Reintroduction of Rs 1 notes

It’s been 22 years since its printing was discontinued, but the Rs 1 note seems set to make a comeback now. The new pink-green notes will be circulated by The Reserve Bank of India soon, while the most commonly distributed Rs 1 coins, and the older notes will still remain legal tender. The move comes on the heels of demonetisation of the old Rs 500 and Rs 1,000 notes and the introduction of new Rs 500 and Rs 2,000 notes with additional security features. We ask prominent social commentators and economists if the introduction of new notes of a low denomination makes sense in current times, and what changes they would suggest to the RBI, as far as currency is concerned.

‘Minting Rs 1 note makes no difference’
Nandini Sundar , Professor, Delhi School of Economics
According to me, minting Rs 1 note makes no difference. We already had coins for that. It's important to have that Rs 1, but getting notes back won’t change anything. Given that minting currency also requires investment, getting new notes in circulation wasn’t required. I just want Rs 1,000 notes to come back because it’s very difficult to get change against Rs 2,000 notes.

‘Rs 1 notes will reduce transaction costs’
V. Santhakumar, Development Economist
This is a desirable move, although I have my reservations on the usefulness of it. Given the prices of different items in the economy, there is a demand for payments in amounts of Rs 1-Rs 4 (since the prices are not in the multiples of Rs 5). Hence, coins of Rs 1 and Rs 2 are in demand. My personal experience (and I presume that this is true for others), is that carrying coins is more difficult than handling notes. This is true for firms too, since there are counting machines for notes but not for coins. Hence, the reintroduction of Rs 1 notes will enhance the easiness, or in economic terms, reduce transaction costs. After all, an important purpose of the currency policy is to reduce the transaction costs.

‘These notes will be helpful for middle class’
Pramod Chandra, Former SPP, Kar. Lokayukta
It is a welcome move. On a macro level, it doesn’t really make a difference. For instance, in a restaurant or a five star hotel, where the denominations used are over Rs 100 or Rs 500, Rs 1 rupee denomination doesn’t really matter.

However, on a micro level, it is of major significance. Be it at grocery stores or at places like toll gates or in cabs, they cite shortage of small currency as a reason for not being able to tender exact change in return. And they give you sugar-laden sweets in return instead of change. This introduction of new Rs 1 notes could help eliminate such practices. It will be helpful for the poor and the middle class.

‘Rs 1,000 note would have been preferable’
Sanjay Pinto, Lawyer and Media Personality
The new Rs 1 notes may help consumers in getting back exact change at shops where items are priced in multiples of Rs 99, instead of chewing gum as barter for small change. However, one would have preferred new Rs 1,000 rupee notes during demonetisation. So this is too little, too late.

‘A Rs 1 note is more of a symbol from the govt.’
Shiv Visvanathan, social scientist
Well, if you were an ordinary customer, you would need a Rs 10 and Rs 100 notes, but this issue of Rs 1 is more of a message, and symbolism from the government saying that we are making changes.

A Rs 1,000 note is welcome, but I believe that Rs 500, Rs 100 and Rs 10 would be more welcome. If a person gets a salary, and he is required to make payments such as for newspaper, grocery, and bills, he requires note of smaller denominations such as Rs 100 and Rs 10, more than Rs 1,000 notes.

The smaller notes, particularly for the middle class and others who do not earn as much, would help pay off their day-to-day requirements. Rs 1 note does not make sense, as how many of them would you be able to carry? In addition, by having more of Rs 10 and Rs 100 notes, you can have prices that are rounded up such as Rs 60, instead of Rs 57.25 or something along those lines.

‘Rs 1 coins are not practical for bigger transactions’
Dr Yamini Gupt Associate Professor Dept of Business Economics, University of Delhi
The govt had started printing Rs 1 notes in January 2015 itself, but the notes weren’t released at that time because the RBI questioned the legality of this. Later, the law ministry clarified that this action was legal. At that time, the rationale given for printing theses notes was a shortage of change in terms of coins. It was believed that the coins were being melted for their metal content from a profit motive.  

Since the news about the Rs 1 notes being released now in 2017 has not been accompanied by any reasoning, it is safe to guess that the reasoning might be the same. The reasons behind the demonetisation of high denomination notes are very different. One rupee coins are durable but not practical for bigger transactions. That is where the note will score points.