Demonetization – Effect of change of currency notes size !

The real reason of why the new Rs 500 and 2,000 notes were changed is known only to Modi and his team. Even if they disclose it at a later date, politicians and large section of pubic might, as usual, will not accept it citing some or other reason. Nevertheless, we can as usual speculate on what change in note size means:

Negative impact:

1. Yes, change in note dimensions have impacted the public massively as many ATMs are still closed, waiting for the technicians to change the ATM machine plates to accommodate new 500 and 2,000 notes.
2. If the ATM were functioning, as promised by government, by 10^th or 11^th Nov 2016 then most of the crowd and long queues in banks would have been taken care of. Lack of ATM has deprived people’s ability to withdraw and use their own money in India’s cash based economy. This definitely has not gone down well with public as they see government not prepared for such a massive exercise. 
3. Lack of ATM readiness has given more fire power to opposition and media, allowing them to focus on the plight of comman man rather than focusing on merits/demerits of demonetization.

Overall, change in new currency note size was neither planned nor executed well by government. If ATM had been functioning, people would have got a positive message that government had planned well and taken care of common man before embarking on such a huge journey of demonetization.

Positive impact:

Still, rather than speculating why the note dimensions were changed and why it was not handled properly, I would like to focus on how note dimension change helps in longer run.

Change in dimension (reducing the size of the new 500 and 2000 notes) reduces the cost of printing. To quote-unquote from below mentioned economic times page, "..... It is cheaper to produce. Smaller notes mean less colour and more notes per sheet, it helps reduce cost and also allows the Reserve Bank of India (RBI) to print more notes in a lesser time. As per estimates, around forty Rs 2,000 denomination notes can be printed per sheet of paper instead of 32 or 36 previously for the Rs 1,000 denomination notes... "

http://economictimes.indiatimes.com/news/economy/policy/smaller-bank-notes-are-cheaper-to-print-in-note-economy/articleshow/55570768.cms

Let us assume that note dimension were not changed. In such scenario,

• Everyone (including Terrorists, Naxals, Hawala operators, Mafia, Counterfeits, corrupt politicians / bureaucrat s and many other crore’patis) could decide to hide their un-accounted cash / black money till next election. They will not deposit their un-accounted money in the bank now, thinking that if others (mainly corrupt politicians, if any) are sitting on larger pile of cash, why not wait and see what they do if and when they win Lok Sabha election. Due to this, deposits in banks would have been be much lower than what is being experienced now.
• If Modi government does not win next Lok Sabha or any other Lok Sabha election in future or even if BJP wins but Modi is kicked out and no longer PM, it will be relatively easy for a non-Modi led government to unite with other so called “corrupt” politicians / people to legalize and bring back old Rs 500 and Rs 1,000 notes.
• In future, new non-Modi led government can direct RBI to start printing new 500 and 1,000 Rs notes exactly matching the old ones. This way, everyone’s black-money (running into lakhs of crores) will become “valid” again. Public cannot distinguish between old and new notes as government purposefully will print new notes exactly same as old notes.

If above is allowed to happen, money power and corruption will again rule the country and will also be a big boost to terrorism, counterfeits etc.,

Conclusion: 

With the new currency dimension changed, it will be a stupid and non-justifiable move by any government to change all ATM machines again to support old 500 and 1,000 Rs notes. Forget public, I strongly believe our legal system will see through and courts will not allow this to happen.

In essence, knowingly/unknowingly, Modi is not only not fighting corruption and black money now but is also ensuring that it does not re-surface again easily in future (in form of revival of un-accounted old 500 and 1000 Rs notes) irrespective of whether he is in power or not !