I had a big smile of my face when I read this news few days ago. People who know the theory and history of money (see, Menger, Mises, Davies, and Money Museum) will immediately realize the idiocy of such crazy innovations. I understand there is nothing wrong in introducing plastic currency notes per se, but to call it money is absurd. These currency notes are not money because they are not backed by any real commodity money like Gold or Silver. These notes are in circulation only because of government's legal tender laws. They are forced on people by the politicians.
If the goal of RBI is to give people a choice of money which can last long - has a longer shelf life - then the clear choice are precious metals, Gold and Silver. No other money can last as long as these two metallic money. They were formed at the time of formation of Earth itself some 4.5 billion years ago, and since that time they were lying in Earth's crust to be found out by humans some 6000 years ago (see this). The chemical properties (see this) and human yearning for them made these two metals winners in the historical competition between different monies. Free market participants chose them as money because of their unique money like properties. Paper, plastic, leather etc., are no match against these two metals. What India needs is a 'pure gold standard (even a Silver standard will do), and not some plastic currency notes!But, I know, people, mostly academicians and mainstream Ph.D. economists, will say, that the supply of Gold is scarce so it can't function as money. It seems their Keynesian university econ degrees have killed their thinking power. They don't understand, that scarce supply is a necessary prerequisite for any commodity to become money in the market. Scarce supply of commodity money is a good thing. We don't have to worry about Gold's supply because it's purchasing power will adjust according to the transaction needs of market participants. People who argue about scarce supply of money easily forget, that money is also a commodity whose value is determined by its demand and supply.
This policy of RBI will go in history as yet another lunatic scheme of central planners. When some future Charles Mackay will write another edition of Extraordinary Popular Delusion and the Madness of Crowds, he will surely include this scheme in his list.
For present we hapless subjects of the Indian state will have to get ready for yet another experiment on us by the central planning social engineers.