just three to six days for allowing the use of old high-denomination notes for public utility and emergency services, and seeks a one-month period for the same. In all fairness, one tends to agree with him on this highly undesirable aspect of demonetisation. Incidentally, this facility has now being further extended till November 24. While seeking a longer deadline, the author says “there could have been other methods to tackle the terror-money menace and that could have been debated”. One wishes he had elaborated on the “other methods”.
But he is perfectly justified in his observations about the use of Section 26(2) of the RBI Act, 1934, to declare invalid the currency notes of Rs 500 and Rs 1,000 denominations through a notification vis-à-vis the highly complicated and controversial ordinance route that was adopted by the Morarji Desai-led Janata Party government in 1978. It may be quite interesting to point out that the government has also made use of Section 24(1) of the same Act to first introduce the new Rs 2,000 denomination currency notes. The relevant Section reads: “Denominations of notes — (1) Subject to the provisions of sub-section (2) bank notes shall be of the denominational value to two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the central government may, on the recommendation of the Central Board, specify in this behalf.”
In any case, it is strongly felt that the government should seriously reconsider its decision to re-introduce a new series of Rs 1,000 notes in addition to those of Rs 500 and Rs 2,000 as it would spruce up the macro money supply much against the grain of the government’s attempts to reasonably reduce the extant cash-GDP ratio. Moreover, the revised limit of Rs 4,500 as exchange value should be urgently raised to Rs 10,000 more so when the claimants have to prove their credentials through submission of an approved ID for the purpose. Are you listening, FM sir?
S Kumar New Delhi
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