The daily nightmare that Indians are facing following Prime Minister Narendra Modi’s cavalier demonetisation move will not end anytime soon. The worse is about to come.
Notwithstanding Reserve Bank of India (RBI) Governor Urjit Patel’s assurances that the problem of severe cash crunch will ease soon, it may take at least 175 more days to remonetise the banking system. That too, if the complicated and time-consuming process of “printing press-to-pocket” flow is considerably overhauled.
The RBI announced on Wednesday that an amount of Rs 3.81 lakh crore has been supplied to the public as on 6 December. That still leaves a shortage of nearly Rs 11 lakh crore in the system, assuming that the amount rendered illegal on 8 November was close to Rs 15 lakh crore.
According to reliable sources, all the four currency printing presses together have been printing notes worth Rs 6,300 crore every day. If things stay as they are, it will require non-stop work for 175 days to reach the magic figure of Rs 11 lakh crore.
The Salboni press has been printing 26 million notes of Rs 2,000 denomination, Nashik and Devas presses an additional 16 million notes of Rs 500 denomination and Mysuru press has the capacity to print 5 million notes of Rs 500 denomination, while running at full capacity.
A Long Wait Ahead
- At least 175 days required to remonetise banking system
- Cash shortage of nearly Rs 11 lakh crore in the system
- Printing presses struggling to print adequate number of Rs 2,000 and Rs 500 currency notes
- Rate of printing of Rs 500 notes far below the target
- Hurried printing has left the new notes vulnerable to counterfeiting
Even the review of official data on how remonetisation has evolved in the last one month does not inspire much confidence. We have two sets of data to get a sense of how remonetisation has panned out in the last one month.
According to a Credit Suisse report, Rs 1.50 lakh crore was released in the banking system by November and most of that reached the people. It works out to an average of Rs 10,000 crore a day worth of money being withdrawn. According to another set of data provided by the RBI, an average of Rs 14,000 crore a day reached the banking system since 8 November. Even going by these numbers, it may take anywhere between 80 to 110 more days to bring the level of cash in the system to pre-demonetisation days.
As Modi’s 50-day allowance period – the time that he has promised Indians to restore normalcy to the huge economic and cash upheaval his seemingly reckless move has caused – nears its end, there has been little improvement in the supply and flow of cash into the system.
ATM Woes
While banks run out of the little cash that they receive in no time, the majority of ATMs in the mega cities, especially Delhi, remain dry and at the mercy of companies supposed to reconfigure the mechanics to facilitate the outflow of the new Rs 2,000 and Rs 500 currency notes which are very different in shape and dimensions to the ones that are no longer legal tender.
Over the past three weeks, The Quint has published a series of stories that have exposed not just the unpreparedness of the government to handle the difficulties that people would face, but also exposed the ham-handed ways in which the post-demonetisation measures are being followed.
The Security Printing and Minting Corporation of India Ltd (SPMCIL) under the Finance Ministry and the Reserve Bank Note Mudran Private Ltd, a fully-owned subsidiary of the RBI, are still struggling to print adequate number of Rs 2,000 and Rs 500 currency notes at the Nashik, Dewas, Salboni and Mysuru currency printing presses.
The rate of printing of the Rs 500 notes, which began a full month after printing of the Rs 2,000 notes began, is far below the target and it may take months before the situation turns normal. The RBI, the SPMCIL and the government have pulled out all stops to achieve a seemingly difficult, if not impossible, task. So much so that they have dispensed with important note printing procedures in their bid to print more cash, though at the cost of quality.
So, even as most Indians wait for the situation to ease, the sheer carelessness associated with the printing of new high-value currency notes makes them vulnerable to counterfeiting, defeating what was one of the so-called purposes of Modi’s demonetisation move.
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