In Modi, Indians hope for an economic miracle-worker

After preliminary results on Friday revealed Narendra Modi and his Hindu nationalist Bharatiya Janata Party had won by a landslide in India’s parliamentary elections, the country’s new prime minister declared in a triumphant tweet: “India has won!” It quickly became India’s most retweeted post ever.

While not everyone is convinced that “India has won” with Modi, a polarizing figure on the Indian political scene who many accuse of fostering sectarianism between Hindus and Muslims, the BJP leader can be forgiven for his exuberance. Not only has Modi unseated the embattled Congress Party that has ruled India for most of the past 60 years, he did so with the most dominant election margin in a quarter-century and during a record-setting election — 66 percent of eligible citizens turned out to vote.

Modi triumphed despite questions about his past, and in particular concerns about the 2002 anti-Muslim riots that killed 1,000 people in Gujarat state while he, a virulent Hindu nationalist, was governor. Though Modi has never been formally charged with wrongdoing, accusations that he allowed — or promoted — the unrest have dogged him ever since and even spurred Western countries, including the United States, to deny him an entrance visa.

“The magnitude of his victory suggests that the Indian voting public was willing to overlook Modi’s baggage,” said Michael Kugelman, a senior program associate for South and Southeast Asia at the Wilson Center. “For many Indians, the immediate concern for economic progress, better governance — the things Modi has promised — have trumped any concerns about his past.”

That is precisely what the BJP was banking on. When grilled about his often-hardline rhetoric against Muslims — which was toned down on the campaign trail — party officials instead vaunted Modi’s economic record and said his promised transformation of the Indian economy would be blind to sect.

“Let our work speak for us,” Ravi Shankar Prasad, a senior BJP leader, told The Guardian. “Gujarat has the highest economic growth rate for Muslims in the country.”

Voters overwhelmingly favored the BJP platform of explosive, market-focused growth over Congress’ welfare-minded agenda to breathe life back into the country’s economy, which has experienced a slower growth rate in recent years.

The stock markets agreed: As pre-election poll results indicating an easy BJP victory trickled in, India’s Sensex rose more than 15 percent in six months to a record high.

“The people of this country have given their verdict,” Modi told an enthused audience in the Gujarat city of Vadodara shortly after the election victory was confirmed. “This verdict says we have to make the dreams of 1.25 billion people true. I must work hard.”

In a gesture of goodwill on Friday, U.S. President Barack Obama called Modi to congratulate him on the BJP’s landslide victory in what the president called a “historic election.” Perhaps more importantly, State Department spokeswoman Jen Psaki followed up in the afternoon by confirming that Modi would indeed “be welcomed to the United States” with a visa.

But Modi’s ambitious promises of economic revitalization — “development for all,” the party called it — will be difficult to fulfill. His reputation as an economic miracle-worker was established in Gujarat, where he helped foster India’s highest economic growth rate. Replicating the same transformation on a national scale will be another task entirely.

Even granted such a decisive mandate by India's electorate, the prime minister can only do so much. If Modi seeks to transform India into a manufacturing powerhouse, as BJP officials have indicated, he will have to clear certain structural hurdles that are out of his control, namely the upper house of Parliament and the independent Supreme Court. Furthermore, any gains will need to overcome India’s rampant corruption and its $100 billion fiscal deficit.

An overhaul of India’s investment climate, another of Modi’s priorities, is also easier said than done: A report from JPMorgan suggested that 80 percent of stalled investment projects, by value, resulted from red tape at the state level, rather than in Delhi.

While the International Monetary Fund recently predicted that India’s economy would improve — that its flagging growth rate would recover from 4.4 percent in 2013 to 6.5 percent in 2015, that may not be enough.

“Voter expectations are far greater," wrote Milan Vaishnav, an associate with the South Asia program at the Carnegie Endowment for International Peace, in an op-ed for Bloomberg View.

"Surveys suggest that they are flocking toward the BJP in the hopes that Modi can generate millions of new jobs, plug India's infrastructure gap and attract the kinds of foreign money he has lured to Gujarat,” he wrote. They may be disappointed.

A critical factor will be how Modi manages India’s sometimes-tumultuous relationship with the U.S., a $64 billion trading partner in 2013. Modi will be under pressure to assuage the concerns of U.S. businesses that, despite growing ties, have been wary of India’s slouching economy, civil sector corruption, and occasional political turmoil.

Anubhav Gupta, a senior program officer for the Asia Society Policy Institute, said economic partnership should pave over any political differences between the U.S. and India.

“Notwithstanding the many challenges facing India, its economic potential is too great, its institutions too resilient, and its shared interests with the U.S. too significant for the country to be anything less than a great long term bet,” Gupta said.

But Modi will have to perform in his first few months as prime minister, analysts say. He would do well to demonstrate that the BJP is committed to quelling communal violence in India, said Kugelman, but no one expects Modi to be the “silver bullet for India’s sectarian tensions — quite the opposite.”

On May 1, the most recent flare-up, dozens of Muslims were killed during election-week violence in northeastern Assam state that was tied to the influx of Bangladeshi Muslim immigrants in the region. Modi has called for tighter borders to keep immigrants out, and Congress politicians have warned Muslim immigrants to keep their "bags packed" should Modi be elected. But analysts say India’s 150 million Muslims might be convinced to tolerate BJP rule so long as Modi steers India’s economy back on course.

A similar principle of economics trumping all else might also apply to relations with Pakistan, India’s long-time bitter rival with which it has fought four wars. Though he has taken a hard line with Pakistan in the past, Modi also has the potential to thaw bilateral relations — and perhaps slow the regional arms-buying rivalry — by inking trade partnership deals.

Nawaz Sharif, the prime minister of Pakistan, indicated he might be interested in the same by calling Modi upon news of his victory to invite him to the country.

“India now has a leader who’s very interested in improving economic relations with all of his neighbors — even Pakistan,” said Kugelman. “But it is also very clear to me that if India were to be provoked by Pakistan – a terror attack traced back to Pakistani intelligence, for instance – Modi would not be as restrained as his predecessor.”

For India-Pakistan relations — as with most things — “Modi’s victory could be either a blessing or a curse," he added.