The politics of demonetisation

As Parliament prepares to convene again after a winter session washed out due to the Opposition’s protest on demonetisation, it is worth asking why political mobilisation against the exercise is proving to be so difficult

January 28, 2017 12:15 am | Updated January 30, 2017 11:52 am IST

Demonetisation has been the most hotly debated topic since November 8, when Prime Minister Narendra Modi announced that the high-denomination notes then in circulation would cease to be legal tender. In a single stroke, nearly 86% of the currency in an economy powered by cash transactions, with 54% people without bank accounts, was wiped out. The move disrupted the lives of ordinary people, led to widespread hardship for the poor, major job losses and over a hundred deaths. Despite the huge distress and disruption, the general sentiment seemed to be in favour of the decision.

The shock move invited widespread criticism. It provoked protests and a lot of anger and agitation, but most of it was directed against local irritants, particularly banks. There are numerous reports of angry crowds locking up banks and jamming roads to protest against the non-disbursement of cash. As for more organised opposition, the winter session of Parliament saw Opposition parties locking horns with the government over demands for a vote on demonetisation. The tussle between the government and the Opposition washed out the entire winter session. Opposition parties staged several protests in different parts of the country, but this did not coalesce into a larger expression of protest against the government despite the pain caused by demonetisation to the poor who have suffered overwhelmingly because of it. The question that needs to be asked concerns the relative importance of social and political influences that generated greater support than opposition against demonetisation.


Diversionary tactic

Much of the debate on the demonetisation move has focussed on its economic consequences; not enough attention has been paid to the politics of this drastic decision which can possibly explain the lukewarm opposition to it. One of Mr. Modi’s big campaign promises was to end corruption. But that didn’t happen. The growing criticism of the government’s failure to deliver on the promise of bringing back black money stashed abroad and depositing ₹15 lakh into every bank account as promised at the time of the Lok Sabha polls led the Prime Minister to do something bold to offset the negative feelings in the context of impending State elections. It was seen as a dramatic measure that would enhance the regime’s credibility in fighting corruption and black money and divert attention from its perceived failures on this and other fronts. Instead of finding ways to tackle graft through the tightening of regulations and controls on real estate and political party funding, demonetisation was promised as the ultimate solution.

As a political decision, demonetisation was aimed at setting the agenda for State Assembly elections. The timing of the decision clearly indicates this: it was announced three months before five Assembly elections, particularly in the crucial State of Uttar Pradesh. It was unleashed as a political strategy to checkmate regional parties (by threatening their cash reserves) and expand the BJP’s support base in the Hindi heartland by projecting demonetisation as a pro-poor measure.


Shifting goalposts

With this background in mind, it is possible to speculate about the political repercussions of demonetisation on popular discontent. The focus of discussion has been the inconvenience, not the policy of demonetisation — the acme of unreason (it is not open to question) — which exposed a deliberative deficit in the government and cast a shadow on its capacity to effect sound policies. In the event, the efforts to combat black money have been so far ineffective. The government has assumed that a significant portion of illegal wealth is stored in the form of banknotes when it is well known that it is not. By December 30, practically the entire stock of old bank notes had been deposited, thus undermining the government’s claim of extinguishing black money. This happened within a few weeks of the announcement. It put paid to hopes that the government can profit from old and unreturned notes as the Reserve Bank of India could transfer that money to the government to spend. Given the failure of the initial drive against black money, the goalpost was changed from curbing black money to cashless economy to digital transactions, all this to justify the move which had caused so much disruption.

Nonetheless, the 50-day deadline for depositing old notes allowed the government time to reposition demonetisation, which made it more difficult to trigger and sustain protests.


‘Good’ intent, ‘bad’ management

Further evidence of the overwhelming influence of what might be loosely termed as political constraints emerges from the fact that even critics assume demonetisation was motivated by good intent, which makes it more difficult to go against it. This intent was supposed to include the elimination of black money, the curbing of counterfeiting, controlling terrorism and moving the nation to a cashless age. Most critics of the government have had to preface their criticism with a disclaimer acknowledging the laudable motivations of the exercise even as they bemoan its incompetent implementation. This shields the Prime Minister and the government from criticism, which is limited to inconvenience and time spent in accessing bank accounts. But the poor and people working in the informal sector have not only been inconvenienced, they have been dislocated and their livelihoods irreparably damaged. Standing in a queue or being late to work is an inconvenience, but collapsing businesses and losing jobs go beyond inconvenience.

At the social level, demonetisation was presented as a great moral project to clean up the national economy. It has been portrayed as a crusade against tax evaders to help the poor. Mr. Modi describes it as ‘redistributive justice’, ‘a war unleashed against the corrupt’ and venal elite flaunting their black money. Hence, many people believe that in trying to curb black money, Mr. Modi is acting against the unscrupulous rich hoarding piles of illicit cash. The idea that the rich are suffering because this was a measure that caused problems for them is undoubtedly appealing to poor people, but such resentment doesn’t translate into protest. In this case, it is actually thought to explain or excuse the pernicious effects of demonetisation. Martha Nussbaum argues in Hiding from Humanity: Disgust, Shame and the Law that disgust is a questionable formation, one that has the social function of maintaining hierarchies, while the really democratic act would be to criticise and undo social hierarchies. The same could be said about the formation of resentment in perpetuating social fault lines rather than undoing it.


Climate of fear

Three other reasons can be adduced to explain the relative shortage of protest. First is the general climate of fear and the government’s intolerance of dissent which deters people from expressing opposition against the move. Second is the Indian obsession with black money. For the past few decades, black money has become the single greatest marker of what is wrong with India today. Successive anti-corruption movements have played a major role in creating this perception. Thanks to Bollywood films and their good-and-evil stories with an unremitting focus on corruption and black money, they fire the popular imagination like no other issue can. Hence, visible action against black money successfully channels the anger of the people in favour of those who are seen to be doing something to eradicate it.


Third, to strengthen his position, the Prime Minister has repeatedly offered the trope of nationalism so that anyone opposing demonetisation is denounced as corrupt and anti-national. The analogy with a war against corruption is also designed to do this, to make people participate in a sacrifice for ‘cleaning up’ the nation. Thus, the Prime Minister compared the war on black money to the external aggressions India faced in 1962, 1965, 1971 and 1999 (Kargil), when the ‘intrinsic strength’ of citizens was on display. He went on to add: “Such collective energy and patriotism is understandable in the face of external threats. However, when crores of Indians unite to fight a war against internal evils, it is unparalleled.” Hyper-nationalism and grandiloquent rhetoric are constant responses of this government every time it finds itself on the defensive.

Any discussion of public protests must also take into account the fact that large and visible protests are not spontaneous, they are usually an outcome of mobilisation by political parties; but parties have been stymied because mobilising against demonetisation can be instantly condemned as support for corruption. ‘Only black money hoarders are opposing demonetisation’ was one unvarying refrain of the ruling dispensation. In the face of this kind of propaganda, no one can afford to be seen as directly opposing measures to clean up black money and weed out counterfeit currency. The public also fears that opposition to demonetisation will make them appear corrupt and immoral.

The lack of large-scale protest is by no means an expression of popular support for the government’s decision but it has been interpreted not just as acquiescence but endorsement of the demonetisation move. The Prime Minister has repeatedly claimed that people overwhelmingly support his policy. One might ask how he is privy to this sentiment given that he is a master of one-way communication and hasn’t deigned to speak in Parliament, leave alone talk to people. Most likely the support is deduced from the fact that so far the BJP has not lost any elections, local or otherwise, since demonetisation. This reasoning suggests that as long as there are no large street protests and people continue to vote for the BJP, there is no need to accept the downside of this decision and the social obligation to address public grievances arising from it.

Zoya Hasan is Professor Emerita, Centre for Political Studies, JNU, and Distinguished Professor, Council for Social Development, New Delhi.

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