ARTICLE | Indians’ ‘notes ban’ compliance masks a silent crisis of legitimacy

Esha Sen Madhavan, University of Sydney

This article is part of the Democracy Futures series, a joint global initiative between The Conversation and the Sydney Democracy Network. The project aims to stimulate fresh thinking about the many challenges facing democracies in the 21st century. The Conversation


India’s demonetisation, the “notes ban”, began on November 8, 2016. The Bharatiya Janata Party (BJP) government announced that all high-denomination notes (500 and 1,000 rupees) in circulation would cease to be legal tender.

This was a shock. No hint of such a 1.3 billion-person-wide policy was given until the announcement. The population had only 50 days to exchange their old notes.

At the time more than half (54%) of the population lived without bank accounts and were employed in a highly cash-driven and very large informal agricultural economy. The supporting infrastructures were far from adequate for the millions of citizens who needed to learn the management skills required in a less cash-dependent society.

Unsurprisingly, daily life was completely disrupted. Chaos reigned in the banks, which suddenly had to deal with the demands of India’s entire population all at once. Everyday business and trade threatened to collapse on the streets.

Hyper-technocracy, or democracy in action?

Leading economists and political analysts slammed the government’s move as “despotic”. This policy drive discarded the norms of democratic decision-making, which necessarily involves the public, is driven by their demands and settled through their deliberation.

Under the leadership of Prime Minister Narendra Modi, the BJP argued that the sudden announcement of the notes ban was simply the most efficient way of achieving its goals.

However, this year’s state elections in India may also be a factor. The BJP achieved another “decisive” result in the most-recent campaign. Certainly, its timing can be seen as the ruling party taking advantage of its power to jeopardise and inconvenience the very cash-driven campaign plans (think election freebies and rallies) of opposition parties.

Political parties often recruit Bollywood stars like Salman Khan and give out freebies at election rallies.
Al Jazeera English/flickr

Even though the BJP portrayed the demonetisation drive as a major public problem-solving measure, the government never clearly defined the problems. This isn’t to say that it didn’t offer a range of objectives. The notes ban was going to flush out black money (assumed to be in cash only), curb counterfeiting and illegal cash transactions, and move India towards a cashless economy.

The Modi government drew a clear link between black (paper) money, corruption and illegal and terrorist activities in the public’s mind. Heavily loaded with the moral sentiments of “redistributive justice”, the BJP aimed to position itself as the people’s crusader against corruption.

Yet the immediate effect of the demonetisation process, apart from massive inconvenience (90 people so far have died in bank queues), was that almost 86% of the currency went back to the banks. In short, the government’s assumptions about the quantity of black money cash were wrong.

And while a demonetisation drive might have several economic objectives, the lack of deliberation and public consultation left no room for clarity on either the grounds or urgency of the measure. Instead, the government’s shifting goals made it look opportunistic.

Still, from the BJP’s perspective, India was always going to encounter transition pains in moving towards a more modern economy. Sure enough, large parts of the population are entering the formal banking system. Major banks such as the State Bank of India have been opening 50,000 new accounts a day.

Why did the public cooperate?

The most intriguing political outcome of the demonetisation drive was its seeming legitimacy. The Indian people largely co-operated in spite of the inconvenience and loss of livelihoods. But why did they acquiesce to the suppression of their economic choice and security?

Executing a surprise policy that affects the public at every level but fails to involve them in the decision-making is undeniably undemocratic. Yet, in technocratic terms, it may appear to be the only efficient option. The public apparently believed this to be so.

While the execution of the notes ban has been attracted public criticism, the plan itself has found support.

To maintain the effectiveness of its shock tactic, the government set very short deadlines and made rapid changes to banking regulations in an unprecedented manner. Not only did most people co-operate, but they did so in silence. Except for incidents of agitation against the functioning of banks, no significant voices of protest were raised.

The public’s gracious behaviour can be interpreted as a result of both fear and a sense of social and moral obligation. Any dissent risked provoking a negative government reaction. Furthermore, given the tight deadlines and huge penalties involved, people thought it wiser to play by the rules rather than waste precious time questioning them.

And since the notes ban was supposedly about cleaning up India’s corrupt systems, it allowed the public to feel as if they were participating in the national project of wealth redistribution.

A breakdown of representation

The demonetisation drive was clearly based on government management of perceptions about efficiency and legitimacy. The citizens perceived it to be efficient. The government, in turn, flaunted their co-operation as a sign of legitimacy. What emerges is a perception-based democracy, a sure sign of crisis.

It’s important to note that the public’s lack of protest flows directly from a lack of trust in their political representatives. The opposition parties’ failure to mobilise any substantial challenge to the measure (for fear of appearing corrupt themselves) comes as no surprise.

Regional political parties, which have considerable control over state politics, failed to garner any public support against the demonetisation drive.

Public co-operation does not demonstrate public trust in the ruling BJP, either – remember that the Indian people felt a moral obligation to participate in demonetisation. They felt involved, for once, in actively solving their own problems. But they did not trust their representatives enough to think that they could take up their cause against even the functionally difficult aspects of the policy.

After the shock ban on notes in circulation, the new Mahatma Gandhi banknote series was introduced.
Partha S. Sahana/flickr, CC BY

And so demonetisation went ahead. But it is time that politicians understood the deeper significance of the Indian people’s acquiescence as a sign of representational breakdown.

To interpret the people’s hard work and suffering during the note ban implementation as a mark of government legitimacy is to ignore the obvious democratic crisis. A lack of democratic safeguards has overridden the public will with the BJP’s manipulative information management, political gimmicks with social and moral sentimentalities wrapped in nationalistic hyperbole and electoral mayhem.

As the long-term impacts of demonetisation are revealed, the citizens of India will need to acquire the skills to hold the government accountable for a policy that has caused them immense trouble and stands to affect their livelihoods for the foreseeable future.

While elections remain the only practical opportunity for citizens to channel their political grievances in India, the BJP’s notes ban should not be allowed to get lost in the electoral theatre of political histrionics.

If the people are to benefit from a policy that, despite appearances of efficiency, entails unimaginable costs, they must begin to scrutinise its impacts on long-term prosperity and democratically demand the most of what can be made of it.

Esha Sen Madhavan, University Grants Commission PhD Research Fellow, University of Madras, and Visiting Fellow, Sydney Democracy Network, University of Sydney

This article was originally published on The Conversation. Read the original article.

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