26 November 2016

Demonetisation: one paise view

Caveat: This is indeed a one-paise view. If you are in search of serious stuff, pardon me. However, this is not for the light-hearted.

Some of you might have heard of the hindi film song paanch rupaiya baara anna from the 1958 Chalti ka naam gaddi. Is it a mere coincidence that this song followed the demonetisatioin of the anna (its history lies in Kishore Kumar's udhari in the college canteen perhaps before demonetisation), or, should I say the conversion into the metric system from one rupee equals sixteen annas to one rupee equals hundred paise. Even after demonetisation of the anna, its popular usage remained with char anna, ath anna and baara anna referring to one-fourth (25 paise), one-half (fifty paise) and three-fourth (75 paise) of a rupee. Prior to the metric system, an anna was equal to four pices (to make its spelling different from paise, but pronounced the same) and one pice was equal to three pais; the denominations of coins being 1 pai, one-half pice, one pice and one anna. In other words, one rupee was equal to 192 pais, recall the roots of pai, pai ka hisab.


At a personal level, when I started my piggy bank, I did save one paise, two paise, three paise, five paise and ten paise coins. Soon the first three denominations were phased out of circulation and the latter two jostled for space with twenty paise, twenty-five paise, and fifty paise coins. All these denomination of coins have been phased out. I failed to understand this, because the British still continue to have their coins of 1 penny, 2 pence, 5 pence, 10 pence, 20 pence, 25 pence (crown), and 50 pence (half-a-pound); and US also have their coins of 1 cent (penny), 2 cents (nickel), 5 cents (dime), 25 cents (quarter), and 50 cents (half-dollar) in circulation. 

Besides, a pro-market economy should be in favour of exact prices (or, should I say equilibrium prices) to avoid distortions. While mathematical exactness is not feasible, the availability of smaller denominations could reduce those distortions. Contrary to this market understanding, in India, many shops do not return the change for one rupee, two rupees or even five rupees even prior to their greater demand that has resulted in their short supply in recent times. 

Instead of the change, the shopkeepers will pass on some candies or such stuff that you had no intention of purchasing. If one consumes it, the sugar content and and associated additional disease burden are a matter of concern, and if one does not consume then one has the burden of generating additional garbage and also the 'notional' loss of money. Damn, if I do; damn, if I don't. Hey, but I transacted with the shopkeeper because it increased welfare for both. Or, so I thought from that Edgeworth box

Prior to the short supply, I contended myself that the shopkeeper did return the 10 rupee change, But, today, people are willing to pay a hundred rupees to get nine or even eight of the ten rupees, which is available in notes as also coins. This reminds me that in my piggy bank of yore, I also had an old ten rupee coin passed down from my grandfather, which one of my older cousins (not related to the grandfather) surreptitiously usurped, which, I suspect, was sold in the 'open' market at a much higher value, as it had acquired the distinction of a rare artifact.

I must be crazy discussing the phasing out of smaller denomination coins/notes when for the whole of India, nay world, the post-truth of demonetisation are the notes of higher denominations. I had already warned that mine is a one-paise view and should add to that that this is also part of my wandering thoughts. The old ten rupee coin has some lessons for those looking for some. The first is to keep 'cousins' at bay. The second is not to panic if you are not able to exchange or deposit the demonetised five-hundred rupees and the one-thousand rupees notes (the white ones) because one can store it so that in future (perhaps much before when we all are dead) there will be someone who can benefit after the notes acquire the status of an artifact (note: the more numbers you keep the lesser will be their value).

Don't ask me who gains and who looses. I hear that we will be moving to a cashless world. There will be no need of banks (no, I am not being prophetic, I am serious and am of the view that this would have happened in the near future, demonetisation may act as a catalyst in making it a wee bit faster) and there will be no need to print notes or mint coins. I will now no more get those candies from shopkeepers. The digital world will 'nudge' me to buy all that is 'attractive'. Seemingly, I will benefit from all that that is indicated in that Edgeworth box. And, yes, I seriously hope that I can fill up all those empty economic boxes. Mai karunga pai pai ka wasool.

No comments:

Post a Comment