The government’s first-ever attempt to estimate the quantum of counterfeit notes in India has shocked the authority. It has been found out that four in every 1,000 currency notes, in circulation, are fake, amounting to over Rs 3,200 crore in 2010, which would seriously affect the “credibility of rupee as legal tender”.

The white paper on the status of fake currency notes is jointly prepared by the Intelligence Bureau, Research and Analysis Wing, Directorate of Revenue Intelligence and Central Bureau of Investigation.

However, the Reserve Bank of India (RBI) does not have an estimate of fake currency notes and opines that Indian bank notes are secured. “The fake currency notes flowed in 2010 from abroad were between Rs 1,500-1,700 crore”, the white paper said.

Experts said the circulation of fake notes, in such a big number, is a cause of concern. Mr. D. K. Joshi, Principal Economist at rating agency Crisil Ltd., said, “From a monetary policy perspective, if a growth in fake currency becomes too rampant, it will reduce the control of monetary policy over inflation, making the monetary actions less effective.”

This number, as revealed in the report, is much higher as compared to other nations. In Australia, counterfeit notes were detected at nearly seven per million notes in circulation in 2008-09; whereas in Canada, the number was 76 per million in 2008, according to RBI’s data.

“The importance of curbing fake currency circulation in India is even more important in current scenario, when the apex bank is taking steps to reign inflation and striving to curb growth in money supply,” said Mr. Saurabh Tripathi, a partner at Boston Consulting Group.