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Big political test Modi passes


Dinesh Unnikrishnan
[ March 12, 2017 ]

The big takeaway from the assembly poll outcome in Uttar Pradesh (as the results so far suggest), is that Prime Minister Narendra Modi has cleared his big political test on demonetisation—one of the key factors in this round of polls—in grand style.




Not only did the massively disruptive economic policy and opposition’s primary weapon against BJP fail to impact Modi’s charisma among voters in the state, but it even seemed to aid party’s fortunes. If demonetisation is ‘no problem’ for Modi in UP, a state where informal sector plays a dominant role, demonetisation is not likely to cause troubles for the party elsewhere in future. This is a personal victory for Modi who has thrown himself hard in to the UP’s poll battle scene, especially in the last leg of the campaign and tells an observer that people have ignored the demonetisation pain. It is now crystal clear Narendra Modi has only gained on his political capital after the 8 November televised announcement to scrap Rs 500, Rs 1,000 notes. As the trends seen in various surveys and certain civic poll results suggested, the PM continued to enjoy ground support of people in the immediate months post the note ban despite heavy criticism from many economists and political rivals on the move. Though the outcomes of local body polls and surveys suggested continuation of Modi wave post demonetisation, the UP polls, arguably, was the first major test for him. And the outcome would have surprised even the most optimistic supporter of the BJP. More importantly, these numbers will silent his rivals, who have been projecting the ‘disastrous effects’ of demonetisation on all walks of life and larger economy. This will give a psychological upper hand for the government in Parliament to face the opposition on crucial reform process. UP poll outcome is even more surprising given that this one state that is heavily dependent on informal sector and has had adverse impacts of demonetisation in the form of job losses especially in regions like Varanasi. But, all these negatives failed to stand between Modi and his big victory in the state. If one looks at the economy as a whole, the impact of demonetisation has played out much more in the informal sector, not in India’s organised formal sector. This is because informal economy is where cash is the king. About 40-45 per cent of Indian economy is estimated to be in the informal sector, which also contributes almost 80 percent of the total employment.


According to certain estimates, 78 percent of transactions in the economy are conducted in cash. But since segment is poorly captured in official data, the impact here never showed up in the GDP numbers. This is the reason why the 7 per cent October-December quarter GDP figure was seen with suspicion. The flaws in the way noteban was implemented, prompted even former Prime Minister, Manmohan Singh, to use phrases such as ‘mammoth tragedy’ and ‘organised loot, legalized plunder’ to describe Modi’s drastic move. Almost all of his political rivals used demonetisation as a tool to attack Modi since the day the drive was launched. But all the confusion and lack of correlation in numbers and statistics have obviously did not have any impact on people's sentiment on the ground, so is the absence of tangible results on the stated goals of the exercise so far. The evidence of big victory over black money and fake currencies is yet to emerge and the shift to digital payments—another objective of demonetisation—still hasn’t taken a firm hold. But, none of these factors have worked against Modi. The voters have judged demonetisation as a big political step on those in the society having possession of ill-gotten wealth, a long pending political step. The economics of the move never really mattered. For them, Modi is the leader who finally made the change happen, precisely how he sold the idea of note ban to 125 crore Indians. In this fight of economics Vs Politics, politics have clearly won. The UP poll outcome practically ends the debate on the impact of demonetisation on Modi’s political fortunes. Let’s remember that demonetisation, besides being a bold, unprecedented economic policy, also carried significant weight as a big strategic move for Modi, for whom fight against black money has always been at the top of his poll agenda since 2014. Thus, to sum up, PM Modi has passed his first big demonetisation test in style, silencing his political rivals and proving decisively that Modi wave has negated the demonetisation card flashed by his political rivals all along.
--------(Courtesy………firstpost.com. The views expressed by the author are his own but not of “Kashmir Horizon”)