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Demonetization in India has lead to erosion of confidence in the system but not in the leader.
On the eve of the New Year, the Indian Prime Minister Narendra Modi went on air to make an address to the nation, this would be his first televised speech after the Nov. 8, 2016, demonetization announcement.
Mr. Modi is a Teflon coated slick politician who is both glib and prone to bouts of braggadocio. His televised appearances are the subject of many a Twitter joke and WhatsApp message, which act as a source of humor in times when many Indians are forced by his government to spend hours exchanging old notes for new and there isn’t much to feel cheerful about.
They are also being harassed by ever changing rules and threats of punishment for handling their own money. Mr. Modi described the demonetization as a “ritual purification”. Purification is a theme that is popular with him considering he won the elections on the theme of purifying India of corruption and even purifying the massively polluted Ganges, the holy river of India. So far he hasn’t been able to deliver much on any of these fronts.
Anyone who denies that Narendra Modi is popular would be delusional. He derives his power from years of inefficient governments that have kept India and Indians in poverty and largely devoid of basics needed for a dignified life. Mr. Modi promised to remove that inept system and won the elections on a plank of development and progress.
Yet, even he may have dug himself into a hole by promising a bit too much in a country where everything moves slowly and time is measured in ages rather than minutes or seconds. These promises of development and the unpopularity of the opposition Congress Party has turned Modi into a larger than life figure. It is considered dangerous business in India to be critical of him or his government.
As Firstpost reported in December 2016, “A 45-year-old man was allegedly attacked with cricket stumps after he blamed the Prime Minister for the serpentine queue outside a bank in southeast Delhi's Jaitpur area, police said on Sunday. According to complainant Lallan Singh Kushwaha, he was on his way to buy a television set on Dec. 15 when he passed an ATM and noticed the long queue, they said. He said 'Modiji ki wajah se line lagi hai' (queue is because of Modi), following which a man named Atik came out of the crowd and started beating him.”
We have been covering the demonetization since it was announced and we took stock of the situation a month after. It has now been over 50 days since demonetization was announced. Mr. Modi had made a promise to the nation according to Bloomberg, “If after Dec. 30, there are shortcomings in my work or there are mistakes or bad intentions found in my work, I will be prepared for any punishment at any crossroad of the county that you decide for me.”
However as things have not gone according to plan and the demonetization process has been a total failure, Mr. Modi blew the trumpet of a cashless society and tried to change the tone of the demonetization debate. While the demonetization has failed on every account be it the elimination of black money, the scuttling of terrorist funding or the removal of counterfeit currency, Mr. Modi has continued to repeat the lie that his demonetization drive is successful. It is quite reminiscent of the Nazi propaganda minister Joseph Goebbels words who once remarked, “A lie told once remains a lie but a lie told a thousand times becomes the truth.”
Populism is a dangerous pursuit, you can rile the population against the media, the intellectuals or anyone you deem to be a threat but the cost will be extracted from your supporters. Every populist regime has sooner or later collapsed due to the burden of its own making.
Mr. Modi may have managed to hold on to his popularity despite extracting a heavy toll on India, but when the Indian economy begins to show signs of massive recession in the next quarters to come, the real test of his leadership will begin. In the coming months, there will be elections in the populous northern states of Punjab and Uttar Pradesh.
Chances are that his ultra-right wing Hindu fundamentalist Bhartiya Janata Party might even do well, but when the economy starts to falter, would the support remain as strong? This is something we will have to wait and watch.
There are already rifts forming in the country, where state governments ruled by the opposition are at loggerheads with center especially the South Indian state of Kerala and the Eastern Indian state of West Bengal, Mr. Modi may be the catalyst that shreds India apart. It would be ironic if that happens, as he is a sworn nationalist.
Demonetization is a stern warning for those who believe that the state should be the sole entity allowed to control the wealth of the people. The whims of Mr. Modi have led to a large- scale instability in India.
Even 50 days after demonetization people are unable to hold and spend money in the form factor their choice. Capital controls on withdrawal exist which continue to affect daily life and livelihoods. The inefficiencies of state-run monetary systems and the vulnerabilities of the central bank and the banking system lay exposed.
People in India have put their trust in Bitcoin in these difficult times but if the economic stability as a whole were to be threatened in the future as a result of this demonetization, then the very future of the Indian currency is at stake.
If Mr. Modi was restrained on his New Year speech and did not announce any more “anti-corruption” measures, it was because he knows that India can’t handle any more pain. If he were to announce restrictions on property or gold holdings in the near future, the whole house of cards is likely to come down upon him.
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