The Great Gamble

With demonetisation, the prime minister has taken a huge risk— both economic and political. He must succeed, because this move could transform both our economy and our society.

- V. Anantha Nageswaran

AS I WRITE this, it is two weeks since America learnt that its next President would be Donald Trump. Large sections of America are yet to come to terms with it. It is also two weeks since Prime Minister Narendra Modi went on television and announced that currency notes with the existing denominations of Rs 500 and Rs 1,000 would not be legal tender with immediate effect. India is yet to come to terms with it on the ground, on the air and in print.

In our recently published report “Can India grow?”, Gulzar Natarajan and I wrote the following about the kind of leadership that India needed:

“Leaders can break down resistance with appeasement or with empowerment, combined with accountability. Appeasement buys peace and cooperation in the short term but at the cost of potential long-term damage. At the same time, enforcing accountability is not costless. In the short term, adverse economic consequences are possible, resulting in personal unpopularity. But visionary leaders trade off short-term popularity for long-term national interest. When decisions—choices and trade-offs—are made with the consistent application of values and ethical norms, the credibility of the decisions and that of the leadership will be enhanced. The public will understand and accept decisions better. This takes time, often longer than an electoral cycle. Hence, risks need to be taken. But conviction and communication could make such risk taking electorally rewarding, too.”