Withdrawal of Rs 2,000 notes will have no perceptible effect on economy: Panagariya

New Delhi: The RBI’s decision to withdraw Rs 2,000 currency notes from circulation will not have any ‘perceptible effect’ on the economy as any such notes returned will be replaced by either equivalent cash in lower denomination notes or a deposit, former NITI Aayog Vice Chairman Arvind Panagariya has said.

Panagariya further said the likely motive behind this move is to make the movement of illicit money more difficult.

“ We will not see any perceptible effect on the economy. Any currency in Rs 2,000 notes returned will be replaced by either equivalent cash in lower denomination notes or a deposit. So money supply will not be impacted,” the former NITI Aayog Vice Chairman said.

Panagariya noted that Rs 2,000 currency notes represent only 10.8 per cent of the cash currently in the hands of the public and probably most of it is being used for illicit transactions.

The Reserve Bank of India on Friday announced withdrawal of Rs 2,000 currency notes from circulation, and existing notes in circulation can either be deposited in bank accounts or exchanged by September 30.

The bank notes in Rs 2,000 denomination will continue to be a legal tender, the RBI had said in a statement.

Asked whether the public will face inconvenience due to this move, the eminent economist said many citizens probably have no Rs 2,000 notes since few transactions take place in those notes.

“ For those who do, inconvenience will not be beyond an extra trip to the bank. Even that can be avoided by exchanging Rs 2,000 notes when visiting the bank for some other transaction,” he said. Asked is there is a need for Rs 1,000 currency notes, Panagariya said,” As of now, I do not see a need to issue Rs 1,000 notes as citizens have become used to transact in notes of Rs 500 or lower denomination.”