Pros and cons of the comeback of One Rupee notes

Pros and cons of the comeback of One Rupee notes

Introduction:

After 20 years of its last issue, rupee one notes are set to make a comeback starting January 1, 2015. One Rupee coins may not be of much value in present times and most of us do not mind when a shopkeeper hands us a candy instead of One Rupee change but the shortage of these smaller denomination could have larger impact in the overall economy of the country. This could be one of the major reasons that prompted the move after a decade gap. Was this move really necessary? Let's consider the pros and cons of these paper currencies as opposed to coins.

Pros:

1. As compared to coins, the manufacturing of paper currencies are cost effective. Shortage of coins could have been the reason for reviving paper currencies of One Rupee. It's a known fact that the manufacturing of these coins cost far more than their actual value.

2. Paper currency wins when we talk of portability. We can easily carry these one rupee notes in wallets but what we do to coins is simply hand them over to kids for their piggy banks. These coins are not just heavier to carry but also are lost more than often.

3. There have been rising incidents of coin melting and this could perhaps be one of the reasons that prompted the issue of paper currencies for smaller denominations. Smuggling of coins could also be a valid reason that led to this prompt notification.

4. Rising incidents of black marketing and smuggling of coins could have led to shortage of these coins and hence we can accept this to be a good change in times to come. There is no fear of faking of these smaller denomination and hence this change should be welcome without any fuss.

Cons:

1. Higher denomination notes are required more than these smaller denominations of one, two and five. To print higher denomination notes it's necessary to free capacity and hence lower denominations should be confined to coins.

2. Paper notes of lower denominations were less durable owing to more usage. Rips and tears along with fading of inks got them wasted more often. Coins are practically more durable and suitable for smaller denominations and are circulated years after years without any problem.

3. Coins are difficult to counterfeit as compared to paper money. Though nobody would be really interested in printing fake notes of One Rupee yet the very reason that led to discontinuing of the printing of these notes was that these were issued in larger quantities and could have led to faking of these currencies.

4. The reasons that led to the ban in these coins of smaller denominations are still present to this date and let's not forget what India needs is to raise the value of rupee and not bring back the older versions.

Conclusion:

The comeback of rupee one paper currency has its pros and cons and only in times to come we can judge whether or not this move shall prove to be beneficial. Since RBI has yet to notify the reasons for this comeback of rupee one notes, we can presume that they would have considered all the spheres of bringing about this change all of a sudden after an entire decade has passed by.