The demonetisation of India’s currency that commenced on November 8 inconvenienced every segment of society. People lined up for long hours outside banks and ATMs, many lost wages, and businesses saw a downturn in demand and retrenched their employees. The cash shortage meant that farmers dumped their produce lower than cost price and the winter crop was not sown in time. A leading industrialist in northern India told us that his company suffered a financial loss for the very first time in its history. From our conversations with people, it also appears that low-level corruption has returned to its pre-demonetisation levels as cash has re-entered the economy.
Many have wondered if notebandi is Prime Minister Narendra Modi’s and the Bharatiya Janata Party’s nasbandi. After all, nasbandi was another well-intentioned but poorly implemented government policy. It forcibly sterilised 11 million Indians during the Emergency, and cost Indira Gandhi and the Congress dearly in the 1977 elections.
The inconvenience and suffering related to demonetisation has produced much discontent. While it is difficult to estimate whether this has hurt the popularity of Modi, the father of demonetisation, and the BJP, it is clear that it has not produced an electoral revolt against them. Modi remains popular and the BJP has done reasonably well in the elections in five states that concluded on Wednesday, with the results due on Saturday.
In our view, notebandi will not produce an electoral upheaval for three reasons. First, the discomfort caused by notebandi is not very different from the routine capriciousness of the state towards its citizens, who are normally subject to the whims of officials. Second, for many Indians, notebandi is a legitimate form of state intervention. Third, notebandi was popular because it was presented as a bold and swift move against the corrupt, the powerful, and the wealthy.
Routine apathy
Our research across various states suggests that the rich, the poor, and those in between constantly experience the states’ half-kept promises. Their expectations are shaped by their encounters with state capriciousness. Roads that fail to survive monsoons, callous public officials who demand bribes, irregular electric and water supply, teachers and doctors who do not show up to work, politicians who do not honour their promises – all of these inform this experience. Some citizens possess the means to escape this capriciousness by procuring solutions in the market: private schools, healthcare, gated communities with electricity back-up and water treatment plants, for example, while others do not. But all experience it routinely.
The state performed to script on the demonetisation policy. New currency was not produced and transferred to banks in a timely manner, the currency notes were not made to size for the ATMs, the banks dispensed high-denomination Rs 2,000 notes that were difficult to use. The misery of the people was further compounded by frequent fluctuations in government policy. Sadly, the median Indian voter does not expect any better from the Indian state other than a degree of ineptness in the implementation of public policies. So, when the same state bungles a role out of a public policy, people suffer and grumble, but the experience does not upend their expectations of the state. It only reinforces them.
Legitimate intervention
Demonetisation also represents a legitimate form of state intervention in the eyes of citizens. Since the state creates currency, the state can withdraw and replace it. Not all forms of state intervention are viewed similarly, however. There is a conservative Indian intellectual tradition in which the state is not seen as the source of all law, or as an agent of social change. In this tradition, the state is subservient to society and has to protect social norms. Dating back to ancient India, this view expects the king to build infrastructure and to provide for the poor and the needy with basic necessities, but draws a line at the state’s intervention with social norms.
Nasbandi directly intervened in the decision of citizens on the size of their family, a deeply personal matter, and crossed this line. But notebandi has not. Survey evidence testifies to the survival of this deep-seated skepticism among the electorate of the state’s role in management of social norms. A large plurality (43%) of respondents to the 2004 National Election Study favoured the idea that “every community should be allowed to have its own law to govern marriage and property rights”.
Targeting the rich
Finally, notebandi’s popularity was ensured because it was politically framed as a policy to hurt the corrupt and powerful. After all, in popular perception, it is this group that hoards cash. The referent for one’s own well-being is often bound up with the well-being of others. Economists view these as interdependent utilities. Simply put, when someone we love (say our child) does badly, we do badly. At the same time, when someone we dislike (say a rival or a boss) does badly, we do well. In India, the powerful, the wealthy, and the corrupt make the poor angry. The poor are aware of how their life experiences are completely different from those who are wealthy. Since notebandi was supposed to check the power of the wealthy and corrupt, it was popular among the poor despite the inconveniences it heaped on them. Irrespective of the BJP’s electoral performance in these elections, it is unlikely that the hardship inflicted by notebandi will be a primary motivator of political preferences.
Amit Ahuja and Pradeep Chhibber teach political science at the University of California at Santa Barbara and Berkeley, respectively.