When Prime Minister Narendra Modi made the shock demonitzation announcement on November 8 he assured that nation that the currency situation would be back to normal by December 31.
With all 500 rupee and 1,000 rupee banknotes – nearly 86% of the country’s currency in circulation – ceasing to be a legal tender and that year-end deadline fast approaching, doubts are being raised whether India’s currency printing presses will be able to deliver on time to ease people’s agony.
The situation on the ground inspires little confidence. There has been no let up serpentine queues in front of banks and ATMs all across the country, while the problem is more acute in the hinterlands.
Some ATMs run out of cash as soon as they are filled, while many of them have remained defunct since November 8. There have been many incidents of deaths of elderly and ailing people while waiting in queues.
A recent report by a non-profit website Indiaspend quoting Reserve Bank of India data on the capacity of India’s printing presses and currency distribution expressed doubt about meeting the December 31 deadline.
The report also said that getting adequate money to banks and ATMs nationwide will depend on how many bank notes the government wants to put back into circulation.
If the government wants to pitch for its “less-cash” economy and introduce 35% less money than it pulled out, it will be able to meet that target only by May. If it wants to reintroduce the entire money supply that was withdrawn then it could take up to August.
The main constraint is that the printing presses cannot print enough high value currencies, especially the 500 rupee notes. The RBI has four presses and their normal combined capacity per day is 74 million notes, although this can be ramped up to 111 million.
But the problem is only half of the presses have the ability to print the security features required for 500 rupee notes and above.
Even if India decides to print only 65% of the money withdrawn, it will have to print 6.81 billion 500 rupee notes, while the printing capacity is 55.6 million notes a day.
Meanwhile, people are finding it difficult to carry out cash transactions with 2,000 rupee notes as shopkeepers struggle to provide change. Without an adequate supply of 500 rupee notes, the next biggest currency is the 100 note which makes it difficult to “break” the 2000 rupee note.