Modi’s surprise anti-corruption move
Indian PM implements election spending measures, bans high-value currency
In a bold move against corruption and unaccounted wealth, Prime Minister Narendra Modi has acted to put a stop to his fading popularity and place constraints on election funding, which will benefit him in crucial state elections next year.
But Modi’s late-night announcement of a crackdown on unaccounted wealth through the withdrawal of high-denomination bank notes left Indians with little time to prepare for the impact of the most extensive anti-graft operation in almost four decades.
With 500 ($10) and 1,000 Indian rupee notes banned as of midnight Tuesday until the government begins circulating new notes, including a 2,000 rupee note, those who operate in India’s extensive cash economy were struggling with the simplest transactions.
At a roadside shop in the state of Uttar Pradesh, a heated argument broke out over a small packet of chips and a 1,000 rupee note.
Mohamed Zafar said he has turned away many customers carrying the worthless bank notes, echoing the concerns of other small traders in the state, which goes to the polls early next year. “Because of the Uttar Pradesh elections, the government has done this,” said Zafar. “Maybe it will be tough for one year, then the black money will start again, and because of the new 2,000 rupee note there will be even more black money.”
Zafar said even petrol pumps in his local area, which were meant to be accepting 500 and 1,000 rupee notes, were refusing to take the money.
Scenes like this played out across India, but even as small businesses, shopkeepers and restaurants experienced an immediate downturn in sales, many praised Modi’s push to battle corruption and said it could boost support for his Bharatiya Janata Party.
Coming just before state elections, the timing of the move is critical. So-called black money is often used to fund political campaigns, particularly by smaller, regional parties who entice voters with cash, said Mi- lan Vaishnav, a senior associate with the Carnegie Endowment for International Peace in Washington. Larger parties distribute political favours to businesses that pay campaign expenses directly, avoiding the use of cash.
Having won the 2014 election in a landslide on the promise of tackling corruption and improving the ease of doing business, Modi’s star had started to fade as he faced criticism he mostly implemented incremental reforms. That election was dubbed the most expensive in Indian history, with the government, political parties and candidates spending 300 billion rupees, according to estimates from the New Delhi-based Centre for Media Studies.