Huge amounts of counterfeit Indian currency, believed to be printed in Pakistan and routed through Nepal and Bangladesh, is causing major concern for Indian authorities, a new report by a Washington-based study group said today.
The value of the fake currency in circulation is estimated to be $9 million in Nepal's bordering state of Uttar Pradesh alone and the report said that fake currency dealers in Nepal had projected that by 2010 nearly $2.2 billion worth of fake currency will be in circulation in India.
Global Financial Integrity in its report said that the heavy flow of counterfeit notes has led to speculation that elements in Pakistan are trying to create confusion and destabilise India. The fake currency money is routed to the country through Bangladesh, Thailand and Nepal.
"In India, on the other hand, counterfeit rupees are becoming a cause for concern. Fake rupees are believed to be printed in Pakistan and then channeled through Dhaka, Bangladesh and Bangkok, Thailand into Kathmandu," said the report on 'Transnational Crime in the Developing World'.
The report estimates that illicit trade in "goods, guns, people, and natural resources" is a $650 billion enterprise, which most negatively impacts the developing world.
"Indian authorities estimate that as many as 400 million fake rupee notes with a value of some $9 million are in circulation in the state of Uttar Pradesh alone, and fake currency dealers in Nepal projected in 2009 that by 2010 nearly 10,000 crores will be in circulation in India," the report said.
This heavy inflow of fake currency has led some to speculate that Pakistani elements are deliberately trying to "create confusion and destabilise India," it said.
The effects of counterfeit currency are mostly felt on the micro-level when it is circulated from person to person, the report noted, adding that if the fake money is ever discovered and seized by the authorities, the holder is not reimbursed, thus losing income in the amount printed on the fake bill.
"On the macro level, flooding an economy with fake currency can cause inflation and devalue the currency being counterfeited. This is why India is worried about the inflow of fake rupees, possibly from Pakistan," the report said.
According to the report, fake euros tend to circulate less around the world, and are found mainly in the euro zone.
As a result, the overall rate of euro forgery is believed to be much lower than that of dollars.
Based on seizures, it is believed that 70 per cent of counterfeit euros are produced by only three gangs, "all based in Italy and the Balkans".
Relative to overall currency circulation, the counterfeiting of dollars and euros is not a huge problem.
The US Secret Service estimates, for example, that in 2005, of the $760 billion in US banknotes circulating worldwide, only $1 for every $12,400 passed was counterfeit.
"While this does add up to $61 million in counterfeit currency passed ($55.2 million of which was passed in the United States), the ratio of counterfeit to real currency would have to be much higher to inflict real damage on the reputation and strength of the US dollar," the report said.
