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7 things the demonetisation will do immediately

The November 8 move will hit one politician badly: Akhilesh Yadav. The Uttar Pradesh CM is out on the Vikas Rath Yatra, which needs to be managed with high value notes. It is going to be very difficult for him and his managers to get the crowd at his rallies with the cash restrictions
RS 500 note

With the Narendra Modi government doing a Houdini by demonetising Rs 500 and Rs 1000 on Wednesday, we take a look at what all will be hit immediately and what will gain.

  1. India sees an average hawala trade of Rs 15,000 crore per day. This money is usually paid the next day. Why did yesterday’s announcement come at the time it did? That 15,000 crore is frozen in time now. Sounds like a plot for a potboiler.
  2. The cash and carry sector of the economy is more than double the hawala market. The local vegetable vendor, the grocer, the milkman, the paanwala all of these see trade worth Rs 35,000 crore per day. Most of these people will have heaps of 500s and 1000s earned the hard way.
  3. The cash-rich informal economy, which had ignored the Jan Dhan Yojana all this while, has no way but to foot it to the bank and get an account to prevent its hard-earned money turn into winter warmth. Be prepared for a new ad blitz saying Jan Dhan Yojana has gone platinum.
  4. The majority of traders who have always supported the BJP have nowhere to go after the party pulled the blanket from under their collective tijori. Politically, the BJP may hope to get more members with anti-black money act but it will lose core supporters who are looking left, right, centre, under and above for a way out to rescue their black money.
  5. If one evaluates this as a political ploy, it will hit the Patels the hardest. The community which rallied behind Hardik Patel for reservation mostly converts black money into white and takes a cut. But with this one move, the Patels’ area of expertise has been laid waste albeit for a short while. The other communities that will be hit are the Marwaris and Sindhis.
  6. With the Election Commission keeping an eagle eye on poll expenditure, political parties need black money to get by. Congress leader P. Chidambaram’s pointed jibe at the BJP today at a press conference was that the Congress didn’t have enough money in the last elections drawing attention to the BJP’s powerful and therefore expensive campaign funded by industrialists and Sangh acolytes in the West. But the November 8 move will hit one politician badly: Akhilesh Yadav. The Uttar Pradesh CM is out on the Vikas Rath Yatra, which needs to be managed with high value notes. It is going to be very difficult for him and his managers to get the crowd at his rallies with the cash restrictions.
  7. Most poll campaigns cost Rs 20,000 crore to Rs 25,000 crore. By eliminating Rs 500 and Rs 1000 notes, the Bahujan Samaj Party has been dealt a bad blow. It is usually alleged by BSP leaders who leave the party that their party chief sells tickets to the highest bidder. All that cash, if it has exchanged hands for party tickets, is now illegal tender and no use for the party which was expected to do well in the 2017 UP Assembly elections that are due early next year.

Postscript: Veteran journalist and commentator Kingshuk Nag posted on Facebook that the Rs 500 notes had been long compromised. Modi has timed the decision to withdraw the notes by making a virtue of the necessity in the war on black money, Nag posted.

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