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India has seen extraordinary scenes over the past few days—from serpentine queues outside banks to a strange rush to buy salt. The currency swap has clearly not been a smooth process. The government could also have communicated better about what is still an important move.
However, it is likely that the cash crunch will ease in the coming days. The Reserve Bank of India said on Sunday that banks did 10 crore “exchange transactions” on 10 November—or about 40 crore transactions by the end of Sunday, assuming they kept up the pace. That could mean the release of Rs1.6 trillion of new currency if each person who transacted got Rs4,000. Of course, this is a back-of-the-envelope calculation.
Hoarding of these new currency notes because of panic should be avoided. So, a lot now depends on the behaviour of citizens so that the cash crunch eases quickly, even as new currency enters the system. The government also needs to assuage fears more effectively. The hardship is undeniable. The panic is unwarranted.