GOA, India — In India, the world’s largest democratic exercise this year is currently underway and the stakes are high. The results in the five state elections are being viewed as an early referendum on Prime Minister Narendra Modi and his currency decree late last year that caused weeks of economic chaos.
Coming halfway through Modi’s term, the polls may provide early public feedback about the prime minister’s leadership, and could signal the fate of a bid for a potential second term at the helm. Any setbacks by Modi’s Hindu nationalist Bharatiya Janata Party, or BJP, will likely be tied to him and the currency swap he initiated last year.
“Even his own party will blame him for it,” says Mohan Guruswamy, chairman of the Center for Policy Alternatives. “Already there have been murmurs. They’ll become a crescendo.”
Voters are currently electing representatives to the legislative assemblies in five Indian states, the most politically important of which is Uttar Pradesh, a northern state of more than 200 million people. Voting in the states began on Feb. 4 and concludes on March 8. Results are due on March 11.
Modi, who has campaigned vigorously in Uttar Pradesh for the BJP, has staked his reputation on winning it. But his message — the wisdom of his decision to withdraw from circulation $230 billion of Indian currency — may be a hard sell.
Last Nov. 8, while Americans were transfixed by their presidential election, Indians also were glued to their televisions as they heard Modi’s shocking announcement: Starting at midnight, the country’s two largest bank notes were no longer legal tender. Modi scrapped the existing 500- and 1,000-rupee notes (worth roughly $7 and $15) — about 86 percent of the cash in circulation in India — in an effort to crack down on corruption, terrorism and counterfeit money.
Indians had until the end of last year to turn in their money at banks for new notes. In doing so, Modi hoped to punish tax evaders and bring illicit or untaxed cash, so-called “black money,” to the attention of authorities. Modi acknowledged his policy would bring “temporary hardships” for law-abiding citizens.
Nearly four months later, the hardships have not abated. Prices of vegetables have crashed, as farmers have faced difficulty selling their crops. Construction is sputtering. Work for daily wage workers has dried up. More parents are struggling to feed their children milk and fruit.
The International Monetary Fund estimates that India’s growth for 2016 fell to 6.6 percent, a full percentage point less than the previous year. China snatched back the title of world’s fastest-growing economy.
“It was clearly mismanaged,” Guruswamy says of Modi’s currency measures. “It has had a boomerang effect.”
Purifying the country
A week before New Year’s, Indians arriving at Mumbai’s Chhatrapati Shivaji Airport shuffled between ATMs unaware of the strict 2,000-rupee limit. “I don’t think any of the machines are working,” one baffled newcomer told others waiting in line as the ATMs refused to spit out cash.
For those living in India, the pain is far more acute. Cash shortages have crippled demand for goods and services. The poor and middle class have struggled to pay fixed expenses like school fees and house rent.
For most countries, Modi’s ban would have been drastic. In a cash-intensive country like India, where the majority of people work in the informal economy, the move was catastrophic.
“The line between hardship and starvation is small,” says Guruswamy. “You lose one day’s income, the pots will be empty at home.”
Yet, if any politician can pull off a bold gamble, it’s Modi.
Before he came to power in an election upset that India hadn’t seen the likes of in decades, Modi used unorthodox approaches, such as gigantic 3-D holograms to beam a larger-than-life image of himself across India. He energized the country on a narrative of creating jobs and making India a superpower.
Critics have excoriated the clampdown of free speech under Modi but others have professed the need for a strong leader to ram through reforms in India’s chaotic democracy.
“Opinion polls seem to indicate high credibility and belief in Modi,” says Ashok Malik, a fellow at the Observer Research Foundation, an independent think tank based in India. “Whether it lasts or not, I don’t know.”
Supporters see Modi, who wears a trim white beard, flowing tunics and practices yoga, as a messiah ready to lead India into a brighter future. His Nov. 8 address to the nation about the cash swap was even couched in spiritual language. He spoke of a cash purge to “clean” the system and “purify” the country, and referred to a “Mahayagna” — a ritual sacrifice in front of a sacred fire in Hinduism.
Modi’s promise to root out malfeasance resonates in India, a country plagued by multi-billion dollar graft scandals for years and where petty corruption is a fact of everyday life. For the poor, Modi’s cash swap meant chinning up to the punches they are already so used to. For the middle class, it was a chance to see rich Indians with stashed wealth squirm.
Economists are divided over Modi’s currency measures. Many argue that Indians with black money had already poured it into land and gold. Supporters of the policy counter it was needed to bring India into the digital age and is one part of many moves against graft.
“He is presenting it as a series of steps against corruption and black money,” Malik says.
Another such step was unveiled earlier this month. Finance Minister Arun Jaitley declared a slew of campaign finance reforms. In India, dirty money has fueled elections where cash, saris and liquor are often fed to voters. Election officers stop cars to pop their trunks to check for suitcases stuffed with cash. Analysts say the new measures have few teeth to bite.
Writing in Quartz, Milan Vaishnav, author of the book, “When Crime Pays: Money and Muscle in Indian Politics,” says Modi’s policies only offer “the first hint of spring cleaning.”
‘Where is the black money?’
As the economic crisis drags on, public patience is running out.
In order to keep the announcement secret until the last moment, the government printed too few replacement notes ahead of Modi’s announcement. Even today, people struggle to break their notes into denominations smaller than 2,000 rupees.
“People are asking ‘where is the black money?’ Nothing has happened,” Guruswamy says.
The state elections may also indirectly determine the cast of characters sent to India’s upper house of Parliament, which has blocked bills introduced by Modi’s administration. Victory in the state elections would send more BJP legislators to Parliament and help push through Modi’s legislation.
In Goa, one of the states currently holding elections, roadside billboards are plastered with faces from the Aam Aadmi Party. The upstart defeated the BJP in state elections in the capital Delhi in 2015, despite Modi’s sweeping victory in national elections the previous year. Later in 2015, his party also lost in Bihar, a populous state he had won handily in national polls.
Any losses in the ongoing elections will likely be attributed in part to Modi. Guruswamy, of the Center for Policy Alternatives, says losses by the BJP will not drive Modi out of office. But the prime minister’s imperious ruling style will have to change, he says.
“Ministers will challenge him in the cabinet. They’ll ask questions,” Guruswamy says. “Modi is not used to government by discussion. He’s used to government by diktat.”
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Narendra Modi’s Big Bet on India’s State Elections originally appeared on usnews.com
