international analysis and commentary

Modi, India’s man of the moment

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It has been a truism among observers of India’s complex polity that the country was destined to be governed by unruly and unstable coalitions for decades to come. Over the past several weeks, over 500 million Indian voters cast ballots in a nine-phase general election.

Belying the predictions of all but one exit pollster, the electorate gave an absolute parliamentary majority to the religious conservative Bharatiya Janata Party (BJP) and its charismatic if controversial leader, Narendra Modi.

The BJP won 282 parliamentary seats out of a total of 543. The coalition that Modi led into the elections, the National Democratic Alliance, won a total of 336. No single party has won an absolute majority in India since 1984, when the late Rajiv Gandhi swept the polls riding a sympathy wave created by the assassination of his mother, Indira Gandhi.

The Congress Party, which has dominated Indian politics since independence in 1947, was reduced to a historically low 44 seats. While it has survived defeats before, the extent of the loss inevitably raised questions about the long-term future of the party’s ruling dynasty, presently represented by the Italian-born Sonia Gandhi and her son Rahul.

A deeper look at the numbers, however, notes that Modi has also benefited from some statistical luck. The BJP won an absolute majority on only 31% of the vote, almost 10 percentage points less than the second-lowest vote share to ever provide a party an absolute majority. This indicates that Modi won large numbers of marginal seats on relatively thin margins. The BJP made inroads into the southern and eastern parts of the country, but the vast bulk of its seats are from its traditional strongholds in the north and west.

A controversial figure
Modi elicits strong responses in India for two different reasons. The best known is the questions hovering over his role in anti-Muslim riots that took place in his home state of Gujarat in 2002, when he was Chief Minister. Over a thousand people, almost all Muslims, died in the riots. Modi was accused of orchestrating the riots or, at the very least, sitting on his hands while the riots raged on. A subsequent Supreme Court-ordered investigation was unable to prove either charge, but Modi’s overt invocation of Hindu iconography in his political narrative means that the shadow of the Godra riots will always hang over him.

Modi’s other claim to fame, however, is economics. During three consecutive terms as Chief Minister of Gujarat, he made the state a paragon of efficient governance, high economic growth and excellent infrastructure. In particular, the World Bank and other agencies have lauded his power sector reforms and the fact Gujarat is one of the only states in India that provides power around the clock and does not burden its electricity firms with unsustainable subsidy payments.

Critics argue that his claims of a “Gujarat model” that merges high levels of public service and market-based growth are overrated. Other states can match Gujarat in many of these indices, they note. The state also has relatively high inequality and poor social indices, especially among marginal social groups.

Ultimately, Modi did not have to prove his model one way or another. What helped him was the dismal economic record of the outgoing Congress-led government headed by Prime Minister Manmohan Singh. A number of books by those who worked with him say Singh, who authored India’s move to the market in 1991, was blocked by the more populist and leftwing instincts of Sonia Gandhi.

The net result of this policy struggle, however, was stagflation. India’s growth rate, which touched 10% in 2008-09 has halved to about 5%. However, this all took place during a decade of nearly double-digit inflation that has ravaged the living standards of working class Indians. The final nail in the government’s coffin was a series of corruption scandals that erupted in 2009 and bedeviled the government right to the new elections.

The Indian public was desperate for a political alternative to the Singh government. At Sonia’s insistence, Singh introduced a series of welfare schemes including a food dole program to compensate for the other bad economic news. But voter anger was evident. The Congress began losing state and local elections. A one-year old party, the Aam Aadmi Party, defeated them for the Delhi assembly elections on a single plank: anti-corruption. And the results confirmed the anti-incumbency sentiment that had been building up in the electorate.

Under the circumstances, Modi had only to make the claim he had a better economic model. When he campaigned, clocking nearly 100,000 kilometers across the country, he eschewed references to the religious-political ideology of the more rightwing members of his party, Hindutva, and talked only about inflation, corruption and growth. Polls showed that these three issues dominated public concern – and that the Congress had no credible means to respond given their record in office. Modi, a seasoned political veteran, had even less to worry about when the Congress put up Rahul Gandhi as its candidate. Rahul, a reluctant politician, had never held any government position or won an election in his 43 year life – and showed it.

A man with a mission
What will Modi do with his mandate? Modi has almost overwhelmingly talked only about his plans to revive the Indian economy and then move it to a higher plane of growth. “The first priority of the government will be to restore the health of the economy,” he says metronomically.

In the short term, however, he will be constrained by the legacy of a huge fiscal deficit, possibly two percentage points of GDP larger than the official 4.8% figure. He will also need to ensure the present down trend in inflationary growth continues. Finally, he has to sort out of morass of policy problems that have pulled down the investment cycle, a down trend that is the single largest contributor to the fall in India’s growth. His aides already speak of a series of policy moves that will be announced in the next 100 days, culminating in his first budget in July.

In the long term, Modi has spoken of tackling the structural defects in the economy that are the source of the country’s chronic inflation problem, poor infrastructure and stunted manufacturing sector. Such reforms would include the introduction of a national general services tax that would eliminate the present patchwork of state-to-state taxes. He would need to iron out a land acquisition policy that has gone back and forth from officially-sanctioned theft to a communalization of property rights that make even voluntary sale impossible. Energy pricing has become a huge battle between various players and resulted in thousands of megawatts of idle generating capacity. The list is long. He himself has said he wants to “first and foremost (…) bring back the focus on infrastructure and the manufacturing sector”.

Modi argues that his experience of reform in Gujarat has shown that “social contracts” between consumers and producers, landowners and buyers, and so on are feasible if a political leadership takes a long-term view and is able to deliver on its promises. He also believes that a process of collective decision-making, bringing state leaders into cabinet meetings for example, could also break the logjam on policy that has arisen from India’s center-state federal structure. “As a Chief Minister, I have experienced firsthand the problems that the state governments face vis-à-vis the Center (…). Thus I am better placed to work closely with the Chief Ministers,” he said in an interview.

What Modi will probably not be overtly interested in is foreign policy. Only the second Indian Prime Minister to have come from state politics without ever having served in New Delhi, he sees the external world largely in economic terms. His global focus has been on trade and investment, technology and capital movement. A burgeoning economic relationship with Japan will be a centerpiece of his foreign policy. He is open to investment from China, a country that has been a security taboo in India for years. Modi is known to see the Singapore ex-Prime Minister Goh Chok Tong as his international mentor and is much taken by the economic rise of the so-called “Asian tigers.” But his aides insist his will be an “economic-focused” foreign policy.

This does not mean that Modi will abandon his Hindu nationalist sentiments once he enters office. Modi fled an arranged marriage with a child bride when he was young, spending years seeking spiritual guidance. He deeply believes in the need to revive a Hindu culture and society that has become debased with caste, ritual and poverty.

Like many BJP leaders he has merged this with a sense of Indian nationalism which, in turn, recognizes that the first step is an end to the country’s economic ills. Ultimately, though, given his low class and middle caste background, his vision is largely reformist. Muslims are less a hate figure in this narrative than simply irrelevant.

With an overwhelming majority and a widespread acceptance that this election victory was not even about his party as much as about himself, Modi can be expected to push hard for economic reforms. Given the complexities of ruling India, let alone moving its billion plus people on a different path, many believe he will find his Gujarat lessons irrelevant. Modi doesn’t and likes to say “whatever is possible in Gujarat is possible in India.” He likes to call himself a karma yogi (disciple of action), a Hindu who seeks salvation through good work and accomplishment – and this makes him willing to take risks on the policy level that others might prefer to avoid.