Demonetisation: Narendra Modi has taken a political gamble by annoying his core voter base

The 'Swachh Bharat' slogan is on the Rs 2,000 note with a reason. The demonetisation is seen as the first step towards a clean-up of the system.

"But he is cleaning up our business," says a resident of Hyderabad, who is into the business of arranging pilgrimage tours. Let us call him Mr Devout. For a trip, say to pilgrim spots in north India like Vaishno Devi etc, he charges around Rs 1.30 lakh per person, entirely in cash. He sends groups of around 40-50 people. He pays 0 percent tax and sits on piles of cash.

Another citizen is into the business of car accessories, with a turnover of Rs 5 crore per annum. Let us call him Mr Car. Even when he sells accessories worth around Rs 20,000, he does not take money by card or by cheque. He insists on cash. But look at his IT returns and you will find that Mr Car's declared income is only around Rs 1.5 lakh per annum.

Demonetisation: Narendra Modi has taken a political gamble by annoying his core voter base

PM Modi addressing Karnataka Lingayat Education Society Centenary celebrations in Karnataka. Twitter @BJP4India

Mr Devout and Mr Car both voted for Narendra Modi's BJP in 2014. Since 8 November, when the PM dropped the bombshell on them, both have turned bitter critics.

Just like this person who deals with automobiles. On the morning of 9 November, he approached his neighbour asking him if he can help convert Rs 3 crore from black to white. "Modi ne achha nahi kiya," he grumbled. "Business will become zero. We wanted him to increase our dhanda, not kill it." When asked why he wouldn't he pay tax to the government, his counter question was : "Why should I give my money to the government?''

When you come across examples of such citizens, you realise this 'surgical strike' was much needed. The black sheep had to be identified and weeded out. They now have no choice but to make their cash enter the system.

Not that they are giving up. Several experts at money laundering are in hyperactive mode since Wednesday, reaching out to known moneybags through SMSs, offering to exchange the cash at 30 percent commission. But experts estimate that even if Rs 5 lakh crore of the Rs 14 lakh crore worth of 500 and 1,000 rupees notes come into the system, it will take care of India's entire fiscal deficit for at least the next one year.

Though it is estimated that 20 percent of India's GDP or around $450 billion is unaccounted for wealth, experts estimate that the actual figure could be much higher. Most of it is stored in the form of cash or parked in real estate or bullion.

Which is why demonetisation has to be just the first step in ensuring India changes its shades –from black to white. Modi has already indicated that more steps are in the offing after 30 December. Sources say the gold holdings of high net worth individuals could come under the scanner next. The jewellery business again is a murky world with a large number of customers opting to buy with cash, without revealing PAN card number. Once the whip is cracked on the jewellery houses, this practice will be a thing of the past.

But the real effective surgical strike will be when benami real estate is identified by linking each land deal to PAN and Aadhaar card. Land is where most black money is parked and is a favourite mode of investment among politicians who do not take the Swiss Bank route. That explains the nervousness among the political class in several states, leading to incoherent statements.

Modi has clearly taken a huge political gamble by annoying his core voter base. Politically, his calculation seems to be that he has time till 2019 to ensure the benefits of liquidity in the system and with the exchequer percolate down to the people of India

Visit any bank or ATM and you will realise that the people who are standing in the queue to withdraw money are not the likes of Mr Devout, Mr Car and Mr Automobile. They are mostly the Form 16 kind salaried class or senior citizens. They are not sitting on black money and most likely, given that public memory is short, after this bout of inconvenience is over, will applaud the same Modi for teaching the law breakers a lesson. There is an element of shadenfreude at play here.

The jury is out on how Uttar Pradesh, Punjab and Goa will react to this Modi-stroke next year. But Modi, I think, believes in a long-term systematic investment planning. Even if he pays a price in the short-term, he will look to book electoral profits only in 2019.

Of course, this is not to say that the Modi sarkaar handled this logistical nightmare well. In most places, especially semi-urban and rural India, people are struggling to get their hands on money they spend. Finance Minister Arun Jaitley made it clear that it will take three weeks for ATMs to normalise operations and the wild rumours on social media have only made life anxious and difficult for the common man.

It is only fair that we blame Modi for not keeping his word. He told us in 2014 that he will bring change. For the last five days, all of India is waiting in queue to get the change.

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Updated Date: Nov 13, 2016 16:13:50 IST

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