Elections time! False promises, we fully expect; deceitful politicians, that too; false voting, sometimes. The worst fallout of this 9-phase, 814.5 million voter Lok Sabha elections, however, is the frightful spurt in inflow of fake Indian currency notes (FICN) in the country.
India prints about 7,647 crore currency notes each year – over double the number of currency notes printed in the US on an annual basis and almost five times as many as those printed in the entire European Union. This makes the world’s largest democracy also the largest producer of currency notes in the world and sharply accentuates the menace posed by the circulation of fake currency notes to the strength of the economy.
K C Chakrabarty, the Deputy Governor of RBI who attended the Banknote Conference 2014 (Washington, USA) in early April sent out a strong message in his statement addressing the issue – “If the counterfeiters are able to do a good job of producing duplicate currency, they are obviously having access to good quality currency paper, printing ink and other components that are necessary for production of banknotes. So, the question is, what is the source of supply for the fraudsters and what is the role of vendors in perpetration of these unlawful activities”. Currently the market for inputs including material and machinery for printing of currency notes the world over is pegged at $27-28 billion, a major chunk of which is accounted for by the Indian mint. The integrity of the vendors plays a key role in maintaining the sanctity of the Indian currency.
Why does election time intensify the risks of fake currency circulation?
According to a recent news report, large quantities of high-denomination FICN were found in circulation in the country a few weeks ago. In India, apart from alcohol and drugs, money is the greatest inducement to gain votes. Political funding lacks clarity and the murky grounds make for easy introduction of FICN. Recently the Election Commission (EC) has seized a staggering INR 240 crore cash, most of it in the southern states – Andhra Pradesh, Karnataka, and Tamil Nadu. In such a scenario, fake currency is easily introduced and used to destabilize the economy. In the Indian context, counterfeit currency is often the source of finance for almost every instance of terrorist activities and sabotages – major threats to national security.
Why is FICN such a big menace?
The National Investigation Agency (NIA) stated that “Crores of currency notes which are not printed in Indian mints has landed in the country…till recently, higher denomination notes dominated the fake market, but now printing smaller denominations like Rs.10 and Rs.20, which are harder to detect or seize, have the potential to cause a loss of confidence in the Indian rupee” (Source – IndiaToday Report). An Economic Intelligence Council (EIC) report concluded that FICN seizures were on the increase due to a corresponding increase in the volumes smuggled in. FICN with face value of INR 28.4 crore was seized in 2010; INR 37.42 crore was caught 2011; in 2012 the haul was INR 58.60 crore (making it over double the 2010 haul). By August 2013, INR 26.68 crore had been seized. NIA believes that in 2012, INR 2,500 crore FICN had been smuggled into the country.
According to one RBI paper published in March 2013, the Indian banking system has detected INR 3.9 lakh worth FICN each year between five-year period, 2007 and 2012. This amounts to about seven counterfeit notes detected in every one million currency notes currently in circulation. This does not include the FICN that may have evaded detection. According to the standards set by the Indian central bank the situation could potentially be alarming if about fifteen counterfeit notes are found in a million pieces of INR 100 notes. The RBI paper’s assessment is by far lower than similar studies conducted by the NIA and other economic intelligence agencies.
Where is fake currency coming from?
According to a November 2013 news report, Inter-Services Intelligence (ISI), Pakistan’s intelligence agency uses the operatives of the terrorist group, Indian Mujahideen to erode the country’s economy by pumping in fake currency. According to NIA, most of the FICN in circulation in India is being printed in Pakistan and then smuggled into the country through China, Bangladesh, Nepal, Malaysia, Sri Lanka, Thailand, and the United Arab Emirates.
Elections in India are the costliest exercise in global democracy. While the total expenditure in the US towards the 2012 Presidential elections was just over $2 billion, India spent about $5 billion towards elections-related expenses in 2009 and is expected to spend several times over this year. Much of this money lacks accountability leading to the flooding of FICN. Are we not, then, handing anti-nationals our economy and security on a platter? It is time to reflect and act.