Demonetisation: Politics beyond the economics

If there is one news item that Prime Minister Narendra Modi’s ‘surgical-strike’ on black money has pushed into the inside pages even a week later, his External Affairs Minister Sushma Swaraj's tweet on her failing kidneys did not make the grade. The other, real 'surgical strike' against Pakistan-based terror camps is history. So have been the continuing border attacks. If someone had also thought that a 'Trump victory' in USA would subsume the negative fallouts, if any, of demonetisation nearer home, it's now the other way round.

It's nobody's case that black-money should be entertained, or PM Modi did not have the right to seek and obtain some political gain out of his surprising announcement about demonetising Rs 1,000 and Rs 500 currencies. After all, political administration, especially in a democracy, is all about carrying the people with you, as much carrying to the people, policies that the rulers of the day are convinced would benefit the nation, over the short, medium and long terms. Having campaigned on and against the ‘Congress brand’ of black money generation and retention, and their collective retardation of the economy, any measure aimed at targeting the same should be more welcome. It’s also the kind of welcome demonetisation received in the media and the social media (the latter, Modi's propaganda backbone for long) in the early hours and days.

However, for the first time since Modi entered the prime ministerial race in mid-2013, the social media is silent on the gains of demonetisation over the past few days. Instead, there is even more on the social media against the long queues at banks, and the collective impact of demonetisation on the poor and lower-middle class economy on the one hand, and on trade and commerce, especially in agriculture produce and products, on the other. It's a story that a political leadership with its hand to the pulse of the people cannot afford to ignore.

Vicarious pleasure, but...

Many stories have done their rounds in the media and social media about the sufferings of the rural masses, who are as much victims of demonetisation as there are hidden beneficiaries in the urban middle-class, especially in the non-TDS sector. The latter might have had a sense of vicarious pleasure in seeing the other man 'suffer', of course for the fault of the other man. The fact also remains that each one in this class has come to think that the liquid cash in his hand is not 'black money' but that in the other man's is - and is most definitely. This should also explain the early euphoria at the PM's announcement.

Yet, it's a fact that from farm labour to construction labour, store boys to out-sourced office assistants, many receive their wages in cash — and in bulk at the end of the week. The average daily income of each of these classes, especially of the semi-skilled and more so of the skilled labour in the unorganised sector, is Rs 500-1,000. In an economy where 85 per cent and more of the cash in circulation has been in higher, banned denominations, it’s but natural that these payments are also in Rs 500 and Rs 1,000 notes.

Anything up to 30-35 per cent of the nation's economy is said to be agriculture-driven. Agriculture income, for instance, is tax-free. In the fight for black money through demonetisation now, the Government may have to ponder how the moneys earned through agriculture income could have become a black money. By extension, how the earnings from the sale of rice or wheat, cattle-heads or sheep, could be dubbed black money, to be eliminated at one go. Or, the purchase of gold with that money could be considered so, as long as the seller had collected and paid all taxes and duties to the authorities concerned.

It's most likely that no government in this country for the foreseeable future would want to tax farm income. It's politically suicidal, to be reflected in election results. But it's not pragmatic as well. In a nation where most farmers, including the producers of vegetables and fruits, milk and flowers, fish and meat, lead a marginal existence, and many counting on the rains for their very survival, taxation in the sector would not help, now or ever. If farm income continues to be non-taxable, the best way to target black money is to attack select sources of its generation, usage and distribution.  

Oversimplification

Coming down on black money happened during Indira Gandhi’s Emergency, or that’s what we were told - or, at least the people believed it. But the other consequences of the Emergency meant that Indira, not India, lost the 1977 General Elections to the hotchpotch Janata Party. Everyone hated to love Janata Party at the time, but they loved to hate the Emergency even more. Hence, when the Janata failed itself and the people, the latter had no hesitation going back to Indira, but sans Emergency.

It’s all proof of how Indians, poor and illiterate as they might have been, loved democracy against Emergency-like autocracy, and punished those that had bungled (on a host of fronts) using Emergency as a cover. It’s yet true that in no democracy, the pundits and political class has ever been able to judge the public mood at one level, and the poll-day mood on the other. Even at the peak of Modi’s popularity, the BJP got only 31 per cent of the national vote-share in 2014 parliamentary polls. There is nothing to suggest that their ranks have swelled either because of demonetisation or earlier economic initiatives of his BJP-NDA Government. In the past, too, elections have been lost by the incumbent than won by the Opposition, combined or not, pre-poll or post-poll.

Leave aside the social media campaign that no leading actor or merchant, politician or bureaucrat has visited the banks, or their wives and children stood in the exchange queues anywhere in the country (barring Rahul Gandhi, who once again was made a butt of irreverent jokes), there are also reports of some government departments in some States that are used to handling lesser currencies in their daily work, are depositing demonetised currencies into their bank accounts the next morning. What demonetisation per se means for the nation’s black money economy, and politics, can be judged only as the nation pauses after the present phase ends and evaluation begins in right earnest.

The Centre and the political leadership should also be concerned about the cumulative effect of impacting on the officialdom at all levels without desired effects on the demonetisation from, as it could have nasty consequences on the implementation also of downstream projects like ‘Swachh Bharat’, famously announced by the Prime Minister in the past and also in the future. Just now, there is nothing to show that these projects have actually worked at the levels where they are meant to.

Administrative bungling

Today, demonetisation, rather than even Hindutva, has united the Opposition, more than any other issue under the Modi raj. To assume and want others also to believe that the political opponents of this Government are driven only by a hate-Modi helplessness could well be oversimplification of the political undercurrents that pundits failed to grasp when Modi was a rising star in this country, and Donald Trump was elected President in the US (the world’s oldest democracy) more recently.

From a purely political angle, it’s half-way through Modi leadership’s five-year term in office. It’s the time when the voter’s honeymoon with the ruler had ended. It’s thus also the time when people who had voted a ruler to power generally sat up and took stock of their own past decision(s). Considering that despite early voter-backing, the likes of Rajiv Gandhi, P V Narasimha Rao and even more so, Atal Behari Vajpayee all lost the immediate next elections should mean that the likes of ‘India Shining’ campaigns have had their limited shelf-life.

Needless to recall, Modi himself bunked all pollsters’ predictions of winning his State for the BJP after the infamous ‘Gujarat riots’ should also be a reminder that the voter has a different yardstick than what the ruling class and the self-styled pundits have given themselves. In the present case, it’s not about the ‘shock value’ attached to the demonetisation announcement, wherein ‘top secrecy’ was very much justified. It’s the subsequent administrative bungling in terms of confusion about the availability of new currencies, adequate and timely supplies to banks and ever-changing instructions on their distribution that has confused the Indian voter - not all of whom are bank customers, either.