Faking it

The circulation of fake currency in the country has reached such proportions that it now poses a serious threat to the economy. There has been an increase in the number of fake currency seizures. But it is felt that only a small percentage of counterfeit currency is actually seized. An estimated two lakh fake notes are in circulation in the country. Only a small part of it is thought to have been produced by counterfeiters within the country.

The bulk of it is smuggled in from outside Indian borders. Dubai, Nepal, Bangladesh, Sri Lanka, Thailand and Singapore serve as major transit points for the flow of fake currency into the country. There has been credible evidence of Pakistan’s involvement in the operation. The government has informed parliament about this and the CBI has found evidence of the role of Pakistani agencies. The Reserve Bank, which recently appointed a committee to study the problem, has made a number of suggestions which need to be followed up in earnest.

The country is not well prepared to tackle the problem. The detection system is inadequate. Sorting machines are in short supply. More alarmingly, it is believed that some features of the 2005 currency design have been leaked or stolen. There is realisation now that the import of paper and ink for production of currency notes is also a security hazard. It is known that Pakistan had imported more paper and ink than it needed for its internal use from companies in Europe which manufacture them. New features are expected to be introduced in the design of currency notes and this may make counterfeiting difficult. There is also a plan to make the special paper and ink indigenously. The proposal to shift to polymer notes should also be considered. These notes are costlier to make but are more difficult to fake and, needless to say, more durable. The higher cost of production is likely to be offset by the advantages of longer life and greater security.

Circulation of fake currency destabilises the country’s economy. It is also used to finance terrorist activities. India is planning to take up the issue at the international level. It should also be taken up with the Pakistan government. Greater public awareness should be created about the problem so that people willingly report fake currency to the authorities. Those who report it should not be subjected to harassment as at present.

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