Amid the political uproar over Centre’s decision to withdraw the Rs 2,000 banknote from circulation, former Chief Economic Advisor, Dr Krishnamurthy Subramanian, has praised the move and listed six reasons on why the withdrawal of the currency is important.
Subramanian, who was the CEA from 2018 to 2021, took to Twitter to explain his backing of the move that has refreshed the memories of the 2016 demonetisation in people’s minds. The notes were first issued in 2016 in the wake of the demonetisation of the Rs 500 and Rs 1000 denomination notes.
Subramanian argued that the use of Rs 2,000 banknotes as a medium of exchange had diminished and the currency was only being used for hoarding ‘mountains’ of money that were being found out in raids.
The 80-20 rule suggests that even if 80 per cent of the people are legitimately storing this money in Rs 2,000 notes, they are likely to be storing only 20 per cent of the overall value. 20 per cent of those who are storing the money in Rs 2000 notes are likely to be hoarders who may account for 80 per cent of the value, he wrote on Twitter.
He extended his first point by saying that since the notes were already not a popular medium of exchange, the move would not cause inconvenience to the normal public.
He then added that since the use of digital modes of payments has risen considerably, there would not be much inconvenience.
He also said that the Rs 500 note, together with digital modes of payments, can be used as a medium of exchange to seamlessly substitute even the minimal use of Rs 2000 note.
He further reasoned that since digital transactions are expected to rise by three times by 2026, there would not be much need for the Rs 2000 banknote in the future.
In the end, he concluded by saying, “Most importantly, as RBI has said that the ₹2000 note will continue to be legal tender (even beyond 30-Sep-2023 is my current understanding though RBI may need to clarify this), genuine folks holding the the ₹2000 note can exchange even beyond 30-Sep-2023.”