India Is Pulling Its Biggest Banknote From Circulation

People are scrambling to offload 2,000-rupee notes
By Rob Quinn,  Newser Staff
Posted Jun 1, 2023 8:15 AM CDT
India Is Pulling Its Biggest Banknote From Circulation
India's 2,000-rupee note was introduced in 2016 as part of a "remonetization" policy.   (Getty Images/Ekaterina Lutokhina)

A change announced by India's government last week has left shopkeepers across the country short of change. The government is taking the 2,000-rupee bill, India's largest bank note, out of circulation later this year and many citizens, especially those without bank accounts, are scrambling to find businesses that will accept the note, the New York Times reports. The note is worth around $24, more than some workers make in a week. It was introduced in 2016 to replenish currency in circulation after the government abruptly pulled the two largest bank notes at the time, the 1,000 and 500-rupee bills, out of circulation in a move to crack down on tax evasion, reports Reuters. The move cut the amount of currency in circulation by 85%.

Analysts say that since the 2,000-rupee note accounts for a smaller proportion of the currency than the bills withdrawn in 2016, around 11%, and the change is happening over a longer period, there should be less disruption this time around. Prime Minister Narendra Modi's government says people have until Sept. 30 to deposit or exchange the banknotes. They will remain legal tender after that date, the government says, but people are worried that policy could change with little warning.

Economists say pulling the 2,000-rupee note will help formalize parts of India's vast informal economy, reducing tax evasion and helping the push toward digital payments. Many people, however, are trading their 2,000-rupee notes for something more solid. "People have a habit of either keeping cash in big denominations or gold at home," New Delhi jeweler Vicky Bansal, who has seen a surge in business in recent days, tells the Times. "So if they can’t keep 2,000-rupee notes, they’ll keep jewelry." (Read more India stories.)

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