It is now 44 days since PM Narendra Modi made the shock ‘demonetisation’ announcement that Rs 500 and Rs 1000 notes would not be valid after four hours, thereby rendering 86% of the country’s currency as invalid. While conveying the message, the PM did mention that there would be inconvenience caused to the citizens because of this move, but in the long run, this step would play a part in eradicating corruption in India.
During this period, there have been varying views in the country on the sincerity of the government in tackling the menace of corruption, on the actual implementation of this entire exercise and to what extent would this move help in achieving the desired objective of reducing corruption. As expected, the opposition parties and some sections of the mainstream media have tried everything possible to cause unrest among the citizens. There have been allegations that the friends of BJP were informed about this move well in advance and they have planned accordingly. Mamata Banerjee and Arvind Kejriwal have been the most vocal critics of Demonetisation and all of a sudden, have developed special love for the poor and underprivileged citizens of the country. Sycophants of the Congress like Sanjay Jha posted pictures of queues of elections in Africa on twitter and claimed that these are queues outside a bank in India. The overrated economist former PM Manmohan Singh made a scathing attack on the government, terming this as ‘organized loot, legalized plunder and a monumental management failure’. Rahul Gandhi’s views on this are not worth discussing and hence, I am not getting into that. Parties like AAP and AIMIM have played the religion card. While AAP tried to instigate the Hindus against the government by saying that BJP has ruined the life on Hindus, the AIMIM has alleged that Muslims are suffering more in comparison to the Hindus. The mainstream media and some of the portals have been spreading misinformation on the number of deaths due to Demonetisation, although they have not furnished any evidence on the deaths being directly linked to the Demonetisation. Some of the economists have predicted a huge drop in GDP albeit in the short term.
On the other side, the government has claimed that the citizens of the country are firmly behind the PM. The survey in the Narendra Modi app suggested that over 90% of the participants were with the government on Demonetisation. There were various other surveys, notably by journalist Rahul Kanwal, which also suggested that majority of the participants were with the government on Demonetisation. The critics responded by saying that only a small percentage of the actual population is covered in these surveys, although internet and social media polls cannot be ignored as we saw in the 2014 General Elections.
The most reliable indicator would be the election results after the Demonetisation move. Let us analyze the elections that have taken place after the Demonetisation was announced. There have been by-elections held in West Bengal, Tamil Nadu, Arunachal Pradesh, Assam and Madhya Pradesh. The by-election results clearly suggest that if anything, the BJP has only gained as a result of Demonetisation. The BJP did exceptionally well in most of these states, even doing better than the left in West Bengal. This was followed by good performances by the BJP in the Maharashtra municipal council polls, the Gujarat civic polls and more recently the Chandigarh civic polls. While one may argue that other local issues would take precedence in these polls, the fact remains that Demonetisation was a big factor in all these polls. If the citizens were indeed as much against the government as claimed by the critics of Demonetisation, the BJP would have been routed in each of these polls.
While the election results and the various polls seem to suggest that it is still Advantage Modi, there is a large section that is disillusioned with the government. Some of the things the government and RBI can do in my view to further enhance the credibility of this move are as follows:
1) Over the past few days, there seems to be a growing disconnect between the government and the RBI. While Finance Minister Arun Jaitley said that anyone depositing over Rs 5000 would not be subject to any scrutiny for the first time, the RBI has already started scrutinizing deposits over Rs 5000. This kind of a disconnect has created a negative vibe among the people. In the first place, when the government initially gave a deadline of 31st December to deposit old notes, there was no need to enforce this scrutiny. The RBI has now relaxed the rule, but some damage has been done as far as credibility is concerned.
2) There has been criticism against the government as far as implementation is concerned. Yes, the implementation and planning could have been better and even after one and a half months, we find long queues outside ATMs. The government and RBI must act fast and ensure that there is sufficient money available in the ATMs and the inconvenience is quickly addressed. Bank employees indulging in illegal acts must be strongly punished.
3) There is no doubt that people are slowly starting to get impatient and are fed up of standing in long queues. To make up for this, the government must consider revising the Income Tax slabs during the budget in early 2017. There have been unconfirmed reports of new tax slabs wherein the minimum taxable income would be increased to 4 lakhs from the current 2.5 lakhs. If the government does come up with a change in the IT slabs, that would go a very long way in enhancing the goodwill factor. Reducing the tax rates would also be an incentive to the people to be honest in paying taxes and not to indulge in evasion.
4) The Finance minister has mentioned that there is no shortage of money with the government. During the budget, the FM must look at increasing the public spend, especially on infrastructure. This would help in generation of more employment and the economy in general would prosper.
5) The government must also look at further encouraging a digital economy by providing more incentives to digital transactions. The government’s PR skills in educating the people on the various digital options available have been rather poor. This is something that the government must seriously look at.
6) Now that inflation is very much under control, the RBI must look at reducing the repo rate soon. This would benefit the end consumer when the banks decide to pass on the reduction in the rate. This would also enhance economic activity as banks would have money available at a cheaper rate.
To conclude, looking at the various surveys and election results, Narendra Modi’s popularity has certainly not reduced after the Demonetisation move of the government despite best efforts by the opposition parties and the mainstream media.
Having said that, people are slowly getting restless and the patience seems to be running out with a lot of people. The government must act fast and ensure that things come back to normal at the earliest. The PM had asked for 50 days for things to come back to normal and we are slowly nearing that timeline. At the moment, the situation is far from normal and this is something on which the government must act and act fast. The Budget in 2017 is critical for the government and the people are already looking forward to some major incentives, especially on the IT rates.