Modi's Master Stroke?

While the economic gains of currency demonetisation will take time to be seen, Modi's political gains are immediate.

- Vijaya Pushkarna

Former chief election commissioner S.Y. Quraishi was at Ashoka University in Sonepat, Haryana, on November 9 to deliver a lecture on democracy and elections. He had lunch at the canteen with Gopalkrishna Gandhi, who teaches history at the university. Quraishi did not offer to pay for Gandhi’s lunch because he had in his wallet just ₹100 and a few pieces of paper. It did not matter that those pieces of paper were, till a few hours earlier, worth ₹500 or ₹1,000 each in legal tender.

“To fight corruption in elections this is the most brilliant move anyone could have made,” said Quraishi, referring to the government’s sudden decision to demonetise ₹500 and ₹1,000 currencies. When he took over as CEC in June 2010, he mentioned money power in elections, along with voter apathy, as the biggest challenge. “Our theory is that abuse of money power in elections is the source of all corruption in the country. To spend money that is not accounted for, they collect by means fair and foul, and there is a quid pro quo. And anecdotally we know they spend up to 100 times the ceiling,” he said.

It was a masterstroke from Prime Minister Narendra Modi, with which he possibly converted ₹14.17 lakh crore into “worthless pieces of paper”, and wiped out black money and fake currency that the government knew had been used to fund terrorist activities. “It is a great move, and we have been arguing for it in the past three years,” said Dr Shamika Ravi, senior fellow at the think tank Brookings India.

Chartered accountant P. Sivaram called it an “involuntary disclosure” scheme which came a month after the government’s voluntary income disclosure scheme. “It is good politics and good economics,” he said. All money will come into the banking system, which became the tracking point, he added.