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[NEW DELHI] India's Prime Minister Narendra Modi offered interest waivers for farmers and cheaper housing loans for the poor in a bid to shore up his popularity, a day after his deadline for exchanging banned notes expired.
In a televised speech that stretched close to three-quarters of an hour, Modi praised citizens for bearing the hardship caused by the cash clampdown, and announced the government will pay the interest cost on farm loans for a period of 60 days. He also offered 4 percent interest subsidy on home loans of up to 900,000 rupees (S$19,167) and 3 per cent for 1.2 million rupees.
"Patience, discipline, resolve displayed by 1.25 billion Indians will play a critical role in shaping future of the nation for years to come," Mr Modi said in a special broadcast, defending his Nov 8 move to withdraw 86 per cent of the currency in circulation. "There is no precedent globally to what we have done".
Mr Modi, who had pledged to end hardship caused by the withdrawal of the 500 rupee and 1,000 rupee notes within 50 days, in his address reassured people that the move would benefit the economy in the long term. His sops for the poor, small businessmen and farmers - sections most affected by the cash withdrawal- comes weeks before crucial state elections. Mr Modi, in his speech on Saturday, didn't give any details on the amount of unaccounted money seized by authorities during the drive, which was originally aimed at seizing illegal wealth.
"It was like a poll-oriented speech," said N. Bhaskara Rao, chairman of the New Delhi-based Centre for Media Studies, a policy research group. 'People's exceptions were more. He just announced some minor reliefs by advancing some budget proposals."
The damage from the so-called demonetization - on farmers, workers, small shopkeepers, low-income households and businesses - is yet to ease. There continues to be queues at banks and daily stories of rural distress.
The government will double the credit guarantee offered on loans offered to small businesses. Senior citizens will be offered an assured 8 per cent interest rate on their bank deposits of up to 750,000 rupees, Mr Modi said, with the tricolor national flag in the background.
Although Mr Modi's credibility has been dented, the jury is out on the long-term economic and political fallout. So far his public support remains strong, with some standing in lines waiting to access cash still voicing their approval of his decision to target unaccounted wealth.
The government is keen on supporting honest tax payers and majority of citizens have chosen to fight corruption and the menace of tax evasion since the note ban, Mr Modi said. Banking operations will be normalized and caps on cash withdrawals lifted as soon as possible, he added.
The next real test will be held through the five assembly elections, including the most populous state Uttar Pradesh, expected by April.
On the economic side, experts are slashing India's growth forecast after the cash ban dented demand. The economy is projected to grow 6.5 per cent in October-December instead of the 7.8 per cent economists had predicted earlier. All eyes will be on the government's forecast for the year through March - due January 6.
Since the currency ban, many have found illegal ways to convert the so-called black money into genuine wealth. In response, the government has amended or clarified its rules more than 60 times to plug the loopholes. Of the 15.4 trillion rupees of junked currency, about 13 trillion rupees of bills have been deposited in banks, as of the first week of December.
This was his second television address in close to two months - the first was the demonetization announcement itself.