CHENNAI: The Centre should withdraw the new Rs 2,000 and Rs 500 notes over a period of time to cut down on cash in the economy, according to former Union Revenue Secretary M.R. Sivaraman.
"The cash-to-GDP ratio of 13 per cent is certainly not right. All these years, nobody said anything against the RBI on the cash economy in the country," Sivaraman, who also served as Executive Director of the IMF, told IANS here.
Sivaraman said the central government should make it clear that the new higher denomination notes of Rs 2,000 and Rs 500 would be withdrawn, aimed at bringing the cash-to-GDP ratio to seven per cent in three years.
Agreeing that there has been a failure in the smooth implementation of the demonetisation of 500/1,000-rupee notes, Sivaraman said at least now the Centre should take some proactive and open steps and take state governments into confidence.
According to him, all payments by and to the central government should be by way of cheque or other means and not by cash. Similarly, all public sector undertakings should go cashless.
"Supply of cash to rural areas should be increased while cash supply in urban areas should be contracted. People in urban areas have alternate modes for financial transactions like credit/debit cards, mobile payments and others," Sivaraman said.
"The government should tell people that it is working towards the cash-to-GDP ratio of seven per cent. The people should also be informed that the new 500- and 2,000-rupee notes would be withdrawn and only 100-rupee note and other lower denomination would exist," Sivaraman said.
According to him, the plan of action should be made known to the public.