Demonetisation and Elections : 2017 the year of reckoning

While many discussions and op-eds have been written about the economic aspect of demonetisation, not much has been written on its effect on the political spectrum of the country. Political pundits have mostly viewed this as a grave mistake on the part of PM Modi. It is being viewed as digging the grave for BJP in electoral politics as the percentage of these higher notes was 86% of the total notes in circulation meaning everyone was affected by this and was made to stand in long queues in front of ATMs and Banks. Add to that traders – considered to be among core supporters of the BJP – being forced to go cashless and to follow proper accounting.

2017 is going to be a crucial year for BJP as 7 states – Uttar Pradesh, Punjab, Uttarakhand, Manipur, Goa, Gujarat and Himachal Pradesh – go to elections. Out of these seven, BJP has government in 2 states – Goa and Gujarat – while in Punjab, they are part of the government with SAD being the major party. After defeat in Delhi and Bihar in 2015, winning these elections is very crucial for BJP.

So why would PM take such a step at this juncture where another loss could be seen as the government losing popular support, and eventually appearing to lose in 2019. Although PM said in his address that this wasn’t about politics but about cleaning up the economy, there is hardly any decision of any government that doesn’t involve politics.

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So even here one has to see what gains Modi hopes to make via this decision politically, although the central idea behind demonetisation may or may not have been political.

Let’s remember that elections in India see big usage of black money, and every party is believed to be guilty of spending unaccounted money. The meltdown of many politicians with some of them hallucinating things out of the air, proves that demonetisation has hurt some in the opposition and has upset their plans.

Every political party would have hoarded vast amounts of cash to be distributed as election dates approach. BJP on the other hand would be at an advantage here as they rely mostly on the RSS for ground work when. This could prove to be a crucial difference. With most of the cash being made redundant, it will be difficult to buy votes. Also, BJP being the largest party in India at the moment in terms of registered members will have an advantage over others.

Another aspect that can further help is the shifting of the Union Budget date from 28th February to 1st of February and doing away with the separate Railway Budget. Now the Railway budget would be part of the main Union budget. The main reason behind this move was to make sure GST rolls out on the 1st of April as no time is wasted between March and April as the budget on 28th Feb would have delayed the GST.

Politically it will help the Government, as with the elections being held in Feb-March, the surplus money coming into the government treasury via IDS and demonetisation can be used to announce schemes for the economically backward class. A bit of that was already done on 31st December 2016 as PM announced various goodies for such classes. This is the reason opposition is demanding that the date of the budget be shifted from the 1st of Feb to after 8th of March when the final phase of voting will be done with.

Currently BJP has the momentum on its side with the party winning the recently concluded by-polls and civic body elections in Gujarat and Maharashtra. With the new elections poll surveys showing BJP doing much better in all the states compared to the last time, one can not say that the idea behind demonetisation was not thought through politically.

If BJP wins the assembly elections in coming Feb-March, it could also force the likes of Nitish Kumar (CM of Bihar) and Naveen Patnaik (CM of Odisha) to realign themselves before the 2019 elections. 2017 will also be the make or break year for Aam Aadmi Party and Arvind Kejriwal’s dreams of being the Prime Minister in 2019 as they aim to win in Punjab and Goa, and later in Gujarat. But with AAP’s Goa leader supporting demonetisation and no money to fight Punjab elections, things are not looking rosy for the party.

In a nutshell, 2017 will be an interesting year as political landscape could see tectonic shifts and realignments before 2019 – and demonetisation will play a crucial role in this.


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