Demonetisation: Modi risks winning Battle, losing War

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For how long will Mr Modi ride on individual charisma without ushering in greater legal and institutional reform?

For those still surprised by prime minister Narendra Modi’s audacious demonetisation gamble, the past maybe a useful guide. In 2007, just ahead of the Gujarat assembly elections, Mr Modi kickstarted power reforms in the state as chief minister, including a hike in rates and police action against farmers involved in power theft. When an angry RSS-backed farmers delegation met the chief minister, Mr Modi’s response was reportedly defiant: “I will step down as chief minister but not back down. You can always replace me if you wish.” In the elections that followed, Mr Modi won the day and silenced his critics.

In a sense, the 2007 power reform battle in Gujarat, much like today’s demonetisation challenge, is typical Modi: he is a leader whose self-belief, bordering or narcissism, leads him to short circuit political systems and reject sectional interests in the confidence that he has the answers to all likely pitfalls. It is both a strength and a weakness: the lack of self-doubt makes him a consummate risk taker, but also someone who can at times act impulsively without due consultation.

Is Gujarat a mini-India then, and will Mr Modi triumph yet again? When almost the entire opposition protests against you within and outside parliament, there is reason to believe that demonetisation has provided fresh impetus to a potential grand anti-Modi alliance. When even your own allies like the Shiv Sena speak out and BJP MPs express reservations, then the disquiet has to be taken on board. When rising anger in queues outside banks over a cash crunch can no longer be masked as temporary inconvenience, the political leadership should be worried. Nor can the growing concerns of leading economists and global research groups warning of an economic slowdown and job losses be wished away. Indeed, on the face of it, it appears that the prime minister who has chosen to even stay away from a parliament debate on the issue is being pushed on the defensive: what else explains the rather bizarre ‘app-based’ poll conducted by the PMO, a classic self-simulation exercise designed to sway public opinion.

The truth though is that the prime minister has already won round one of the demonetisation battle. Firstly, he has successfully pitched his political opposition as a “coalition of the corrupt’’. A number of his political opponents are tainted by sleaze: can a Mulayam Singh or a Mayawati, both of whom have faced disproportionate assets cases, take the moral high ground on corruption? Can Mamata completely erase the blot of the Saradha chit fund scam or the Congress of the 2 G and coal muddles? The fact that no corruption scandal has yet stuck to Mr Modi gives him the moral edge in his battle with the opposition.

Secondly, Mr Modi has mastered the art of shaping the media narrative to his advantage through populist nationalism. By positioning demonetisation as a sharp weapon in the “war” on black money and terror funding, he has created a post-truth dialogue where even an intelligent argument as to why demonetisation will have limited impact on the black economy is lost in the cacophony of treating any dissent as “anti-national”. Any criticism of the prime minister’s move is instantly identified with being an apologist for corrupt forces, thereby preventing any sane debate on the issue.

Thirdly, the prime minister has successfully projected himself as an “agent of change”, someone who wants to wipe away decades of sloth and dishonesty in the political system. The spectacular Modi victory in 2014 was predicated on the promise of “achche din”, of dramatic change that would end the Congress era of slow moving governance once and for all. By taking a tough decision, the prime minister has cemented his image as a strong leader with a self-proclaimed “chappan ki chati” (56 inch chest).

Finally, Mr Modi has without doubt built a personal connect with millions of Indians who are inclined to trust him. The “jumla” tag may have been used by his critics to brand him as a leader who promises more than he delivers, but on the ground he still enjoys enormous goodwill, especially amongst youth and the urban middle class. For them, Modi still symbolises an aspirational India, one that wants to break free of the status quo. Which is why even amidst lounging public anger over restrictions on withdrawing your own hard-earned money, there is a willingness to give the prime minister the benefit of doubt.

The key question is, of course, for how long will Mr Modi ride on individual charisma without ushering in greater legal and institutional reform? If the queues don’t shorten because of a creaking banking system, if the cash crunch extends beyond the 50 day mark, if small and medium enterprises begin to lay off employees, if farmers struggle with rural credit, if a tax bureaucracy becomes oppressively, then public support can easily turn into rage at the being taken for granted by the leadership. Which is why the chest-thumping Modi cheerleaders need to be careful in projecting demonetisation as a magic bullet that will make their leader invincible. In the short run, it is highly likely that Mr Modi has scored a political slam-dunk over his rivals ahead of crucial assembly elections but if an economic slowdown begins to hurt the aam admi, then today’s triumphalism may become tomorrow’s self-goal.

Post-script: A senior minister in the Modi government claimed in parliament’s central hall that the pain of demonetisation will last for only two quarters. Now, 180 days may seem a short span in the life of a nation, but for millions dependent on a cash-driven informal sector, six months can seem an eternity. As a cash-strapped fisherman living by Goa’s River Mandovi told me, “in this country, the big fish yet away, the small are always trapped.”