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Mainstream, VOL LV No 1 New Delhi December 24, 2016 - ANNUAL 2016

Demonetisation: Decoding the Moves of a ‘pracharak’ Prime Minister

Monday 26 December 2016

by Diptendra Raychaudhuri

Winter has set in. A winter at the time of demonetisation is expected to be severe, parti-cularly when the battle-lines have already been drawn and demarcated clearly.

Now, if it is a battle—ostensibly waged by the PM to hurt black money that has severely dented our confidence in politicians and the system (and also eroded our faith in the eternal ethical value of honesty and integrity)—there should be clear winners and losers. But, the government has not spelled out the target in clear terms. Even the Prime Minister, who has dubbed it a dharma-yuddha, has not left a hint of what in concrete terms will suffice to declare a victory. What we know, for sure, is that the battle of demonetisation aims at hitting black money held in cash. But the cash component is only a small part of the black economy (money amassed illegally over the decades and invested in different forms) estimated to be worth many, many trillions of rupees. So, the battle of demone-tisation is futile if it is not part of a war against the entire black economy.

Interestingly, by mentioning his willingness to attack benami property and illegal money tacked away in foreign banks, Narendra Modi has made it clear that he has waged a war, and not just a battle. But, even in the case of a war, the goal remains equally vague. Everybody knows no one can recover much of the black that has been converted to investments even ten years ago. So, is it just an eyewash to divert attention of the citizens from the other real problems? If so, why has the Opposition, which was stalled Parliament and protested on the street, has not dared the government to identify the target?

Surely, it is an ongoing political fight. But not an ordinary one. It is, for sure, a very big fight where no one wants to commit to something concrete.

An unexpected, abrupt break 

from the past

We all know, politics is ordinarily not about the fiduciary role of the state. Politicians do not do everything that we expect them to do. They do things that they believe can garner votes. A non-politician PM like Manmohan Singh could go all out to risk an election for a Nuclear Deal, for he shared no responsibility of steering his party in the election. But the real leaders, who shoulder the responsibility of leading the party, generally play it safe. So, when a politician opts for something radical, one assumes he is aiming a total overhaul of his ‘vote-bank’. However, if the action stretches the limits of the conceivable and shakes the entire system rather violently, if a goal is set to purge the nation from the sinners, the decision has to be categorised as both unconventional and revolutionary or, perhaps, rather outlandish.

That is what Narendra Modi has done by announcing demonetisation. He has broken with the past by making it clear that the black-wallas will not enjoy impunity any longer. Seen from a dry economic angle, the decision has undermined the trust of the people in the banking system. More significantly, he has hurt a large section of the moneyed class that has immense capacity to hit back, has hurt those who wield the power of the ballot (either directly by attacking their dishonesty or indirectly by creating inconvenience for them), and has hurt the political class that acts as the guardian of the black economy. Now, the BJP’s core support base, the business community and the professionals, will turn against it. He has done something that may make him, politically, bankrupt.

Seldom had a politician treaded such a risky, slippery path that might put his own career at stake. In India, we have two examples of daring political acts. First, Indira Gandhi’s war against Pakistan in 1971, which was a very risky affair in those days of the Cold War. But she won, and carefully projected an image that had a deadly mix of being socialist (bank nationalisation), nationalist (1971 war), and pro-poor (garibi hatao). It raised her, in the early 1970s to the level of a deity. The second major political move was made by V.P. Singh through implementation of Mandal report. It strengthened the movement for social justice, and changed the socio-political map of India. While Indiraji’s politics was conventional and it gave her rich dividend, VP saab’s was unconventional and gave him, politically, negative returns.

No doubt, Narendra Modi’s demonetisation is extremely unconventional, a ‘dharma-yuddha’ to clean up the system as a whole, and it has surpassed everything of the past as it involved the participation (and hardship for quite a few months) of almost every citizen. Surprisingly, he did it though no one expected him to do so.

Still, according to an independent survey done in November by The New Indian Express in five southern States and Odisha (and the BJP is not very strong in this region except in Karnataka), the percentage of people who supported Modi far exceeded those with the naysayers ( 01.12.2016). If that is the perception, it really looks like a ‘dharma-yuddha’, a term that alludes to the battle of Kurukshetra where the Pandavas fought their dear and near ones for justice. The PM too has told the BJP parliamentarians that they have not come to power to serve their near and dear ones, but to serve the people. So, even the allusion is well-calculated.

But we know, despite his best efforts, a PM today can recover only an insignificant portion of our lost treasure. So, why did Modi decide to give it a try?

The journey more important than the destination

In chess, the player with white pieces has the advantage of what is called the ‘initiative’. Till the time he can hold on with this initiative, he dictates the game, and the other side just reacts to it.

When he became the PM, Narendra Modi had the advantage of the ‘initiative’. But, his development agenda was somewhat marred by various infamous acts of the Hindutva forces in the last two-and-a-half years. The RSS made a conscious effort to cut him to size by raking up the reservation issue just before the Bihar elections. Consequentially, Modi lost the ‘initiative’. His magic that swept Bihar and UP to give him a majority in the Lok Sabha could not get him Bihar in the face of a united Opposition. On the economic front, the situation is not bright enough to attract the masses. We witness a jobless growth, and the PM’s emphasis on building a manufacturing sector has not come up to the expected level. It is said that Modi predicted his works in the first two years (and he included GST in it) would make him somewhat unpopular for the next two years, but in the fifth year the attitude was to change as people would be credited with the benefits. GST, however, has not come to effect yet. Other reforms too have failed to deliver much tangible results. As uncertainties loomed large on his future (Narsimha Rao lost the elections despite radically changing the economy the benefits of which has helped India rise as an economic power), Modi decided to go for something new, something very big that touches the people’s hearts, gives them a new hope, and allows him to be free from everything that bridles him, be it the Opposition, or the RSS. He aspired to be the Indira Gandhi of the early 1970s.

We know Modi was once a pracharak. Now the prachark in him combined with his politician self. The pracharak chose the ethical angle, while the shrewd politician thought of several add-ons to make it saleable to the extreme.

The ethical clean-up drive is something that people have waited for too long. Black money was a live issue throughout the 1970s, 1980s and 1990s. A young PM claiming to be Mr Clean lost the people’s confidence for a defence deal which in today’s money is worth a thousand crores or so. But, in the present century, the magnitude of various scams crossed one lakh crores each. It compelled the common man to settle with the thought that India was to remain a lowly country on the moral scale. But, the huge response to Anna Hazare’s fast (2011), and the AAP’s success, highlighted a curious feature: those above sixty and below thirty have not accepted the corrupt way of life as normal. Modi is surely well aware that no one will be able to recover any significant part of our lost treasure. What he decided to bank on was the aspiration of the people. He offered the mass a new, ethically better life, knowing well that in this game perception will decide the attitude of the masses, and not the real achievements.

In other words, Narendra Modi is playing a psychological game. And he has already won round one. Demonetisation has induced a huge support from the people, because what has been promised is a journey towards the heaven, an Indian state free of corruption.

Our people are aware of the ingenious ways of the dishonest to make illegal money. They know weeding out corruption is an impossible task. So what they expect, and after bearing all the hardship will demand from the PM, is a series of strong actions aimed at the rot. If such actions are taken, the impunity the black-wallahs enjoyed for decades will go, and that will make every honest man and woman happy. So, here we have a case where the journey is much, much more important than the destination.

In a way, by their inaction against the corrupt the previous leaders of the country kept the field open for someone to exploit it. Modi has utilised the opportunity for his political renewal. He was never known as a crusader against corruption, just as V.P. Singh was not known as a votary of social justice. Like VP, in a troubled time Modi too has reinvented him in a way that may change the course of Indian politics.

But how can he make the people feel that he is on the right track?

The Short Term Impact is the Deciding Factor

In the short term, say, from now to the next general elections, it will be a fight between the unconventional and the conventional.

Surely, more than half of India would not have remained steeped in poverty (living on less than a dollar, in PPP terms, per day per head) if black money worth trillions of rupees were not allowed to be generated and siphoned off over the decades. Surely, about 1.2 million child deaths a year (estimated Lancet Report as quoted and explained by The Indian Express indianexpress,com updated on September 9, 2015), mostly out of under-nutrition, would not have haunted our conscience if our leaders had attacked the problem of corruption seriously. And Modi has challenged this sab chalta hay attitude. This is unconventional, something we rarely come across in modern days.

Now, in the short term (say, from now to the next general elections), he will emerge victorious if he can send the right signal to the people.

The ordinary man will now demand to see some tangible results of the first battle, the demonetisation move. If the sum-total of currency notes not making way to banks after demonetisation and the black money declared or forfeited under the new Income Tax Laws crosses the threshold of Rs 3 lakh crores (about 20 per cent of the demonetised Rs 15.44 lakh crores), people will be happy for now. But, after the big bang, they will expect the government to follow it up with massive crackdowns. A drive to unearth benami and trailing the money stashed in foreign banks (as Modi has promised) will create a positive ambience for the government to retain the ‘initiative’. Along with that, by keeping strong vigilance on the income of the IAS and IPS community, on MPs and MLAs and so on, and quietly carrying on structural reforms (like simplifying the tax structure and abolishing the scope of the bureaucracy to tamper with it), Modi can show his sincerity of purpose. People will be satisfied if they feel, and experience in their life, that the demand of bribe has gone down. That will happen if the cops, municipal or state officials, and politicians are robbed of their impunity shield.

If Modi succeeds to portray such a perception in the electorate’s mind, he will emerge a leader much, much taller than his competitors. But, this is not an easy job, particularly when his party does not rule even half of India at the State level. That is why Modi, the outstanding politician, is making quick moves to expand the theme. By giving a chance to the black-wallas to come clean by paying 50 per cent tax and locking of another 25 per cent for four years in a scheme for welfare of the poor, he has linked poverty alleviation and other developmental programmes with the attack on black money. His calculations are simple: (a) the cleaner the country will become, the more the government will earn, and with this topped-up fund it may serve the poor directly and others indirectly; (b) additional deposits will bring down interest rate and give impetus to production (and may, down the chain, even reach the peasants with institutional credit, thereby abolishing the role of the traditional money-lenders); (c) with less money chasing the basket of foods, other essentials and flats thanks to the curb on discre-tionary spending of the black-wallas, many items will come within the reach of a greater number of people than now; and (d) by walking towards a cashless society, different forms of crime—from terrorism or fake notes to robbery and money-snatching—may go down. All these can be claimed as offshoots of the demonetisation drive. If he succeeds in this many-pronged strategy, he will emerge as a sincere, pro-poor, pro-development figure who the people can trust.

Thus, the PM is making his ‘dharma-yuddha’ both an end and a means. Re-establishing financial probity in the nation’s life is an end in itself. And it becomes a means when one utilises the enhanced revenue earning (thanks to increased compliance out of fear) for infra-structural development and poverty alleviation.

It is no wonder that mature politicians like Nitish Kumar and Naveen Patnaik have hailed the PM’s move while drawing attention of the government to the inconvenience of the people. By doing so, they too have kept open for them the prospect of sharing the glory of the PM if he really attains the glory. On the other hand, if Modi fails, they reserve the right to criticise him from a raised platform, for they were not the naysayers. At the opposite pole stand Mamata Banerjee and Arvind Kejriwal. They are naysayers, and they demanded complete rollback of the decision. If Modi fails, they can claim a complete victory. If Modi wins, they will lose heavily. The Congress party, however, is trying to trick the people by not demanding a rollback. But they cannot hide their intentions. Manmohan Singh dubbed demonetisation as ‘organised loot’ and ‘legalised plunder’. Rahul Gandhi ridiculed it as a ‘TRP politics’ and a ‘disaster’. So, morally, they have forfeited their right to share the glory if Modi succeeds.

Among the intellectuals Amartya Sen has predicted that the demonetisation and its aftermath will fail to unearth a sizable portion of black money, because ‘the people who are best equipped to avoid the intended trap of demonetisation are precisely the ones who are seasoned dealers in black money’. (, updated on November 26, 2016) Many of the intellectuals known as liberals or Leftists have recorded similar prediction. P. Chidam-baram has made it clear that he considered the action completely unnecessary. If they are proved right, Modi will be ruined. It will be interesting to watch how things unfold in the near future, and who wins: the erudite Left-leaning or extreme Rightist economists and analysts, or a shrewd, dynamic politician. The next general elections will see the people’s verdict on it.

In the Long Run a Nation is not Dead

Those who do not care about the future, quoted John Keynes: ‘In the long run we are all dead.’ Manmohan Singh, the bureaucrat-turned-Prime Minister, too quoted Keynes in his speech in Parliament on demonetisation.

Whether Keynes was a short-termist or not is a debatable issue; but by quoting Keynes, Manmohan Singh has made it clear that he and his colleagues are. Now Modi, otherwise accused of encouraging the communal forces either directly or by his silence, has chosen something for the long term, and this something is a secular issue. Whether he can follow it up towards its logical end and establish a much cleaner India, depends on his sincerity and acumen. Even if he fails, in the next ten to twenty years, the anti-corruption movement will become as strong as the human rights movement. Some of our CAGs and judges and people from other institutions played a laudable role in fighting corruption. Now Modi has, theoretically, lent a political hand to the fight. It is for political gain, but politicians are there to make political gains. Modi’s effort, beyond doubt, is a great service to the nation.

If Modi walks his talk, he may emerge much, much taller. Earlier he combined in himself a Hindu nationalist (not to be confused with nationalist Hindu) and a development man. Now he has the opportunity for a makeover to a nationalist, pro-poor, pro-development leader. It is a deadly combination for the appeal of such an image cuts across class and caste barriers. It can uplift him to the stature of Indira Gandhi of the early 1970s. Or even higher. The question is: if it happens, how would Modi act after rising to such a high pedestal? If he moves towards a honest society free of all sorts of corruption, including communalism, casteism, sectarianism, he will emerge as the Kemal Ataturk of modern democratic India: authoritarian, but benevolent. However, the ominous possibility is: he may utilise the opportunity to create a cult that will allow the leader to establish a regressive Hindu state. That will surely be a journey towards darkness. Which path he will choose depends entirely on him.

Diptendra Raychaudhuri is a freelance journalist and author. He can be contacted at dip10dra[at]

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