Essay on fake Currency and its impact on economy

Free 760 words essay on fake Currency  and its impact on economy for school and college students.

Counterfeit Money And Its Impact On Economy

Counterfeit currency, better known as fake currency is the copied or imitation currency that are produced without the legal sanction of the government. The act of producing fake currencies is a fraud or as you can call forgery. The history of fake currency is as old as the currency itself. Before the paper currencies came into existence, the counterfeiting was done by mixing base metals into the gold and silver.

Free Essay on Counterfeit Money And Its Impact On Economy

Data show that 250 out of ten lakh notes in circulation are fake. It also shows that the fake currency of the value of almost Rs. 70 crore is infused in the Indian Economy every year and the meagerly third of which is intercepted by the security agencies.

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The free flowing fake currency impacts economy in a very negative way. Here is a few points how the counterfeit currency impacts the economy:


  • Inflation: The foremost problem that fake currency brings in an economy is inflation since more money gets into the circulation. Also, most of the times when you find out that what you have received in lieu of your goods sold is a fake currency and you are not going to get compensated, you tend to raise the price of the goods for making up for the loss. This in turn brings the inflation as well.


  • Loss Of Confidence: So many fake currency gets into the circulation, efficiently mixing up with the real ones. It is often hard to tell them apart. This brings down the confidence of public in their economy and the currency.


  • Reduction In The Value Of Money: Inflation is one problem that we have discussed and is caused by fake currency. So, we can’t ignore the base problem of it as well. With the fake currencies, the real money is actually less in circulation, thus reducing the value of the real money. This, hand in hand, causes inflation as well.


  • Decrease In Real Income: Suppose you earn Rs. 10,000 per month. And from among that you get two fake notes of Rs. 500. This leaves you with a monthly salary of Rs. 9000, which is lower than what you are getting. There is no argument that fake currency reduces the real income.


  • Dumping Of Cheaper Goods: When the price of the goods rises and the real income decreases, people tend to go after the cheaper goods. This makes some other countries dump their inferior goods that are then sold at comparatively lower price. This in turn hurt the economy even more.


  • Black Marketing: Black Marketing is another child of fake currencies in circulation. With the fake money in circulation and short supply of the goods takes them to the another level of pricing that is way higher than the reach of normal people and are sold illegally at higher rates. It is a part of vicious circle of corruption that keeps eating away the economy.

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Fake currency also impacts the Global economy immensely. There have been examples where nations have tried to destabilize the economies of their economic and political rival nations by inducing counterfeited currency in their economy on a huge scale. There is not a drop of doubt that counterfeit currencies are a threat to every economy and that too in more than one ways. Although there are awareness programs and agencies that look after the issue, yet it still exist without a fear.

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There is FCORD known as Fake Notes Co-Ordination group that is formed by government for intercepting the fake currencies. Then there is TFFC as well which is the Terror Funding and Fake Currency Cell. Indian government has also signed MoU with  Bangladesh for preventing the smuggling and circulation of the fake currencies. However it is evident that it is not enough. The fake currency problem is bigger than what it might sound to the regular ears.

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Government has also tried banning the legal tenders of Rs. 500 and Rs. 1000 of whose fake notes were much in circulation. The issue of new currency have helped the economy to recover from the pain that the counterfeit currencies and black money have caused. However, it is yet to be seen that how long it could prevent these fake currencies to be back in action and that too in new shapes and sizes. We need to be well aware of identifying the currencies as well. And the best way to fight it is to go digital. The lesser the paper currencies are used, lesser will be the chances of them being fake.



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