Opinion

Demonetisation: reality and the optics

A Srinivas | Updated on January 12, 2018 Published on January 09, 2017

Spin win: It’s about how you want to be perceived - Photo by Arunangsu Roy Chowdhury

Modi remains in control of the narrative despite its disastrous economic effects, thanks to an inadequate opposition

By now, the economic impact of demonetisation has been discussed threadbare. Two months after the momentous announcement, it is pretty clear that the demonetised ₹500 and ₹1,000 notes returning into the system have far exceeded expectations.

To many, it would appear that black money hoarders have managed to launder their wealth in ingenious ways. It is now up to the income-tax authorities to do a salvage operation by combing through the millions of deposits and cracking down on those where the sums appear absurd in relation to the profile of the account-holder.

Whether this operation succeeds (it will take some time, for sure) remains to be seen. The Government promised short-term pain for long-term gain in terms of shuddhi or purification of the economy. What has ensued is considerable pain, even as the gain in terms of black money being unearthed remains uncertain. Besides, the Centre may not have a sizeable surplus to redistribute directly into the accounts of the poor.

Economics and politics

Agriculture and small industry have been worst-hit. The All India Manufacturers’ Organisation, which represents over three lakh small, medium and micro enterprises, estimates 55 per cent revenue and 60 per cent job losses by March 2017. While conceding that labour data is unreliable at the best of times, estimates of job losses doing the rounds are upwards of four lakhs. Anecdotal reports suggest that social and familial stress could be building up in rural areas as a result of workers returning to their villages. It seems that demand for MGNREGA work has been rising.

Former finance minister Yashwant Sinha, now a dissident voice in the BJP, has suggested that a regime that has been unable to live up to its promise of job creation in relation to the Vajpayee government could end up disappointing the aam aadmi, more so in the wake of demonetisation.

However, those predicting dire political consequences could be wrong. Despite the chaos, Prime Minister Narendra Modi appears to be winning, at least for now.

This is because what seems to count, politically, are not the facts, but the popular perception — that finally, one man at the helm is trying what none has attempted before.

For the sizeable supporters of demonetisation, the critics are, by implication, those who are compromised, gutless, jealous or just habitually ‘anti-Modi’.

Even if he fails to unearth black money, he would have won the hearts of the people, sick of venality all around them, for having tried.

The BJP needs to ensure that this perception rides out at least the end of February so that it wins in Uttar Pradesh in particular. Perhaps nothing other than resolute faith in the commitment of one individual can explain how so much economic disruption has not resulted in violence.

The barbs on social media apart, Modi remains in control of the black money narrative.

This confidence perhaps explains why the Centre has not come up with any time-lines on when the cash shortage will end.

Triple failure

Modi is, however, lucky to have been let off the hook by a directionless Opposition. The Opposition has failed on three counts.

First, it has criticised Modi’s demonetisation for its impact on livelihoods without presenting an alternative plan to root out black money that promises ‘no pain and more gain’.

Second, it has been silent on electoral reforms.

Finally, it has not used this occasion to critique an economic model based on privatisation of health and education, which has bred insecurity and corruption all round.

Oddly enough, the level of debate on corruption was more evolved in the aftermath of the India Against Corruption agitation, pioneered by Anna Hazare, which was centered around creating a Jan Lokpal. The IAC gave rise to the Aam Aadmi Party. Today, Arvind Kejriwal, whose AAP blew the bugle on poll reforms by setting a new trend in fund raising, has been quiet on this subject as well as on institutional solutions such as the Lok Pal.

By being silent about electoral reforms — lowering the threshold level of donations to ₹2,000 from the current level of ₹20,000, beyond which it would have to provide a clear account; reducing the scope for fudging an individual candidate’s campaign spending; and scrapping the income-tax exemption for political parties — the Opposition has ceded moral ground to Modi.

He has got away with limited proposals on electoral reforms so far. Can he transform the ways of a party whose sources of funding in the 2014 general election remain a subject of controversy?

Thanks to inept leadership on the other side, Modi’s larger than life image remains unchallenged. Nitish Kumar and Naveen Patnaik, two leaders with a clean image, have stayed out of the anti-demonetisation campaign, perhaps sensing that taking on Modi could prove counter-productive. Kejriwal’s allegations against Modi have not cut ice. The rest of the leaders lack the ‘clean’ tag to raise the discourse beyond its immediate effects.

Another theme?

So, we’re down to optics, where Modi with his remarkable communications skills can manoeuvre the discourse. Expect some cosmetic exercises on reforming property laws and capital markets, and it shall be business as usual.

Jugaad will keep reinventing itself to keep pace with the changes, as it has done so well since November 8.

The BJP’s fortunes would, however, depend on how quickly it can reverse the economic setback. The economic crisis could turn out to be worse than 2008, with consumption and investment dragging each other down. Issues of survival may prevail over than grander themes such as a war against black money. But by then, we may have another narrative of national renewal waiting for us.

Published on January 09, 2017

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
null
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.