Key Metrics

• More than a quarter of the currency in the hands of the public in India currently (2024) may be counterfeit. According to an estimate made by various Agencies. The RBI doesnot release percentage figures even as it announces a great increase in fake 500, 200 and even smaller notes.
Fake currency dealers… projected that by 2010 nearly$ 2.2 billion worth of fake currency will be in circulation in India. The ‘Black’ or unaccounted economic transactions are nearly 50 percent of the economy of the Country.
• Fake currency dealers in Nepal had earlier projected that by 2010 nearly $ 2.2 billion worth of fake currency will be in circulation in India. It would be even more today. The Global Financial Integrity in its report said that the heavy flow of counterfeit notes has led to speculation that elements in Pakistan are trying to create confusion and destabilize India. The fake currency money is mostly routed to the country through Bangladesh, Thailand, Dubai and Nepal. Fake currency is being now printed within India too.
• The ‘Black’ or unaccounted economic transactions are nearly 50 percent of the economy of the Country. Such Black Money also, encourages money being taken out of the Country (See ‘Indian Money in Foreign Banks’) War is defined as essentially a Political or Economic Act by a Nation against another Nation to secure its Aim, and a Military Act only to the extent that Military forces may be required, as a last option, to be used to achieve that Aim.
The value of a currency note is only what people believe it has. That means they have confidence that the issuing Government will back it with appropriate assets. Counterfeit currency has no such backing and thus devalues the original currency, and if introduced by domestic parties is a serious crime and if introduced by a foreign country is an act of war, and calls for a strong and immediate response. However, it is a surreptitious way of warfare and hence, difficult to prove and retaliate against. In such a case, the best ‘defence’ is not ‘offense’ but only a good ‘defence’.
• The best defence would be to negate the entire effort of the suspected enemy in producing and distributing the counterfeit notes. The solution proposed hereunder was not feasible for the USA when its Currency was similarly, targeted in the past, allegedly by Iran. It would not have been feasible for us even a decade ago. But today when:
• The Aadhaar System identifies everyone and the ‘Jan Dhan’ scheme encourages everyone to have a Bank account to avail direct subsidy as applicable,
• The availability of Debit / Credit Cards is extensive,
• The spread of Banks across the Country with the ability to rapidly encash / credit Cheques is also, extensive
• The Unified Payment Interface (UPI) has greatly reduced the use of cash.
• The Negotiable Instruments Act makes the use of Cheques more acceptable and effective and can be made even more effective for even greater acceptability by declaring that issuing a cheque is as good as paying cash and, except in cases of extortion which need an FIR, no other excuses will be acceptable for not honouring the cheque, which will then be treated as theft.
• The lack of Capital account convertibility restricts the availability of Currency notes outside the Country,
• The use of personal mobile wallets, likely linked to mobile phones to make necessary payments is increasing. The proposed solution is not only very possible but also, practical. This solution would also, drastically reduce the extent of the ‘Black’ economy.
• It is proposed that all Currency notes above Rs. 200/- value be immediately demonetized. The same should be deposited into Banks immediately and credited to the depositor’s account. This will also, result in removing a fair amount of black money from circulation.
• New plastic based, long use notes with better security features can be introduced for all the remaining circulating currency notes as deemed necessary.
• As high denomination notes are not used in most transactions of the very poor, who do not yet have Bank accounts, such demonetization should not affect them. The rest will be encouraged to join and use the Banking system, something that the Government has long been proposing as being beneficial to them.
• The offensive action to be also, taken in this matter would be an intelligence operation to clearly identify the source of materials (inks and paper) and machines/plates used for counterfeiting and impose appropriate sanctions against the suppliers. These will however, in no way help reduce the present damage caused by notes already printed and introduced into circulation, but would deter such future action.

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