RBI’s Rs 2000 move unclear and confusing, will hassle citizens
It feels like a case of throwing the baby out with the bathwater. The government’s latest ‘masterstroke’ of withdrawing Rs 2,000 notes, more than six years after first starting their circulation, has bemused people more than shocked them.
The purpose of the move has not been articulated clearly and appears to be a knee-jerk reaction. If the objective is to nab those hoarding black money in Rs 2,000 notes—as many commentators suggest, including some of the pro-government voices—there are other means of cracking down on tax evaders rather than shaking the economy now and then curbing the supposed prevalence of black money.
By the government’s admission, Rs 2,000 notes account for only Rs 3.62 lakh crore, 10.8% of notes in circulation, or 1.3% of the FY23 GDP. Unless it believes the entire Rs 3.62 lakh crore held in Rs 2,000 notes is black money, there is no justification for this surgical strike. The fact that the circulation of Rs 2,000 notes halved from Rs 6.73 lakh crore on March 31, 2018, to Rs 3.62 lakh crore by March 31, 2023, is testimony enough that these notes would have diminished on their own. Not all cash is black and neither is holding cash in Rs 2,000 notes illegal.
This newspaper reported on Sunday that many traders and MSME promoters keep cash for working capital requirements. Much of it would be in Rs 2,000 notes. Many labour-intensive businesses like construction and textiles pay their daily wage labourers in cash. So, holding cash in Rs 2,000 notes is not unusual for logistical reasons.
Two days after the announcement, there is already a lot of confusion. Social media was abuzz with speculation that one would have to furnish identity proof to exchange the Rs 2,000 notes in banks. SBI had to clarify that there is no such need. The confusion and chaos might intensify from May 23 onwards when banks start exchanging or depositing the notes. Besides, nobody seems to know what happens to the Rs 2,000 notes after September 30, 2023. If they remain legal tender, what was the need for the September 30 deadline?
With this latest move, the government has again set the cat among the pigeons. People would be hassled, the economy would suffer, and, worst of all, it might shake people’s faith in the rupee. But the government refuses to learn its lessons even as its action inconveniences its citizens.