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This question deals with the consequences of 2016 Indian banknote demonetisation and it seems that this decision severely impacted dozens of millions of people (especially farmers).

It is clear that such decisions are far from being popular. Since India is a democracy one should expect that highly unpopular decisions to be payed by the parties in power by getting significantly fewer votes at the next elections.

Where I live (Romania, but I think this extends to other democratic countries) political analysts argue that some decisions that impact lots of voters (e.g. public administration reformation, pension system reformation) are delayed forever out of fear of losing votes. I am wondering why this does not seem to happen in India.

Question: How can Indian government afford highly unpopular decisions such as banknote demonetisation?

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    It doesn't matter if one decision is unpopular with one demographic. It matters if the balance of decisions is overall more popular with enough demographics to get elected.
    – user4012
    Oct 3, 2018 at 0:53
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    India is a federal republic with a national parliament. It has both heavily populated cities, and populous rural areas. It has both a large Muslim population, and a Hindu majority that consists of many castes. These divisions suggest several ways that a policy could adversely affect a large number of people, without them having the ability to remove many elected officials from office. This question raises several sub-questions: Did the demonetization affect certain castes or religious groups disproportionately?
    – Jasper
    Oct 5, 2018 at 19:01
  • Does the method of federal parliamentary districting cause those groups to not have a significant influence on who is their locality's representative? Were farmers actually disproportionately affected? Why? Are the reasons for their being disproportionately affected consistent with their having a difficult time bringing attention to their grievances? How much (political) sympathy do urban Indians have with difficulties faced by rural Indians? Were there groups that benefited from the demonetization? Do those groups make significant campaign contributions or bribes?
    – Jasper
    Oct 5, 2018 at 19:04
  • When Indians vote for local or state-level officials, do their opinions of national policies significantly affect their local- and state-level votes? What fraction of Indian votes are based on considerations that are not policy-based? (For example, shared ethnicity or religion with the candidate, or vote-buying, or allegations of personal impropriety.) Did the government provide a plausible argument that the demonetization would provide benefits to the people harmed? Did the government offer other benefits to offset the harms?
    – Jasper
    Oct 5, 2018 at 19:09
  • Has anyone publicized "viral memes" about the demonetization? In other words, come up with an easy-to-remember, easy-to-say, emotional description of the policy (or the people who made the policy) that will affect how people vote? How much time is there between the demonetization and the next significant elections? Does India have methods for recalling politicians, other than assassination? (A recall is an early vote on whether to force a polician out of office.)
    – Jasper
    Oct 5, 2018 at 19:15

3 Answers 3

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In short, marketing strategies.

Here are some things that should be noted about demonetization, maybe it will shed a better light.

1) The objective of the move kept shifting arbitrarily

Initially the move was said to be against black money and terrorist activities. Then somehow the goal shifted to raising tax awareness and promoting a less-cash economy. So basically, wherever the arrow landed was declared as the target.

2) Support of the public

The public actually believed that standing in lines near cash machines was actually helping their economy. Intense rhetoric relating demonetization to sacrifice and nationalism was generally in the public domain. Although expert opinion of economists like Amartya Sen on the move was not favorable, large scale engagement of public made it seem like a revolution! Academics like Akshay Mangala have called this 'politics of visible disruption'.

For example, Narendra Modi's own 95 year old mother stood in line. This collected a lot of public sympathy.

3) Weak opposition

The Bharatiya Janta Party was quite popular at the time of this move. They had very good numbers in the 2014 elections. Also, political parties opposing and protesting against the move were alleged to be the ones hoarding cash themselves! This strategy discredited their protests.

4) Government marketing

Schemes were divised to promote cashless payments. There was a lottery scheme for users of the Bhim app, the government sponsored payment app. The government also conducted a questionable survey on the Narendra Modi app and declared that the public favored the move.

5) (Opinion) Biased media

The last one is my opinion. During the whole event, I witnessed a lot of news channels hounding the opposition and declaring demonetization as a patriotic act, a great move, etc. I think this has also worked in the favor.

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There are basically two reasons:

1. Politics is mostly controlled by upper caste Hindus

Most Indian politicians are upper caste Hindus. They enter politics either to earn money, or, fame, or, power, or, simply to uphold family tradition. Since, Indian society is segregated along caste lines, lower caste people are always under systematic pressure. So, they either can't say anything very openly because of fear of persecution or because of low self esteem they simply think that those are not their domains of interest.

2. A vast majority of common people are poor

There is a huge wealth gap in India. Rich people can easily dominate poors by using their influence.

Niteesh Shanbog's answer also made a valid point.

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    Well I am amazed that this answer just show a opinion of individual instead of showing a detailed and brief viewpoint of the situation and still got accepted and upvoted.
    – Abhishek Gurjar
    Dec 5, 2018 at 7:01
  • The Prime Minister of India is not upper caste. Neither is the current or former President of the republic. Ex PM Manmohan Singh wasn't even Hindu, while UPA President Sonia was infact a foreigner to the whole caste/religion system, and her closest advisor was Ahmed Patel, a muslim. That rhetoric is just stupid.
    – whoisit
    Feb 1 at 21:58
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India's ill-advised move of demonetization has cost the coffers approximately 12000 crore rupees. Thousands of jobs were lost. Mostly in the cash-driven informal sector. The steadily growing growth curve was pulled back. The government handled the backlash only because of the immense popularity of the party in power. Any other coalition government would have fallen.

The government has marketed demonetization as an ultra-nationalist move, designed to draw out all the black money in the country. Whether that has been achieved or not is up for debate. But what this means, is that anyone seen criticizing demonetization is labelled an anti-national and a traitor by the ruling party members. The well oiled social media team of the ruling party is quick to troll anyone criticizing the move. Their intentions are questioned. This dissuades people from openly criticizing the move. People start assuming that anyone who questions demonetization must have made some illegal money. No one wants to be publicly ridiculed.

It was reported that almost 99.6% of the money was back in the banks. So the government's claims of eradicating black money fell on its face. But, the main objective of demonetization was not that. It was to show the people that the government is in 'action'. Pure optics. And drama. A 12000 crore drama.

India was barely able to handle the ill effects of this hare-brained scheme. One or two more of these 'drives' would bring the country to its knees.

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    This answer is mostly criticizing the demonetization. But that's not what the question was asking for. There is just one sentence which actually addresses the question: "The government handled the backlash only because of the immense popularity of the party in power". The rest is unnecessary. This answer would be better if it would focus on this statement and provide evidence that it is true and explanations why the BJP is so popular.
    – Philipp ♦
    Oct 5, 2018 at 12:17
  • Criticism is important. Especially since the question mentioned demonetization as an unpopular decision. You cannot talk about demonetization without talking about how it affected people. And I don't think the OP is looking for reasons as to why BJP might be popular.
    – Niteesh Shanbog
    Oct 5, 2018 at 17:52
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    I am sure that the consequences you are describing are real. However, my question remains: how is that they are not afraid of losing points at the next elections?
    – Alexei
    Oct 5, 2018 at 19:30
  • It is because they have marketed demonetization as the panacea to the nation's problems. No one dares speak against it. I have added it in my answer.
    – Niteesh Shanbog
    Oct 9, 2018 at 3:38

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