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The demonetisation of Rs 500 and Rs 1000 currency notes, Prime Minister Narendra Modi’s most audacious move till date, is mind blowing in its impact and mind-boggling in its implications.


When the Prime Minister had warned “Don’t blame me for tough action on black money after September 30 (the last day of the amnesty scheme)”, not too many people would have paid heed to his words. Later he even spoke of a ‘surgical strike’ on black money. What people expected at best was a step-up in tax raids and seizures for a while. There were sly attempts to put the Government on the back-foot by coining terms such as “tax terrorism”.


A master of changing paradigms, in one fell swoop Narendra Modi reconfigured the rules of the game. The nation was stunned by both the swiftness and secrecy of the demonetisation. There was not even a whiff of what was coming till the Prime Minister’s address to the nation.


In theory, it is difficult to fault the decision. Some have been quick to call the move ill advised and ill conceived. For a short period, Twitter was trending the hashtag ‘ModiBinTughlaq’ but it died soon. It would be naïve to believe that someone as methodical and meticulous as Narendra Modi would take such a mega decision without careful consideration and a detailed blueprint. Subsequent announcements of administrative steps reveal the micro-planning and preparations that went into the move before the rollout.


However, no action or decision of Narendra Modi can pass muster with the media and public till it has been put through the sieve of conspiracy theories. Many hypotheses have, therefore, been spun by the conspiracy theorists. Some have called it another ‘Jumla’ to fool the people and reinforce the cult of ‘Modi the Messiah’, while others have said it is a ploy to paralyse his opponents before the crucial Assembly elections in Uttar Pradesh and Punjab where money power is expected to be a critical factor. A few felt it was a belated effort to take the sting out of the accusation that he has done nothing to redeem his election promise of unearthing black money.


Whatever may have been the underlying rationale or motive, it would be interesting to watch how it plays out on the economic, political and, the less obvious, national security fronts.


Let us talk of security first, It is idely know that, Pakistan and, of late, a China have been pumping in fake high denomination currency into India to fund terror outfits. ounterfeit currency printing presses have mushroomed along the border with Bangladesh. This will be a killer blow to them.


More than choking supply of money, it will expose and starve the ecosystem that was thriving on the counterfeit currency racket. The introduction of new high value notes with several hard-to-crack security features will not only make the printing of duplicate currency notes more difficult if not impossible, it will take a long time to rebuild the network to get fake currency going once again.


So, is this a ploy to cripple the BJP’s cash rich political opponents before two very important Assembly elections in Uttar Pradesh and Punjab? Even assuming that could be a reason, we must not forget it would affect his own party as much as the others. It is highly improbable that BJP leaders had a heads-up on what was on the cards. If they had even a whiff, the news would have leaked much before. But, the fact is neither the public nor the media have any clue. At best it can be said, to quote a former Election Commissioner remarked, demonetisation creates a ‘level playing field’ for all parties.


In a nation of jugadus, as we are called with some justification, it is likely that politicians of all hues will find an ingenious solution around the problem. Newspapers are already reporting instances such as a Karnataka politician holding ‘loan mela’, doling out Rs 3 lakh currency packets to constituents. It does not take much imagination to guess that much of the ‘loan’ amount is likely to be recycled back to him via the Jan Dhan account of the recipients. But, if this results in lowering cash spends in elections, it would be a huge achievement by itself.


The real rub, however, lies in the economic impact of the decision and that is where Narendra Modi has played his biggest gambit. At first take, this runs the risk of alienating the BJP’s traditional support base among traders, builders, businessmen and industrialists. The common man, it may be argued, after the initial shock and awe will adjust to the situation with some difficulty. Overall, it will be a huge push towards a cashless and transparent commercial environment. Even if Jan Dhan accounts are misused to an extent for laundering money, it will still bring more people into the banking net.


Some months ago – a builder had complained to this writer: “Modiji was supposed to bring in black money from abroad, instead he is going after black money at home”. This is the section that will be the most disenchanted as indeed large businesses, whose concept of ‘Achchhe Din’ was at a wide variance with what seems to be the Prime Minister’s idea. However, by going for an across the board approach the Government has at least avoided accusations of discrimination or being selective in its action.


As per one estimate, even a 20% ‘no show’ in converting old notes will ‘release’ over Rs 3 lakh crore of black money from the system. The real test will not be in this one time cleansing of pus but how to prevent black money generation in future. After all, the previous demonetisation in 1978 by another non-Congress (Morarji Desai’s Janata Party) Government did not have a sustainable impact.


Therefore, much depends on the follow-through steps that the Government comes up with after this. Tax raids, which have begun, at this point are bound to reveal many ducks sitting on piles of demonetised notes. After that, the Government would have to look at tax havens. If nothing else, just for credibility Narendra Modi would have to be seen to be acting against black money stashed in offshore accounts.


Before that, he has only about two months to steady the boat buffeted by waves as the Union Budget is presented in early-2017. Only then can the benefits of these structural reforms striking at the root of the economy be harnessed to yield results in the near future.


Whether one considers Narendra Modi to be a messiah or a maverick, a fundamental point both his critics and fans have to understand is that he is playing for the long haul and not looking at just 2019.



The Buck May NOT Stop at the LOC

The Buck May NOT Stop at the LOC