Does India need a new currency set up?

by Seva Lamberdar Wed Nov 09, 2016 10:18 am

Perhaps it's time for PM Modi / Indian Govt. to not only take out 500 rupee and 1000 rupee currency notes out of circulation for tackling the problem of black money, corruption and fake currency notes in the country as was done a few days ago, but also restore the Indian currency (rupee) to a reasonable / sensible level of respectability (value) by having the new rupee which is ten times more in value (purchasing power) than the current (old) rupee.

In other words, one new rupee introduced by the Govt. will be equal to 10 current / old rupees. That will also bring the exchange rate of Indian rupee against the U.S. dollar to the same level as was in the past, i.e. 1 U.S. dollar = 6 or 7 INR. Thus, the printing of new currency notes (ten times in value) for all the denominations starting from one rupee, five rupee, and so on... , will further take out the black money and fake currency notes etc. in addition to restoring the value of Indian currency to a greater respectability in terms of its enhanced purchasing power both at home and abroad.

by Seva Lamberdar Thu Nov 10, 2016 2:07 pm

The way prices of things have been going up and the value of money (rupee) going down due to inflation during last several decades, this type of remonetization (in order to restore the value of rupee to some respectability) will have to be done sooner or later. It looks like the right time to also tie up this thing now when some of the old notes (e.g. 500 Re. and 1000 Re) are being withdrawn and the new ones replacing them will be introduced soon. Anyway, as the value of money (new rupee) goes up making 1 new rupee = 10 current / old rupees, the prices of things will also be "down" similarly, for example one cup of coffee costing 1 or 2 new rupees instead of 10 or 20 current / old rupees.

by Seva Lamberdar Sat Nov 12, 2016 9:16 am

Btw if this trend continues with currently lower value of rupee going further down in future, that ultimately will lead to taking out of circulation 1 rupee note and other small denomination notes (e.g. 5 rupee etc.) because printing such notes will be more expensive than their face values. The best solution to avoid such unwanted situation in future is to tackle this problem as soon as possible, i.e. by introducing a new rupee which is 10 times in value than the current one.

by Seva Lamberdar Mon Nov 14, 2016 9:12 am

This way India will not be strengthening its currency (Rupee) arbitrarily in violation of market forces but merely introducing a new unit of currency as "new rupee" ("Rn") which will be 10 times more in value than the old / current rupee ("Rc"). In other words, 1 "Rn" =10 "Rc".

Naturally, the prices of goods and services expressed in new currency will be "lower" by a factor of 10. Similarly, the salaries and wages as well as the assets and liabilities (including the national wealth and debt etc.) will be "lesser" by a factor 10 under the new system ("Rn"). This certainly will boost the currency (as new rupee "Rn") without violating market forces etc.

by TruthSeeker Mon Nov 21, 2016 11:56 pm

In a free market, your country's currency value is determined by the markets. For example an ounce of gold, if it costs $1000 an ounce in global markets, or if a loaf of bread costs $0.80 in global markets, will automatically determine what your local currency is worth. One cannot just say that $1 = Rs. 10. If $1 can buy a loaf of bread, and Rs. 10 cannot buy even a slice. Market driven open economy 101. Best explained not by bread, but by oil. If Oil sells for $2/gallon in US, India cannot claim to sell it for Rs 20/gallon, just to make Rupee stronger.

China tries it, just the other way, to devalue its currency. To make its things cheaper.

You get the point,
TS.

by Seva Lamberdar Fri Nov 25, 2016 2:12 pm

TS,
The above is not a suggestion on inflating or increasing the current value of rupee superficially but doing the complete remonetization of Indian currency, i.e. by having a new unit of currency which, let's call it XYZ (or even 'rupee', new rupee of course), will have 10 times more value than the current rupee. In other words, 1 XYZ (or new 'rupee') = 10 rupees (current rupees). Thus everything (goods, services, assets and liabilities,..) expressed in the new currency (XYZs) will be one-tenth the amount / figure in the current rupees. For example, 1 cup of coffee costing 20 rupees currently will be 2 XYZs, a teacher earning 20000 rupees / month currently will instead earn 2000 XYZs / month, and a house worth 10 lakh rupees currently will be worth 1 lakh in new XYZs, and so on. It's not violating any economic and accounting laws.

by TruthSeeker Mon Nov 28, 2016 1:06 am

The value of XYZ is determined by markets.

Global markets.

Just calling it XYZ does not change anything, in terms of its "value".

Regards,
TS.

by Seva Lamberdar Mon Nov 28, 2016 10:14 am

TruthSeeker wrote:The value of XYZ is determined by markets.

Global markets.

Just calling it XYZ does not change anything, in terms of its "value".

Regards,
TS.

Value of XYZ will be in agreement with the markets, at 1 XYZ = 10 Rupee ... with the value of rupee remaining same as determined by markets currently.

by Hellsangel Mon Nov 28, 2016 10:41 am

Perhaps Sevaji would do well to understand how stock splits and reverse stock splits don't affect market capitalization and apply the same principle here.

by Seva Lamberdar Mon Nov 28, 2016 1:58 pm

Hellsangel wrote:Perhaps Sevaji would do well to understand how stock splits and reverse stock splits don't affect market capitalization and apply the same principle here.

It probably is easier to understand in terms of a totally new currency unit, whatever the market condition. Stock splits and reverse stock splits don't help much in this regard because the currency unit remains the same as before while there may be new stock certificates (after split or reverse split).

by TruthSeeker Mon Nov 28, 2016 11:39 pm

Hi Seva,

If Rs 30 buys a loaf of bread in India today. The value of "Rupee" is determined.

If you are proposing that "Rupee 1" can buy the same loaf of bread, you are proposing a "different definition of Rupee", XYZ?

An Indian Rupee cannot become XYZ.

It is like saying that as US Dollar is hereby called another currency, namely Trump Currency, and we decide that its valued at $10 USD = #1 Trump currency.

The country does not determine it, at it own free will.

Regards,
TS.

by Seva Lamberdar Tue Nov 29, 2016 9:56 am

TruthSeeker wrote:Hi Seva,

If Rs 30 buys a loaf of bread in India today. The value of "Rupee" is determined.

If you are proposing that "Rupee 1" can buy the same loaf of bread, you are proposing a "different definition of Rupee", XYZ?

An Indian Rupee cannot become XYZ.

It is like saying that as US Dollar is hereby called another currency, namely Trump Currency, and we decide that its valued at $10 USD = #1 Trump currency.

The country does not determine it, at it own free will.

Regards,
TS.

Okay TS, let's try by using your example, 10 us$ = 1 t$. USA can decide tomorrow to use a new currency, with the currency unit as t$, expressing all its assets and liabilities (including prices and wages etc.) in terms of t$s, and no one can object to that.

by TruthSeeker Thu Dec 01, 2016 11:05 pm

Sir ji - Jo country demonetization nahi sambhaal paa rahi, wahaan "Rupaye" ki definition hi badal dena? Rs 10, 5, 100, 50 will change meaning too!

Its a thought.

But, I want to focus my energy on - what do we think Government can do more since it has already given the "shock" ?

If only 1% of Indians pay taxes, next thing that govt can do is to encourage more to do so. Make it simple.

1. If you make less than Rs 10 lacs, a flat 5% tax. declare it, file the taxes on one page or check a box in your bank account, which will automatically take the taxes. And consider you income all white. Make it easy. Between 5-10 lacs has to be a drastic, automatic, tax filing.

2. 10-25 lacs income group: Must have a bank account. IMHO, Tax filing should be automatic. If one is to override what is defined as automatic, then only they have to file.

3. Over 25 lacs: If you are not salaried, you belong to the most suspicious group in India. Doctors, Lawyers, PWD workers, MLAs, IPS officers, etc all fall under this category. The most corrupt group, because this group has unchecked "power".

Ideas for this group to not become corrupt?

Mine include:

0. Demolish this stupid, blind, useless Election Commission which cannot enforce a single rule; Let Supreme Court hold elections in India under its supervision. EC is an useless body, has convicted no one while murderers/rapists (convicted!) continue to become MLAs in India, using black money

1. Demonetization
2. Lokpal (one must create FEAR, US is not US because people are honest, it is US because people fear being caught)
3. Corrupt judges in judiciary should be tried under military law

Will any one do it?

Not if they want to lose elections in India.

People like Anna Hazare cannot win an MP seat in India, because even they know that elections are bought.

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