Demonetising the country's highest-valued note is among the many suggestions made by former Finance Secretary Subhash Chandra Garg in a note to the government on Thursday. The 72-page note also talks about how the government needs to have an active policy of de-nationalising public sector undertakings (PSUs) and promoting privatisation, manage its own debt instead of falling back on RBI, and discontinue off-Budget borrowing, besides demonetising Rs 2,000 notes. India's fiscal management system "uses practices that are not sound and stable and runs levels of deficits and debt which are high and unsustainable," The Indian Express reported him as saying. Subhash Chandra Garg demitted office as Power Secretary on October 31 after opting for voluntary retirement. He was earlier in the Finance Secretary.
Why is he advocating for demonetisation?
While the government introduced the Rs 2,000 note soon after its previous demonetisation move in 2016 with the aim of curbing black money, Subhash Chandra Garg said that people have been hoarding Rs 2,000 notes. "A good chunk of Rs 2,000 notes are actually not in circulation, having been hoarded. Rs 2,000 note, therefore, is not presently working as a currency of transaction. It can be demonetised, without causing any disruption," he said in his note.
Meanwhile, the government is still grappling with the issue of "maintaining a balance between existing stocks and fresh printing of various denominations of currency, while enforcing the new security features which were last introduced in 2005 as costs escalate," The Indian Express reported. According to the Minutes of the last meeting of the Strategic Planning Group of the Currency and Coins Division of the Ministry of Finance which was held on June 3, there has been a delay in approval of the new security features, which had been fast-tracked at the level of the Finance Minister in 2015. "Due to the withdrawal of Rs 500 and Rs 1000 denomination notes after demonetisation and introduction of new denominations of Rs 200 and Rs 2000, the inter-se revision of new security features among various denominations of bank notes has now been proposed by the RBI for approval," the Minutes said.
Further, the government is also scaling down the printing of Rs 2,000 note and no new notes have been printed this year, according to the government's response to an RTI filed by The New Indian Express. The officials stated that a high circulation of Rs 2,000 notes may defeat the government's objective as Rs 2,000 notes are easier to get used for illegal purposes such as smuggling, the RTI reply said. The officials also cited that they had recovered unaccounted cash of Rs 6 crore in Rs 2,000 notes at Andhra-Tamil Nadu border and that incident prompted them to take action on printing fresh notes.