The demand for abolishing high denomination currency notes

In India, various quarters, as diverse as an NGO Arthakranti with a rather radical tax proposal, a yoga guru turned FMCG Entrepreneur Baba Ramdev to political leaders such as Andhra CM N Chandrababu Naidu have raised the demand to abolish / recall & withdrawal of high denomination currency notes such as INR 1000 and INR 500 to stem the flow of black money in high value cash transactions.

At current exchange rates of 1 USD = 66.83 INR, INR 1000 note translates into 14.967 USD and INR 500 note into 7.484 USD. Compared with this, USD has denomination s including of USD 20 (INR 1336.60), 50 (INR 3341.50) and 100 (INR 6683).

We must also note that India is the third largest economy in PPP terms after United States of America (USA) and China (PRC). The Chinese yuan also has denominations of CNY 50 (INR 497 ) and CNY 100 (INR 994) at current exchange rate of 1 CNY = 9.94 INR.

This fact establishes that Indian currency denominations are comparable with currency denominations in China and far less in value when compared to currency denominations in USA.

As with most noble intentions, there are no rational explanations or an in-depth understanding of the economic impact of the demand for recall / withdrawal of so called high denomination notes.


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