India’s Quest To Regain Trust In Its Currency – OpEd
India appears to halted its move towards a cashless society—a positive development for the vast majority of the population and its growing economy. But how can trust be fully restored in its currency? A political commitment to safeguarding physical currency is one thing, but technical and technological measures are also essential to thwart counterfeiters, which have been targeting the country given its growing stature in the global economy. This threat can be countered through an innovation capacity notably fuelled by companies specialized in currency production.
India is redefining its approach to financial systems by shifting away from an exclusively cashless policy, because it was realised that financial inclusion cannot be achieved in a fully digitalised economy. In a 2021 speech, former Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted that “financial inclusion is a key driver of sustained and balanced economic growth which helps reduce income inequality and poverty.” His statementunderscores the necessity of accessible financial services, including cash, for comprehensive economic participation. While digital payments surged in the wake of demonetisation and subsequent government initiatives, this renewed focus on physical currency holds profound implications for the country’s economy and its people. For a nation often described as a “state-continent,” this decision reflects both practicality and inclusivity, addressing the needs of its diverse population while securing economic stability.
Why cash is still important in India
Few could have imagined what would unfold following Prime Minister Modi’s demonetisation efforts that were launched back in 2016. Almost overnight, he decided to out the old paper currency, giving citizens just 50 days to turn in their ₹500 and ₹1,000 rupee notes (which constituted 86% of the currency in circulation), and exchange them for new ones. This ill-thought out policy was ostensibly devised to flush out criminal gangs, fraudsters and cash hoarders. The process of demonetisation, owing to the short notice period given, among other factors, led to real economic instability. Even the Reserve Bank of India (RBI) was taken aback by the negative effects felt across Indian society; stalled transport and agriculture industries, to crashing stock markets and reductions in the country’s GDP. A 2018 RBI report even outlined how the demonetised banknotes had actually found their way back into circulation, rendering the goverment’s anti-cash revolution somewhat ineffective and fruitless.
Despite the ineffectiveness of the demonetisation policy, India has remained at the forefront of efforts to develop robust cashless infrastructure; almost half of the world’s digital transactions take place in India today. But a definite shift has occurred, with policymakers moving away from the cashless concept in a quest to regain global trust in India’s currency as its economy grows and its geopolitical standing is reinforced. This decision to steer away from a cashless-only policy marks a significant shift that benefits both its vast population and its growing economy, as it will lead to increased financial inclusion for its rural populations, economic stability, trust in its currency and psychological and cultural benefits. This requires advanced technological solutions to prevent counterfeiting.
Combating the counterfeiters
Modi’s demonetisation project, though ineffective, highlighted a very real problem for India and most economies around the world: the threat of counterfeit notes distorting the economy. RBI Statistics (annual reports) indicate that there have been fluctuations in the number of counterfeit rupees in circulation since 2016 and that counterfeiting remains a persistent challenge. The increase in counterfeit ₹500 notes suggests that counterfeiters are targeting higher denominations, underscoring the need for enhanced security features. Indeed, the integrity of India’s currency is crucial if its economic growth is to remain sustainable in the long term. The country’s geographic and economic size make it particularly vulnerable to counterfeit currency infiltration. To mitigate this risk, the adoption cutting-edge solutions that incorporate both physical and digital safeguards, ensuring its currency remains one of the most secure in the world, is essential.
India’s renewed focus on physical currency opens the door for strategic collaborations with global leaders in banknote security; firms that have developed a deep understanding of the modern, sophisticated security features that leave banknotes less susceptible to counterfeiting. Indeed, the global market for secure currency manufacturing features just a few prominent companies, each with unique strengths. Giesecke+Devrient (G+D) has established itself as a reliable provider of high-security solutions. Oberthur Fiduciaire is also contributing to the modernisation of banknotes in economies worldwide and has even developed a solution – Bioguard – that effectively protects banknotes against bacteria, fungi and other viruses, such as Covid19. Similarly, De La Rue, a company with historical ties to India, has long been associated with secure currency production. However, De La Rue has been somewhat occupied with its sale and recent challenges.
Strategic collaborations
The manufacturing of secure banknotes has evolved into a sophisticated field that combines advanced technology with intricate design, and India could turn to a number of trusted firms. Clemens Berger, Chairman of the Board of Managing Directors at Louisenthal (a subsidiary of G+D) explains that now “nanotechnology enables dynamic and captivating effects in banknote design” taking “banknote security to a new level“. With its decades of expertise and innovative solutions tailored to counter the threats posed by counterfeiters, the French firm Oberthur Fiduciaire is also a potential partner for Indian authorities. The company has established itself as a go-to partner for central banks worldwide, offering cutting-edge technologies like the Anima thread, which seamlessly integrates advanced security features into banknotes to make them virtually impossible to replicate. Indeed, innovation is at the heart of the firm’s approach to the development of security features, as highlighted by CEO, Thomas Savare: “We must innovate to ensure that we are always one or more steps ahead of the counterfeiters. Innovation is also needed to stand out from the competition and ensure the trust of central banks and the billions of people who use banknotes every day.”
Modern banknotes incorporate a range of visible and covert features that not only deter counterfeiting but also enhance public confidence. Visible features like colour-shifting inks and watermarks are designed to be easily recognisable, enabling individuals to authenticate currency at a glance. Covert elements, detectable only under specific conditions, provide an additional layer of protection, accessible to trained professionals and specialized equipment. Machine-readable technologies further enhance the functionality of banknotes, ensuring compatibility with automated systems like ATMs and cash counters.
If India focuses on safeguarding its physical currency, it will send a strong message of commitment to economic resilience and inclusivity. It signals to its citizens and the global community that India is prepared to address emerging threats and secure its financial systems against evolving challenges. By partnering with trusted global players, India can ensure that its currency remains a symbol of trust and stability. The future of India’s currency does not lie in choosing between cash and digital transactions but in creating a secure ecosystem where both coexist harmoniously. Investing in advanced solutions and fostering collaboration between public institutions and private innovators is key to achieving this balance. Through these efforts, India is not only safeguarding its currency but also reinforcing its role as a global economic leader. By embracing the right technologies and partnerships, the nation is set to usher in a new era of confidence and security, ensuring that its currency reflects its aspirations for progress and trust in an increasingly interconnected world.