WHY RBI CANNOT PRINT MORE CURRENCY NOTES IN CRISIS

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Why can’t RBI print more and more currency during crisis time to help the country and its people? This is the most common doubt that everyone gets and occasionally during crisis time like this when the Coronavirus outbreak is hitting the country’s economy. Here I am going to explain this in a very interesting and simple way. Just spare 5min to get a good command on this. I am sure you can also debate with others regarding this.

There are 10 people living in a country called XYZ. The average income of each person is 10/- per year. Country XYZ produced 10 kgs of rice per month and each KG of rice costs 1/-. The country XYZ produced 100kgs of rice per annum. Now, the country XYZ wants to increase its economy. So, they thought of printing more currency notes. Reserve Bank of country XYZ has printed more currency notes and so, the salary of 10 people in the country has increased by 10/-. So, now the annual income of each person in the country became 20/-. Now, the people of XYZ country are capable of buying anything because of the increase in their salary. But, the production of rice which is now 100kgs per year cannot be increased as it is not in the hands of people or government. So, the rice sellers will now increase the price. Now, 1kg of rice which was 1/- has now become 10/-. This means that people have more money and production is less. This phenomenon is called “HyperInflation”.

This got failed in many countries. Zimbabwe, Venezuela in order to improve its economy has printed more currency notes. Thus there was more rotation of currency in their hand. When there is money, people want to buy things and lead a luxurious life. But, to buy things, there should be more productive, for more production, there should be raw materials and machinery. Almost all the countries import raw materials and so, it is impossible to increase production. This leads to inflation. Salaried persons earn more and unemployed turn thieves. This leads to an increase in the crime rate, an increase in the goods price. And thus, the economy of the country can never be grown. It is said that during Hyperinflation in Zimbabwe, a piece of whole bread price was around 15000/- Indian rupee.

So, in order to increase the economy, the country should increase production. Sell their goods to other countries, increase the exports and raise the economy. The government and RBI should work in maintaining the balance between production and currency rotation in the hands of people. So, printing money can’t be solution to raise the economy. When you have more money and less things to buy, then the money will lose its importance. The currency note will then become a waste paper.

-Krishna (Chief Editor, FrontlinesMedia)

6 COMMENTS

  1. Sirr we r taking many crores from world bank…. instead of distribution of money to people ….if we would repay the money to world bank….it something relief from burden on people….
    Sir is it possible to done

  2. Sir then why world bank is giving us crores of money , they should give us raw materials and resources.
    Crores of money can be printed by us also since it is just a piece of paper.
    What is the difference between we print crore of money and world bank gives us crore of money

  3. In this period of economic crisis, the daily wage labour suffer a lot. How to overcome this. After lockdown, the prices from fan to flights, pen to pendrive, everything will increase in cost… How to face this situation

  4. Poor people or the daily wagers facing the untold grievance in their daily fooding amidst the lockdown, instead of printing new currency notes the banks of India should pay to needy people directly through their accounts by splitting 7 or 9 percent interests that is being earned through times from borrowers.

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