The BJP, demonetisation, and faking the numbers

West Bengal: Notes in denomination of Rs 500, 1000 found in garbage vat, private car

“Two sacks with torn and damaged currency notes of old ₹500 and ₹1,000 stacked in them were recovered from a garbage vat [āstākūṛ, in Bānglā] in the southern part of the city’s Golf Green area [specifically, Golf Club Road in the Jadavpur police station jurisdiction] this morning.”

. . . . .

“In North Dinajpur district in north Bengal, the police seized Rs 1.60 crore in ₹500 and ₹1,000 notes from a private car on NH-34 under Itahar police station area last night.”

* * * * *

Sightings of dumped ₹500 and ₹1,000 demonetised currency notes have also been reported from Uttar Pradesh and Bihar.

The government says it’s all kālā dḥan being dumped by panicking black money hoarders.

* * * * *

Which narrative makes no sense.

The torn and damaged notes discovered at Golf Green in Kolkata seem to be part of a cyclical subeconomy that few people know about and the government and banks never acknowledge: This subeconomy is run by traders who make a living picking up damaged notes past their shelf lives and depositing them in the banks for termination.

These traders are a crucial part of any economy – especially the Indian one, in which 85% of transactions are conducted in cash.

In cash-intensive economies, currency notes have brief lives – because handling also entails mishandling, finger-grunge is a killer, and paper is one of the least-durable commixtures in existence.

Banks, in fact, depend upon currency-note recyclers to keep the cash economy running and the RBI needs them to keep its mints up-to-date.

And, now, the recyclers are tossing the notes away.

Economists expect 20% of the ₹500 and ₹1,000 currency-in-circulation (or 301,688-crore out of ₹1,508,440-crore) to not make it’s way back into the system. In other words, 17.2% of the total currency-in-circulation (₹1,754,000-crore) might be lost to this round of demonetisation forever.

(To extend the life of currency notes, Britain decided to go the ‘polymer currency’ way: the fiver, £5, became a plastic note in September 2016. £10 will be plasticated in 2017, and £20 in 2020.)

Exactly how does the Indian government plan to get this back?

It doesn’t. It hasn’t a clue. Demonetisation slammed the door shut on currency-recyclers.

* * * * *

Of course, all this loose cash is all black money, the government says.

Which narrative makes zero sense, too.

Here’s why:

Inflation makes uninvested loose cash drastically drop in value quarter-by-quarter. Merchants, traders and small-time retailers keep cash in bundles (not in gunny sacks, or in – that faded, old trope that spotlights the archaic Indian mindset – mattresses) because they buy and sell in cash. Hard cash is a fast-moving commodity. It doesn’t grow fat sitting at home.

Knowing this – it’s not rocket science – black money honchos invest ASAP in bullion or real estate, because gold and immovable properties always increase in value, inflation, deflation or plateau.

* * * * *

And as for counterfeit money:

RBI data (2015-16) has it that 632,926 counterfeit notes were detected in commercial banks this year. (This was a 6.42% increase on the 2014-15 haul of 594,446 counterfeit notes.) About 41% (259,500) of these were ₹500 notes, and 23% (145,573) were ₹1,000 notes. (And 35% – 221,524 – were₹100 notes – which Finance Minister Arun Jaitley is not interested in talking about.)

* * * * *

The arithmetic is child’s play: ₹129,750,000 in ₹500 counterfeit notes; ₹145,573,000 in ₹1,000 counterfeit notes; and ₹22,152,400 in ₹100 counterfeit notes.

A total of ₹297,475,400 (app. ₹29.75 crore) this year. Or 0.00167% of the total currency-in-circulation of ₹1,754,000 crore.

. . . . .

This BJP government either knows something we don’t – or it doesn’t really know much at all.

[This article has been updated to conform to better data and stricter calculations]


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