Fake currency notes can destabilise our economy

There was a small news item a few days ago about ink used in printing currency missing in transit. According to the report, a consignment of OVI intaglio ink was sent from the Swiss SICPA unit in Sikkim to the Reserve Bank Note Mudra unit in Mysore and about 5 kg ink was found to be missing on arrival. The missing ink is worth Rs 5 lakh and an FIR has been filed with the local police.

But the cost of the consignment is not the issue here. The issue is the seriousness of the sabotage.

Namo Narain Meena, minister of state for finance, said in the Parliament on August 4 that Pakistani intelligence agencies were flooding the market with counterfeit currency.

The issue of fake or counterfeit currency has become very serious in our country. Because of the increasing menace of this issue of fake Indian currency notes (FICN), a high level committee headed by the home secretary is working on identifying the latest security features to be incorporated into the currency notes to make counterfeiting difficult. The committee comprises top officials from the Central Bureau of Investigation and Intelligence Bureau.

Reports suggest that the Dawood Company is encouraged by the ISI in this regard and Bangkok is used as a hub for this purpose, and Chinese and South Korean carriers are used to bring them to India. The purpose is twofold —- destabilise our economy and finance terror activities.

There is a huge gap between the actual circulation and seizures of FICN. Official estimates put the number of FICN in circulation at 61,000 million pieces of different denominations worth Rs 1,69,000 crore till the year 2000. In comparison, the actual seizures amounted to Rs 5.57 crore in 2002, Rs 5.29 crore in 2003 and Rs 6.81 crore in 2004.

As per RBI norms, if 15 pieces of fake currency notes are found to every 10 lakh pieces of 100 rupees notes, the situation is alarming. From that point of view, the current situation should be very alarming.

A recent report suggested that a woman ISI agent was held in Amritsar. Savinder Kaur, the accused, had in her possession notes worth Rs 4.8 lakh and she had visited Pakistan several times with religious groups. She would buy fake currency notes with face value of Rs 1 lakh for Rs 40,000 (huge discount obviously) from her counterparts in Pakistan and sell these notes for Rs 55,000 to one Yodha Singh who in turn would sell it for Rs 65,000 and so on. RBI officials reportedly said it was very difficult for a layman to tell these fake notes from the original.

The role of Pakistani intelligence agency ISI in printing and circulating FICN has never been a secret. But the Pakistan government has been importing additional currency-standard printing paper and ink from companies located in UK, Sweden and Switzerland to increase the ISI activities. The issue has reached such alarming proportions that it is expected to be discussed when chief ministers and police chiefs of states get together in Delhi on August 17 for the internal security meeting.

A number of arrests made in other countries, such as Sri Lanka and Bangladesh, in the recent past point to Pakistani hand in using FICN for terror related activities. For instance, one Naushad Alam Khan, arrested in Dhaka on April 24, 2008 with FICN of Rs 50 lakh face value had admitted to links with HuJi chief Mufti Abdul Hannan of Bangladesh and it was found that both had fought for the Taliban in Afghanistan.

That the US dollar is counterfeited, or even euro, is understandable. But the most absurd target from a global economic point of view is counterfeiting of the Indian rupee. Clearly, economic gain is not the reason for the counterfeiting of Indian rupee, unlike for US dollars. The aim is economic subversion and terror financing.

It is also to be recognised that less than a dozen global companies dominate the security grade printing and processing. These companies will not encourage counterfeiting and hence state sponsored agencies have to act as a cover to perform such task. It is not very difficult to track the source of ink, paper, dies, plates etc and nail the destabilisers and terror financiers.

India seems to have agreed in Egypt to continue the dialogue with Pakistan without seeking an end to its sponsored terrorism. But pushing fake Indian currency is also a form of terrorism aimed at destabilising our economy and financing terror activities. The government should unequivocally and unambiguously tell Pakistan that enough is enough and that economic terrorism is a game the two countries can play with catastrophic results for the Pakistan economy. Saam, daam and bhed may not be useful in tackling economic terrorism; dand helps.

The writer is professor of finance and control, Indian Institute of Management - Bangalore, and can be reached at vaidya@iimb.ernet.in. Views are personal.