Rivals of the prime minister’s BJP party have
suddenly found their resources depleted in the run-up to an election in the key
state of Uttar Pradesh
By Reuters
 |
An Indian girl shows her inked finger as she holds one of the new Indian currency
notes at a bank in Bhopal, Madhya Pradesh. Photograph: Sanjeev Gupta/EPA
|
Indian prime minister Narendra Modi’s sudden
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.
Opposition politicians are scrambling to
redraft campaign plans before 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.
There has been 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.
The prime minister 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 $2.1tn 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 on
“gifts” to win votes.
Spending on the Uttar Pradesh election is
forecast to hit a record 40bn rupees ($590m), despite the cancellation of big
denominations.
Modi’s banknote change 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 the BJP in national
elections in 2014.
His concerns reflect a view that the 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 in 2017.
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 that this is going to
hurt everybody, but in relative terms the BJP is going to come out stronger,”
said Milan Vaishnav, a south Asia expert at the Carnegie Endowment for
International Peace in Washington.
According to the Delhi-based Centre for Media
Studies (CMS), which tracks campaign financing, the BJP relies on cash for less
than two-thirds of its funding in a state such as Uttar Pradesh.
Its regional rivals use cash to cover 80-95%
of campaign spending.
Demonetisation will force Congress to hold
smaller rallies, said Mathur, and there will be fewer “freebies” for voters.
Other parties are also adjusting plans in
Uttar Pradesh. Ashok Agarwal, a politician with the incumbent Samajwadi party
in the city of Mathura, will have to rely more on his team of 1,000 volunteers
to connect with voters.
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In a bid to limit the squeeze, parties are
paying workers to queue at banks and swap old notes for new ones and evade
scrutiny from tax inspectors, said party activists in Mathura.
Event managers, whose businesses usually boom
at election time, are worried.
“No political party except the BJP wants to
organise big rallies before January. All of them depend on cash,” said Rajesh
Pratap, who has provided loudspeakers, outdoor airconditioners and security for
party rallies for over a decade.
Mayawati, a powerful former leader of Uttar
Pradesh who Modi’s aides view as his biggest electoral threat in the state,
said the demonetisation timing appeared highly political.
BJP officials accused Mayawati of hoarding
“black” money garnered from selling tickets to candidates to fund her campaign.
One senior official and a close aide to
Mayawati said some of her party’s rallies would be axed and replaced by more
door-to-door campaigning.
“Last month ... we had to bring over 300,000
villagers from across UP [Uttar Pradesh] to Lucknow city for a day ... It’s not
just us, but every political party spends money at grassroots level to win
votes,” the official said.
Modi has not explicitly linked demonetisation
to a clean-up of electoral funding, but officials in his party said rivals
should have heeded his warnings earlier this year that he was serious about
clamping down on “black” cash.
“You cannot call it a bolt from the blue
because Modi ... had dropped sufficient hints that he will take strict action,”
said a close aide.
While an immediate liquidity crunch for
parties is clear, the longer-term impact on funding is less so.
The symbiosis between businessmen seeking
favours and parties needing cash has sent campaign funding soaring.
In southern Andhra Pradesh state, three in
four voters reported receiving money from parties during the last general
election, according to research by CMS.
The group’s chairman, N. Bhaskara Rao,
described electoral corruption as “the mother of all corruption” in India.
In the 2014 election, when Modi swept to
power with an electrifying campaign that included 3D holograms of him giving
speeches in villages across India, parties spent a record 370bn rupees, CMS
estimated.
They have also long circumvented rules and
learned to avoid using cash – parties get donors to acquire equipment for
rallies directly, or local traders to buy gifts for would-be voters, such as
mobile phone credits.
