It costs a lot of money to make money.
The special papers and inks, security features, and printing processes require specialised facilities and a hefty sum every year. So it’s no surprise that a number of countries, from Denmark to Kuwait, look to outsource the printing of their currencies.
But India, the world’s second-largest producer and consumer of currency notes (after China), isn’t one of them. The country prints all of its notes. However, until recently, it used to import many of the raw materials needed to make money. For instance, it got around 95% of the watermarked paper required for currency notes from companies such as Germany’s Giesecke & Devrient and Britain’s De La Rue, among others.
India uses around 22,000 metric tons of such paper every year and that accounts for at least 40% of the total cost of manufacturing money. For the year ended June 2016, the Reserve Bank of India supplied 21.2 billion banknotes and printing costs came to around Rs 3,421 crore.
That high cost is likely one of the reasons prime minister Narendra Modi was keen to include India’s currency in his “Make in India” project, putting an end to outsourcing. In 2015, he urged RBI to start producing more of the required paper and ink, with the eventual goal of keeping the entire production process within the country.
This week, Indians are gradually getting their hands on the new Rs 500 and Rs 2,000 notes produced at RBI’s press in Mysuru, Karnataka. What’s interesting is that part of the paper used to make them was produced in India, though RBI refused to reveal exactly how much.
This paves the way for India to eventually become self-sufficient in producing all its currency notes, an important milestone that comes nearly 90 years after the country first began printing its own paper money.
From England to Nasik
When the British colonial government first issued rupee notes in India in 1862, it sourced them from the UK-based Thomas De La Rue which started out printing playing cards and postage stamps before entering the currency business. Today, the nearly 200-year-old company, now known as De La Rue, is the world’s largest commercial bank note printer and also supplies much of the paper used to make them.
In the 1920s, the British decided to print money in India. In 1926, they began constructing the region’s first-ever currency printing press in Nasik, Maharashtra. The city was picked for its stable climate and close proximity to a key railway line that connected it to the rest of India, according to Rezwan Razack, co-author of The Revised Standard Reference Guide to Indian Paper Money.
Two years later, the Nasik press began operations, printing a Rs 5 note of the same design previously brought from England. Over the next few years, this press would go on to produce new designs of notes in denominations of Rs 100, Rs 1,000, and even Rs 10,000, which could be used all over India.
Long after the British left in 1947, the Nasik facility was still India’s only bank note printing press. But as the economy developed, the demand for money increased and a larger production capacity was required. In 1975 the government established the country’s second press, this time in Dewas, Madhya Pradesh, which produced more hi-tech notes with better security features to prevent counterfeiting.
By 1997, these two presses together were printing all the notes India required. However, with a growing population and more economic activity, demand was again outpacing their combined capacity. So, the government decided to place a massive printing order of 3.6 billion notes with American, Canadian, and European companies (including De La Rue) to fix the shortfall. That was an expensive move, costing around $95 million and attracting heavy criticism amid concerns over potential security risks.
After this episode, the government established two more such presses, one in Mysuru in 1999 and one in Salboni, West Bengal, in 2000.
Through it all, India’s sole facility to produce the paper needed for new notes was the Security Paper Mill in Hoshangabad, MP. It was established in 1968 as a step towards bringing India closer to its goal of becoming self-sufficient in producing its currency. But with its capacity of around 2,800 MT, it could only meet a small part of India’s paper requirement; the rest had to be sourced from countries such as Britain, Japan, and Germany.
It has taken nearly 50 years for further change.
Following Modi’s urging, the government and RBI’s printing and paper production subsidiaries stepped up their capacity in 2015. A new production line was added to the Hoshangabad mill and operations finally began at a second mill in Mysuru, close to the printing press. This new mill was built with a capacity of 12,000 MT and, together with the Hoshangabad line, was expected to meet pretty much all of India’s bank note paper requirements, while also knocking off around Rs1,500 crore from its future import bill.
While it’s not immediately certain whether the new rupee notes officially mark the beginning of a completely “Made in India” phase, they do mark a big move in the evolution of printing money in India.
This article first appeared on Quartz.