Counterintuitive Behaviour

On November 8, Prime Minister of India, Mr Narendra Modi shocked everyone by announcing that Rs. 500 & Rs. 1000 notes will be
demonitized. Economist Jean Dreze, a known critic of Narendra Modi, slammed demonetisation as shooting a bullet at the tyres of a booming
economy. The effects were:
1. Indian economy being heavily cash dependent, trade and consumption was hit hard
2. As people started swarming to the banks to exchange their old notes, chaos ensued.
3. Close to 25 people died while waiting in queue
4. With more than 80% of working population in the cash dependent informal sector, the livelihoods were hit hard as many were put of
business
5. GDP fell from a high of 7.9% to 5.7%

It was evident that it was a huge blunder on the part of BJP, who decided to take such a step without proper planning and with poor
implementation. The GDP Growth Rate started plunging. Despite the initial support of the public, the effects started to manifest slowly as
livelihoods and consumption were hit hard.

The opposition seized the opportunity. The Uttar Pradesh elections were scheduled to be held in the month of February 2017. The opposition
used demonitization as their weapon against BJP, as UP being the most populous state was the worst hit. The public opinion was also that
demonitization will lead to the ultimate downfall of BJP, as UP election was the most crucial election.

BJP won the UP Elections, winning 312 of the 384 seats and a vote share of 40%! And this was just the beginning. BJP now controls 19 out of
29 states, which is unprecedented in the political history of India!
Counterintuitive Statement:
Despite economic hardships caused by Demonetization, BJP has become the most popular party in India.

Events:
1. Demonitization:
A. Scrapping higher denomination notes
B. Chaos/ Panic among public
C. Severe withdrawal limit
D. Cash crunch
E. Livelihood hit/Job loss as the large informal sector was cash dependent
F. GDP fell to three-year low of 5.7%
G. Postponement of many marriages- Marriages are cash intensive in India

2. Elections:

A. Before Demonetization: B. After Demonetization:

a) Assam Legislative Assembly election: Winner BJP
b) West Bengal Legislative Assembly election: Winner AITC
c) Kerala Legislative Assembly election: Winner CPIM
d) Puducherry Legislative Assembly election: Winner INC
e) Tamil Nadu Legislative Assembly election: Winner
AIADMK
a) Punjab Legislative Assembly election: Winner INC
b) Goa Legislative Assembly election: Winner BJP
c) Uttarakhand Legislative Assembly election: Winner BJP
d) Uttar Pradesh Legislative Assembly election: Winner BJP
e) Manipur Legislative Assembly election: Winner BJP
f) Indian presidential election: Winner BJP (NDA)
g) Indian vice-presidential election: Winner BJP (NDA)
h) Himachal Pradesh Legislative Assembly election: Winner BJP
i) Gujarat Legislative Assembly election: Winner BJP
Pattern: There was an evident surge in popularity of BJP among the electorate after demonitization. The stark difference between
number of elections won by BJP before demonitization and the number of elections won after demonitization supports the pattern that
BJP is riding on the wave of popularity of the electorate and this popularity is not waning anytime soon.

Explanation: The common man saw the demonitization as an assault on the unscrupulous rich, tax evaders and anti-social elements
like terrorists, drug peddlers. Modi has been able to convince people that he took this step in larger public interest and not due to any
vested interest. In a survey conducted by Economic Times, in response to the question, 'What was Modi's real purpose behind
demonetisation?', 71% said his purpose was to reduce black money. Although, the data that was released later revealed otherwise. There
were critics among the public who raised issues like that the informal poor working sector will be worse hit, that the Government was
trying to divert attention from basic issues, but these voices were drowned in the huge sea of support for Narendra Modi.
 Demonitization

POLICY ACTION
Severe Cash Crunch

Withdrawal
Limit
CIB Graph

Note Scrap

TIME
POPULARITY

CIB

TIME
Actual Behavior Intuitive Bahavior
CLD
 ARCHETYPE

• In this case, the archetype is of BR type.

• The effective marketing loop creates a reinforcement loop which is balanced by the “Balancing Loop” consisting of
Hardship and cash crunch

VARIABLES
Endogenic Exogenic
• Demonitisation Step • Positive image on national and global platform
• Short time for demonitisation change management • Increased foreign and domestic investment
• Lack of preparedness on part of bank • Govt. popularity
• Effective marketing
• Action against black money/corruption