Demonetisation: How Modi went from gloat to broke
Prime Minister Narendra Modi’s demonetisation gamble tried to kill two birds with one stone, but the birds have flown and it is the PM who may get stoned (if he already wasn’t for taking such a risk).
The last one month has seen economic chaos and acute distress, wages lost and wagers unemployed, zero industrial growth, plummeting jobs and employment opportunities; demonetisation has overnight thrown a billion people down a dark hole of shock, panic and dread.
With one stroke, Modi wiped out Rs 15.44 lakh crore, equal to 86 per cent of cash circulating in the country.
But what was Modi’s plan in the first place? How did a political masterstroke - it had less to do with economics obviously - spin out of control for Modi and his band of finance ministry officials, data experts and researchers?
Speaking to several top BJP party officials, who didn’t wish to be named, a plan is unravelled, which could have brought a rich bounty if Team Modi had put more rigor and exactness rather than cowboy rapid fire. Consider this:
For over a year and more, Modi has been jeered by Opposition leaders and critics for not being able to fulfil his big ticket electoral promise of bringing back the multi-billion dollar black money stashed overseas, and putting Rs 15 lakh in every citizen’s pocket.
The jumla (empty promise) tag has dogged both Modi and his confidant, party chief Amit Shah, to make it stick; worse, so was the biting jibe, suit boot ki sarkar (government of the rich), nagging the duo.
The humiliating defeat of Modi and his party in Delhi and Bihar at the state elections, was a dire warning sign, and with crucial elections coming up in the critical state of Uttar Pradesh, where Modi’s personal stakes are immense, apart from Punjab and Goa, was a tall call.
As a BJP leader says: “Modi’s development mantra does not grab the people of UP, MP and Bihar beyond a point, as there are no big stakeholders (industrialists) and industry to push for it. What matters most is caste affiliations and alliances for development, progress and growth, which is what the likes of Mulayam Singh, Lalu Yadav, Mayawati etc, represent and deliver to their votebanks. BJP’s prospects looked pretty good before November 8 (demonetisation date) in UP, but Modi wanted to not only guarantee victory but also make it his personal success.”
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| Unfortunately for Narendra Modi and his team, their estimate of black money was so off the mark and the amount so minimal that the whole demonetisation exercise seems like a dud, if RBI figures are to go by. (Photo: India Today) |
The only way for Modi to smash the caste factor in UP, and make the voter rise above his and her caste, was through the demonetisation move.
The gamble was the black money circulating in the country was so high - Modi’s first big mistake, as RBI data will reveal – that the money not deposited (black money) will turn into a giant bonanza for the government, to afford it to put cash into poor people’s Jan Dhan accounts, after the deadline of December 30.
The cash announcements would have been made by Modi in January, among other sops and subsidies for farmers, small-scale industries, budget housing etc, and Modi would reap a rich electoral harvest in the UP elections, which are slated around February-March.
The other political benefit that Modi shrewdly believed he would scoop was to sideline the RSS and its Hindutva-charged cadres in the BJP’s political sweepstakes, by reaching out to the voter directly.
It’s well-known that the BJP relies significantly on RSS troops on the ground to beat the drum, mobilise and herd voters on voting day. The RSS leadership may demur and balk at charges that it is the central command and pontiff for a BJP government, but almost half of Modi’s ministers are from the RSS, including the PM himself.
It has not gone unnoticed that last year PM Modi and most of his Cabinet colleagues trooped to attend an RSS convention, where they had to make presentations to the RSS leadership on the plans and proposals of their ministries, apart from receiving suggestions on RSS’s pet subjects, on education, culture, economic and foreign policy.
Modi has been also besieged by Hindutva lynch mobs who rightly believe he rode to power on their backs, and it is now payback time. As cries of gau rakshaks, beef bans, love jihads, Ram temple ambush his desperately seeking statesman image, it pays to push aside the ever demanding and vigilante RSS and its flock.
The RSS has not missed his barbs at public rallies when he says the “BJP has no high command” or “you, the people are my high command” (at a rally in Moradabad last week).
Unfortunately for Modi and his team, their estimate of black money was so off the mark and the amount so minimal that the whole demonetisation exercise seems like a dud, if RBI figures are to go by.
The reasons are obvious - they overestimated the black quotient and their money exchange schemes allowed for quick and easy laundering of cash to put it back into the banking system.
You just have to look at how deposits in the 256.8 million Jan Dhan accounts soared within a week after demonetisation to assess money laundering.
Within a month, as of December 8, the RBI had got back Rs 11.5 lakh crore, this despite the excruciatingly long queues at banks and ATMs. Then the RBI’s cash reserve ratio (CRR, which the RBI keeps to maintain liquidity) was Rs 4.06 lakh crore on November 8, and usually in Rs 500 and Rs 1,000 notes; which means the RBI already has got most of its money back, or the difference is minimal keeping the RBI’s movement of liquidity.
And with three weeks to still go to exchange old money for new, with the deadline of December 30, it leaves Modi with hardly any money in his kitty to give money to voters in UP, Punjab and Goa.
Is it any wonder that Modi is pleading with poor people to keep the money deposited by black-marketers (normally politicians, landowners, employers, etc) in their accounts!
It’s another matter that here is a prime minister who is actually instigating violence and threatening the law and order situation in the country. Any wonder if people are asking if Modi is stoned?