Demonetisation in India: A Democracy Deficit


On November 8, 2016, when the United States of America was busy electing a populist president in Donald Trump, India’s own populist prime minister, Narendra Modi came up with a unique economic decision. In one stroke, he invalidated two high denomination currency notes the nation had been using –  Indian National Rupee notes (INR) valued at INR 1,000 and INR 500. According to Modi and his supporters, the move was a masterstroke for it took on many ills at one time – black money, terror, counterfeit money and corrupt trading practices.

On August 29, 2018, almost 22 months since that earth-shattering call by the Modi government, the Reserve Bank of India (RBI),  India’s apex bank said in its annual report that over 99 per cent of the banned currency notes were back to the banks. In terms of figures, INR 15.31 lakh crore came back to the bank out of INR 15.44 lakh crore. So all the fuss for just INR 0.13 lakh crore?

The government had expected that up to INR 10 lakh crore would return to the bank but the eventual amount was far higher than that. So, what happened to all claims that demonetisation dealt a body blow to a number of India’s prime problems? Problems in fact arose at the other end of the social spectrum.

The move, on the other hand saw an adverse impact on India’s social and economic spaces. While millions of jobs evaporated, the country’s economic growth itself received a blow. On the top of it, many lives too were lost as a result of a crisis which was created unnecessarily. The creative minds of the country also let  their disapproval of this move be known through books and films that showed how the decision on demonetisation brought lives of those located at the periphery to a complete standstill.

Modi made demonetisation a success in an incredibly well-crafted move

But Modi was too clever a politician to not just set aside the real consequences demonetisation had on the ground, he also managed to get a decent support behind him. A large section of people started believing that here was a leader who has started a real fight for them and they should reciprocate by standing by him and tolerate whatever ‘little pains’ that were inflicted on them.

Demonetisation was a multi-faced political masterstroke which was aimed more at scoring political brownie points that would strengthen Modi’s position in Indian politics. It also thrived at strengthening the online community – business and otherwise – something a tech-savvy party like the BJP and its supporters always cherish. However, the irony derived from the fact that while demonetisation was something tailor-made for the elite, it pretended to be a socially inclusive initiative aimed at a universal good for all Indians – irrespective of the economic distinction.

It was never an easy task to accomplish this mission. Had the same move been made by the Indian National Congress or any other leadership, demonetisation would have invariably led to a backlash. In such cases it may be even have paved the way for conditions conducive of riots and grave social insecurity. But since demonetisation happened under the aegis of a leader who is one of contemporary India’s most revered and who is still believed to be someone who is genuinely trying good for the country, such effects were not immediately felt.

This is reflective of the same ‘loyalty to the strongman’ syndrome which is being seen in countries like the US, Turkey, China and Russia. But it also spokes to a certain degree of a crisis in democracy which allowed Modi to get away with the circumstances even after demonetisation failed to bring the desired results.

When the economy becomes a populist’s playground

Though demonetisation, Modi made more of an emotional popular gesture than articulating a robust economic policy. Prior to the elections in the politically crucial state of Uttar Pradesh in northern India, it was key for the BJP leadership to turn off the supply lines for its opponents operating in the local political spectrum and what could have been better than invalidating cash – a major determinant of electoral results in India to this day. The more Modi connected with the masses through the use of emotional appeals (saying things like “I am a fakir, I can leave any time” or “many are holding me as an offender when I am trying to do something good” or “farmers’ problem is my problem”), the more authority his controversial move on demonetisation received.

For someone who rode the tea-seller narrative, the rich man’s government jibe was difficult to digest

Modi also had to take care of images relating to his public image. His pinstriped suit during his meeting with former US president Barack Obama in India in 2015 was something that had given his opposition a lot of ammunition to fire at a supposedly ‘humble’ leader. His party also lost the crucial Bihar elections that year and Modi was being suddenly projected as a leader who was closer to the rich than the poor. In early 2016, Opposition leader Rahul Gandhi cashed in by calling the Modi government as one of the suit and boot- one for only the rich. For Modi, whose image as a tea-seller making it to the highest political platform in the country, such charges were deemed to be insulting and destructive. He hence made a fresh attempt to establish himself as a leader who doesn’t compromise on the interests of the poor and on issues like corruption.

In the early 1970s, former Indian prime minister Indira Gandhi had also made the pro-poor plank an effective electoral weapon. Her populist brand of politics had received a fine touch through the pro-poor slogan of ‘Garibi Hatao’ (Get rid of poverty). Modi did not imitate her verbatim but he also improvised and came up with his own brand of pro-poor populism. In one of the many election rallies that he addressed prior to the UP provincial poll in early 2017, Modi made a fluent presentation of how much he is in favour of the poor. These were extremely well-crafted political moves by the BJP’s top leadership that laid the groundwork for the prime minister to flourish, even while pursuing a policy which was never fool-proof. But this is how modern-day politicians act. They can mesmerise not just a particular section of people but in fact, all sections. But just as we can’t fool all people for all time, the lacunae of demonetisation has also come out gradually though the debate is still going on.

Since Modi himself is always the subject of intense debates, his policies and stances do not always come under scrutiny from a purely merit-based point of view. For a democracy, these conflicts of biases and prejudices aren’t conducive to healthy politics. But having said that, democracies all over the world are suffering from a lack of merit based discussions as the followers of various parties and politicians are more content playing cheerleaders to ultra-populist leaders who value style and sensation as replacements for substance.

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