Finance Minister Arun Jaitley was right to stress the improvement in the Government’s revenue collections in recent weeks as a pointer to the fact that the so-called calamitous effects of the November 8 demonetisation have been overstated. However, while the full impact of Prime Minister Narendra Modi’s audacious ethical cleansing is yet to be fully grasped, either by economists or other policy makers, demonetisation looks set to have a profound effect on the politics of India.
The Opposition parties, particularly the Congress and the Trinamool Congress have not lowered the tempo of their anti-demonetisation campaigns. They have convinced themselves that there is considerable political mileage to be gained by tapping into the dissatisfaction of group or individuals who have been either inconvenienced or even devastated by the attack on the cash economy. They have also been egged on by a section of the media and the intelligentsia who have other scores to settle with the Prime Minister.
Whether demonetisation is as popular as the BJP claimed in its National Executive meeting last week or a good idea marred by incompetent implementation, as some people insist, is a debate that will always be inconclusive. However, a spate of local polls has thrown up results that could be interpreted positively by the Prime Minister.
The BJP registered resounding victories in municipal elections in the mid-sized towns of Maharashtra and Madhya Pradesh. These victories were supplemented by big victories in Chandigarh and the industrial town of Faridabad (Haryana) on the outskirts of Delhi. It may well be argued that municipal polls are fought over local issues and not issues of national importance. In normal times this is true. The question is: was demonetisation a normal, run-of-the-mill Government decisionIJ
Judging by media reports, anecdotal evidence and the political noise it generated, demonetisation was anything but mundane. Rarely has an issue touched the daily life of every Indian in such a profound way. Every Indian, however high or low, has a demonetisation story to tell.
The sheer magnitude of Modi’s November 8 decision prompts an obvious conclusion. Even if we assume that all those who supported the decisi-on, either passively or more vocally, need not necessa-rily have voted for the BJP in a set of local elections, there is also a converse logic. If the move was extremely unpopular and left communities devasta-ted, it would follow that the people of Chandigarh and Faridabad would have voted determinedly against the BJP. Yet in both places the BJP won decisively, defeating the Congress.
The results pose curious questions. The few available quantitative studies of the effects of demonetisation suggest that the small-scale units, particularly those in the twilight zone between the organised and informal sectors, have been hard hit. Personal conversations with BJP functionaries revealed that the traders in market towns who have been traditional supporters have been very hard hit and many feel betrayed. The support for demonetisation has come from two quarters. First, there is a section of the salaried middle classes that, despite not being totally conversant with the joys of low-cash existence, are happy that the entire expansion has resulted in that section which avoided paying tax altogether being dragged into the tax net. Secondly, those on the margins of the poverty line are overjoyed at the discomfiture of tax-evading fat cats. For them, demonetisation has about the same meaning as Indira Gandhi’s anti-rich, socialist measures of the 1970s.
If we assume that a section of the BJP’s traditional supporters in the places municipal polls were held, shied away from supporting the party, it implies that newer voters must have rallied behind Modi. This in turn raises an interesting possibility: has demonetisation changed the nature of support for the BJP and made the party more acceptable to those lower down the income ladderIJ The BJP was always a party that epitomised middle class aspirations and values. Has it now managed to percolate downwards in the economic ladderIJ If so it is a development of huge consequence. Over the years, the BJP has quite consciously reinvented itself as a party of a section of OBCs. If this is
now combined with significant support from the poor — a traditional bastion of the Congress — it would suggest that Modi and Amit Shah are on the cusp of forging a dramatic socio-political realignment. The suggestion isn’t fanciful. Those examining Modi’s recent speeches endorsing demonetisation may be struck by the frequency with which he couples his invocation of modernity with concern for India’s poor. Commentators have been struck by the apparent similarity between Modi’s recent speeches and Indira Gandhi’s rhetoric between the Congress split of 1969 and the general election of 1971.
The circumstances may be very different. But there is one arena where comparisons are warranted. When Indira Gandhi adopted Garibi Hatao as her plank, her left turn was expedient. She used it for two ends. First, to rejig the Congress leadership; and secondly, to rejuvenate the Congress’ social coalition and supplement its traditional upper caste, Dalit and minority votes with an overarching constituency of the poor. Apart from its ethical role, Modi’s demonetisation is heralding a huge social change in the BJP. With the leading Opposition parties determined to forge a grand alliance against him, Modi has little alternative but to enlarge the party’s social base. Good governance can win brownie points. However, as the 2004 election showed, it is by no means sufficient to add votes to the kitty. Emotional appeal based on aggregative identity is a possibility but it has damaging social ramifications. Mobilising the poor to supplement the party’s middle class core seems to be Modi’s preferred approach. This doesn’t make him socialist. At its core, the Modi agenda remains economic modernity and state efficiency. His strategies of political mobilisation are however, more innovative.