Money & Banking
India needs a Rs200 note, not a Rs2,000 note and the science behind it
What should be the size of the Apple Mac screen? Technically, Apple can produce hundreds of different sizes, but they have settled on four: 13.3 inch, 15.4 inch, 21.5 inch, and 27 inch. The four are spaced close enough, and far enough to satisfy most Apple consumers. 
 
Industrial design has a mathematical concept called preferred numbers. Way back in 1870s, a French engineer Charles Renard proposed a system based on logarithmic scale to produce a limited number of sizes to cover a wide range. A variant of that internationally accepted system is the 1-2-5 series, which is widely used in minting coins and printing notes.
 
The 1, 2, 5, 10, 20, 50, 100, 200, 500, 1000… is that series. The beauty of the series is that any adjacent numbers differs by a product of 2 or 2.5. As a result, they are spaced close enough but cover a wide ground. How? Let us look at an Indian street vendor who still measures the fruit he sells on old-fashioned scales. If he has weights of 100gms, 200gms, 500gms and 1 kg, he can give you fruits in multiples of 100gms by using a maximum of three weights. E.g. 800 (500+200+100), 900 (500+200+200). In no case does the seller need to use four weights. If you must follow the decimal system, this is an extremely efficient system. 
 
Now look at the Indian banknotes. Until 8 November 2016, India had currency (notes or coins) with a denomination of 1, 2, 5, 10, 20, 50, 100, 500 and 1000 rupees. Below Rs100, transactions were efficient. The gap between Rs100 and Rs500 (1:5) has been too large. Over the last few years, it has produced inconvenience (certainly) and contributed to inflation (probably). It is well known that bigger values and larger gaps can increase prices. In January 2002, when most European currencies converted to Euro, prices rose on many goods as a result of rounding up. This rounding up phenomenon has made coins below one rupee disappear from India. 
 
I had hoped that Reserve Bank of India (RBI) would use the demonetization to introduce a Rs200 note. That would have bridged the gap between Rs100 and Rs500 and made the cash economy efficient. What we got instead was a Rs2,000 note. 
 
With the death of the Rs1,000 note, the new ratio of Rs500-Rs2,000 (1:4) to follow the already inefficient Rs100- Rs500 (1:5) is not sustainable, now or in future. And since the new Rs500 note is as yet rarely available, the ratio currently is Rs100-Rs2000 (1:20). When the maximum prescribed ratio for efficiency is 1:2.5, in practice we have 1:20, which is catastrophic. That is why; we have millions of people with wads of Rs2,000 notes unable or unwilling to make a small purchase of Rs200.
 
This is pure and simple mathematical illiteracy. I expect the Reserve Bank to be aware of the Renard series, which is an ISO standard. Politics and economics can be subject to opinions, but not mathematics. You invite disaster when you do not follow the basic number rules. 
 
What India needs to do urgently is to introduce an Rs200 note. And if Rs1,000 is to be permanently abandoned, then to withdraw Rs2,000 as well. For efficient transactions, the ratio in the 1-2-5 series must never exceed 2.5. 
 
(Ravi Abhyankar is an independent analyst and strategic advisor.)
 

User

COMMENTS

Sunil Harlalkaa

5 hours ago

There is a Golden Ratio of everything. Renard series is one of them. The govt will launch Rs 200 Rs note by September 2017. This launch will be to save on printing and transportation costs. Yes the govt wants to increase cashless transactions but Rs 200 would be launched too .
In 2018 a Rs 5000 would be launched ( 2.5 of Rs 2000 )
In 2021 Rs 10,000 would be launched ( 2 times of Rs 5000)
Only time will tell

Sunil Harlalkaa

5 hours ago

There is a Golden Ratio of everything. Renard series is one of them. The govt will launch Rs 200 Rs note by September 2017. This launch will be to save on printing and transportation costs. Yes the govt wants to increase cashless transactions but Rs 200 would be launched too .
In 2018 a Rs 5000 would be launched ( 2.5 of Rs 2000 )
In 2021 Rs 10,000 would be launched ( 2 times of Rs 5000)
Only time will tell

Sunil Harlalkaa

5 hours ago

There is a Golden Ratio of everything. Renard series is one of them. The govt will launch Rs 200 Rs note by September 2017. This launch will be to save on printing and transportation costs. Yes the govt wants to increase cashless transactions but Rs 200 would be launched too .
In 2018 a Rs 5000 would be launched ( 2.5 of Rs 2000 )
In 2021 Rs 10,000 would be launched ( 2 times of Rs 5000)
Only time will tell

Prateek Dalmia

17 hours ago

No doubt,it will cause efficient working of the economy.
There are many economists in our country. All have brief knowledge of ecomomics. Even our PM Namo also consulted to an economist before taking this step.
Many of them are supporting Namo and are saying its a nice move of the government to give a glimpse of better tomorrow while other are against it.
Whom to believe??

Rajesh Acharya

18 hours ago

The logic is sound but misses a very important point. The GOI is trying to do away with "cash based economy" and leap-frog to the digital, trackable world of cashless. This "₹200" or other filler notes would defeat the purpose. The strategy of GOI should be to keep "cash hoarders / tax evaders / criminals" guessing and every few years demonetizing notes, if they don't learn their lessons!

Gaurav Aggarwal

1 day ago

https://m.facebook.com/story.php?story_fbid=488430254555819&id=100001665450912

See what I told RBI in 2013

Ravi Khot

1 day ago

Has his suggestions reached RBI ? A friend has offered to help and therefore needs the email ID of Ravi Abhyankar.

Pankaj Jangid

2 days ago

One of the readers commented on bringing back Mr. Raghuram. While This article is not relevant to this matter but just want to let him know that RBI had proposed a ₹5000 note under Mr. Raghuram.

Rajesh Gupta

3 days ago

bring back raghu ram rajan ( R3) at the post of RBI governor is the only solution. there is always a difference between politician mind and academician mind. one can not perform both function at a time. do not try to make India equal to america or Europe in just 5 yrs time span.

Rajesh Gupta

3 days ago

bring back raghu ram rajan ( R3) at the post of RBI governor is the only solution. there is always a difference between politician mind and academician mind. one can not perform both function at a time. do not try to make India equal to america or Europe in just 5 yrs time span.

Dilip SK

3 days ago

I think it was intentional to create the gap so that people have a problem. Lack of availability of cash will push them to go cashless

REPLY

Pankaj Jangid

In Reply to Dilip SK 2 days ago

Probably, this is true. And probably ₹2000 note will go away in very short time.

Pradeep Kumar M Sreedharan

In Reply to Dilip SK 2 days ago

My line thinking too.

Anurag Kulkarni

4 days ago

Hi How can I get in touch with the author?

Pradeep Kumar M Sreedharan

4 days ago

Besides this, I wish RBI would ensure interoperability of various digital Wallets, for reasons obvious.

Sreedhar Souparnika

4 days ago

The damage has already happened and now it is time to think of alternate solutions to reduce the difficulties faced by common man. As suggested it would have been better to introduce Rs.200/- or Rs.250/- denomination currency notes instead of high value note of Rs.2000/- which has created the confusion and matters becoming worse for the common man. Yet another suggestion is to introduce Coins for all denomination currencies of Rs.20/- and below. Though the step for demonotisation was welcomed, I think Mody was ill-informed of the possible consequences by the bureaucrats in Finance ministry and RBI. Or even they do not want to be on the wrong side of Mody's books. Urjit Patel took over only a few weeks back and may crave for a post in the next ministry. What happened to the learned economists in Finance ministry and and DBOD ?. Now the worst is yet to come unless immediate proactive steps are not being initiated . To err is human but not with the lives of innocent millions in the country.

Ramesh Goradia

4 days ago

Very logical and precise scientific solution .Very well illustrated.

Congress Twitter account hacked
Indian National Congress's official Twitter account was hacked on Thursday morning, a day after the account of its Vice President Rahul Gandhi was hacked.
 
Expletives and abusive tweets were posted on the handle.
 
One of the tweets posted on the account said that a "full dump" of Congress emails will be posted.
 
"...Stay tuned for Christmas special. We have enough info to drop your party down to shreds," it said.
 
"For every retard out there who thinks we have a political agenda - No, we don't," one of the tweets read.
 
"Corrupt political party trying to (expletives) around with innocent hackers, you think you're cool bro?"
 
"Remember, we are legion, do not (expletives) with us!" it added.
 
On Wednesday, Rahul Gandhi's official Twitter account was hacked and expletives and abuses posted on the handle. The abusive tweets were later deleted.
 
The hackers also removed Rahul's profile picture and changed the account title from @OfficeOfRG to Retarded gandhi.
 
The Congress said it smacked of "sinister conspiracy and reflected disturbing insecurities of prevalent fascist culture".
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

COMMENTS

Mukund Rajendran

22 hours ago

Quite possible that the number of 500 rs + transactions was quite low back in the day to not warrant a 200 rs note...but not now! I agree with the premise though!

Simple Indian

4 days ago

Twitter has clarified that neither Rahul Gandhi's nor Congress' Twitter accounts were hacked, but were possibly compromised through email breach. Which means that someone who had access to the email accounts linked to these Twitter handles misused it to gain access to the Twitter accounts (say, through "Forgot Password" option on Twitter) and posted objectionable tweets through both these accounts. Also, Twitter is a private firm and has its headquarters in USA, not India. Govt of India has no role to play in this matter, yet most of our media has been carrying this story ad nauseam without a basic understanding of how Twitter works. This seems yet another case where much of media has given undue publicity to Congress on a matter which didn't merit a second look. Just proves how deeply biased and compromised our media is.

Cabinet clears Mumbai Urban Transport Project Phase-III
The Union Cabinet on Wednesday approved the Mumbai Urban Transport Project Phase-III (MUTP III) that is aimed at boosting rail infrastructure in Thane, Palghar, Raigad and Mumbai districts of Maharashtra.
 
The MUTP-III involves expansion of the suburban rail network up to Dahanu by constructing third and fourth lines between Virar and Dahanu (63km), Airoli-Kalwa connector (4km) and doubling of Panvel-Karjat line (28km).
 
The Western Railway operates suburban services between Virar and Dahanu on the busy mainline Mumbai-Ahmedabad/Delhi route, which is over-saturated.
 
"Main line is already over-saturated and there is no scope for supplementing suburban services on this line. Construction of additional Virar-Dahanu Road double line will address the demand of commuters in this region. This will provide extension of suburban services from Churchgate to Dahanu Road," said an official release.
 
The release further said: "Panvel-Karjat line will provide alternate route from Karjat to CSTM via Panvel, which will be shorter by 23 km than the existing route via Kalyan and will reduce travel time between CSTM to Karjat by 35 to 40 minutes by slow trains."
 
At present, passengers commuting from Kalyan to Vashi or Panvel have to get down at Thane station and take Trans Harbour Link, which results in congestion at the Thane station, which is already a busy station on the Central Railway.
 
"Airoli-Kalwa corridor will reduce congestion at Thane station and will also save time as these passengers can travel bypassing Thane," said the release.
 
It further said that the procurement of new coaches will enhance the quality of service and the works proposed under trespass control at 22 locations will reduce trespass significantly.
 
"The estimated cost of project is Rs 8,679 crore with completion cost of Rs 10,947 crore. The project is expected to be completed in the next 5 years during 13th Plan period," it added.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

COMMENTS

Suresh BS

5 days ago

Debek Roy's is the only comment made so far on ₹2000 note introduction. So we don't know what's up govt sleeve yet !!!

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)