While Reserve Bank of India (RBI) has denied as rumours that every Rs 2000 note has a GPS-chip in it, which would be able to tap its movement from a satellite, a top Indian Institute of Management-Bangalore professor, R Vaidyanathan, who was the main brain behind the demonetization move, has said that the new notes do have radio frequency identification (RFID) tags in them.
Vaidyanathan, who was in constant touch with Prime Minister Narendra Modi's national security adviser Ajit Doval ahead of the surprise Modi announcement to demonetize Rs 500 and 1000 notes, has said, the “new notes cannot be easily faked” as the new “Rs 2000 note has RFID tags”, though adding, “The government is not coming forward to announce it.”
Suggesting that this is what he has gathered, Vaidyanathan seems sure, “The new notes have some tracking mechanism in them. ” Vaidyanathan first openly declared the need to demonetize Rs 500 and Rs 1000 notes way back in 2012, which is reportedly the basis of the Modi idea to go for it.
Vaidyanathan, significantly, was part of the task force which the BJP set up on January 31, 2011, to suggest measures to tackle black money. While the task force did submit a slew of recommendations on how to combat the menace, the party in its 23 recommendations furnished in a 95-page report did not refer to the need to demonetize Rs 500 and Rs 1,000 denomination notes.
However, even then, Vaidyanathan had been of the view that there is a need to scrap “high-value notes” as a measure to counter the hoarding of black money, something that he continued to doggedly insist on ever since.
After Modi came to power, he began being consulted more often than other experts on issues of black money. In fact, it is Vaidyanathan’s proposal which found “wide acceptance among the key people involved”, says a report.
He reportedly held discussions with Doval, in which a few senior officials from the RBI too were roped in, and informal discussions began with key bank officials from the public and private sector on how to demonetize Rs 500 and 1000 notes.
In 2012, Vaidyanathan wrote, “If the government wants to reduce domestic black money, it should withdraw Rs 500 and Rs 1,000 notes from circulation”, though adding, it should “replace them with lower denominations such as Rs 100 and Rs 50.”
He insisted, “This can be undertaken in an orderly fashion over a period of say three to four months and all those who possess the higher denominations can exchange it with banking channels for lower denominations. It will automatically bring a huge amount of the funds kept in these denominations into the banking channels.”
Vaidyanathan was of the view, “In our country, cash transactions are more to avoid taxes and generate black money. The higher the denomination, the easier it is to transact and transport. Taking into account our situation, we should evolve laws to prohibit the holding of cash beyond a threshold level and this will go a long way in preventing disbursals for black transactions.”
Hence, he said, “Two steps - demonetising Rs 500 and Rs 1,000 currency notes and creating a threshold limit for cash holdings - will facilitate a reduction in domestic black money transactions. These decisions will not eliminate domestic black money, but will help reduce it to some extent.”
However, Modi did not pay heed to this view, but announced introduction newly designed notes of Rs 500 and 2000, with possibilities of introduction of Rs new 1000 notes, too. It is not known whether Vaidyanathan thinks Modi has done the right thing.