Winter Session begins: Why Narendra Modi will find it tough to face politics of demonetisation - Firstpost
Firstpost

Winter Session begins: Why Narendra Modi will find it tough to face politics of demonetisation


One need not be surprised if this turns out to be among the toughest Parliament sessions Modi-government has ever confronted since it’s ascension to power in May 2014. Most opposition parties, led by a rejuvenated Congress, are united to attack the government using the trump card they have — the severe cash crunch that has crippled the normal life post the demonetisation announcement.

There is continuing chaos, panic and distress among different sections of the population as ATMs continue to run dry and bank branches mobbed for exchange and deposit. The cooperative banking sector is in a grave crisis in states like Kerala since they aren’t allowed to accept old notes and issue new ones. Continuing tax, vigilance raids have resulted in a fear psychosis. The opposition parties have smelled the opportunity here.

They have grouped and schemed to corner the government in Parliament on this issue. Besides the cash crunch, the OROP suicide too may come up.

File image of Prime Minister Narendra Modi. PTI

File image of Prime Minister Narendra Modi. PTI

For Modi, who dared to initiate one of the biggest economic cleansing exercises in post-British era, the challenge is to make a convincing point before a confronting opposition that short-term pain is inevitable while executing the demonetisation plan, admit that there has been flaws and lack of planning on government’s part and assure that the government will do everything possible to ease the common man’s pain. Of course, this wouldn’t be easy.

The strong reminder from the Supreme Court on Tuesday on the problems faced by the public due to the cash crunch too will mount pressure on Modi administration. The SC observed that the demonetisation exercise appears to be a carpet bombing rather than a surgical strike.

The nation is still in the painful process of swallowing a bitter pill administered by Modi after he announced, on 8 November, an abrupt ban of Rs 500 and Rs 1,000 notes. The side effects of this pill are still being manifested across the country in the form of severe disruptions to normal life and cash crunch.

How things went out of control

By any yardsticks, the demonetisation process initiated by the Modi government is the biggest ever crackdown on fake currency dalals and black money hoarders in this country after a similar crackdown by the Morarji Desai government in 1978. Many are lauding Prime Minister Modi for showing the political will and courage to take on the parallel economy announcing what was sure to be an unpopular step. Modi stood victorious in the eyes of everyone who saw the move using the yardsticks of a big economic reform and show of political will to cleanse the deep-routed parallel economy in this country, long exploited by corrupt politicians, cronies and crooks.

As Firstpost said on Tuesday, Modi’s move was welcomed by even his worst political enemies and critics in the beginning in larger national interest, but the entire attention turned to people’s problems when the government failed miserably to think ahead with respect to the panic-driven cash demand in the system. When people began hoarding Rs 100 notes in anticipation of tougher days ahead, things went out of control.

It is this mood of public unrest that the opposition political parties will exploit to their best as they step into Parliament building on Wednesday. One can expect a heavy exchange of arguments and counter arguments on the issue of public agony post the demonetisation announcement. Political parties have surely done their homework on how to corner the government on the issue.

Politics of demonetisation

The opposition parties should share the blame of overly politicising the issue instead of offering constructive criticism. What has happened so far is attempts to make political mileage out of the whole mess. This was evident when Congress Vice president Rahul Gandhi joined an ATM queue in Delhi, Mamta Banerjee made a war cry from West Bengal and Akhilesh Yadav cried foul from Uttar Pradesh. All this will reflect in Parliament beginning Wednesday.

As mentioned earlier, what one needs to watch out for is how effectively the Modi government can counter the onslaught of accusations and get over it, to progress to the business of house, mainly the passage of remaining crucial bills in Parliament for the much awaited 1 April rollout of the GST — Central and integrated GST Bills.

There are few possible questions the opposition will likely raise against the government:

One, Why did the government not anticipate the chaotic situation and panic when it says that for the last six months or so the planning was on for the demonetisation process? Why weren’t the bank branches and ATMs equipped to meet the crowds, even though maintaining secrecy of the operation was a challenge? Doesn’t the government have the constitutional and moral responsibility to ensure public life isn’t hit hard during the implementation of a well-thought out decision?

Two, did the government leak out the information to the BJP and its “friends” well in advance, as alleged by certain political parties including Arvind Kejriwal’s Aam Aadmi party? Last week, Kejriwal had accused that the government for allegedly facilitating the hoarders of unaccounted cash to push their money into safer destinations, including whitening part of it by depositing in the banking system. Kejriwal also cited an incident involving Sanjeev Kamboj, co-convenor, BJP law and legal affairs, Punjab, revealing on Twitter pictures of Rs 2,000 notes on 6 November, two days ahead of Prime Minister Modi's announcement on 8 November. Kejriwal also raised concerns over an unusual surge in bank deposits in the July-September quarter.

“The government needs to tell us who they had warned among friends about this announcement about black money,” said the Delhi Chief Minister .

Three, how do the government and the RBI explain the unusual surge in bank deposits in the July-September quarter. During the quarter, the bank deposits rose by a record Rs 6.65 lakh crore to Rs 102.08 lakh crore, a record level which has surprised economists given that in the previous quarters most banks have reported a negative growth in deposits.

Finance minister Arun Jaitley has, however, pointed out that the rise in the deposit was because of 7th Pay Commission arrears that may have been channelled into the bank accounts. But these arrears, Rs 70,000 crore and add any other inflows including subsidies, this amount will not go beyond Rs 1-1.5 lakh crore at the most.

Economists and financial experts are perplexed with this sudden spike. They point out that the black money hoarder who knew about the ensuing measures would have used benamis to put the unaccounted cash into different bank accounts to escape tight scrutiny and tax penalty implication that would happen on such deposits post the demonetisation announcement. The government has warned that cash deposits above Rs 2.5 lakh threshold during the 50-day window could attract tax plus a 200 percent penalty in case of income mismatch.

Modi government will have to answer these tough questions in Parliament. For sure, there will be political chaos and mudslinging, especially given that key state elections are due. But, the key is to build the political consensus and get back to business as early as possible.

First Published On : Nov 16, 2016 11:01 IST

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