Finance Minister Arun Jaitley today sought to calm panicked nerves over the government's decision to withdraw ₹500 And ₹1,000 notes, which has led to chaos at some retail outlets, saying the "inconvenience" resulting from the move should go away in two or three weeks when there are enough new notes to replace old ones.
"Efforts are being made so that banks have enough replacement currency. It will take two to three weeks to adequately replace the notes," he told reporters here today, adding the government may revise the time limits by when people can replace money as more money comes in the banking system.
Appealing for patience and admitting to short-term "logistical challenges" of India's currency swap move, he urged people to bear any inconvenience in the coming days, reiterating that old notes will still be accepted at hospitals, pharmacies, LPG Gas cylinders, toll plazas and also ASI monuments.
He played down reports of hardships that people in rural areas and cash-dependent low-income families are likely to face, saying those families should also ultimately become part of the nation's banking system, which will not only earn them interest on their deposits, but also ensure the safety of their money. He dismissed reports of people getting into illegal dodgy currency conversion rackets, saying those reports were "exaggerated" and were ultimately against the self interest of the vendors.
Explaining the government's decision behind the move, he made a strong case for the step saying it goes beyond just taming black money by ultimately helping India move towards a cashless economy, benefiting both states and the Centre.
"The long-term advantages to the economy are so significant...we would request for people to bear with the relativly minor inconveniences...and we will try to minimise those inconveniences."
He hopes that in the long-term, the step will also influence larger spending patterns.
"Once black money gets into the banking system, it will change consumption patterns," he said, adding that it will prompt people to spend through digital means.
Asked if the move will see a similar fate as the demonetisation attempts tried by previous governments in the 1970s, he said the problem of black money is now much larger in scope and will therefore have much more impact than it did in the early 70s.
"You cannot compare 1971 economy to today because the size of the economy is different...the high denomination notes were a small percentage then – in the single digits – compared today when the high denominational notes make up 86 per cent of the cash," Jaitley said.
He dismissed rumours that a chip or tracking system will be part of the new notes.
On Tuesday, PM Modi made a surprise announcement, saying India will embark on a massive currency exchange scheme to tame black money and corruption. The move has been widely hailed by the business community, but criticised by some politicians.