For Bringing Things Back To Normal, Around 6 Months Needed To Replenish Rs 500 Notes

When the announcement to demonetise Rs 500 and Rs 1,000 notes was made the government said it would cause minor inconvenience for a short period of time. PM Modi had said that it was just a matter of 50 days.

In the following days both the government and RBI on a daily basis reassured the public that there were enough currency in circulation and that the remaining gap will be filled soon. But the reality of the currency printing in India couldn't have been farther from what the government and RBI had anticipated.

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Assuming that all the currency printing presses in the country are going to run in their full capacity, it will take around six month to replenishment the notes.

This is particularly true for the new Rs 500 notes, whose printing, presumably, started after November 10. Till those are replenished in adequate numbers, the "currency pain" would not go away since Rs 2,000 notes are difficult to exchange for lower denominations.

However, enough of the new Rs 2,000 notes may already have been printed.

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There are four currency presses - one each in Nashik (Maharashtra), Dewas (Madhya Pradesh), Salboni (West Bengal) and Mysuru (Karnataka).

The first two are owned by the central government through the Security Printing and Minting Corporation of India Ltd. According to information available in the Finance Ministry's latest annual report, the yearly currency printing capacity of these two presses is around 40 per cent of the total in the country.

The other two presses, in Salboni and Mysuru, are part of the Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL), a wholly-owned subsidiary of the Reserve Bank of India (RBI).

These two, comprising 60 per cent of the total capacity, can print 16 billion notes in two shifts per year.

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It means that total capacity in the country would be 26.66 billion notes in two shifts.

If all three shifts run, the four presses would be able to print 40 billion notes a year, irrespective of the denomination.

According to the government, the total money in circulation before Rs 500 and Rs 1,000 notes were declared illegal was Rs 17.54 lakh crore or Rs 17,540 billion.

Of this, 45 per cent was in Rs 500 denomination equivalent to Rs 7.89 lakh crore or Rs 7,890 billion and 39 per cent in Rs 1,000 notes amounting to Rs 6.84 lakh crore or Rs 6,840 billion.

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In other words, there were 15.78 billion notes of Rs 500 denomination in circulation and 6.84 billion notes of Rs 1,000. But if they are going to print Rs 2,000 notes equivalent to value of the Rs 1,000 notes declared illegal, that is, worth Rs 6.84 lakh crore, they would have to print only half, or 3.42 billion notes.

If the printing started in early September, as has been claimed by some printing press officials, they would need only a little over two months to meet the full requirement, even at 50 per cent capacity meaning that they should have printed all the replacement needs of Rs 2,000 notes till now.

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So, by a realistic estimate, it should take anywhere around 5-9 months to get everything back into normal. And, of course, the pain would be longer than the 50 days that Prime Minister Narendra Modi has mentioned.