The government decision to demonetise high value currency notes without adequate preparations leading to unanticipated hardships to the common man could have wide ranging political ramifications as and when the next round of elections take place. The unending misery being experienced by citizens is the obvious consequence of a poorly implemented order and therefore has invited innumerable petitions filed before various courts in the country seeking relief. The Apex Court as well is seized of the matter and appears to be perplexed why the government had reduced the cash exchange limit from Rs 4,500 to Rs 2,000, thus adding to the woes and currency crunch.
Many economists have articulated divergent views on the issue, which is snowballing in the political arena into a major confrontation between the opposition and the ruling party. Prime Minister Narendra Modi, who announced the stringent measures to curb black money on 8 November, taking the whole country unaware, is believed to be constantly reviewing the developments that have somehow not only brought together political rivals but have also evoked a strong reaction from BJP allies like the Shiv Sena. Long winding queues outside every bank and ATM in India are indeed a cause of anxiety for those entrusted with law and order management and could even lead to riots, given that there is no realistic assurance coming in from top ministers and functionaries.
Various theories are doing the rounds as to what has made the government take this hasty decision. One version claims that a few scandals featuring this government and its top leaders were expected to rock the winter session and thus the demonetisation became essentially a pre-emptive strike. Another conspiracy theory is that a noble decision with clear cut objectives taken at the behest of the Prime Minister was sought to be sabotaged by jealous adversaries within the ruling alliance. The third account is about how the BJP strategists persuaded Modi to implement the demonetisation plan ahead of the Assembly elections in order to hurt its opponents, some of whom could be in possession of huge amounts of money, mostly in high denomination currency to use in the polls. Without the cash, the political parties would be grounded and the BJP could march into the electoral battle with an added advantage.
None of the theories stated above are consistent with how the government is portraying the financial exercise. So far as Modi is concerned, he seems determined that this would curtail the circulation and subsequent generation of black money. The action was one of the many measures the government plans to take in its war against corruption and varied other significant decisions to bring to book defaulters were already in the pipeline. There is already talk regarding a crackdown on jewellery hoarders and those who have benaami land through fraudulent agreements and deals. The Prime Minister has categorically stated at a public meeting that he was prepared to make any kind of sacrifice to ensure that the defaulters were taken to task and honest people could breathe easy.
The opposite view of these steps is that India has basically thrived on a parallel economy right from its inception. When a global financial crisis took place in 2008, India was able to do better than most countries primarily because its unstructured financial strength contributed to the bailout. It is being argued that the reason why recession never impacts the country as much as it does every big nation is on account of its parallel economy. It is being further claimed that once the demonetisation process is completed, recession and unemployment would follow. In other words, the BJP would never be able to create jobs as it had promised during the 2014 Parliamentary polls, but could end up facing the wrath of many who would lose it in view of the latest decision. Another problematic area for the BJP, which had its origin as being the party of small traders and shopkeepers, is how to keep its core constituency intact. The political fallout of this monumental decision is that not everyone within the BJP is happy with the way things are, though no one is willing to come on record to criticise the move publicly. Some have trained their guns on the Finance Ministry knowing full well that the decision was not the brainchild of the North Block mandarins, but had its origins in the South Block.A piece of puzzle that does not fit the jigsaw is that common people are refusing to openly share their true feelings and the majority is mechanically lauding the decision that would help in curbing black money. The situation is similar to the one that existed during the Emergency and when the then government initiated its supposedly ambitious programme of conducting vasectomy (nasbandi) operations as part of the late Sanjay Gandhi’s five-point programme that included population control and family planning. Anyone who was asked his opinion about the government drive would praise it. However, nasbandi became a major political issue once the elections were announced in 1977 and people voted with vengeance against the Congress, resulting in the unimagined defeat of both Indira Gandhi and Sanjay Gandhi. People can never be taken for granted. If not implemented properly, demonetisation could become a horror story for the BJP.