02 Dec 2016 21:29 IST

Will Modi’s gamble pay off?

Marked by shifting goalposts, the path to cashless utopia seems strewn with landmines for the aam aadmi

We have entered the fourth week of Prime Minister Narendra Modi’s demonetised era and there are no signs that the woes of the common people will end any time soon. The 50-day ‘pain period’, which the Prime Minister asked us to put up with for the greater good, will most certainly stretch to a few more weeks, if not months. 

There is little doubt now that this was an ill-conceived policy, implemented with little or no preparation and, what’s more, the government seems to have seriously miscalculated the demand for low denomination currency notes. Even Modi’s supporters are now grudgingly accepting that the preparation could have been better but they still steadfastly hold on to the efficacy of the policy.

But let’s go back to the policy’s avowed objectives. First and foremost, it was supposed to flush out black money from the system and cleanse the economy of ill-gotten wealth. Now, with 60 per cent of the demonetised money coming back into bank accounts, there are serious doubts over how much black money would be fossilised.

Cashless economy

Then it was supposed to cut off funding for terror activities and stop the fake currency racket. Given the latest attack on the Nagrota army camp in Jammu and Kashmir and the volatile situation on the Line of Control, it’s clear that demonetisation has done no such thing.

Some of Modi’s supporters even said that demonetisation had solved the Kashmir issue, given the absence of demonstrations in recent weeks. Now, anyone with even a fleeting acquaintance with the Kashmir issue will know that the unrest on the streets happens in spurts, with acute stone pelting interspersed with deceptive periods of calm. Besides, expecting demonetisation to solve a primarily political problem, that has been festering since Independence, is naïve to say the least. 

So now the narrative has subtly shifted from black money to the advantages of a cashless economy. The government has been busy forming committees, and one of them even suggested subsidising smartphones to boost cashless transactions, a suggestion fraught with controversy.

Black money

That the government has been making rules as they go along, almost on a daily basis, is further proof of its unpreparedness and how this whole exercise hasn’t quite panned out the way it was expected. The latest in line is the Pradhan Mantri Garib Kalyan Yojana, where black money holders can come clean by foregoing 50 per cent of their black money. The black money mopped up is proposed to be used by the government for infrastructure projects and other welfare measures, in a ‘Robin Hood’ style policy.

But all this can lead to the return of petty regulation where everyone is seen with suspicion by the government, denting Modi’s much-vaunted election promise of “minimum government, maximum governance”.

A couple of prominent columnists have even suggested that the black money which is likely to be extinguished — the consensus figure on that is ₹3 lakh crore — and which will be out of the liability column of the RBI’s balance sheet and given to the government as a one-time windfall, can be used to pump-prime the economy. They have suggested that the government can use this ₹3-lakh-crore to put money into every Jan Dhan account — another Robin Hoodish policy where the government can come out smelling of roses by distributing ill-gotten wealth among the poor. But this plan could run into rough weather if the ₹3 lakh crore sum doesn’t materialise.

Tough times for aam aadmi

Despite the hardship suffered by the people and the skids put on the economy, at least in the short term, the government firmly believes that the people strongly support the move, bolstered by the fact that there has been no unrest or popular protests on the streets. Besides, the goalposts of the debate have shifted in a way that anyone criticising demonetisation is dubbed a supporter of black money. Also, given how the UPA 2 was wracked by massive corruption scandals, the main Opposition Party Congress is hardly in a position to mount an effective protest against this move.

Though the media has been full of reports about the hardship suffered by the people in various sectors of the economy, they have been careful not to criticise the Prime Minister directly, apart from a few exceptions. This has helped Modi retain the high moral ground.

Most policy decisions taken by governments have a political dimension and Modi’s demonetisation move is no exception. As one eminent columnist has suggested, demonetisation is a big bang reform measure taken with an eye on the 2019 elections. So it will be interesting to see how this issue plays out in the political arena, especially in next year’s crucial Assembly elections and the 2019 general elections.

But in the meantime, Modi’s path to a cashless utopia seems to be littered with landmines for the aam aadmi.

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