The answer is simple. Let’s say we want to make every quantity from Rs. 500 to Rs. 5,000 in increments of Rs. 500

And we have only 2 types of notes – Rs. 500 note and Rs. 1000 note.

Let’s see how many minimum notes we need.

Rs. 500 -> 1 note (500)

Rs. 1000 -> 1 notes (1000)

Rs. 1500 -> 2 notes (1000+500)

Rs. 2000 -> 2 notes (1000+1000)

Rs. 2500 -> 3 notes (1000+1000+500)

Rs. 3000 -> 3 notes (1000+1000+1000)

Rs. 3500 -> 4 notes (1000+1000+1000+500)

Rs. 4000 -> 4 notes (1000+1000+1000+1000)

Rs. 4500 -> 5 notes (1000+1000+1000+1000+500)

Rs. 5000 -> 5 notes (1000+1000+1000+1000+1000)

Total -> 1+1+2+2+3+3+4+4+5+5 = 30 notes

Now suppose we have the same task, but we have only Rs. 500 and Rs. 2000 notes:

Rs. 500 -> 1 note (500)

Rs. 1000 -> 2 notes (500+500)

Rs. 1500 -> 3 notes (500+500+500)

Rs. 2000 -> 1 note (2000)

Rs. 2500 -> 2 notes (2000+500)

Rs. 3000 -> 3 notes (2000+500+500)

Rs. 3500 -> 4 notes (2000+500+500+500)

Rs. 4000 -> 2 notes (2000+2000)

Rs. 4500 -> 3 notes (2000+2000+500)

Rs. 5000 -> 4 notes (2000+2000+500+500)

Total – > 1+2+3+1+2+3+4+2+3+4 = 25 notes

We see that already there is a difference of 5 notes. If we were counting all possible values from Rs. 500 to Rs. 10000; then

With Rs. 500 and Rs. 1000 notes, we’d need -> 110 notes

With Rs. 500 and Rs. 2000 notes, we’d need -> 75 notes

We see that the difference is considerable!

This comes as a factor in both the logistics of printing cost of these new currency notes, as well as handling them.

All in all, this is a very logical decision by the government.

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