“We will have to plan the entire election strategy all over again,” said Pradeep Mathur, a senior Uttar Pradesh leader of the Congress, alleging that with 500 and 1,000 rupee notes banned, the party will have to hold smaller rallies and there will be fewer “freebies” for voters.
His comments reflect a view that the BJP, with more members than its rivals and allegedly close ties to big corporate donors, can survive the cash crunch better, helping it win Uttar Pradesh, which is crucial to PM Modi’s plan for re-election in 2019.
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 like Uttar Pradesh. Regional parties, on the other hand, like the Samajwadi Party or Mayawati’s Bahujan Samaj Party are believed to use cash to cover 80 to 95 percent of campaign spending.
“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.
With no state election funding, illicit cash is the unacknowledged lifeblood for political parties that collect money from candidates and businessmen, and then spend it to stage rallies, hire helicopters and hand out “gifts” to win votes.
PM Modi’s demonetisation drive, introduced suddenly last week, 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 attack the government over the long lines that have formed at banks to change small amounts of old money for new notes. They also alleged in parliament yesterday that big businessmen and some BJP officials were given notice of the ban, a charge the government emphatically dismissed as baseless.
Mayawati, the powerful former Chief Minister of Uttar Pradesh says the demonetisation timing appeared highly political. For decades, other parties have accused her of hoarding “black” money garnered from selling tickets to candidates to fund her campaign. One senior official and a close aide to Mayawati told Reuters that 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 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.
Ashok Agarwal, a politician with the incumbent Samajwadi Party in the city of Mathura, said he will have to rely more on his team of 1,000 volunteers to connect with voters. 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 workers from different parties in the city, according to Reuters.
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 air conditioners and security to party rallies for over a decade.
PM Modi has not explicitly linked demonetisation to a clean-up of electoral funding, but officials in his party, unnamed by Reuters, say rivals should have heeded his warnings earlier this year that he was serious about clamping down on “black” cash.
In the 2014 election, parties spent a record 37 thousand crore 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.