JOIN US“Indian economy is like a Zebra skin...difficult to say whether black stripes are on a white skin or white stripes on a black skin,” said eminent economist and Prof (late) P R Brahmananda of Bombay University in mid-eighties.
Monetary economist Brahmananda's saying holds good even to this day going by the latest move of the Reserve Bank of India (RBI) to withdraw all banknotes issued prior to 2005 from the very beginning of the next fiscal --April 1, 2004 -- is the central bank's way of extricating the inextricable black stripes from the skin.
In other words, the apex bank want unaccounted money hoarded clandestinely or circulated in covert transactions, be brought out in open and made legit. Mint Street observers maintain even as the RBI move may ostensibly look like a tool for tackling inflation, but one cannot overlook the political twist of the North block behind it.
The central bank move may willy-nilly help political parties of all hues to pitch for these unaccounted money to fall into their fund-starved election-kitties in the next two months before the RBI dead-line ending March 31, 2014.
This move mirrors late-night demonetisation fatwa mooted by then Prime Minister Indira Gandhi; the move then brought out in hordes fat cats scurrying, scrambling and queueing up to get their illegitimate money legitimised.
The move then had political overtones and the move now also ripples the same undercurrent; with elections around the corner, inflation soaring, political funds running dry and above all the economy is in dumps. If the black stripes starts turning white the economy may start gleaming at least for some time till the crisis again strikes from the blue. But then by that the elections will be over.
Meanwhile, the RBI has appealed to the public not to panic over its move saying they are targeted to bring out the unaccounted money.
From April 1, 2014, the public will be required to approach banks for exchanging these notes.
Banks will provide exchange facility for these notes until further communication. Further, RBI stated that public can easily identify the notes to be withdrawn as the notes issued before 2005 do not have on them the year of printing on the reverse side.
However, from July 1, 2014, non-customers will have to furnish proof of identity and residence to the bank branch in which she/he wants to exchange the notes, if they want to exchange more than 10 pieces of Rs 500 and Rs 1000 notes.
In short, the latest RBI move is a replica of demonetisation exercise carried out in 1978, where at one stroke all the Rs 1000, Rs 5000 and Rs 10,000 were turned dud, but in order to contain the volume of banknotes in circulation due to inflation the bank note of Rs 1,000 was reintroduced in 2000, while bigger nomination of Rs 5000 and Rs 10,000 continued to remain in cold storage.
However, the difference this time is that all banknotes issued prior to 2005 is being taken out of the system for good.