Shraddha Tiwari, BA LLB (Hons.) School of Law, Christ University
ABSTRACT
This article analyzes the efficiency aspects of the Reserve Bank of India's decision to withdraw ₹2000 banknotes from circulation, drawing upon Richard Posner's economic analysis of law. The withdrawal of these high- value notes aims to address various issues, including illicit activities, tax evasion, and the promotion of financial transparency. By considering factors such as transaction costs, resource allocation, negative externalities, and incentives, it becomes evident that the removal of ₹2000 notes can enhance economic efficiency. The policy encourages the adoption of digital payment systems, reduces transaction costs, promotes financial inclusion, and strengthens regulatory oversight. While the anticipated impact on the economy may be marginal, the overall efficiency gains justify the withdrawal of these banknotes.
Keywords: Efficiency Analysis, Withdrawal, ₹2000 banknotes, Richard Posner, Circulation
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