Modi’s cash crackdown hits rivals’ coffers

NEW DELHI: Indian Prime Minister Narendra Modi’s shock ban on high-value banknotes will hit the war chests of his rivals before a key state election next year, sparking accusations that his strike against “black cash” will unfairly boost his party's chances.

That is despite widespread anger among millions of Indians forced to queue outside banks to change small amounts of old money for legal tender, possibly denting support for the ruling Bharatiya Janata Party (BJP), at least in the short term.

Opposition politicians are scrambling to redraft campaign plans ahead of the ballot expected early next year in Uttar Pradesh, a state of more than 200 million people which will be crucial to Modi's long-term plan for re-election in 2019.

Modi last week outlawed 500 and 1,000 rupee notes in a drive to rein in corruption and a shadow economy that accounts for a fifth of India’s US$2.1 trillion (RM9 trillion) gross domestic product.

With no state election funding, illicit cash is the lifeblood for political parties that collect money from candidates and businessmen, and then spend it on staging rallies, hiring helicopters and handing out “gifts” to win votes.

Spending on the Uttar Pradesh election is forecast to hit a record 40 billion rupees (RM2.6bil), despite the cancellation of big notes.

Modi’s demonetisation drive has so far proven popular among increasingly aspirational voters who are tired of corruption, although views among the broader population and economists are divided over the efficacy and fairness of the move.

Opposition politicians have united to decry it.

“We will have to plan the entire election strategy all over again,” said Pradeep Mathur, a senior Uttar Pradesh leader of the Congress opposition party that was trounced by BJP in 2014 national elections.

His concerns reflect a view that BJP, with more members than its rivals and close ties to big corporate donors, can survive the cash crunch better, helping Modi win Uttar Pradesh and four other territories heading to the polls early next year.

For Modi, winning India’s main battleground state is vital to strengthen his party’s position in the upper house of parliament, where it is still in the minority, before seeking a second term in the 2019 general election.

“Their calculation is this is going to hurt everybody, but in relative terms BJP is going to come out stronger,” said Milan Vaishnav, a South Asia expert at the Carnegie Endowment for International Peace in Washington. — Reuters