Among the many questions raised over the Bharatiya Janata Party government’s move to invalidate high-currency notes is that of timing. The decision to demonetise Rs 500 and Rs 1,000 notes, ostensibly to crackdown on the black money economy and counterfeit currency, was announced on November 8, just a few months before two key states – Punjab and Uttar Pradesh – go to the polls. This has raised speculation that the decision was aimed at hurting their competitors in states where money power is crucial to electioneering.
Just four days later, on November 12, BJP President Amit Shah launched the “UP ke mann ki baat” campaign in Lucknow, to seek inputs of voters. Over the next two months, the party will hold meetings and events across the state, campaigning on the dual plank of eliminating black money and their opponents.
While there are no concrete figures for this, the so-called “surgical strike on black money” has undoubtedly impacted the flow of unaccounted-for cash used for campaigning and has made things difficult for parties as well as candidates – declared or potential.
Candidates, in particular, are facing serious difficulties in raising money to buy tickets, a common practice, especially in Uttar Pradesh. Rumours abound of parties returning the Rs 500 or Rs 1,000 notes paid by candidates, asking them to replace it with small or new denominations.
The campaigns of parties are largely funded in cash and money power is known to be used to woo voters. To avoid the Election Commission’s scrutiny during the official campaign, parties and candidates tend to spend their cash on voters months in advance, so that they can avoid the regulations imposed by the model code of conduct. The code, a set of guidelines for political parties to ensure free and fair elections, comes into force once the poll body declares the election dates.
Campaign cash is primarily spent on three things. First, money is used to fuel patronage networks that connect candidates to the local elite. Candidates need to tap into the mobilisation capacity of local leaders – such as members of Panchayats – which they will not get for free. Candidates have to practically buy the loyalty of these local leaders, and so way ahead of the elections, before other parties can get to them.
Money is also needed to tackle factions and other party leaders, to prevent them from defecting or breaking away, for instance. And in most parties, candidates are expected not only to fund their own campaign but also to contribute to the party’s coffers.
The third use of cash is to fund regular campaign activities, of the legitimate kind – such as organising rallies, ferrying supporters, issuing leaflets, setting up hoardings and hiring vehicles – and the illegitimate kind (to distribute liquor and other doles). All these expenses are largely cash-based and rely on black money.
So the demonetisation move has hit candidates from all parties hard, because much of the cash they had been consolidating for the past few months – or years – has been devalued. Laundering all of it or converting it to white will be a challenge. For now, candidates are spreading their cash reserves among individuals making small deposits. This comes as a cost since those individuals usually take a commission for their service. It also has limited impact, since the amounts are usually too large to be laundered that way.
As a result, parties are reshuffling their resources. Many candidates fear that they will lose their tickets because they will not be able to finance their campaigns. Local landed elite, businessmen, party workers and other supports who usually contribute to political campaigns are now reluctant to do so. The entire flow of campaign money has been curtailed.
Which brings us to the question: How does this give BJP the upper hand?
Given the nature of its organisation and financing, the BJP has a comparative advantage against its rivals. First, money does not play a very central role in ticket distribution for the party, as candidates are largely recruited from within the Sangh Parivar’s organisation. Second, the party relies largely on the Rashtriya Swayam Sevak Sangh for mobilisation. Arguably, the RSS also needs cash to fund campaign activities but the reach of their local network make it less of a headache for them than for other parties.
And finally, the fact that the decision is that of the BJP government at the Centre gives the party a narrative for its campaign – the fight against corruption and terrorism, along with the need to keep the ruling Samajwadi Party and Bahujan Samaj Party out of power. This enables the saffron party to create an imaginary bond between these four targets, to create an association in the minds of voters.
Whether or not voters will be receptive to that narrative – and how the current hardship faced by people in accessing their money because of the liquidity crunch in the immediate aftermath of the move affects the party’s prospects – remains to be seen.
A worrying possibility, however, is that the cash crunch may push strong local candidates across parties to rely more on muscle than money power in the elections, which could lead to violence – among potential candidates as well as towards specific segments of voters.
The writer is a Research Fellow at Trivedi Centre for Political Data, Ashoka University. These are his personal views.