Demonetization - What about cost of printing and distributing new notes?

 

Many experts have aired their views on why demonetization is not sensible considering the high cost involved in entire logistics of printing and distributing the new currency notes in such a short time. Let’s try to understand how much it costs government and RBI to print these new notes.

Media reports says that logistics of printing new Rs 500 and Rs 2,000 notes itself is more than Rs 12,000 crores.

http://www.thehindu.com/business/printing-new-notes-to-cost-rbi-more-than-rs-12000-crore/article9320924.ece

Now let’s assume (for discussion sake) that we need another Rs 8,000 crores for distribution and all other related expenses till last mile coverage (banks, ATMs, mobile micro ATMs, etc.,), transporting back and disposing of the old Rs 500 and 1,00 notes etc.,  

12,000 + 8,000 adds to total cost of Rs 20,000 crores. There could be additional cost for the bank employees and all others supporting this initiative getting paid for working overtime. Just for discussion sake and to drive home the point, let’s double these expenses from Rs 20,000 crores to Rs 40,000 crores to ensure the critics do not have anything else to pick upon.

Now, is it just justifiable to incur cost of upto Rs 40,000 crores to recall old Rs 500 and 1,000 notes ?

Answer is yes. RBI, government, other banks etc., can deduct this Rs 40,000 crores from Rs 3 lakhs crores that is expected to come from un-returned notes. Even if un-returned note is less than 3 lakhs crores, it definitely will be more than Rs 40,000 crores that RBI and others are expected to incur!

http://m.economictimes.com/news/economy/finance/from-note-ban-government-eyes-rs-3-lakh-crore-windfall/articleshow/55471650.cms

Dip in the economy in near future is just a short term effect, do expect the economy to flourish once everything stabilizes and new measures kick in.

Topic closed! No need to even ponder on the additional benefits of check-mating terrorism, counterfeits, mafia, organized crime, corruption, black money, etc. etc.,