During the Uttar Pradesh assembly election campaign a large group of women in Rampur were chatting in an open courtyard in the late winter sun. The aftershocks of the sudden note ban were still being felt everywhere in the country. A visiting journalist from Delhi was curious to gauge the mood of the voters and the impact of demonetisation on their humdrum existence.
The women were from working class. Some educated and others semi-literate. On prompting they told the journalist of the disruptions they were facing in their daily life due to ‘notebandi’
Despite being at the receiving end of the sudden note ban they told the journalist in unison: “ if the ‘Pradhanmantri’ has taken this step he must have had our well-being in mind. We are suffering today. We may be better off tomorrow. We trust Modi Ji”.
That would have been music to Mr Modi’s ears, especially at the time when he was under so much pressure from all corners following his decision to take 500 and 1000 notes out of circulation.
In Modi we trust. That level of trust has not been enjoyed by any prime minister in our generation. Rajeev Gandhi swept to power with a massive mandate not because of the public trust in him but the public sympathy on account of Mrs Indira Gandhi's assassination.
Perhaps Modi knew more than anyone else that he enjoyed the trust of 1.3 billion people of this country. He knew that his rapport with the masses would stand him in good stead. He took the plunge on the back of the massive popularity he enjoyed as the prime minister of the republic.
And indeed Modi was not going to betray the people he loved so dearly. He was not going to let the people who put their trust in him down.
In one go, he broke free from the Congress government-nurtured corrupt system. He did it because he had the well-being of his people in mind. He was accused of ulterior motives. The anti-Modi tirade escalated and it was suggested the note ban was done to strengthen his elite industrialist friends. He was told it was to do more with politics than economics. He was told he had done this to win the UP assembly election. Contradicting this assertion some others claimed he was going to lose the UP polls badly. We all know now that the election results only strengthened his hand and emphatically endorsed his campaign against corruption and black money — the two ugly legacies of the congress regime.
It must not have been easy for Modi. In hindsight his supporters now believe he did the right thing, but Modi didn't have the luxury of hindsight. A weak leadership might have melted under intense pressure. The move might backfire, must have crossed his mind. After all it was a completely unchartered territory for him. The best of his supporters said demonetisation was a shot in the dark. They stood bewildered not knowing how to defend it.
His detractors had drawn the daggers. They said it was akin to a “Tughlaqi” farmaan. They called it a self-goal or a political suicide. They made fun of him and called him a novice. In short he had to endure utmost insults.
But the man is made of sterner resolve. He stood firm and led the nation from the front. He didn’t hide. He came out and addressed the nation in December urging them to make sacrifices for the country. He assured them that their sufferings were temporary. In longer term it would benefit the people who could live in a corrupt-free society. He rallied the party and government around him but above all he managed to convinced the average man on the street that the move was to his advantage and for his better future.
One year on we know now that demonetisation is India’s hardest hitting attack on black money. It unearthed untold amount of black money which gave decisive blow to terrorism, naxalism. In one stroke, the government achieved many objectives, including putting an end to anonymity of cash holders, push for digital and cashless transaction, increasing higher tax base, increasing tax revenue, reducing cash to GDP ratio and decreasing substantially the presence of high value denominated currency in the system besides tackling the menace of counterfeit money which was primarily coming from our neighbour on the western border.
Besides marked reduction in stone pelting incidents in the Valley to 1/4th and 20 percent reduction in Maoist extremism, the note ban has led to numerous advantages like lower EMI rates as the lending rates had come off by 100 bps, increased savings in financial instruments to increasing revenues of urban bodies. Demonitisation also doubled the digital transaction and also resulted significant decline in real estate prices.
It is important to take into account that the economy has been formalised to a large extent only because of demonetisation. Cash in circulation has dropped by almost 2.5 percent points of GDP or almost Rs 3.5 lakh crore. Combined with other reforms like, Bankruptcy Code, RERA and GST, more formalisation is in the offing. A more formalised economy will multiplying tax payers. Today we have only one percent of the population paying direct taxes. This is already changing. The banking sector surplus liquidity created by the flow of cash into the banks will now translate into greater credit growth (thanks to the recent recapitalisation) and hence more growth and jobs. Unfortunately experts tend to analyse demonetisation in isolation and opine about its ill effects but demonetisation is one of many big reforms the PM has undertaken and when these reforms are combined, the true positive impact of demonetisation is understood.
(The author is the national spokesperson of BJP and former managing director; Deutsche Bank, India. Views expressed here are personal)
Updated Date: Nov 08, 2017 15:48 PM