Demonetisation exercise could backfire for BJP if cash crunch in ATM continue

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With Prime Minister Narendra Modi strongly defending the demonetisation of Rs 500 and Rs 1,000 currency notes in recent public speeches, there’s no denying that the move is a high stakes political gamble for BJP. Though aimed at fighting black money and counterfeit currency, the exercise has also caused much hardship to the common man. Aside from long queues at banks and ATMs, people facing medical emergencies or planning weddings have been hit hard by the cash crunch. The situation is even worse in small towns and villages where banking penetration is weak.

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Yet, despite the inconvenience caused, the public has so far been largely supportive of the demonetisation move. They hope that it will fight corruption. But if the cash flow isn’t normalised soon and queues at banks and ATMs remain long, this supportive mood could quickly flip. It isn’t clear that the government has prepared adequately for the demonetisation effort. Even accounting for secrecy, it could have taken steps such as increasing the flow of Rs 100 notes and quietly recalibrating ATMs for the new notes, that would have mitigated public hardship.

The move is risky as it could alienate a core support base for BJP: small traders and businessmen who largely deal in cash. In recent days, they have seen their supply chains dry up and customers dwindle for the want of liquidity. The pain can’t be sustained for long. BJP might want to advertise the demonetisation effort as a surgical strike against black money. But given India’s economy depends largely on cash, and 85% of the currency in circulation was in Rs 500 and Rs 1,000 denomination, the move is nothing short of a full-blown conventional strike with massive collateral damage. Given the nature of Indian politics, it shouldn’t come as a surprise that opposition political parties will use this opportunity to attack the government.


We have already seen West Bengal chief minister Mamata Banerjee try and reach out to arch rival CPM to corner the Centre on the issue. The upcoming winter session of Parliament is likely to be stormy with political battle lines clearly drawn – BJP will continue projecting demonetisation as a bold move to fight graft while opposition parties will highlight the plight of the common man. BJP’s strategy will work to the extent the government is able to stem the cash crisis quickly.

DISCLAIMER : Views expressed above are the author’s own.
Source : TOI


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