DNA Money Edit: Govt, RBI should scotch rumours on second demonetization

Rumours are flying thick and fast that India may be heading for another round of demonetization. When the opposition in the parliament asked finance minister Arun Jaitley to clarify the speculation that the government has probably decided to scrap the newly-launched Rs 2,000 note, he was tight-lipped. What has fuelled a wave of fresh rumours on a possible second round of demonetization is the report that the Reserve Bank of India (RBI) has stopped printing the Rs 2,000 currency notes altogether and is launching Rs 200 notes by next month.

Over the last few weeks, there were reports about a looming shortage of Rs 2,000 notes, leaving many to speculate that hoarding of hard currencies is back in vogue. The high-value currency notes of Rs 1,000 and Rs 500 were demonetized on November 8 in a crackdown on black money. The government introduced the Rs 2,000 notes simultaneously. Many believed that the higher-denominated currency notes made it much easier to hoard.

If the government ensures an adequate supply of cash in Rs 200 and Rs 500 notes in circulation, the common man may not be bothered much if at all there is a ban on the Rs 2,000 note. But if the speculation continues, people may stop accepting Rs 2,000 notes so as to stay away from the troubles of converting them later in case of a note ban. Also, the economy can't afford to face another round of disruption created by a sudden removal of around Rs 7.4 lakh crore worth of cash from the market.