The continuing queues at banks and ATMs reflecting that the mad rush for cash exchange is unlikely to be settled in a month or so as originally expected by the government. It may be recalled that while making the demonetization announcement on November 8, Prime Minister Narendra Modi said that the government will review the limit for cash exchange after 15 days.
The limit for currency exchange was initially fixed at Rs 4,000 per day, which was later hiked to Rs 4,500 for all the entire 50-day period. But suddenly halved to Rs 2,000 two days ago. This shows how the government is facing herculean task to meet the ever growing demand for cash notes.
Sources said the government is waiting for new currency to get into the system first and as and when there is near adequate circulation, the exchange facility could be withdrawn. With over Rs 14 lakh crore of currency being withdrawn due to demonetization, the replacement has to be of the order of at least Rs 10-12 lakh crore to restore normality to a cash-based economy.
According to the report of financial daily Ming, the Indian note printing presses are capable of printing around 24 billion notes a year, and orders for printing 3.5 billion pieces of the new Rs 2,000 note have already been half completed. Assuming all of it is printed by December end, it would effectively replace Rs 7 lakh crore of demonetized notes only.
The challenge before the government would be to print the other Rs 3-5 lakh crore in Rs 500 and Rs 100 notes, not over a year, but in just two or three months. Apart from running the printing presses in three shifts instead of two, the only way to up cash supplies quickly is to import it by printing it in Switzerland or elsewhere.
