Modi govt risks backlash by scrapping Rs500, Rs1,000 notes to fight black money

New Delhi: In a brave economic move, which risks political backlash, Prime Minister Narendra Modi on Tuesday announced that existing currency notes of Rs500 and Rs1,000 denomination would no longer be legal tender. The decision could upset the Bharatiya Janata Party (BJP)’s key support base—traders, small and middle-level businessmen.

Even as senior leaders of the BJP described the announcement as a game changer which would help the government in its fight against corruption and black money, they admitted to fears that it could affect the party’s voter base. At best, said a senior BJP leader who asked not to be identified, it would be a “short-term loss”. “The big worry is we can’t fathom how it will impact us in the long-run,” this person added.

With assembly elections due in five states over the next six months (Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur all go to polls), the move is risky, and brave, said analysts. Elections attract cash, and the move, the BJP leader mentioned above added, means “campaigning is going to be a big headache for political parties”.

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“The whole political economy of elections run on black money. There could be backlash from politicians and the propertied class. It will be an electoral dividend for the government if they succeed,” said Ashutosh Kumar, a professor in the department of political science at Panjab University.

President Pranab Mukherjee tweeted the move is a “bold step of Government of India which will help unearth unaccounted money and counterfeit currency.”

Not everyone is convinced the move is bad politics. “The lower/middle class, who are traditionally BJP supporters, will not find it tough to account for or exchange the currency. The real fear will be for those who have unaccounted money,” said Sandeep Shastri, a Bengaluru-based political scientist and pro-vice chancellor of Jain University.

While political parties welcomed the announcement, they cautioned the government must be open to changes so that common people are not penalized in the process of fighting corruption and black money. “We are together in the fight to get back black money. Modiji made a promise to bring back money in 100 days but two-and-a-half years later, there is nothing. Did you consult economic experts and scientists before this decision was taken? He should give these answers to the nation,” Congress chief spokesperson Randeep Surjewala said.

“I welcome the bold step...to weed out black money from circulation which is a parallel economy in our country. Next step is to keep a hawk’s eye on the money transaction that may change hand now,” senior Biju Janata Dal (BJD) Bhartruhari Mahtab said in a note.

Not everyone had kind words. “This is a financial chaos and disaster let loose on the common people of India,” Mamata Banerjee, West Bengal chief minister tweeted.

The Bahujan Samaj Party (BSP) argued NDA had failed to fight the menace of corruption and black money, BJP’s key election promise. “The PM is not able to fulfil his promise on black money and corruption. He promised to fight black money and deposit Rs15 lakh in account of every Indian. Has that happened?” said Ambeth Rajan, senior leader and BSP Rajya Sabha member.

Anuja and Amrit Raj contributed to this story.