One year has passed since the Modi regime applied shock therapy to improve the functioning of the Indian economy through demonetisation on November 8, 2016. Thus, legal tender to rupee notes worth 1,000 and 500 denominations was withdrawn and 86 percent of the currency went out of circulation. It was claimed that the policy was designed to fight black money, counterfeit currency, corruption and terrorism. Such a tall agenda, although momentarily mesmerising, gave nagging suspicions about prospects of its eventual implementation. Indeed, handling terrorism and minimising its impact has surely been one such area. The relationship between demonetisation and terrorism could be unveiled in a more nuanced manner if the functioning of the Modi regime is placed in a proper perspective.

After having secured an absolute majority in the Lok Sabha in the 2014 general elections, prime minister Modi was committed to translating the BJP’s pre-election promises into a reality by ensuring maximum governance and minimum government. In essence, Modi aimed at rescuing the money stashed in safe havens abroad on priority basis. He brought in the development agenda, involving clean and efficient administration and creating jobs for jobless millions to the centre-stage of political discourse. Modi could appeal to a large proportion of voters, especially aspirational neo-middle classes that catapulted the BJP to power.

Ironically, the cry for development from the BJP, which was steeped in identity politics of Hindutva and construction of the Ram temple, appeared refreshing. Nevertheless, the issues of development have seldom led to the retreat of the forces of Hindutva altogether. In substance, a penchant to pursue reforms and facilitate liberalisation and digitalisation of the economy coupled with socially conservative attitudes favouring majoritarian tendencies have characterised the functioning of the Modi regime. In his bid to combat black money, Modi announced the income declaration scheme (IDS) in 2016 to recover taxes. Through Jan-Dhan Yojana, Modi chose to formalise economy by making the banking system inclusive. This allowed subsidies to be directly paid in the accounts linked to Aadhaar number. Such minor measures, however, did not yield sufficient political or economic dividends.
Consequently, the Modi regime began to show political and economic imagination that was not averse to taking risks. The surgical strikes launched by India, in the external domain, in September 2016 to counter Pakistan-based terrorist outfits inside the Pakistani territory highlighted this proposition. In internal economic matters, the Modi regime went for demonetisation in the same vein. In contemporary times, only a country like Zimbabwe, that suffered from hyperinflation and dismal economic performance had gone for demonetisation in 2009. From the point of government, there was no such urgency in India except perhaps the then forthcoming assembly elections in Uttar Pradesh. And yet, by observing secrecy the government suddenly announced its demonetisation policy. The idea was to avoid giving any respite to money hoarders, terrorists and other anti-social elements.

In the process of going through the implementation process of demonetisation, Modi in his inimitable style chose to make citizens active subjects of history and appealed to their nationalist impulses by extolling them, along with bank employees, for putting up with short-term difficulties to ensure long-term gains. People standing in line to change currency notes were persuaded to believe that if soldiers can stand at the borders to protect territorial integrity of India why can’t citizens stand in line for a month or two to wage war against corruption. By and large the BJP-ruled states supported the demonetisation but states such as Delhi, Puducherry, Tripura, Manipur, Meghalaya, and UP (under Akhilesh Yadav) opposed it, while the states of Telangana and Andhra Pradesh supported it with reservations. The net positive outcome of demonetisation for the BJP was its landslide victory in UP assembly elections of February-March 2017.

After demonetisation, however, several questions are being raised about the efficacy and procedural propriety of this measure. For instance, did it induce more pain or gain? Was demonetisation an unmitigated disaster? Did it undermine credibility of institutions such as the Reserve Bank of India? One year after demonetisation, forces for and against such measures are acutely polarised. In view of the ambitious goals of demonetisation, it seems obvious that fighting well-structured corruption or parallel economy would warrant a long-term battle and a strategy. Without going into details of all these questions, it is worth illustrating how far the measures like demonetisation had capacity to contain terrorism.

Terrorism as a phenomenon relies on attacking non-combatants as well as different civilian, military and police establishments to achieve political ends. Apart from separatist issues concerning the northeast, there are two kinds of terrorist organisations: Jihadists and Maoists that have been affecting the security and integrity of India and its people for the past few decades.
The roots of Jihadist organisations in the state of Jammu and Kashmir could be traced to mismanagement of the state by successive administrations from Delhi since the 1980s. Growing alienation of the people in Kashmir broke their emotional bond with India and initially prompted them to make sub-nationalist assertions. However, ideologies of radical Islam eventually succeeded in influencing the Kashmiri youth and the secessionist demands began to get fused with Jihadist overtones. After 1992, organisations such as Hizbul Mujaheedin openly began to characterise Kashmiri self–determination as Jihad. Further, Maulana Saifullah Akhtar, a former suspected Al Queda militant and the then president of Harkat–ul-Jihad al Islami (HUJI, an Afghan-based terrorist outfit active in Pakistan and Bangladesh), chose to participate in Jihad in Kashmir. Terrorist outfits located in Pakistan such as Jaish-e-Mohammad (JEM) and Laskhar-e-Taiba (LET) /Jamad-ud-Dawa (JuD) have always fuelled Islamic radicalism and the demand for secession in the Kashmir valley. These terrorist organisations, in their turn, have been linked to multinational terrorist organisation such as Al Qaeda which almost functions like an umbrella organisation of terrorist groupings. The terrorists in Kashmir are also backed by the Afghan Taliban. Evidently, Kashmir as a phenomenon directly forces India to face the winds of transnational terrorism blowing from west Asia and Pakistan. Tactically the terrorists in these parts have deployed every means including transacting drugs for arms. In the context of India, fake Indian currency notes (FICN)/counterfeit currency is being procured by terrorists since 2003. In fact, FICN are being pumped into India through states such as Pakistan, Nepal and Bangladesh. India’s most wanted terrorist, Dawood Ibrahim and his ‘D company’ are alleged to have pumped in millions of FICN to sustain terrorist activities through their transnational operations.

Over the years, terrorism also has become a lucrative vocation. Substantial amount is paid to terrorists on entry and exit points apart from regular salary. However, distinction is maintained between foreign and domestic terrorists since the latter are paid substantially more amounts than the former. The terrorists are also rewarded for their spectacular performances. To control the terrorist funding, the National Investigation Agency (NIA) conducted searches in 16 different locations in Kashmir and Delhi and recovered substantial amounts in September 2017. According to NIA investigations, the Inter Service Intelligence (ISI) of Pakistan and the LET were using cross-border duty-free trade of California almonds to transfer funds to terrorist organisations. There is thus unholy nexus between almond traders, Valley separatists and terrorists. Demonetisation has certainly affected at least some of the sources of terrorist funding. However, till Pakistan liquidates terrorist outfits across the Line of Control (LoC) in Kashmir, terrorist activities can always continue and even flourish.

Similarly, the Left Wing Extremist violence under Maoist/Naxalite groupings, founded in 2004, has been constantly on the rise. The Maoists aim at seizing the state apparatus through violent means. By now, the Maoist violence has spread its tentacles with uneven intensity in different districts of states including the AP, Telangana, Chhattisgarh, Maharashtra, Madhya Pradesh, Jharkhand, Bihar, Odisha and West Bengal.  Such organisations, in their turn, are linked to Maoists in Nepal through the so-called Red Corridor that encompasses the area from ‘Tirupathi to Pashupati’.

The Maoists have tried to gather support from indigenous tribal people who have been victims of exploitation by extractive industries. They are ostensibly defending the rights of indigenous people over land, water and forest resources. Since they have been fighting guerrilla warfare against the Indian state it has been easier for them to operate from forest areas that offer sufficient hiding places from the police. The Maoists often resort to murder, kidnapping, extortion and threats as usual tactics to gather resources and strength. There are various inexact sources and figures about the estimates of Maoist funding. By and large, apart from extorting funds from big and small industry, politicians and corrupt bureaucrats in India, the Maoists, according to the government, have clandestine sources of foreign funding. Since Maoist groups operate in subterranean ways, there is no way to measure their exact funding. During the demonetisation phase, such organisations reportedly threatened local businessmen to get their currencies converted into white money.

Thanks to the spread of the Maoists within civil society and their capacity to muster support from local people, like Kashmir, the Maoist problem is intractable because it has ceased to be a mere a law and order issue. Constitutionally, the lawfully elected government in India can as well press coercive mechanisms at its disposal into service to handle this problem, albeit, at a huge social and economic costs. Whether it is terror from the Jihadist or the Maoist, the terror is located within the societal structures in India.  In the long run a blend of coercion and active dialogue with contending parties can alone take the Kashmir issue or the Maoist challenge nearer solution. In this context, demonetisation merely has appeared like one of the short-term tactical measures to halt the terrorist onslaughts in India.

Harshé is president of GB Pant Social Science Institute, Allahabad, and founder vice chancellor of the Central University of Allahabad.

(The column appears in the November 30, 2017 issue)