The delegitimisation of large bills was a Kejriwal-type idea that was implemented with Congress-type efficiency. Even so, it would be recognised in time as a politically sound move by Narendra Modi. Despite the suffering it has unleashed, it would enjoy an exalted place in public consciousness as the policy that pushed most Indians towards formal banking, increased tax collection, and debilitated illicit money and low-grade terrorism. In fact, it would be wise for Modi's foes, who include politicians and conscientious humanities professors, to quickly abandon their public campaigns against the policy because the longer they keep at it the deeper the branding of Modi as an economic reformer.
The recent by-polls that were held at the height of the cash crunch and in which Modi's Bharatiya Janata Party did extremely well should not be surprising at all. In time, the rewards would be greater. There are several reasons.
Among the working class the very potent anger against the great cash crunch is not translating into political venom. A majority of the nation perceives demonetisation as a painful but honorable move that would screw the rich more than them. We must never forget that this is the age of the underdogs where every layer of the society feels that there are despicable oppressive layers above it. The poor, who stand in queues outside banks, notice that the 'other kind of people', the masters and madams, are suffering too. In this light it is a bit daft of the elite to keep joking, 'We don't see any rich person in the queue to the ATM'. You are that rich person in the queue, from an average voter's point of view.
In the past few days we have seen an enormous amount of middle-class love for the poor. Almost all elite arguments have been couched in concern for the cashless poor. Some Beautiful People are even worried that Modi is coercing India's poor into the formal banking system. Ideally, those who truly care about the poor should have done the job a long time back instead of leaving it to a practical professional politician who has begun work on securing another term. Well-meaning activists did try but it appears that only a government can accomplish the job, and the only way millions of Indians can be inspired to enter the banking system is by delivering a mild shock. That is what has happened.
The Beautiful People say that the poor would suffer without physical cash in their hand, they would not know how to use a card, they would not know how to transact over their mobile phones, and their mobile phones are not so smart in the first place. It is extremely amusing that the same people who sabotaged Facebook's efforts to bring free internet to the poor are now wondering how the poor would find access to the internet to bank on their phones.
Such beautiful thoughts fall in line with the general condescension that the fortunate have for the wretched. The fact is that the poor are not retards. They figure out things, especially when it concerns money. They adopt affordable technologies and processes swiftly.
Another hypothesis of the Beautiful People is that the government's push towards the formal banking system is sinister. The broad reasoning is that the more organised a society is the more powerful and effective the government would be, and such an arrangement usually does not bode well for freedom and rebellion. This is a correct analysis. But the truth is also that we have experimented with disorder and loose regulations in almost every aspect of Indian life and it has been a colossal failure for the poor. Maybe it is a good idea to give order a chance. And yes the government would be able to track the finances of its people, and it would be able to collect more protection money from us. But it is a price we pay for order. It might even be a good bargain.
Modi does have one cause for concern, especially if demonetisation works better than expected. Millions of small traders, who until now paid no direct taxes, would be dragged into the formal economy. Many rural lower middle-class families, similar to the one Modi himself emerged from, would lose the subsidies that they have been claiming illegally. The short term contraction of the informal economy which, according to some estimates, provides 80% of the jobs, would result in perceptible unemployment. The resentment of the immediate victims would not be expressed directly against demonetisation because people usually do not rage against an act of righteousness. They would instead find faults with Modi, faults they would have overlooked otherwise. They might start looking at him very carefully. And he is not going to like that.
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