Briefly analyzes India's currency remonetization and concludes that there murky details in the background that do not synch with the stated official objectives.

1. 1
Remonetisation 2016: BJP’s Life Saver or Shaver?
Shantanu Basu
In Jan., 2014, Meenakshi Lekhi of the BJP severely castigated the UPA 2.0 govt. for its
reported currency demonetisation move. She called it “anti-poor”, “the latest gimmick of the
finance ministry’s demonetization of currency notes before 2005 is basically an attempt to
obfuscate the issue of black money that is stashed outside the country”, “those who have
black money will actually convert it into new currency notes”, “people who have small
savings and no bank accounts and their life savings will be targeted”1. In Nov., 2016, the BJP
President was unable to “fathom as to why leaders like Mulayam Singh Yadav, Mayawati
and Arvind Kejriwal were joining the list of such people (dealers of black money, fake
currency, hawala and drugs) and that “demonetisation move will do no harm to the poor”
“but some political parties have become poor.”2
On Apr 1, 2016 a Rajkot-based newspaper, Akila, reported that currency remonetisation was
being contemplated by the Govt. of India. Although the publishers passed it off as an All
Fools’ Day joke, in retrospect, it was advance intimation of the Govt. of India’s immediate
intent3. Kirit Ganatra, the owner-editor of Akila, a strident UPA-baiter and supportive of the
police actions in the Ishrat Jahan case, is reportedly a close friend of PM Modi who started
his political life in Rajkot4. Therefore, in all probability, the die for currency remonetisation
was cast in March, 2016 itself, that Akila reported. Three months later, on Jun 26, 2016, Mr.
Modi issued a stern public warning to grey money hoarders threatening dire consequences, in
the event of their non-compliance with Government’s voluntary disclosure scheme, by Sep.
30, 2016. What accounted for such political amnesia oblivious of the adverse fallout?
Reactions to the govt.’s voluntary disclosure scheme (VDS) promised to net about Rs. 29000
crore as tax and penalty5, which was perhaps, not even a respectable percentage of what was
legitimately due and certainly not as much as would have brought about achhey din in a
nation whose needs are infinite. Given the 70 years of mollycoddling by successive govts., it
was a given that “dealers of black money, fake currency, hawala and drugs” would continue
to dodge the IT Dept. Even here, instalment recoveries were allowed giving ample time to
enter an appeal to an IT Appellate Tribunal. VDS’s limited success, somewhat dented the
credibility of the govt. and of the PM. This was time for a Big Bang for survival!
At the same time, any further drastic follow-up action could not be allowed to impair BJP’s
funding in time for national elections in 2019, a delicate balancing act. The govt. would have
1 ABP: Flashback video:When BJP termed demonetization 'anti-poor' in 2014 extracted on Nov. 13, 2016 from
http://www.abplive.in/india-news/flashback-video-when-bjp-termed-demonetisation-anti-poor-in-2014-
445121
2 Times of India:Why areyou upset?: Amit Shah attacks political foes on currency demonetization extracted on
Nov. 13, 2016 from http://timesofindia.indiatimes.com/india/Why-are-you-upset-Amit-Shah-attacks-political-
foes-on-currency-demonetization/articleshow/55368939.cms
3 Huffington Post India:This Gujarati Newspaper 'Predicted' The Fate Of ₹500 And ₹1,000 Notes Seven Months
Ago extracted on Nov.13, 2016 from http://www.huffingtonpost.in/2016/11/11/this-gujarati-newspaper-
predicted-the-fate-of-500-and-1-000/
4 Livemint: The people’s editor: KiritGGanatra extracted on Nov. 13, 2016 from
http://www.livemint.com/Consumer/LJmlSK5Sko9NaWYdj2KHsK/The-peoples-editor-Kirit-G-Ganatra.html
5 The Hindu: Rs. 65,250 cr. mopped up via new black money window extracted on Nov. 13,2016 from Rs.
65,250 cr. mopped up from http://www.thehindu.com/news/national/black-money-rs-65250-crore-disclosed-
under-income-declaration-scheme-says-arun-jaitley/article9173242.ece

2. 2
realized that long-term cataclysmic changes to import and export laws and rules, successful
enforcement of compliance and anti-corruption laws, etc. would severely affect future
funding for the 2019 national elections, apart from likely speed-breakers imposed by the
Indian judicial system in its current state of agitation with the govt. over appointment of High
Court judges.
Simultaneously, the Indian economy’s steady southward plunge (never mind 7% GDP growth
rates bandied) needed to be pushed back with higher public spending and resultant jobs to
take the steam out of steadily emerging scepticism of the govt.’s abilities and intent. Further
straining finances of the government were steadily mounting liabilities, viz. defence, 7th
Central Pay Commission, steadily mounting NPAs in public sector banks (that may be
manifold more than reported), the telecom spectrum fiasco, opposition to divestment in
CPSUs reportedly from within the BJP and the RSS and rising prices of petroleum and its
products and extra budget provisions to meet contingencies arising from hostilities on India’s
northern and western borders, etc. and apply antiseptic on a clearly unhappy national defence
force. The civil services were unhappy over their meagre pay hike after a decade and for a
decade to follow, apart from having to follow a former Telecom or Coal Secretary to jail for
ministering to their respective Ministers, way after the their retirement to a golfing and
clubbing life. From what I hear, civil servants are not certain that proposed amendments to
the Prevention of Corruption Act for ‘honest’ officers would stand judicial scrutiny, a
certainty. Till then they are holding their policy-making recommendatory autographs on file.
Muscular foreign policy initiatives have not yielded many tangible results as yet, even where
many were sought to be strengthened by offering contracts for supply of war materiel to our
defence forces. Interestingly, few, if any, of such military-based initiatives has come into
operation with UPA-ordered materiel hitting our shores, this far. Relations with our
neighbours have radically plummeted leaving India on the side-lines of rapidly changing
strategic dynamics in Central Asia owing to methodical, yet silent, Chinese manoeuvres. The
Western world is clearly in severe decline while Russia under Mr. Putin’s leadership is fast
spreading its military tentacles into Syria and its Eastern European borders and entering into
business with their Chinese neighbours. Pakistan remains a strategic asset for both and their
economic partners, never mind India’s mother-in-law vs. daughter-in-law verbal spats with it.
Businesses of varied hues that ‘invested’ at least Rs. 75000 crore in elections from 2009 to
2014 (with Rs. 30000 crore being on the 2014 general election)6 were clearly unhappy with a
floundering public exchequer and no achhey din, as in UPA times, for them in sight to recoup
their election investments plus a healthy return on investment, save for select favourites. The
reported inaccessibility of NDA 2.0 ministers and civil servants to industry as an anti-
corruption move severely irked industry. A tough cajoling jhatka to financiers was certainly
overdue before ‘negotiations’ for 2019 commenced!
India’s plummeting economy was also unlikely to attract many votes for the BJP in state
elections due in 2017-19. The much proclaimed galloping GDP growth rate has neither
translated into jobs, nor to growth in manufacturing, consumer purchasing power and
savings. Instead company balance sheets show reserves and surpluses being written down
rapidly and rising indebtedness translating into NPAs and torpedoing the Indian banking
industry. India’s publicly-owned banks are certainly in far graver trouble than what experts
have gleaned or media or govt. disclosed, so far. Govt. borrowings too have risen rapidly, as
has administrative expenditure (non-plan) with at least a third of Union Ministries, Depts. and
6 NDTV: Election expenses for five years crosses Rs 1.5 lakh crore:study extracted on Nov. 13, 2016 from
http://www.ndtv.com/elections-news/election-expenses-for-five-years-crosses-rs-1-5-lakh-crore-study-
558493

3. 3
CPSUs being kept alive on artificial resuscitation. Hitherto healthy CPSUs have had to fork
out dividends disproportionate to their earning, buying back of govt. shares and forced into
investing in projects with uncertain timelines and return. Clearly, the Govt. of India may not
be too far from a major financial crisis with POL prices again on the rise.
Compounding the BJP’s worries are elections to several major states, including the Lucknow
crown. If in UP, the BJP has no CM candidate and very little to boast of for its national
achievements, three months before the election, its seat in Jaipur is threatened by several
corruption allegations. Likewise, the Patidars and Patels in Gujarat pose a huge threat to the
BJP were they to ally with the local Congress unit while the SAD has ensured a burial for its
partner, the BJP. Uttarakhand too has just witnessed the reinstatement of the Congress govt.
by the Supreme Court, identical to Arunachal Pradesh. Goa and Manipur would not matter
much in the national BJP tally.
Yet these elections are critical to a second term for the BJP in New Delhi and the election of
India’s next President of their choice. Presently, the NDA 2.0 has 457342 electoral votes but
needs 549442 votes, i.e. 92100 for a simple majority. Ten states that go to the polls before
July, 2017, have 265140 votes of which UP alone has 83,824 votes7 or 32%. Even if the BJP
were to secure the support of big regional parties like the AIADMK, TMC or BJD, it would
still face the challenge of picking a candidate who enjoys wide acceptance. Uttar Pradesh
therefore is the key to the election of India’s next President for the BJP.
In such a gloomy economic, political and strategic outlook lay the seeds of the BJP’s Big
Bang, i.e. remonetisation. Remonetisation, IT & ED notices/raids, CCTV footage in
encashing bank branches, declaration forms, etc. were the logical follow-up actions in
addition to threats of future prosecution for non-compliance, a ‘surgical strike’ with the least
long-term (before 2019) collateral damage. PM Modi attributed remonetisation to fake
currency (produced in Bangladesh and Pakistan) and their link to terror and corruption
affecting development as the official catalysts for his govt.’s decision. Remonetisation was
therefore expected, indeed laudable in official principle, but the manner in which it is being
implemented raises several disturbing questions.
Usually quick to bask in the PM’s reflected ‘glory’, India’s Finance Minister (FM) stated that
86% of all currency notes in circulation were of Rs. 500 & 1000 denominations, apparently a
rank abnormality. However, FM conveniently failed to add that his own Ministry’s Currency
& Coinage Division and the RBI had been steadily adding to make this percentage over the
years, based on demand. Were they unjustified? Apparently not! In these days of high
inflation, a Rs. 100 denomination note taken to the neighbourhood market vanishes faster
than a cigarette on a smoker’s lips. Change lower than Rs. 20 is often overlooked by
customer and client alike with the contempt these denominations deserve. Hence, the demand
for Rs. 500 and 1000 denominations expanded exponentially. If Pakistan and Bangladesh
duplicated efforts of Indian currency presses while terrorists availed benefits to buy arms,
munitions, etc., that was entirely the fault of enforcement by the Govt. of India and high
inflation, not that of Indian currency.
Notwithstanding low public demand, why were India Security Presses and Government
Mints, both under India’s Ministry of Finance, still churning out sub-Rs. 100 notes in
profusion while minting virtually worthless coins too? It is therefore not surprising that
customers are now being handed out idle inventory of ink-fresh tens, twenties and fifties.
When inflation was steadily rising and lower denominations were in low demand, why was
available domestic installed printing capacity not substantially diverted to printing Rs. 100
7 Election Commission of India: Election to the office of the President of India extracted on Nov. 12, 2016 from

4. 4
denomination en masse since remonetisation was clearly envisaged several months back? The
Rs. 100 denomination mysteriously declined in numbers from the market and banks since
Mar-Apr. this year when first media reports emerged of probable high-value remonetisation.
Even Rs. 100 notes being handed out now are mostly used ones. Were these deliberative but
oblique media bytes notices to convert to untraceable hundreds before the axe fell on Nov. 8,
2016? Would opposition political parties have been blind to such obvious media signals?
Why else would the BJP President name them earlier his week were it not admission of the
true intent of this policy? Delhi’s maverick CM Kejriwal may therefore have made a valid
point8. Now India has a colourful Rs. 2000 denomination, an inexplicable add-on in India’s
currency bouquet, for which change may not be available with the retailer in the absence of
Rs. 500 and 1000 denominations.
What is even more interesting is that the Finance Minister and his Economic Affairs
Secretary publicly stated on Nov. 8, 2016, that new currency notes would be of Rs. 500 and
2000 denominations. For now, the new Rs. 500 notes have not showed up in banks. On Nov.
10, 2016 the Union Finance Secretary added that all Indian currency would be progressively
remonetised without specifying any time frame, a none too oblique threat to currency
hoarders and speculators. Does that mean remonetisation of Rs. 100 is already on the way?
If replacement cost, variously estimated at Rs. 15000-20000 crore were of no import, why is
it that weather and duplication-resistant plastic currency notes with embedded authenticity
microchips (as in US$100 dollar bulls) with a far longer lifespan (in a hot and humid climate)
were not contemplated for such an evidently large and emergent order? Above all, where
was the need to introduce the oddity of a Rs. 2000 currency note and then promise a new Rs.
1000 note as well? If checking corruption and misuse was a major objective of this
remonetisation, then why have denominations above Rs. 500 at all? Disabling embedded
“nano-GPS chips” if at all there is one embedded in these notes (India’s Finance Minister
laughed off this suggestion but did not deny it) may be no more than child’s play for
increasingly tech-savvy terrorists and professional hackers. If there is any truth in the ‘GPS
chip’, such system would be hacker-prone. Intriguingly, the Union Finance Minister and his
mandarins have no answer to date.
This sordid saga does not end here. Why it is that Delhi’s banks do not have adequate
currency for public distribution? Why must customers wait like stray cattle on the roads to
exchange their currency, some even collapsing from exertion? How would higher
denominations compensate the Rs. 100 denomination that is in severely short supply? Or
would new Rs. 100 notes hit the market very shortly? This is when there is the ridiculous
sight of tents outside bank branches in New Delhi on Nov. 10, 2016, to open new bank
accounts while there was little cash to meet the needs of existing accounts. I understand the
situation in rural and semi-urban areas where people have no credit/debit cards, banks have
poor or no internet connectivity, replacement currency is far scarcer, bank penetration low
with people converting their small savings into high-value currency to keep them safe, is
even more worrisome with suicides being reported from these areas. An exercise of this
magnitude merited planning and execution far higher than that of an army division going into
battle. Yet, why did this not happen?
What of the misery of the aam aadmi who owns but a pittance of the vast troves of black
moneys? As if the above were not enough, shortage of replacement currency has had other
fallouts. In Delhi, fancy malls and shopping centres wear a deserted look. Sweet and snack
8 Times of India:Demonetization a major scam,PM informed his friends beforehand: Arvind Kejriwal extracted
on Nov. 13, 2016 from http://timesofindia.indiatimes.com/india/Demonetisation-a-major-scam-PM-informed-
his-friends-beforehand-Arvind-Kejriwal/articleshow/55383370.cms

5. 5
shops produce very little goodies and veggie vendors are almost out of business with veggie
and fruit wholesale markets next in line. Cigarette and betel vendors are out of cash to
replenish their stocks. Chemists, grocers and fish & fowl vendors without a POS terminal are
idling through the day. Our maid’s surgery was delayed by about six hours since her husband
who had organized the cash needed was told the private hospital would not accept old
currency on Nov. 9 morning. I paid for the hospitalization on my credit card. My wife and I
visited over 15 bank branches for Rs. 4000, all in futility. Construction labour, repairmen,
maids, cooks, waiters and caretakers, etc. are legitimately demanding their wages/service
charges in Rs. 100 denomination. Compounding their loss of earning are the wageless days
they queue in futile wait to exchange their hard-earned savings.
What is striking is the composition of the thousands of people thronging banks and ATMs in
Delhi. Few are well-heeled, most appear to be employees, unemployed youths or even
urchins picked off the street, all with ID proofs of their own. These indigent people are
making a killing with their ID proofs (even as they pay no tax themselves) by moonlighting
as full-time depositors/collectors of Rs. 4000 over several branches throughout the day, every
day, even the same branch. These are early warning signals and could lead to food riots next
in the capital.
Ironically, thriving parallel currency exchange system has emerged in almost all big cities of
India, particularly in Delhi. For instance, if a large businessman were to deploy 200 hired
‘workers’ across a thousand branches in Delhi he could safely withdraw Rs. 8 lakh cash per
day, enough to meet his routine business expenses. This businessman would also, doubtless,
have at least 50 ghost bank accounts spread over, say 25 scheduled bank branches in Delhi,
into which he could safely deposit up to Rs. 2.50 lakh every third day per account by rotation,
using a quarter of the same set of his hirelings and their ID proofs. Assuming a safe thrice a
week average deposit of Rs. 32.50 lakh per account, in 13 working days of the current
amnesty (a third of 39 working days), he could launder Rs. 16.25 crore and walk away with
Rs. 3 crore of this, while the balance could earn interest at 4-7% per annum. Interest of Rs. 5-
9.25 lakh per annum, even after paying a third as tax, would suffice to pay off his collectors
and depositors for their ‘selfless’ services. Adding batches of 50 benaami bank accounts
networked across India, this businessman could potentially launder Rs. 16.25 crore more per
batch, all for a small ‘fee’ to the holder of an account. The businessman could also bid for
loans from his bankers against the security of his above bank balances and deposits.
Likewise, what prevents a bank manager from passing out new denominations to his well-
heeled clients without any record of transactions and be handsomely be rewarded for his
services while the hapless ones clamour for pennies outside the gates of that branch?
Hoarders are using this system to get their hands on “broken” or “bad” currency in exchange
for demonetised notes with discounts ranging from 10-50%. As per RBI regulations, an
individual can deposit Rs. 2.5 lakh into the bank but withdrawal would be capped at
Rs.10000 per day and Rs.20000 per week till RBI enhances the limits. By distributing money
to employees, workers or family members, hoarders can actually change large amounts of
black money into white. In Kolar reportedly local MLAs and few politicians were giving
away Rs 3 lakhs per head as a loan in Rs.1000/Rs.500 denominations. As per reports, the
organizers said notes would have to be exchanged in banks by producing valid IDs. These
loans are said to be interest-free for six months!9
9 Channel 42: Black Money Hoarders Have Already Found Ways to Bypass Modi’s Currency Ban. No.4 Is Pure
Evil Genius!Extracted on Nov. 13, 2016 from http://www.channel42.in/news/black-money-hoaders-have-
already-found-ways-to-bypass-modis-currency-ban-no-4-is-pure-evil-genius

6. 6
In May, 2015, the Govt. of India enhanced the limit of its Liberalized Remittance Scheme to
$250000 per annum per person. Consequently, outward remittances rose from $ 1.60 billion
(Rs. 11000 crore) in 2014-15 to $4.60 billion (Rs. 32000 crore) in 2015-16, particularly on
maintenance of close relatives and study abroad. Average monthly remittances roe from $100
million to $400 million10. There was no explanation for this exodus. Has any verification of
identity of such ‘close relatives’ and ‘students’ and sources of such remittances been
undertaken by investigative agencies of the Govt. of India? Then why is the brouhaha of
black money within India?
The saga stretches much further. Recent media reports speak of the Govt. of India garnering
an additional $45 billion (Rs. 3.15 lakh crore) in 2016-1711. This is possible only if the Govt.
of India sequesters all guesstimated deposits unilaterally, a legal impossibility. How do such
collections become government’s assets when they carry currency replacement, interest and
repayment liabilities and do not form part of Govt. of India’s cash balances? Where is the
guarantee that even 25% of this figure will be invested by owners of such capital? Given the
past track record of publicly-owned banks, how will the govt. guarantee that fresh
investments do not go the way they did in the last 6-7 decades? Would investors seriously
look at such guarantees? If investments are not available, how would jobs and consumer
demand be generated? Would investors trust publicly-owned financial institutions and
government bonds with their moneys? What mechanisms are proposed to minimize the re-
generation of black money, post-remonetisation when governments themselves are the
biggest generators of black money?
Several financial analysts have gone public on the positives of remonetisation in the last 2-3
days12. Nearly all predict a rosy future but answer none of the questions I pose above. Nor do
they suggest a roadmap for introducing plastic money, using POS terminals to bring retailers
with turnover below Rs. once crore per annum in the GST net, likely financial sector reforms,
directions for further enforcement to prevent regeneration of black moneys and introducing
easily available pre-paid debit cards across India sponsored by manufacturers/FIs, etc.
Despite the security measures being embedded in Indian notes, counterfeiting of notes
continues. According to RBI data, 4.88 lakh pieces of counterfeit notes were detected in
2013-14, of which 4.68 lakh pieces (95.9%) were detected by commercial bank branches,
while the remaining pieces (4.1%) were detected at RBI offices across the country. During
2013-14, the detection of counterfeit notes of Rs1,000 and Rs100 increased by 11.8% and
9.8% respectively whereas that of Rs. 500 denomination decreased by 10.3%, as compared to
the previous year. This data, however, does not include the counterfeit notes seized by the
police and other enforcement agencies13.
Now for the final twist in this tale. De La Rue Giori is an unknown name in aam circles but a
VVIP in official ones. The company’s web site says that 85% of global transactions are still
in cash and that it supplies currency services to 142 nations worth over $7 billion per annum.
10 Economic Times: Indians senta record $ 4.60 billion abroad as outward oversea remittances on extracted on
Nov. 13, 2016 from http://economictimes.indiatimes.com/news/economy/finance/indians-sent-a-record-4-6-
billion-abroad-as-outward-overseas-remittances/articleshow/52301330.cms
11 NDTV: PM Modi's Cash Ban Could Boost Budget By $45 Billion: Foreign Media extracted on Nov. 13, 2016
from http://profit.ndtv.com/news/economy/article-pm-modis-cash-ban-could-boost-budget-by-45-billion-
foreign-media-1623674
12 Kapoor,Rana: 7 Reasons Why Demonetization Is A Masterstroke extracted on Nov. 13, 2016 from
http://www.huffingtonpost.in/rana-kapoor/7-reasons-why-demonetization-is-a-masterstroke-by-modi/
13 DNA India:Why videshi paper for swadeshi currency,PM Narendra Modi asks Reserve Bank of India
extracted on Nov. 13, 2016 from http://www.dnaindia.com/money/report-why-videshi-paper-for-swadeshi-
currency-pm-narendra-modi-asks-reserve-bank-of-india-2074240

7. 7
It has been in this business since 1813. De la Rue was the official Crown Agent of the British
Empire who still prints banknotes for the Bank of England. Crown Agents printed the stamps
and banknotes of the colonies; provided technical, engineering, and financial services; served
as private bankers to the colonial monetary authorities, government officials, and heads of
state; served as arms procurers, quartermasters, and paymasters for the colonial armies. In
effect, Crown Agents administered the British Empire.
Even after Independence, for a half-century, India printed its rupees on machines bought
from De La Rue Giori, run by the Swiss family Giori and till recently said to control 90 per
cent of this business. In 1999, Roberto Giori the then CEO was a passenger on the ill-fated
Indian Airlines flight hijacked to Kandahar. The Swiss govt. not only opened a special cell to
deal with this hijack but even sent a special envoy to Kandahar. Some media reports suggest
that the Govt. of India paid a ransom for Giori’s release by the Afghan Taliban. Rumours
abound about how this company delayed supply of Libyan currency to the Gaddafi regime
that caused it not to be able to pay its army men and the regime’s eventual ouster.
In 2010, the CBI raided the vaults of RBI, Mumbai and discovered huge stacks of Rs. 500 &
1000 notes in its vaults. This was conducted when the CBI raided some 70-odd branches of
various banks on the India-Nepal border from where counterfeit currency racket was
unearthed. The officials of these branches reportedly told the CBI that they had got these
notes from the RBI. The CBI sent the notes to labs in India, Japan and Hong Kong that were
unable to distinguish the fake from the original. Thereafter they were sent to America for
testing where a lab discovered that they were counterfeit. The lab reportedly stated that so
striking were the similarities with the genuine that it was nearly impossible to tell the
difference and the dissimilarities were also injected on purpose only. It could be the work of
some state of the art international company dealing with printing currency. Presumably, the
new currency is equally amenable to manipulation and duplication, albeit in a few months, by
foreign security printers for infiltrating India’s economy again, unless there is stringent
enforcement.
Experts believed that Indian currency notes could be faked easily and that Pakistan did not
have the technology to support such counterfeiting. This means that currency notes of ISI and
RBI had the same source. This left three probabilities. Either some officials of RBI were
complicit in this conspiracy or that they were acting on instructions from the national political
leadership of the country or that De la Rue was printing counterfeit notes for the ISI that
explained their near perfection. The matter was therefore quietly hushed up by the Govt. of
India and orders for 16000 tons of printing paper on De la Rue were diverted to four other
suppliers14 causing this company’s stock to nosedive in losing a third of its business. The
Serious Fraud Office (SFO) of UK uncovered that a number of De la Rue employees had
deliberately falsified certain paper specification test certificates for some of its 150 clients.
Recently it was also revealed in the Panama Papers that De la Rue paid out a 15%
commission to a New Delhi businessman to secure contracts from RBI. There were also
reports that De la Rue paid £40m in settlement to the RBI for issues in production of paper
notes.
The current Board of De la Rue is chaired by Philip Rogerson while Martin Sutherland is its
CEO, both Englishmen. The company’s web site shows that advisers/investors in this
company include N M Rothschild and Sons Ltd., JP Morgan Cazenove Ltd. and Investec
Asset Management based in Johannesburg15. The last is clearly a Rothschild entity having
14 Kumar, Dr Manish:The Fake Money Saga extracted on Nov. 13, 2014 from
http://www.afternoondc.in/nation/the-fake-money-saga/article_21556
15 Investec: Contacts extracted on Nov. 13, 2016 from http://www.delarue.com/investors/contacts

8. 8
bought that group’s Australian subsidiary in 2006 that was sold to the Bank of Queensland in
2014. Investec also acquired the Mauritian-based bank, Banque Privee Edmond de
Rothschild (Ocean Indien) Ltee.16 Investec has grown from a small operator in 1974 with
global spread in 2016 that seems unlikely to have happened without the backing of its two
principal advisers/investors.
It is De la Rue with whom MP CM, Shivraj Chouhan held talks in London in Oct, 2016 to set
up a security paper mill and a research and development centre of identity software in
Madhya Pradesh17 under PM Modi’s Make in India banner. Martin Sutherland the present
CEO of De la Rue in an interview with India Investment Journal said that under the UK-India
Defence & International Security Partnership Agreement which was signed in November
2015, De La Rue is committed to supporting both governments on the subject of
counterfeiting under this agreement18.
India imports bank note papers from European companies like Louisenthal in Germany, De la
Rue in United Kingdom, Crane in Sweden and Arjo Wiggins in France and Netherlands.
India had blacklisted two European firms in 2014 amid reports by security agencies that the
security features, which come embossed on bank note paper, were compromised and given
away to Pakistan. However, the ban was lifted and the companies were removed from the
blacklist on the grounds that “These companies are in the business for 150 years; they will
not hamper their trade by passing on information of one country to another. Some of these
firms even print currency notes for smaller countries. After the investigations, it was found
that the two firms had not compromised the security features and the ban was lifted.”
Currency notes were largely printed at Mysuru under utmost secrecy while the paper note on
which the printing was done came from Italy, Germany and London. The printing, according
to officials, began in Aug-Sep, 2016 and nearly 480 million notes of Rs 2,000 denomination
and an equal number of Rs 500 denominations were printed. The printing facility at Bharatiya
Reserve Bank Note Mudran Private Ltd. (BRBNMPL) in Mysuru under RBI was set up with
the De La Rue Giori, now KBA Giori, Switzerland19.
What is most interesting is that the stock of De La Rue plc (LON: DLAR) is a huge mover
increased 0.17% or GBX 1 on November 9, hitting GBX 579. About 108,414 shares traded
hands and stock values rose by 33.33% since April 11, 2016 and steadily rising
outperforming by the S&P 500 by an impressive 28.55%20. Share prices have risen from a
low on Apr 11, 2016 of $433.50 to $584.50 on Nov. 11, 2016 and likely to add GBX 364.84
million to its net worth on Nov. 9, 2016 from GBX 588.45 million on Apr. 11, 2016. What is
most interesting is that this company now enjoys ‘Buy’ or ‘Neutral’ classification of 80%
analysts that makes for a very favourable status. This period is also the one in which currency
printing paper was imported by RBI from this company. Likewise, SICPA, another Swiss
family held-company (by the Amons) since 1927 holds a virtual monopoly of security
16 Investec: History extracted on Nov. 13, 2016 from https://www.investec.com/about-investec/who-we-
are/history.html
17 Hindustan Times: Chouhan discusses investmentopportunities with British firms extracted on Nov. 14, 2016
from http://www.hindustantimes.com/bhopal/chouhan-discusses-investment-opportunities-with-british-
firms/story-uIulVtMpNfbG0MLfT238cO.html
18 India Investment Journal:GivingMake in India the currency to succeed extracted on Nov. 13, 2016 from
http://www.indiainvestmentjournal.indiaincorporated.com/giving-make-india-currency-succeed/#social-
popup
19 Kasli,Shelley:Op.cit. Note 2 supra
20 De La Rue: Historical SharePrices extracted on Nov. 13, 2016 from http://www.delarue.com/investors/our-
share-price/historical-share-price

9. 9
currency ink21 and has its India office in Delhi22. Being a privately-held company, it does not
disclose its financials on its web site. Consider the fact that India prints 15 billion pieces of
currency annually, of which up to 12 billion are printed on foreign-made cotton-based paper
that has the advantage that it cannot be easily replicated, yet has the touch and feel of paper23.
Remonetisation 2016 is evidently a hydra-headed monster. While the stated objectives of this
move are laudable in principle, the manner of its implementation and the murkiness
surrounding it raise more questions than answers. India recently placed 43 satellites in space,
yet is incapable of producing its own security paper and printing ink. RBI’s contracts for
currency paper and printing ink, technical cooperation and collaborations with foreign
partners ought to be brought under the scanner, instead of it being treated as a holy cow. The
Union Finance Ministry’s role in sanctioning RBI’s contracts, if any, also needs to be
thoroughly probed and responsibility fixed. The impression that is gathering ground in public
statements of bank officials, ministers and civil servants is that the Rs. 2 lakh crore collected
after Nov. 8, 2016 is all illegal and therefore the property of the Govt. of India, the grossest
travesty of truth.
Fear and terror are distinct states of the popular mind. While the former is a virtue, the latter
is vice. Fear may instil healthy respect for a political system and foster investment and
growth but terror may discourage honest disclosure for fear of sequestration/limitations of
drawing/investment or coerced unwise investment and erode the capital base of the nation,
apart from fostering hate for a regime in the popular mind. In Chapter XVII of The Prince,
Florentine statesman, Nicolo Machiavelli wrote, “(The Prince) ought to be slow to believe
and to act, nor should he himself show fear, but proceed in a temperate manner with prudence
and humanity, so that too much confidence may not make him incautious and too much
distrust render him intolerable”.
PM Modi ought to take a cue from Machiavelli, six centuries ago. Urban populations are
articulate and have access to public communication manifold more than those in rural and
semi-urban areas to voice their opposition. Yet the latter two are much more articulate when
it comes to voting. Remonetisation may have already become the BJP’s biggest electoral
nightmare, indeed the single biggest election agenda for its detractors and the opposition in
all elections from 2017 to 2019.
The author is a senior public policy analyst and commentator
21 SICPA: The Company extracted on Nov. 13, 2016 from http://www.sicpa.com/company-heritage/company
22 SICPA: Our Locations extracted on Nov. 13,2016 from http://www.sicpa.com/company-heritage/company
23 DNA India:Op.cit. Note 6