Demonetisation won crucial UP for BJP, but litmus test in five states soon

Chandrababu Naidu
Andhra Pradesh Chief Minister N Chandrababu Naidu, once an ally of the Bharatiya Janata Party (BJP) and a supporter of demonetisation, now says Prime Minister Narendra Modi’s decision to ban high-value currency notes was driven primarily by political objectives rather than economic ones. 

In the national capital last week to cobble together an anti-BJP front, Naidu said that the note ban had led to an economic “vicious circle” of lack of growth and poor investor interest.

The Telugu Desam Party, which Naidu leads, was an ally of the Modi government when the Prime Minister announced demonetisation on November 8, 2016. In fact, on November 29, 2016, Modi appointed Naidu convener of the ‘CMs’ committee on digital payments’. The committee, under the NITI Aayog, submitted its interim report at the end of January 2017. 

“We recommended that the government promote digital currency as it would be cost effective compared to paper currency and curb corruption,” Naidu said. “But they (the government) introduced Rs 2,000 and Rs 500 notes, which made distributing currency during elections easier and increased electoral corruption.” 

In the run-up to the Karnataka assembly polls in May 2018, Naidu had openly talked about an “artificial” cash shortage in his and neighbouring states, and had alleged that it was part of the Centre’s poll strategy to keep opponents famished of cash. 

Last week, Naidu said this strategy was likely to be used again now that assembly elections were round the corner in five states. 

The difficulties that Bahujan Samaj Party (BSP) chief Mayawati faced because of the cash crunch in the Uttar Pradesh assembly polls of February-March 2017, held nearly three months after note ban, are now part of the state’s political folklore.

After a series of electoral wins in 2014, both in the Lok Sabha and some states, in 2015 the Modi-led BJP lost the Delhi and Bihar assembly elections. It was slammed for its efforts to amend the land Bill and accused of being a ‘suit boot sarkar’ — a government of and for moneybags.

The May 2016 results of assembly polls in West Bengal, Kerala, Tamil Nadu, and Puducherry could have been more favourable to the BJP, although the party scored a famous win in Assam. 

The real challenge was to win Uttar Pradesh in March 2017, where elections were held along with Punjab, Manipur, Goa, and Uttarakhand. The spectacular win in Uttar Pradesh months after the note ban showed that though the drastic move had failed to achieve most of its economic objectives, it had weakened BJP’s opponents in the state and convinced the man on the street that Modi was anti-rich and pro-poor.

By the time Gujarat and Himachal Pradesh went to the polls in December 2017, demonetisation had severely disrupted the informal economy and a hurriedly implemented goods and services tax (GST) on July 1, 2017, had further hurt the MSME (micro, small and medium enterprises) sector. The anger against the Modi government was palpable on the streets of Gujarat. Rashtriya Swayamsevak Sangh affiliated outfits — Laghu Udyog Bharati and Bharatiya Mazdoor Sangh — also took to openly criticising the BJP government. The BJP won the day in Gujarat but only just. MSME owners, part of the party’s core support base, expected the Centre to look into their problems, which the PM eventually did last week, by announcing a series of measures.

Opposition leaders believe people kept their faith in the Modi government despite the hardships owing to demonetisation because of hope in his ability to deliver, which they say has now eroded. As the BJP turns to the Ram Janmabhoomi issue in the run-up to the 2019 Lok Sabha polls, the Opposition narrative against Modi government is gathering steam. 

Meanwhile, when the results of the upcoming elections in Madhya Pradesh, Rajasthan, Chhattisgarh, Telangana and Mizoram are declared on December 11, it will be clear whether the people have forgiven the Prime Minister for demonetisation.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel