Narendra Modi – Thatcherite reformer or India’s Putin?

Written by Chirag Shah on 30 May 2014

While it was tempting to discuss the recent European election results and Europe’s apparent disillusionment with the EU, I thought I would write about something a bit closer to home, the election of India’s Gujarati Prime Minister, Narendra Modi.

Modi campaigned in the recent election on his record of making Gujarat one of India's fastest growing and business friendly states, and his own reputation as a tough administrator and staunch Hindu nationalist which resulted in a landslide win. 

Indians want a version of the American Dream, or failing that even the Chinese Dream will do, and so have voted for a man who promises more for less: more development and growth, with less government red tape.  To admirers he is a Thatcherite reformer set to jolt India from the economic doldrums, while his opponents liken him to Putin or even Hitler.  He is a man who divides opinion like few other politicians.  This stems from his position as a hardliner within the right-wing Bharatiya Janata Party (BJP), a party steeped in the ideology of Hindu nationalism.  While Modi has mostly campaigned on a platform of good governance and economic revival; his links to anti-Muslim violence in Gujarat in 2002, in which more than 1,000 people died, remain his biggest handicap.  He was chief minister when riots broke out and, although he has never been found guilty of wrongdoing, the failure of his administration to control the violence left a legacy of distrust and suspicion.  The United States and European powers boycotted him for more than a decade.

It is clear, however, Indians have moved on from the issue and are now focusing on Modi’s record as a business-friendly administrator and he has many fans in corporate India, notably the country’s richest family, the Ambanis.  Between 2005 and 2012, Gujarat recorded average annual growth rates of 10.13%, the second-highest pace among large or medium-sized states and what has apparently worked for Modi is his projection of the so-called Gujarat model of development with its emphasis on setting up industries.

He has inherited a sluggish economy.  Growth has slowed to under 5% while 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.  The BJP’s manifesto is packed with promises which echo Modi’s obsession with infrastructure building.  Modi is clearly pro-business, but is he pro-free market at heart?  He has spoken about “maximum governance and minimum government”, without providing much detail about what he meant.  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.  It is believed that the BJP will start working toward redeveloping confidence in the Indian economy with administrative reforms coupled with headline-grabbing infrastructure projects that signal to corporate investors, both domestic and foreign, that India is open for business again.

For Modi's counterparts in Washington, Beijing, and Islamabad, India's new leader is considered a wildcard.  Little is known about his views on foreign policy and his vision for India’s place in the world.  “Anyone who says they know Modi’s plans, doesn’t really know anything.  The ones who know won’t talk”. He has already scored a coup in getting his Pakistani counterpart, Nawaz Sharif to attend his swearing in, the first Pakistani Prime Minister in history to attend an Indian prime minister’s inauguration.   He has also wasted no time in connecting with his new counterparts by posting congratulatory messages from world leaders on his Twitter account, lavishing particular praise on Japan.  None of the above sheds light on what kind of vision Modi has, but it points to a more proactive diplomacy, the opposite of India’s foreign policy in years gone by.

There are two main fears about Modi’s foreign policy.  First, that he will channel his brand of pro-Hindu nationalism into friction with Pakistan.  Second, that he will use his prior history with Washington; his U.S. visa was revoked in 2005, as a reason to snub the world’s biggest economy.  Early indications suggest those fears are unfounded and that Modi is a realist who will do business with anyone to help India grow.

I for one will be following Prime Minister Modi’s progress with interest.    

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Chirag Shah
Trainee Corporate Accountant