Everyone has seen the new Rs 2,000 note. Even if they haven’t managed to get their hands on one, the new high-denomination magenta notes seem to have made their way into circulation.

In fact, there are enough around for people to rip the notes apart looking for a GPS chip or to dip them into boiling water to see if the ink bleeds. There’s only one thing most people haven’t been able to do with the new Rs 2000 note: Use them, because it’s impossible to get any change. Which is why people are starting to ask: Where are the new Rs 500 notes?

The demonetisation effort was announced as a withdrawal of Rs 500 and Rs 1,000 notes with the aim of cracking down on black money and counterfeit currency. But authorities also assured people immediately that, since Rs 500 and Rs 1,000 notes counted for about 86% of all currency being used, new notes were being printed to replace them. Reserve Bank of India Governor Urjit Patel said on November 9 that the new Rs 500 and Rs 2,000 notes would come into circulation the very next day.

A week since then, however, the Rs 500 note still remains an elusive creature. A few people have seen them – according to Times of India, the first consignment of five million notes was sent to the RBI on November 13 – but few people have had any access to them. Having just Rs 2000 notes in the meantime has been unhelpful for many, because it’s impossible to break them.

Everyone wants to know where the new Rs 500 notes are. Even the Madras High Court on November 16 demanded answers from the RBI. Capacity is, of course, one of the reasons, but the Rs 500 shortage could even be the result of a deliberate decision from the authorities on how to bring cash back into the economy after suddenly declaring 86% invalid.

Different orders

There seems to be a huge disparity between the denominations in the number of notes that have so far been printed. According to Mint’s sources, as of November 17, only 15 million of the new Rs 500 notes have been printed, versus 1.5 billion of the Rs 2,000 note.

The central government-owned Security Printing and Minting Corp of India Ltd is printing the new Rs 500 notes. Meanwhile, the RBI-owned Bharatiya Reserve Bank Note Mudran Pvt Ltd, which is printing the Rs 2,000 notes. BRBNMPL’s annual capacity is almost twice that of SPMCIL, which anyhow was only expecting that it would need to put the new Rs 500 notes in circulation from from January 1, according to the Indian Express. All the printing presses began production in September, according to Mint, after getting the signature from new RBI Governor Urjit Patel.

Storing value

So why did the government put its higher capacity agency to work on the Rs 2000 note instead of the more useful Rs 500 one? It might be useful to look at what the currency and value distribution was like before.

As of March this year, there were 15 billion notes of Rs 500 denomination in the economy, against just 6 billion Rs 1,000 notes, according to the RBI. But of course, despite there being less than half in number, the Rs 1,000 notes stored nearly as much value as the Rs 500 ones.

Although no one has come on record, numerous sources have suggested that the reason the government has focused on printing Rs 2,000 notes first, is to ensure the total value of currency in the economy is shored up quicker – even if that money is not actually moving around.

“We planned to first bring the 2,000 rupee notes as the focus was to create high-value notes to ensure the smooth replacement of the old 500 and 1,000 rupee notes. We would have to print four 500 rupee notes for every one 2,000 rupee note. If we would have focused on printing the 500 rupee notes, the entire printing exercise would have taken much longer,” an unnamed source told Mint.

Essentially, the government was hoping to replace all the value into the economy, which is easier done by printing fewer currency notes of higher value. Ironically, that is the same reason high-denomination notes were withdrawn in the first place, since holders of illicit money found it easier to store them in fewer notes of higher value.

Sheer capacity

But even now with all presses working at full speed, on three shifts instead of two in some cases, it will still take much time to replace all the notes that have been withdrawn. In the case of the Rs 2,000 note, if the government is doing a one-to-one replacement, it only has to print half the number of Rs 1,000 notes that were in circulation.

Saumitra Chaudhuri, a former Planning Commission member, estimated that this would take at least another two months. The Rs 500 is harder to replace, since there the government would have to print as many as were around before – 15 billion pieces.

“Assuming that BRBNMPL combines resources with SPMCIL after mid-December, the timeline to replace the existing stock of 1,658 crore pieces of Rs 500 notes will run into May 2017. Ergo, currency shortages will remain with us for many months and economic contraction will rule this period.”

Transport issues

Madras High Court’s request for RBI to explain why Rs 500 notes hadn’t reached Tamil Nadu reveal one more unexpected answer. Earlier this year, election commission authorities seized more than Rs 500 crore ahead of assembly elections in the sate, forcing the RBI to change the way it transports money.

“RBI has stopped transporting currencies through private agencies. Now it is made only through government agencies,” the RBI’s counsel told the court, saying that this too was slowing down the distribution of currency.

Correction & Clarification: An earlier version of this story said that Mint reported 3.5 billion pieces of the new Rs 500 note had been printed. That was the number of pieces ordered, with only 1.5 billion printed as of November 17.