None of the arguments that the RBI has given to justify the move are valid.
In a sudden though not unexpected move, currency notes of denomination Rs 2,000 are being withdrawn from circulation. This is announced via a notification released by the Reserve Bank of India and not the government (as at the time of demonetisation). These notes are not being withdrawn from circulation, but actually, they will stop circulating right away given that they will have to be deposited in a bank or exchanged for lower denomination notes.
So, no one will accept these notes in transactions which is as good as being withdrawn from circulation. This will create confusion in the public for a while.
Further, as transactions face problems, especially for small businesses – producers and traders – the economy will be impacted.
Arguments Given
The RBI press release gives the logic of the move.
First, the objective of introducing these notes at the time of demonetisation was met as smaller denomination notes became available in larger numbers. It is argued that the availability of these smaller notes is adequate.
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