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The first anniversary of demonetisation of high-value currency notes comes up later this week on 8 November. With the Bharatiya Janata Party (BJP) deciding to take up the gauntlet thrown by the opposition—who plan nationwide protests—by declaring it anti-black money day, political grandstanding and bickering will be par for the course.

The fact that we are in the middle of two key state assembly elections, Himachal Pradesh (which votes a day after the first anniversary of demonetisation) and Gujarat, has only added to the decibel level. Clearly, there is a high-stakes battle for public perception (a collateral gain is that economics is dominating the political discourse, which hopefully will transform from name calling to an illuminating debate).

The last time there was a similar showdown on demonetisation was in the run-up to the election campaign to the Uttar Pradesh assembly. The opposition made it a key part of their arguments to discredit BJP and Prime Minister Narendra Modi. It clearly didn’t work and BJP won a record landslide.

Since then, however, the Reserve Bank of India (RBI) has released data relating to the demonetisation exercise, which has punched holes in some of the arguments put forth to justify this unprecedented action—withdrawing 86% of the value of currencies in circulation. This, and the slowing of the Indian economy, have encouraged the opposition to launch another scathing attack on Modinomics (the economics of Prime Minister Modi). Whether or not they will succeed would be known only on 18 December, when the votes are counted for both assemblies.

It is very likely that this is not the last of the run-ins on demonetisation. The opposition is desperate for a credible counter-narrative to Modi. This is the best opening they have had so far, especially in the backdrop of a slowing economy and the disruption caused to the informal economy by the implementation of the goods and services tax from 1 July.

There is no doubt that demonetisation caused massive disruption, especially in the rural economy—which runs mostly on cash. The biggest squeeze was on the informal economy, including the one operating in the periphery of urban India. Shoddy implementation ensured that ATMs and bank branches did not have adequate supplies of the new currencies, leading to endless queues in urban India (remarkably though, there was no report of social disturbance as people stoically went through the paces) for nearly three to four weeks.

Yes, the economic arguments justifying demonetisation were dodgy, but the politics was not. In almost every stump speech in the run-up to the 2014 general election, Modi harped on corruption and black money; and of course, the dodgy record of the United Progressive Alliance in office only strengthened this narrative. And once elected to power, the prime minister stayed on the message with a series of policy actions. In retrospect, it is apparent that he was steadily building a trust quotient with the electorate—in a democracy this is the only key to power. The policy actions of his government may have been clumsy, but his intent was never in doubt—at least, among the majority who voted.

Demonetisation was the crowning moment of these policy actions. Anecdotally, it was evident that those holding a stash of illegal wealth (always a minority) were for the first time inconvenienced if not living in fear of the tax sleuth. It generated the feeling of schadenfreude or pleasure derived by someone from another person’s misfortune among the majority of the people. Further to them, here was a politician who had actually staked his social capital in going after the corrupt. To put it another way, it was restoring the premium on honesty.

If election outcomes are any indication, then it is clear that Modi has traded in the trust quotient quite remarkably to win the perception battle. The pro-poor narrative of economic policy pursued in the last two years too no doubt has contributed.

It is to be seen though how this plays out over the next 16 months to the 17th Lok Sabha election. The PM has eroded a lot of the social capital he earned and will need to replenish it quickly to get re-elected. And in this the deliverables on the economy, particularly rural India which is still reeling under a decade of neglect and a prolonged phase of drought/inadequate rains, would be the key.

In that sense, unlike in the battle for public perception on demonetisation, economics will drive politics in the next election cycle.

Anil Padmanabhan is executive editor of Mint and writes every week on the intersection of politics and economics.

His Twitter handle is @capitalcalculus.

Respond to this column at anil.p@livemint.com.

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