Breaking news - In the normal course, politics is a careful, cautious and calibrated profession. When in the government, politicians tend to turn even more conservative and risk-averse. Given this context, the demonetisation announcement by Prime Minister Narendra Modi does not fit the conventional mould. Why did he go ahead with it? What were his motivations?
As even his opponents have been forced to concede today, the economy had been repaired significantly in the past two years. The fiscal health of the government was an ocean apart from the profligacy of the UPA years. Foreign investment had picked up. Consumption was slowly beginning to regain lost ground. Domestic private sector investment and job creation remained a problem, but there was hope that the passage and implementation of the Goods and Services Tax (GST) would indicate a more broad-based recovery by 2019, when Modi led the BJP into its re-election campaign.
Modi was in as sweet a spot as is possible for an Indian prime minister in mid-term. Why then did he plunge into this massive disruption, one that was unprecedented in a healthy as opposed to a collapsing or inflation-assaulted economy and the consequences of which could be guessed and surmised but never accurately forecasted? The answer lies in a single word: belief.(Read More)
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