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Despite the long queues at ATMs and the rising tempers, the government’s internal assessment is that the “economic gamble” that it took by invalidating currency notes of Rs 500 and Rs 1,000 will pay off.
“In one stroke, the nuisance of fake currency notes, being pumped in by Pakistan over the last two decades, has been struck — at least for two to three years or until they come up with some new tricks,” said a senior source in the government, when asked about the gains from the exercise.
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The source claimed that the operation will yield other benefits. “The value of the Indian rupee will go up as a result of this exercise. And, the most important advantage is that the RBI will be able to print more notes to fund development projects without having to worry about fiscal inflation,” he said.
When asked about the primary aim of the exercise, the source said, “India is country of 120 crore plus people. We must have a mega budget to match people’s aspirations. Currently, our budget from all sources is only around Rs 4.5 lakh crore. That’s not enough to build up our military strength, bridges, hospitals, schools and space stations. We need big budgets for big projects. At the end of this exercise, we will get more money to fund such projects.”
Sources said the government had been keeping a “tight watch” on banking transactions and when business in banks across the country crossed the Rs 60,000-crore-mark, there was a “sigh of relief”. “This is not just economic reform. This is transformation…parivartan hai, sirf sudhaar nahi,” said a source.
The sources said there was a lot of planning that went into the operations. The initial plan, they said, was to demonetise the Rs 500 and Rs 1,000 notes in February 2016, around the time of the Union Budget, but the move had to be deferred because the arrangement to print new notes of Rs 500 and Rs 2,000 could not be put in place by then.
They claim that Prime Minister Narendra Modi, however, was never in doubt about the operation that finally got off the ground on November 8, with Nripendra Misra, Principal Secretary to the PM, and RBI Deputy Governor R Gandhi, playing key roles.
When the design for the new Rs 500 and Rs 2,000 notes was being debated, there was consensus about using a picture of the Red Fort on the notes. A source in the government explained, “The Indian tricolour flying over Red Fort symbolises the nation’s strength and power. It’s part of Indian history.’
Sources said a special agreement has been signed with the manufacturer and supplier of the ink and paper for the notes. The note includes a clause that disallows them to supply the same ink and paper to Pakistan.