Economy
Currency time-bomb: Counterfeit notes galore with election in the corner!

It is a well known fact that substantial sums of money are used in elections, with cash being used on a much larger scale than ever before. And, unless immediate steps are taken, we may find that huge amounts of fake money in circulation that will create chaotic economic conditions

 
Only a couple of months ago, we at Moneylife had carried stories on the urgent and imperative need to introduce polymer rupee currency notes. (Polymer rupee notes: Slow or no progress?, What about polymer rupee notes?)
 
Namo Narayan Meena, minister of state of finance, in a written reply to Parliament, had stated that over Rs15 crore worth of fake currency in Rs500 denominations had been detected. Apart from the Reserve Bank of India (RBI), various banks had also found counterfeit currency, many of which even fooled banking officials, who were given the choice to select the genuine from the fakes, as reported in the press.
 
Subsequently, in an announcement, the RBI had confirmed that, in fact, they had chosen a few selected centres in the country to introduce, on trial, polymer currency notes of Rs10 denomination to see public reaction. However, how much or how many such notes have been introduced in these markets were not stated, nor, the RBI published any assessment of reaction or acceptability from the public.
 
Among the test centres were Kochi and Mysore in the South. Now report is on hand that fake currency worth Rs40 lakh have been seized by the Bangalore Police, which were mostly in Rs500 and Rs1,000 notes, and these were in the possession of six West Bengal natives from Malda and their three local accomplices. When immediate tests were carried out on these fake notes, it was revealed that as against the standard 14 security features, the counterfeiters had succeeded in 10-12 counts. Obviously, any lay person would not be able to detect the difference between the genuine and fake, and thus this currency will be in circulation until it reaches a bank!
 
According to the Economic Offences Wing of the CID, the counterfeiters have been able to get the same ink, printing machinery and paper, most likely to have been secured from the same supply source! For further tests, these notes have been sent to Bharatiya Reserve Bank Mudran in Mysore to ascertain the make of the machine and the paper used.
 
Prima facie, indications are that the ISI is behind this whole operation, printing the fakes in Pakistan and routing through land routes, though some supplies have come in containers from Dubai, landing in Mumbai, and heading towards Kasargode in Kerala, where they were seized.  Customs and excise inspectors lament as to how many such may have expected into various parts of the country. No reports have appeared about fake currency notes being seized from other centres.
 
The epicentre of this counterfeit currency appears to be Malda, in West Bengal, according to the Police sources, and with easy infiltration from Bangladesh refugees and other forms of carriers, such fakes can easily move into India.
 
So, what is the big worry about counterfeit currency in the country? This sort of thing has been going on for decades? A lot, considering the prospects for early Lok Sabha elections scheduled in 2014, unless the political situation precipitates sudden changes.
 
It would appear the very purpose of having test runs with Rs10 polymer currency notes by the RBI was to see and assess the market reaction and, perhaps, introduce the polymer notes on a gradual basis, if and when a final decision is taken by the government. We need to take care of higher denominations rather than small notes!
 
It is a well known fact that substantial sums of money are used in elections, with cash being used on a much larger scale than ever before. And, unless immediate steps are taken, we may find that huge amounts of fake money will be in circulation that will create chaotic economic conditions, adding to inflation.
 
Whether anyone is willing to admit it or not, the fact remains, that Pakistan, through its ISI is bent upon bringing about economic earthquake in India with devastating effect. Political talks may continue but India needs to be realistic and practical in its approach on such matters as economic stability in the country.
 
As an immediate step, the RBI must place huge orders to print polymer rupee currency notes with Australia (and others) for Rs500 and Rs1,000 denominations and start putting them into circulation immediately.
 
We are late in combating this menace, but it is never too late to start building brides before the flood washes out our economic system. It is grim.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)
 

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COMMENTS

Dr Anantha K Ramdas

5 years ago

Cashless economy is a distant dream as far as India is concerned. With a very large illiterate population, we have somehow managed to deal with the existing system.

Even the debit and credit cards are recent addition to the family use, and that too by the
educated few.

In villages people still hoard currency notes and coins which they are more familiar with and this one reason why we need to bring in polymer notes which are not edible for white ants! Once the bulk of the Rs 500/1000 paper notes are replaced by polymers, it will be a great leap to overcome the fakes in circulation and most definitely reduce it. Total replacement can only happen by demonitising and that would take more than 10 years to achieve!

The poor in India today know how to use the cell phone but use of credit cards, banking etc will need some more time and a good amount of effort.

Amol Phalke

5 years ago

As I understand - yes we are trying to replace current paper currency
with polymer currency which is possibly difficult to counterfeit
because of technological sophestications but are we trying to solve this
problem superficially by doing so...

The amount of currency money in India is huge as compared to bank money and
that too most of the currency money is held in higher denomination notes Rs. 100, 500, 1000.
In such scenario counterfeiting creates huge economic nuisance.

RBI at one hand is having vision of cashless economy.

Isn't it wise to demonetize high denomination notes and promote bank money rather than
recurringly spend money on printing new sophesticated currency which is bound to be counterfeited if
not immediately then after some time when equivalent technology is made available?

The illusion of China's stimulus

Like the Federal Reserve, the Chinese government continues to pump in money, but the real problem is that both are facing “structural problems that counter-cyclical remedies cannot fix, so the private sector cannot find areas to make enough profit to justify its investment”

 
Over the past few years markets have been wild for any sort of economic stimulus that central banks and governments can dole out. The whole idea is that stimulus leads to economic growth. This may been true at one time have, but, at this point, investors may have placed too much faith in the capacity of central banks and governments to counteract economic weakness. The stimulus may in fact be counterproductive, because it is misleading, encouraging investors to take risks when those risks are not warranted. This problem is most acute in China, where the government has an institutional ability to mislead; a strong motive to do so and where the risk is greatest.
 
Economists and analysts have long been predicting that China would have a soft landing because the Chinese would stimulate to prevent a hard landing. The political background is especially reassuring to this thesis. Once every decade the Communist Party holds a Congress. The purpose of this gathering is to change leadership at all levels. In the past the new leaders, especially at local levels, have outdone themselves in spending money to grow the local economies. Most western commentators believe that this year will be no different. But times change and sadly the commentators did not ask the Chinese.
 
According to a commentary published by the official Xinhua News Agency, “a massive stimulus is not only unlikely, but would be detrimental to the country’s sustainable economic growth.” So another stimulus package like the Rmb 4 trillion ($632 billion) package issued in 2008 is not on the cards. One of the reasons is that like the most recent stimulus attempts by western central banks, it probably wouldn’t work. According to one highly respected Chinese economist quoted in the Financial Times: “I believe China is going to experience a very serious economic downturn and I think it has already started. The government is trying now to stabilize the economy but the instruments they have are very limited. If it can’t turn things around then I expect huge and widespread social unrest.”
 
In a way it is hard to blame the commentators. Like their western counterparts the Chinese have been falling all over themselves making pronouncements of vast projects involving untold billions. The central government has approved 25 urban rail projects, 13 highway construction projects, seven waterway projects, nine waste water treatment plants and plans for energy conservation and carbon emissions. The total cost would be Rmb 3.4 trillion ($537 billion), which is not far from the 2008 numbers. Not to be outdone the presumptive local leaders have advertised Rmb1.5 trillion ($236 billion) investments in large industries such as petrochemicals, automobiles, electronics and advanced equipment.
 
All of this sounds great, but there is one problem: no money. Approval of a specific project by the central government does not mean that the central government will pay for it. It means that the central government has approved a loan by a state-owned bank to a local government to pay for it. This process has been going for the past four years on a massive scale and unlike taxpayer-funded stimulus or new money from a central bank; loans eventually have to be paid back. This is a problem for local governments because their main sources of income have been dwindling.
 
Most of the local government revenues come from local land sales to developers, who then sell the houses. These sales have been restricted by the central government to cool prices, but the restrictions have also reduced the income of the local governments by about 25%. Local governments do collect taxes from local business, but these are not the huge state-owned businesses that are often in the news. Those businesses are owned and taxed by the central government. Often the local firms are smaller and involved in exports have been plummeting thanks to slow or negative growth in the global economy. So, local governments have between Rmb 11 trillion and Rmb 14.5 trillion worth of debt. With declining revenue, it is doubtful that many of these loans will be paid back.    
 
Besides most market experts have assumed that the Chinese slowed their stimulus last year to control inflation. This is simply false. If you look at the graphs below it is obvious that Chinese have been issuing new bank loans at a relatively steady rate since 2010.  If anything, the Chinese have been pumping out new money faster since the beginning of 2012. Despite all the cash the growth rate of the Chinese economy has steadily declined since the end of 2009.
 
 
So like the US Federal Reserve, the Chinese government continues to pump in money, but the real problem is that both countries are facing “structural problems that counter-cyclical remedies cannot fix, so the private sector cannot find areas to make enough profit to justify its investment.”
 
(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages. Mr Gamble can be contacted at [email protected] or [email protected]).
 

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COMMENTS

SuchindranathAiyerS

5 years ago

The reality is that all the economies have reached the limits of planning after having painted themselves into a corner.More pump priming with more currency in the system that will return to the hands of the wealthy! When we used to play "monopoly" as kids, as the game neared its end with all the properties and hotels in the hands of the one or two with the rest facing bankruptcy, the winners would propose a redistribution of the money in the Bank equally to all the players. This would delay closure of the game and prolong the joy of winning for the winners who would tote up record sums of "assets". The losers would soon lose the "redistributed" currency to the winners already in possession of all the assets on the board. Our "economists" "central bankers" and "elected representatives" should play a few games of "monopoly" to get the drift.

Pratibha Patil to return 155 artifacts to Rashtrapati Bhavan by 15 June 2013, reveals RTI reply

To a RTI query by this writer asking about the list of gift items loaned specifically to Pratibha Patil along with the evaluated price of each item, Rashtrapati Bhavan says information not necessary as it is a ‘temporary’ arrangement

The Rashtrapati Bhavan has officially admitted through a RTI (Right to Information) reply to this writer that “An MoU was signed on 15th June 2012 between Rashtrapati Bhavan and the Vidya Bharti Shaikshnik Mandal, Amravati, for display of 155 artifacts/mementos on a purely temporary basis, which in any case, cease to be operative with effect from 15th June 2013 and all the artifacts presently on loan shall be returned to the Rashtrapati Bhavan Museum thereafter” but refuses to divulge detailed information on the list of artifacts transferred to Ms Patil’s museum.

The Central Public Information Officer (CPIO) of the President’s Secretariat takes this ‘temporary’ arrangement as an excuse to not provide the list of artifacts given to Ms Patil to display it in her museum in her hometown, Amravati, along with their individual costs and countries that they were gifted from.

The RTI application filed by me on 3 August 2012, specifically asked the PIO of the President’s Secretariat, “List of gift items loaned specifically to Ms Pratibha Patil along with the evaluated price of each item; from which country did each gift item come from; what was the purpose of her visit when she received each of the gift item.” The reply is “do not arise in view of the answer at (3) above” (which is she would be returning artifacts by 15 June 2013 as the agreement would cease by then.

The RTI reply interestingly suggests that it was President Abdul Kalam who started the trend of moving out gifts received in the capacity of being President of India. The CPIO Saurabh Vjay states in his reply dated 6 September 2012, “No such requests have been made by any former President of India. It is, however, stated that in the past, 36 artifacts were handed over during the Presidency of Dr APJ Abdul Kalam for being displayed in the Brahmos Centre, New Delhi.” This reply came to the writer’s query under RTI seeking “copies of official requests made by Presidents of India for loaning of gifts from 1990 onwards. Provide copies of all such correspondence within the President of India office as well as between President of India office and the relevant district/city authority where the President of India may have resided or the place where she/he wants to display the loaned gift items, form 1990 onwards.”

The RTI reply also states that “no such rules and regulations are available for loaning of gift items received by the President of India. This was in reply to my query, “Copies of Rules/GRs/amendments/correspondence for rules and amended rules regarding gift articles and souvenirs which are received by Presidents of India from other countries and within the country; Copy of rules and regulations for ‘loaning’ official gifts received by President of India to presidents on their retirement or loaned to any other organisation.”

To the query, “How many gift items in total does the ‘Tosha Khana’ of the President’s office have at the moment and what is the total amount in value?” CPIO Saurabh Vijay states in his reply that “as per our records there are about 2,500 gifts in ‘Tosha Khana’ of the President’s Secretariat and as regards the value of these items, no such records are available in the Art section.”  This is indeed shocking for, as per the ministry of home affairs, any contribution in the form of gifts received by President of India or other dignitaries must be valued within 30 days of receipt of gift.

It may be recalled that a museum is being specially set up in Pratibha Patil’s hometown by the family trust, Vidya Bharti Shaikshnik Mandal, run by her politician-son Rajendra Shekhawat.

The writer is filing a first appeal to the President’s Secretariat since the information received is inadequate.

Read the previous article here: Pratibha Patil’s Museum: Gifts received by VVIPs from foreign countries can be purchased by them but can they be loaned?

 

(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte. She can be reached at [email protected].)

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COMMENTS

Karma

5 years ago

If the PIO has not responded completely, then you should file an APPEAL, a provision which the RTI act offers.

Details here http://www.fixindia.org

Shadi Katyal

5 years ago

I have few questions about this bhaviour of our Former Presidents.
How many took such gifts and wer those ever returned?
These are nation's property and not any private gifts as no one even know such a person if not on the sid chair.
Why is that this lady not only abused her power by ferrying around the world her whole family and friends and thank asking for a palacve to reire and has the audicity to take that many gifts with her.Who agreed for such acquisitaion?
Why does she needs these national gifts?
It is evidewnt that we as a nation has proved to be nothing else but people without any Ethics and will do to get away wtih anything.What a shame that we elected a lady who was not happy being the President but wants such gifts. Why not take the Raj Bhavan as private proeprty.Shame shame

Shadi Katyal

5 years ago

I have few questions about this bhaviour of our Former Presidents.
How many took such gifts and wer those ever returned?
These are nation's property and not any private gifts as no one even know such a person if not on the sid chair.
Why is that this lady not only abused her power by ferrying around the world her whole family and friends and thank asking for a palacve to reire and has the audicity to take that many gifts with her.Who agreed for such acquisitaion?
Why does she needs these national gifts?
It is evidewnt that we as a nation has proved to be nothing else but people without any Ethics and will do to get away wtih anything.What a shame that we elected a lady who was not happy being the President but wants such gifts. Why not take the Raj Bhavan as private proeprty.Shame shame

prakash C Sheth

5 years ago

RE: Pratibha Patil to return 155 ARTIFACTs to RASHTRAPATI BHAVAN---As ALL GIFTS received by the PRESIDENTs,VICE-PRESIDENTs, Prime Ministers and Central CABINET and State ministers of INDIA are , in fact, received in their OFFICIAL CAPACITY, ALL such GIFTS be placed in the ARCHIVES and / or MUSEUMS specifically for the purpose. Full and Complete notations / descriptions and PICTURES of such GIFTs together with DONOR countries GIFTING notes be officiall recorded, and be Made available for RIGHTs to INFORMATION ACT.INDIAN Parliament should ENACT legislation covering such modalities, incl. Whether Loaning be permitted adn , if YES, HOW and Whether such Loaned GIFTs are in fact recovered and restored in the ARCHIVES. ANNUAL AUDITs be performed and such AUDIT reports be placed before the Parliament. Regards--Prakash C. Sheth

Black Mamba

5 years ago

Its really shameful to read it. Mahatma Gandhi carried only a few items of daily use with him. On the other hand todays politicians have no end to their greed.

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