Rs 500, Rs 1,000 note ban: How PM Narendra Modi stole RBI's thunder

Prime Minister Narendra Modi is a smart politician and there's no better evidence to prove that than his master timing, to turn a historic event into complete political advantage for him.

Dinesh Unnikrishnan November 09, 2016 11:41:25 IST
Rs 500, Rs 1,000 note ban: How PM Narendra Modi stole RBI's thunder

Prime Minister Narendra Modi is a smart politician and there's no better evidence to prove that than his master timing to turn a historic event into complete political advantage for him.

In its entirety, Modi hijacked the currency crackdown on Tuesday evening. The central bank, the statutory authority of monetary policy and currency, remained on the sidelines throughout the spectacle. Though RBI governor, Urjit Patel, was seen alongside economic affairs secretary, Shaktikanta Das, at the Delhi presser, Modi's surprise announcement and the body language of technocrats at the Finance Ministry-RBI joint presser signaled that the government has effectively hijacked the show.

The whole trick lied in the surprise element.

Not many — either in the government, the banking industry or among the general public — would have imagined that Modi will come out with such a drastic step to fight black money and fake currency, risking the discontent among the general public. People flocked to ATMs minutes after the announcement and there was chaos among small-scale traders.

Rs 500 Rs 1000 note ban How PM Narendra Modi stole RBIs thunder

File photo of Narendra Modi.

Modi sensed the bigger opportunity in taking personal responsibility of the move, despite the short-term pain, since the move will surely be seen as a landmark reform ever undertaken in independent India to unearth black money from the financial system.

This is particularly so given the fact that recovering black money has been one of the major poll promises of the Modi in the run up to the 2014 general elections — something still remain as a major challenge. Modi’s previous attempts to recover black money through two separate amnesty-like windows, one in 2015 and the other concluded in last September — cannot be termed as a big success since the amount of money recovered from these operations were either too small, or way below expectations.

The government managed declarations worth Rs 4,147 crore from foreign black money holders in the first round and in the second, Rs 65,250 crore. This time, the massive currency crackdown doesn’t leave any room for criticism, excluding the part of discomfort and panic the unexpected move caused to the aam aadmi.

This also shows how the Modi-government has gradually tempered the power and attention the central bank enjoyed in the Raghuram Rajan-era. The powers of the RBI has significantly been cut down by the government when the monetary policy committee was formed. The currency crackdown is another example.

Had Rajan been in the central bank still, probably the currency crackdown announcement would have happened from the Mint Road? Possibly yes. Patel anyway didn’t have the star power Rajan enjoyed or the mood to claim from the Modi-government the due right to announce what is theoretically an issue falls in the central bank’s domain.

For Modi, claiming the full credit for the currency crackdown was a political necessity especially in the wake of crucial elections lined up next year in Uttar Pradesh and Punjab. He can now attend the political rallies with full confidence and give a fitting response to his political opponents on the black money issue. And the PM staged the entire episode in style. RBI remained on the sidelines throughout.

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