Those who think that Prime Minister Narendra Modi would falter big time on demonetisation may rue their political assessment sooner than later.
There is no doubt that Modi’s profound understanding of Indian social psychology certainly entails risks. It can either go horribly wrong or succeed like never before. And there are all indications that he has been striking the right chord.
His tearful expression of emotions at Goa, after successfully concluding the nuclear deal with Japan was clearly calculated to take the battle several notches up by making it look like a crusade against corruption. He articulated his selflessness by saying that he was not born only "to be the prime minister". Of course, his well-crafted exposition in Goa with a deft mix of theatrics projected Modi as a leader with messianic zeal.
An astute leader that he is, Modi while his three-day sojourn in Japan, where he flew to a day after announcing the demonetisation of Rs 500 and Rs 1,000 currency notes, had kept his ear to the ground in India. He was aware of the attempts by his political rivals to fuel social resentment to build a movement against his move. Falsehood and half-truths were paraded through social media as calculated gambit to stoke social unrest at large scale.
Herein lies Modi’s political genius that has often seen him through many such fiercely-fought battles. Ever since he declared his scheme, Modi was unambiguous in his assertion that his move would cause discomfiture to the common man. But he appealed to the collective goodness of the society to put up with this discomfort for a large social and national cause. In a clever move, he framed the demonetisation issue in a binary: a battle between the honest and the dishonest.
Apparently, Modi’s moves are calculated to rope in the common man and raise their collective stake in the drive against corruption. This follows a familiar pattern. Modi has maintained time and again that no government decision would succeed unless people have their stake in it. In this sense, those forming queues outside ATMs and banks to get cash for their daily existence would turn out to be visible stakeholders in Modi’s scheme. In Modi’s understanding, India has an inherent strength which politicians tend to ignore. Here is an instructive piece of Modi’s mind in an interview that I conducted with him in the February 2011 issue of Governance Now when he was the chief minister of Gujarat.
So you do not subscribe to the theory that the society in Gujarat is more receptive to your model of development than in rest of the country, particularly Uttar Pradesh, Bihar and West Bengal?
This impression is utterly wrong. This country has a strength which has to be recognised.
You mean the hidden strength...
No, I mean the overt, visible strength. During the kumbh mela, each day a population equal to that of Australia gathers, performs religious rituals and disperses in the most disciplined manner. If policy-makers realise this strength, it will be easier to make people understand and accept their models of development.
This is the precise reason why Modi has initiated this scheme with clearly laying out the objectives for common people. For the first time after Anna Hazare’s movement, he has rekindled the collective spirit of people to fight against corruption at a social level. But unlike Hazare’s movement led by NGO and activists, the involvement of common people in this government scheme gives a sense of purpose to participants. At the same time, Modi has conjured up a dream of a "prosperous, corruption-free and strong India" after passing through this ordeal.
Though Modi’s formulations are perfectly in sync with social psychology which yearns for a leader with messianic zeal to free society of evils, he runs the risk of falling far short on delivery if the demonetisation drive fails. Those analysing financial markets feel that the government has been banking heavily on windfall benefits that it would accrue on account of this scheme. On the face of it, the scheme may unlock a huge amount of capital stashed away in the homes of the middle-class and upper middle class families across the country. The exemption of Rs 2.5 lakh deposit to each housewife was aimed at mopping up this locked capital. Similarly, the ill-gotten money if distributed through poor people’s account (Jan Dhan account) would also collect a huge sum of money and infuse them in the banking sector.
According to financial analysts, the government would be hugely benefitted if those who earned ill-gotten money decide to use it as waste paper for fear of retribution by the tax authorities. "It would drastically reduce the liability of the Reserve Bank of India," they point out, adding that the government would mop up enough cash in the system to take of fiscal deficit for next two years. At the same time, the government’s capacity to spend would be enormously increased.
Of course Modi’s move is extra-ordinarily audacious as it entails enormous political risk if the script goes haywire. But given his past, Modi is a conscious risk-taker and guided by his instincts which have rarely let him down.