In an attempt to replace the 10 rupee note ($0.15) that has more than five billion in circulation with a 10 rupee coin, India once again botched the transition and clogged up parts of the economy that still operates on a cash basis. India’s central bank – The Reserve Bank of India issued not one version of the 10 rupee coin, not two versions but 14 versions!
Consequently, consumers and businesses alike are refusing to accept the coin thinking the other 13 versions are fakes and those holding or attempting to use a version other than one they are familiar with, are deemed counterfeiters. The misinformation has sparked fistfights and general confusion amongst Indians.
This is not the first time that India has embarked on rash experiments without any forethought. Early last year, the Reserve bank took out 86% of the cash in circulation without any advance notice and plunged the country into chaos. Consumption suffered and India’s growth fell to a dismal 5.7 per cent, the slowest annual rate since 2014 for an economy that was humming at around 7 per cent in 2016.
Future Wealth’s View
During the 2000s, Brics (Brazil, Russia, India, China, South Africa) drove a boom in global output and trade and was a favorite amongst investors. But since then, Brazil’s chronic deficits, high inflation and an overvalued exchange rate have left the country with no alternatives. China is on the verge of a housing bubble bursting even as it struggles to get more workers into their labor force. Parts of South Africa have completely run of out of water. Russia is reeling from sanctions. In the middle of all of this, can’t India manage a simple currency transition without messing up the economy once again?
Emerging markets traditionally have a riskier investment profile than developed markets but provide investors with much needed diversification at a time of high valuations in developed markets. But, the risk is illogical and sometimes, head scratching decisions by leaders of emerging markets.
This one with a 10 rupee note is particularly appalling and near and dear to my heart. My Dad used to give me monthly – two 10 rupee notes as high school allowance to fill gas in my motorbike and for sodas and ice creams after tennis practice. Sorry Dad, the 10 rupee note is neither enough to fill gas nor is it around anymore. R.I.P.