Blogger debunks Modi's counterfeit logic for noteban, as there's high sezure rate of Rs 400 crore fake currency

By Our Representative
Blogger James Wilson, a consultant with the Government of Kerala, debunking the popular myth that Fake Indian Currency Notes (FICN) were 30-40% of the total currency in circulation, has said, quoting official sources, that, in value terms, they did not form more than 0.0018% of the total currency in circulation in 2015-16, with a declining trend over the last five years.
Analyzing RBI Annual Reports from 2000-2001 to 2015-16 to “gather pointers about the FICN detection in the banking system”, Wilson says in a blog, the figures suggests that “the percentage of FICN in 2000-2001 was 0.0015%, which is seen steadily declined to 0.0004% up to 2005-06, which then steeply increased to 0.0023% in 2008-09 and reached to 0.0018% in the year 2015-16.”
Coming to individual currencies, the blogger says, the FICN of Rs 1000 notes, which were introduced in the circulation in 2000-2001, took eight years to cross the 0.001% of the value of the total Rs 1000 notes in circulation. “During the year 2011-12 it reach 0.0024% and more or less remain around that value till 2015-16 (0.0023%)”, the blogger reveals.
As for the FICN of Rs 500 notes, the blogger says, they were “around 0.0054% in the year 2000-01 dropping to 0.0003% in FY 2005-06, steadily rising to 0.0036% in the year 2008-09, and seen further showing a decreasing trend and reached 0.0017% during the year 2015-16, even though it is almost 50% of the currency in circulation by value basis.”

“I am at a loss”, says the blogger, to understand as to why the government decided to demonetize Rs 500 notes, which are showing a consistent decreasing trend since 2008-09. Also, the high value Rs 1,000 notes, which showed an increasing trend, became steady.”
Pointing towards another figure, the blogger reveals, the in an answer to an unstarred question, on August 5 last year, the Union finance minister replied, “A study on FICN issues, including estimation of FICN in circulation, has been undertaken by the Indian Statistical Institute (ISI), Kolkata, under the overall supervision of National Investigation Agency (NIA). As per the study, the face value of FICN in circulation was found to be about Rs 400 crore.”
The minister insisted, “It was found the value remained constant for the last 4 years.”
Pointing out that Rs 400 crore is “only 0.02% of the currency in circulation”, Wilson says, “Though it is a small quantity, FICN is used for various subversive activities such as espionage, smuggling of arms, drugs and other contraband in India. As per the NIA probe, which has a Terror Funding and Fake Currency Cell, Pakistan is the major supplier of FICN in India.”
The blogger says, official sources further suggest, “the banking system detected around Rs 30 crore of FICN annually and law enforcement agencies seized around Rs 40 crore of FICN annually for the last couple of years.”

Thus, he says, “A total of around Rs 70 crore of FICN were detected during the last couple of years by the checks and balances in the system. So, if we take the ISI, Kolkota, study as a yard stick, only Rs 70 crore of FICN of the estimated quantity of Rs 400 crore, i.e., 17.5% of the FICN is seized by our systems.”
Meanwhile, says Wilson, the ISI, Kolkota which did the study of FICN, concluded that "the existing systems of seizure and detection are enough to flush out the quantum of FICN being infused". The institute, he adds, concluded that “if detection can be improved, the value of FICN in circulation can be reduced by at least 20% annually.”