Demonetisation, Modi and the 2019 Election

In November 2016, Prime Minister Narendra Modi in one stroke scrapped all ₹500 and ₹1000 notes. These accounted for 85% of India's cash. And India's economy is 80% informal/unorganised – which is heavily cash-based. The new notes took a long time to arrive – and people stood in long queues in banks and ATMs for many weeks. More importantly, demonetisation (DeMo) devastated the cash-intensive informal sector. Many small-scale enterprises shut down – and threw their unskilled workers into unemployment and poverty. The impact showed both in the form of a lower growth rate and also a higher unemployment. Of course, there were going to be long-term benefits: more formalisation, more digitalisation, more tax-payments, etc. But these are of interest only to economists. In a democracy, a political party has to face elections every 5 years. In this case, there were only 2.5 years to go for the next national election. So DeMo looked like a politically suicidal move.

Over the next 2.5 years, the Indian economy grappled with two major problems: unemployment and agrarian distress. Unemployment reached a 45-year high and it had definitely been made worse (if not created) by DeMo. Agrarian distress was also at least partially due to DeMo – because agriculture is also a cash-intensive sector. The 2019 national election approached and political scientists said the BJP would pay for its sins. Specifically, the Prime Minister would pay for his sin: DeMo. So the BJP which had won a majority on its own in 2014 would now fall to around 200 seats. Even the NDA would not win a majority – it would get around 250 seats. So the BJP/NDA would need one, two or most probably all three of the 'neutral' state parties (TRS, YCP, BJD) to form the government. Narendra Modi would become Prime Minister once again – but this time he would be much weaker. This was the consensus opinion of almost all political scientists.

Then the election happened. And the BJP won 303 seats – with the NDA winning totally 358 seats. Even by itself, this was an earthquake. And coming in the wake of a politically suicidal move like DeMo, it was a double-earthquake. So how did Narendra Modi manage to pull it off? He did it mainly through many pro-poor welfare schemes – but that is less important. What is more important is the basic fact that he pulled it off at all. Let this sink in: Narendra Modi carried out a politically suicidal move like DeMo and then went on to win 300+ seats. So what does this mean? It means only one thing: Narendra Modi is politically invincible. He is electorally bullet-proof. He can do anything (I repeat: ANYTHING) – and still win the next election. Conventional political wisdom can go to hell . . .