India’s populist leader 1/11/2017

11, January 2017                        India’s populist leader

Following a world-wide trend, India elected a populist politician, Narendra Modi, in May 2014. Since his election, India has shifted dangerously to the right.

Modi’s latest action was the demonetization of India’s currency.

On Nov. 8, he announced, with much fanfare, that all 500 and 1,000 rupee notes would soon cease as legal tender. Over 23 billion notes would soon be rendered worthless. Following the bombshell announcement, Modi declared the old notes would be replaced by new 500 rupee and 2,000 notes. Unfortunately, he provided a very short window to make the exchanges. The alleged reasons for the announcement were to withdraw counterfeit and black money from circulation. Surprisingly, only 2% of the population pays any taxes.  

Modi’s decision to withdraw 86% of the cash in circulation plunged the country into complete chaos. The impact has been extremely painful for businesses that pay their workers or suppliers with cash.

Long lines soon formed outside banks and ATMs. Millions waited for hours to exchange their old notes. Many fainted and a few died. More frustration was experienced when they reached the front of the lines only to be told there was a limited supply on hand. Few working ATM’s had been set up. Most ATMs were rapidly depleted of low demonization 100 ($1.50) rupee notes. People who were lucky enough to get their hands on the new coveted notes found few traders had enough change to execute transactions.

Many of the poor, who don’t have bank accounts, were disproportionately affected unable to store their new cash in safe places. Tens of thousands of laborers, artisans and weavers have lost jobs in many cities such as Agra, Varanasi, Kanpur, Moradabad, Allahabad, Ferozabad and Aligarh. Farmers have been baldly impacted unable to sell their perishable fruit and vegetables. 

There are lingering suspicions that demonization had more self-serving interests by the ruling BJP party whose members have got a ‘heads up’ on the currency plan and were able to exchange their old bank notes before the announcement. This would give them considerable clout over opposition Congress Party members who traditionally use crores of black money when fighting elections.

Although the currency crisis is the daily topic in much of the country it barely got discussed in India’s parliament. Narendra Modi seems to have been given a free pass from opposition members in the 545-member Lok Sabha and in the 245-seat upper house, the Rajya Sabha. Instead both party leaders and their surrogates took to the streets leaking stories of massive corruption.

Meanwhile, India’s parliament has come into withering criticism for its poor performance. It only meets 60 days to conduct the people’s business compared to 140 days which is more typical in countries like Britain or Canada. India’s state legislatures have an even worse meeting record - fewer than 30 days. Conversely, Haryana lead the productivity pack passing as many as 14 bills in 90 minutes.

M.R. Madhavan, the president of PRS Legislative Research, a privately funded watchdog in Delhi, exposed some of the more troubling aspects of India’s democracy.  He revealed that India’s anachronistic Constitution permits a far more dangerous concentration of power in the executive and judicial branches than other democracies. Inheriting some of the worst aspects of the Raj where the viceroy was king, the government can pass laws which can sideline the legislative branch.  These powers have been grossly abused.  For example, Modi has renewed laws that confiscate property belonging to opposition party members. As a further threat to democracy, the government can sign foreign treaties without parliamentary approval.  These parliamentary rules and perhaps India’s Constitution scream for much needed reform.