Cash crunch make some in Modi’s party anxious

Cash crunch make some in Modi’s party anxious

December 31, 2016
Old invalid currency notes are displayed outside the Reserve Bank of India in New Delhi, Friday. A deadline for Indians to deposit invalid rupee notes at banks closes Friday as attention turns toward the potential political ramifications of Prime Minister Narendra Modi’s bold currency shakeup. — AFP
Old invalid currency notes are displayed outside the Reserve Bank of India in New Delhi, Friday. A deadline for Indians to deposit invalid rupee notes at banks closes Friday as attention turns toward the potential political ramifications of Prime Minister Narendra Modi’s bold currency shakeup. — AFP



CASH shortages weeks after Indian Prime Minister Narendra Modi’s decision to abolish large currency notes are making allies and members of his ruling party anxious, with some distancing themselves from the move ahead of a series of state elections.

Modi removed 500 and 1,000 rupee notes, worth around $7.50 and $15 respectively, on Nov. 8, billing it as an attempt to root out corruption, end terror financing and move the country into the age of digital payments.

He promised to replace all old bills with enough new currency notes by the end of this month. But his government has struggled to do that, leading to long lines at banks and a slump in economy activity. Nearly 90 percent of transactions in India used to be in cash.

Interviews with six lawmakers from Modi’s Bharatiya Janata Party (BJP) and a senior leader of the party’s ideological parent, the Rashtriya Swayamsevak Sangh (RSS), show his party cadre is starting to worry that the cash crunch could hurt their prospects in several states that go to the polls next year.

Some parliamentarians said that while they thought Modi’s decision was good, its execution had been botched and they were faced with constituents who were increasingly upset.

“There is no doubt that it is difficult to convince voters that everything will be fine,” said Santosh Gangwar, the junior finance minister who is leading the BJP campaign in western Uttar Pradesh.

“Every candidate who will be contesting polls is nervous because they feel people may not vote for the BJP ... There is tension and we cannot deny it,” he said.

BJP spokesman G.V.L. Narasimha Rao said that despite temporary difficulties, the prime minister continued to enjoy overwhelming support.

“Party cadres are highly enthused about a big victory in upcoming elections, and if a few are apprehensive, they will realize the reality soon,” Rao said.

Disquiet within the BJP underscores how Modi’s unprecedented bet is turning into a test of popularity, and could go some way to determining his political future.

It has become a central issue in Uttar Pradesh, India’s most populous state, where the outcome of elections early next year will be key for Modi’s expected bid for a second term in 2019.

The senior RSS official said Modi was counseled days before the move to take time to prepare the ground for such a massive exercise, including setting up two new mints and expanding the banking network, and to roll it out in phases.

But Modi decided to press ahead, and he alone would bear responsibility for its failure or success, the official added.

Last week, more than three dozen BJP lawmakers, many of whom came from states that go to polls next year, met with Shah to demand that the government sends more cash to their constituencies, and quickly.

The MPs told Shah about severe cash shortages and hardship to local businesses and ordinary people, according to several lawmakers who attended the meeting.

They told the BJP president that they did not have the courage to hold election rallies at a time when people still had to stand in line, sometimes for hours, to get money. Some said they had not started door-to-door campaigning.

“The situation is grim, and we cannot ignore it,” Jagdambika Pal, a BJP lawmaker from Uttar Pradesh who attended the meeting, said. “It is a challenge for every BJP lawmaker to manage the situation, but we cannot do anything if there is no money in the banks.” — Reuters


December 31, 2016
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