Monday, 19 May 2014

Can the Tiger Ride the Elephant? (or, The Future of India under Modi)

It can only be good for our country that there is someone with a clear mandate - rather than a hung Parliament, as was widely feared. Modi is a seasoned administrator and a wily politician, with a clear vision of what he wants to do. Even if he hasn't spelt his policies out, his inclinations are fairly clear from his actions in Gujarat and, though his hands will be tied due to the terrible state of India's national finances, his credit is huge at the moment, and he will no doubt make full use of that.

However, an overwhelming mandate, such as Modi has, brings with it not only striking advantages but also rather strong disadvantages.

The advantage is that he can do basically whatever he wants. Of the 245 seats in the Rajya Sabha (upper house of parliament), the BJP-led National Democratic Alliance has only 62 seats. However, of the 543 seats in the Lok Sabha (lower house of parliament), as a result of the recent elections, BJP alone has a staggering 336 seats. That gives BJP a total strength of 398 out of 788 – giving it a clear majority in any joint session of the LS and RS. Such a joint session can override states’ rights, so it will be interesting to see in what areas and to what purposes Modi uses this power.

The disadvantage is that, if he does not succeed in any objective that is set for him or that he sets for himself, he will find it difficult to point to a scapegoat and will have to shoulder the entire blame himself.

My guess is that after the honeymoon period is over (six weeks after he is sworn in or earlier, because that is the deadline for him to present his first budget), India will clearly make some or considerable progress economically and militarily. By “some” I mean that we can hardly do worse under BJP than under the UPA in the last phase of its rule, and people won’t remember the earlier good that UPA did. By “considerable”, I mean something matching the massive expectations that our people now have. I hear giddy forecasts of 12% and even 15% growth. The reality is that Modi inherits responsibility for an economy that is facing stagflation, a rather poor fiscal situation with a massive deficit, and a current account deficit that has been artificially subdued but will promptly raise its head at the least provocation – so the most realistic expectation could be something around 7% instead of the current 4% (which would be a huge improvement, of course).

The sort of numerical strength in Parliament, to which I drew attention above, also brings Constitutional changes much more easily within Modi’s reach.

So, with all this power at his disposal, what will Modi actually do?

1. Will he continue the regime of subsidies, quotas and guarantees or will he move to radical economic reform? Attracting the kind of foreign money he has drawn to Gujarat may not be particularly difficult, as he should be able to reduce or eliminate policy uncertainty, streamline administration, tackle our infrastructure challenges, boost power supply, rationalise power tariffs, and encourage and create a flexible single market throughout the country. But how will he deal with rising inflation, shrinking manufacturing and India's banking sector stress? Given that we have created less than 8 million jobs per year over the last seven years, what programs will he initiate to generate the 15 million new jobs every year that we need in order for our demographics to become a blessing rather than a curse?

2. How will he address India’s glaring income inequality, and ensure progress specifically for dalits/ OBCs/ poor people?

3. Will he attack corruption in order to systematically eliminate it - or will he merely centralise it as he did in Gujarat?

4. Will he now encourage, or will he strangle as he has done in Gujarat, genuine freedom and debate in the Indian press, and among Indians as a whole?

5. Will he actually set to work on the RSS agenda of integrating Kashmir, eliminating personal rights of Muslims, promoting Hindutvisation and attacking dissenting Hindus – and, if so, what will be the reaction, and how will that be handled by him? Or will he abandon the divisive agenda on which he has ridden to power for an inclusive model as the Constitution requires?

6. What will be the international response to a much more assertive India? Our historic challenges and interests relate to China, Nepal, Bhutan, Myanmar, Bangladesh, Sri Lanka, Pakistan, and Afghanistan. Will these countries now draw even closer to China, or will a strong India encourage them to reach for some equidistance between China and India? What about South East Asian nations who do want a counter to China? What about Middle Eastern and African nations? Europe and the USA?

Lots of questions. And it is not just India that watches with bated breath for answers, but the whole world.