With his move to demonetise high-value notes and his high-decibel rhetoric against the corrupt and the rich, Narendra Modi seeks to snatch Indira Gandhi’s pallu away from her daughter-in-law and drape it over his own head. He has turned, overnight, champion of the poor, class warrior par excellence.
He has found a non-sectarian political platform and given the populace at large the satisfaction of vicarious participation in the class struggle against the decadent rich. Their role is to willingly stand in queue for endless hours in front of a bank or an ATM, cursing the banks, the tax evaders, the bania and the fellow behind who’s elbowing them in the small of the back, but praising Modi for his bold sagacity while telling themselves that this inconvenience is nothing compared to the pain it inflicts on the filthy rich being stripped of their ill-gotten cash.
It’s All Politics
Modi’s relations with the Rashtriya Swayamsevak Sangh is in a different league from Indira’s with the Syndicate, but the anti-rich campaign, if it takes off, would give Modi some additional degrees of freedom in relation to the mother organisation, just as the Garibi Hatao campaign did for Indira Gandhi.
What could go wrong with the strategy? Not that it is based entirely on fiction. No politician has lost anything overestimating the ability of the electorate to fool itself. The possibility that the Opposition would succeed in exposing the hollowness of the anti-black money claims of demonetisation looks remote. The issues are conceptually complex, politicians who have the capacity to deconstruct the scheme and demonstrate its ultimate futility in a manner that the common man understands are scarce. Most people would give Modi the benefit of the doubt.
What could go wrong is just one thing: the money supply would not be restored fast enough to prevent lasting damage. If the rabi sowing is disrupted, or small businesses fail because they just lack the staying power to suffer loss of business for a month, the personal cost it would entail would outweigh by far the satisfaction of seeing the rich shafted.
Why take this risk, and launch the demonetisation scheme before new printed notes are available in adequate quantities? If new notes could be exchanged for old ones without hassle, there would be no drama and no pain. Without feeling the pain, how would people feel they are part of the Modi-led struggle against hoarders of filthy lucre?
If Gandhiji had merely called upon Indians to forsake foreign cloth and had not demanded that they spin by hand the yarn that would displace British mill cloth, popular involvement in the freedom struggle would not have been as intense as it was. The Sangh Parivar is good at thinking up activity low on effort but high on emotive involvement for the masses to take part in. Getting people to consecrate bricks in every village and lug them over to Ayodhya for building a Ram temple was a clever way to convert the merely pious into collaborators in the bloody campaign to tear down the mosque.
Another explanation for the timing of the move is UP. Modi has to win the upcoming assembly elections, if he is to get another term at the Centre. The Dalits and the Muslims have turned against the BJP, and these together account for nearly 40% of the state’s electorate. The Sangh Parivar would continue to polarise voters, hailing those arrested for the murder of a man suspected of storing beef in his fridge as heroes, spreading rumours about Hindu flight from Kairana, etc. But Modi feels the need for yet another string to his bow: enter class war, with Modi leading the charge, fancy suit bearing his gilded name a distant memory.
There is yet another similarity with Indira Gandhi’s Garibi Hatao campaign. Demonetisation will prove to be just as hollow and ineffective. It serves a political rather than an economic objective.
Why assert that the black money battle via demonetisation is so much shadow-boxing that will knock no real villain out? There are multiple reasons why this is so.
One, the bulk of black money is not stashed away but in circulation, making yet more money, including white money. While the entire currency in circulation is worth 12% of GDP, and most of it is used for perfectly legitimate transactions, the untaxed economy in the country is estimated to be at least 20% of GDP. Of course, money has velocity but only when it is in circulation.
Two, most of the demonetised notes will get converted into new notes or gold or dollars. We have armies of underemployed people with identity proof who can take portions of stashed money to the bank and get it converted into new notes. Religious trusts will help out, as will companies that show cash on their books but do not have any.
Three, if Modi were serious about stamping out black money, he would begin with BJP’s own funding, taking all contributions into a bank account and declaring them as the Aam Admi Party originally did.