Demonetisation—Is more cash flowing into Uttar Pradesh banks?

“BJP leaders expectedly deny it. But in the days I have been in Lucknow I see cash pouring into ATMs and banks. Even in far flung places near Amausi airport. Queues manageable. I have been withdrawing without standing for too long. Obviously the UP election. What else for playing this sort of politics?”

This Facebook post on Friday morning by a senior journalist gives voice to what has been whispered for more than a month.

That the purpose of demonetisation was ‘political’ and done with the election in Uttar Pradesh in mind.

That the RBI and the Government have stepped in to ensure that Uttar Pradesh does not feel the pinch as much as the rest of the country; that while cash is being rationed elsewhere, with banks refusing to allow people to withdraw even ₹24,000 per week, a ceiling that the Government itself had imposed, in Uttar Pradesh the banks seem to be exercising a lot more discretion.

The question is whether this means that the RBI has been diverting more cash to Uttar Pradesh while starving other states?

Unless the RBI comes clean and reveals the cash-flow pattern to different states, the mystery of uneven availability of cash through banks and ATMs is unlikely to be solved.

With the election schedule for Uttar Pradesh expected to be announced before Christmas, observers are also expecting some more populist measures before the Model Code of Conduct kicks in.

However, the Model Code is unlikely to come in the way of the Union Budget, which has strategically been preponed to February 1, just before the elections in UP.

And a reduction in Income Tax rates, waiver of farm loans or an announcement on direct cash transfer to Jan Dhan accounts, as is being speculated freely over the past few weeks, incorporated in the budget will not be deemed to be a violation of the Model Code because the announcements will be meant for the entire country and not just the poll-bound states.

So, is the Government being clever? Or is it being too clever by half?