Small change, big signal

‘Take care of the pennies and the dollars will take care of themselves’: this American proverb apparently does not apply to the conduct of monetary transactions in the tricity, at least where loose change has to be returned and accepted.

As discussed in the previous column, there is a fundamental flaw in the way we value our currency if change is simply not valued at any consequence.

There is a view that even as the shopkeeper is not returning your dues, he is doing his bit to spur other economic activity by substituting cash with some sweets or chocolates or revenue stamps.

However, the problem with this argument is that there is no choice involved — the defining feature of free economic transactions. Note that the offer is not reciprocal and as a customer, you cannot go to a shopkeeper and offer him sweets the next time you don’t have change.

So, one of the first things we need to see is whether there is actually a shortage of change or whether enough is being done to mitigate it.

“There is no shortage of change from the supply side. The problem is with the distribution at the local level,” says Charanjiv Singh, president, Chandigarh Beopar Mandal.

A delegation of traders had recently met RBI officials in this regard. They were told that the SBI would be organising regular coin fairs and events to fulfil the business needs and at a recent event, change worth around than Rs 2 crore was distributed.

What is the amount needed in small change for the tricity to be comfortably able to settle all transactions?

There are no easy answers, a refined guess would be more than Rs 15 crore a month is needed in denominations of coins of one, two and five and in notes of Rs 10 and Rs 50.

However, even as there are strenuous efforts to ensure that there is no shortage of change, there are positives per force that can actually result from the situation, some economists reckon.

One of the first positives that can result is that having become fed up of losing a substantial amount in foregone change in exchange for bad quality sweets, residents would start using cards for payments and in turn, put pressure on small shopkeepers, even, to get machines. This, in fact, can also be linked to the recently launched Pradhan Mantri Jan Dhan Yojana and act as a spur on for financial inclusion.

Just for small change, a big transformation could perhaps result, one would like to think.

The second way in which this man-made crisis of small change can be turned around and looked at it in a positive manner is for the government to look at tweaking the denomination of currency notes available and ensure that the pricing of goods and services is done in a manner that makes it less likely that change will be needed in any significant amount.

Finally, the issue of small change can actually be seen as a reflection on the way the future of money can evolve to bypass such problems — easy to store, invisible, perhaps, and increasingly dependent on technology for transactions to go through.