I cannot believe that I have to explicitly put it in words but looking at the misinformation out there this needs to be done as this is really annoying the techie in me. THE NEW 500 AND 2000 NOTES WILL NOT BE TRACKABLE. Identifiable - Maybe. GPS trackable - Absolutely not. Its only in the movies where the entire GPS circuit (chip, battery et al) can be concealed within the pages of the books and wads of cash. It is physically not viable today (at least not on a nonmilitary scale). I personally know more than 10 startups who are working on creating the smallest possible GPS device what can be worn by women and children so that they can be tracked for safety. The biggest hurdles these people are facing are form factor (making the device small) and rechargeable battery. No commercial solution exists that has built such a small device that can be embedded in a paper note. At this point discussing the data center requirements for such a large scale GPS device network would be a moot point because the NOTES DO NOT HAVE A GPS CHIP.
Now I can have a guess about what kind of “tracking” could be possible. The note could have a small RFID chip (the kind used in office IDs and metro tokens) which has the note serial number embedded in it. A RFID reader which can be placed anywhere a transaction takes place (bank, shops etc) and what can be tracked is what was the serial number of notes that were used for a transaction. Theoretically, if all this data can be captured at one central location / repository (which is a data and connectivity nightmare ) it could be possible to predict where the note was last used. But GPS location tracking is not happening. Not in the near future.
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I have helped many startups in building their products and I would be happy to have a chat with you about your idea. Catch me on twitter at @akhilrex