India: Too early to say

Indian Parliament in New Delhi

Narendra Modi campaigned on the slogan that “good days will soon happen”. His promised reforms did not happen yet. But it is too early to judge him.

From 2004 to 2014 India grew at an average annual economic growth rate of 7.2 percent. The GDP in current prices grew from 688.55 billion US-Dollar in 2004 to 2314.72 billion US-Dollar in 2014. It was also a period that saw the national debt reduce from 85 percent of the GDP to 65 percent. This is an enviable performance by any standards, especially considering the Chinese growth was achieved by increasing the national debt from around 150 percent of GDP to almost 200 percent. Yet the Congress was ignominiously defeated with not enough seats to even be a recognized opposition party.

Clearly the discontent was major and the pain people felt went deep. It is generally understood that in a democracy governments are voted out and seldom voted in. And people vote based on their perceptions on bread and butter issues, and issues of valence. In both counts the UPA government’s performance was deemed abysmal. The statistics are telling. During UPA 1, food inflation was a tolerable 6.74 percent. But in UPA 2 this rose to 12.2 percent.

Acche din aanewale hain – Good times are on their way?

In Narendra Modi the people were clearly voting in a leader who would be able to rein in prices and command respect to make the government functional and agile. He campaigned on the slogan that “good days will soon happen”.

Even though the BJP led National Democratic Alliance (NDA) eventually rode to power on just 38.5 percent of the vote it received an overwhelming mandate of 332 seats in Parliament, with enough of a majority with its pre-election allies to pass any transforming laws and amendments to existing ones. Clearly this government has been empowered to take whatever actions are needed to get India’s growth back to the heady trajectories of 2008-2011 when GDP growth hovered close to double digits.

Modi enjoyed powerful support from the 120 million first time voters  (18-23 years) who are also mostly entering the workforce for the first time. By generally accepted estimates, India needs to provide 12 million new jobs each year and hence has to make a huge leap in capital investments.

During the campaign, Narendra Modi frequently referred to the bitter medicine that needs to be administered to get the economy going. But the presentation of the Modi government’s first budget proposals was met with disbelief. Instead of bitter medicine it seems to have has a spoonful of sugar for every stakeholder and sector. Clearly the path-breaking reversal of subsidies and sops expected was not to be.
The expectation that limits on foreign direct investment in the defence sector will enthuse foreign companies to set up factories to produce weapons and munitions locally, and create value chains and jobs locally, did not happen. The limit of 49 percent is seen by most as neither here nor there.

The expectation that land acquisition norms will be relaxed to make the purchase of land f0r industries easier and to facilitate Special Economic Zones (SEZ’s) did not happen.

The long expected labour reforms needed to energize labour productivity and corporate flexibility were not proposed.
Environment - a hindrance to development?

With the economic slowdown uppermost in its mind, the Modi government has moved with speed in removing bottlenecks in clearances of long pending projects. It was being said that over 70 billion US-Dollar of government and private projects were behind schedule due to this, particularly due to the hold up of clearances due to environmental concerns.

The government has also toned down the Environment Impact Assessment (EIA) Notification of 2006 to exempt many categories of buildings and construction projects from mandatory environmental clearances. The original notification of 2006, issued under the Environment Protection Act of 1986, required all kinds of building and construction projects to seek environmental clearances before the construction could begin.

Environmentalists interpret this as exempting large construction projects such as educational institutions, hospitals, roads and bridges, industries and public utilities from seeking EIA clearance. While this has been widely acclaimed by the industry chambers, environmentalists, mostly also politically liberal with built in inhibitions about the NDA government, have begun expressing concern about the government’s intentions.

Falling Popularity against rising prices

The monsoon has been deficient in rainfall by as much as 23 percent adversely affecting sowing in the raid-fed cropping areas, which account for almost 60 percent of farmlands. Consequently food prices are once again under pressure. Vegetables prices have surged more than 40 percent in July and cereals and milk prices have hardened. During the run up to the poll the BJP promised that it will bring down food prices within “20 days.”

This is not without consequences. The BJP has already begun to lose seats in the by-elections even where it did exceptionally well in May 2014. The BJP has lost three out of the four by-elections in Rajasthan and eight out of 11 in Uttar Pradesh. Only in Gujarat did the party just about hold its own. What is more, the BJP had polled fewer votes in these three crucial states that it considers its home turf. Here it polled fewer votes than in May, in 13 out of the 24 seats that it contested. These results confirm the trend revealed by the 10 by-elections in Bihar last month, in which the BJP led alliance's vote share fell from 45.3 percent in the corresponding assembly segments of the Lok Sabha polls to 37.3 percent.

Old habits seem to die hard: The BJP and Hindutva

After forcefully pushing itself ahead on its development agenda, the BJP apparently seems to have reverted back to its sectarian platform. Nowhere was this in greater evidence than in Uttar Pradesh where the party’s main campaigner, the self-styled Yogi Adityanath and its MP from Gorakhpur, launched an inflammatory attack of the supposed Muslim “love jihad” supposedly aimed at enticing Hindu women into marriage and conversion.

On several other issues, too, the BJP seems to be lapsing to its old positions. It has again raised the question of Article 370 of India’s Constitution that gives the state Jammu and  Kashmir a special status in the Indian Union with its own constitution and considerably greater autonomy.

This reverting to old positions is most apparent in the renewed efforts to rewrite Indian history to incorporate many parts of what was hitherto considered to be Hindu mythology as history. Widely held and scientifically validated views on the migrations that resulted in the melting that is India are being sought to be replaced by ideology driven notions of an indigenous race and a homogeneous nation.  Belief seems to be getting ahead of scientific reason.

Modi: Moulding a new foreign policy?

On foreign and neighbourhood policy, the Modi era began quite optimistically. He invited all the SAARC heads of government to his swearing in as Prime Minister. It was intended to send a signal to the neighbours that India will look at them with more interest than it tended to do in the past. As always the brief interaction with the Pakistan Prime Minister, Nawaz Sharif, that elicited maximum attention and set off hopes that, if not a breakthrough, a renewal of the thaw was once again possible. But the meeting also overlapped with renewed tensions on the border and the resumption of cross border firing. From New Delhi it seemed that the Pakistan Army was marching to the beat of a different drummer. Things went back to where they were when on August 14, the Indian government objected to the Pakistan High Commissioner meeting with separatist leaders from Kashmir, and called off the forthcoming meeting of the two Foreign Secretaries.

The Modi government also unveiled a new initiative on economic diplomacy by stating that it was substantially increased international trade and investment that was uppermost in its concerns. The Prime Minister announced “Make in India” as the new guiding motto, as much, to make India attractive for foreign direct investment (FDI) as it was to spur export of manufactured goods from India.  It also announced a slew of measures to make the entry of FDI easier, including in holy cow areas like Defence, Insurance and Railways where a new 49 percent limit for FDI participation in joint ventures was announced.

Narendra Modi’s first formal overseas official visit was to Japan, and it signaled the flagging off of his government’s economic diplomacy thrust. The visit obviously paid off with Japanese PM Shinzo Abe announcing its intention to invest 35 billion US-Dollar in India in the next five years.

This was followed closely by the visit of the Chinese President, Xi Jinping. The Xi visit began at Ahmedabad, Modi’s hometown and there was a marked bonhomie evident between the two leaders. While most of India was eagerly expecting a huge announcement that will trump the Japanese, a situation arose on the border in a place called Chumar in the remote Ladakh sector where Indian and Chinese troop movements led to a tense standoff. This standoff, even as the two leaders were meeting, upstaged everything and the joint statement only mentioned 20 billion US-Dollar as the proposed investment in two Special Economic Zones (SEZ) in Gujarat and Maharashtra. Clearly all did not work out as hoped for with China, and at the time of writing both countries are still trying to resolve local issues on the undefined frontier.

Modest moves into the future

But there is one front on which the BJP government is faring very well. According to a recent India Today Group-Hansa Research “Mood of the Nation” opinion poll, 57 per cent believe he is best suited to be prime minister, 48 per cent think he has made ministers irrelevant, and 47 per cent are sure he will be able to resist the Rashtriya Swayamsevak Sangh (RSS) agenda.

One hundred and twenty days have gone by. The Congress Party still seems numbed by the magnitude of its electoral debacle. Yet it has been unable to jettison the very leadership who are responsible for its current plight. This is to the Modi government’s advantage, both within parliament and in the public discourse. Most Indians across the board feel that the country has a strong and determined leader and want him to be given a full chance to show his abilities. So far Prime Minster Narendra Modi has moved very cautiously.

A leading commentator compared this to Chinese adage to “cross the river feeling the stones.” That may be so. But if the river is not crossed soon; those very stones might be the ones to be hurled at him. But it is too early to say.