Hoshangabad (Madhya Pradesh), Dec 18 (IANS): Finance Minister Pranab Mukharjee said here Saturday the challenge of terrorism from across the border was not confined to danger of loss of life but a threat to the economy due to fake currency being smuggled into India.

He was in Bhopal to lay the foundation stone of a new bank note paper unit at the ordnance factory in Hoshangabad district in Madhya Pradesh.

"The government has met with major success in countering the challenge of fake currency by increasing production of currency note paper and use of ultra-modern printing techniques," said Mukherjee while addressing the gathering.

He said the use of currency had increased due to rise in population, growth rate and per capita income. Till some years ago, paper for currency notes had to be imported, but now 90 percent of the paper for currency notes was being produced in the country.

The finance minister said that with the construction of this unit, the total capacity of producing currency paper will go up to 6,000 tonnes from 2,800 tonnes.

Madhya Pradesh Chief Minister Shivraj Singh Chouhan appealed to Mukherjee to provide employment to maximum number of local people in the unit.

Director General, Currency, Bimla Julka said that the country will start producing all the paper for currency notes for its requirements from 2013.