With reference to Ajay Shah’s “A monetary economics view of the demonetisation” (November 14), the article, with a deft theoretical approach, almost confuses the reader to think that money is cash and a reduced amount of it in circulation is, by itself, something bad for the economy.
The decision to demonetise presumes hoarding of high-value currency for purposes other than genuine transactions, existence of fake currency in the system and evasion of tax by off-the-book high value transactions as in the purchase of gold and property. Though there have been initial flip-flops, by and large it appears the Reserve Bank of India has taken care to ensure availability of currency notes in exchange and for withdrawal from banks. There was a slip-up in readying ATMs to dispense new Rs 2,000 and Rs 500 notes.
While incidents during the first half of the last century mentioned in the article should continue to guide us from a historic perspective, their relevance to the current Indian context is debatable. Because, the entire world is moving toward a cashless system (different from world without money) and though India, with its literacy level and banking infrastructure, may not be able to keep pace with the developed world, it cannot stand still either.
M G Warrier Mumbai
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