Demonetisation. Is it Modi’s political gamble, or a political coup d’état ?

On 8th of November, the Prime Minister of India,  Mr Modi, announced that the biggest denomination notes of Rs. 500 and Rs1000 are no longer valid as legal tender from the next day and have to trade for the newer notes in a bank branch. To understand the sheer effect of this, you need to  know that these denominations account for about 86% of the transaction in India. This initiative, to a nation which has a cash driven economy, has paralysed not only its less developed rural areas but also many of its developed urban cities.

Well, in all respect, this experiment was not carried out to just get the new notes in the market quickly; the main reason was to get unaccounted wealth accounted in the banks. Unaccounted wealth in India is a big problem, with some studies suggesting that it accounts for about 25% of the whole economy and by assuring the voters that his government will target it was one the reasons PM Modi was able to sweep the lower house of the parliament two years back.

What , in the beginning of the experiment, seemed to have played out as a ‘masterstroke’ against corruption, now seems have become a massive political gamble. With long ques, in front of bank branches and ATMs, slow and unorganised logistical planning and mounting anger, albeit slowly, seemed to be indicating that Modi administration made a political mistake.

For a few days, even I thought that this could become the case. Seemed as if this could  be the watershed moment. Nevertheless, this did not happen. In the recent byelections,the Bharatiya Janta Party (BJP) not only won the seats it was holding but also won some which were earlier held by the opposition parties such as the congress party.

This reflects two things. First, that people still have faith in the Modi government to run the administration and secondly, it seems that the pains of demonetisation have not affected the BJP’s chances politically, instead, it may have increased its chances of winning polls. This is very, very crucial as India’s most populous state,Uttar Pradesh, is going to polls very soon.  It somehow seems that making people stand in ques has made the BJP more popular.  In my experience, I don’t think anyone apart from Modi would have had the guts to take the gamble of demonetarization. Nonetheless, it seems it has paid off and somehow has unleashed a coup d’état at other parties!


I know what I am doing
I know what I am doing

Thanks to vishnu patel for the picture.



1 thought on “Demonetisation. Is it Modi’s political gamble, or a political coup d’état ?

  1. Tony Baroudi says:

    Quite an interesting post Rish! Thought you might like to know that The Economist published an article online on 3rd December titled ‘The dire consequences of India’s demonetisation initiative’, which supported your statement that demonetisation has been financially paralysing to India’s poor. Worth a read

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