PM's demonetisation speech should focus less on emotion, more on reason

PM's emotional intervention has not reassured the public

In a series of speeches in recent days, Prime Minister Narendra Modi has launched a spirited defence of the concept behind and implementation of the government’s decision to remove existing Rs 500 and Rs 1,000 notes from circulation. The backdrop for Mr Modi’s intervention was increasing concern about the disruption being caused by the transition. It is natural that the PM would seek to calm fears about the future of the economy at a time when there is widespread uncertainty. But the tone of his comments was counter-productive. Rather than help to end the spread of various concerns, Mr Modi instead gave the impression that the government was not exactly in control of the situation.

In two speeches in Goa and Ghazipur, Mr Modi struck a deeply emotional note in defence of the demonetisation. He even went as far as to say that he had taken on major vested interests and that he might be killed for his action. This is a deeply worrying possibility to lay out. Even if Mr Modi takes this possibility seriously, it is definitely not something he should share with the public at a time of heightened uncertainty. There is no positive to this statement. Some will see it as persecution complex, which will reduce their faith in the prime minister’s judgement. Others will see it as a genuine threat, and thus be even more uneasy about the future. Nobody can question Mr Modi’s effectiveness as a communicator, and the political payoff of his speeches may not be negative. But at a time when the entire country, and investors everywhere, need reassurance in the face of such a massive currency upset, they will not find any in a PM who resorts to such emotional appeals.

There are some additional worries that the PM’s speeches have raised, in particular about the future direction of the government’s anti-black money campaign. There is absolutely no disagreement that unaccounted-for income and wealth must be the target of government action. But some of the specific policies that the PM has hinted at would have severe implications. For example, he has indicated that the government will go after “benami” properties — in which the actual owner is concealed from legal and tax oversight. Certainly, benami property is a common way to launder money. But how would any campaign to confiscate such property be framed? After all, much of India’s land is not part of a formal register of land records. This is particularly true of farmland — and so how will a campaign to examine benami land work in the rural economy? Even if the confiscation can be carried out without severe disruption, what will the government do once some properties have been expropriated? If it auctions these properties, who will buy them? After all, the real estate market will be severely depressed as a consequence. Finally, the PM mentioned that corruption since 1947 was the problem, and the government could not ignore it. But how can decades-old instances be reopened? This is not just impractical — it runs up against legal limitations. It will negatively impact business sentiment that looks to the government to provide long-term stability. Overall, the PM should recognise that his speeches have not given the impression of a government fully equipped to tackle the demonetisation process fallout and pave the way forward for the economy. A far less emotional and more reasoned exposition of the government’s case is called for.