Ahead of the assembly elections in five states, it was almost universally accepted that the results could be a referendum of sorts on Prime Minister’s Narendra Modi’s demonetisation drive.
At 10.45 am on 11 March, the Uttar Pradesh election results show the Bharatiya Janata Party ahead in 290 seats of the 401 for which lead positions are available. The state assembly has 403 seats in all. The combine of the Samajwadi Party and the Congress is ahead in a mere 79 seats. Unless things go horribly wrong for the BJP, the party will form the government in the state with a clear majority.
At this time, Manipur and Goa are too early to call. The BJP has Uttarakhand and the Congress, Punjab. But these two were foregone conclusions. Uttar Pradesh was the state in balance. And it is now clear that the BJP has won it.
So the question to ask is: Didn’t demonetisation matter? Or did Modi just do a great job in selling demonetisation to the masses. The short-term impact of demonetisation has been painful, especially for the unorganized sector. The Modi government’s surprise decision to invalidate all high denomination currency notes on 8 November last year — this took 86% of the currency in circulation by value out — was definitely a shock to the system. Its long-term impact is still unclear, although several economists and even multilateral agencies such as the World Bank believe that it will be positive, with unreported transactions and parts of the informal economy coming into the mainstream.
It is unlikely that voters in Uttar Pradesh have been reading what World Bank economists (or for that matter, what Harvard ones) have been saying. Which can only mean that Modi and the BJP have done a good job of convincing the voters in India’s most populous state that demonetisation was a good move — and one aimed at fat cats with lots of black money.