Is Demonetisation PM Modi's Waterloo or Marengo ?
Couple of years back, I was having a conversation with a Managing Director of a leading nationalised Bank in India. The conversation centred around the financial policies of the present government and specifically about Pradhan Mantri Jan-Dhan Yojana, whereby people can open Zero Balance Savings Account. He mentioned that the Jan-Dhan Yojana was a failure as a huge majority of these accounts had no savings and no transactions and has not delivered the intended results.
As we now connect the dots w.r.t economic policies implemented by the Indian government over the past couple of years till the demonetisation policy last week , the government did seem to have a plan to encourage people to use the banking systems and to bring parallel economy to the mainstream economy. This not only helps the government to pay subsidies directly to a person's bank account but also helps to increase the taxpayers base of the country. I do hope that the money generated out of these taxes will be invested judiciously in social welfare programs and country's infrastructure. PM Modi has taken a huge political risk by going for Demonetisation as it has not just created a chaos over the past few days but has also directly impacted BJP's traditional vote bank of small traders and businessmen. Tough decisions can go either ways and PM Modi is fully aware of the consequences. If this decision backfires, then PM Modi and BJP can write off not just the state elections in Uttar Pradesh, Goa, Punjab etc but also the 2019 General elections. PM Modi might also lose the confidence of his party and their might be calls from within the party to replace the Prime Minister and have another person lead the party for the 2019 general elections. But if this decision yields the desired results for PM Modi and India, then India will start making a transition from a developing economy to a developed economy and the GDP will see a 'hockey stick' growth before 2019 general election. Inflation will fall sharply and housing will become affordable for various sections of the society. With more people within the banking system, it will become easier for government to transfer subsidies and other benefits directly to the citizens, thereby helping to tackle corruption. Above all, PM Modi will not only make massive gains in poll bound states but will have a cakewalk in 2019 general elections. I have interacted with politicians all over the world and during these conversations, I have got to understand that politicians are fearful to make tough decisions because they think more about the next election than they do about the next generation. By this context, PM Modi's Demonetisation policy is more from a perspective of next generation rather than the next election. Every leader worth his or her salt takes decisions when in power but what truly separates an ordinary leader from the greatest leaders are when they focus their energies on turning tough decisions into winning decisions. For India's sake, I do hope this decision of PM Modi succeeds so that India can truly achieve its potential and re emerge as one of the super powers of the world, regain its lost glory and reclaim its position as a world leader in every sphere of influence.