India's prime
minister-elect Narendra Modi has been compared to Deng
Xiaoping, Margaret Thatcher, Ronald Reagan, Shinzo Abe, Tayyip Erdogan and
Mahinda Rajapaksa.
Commentators have
variously described him as assertive, dynamic, authoritarian and nationalist.
Many believe he's a
genuine economic reformer. Others worry about his - and his BJP's - hard-line
Hindu credentials and wonder whether it poses a threat to the idea of a
pluralist India.
Mr Modi campaigned in
the recent election on his record of making Gujarat one of India's fastest
growing and business friendly states, and his on own reputation as a tough
administrator and staunch Hindu nationalist. In return, voters rewarded him and
his BJP with an unprecedented landslide win.
'Change
agent'
Mr Modi's supporters
believe he is the right man to pull India out of the quagmire of low growth,
high inflation, joblessness and slack governance. One commentator believes that
Mr Modi may well have "inaugurated
India's second republic" as his record in governance
makes him an "economic change-agent, not an economic waster".
Mr Modi inherits a
sluggish economy. Growth has slowed to under 5%. Retail inflation, driven by
food prices, continues to be high at over 8%. Manufacturing is subdued and
exports are flat. Jobs have dried up in a country which needs to create 12
million a year to keep pace with its burgeoning population.
On other fronts,
however, things appear to have improved.
The rupee has firmed
to 58 per dollar, its highest in nearly a year. Reining in gold imports and a
modest pick-up in exports have helped tame the current account
deficit - likely to narrow to 2.3% this fiscal year, down
from a high of 4.9%. Foreign exchange reserves - at over $300bn (£179bn) - are
reasonably healthy.
But such improvements
hide deeper structural deficiencies.
Analysts say India
urgently needs to build more roads and ports, boost its electricity supply,
slash wasteful subsidies, reform archaic labour laws and clean up debt-saddled
banks. Since its convoluted land acquisition law makes it difficult for
industry to buy land, the government needs to free up vast tracts of idle land
locked up in ailing state-owned enterprises for industry. It needs to cut red
tape and regulations that scare away investment: India ranks a
miserable 134 among 185 nations in the World Bank's Ease of
Doing Business survey.
The BJP's 42-page
manifesto has Mr Modi's unmistakable stamp. It is packed
with promises which echo Mr Modi's obsession with infrastructure building:
bullet trains, smart cities, linking rivers, more engineering and medicine
schools, low cost homes, cleaning up filthy rivers.
More contentious
commitments which reflect Mr Modi and his party's concession to the hard-line
Hindu constituency - building a temple on a disputed site in Ayodhya and
ending a personal law given to different religions and supporting a common
civil code for all Indians - appear in a few lines on page 41.
On the stump, Mr Modi
repeatedly spoke about "maximum governance and minimum government",
without providing much detail about what he meant. To be sure, it is easier
said than done: diminishing government and making it more accountable will
require considerable institutional reform in the gargantuan and stubborn Indian
bureaucracy, which has been described as the "worst in Asia".
What Mr Modi can - and
will possibly do - his aides suggest is to pick "low hanging fruit"
and rev up investment.
One of the main things
on his agenda, they say, will be to kick-start some of the 250 stalled
infrastructure projects - mainly in coal, steel,
electricity, petroleum and roads - involving an investment of a mammoth $217bn
(£129bn).
"The main
challenge before the new government," BJP leader Arun Jaitley, who is
close to Mr Modi, told me during the campaign, would be to "work towards
redeveloping confidence in Indian economy". The "low hanging
fruit" he mentioned included boosting infrastructure, real estate,
tourism, skills development and low-cost manufacturing.
Federal
constraints
Economist Vivek
Dehejia believes that some administrative reforms coupled with a "few headline-grabbing
infrastructure projects, should signal to corporate houses and
investors - both domestic and foreign - that India is open for business
again".
Mr Modi's
"comparison to Margaret Thatcher, for example, is a bit overblown,"
Mr Dehejia told me. "However, it is always possible that the strength of
the mandate, and the presence of pro-market advisers close to Mr Modi could tip
the balance towards a stronger economic reform agenda, rather than a more
ideologically 'neutral' emphasis on good governance."
Commentator Ashok
Malik, who has written extensively on Mr Modi, says he will be "as
rightwing as possible for a mainstream electable political leader". That
means, he says, Mr Modi will strive to make India's bloated and lumbering state
more "transparent and efficient" and make it more of a facilitator
rather than an impediment. What it also means is he cannot massively reduce or
radically overhaul India's big welfare schemes, which, having improved lives
in the poorest regions, are also shot with corruption.
Then there are the
constraints of India's federal polity.
Mr Modi will need to
depend on a heavy dose of bipartisanship to push through key laws in a
parliament which his party has been accused of stalling in the past - top of
the list has to be the uniform goods and services tax which could fetch India
nearly $500bn (£298bn) in revenues and is more than three years behind
schedule.
The BJP commands the
lower house of parliament but it holds only 26% of the seats in the upper
house, which could make it more difficult to push legislation through. Much
power also lies with India's states. "Prime Minister Modi will expose a
paradoxical tension between his mandate and mission," says economist
Arvind Subramanium. "His electoral appeal is based on his ability to wield
power, ruthlessly if necessary. His success in governing the economy will
depend on coming to grips with, and making the best of, highly circumscribed
power."
Nobody quite knows Mr
Modi's mind on reforms. What we do know is that he's fascinated with Asia's
tiger economies.
"I try to
understand Singapore, Malaysia, Vietnam, South Korea - and also China and
Japan. I consider that China has great strength in its manufacturing - and so I
have strengthened our manufacturing strength," he told his biographer
Nilanjan Mukhopadhyay when he was chief minister of Gujarat.
But when Andy Marino,
Mr Modi's other biographer, asked him about what would happen to India's soul
if it rushed ahead economically, he replied: "Modernisation without
Westernisation. It certainly sounds better than Westernisation without
modernisation, of which India already has a surfeit. But what does it really
mean?" What, indeed? Only time will tell whether Mr Modi will reform or
perish.
