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India’s diversity is Modi’s burden

by Kevin Rafferty

Special To The Japan Times

Narendra Modi was finally sworn in as India’s prime minister after his stunning election victory. One can only pray for India’s sake that, as in the old saying “Cometh the hour, cometh the man,” Modi will rise to a gigantic task that is much bigger than any of the optimistic foreign commentaries or the joyful Indian stock market have imagined.

If you believe some foreign commentaries, Modi has an easy road ahead. All he has to do turn the country over to private enterprise and let in foreign investment and all will be well. In the Financial Times, Gurcharan Das declared, “Modi needs to give India its Thatcher moment.” What a horrible simplistic thought for a complex country.

In his first moments of triumph, Modi promised “to make the 21st century India’s century.” He had reason to be elated after a campaign that was as stellar as his opponents’ was lackluster. His was a brilliant idea: larger-than-life holograms of himself made so that he could appear in many places at the same time.

Some people who turned up for these rallies were mystified that Modi could be there at one moment and vanish at the next, like an omnipresent god.

Perhaps it is unfair to drop buckets of monsoon rain on Modi’s parade just as he has been sworn into office, but in spite of his overwhelming victory, it was inflated by the first-past-the-post electoral system. The BJP actually won only 31 percent of the vote, less than the 36 percent that David Cameron got in the U.K. to push his Conservatives into an uneasy coalition government.

Modi has a majority in the key lower house of Parliament, but he is in a minority in the upper house. Should he compromise with regional leaders to keep everyone on board, which could lead to endless squabbling similar to that which corrupted the outgoing Congress-led coalition? Or should he push ahead with his own agenda?

As a man of humble origins who ran a tea stall at a bus terminus, he understands better than the Gandhis ever did the problems that the Indian common man faces in aspiring for a decent living. Modi spoke of putting a toilet in every home, a basic facility as far as people in developed countries are concerned.

Too many ordinary Indians lack access to basic services such as sanitation and safe water, let alone electricity supplies or schooling. McKinsey in a recent report estimated that 46 percent of Indian households lack basic services.

Modi’s first priority is to tackle the parlous economy, with a difficult fiscal situation, falling growth and high inflation. Former BJP minister Arun Shourie admits that the fiscal situation is tight and makes room for maneuver difficult. Reducing subsidies on a range of common goods is essential but proved politically impossible for the previous government. It is unlikely Modi, even with today’s wind of optimism, can get growth this year to 6 percent.

In the medium term, the leading issues are bound together with manifold economic, social and political complications that are not easy to unravel.

Beina Xu of the Council on Foreign Relations outlined some of the problems involving infrastructure: “Years of underinvestment in infrastructure have left the country with poorly functioning transit systems and power grids that have further endangered its economy. …

“Burgeoning trade is putting pressure on India’s inefficient ports, and rapid urbanization is straining the country’s unreliable electricity and water networks. Bureaucratic red tape and political inertia have thwarted the success of foreign investment partnerships and bruised India’s international standing, discouraging further outside investment.”

As chief minister of Gujarat, Modi achieved relatively faster growth for the state by cutting deals with rich industrialists, offering them land and licenses in exchange for factories and jobs. To an extent it worked well, though critics complained that it played into the hands of already-rich business groups that will now want their reward for having supported Modi in the election.

Whether Modi’s Gujarat recipe can work well for all of India is more problematic. India needs more competition, new ideas, new entrepreneurs — not new privileges for the rich. It needs to get basic services to the poor, a toilet in every home and a literate education for every child. McKinsey found that 50 percent of public spending on basic services does not reach the people, an enormous waste of resources.

The optimists of course imagine that all is going to be well now with a new government enjoying a comfortable majority. Morgan Stanley, the big investment bank, hopes “The election results could be an inflexion point for India’s story. The electorate’s strong and high quality mandate is for development, in our view. This increases the chances that the government focuses on accelerating growth and slowing inflation …

“Reforms that could follow the elections will improve business sentiment, thereby lifting corporate sector profitability and incentivizing a revival in private investment” … so that — as in fairy tales — everyone lives happily ever after.

Supporters of foreign investment also chip in with the claim that the foreign cavalry can ride to the rescue and bring to India all the golden goodies that it has been missing for so long. Dream on.

India was a British colony in one way or another for two centuries, but the British did not bring a golden era. They helped unify the country, then cruelly and crudely broke it up again. They brought the railways, the telegraph and the global benefits of the English language. They brought a government system, and all the red tape that went with it, and justice and the courts system. But real growth under the foreign power was slower than after independence.

Certainly foreign investment can play a role in India’s economic revival. Modi needs to ensure that the rules are clear and fair, and to see that there is no repeat of the standoff with Vodafone, presented with a tax bill of 112 billion rupees for its takeover of Hutchison Whampoa’s Indian telecom assets.

It is not clear to me that the arrival of Wal-Mart, Tesco and Carrefour supermarkets would be the salvation of India. Yes, tap their expertise in keeping food fresh, ensuring that wastage between the farmers’ fields and the market is cut from 40 percent, and in improving the local roads. But India must take charge of its own destiny and set the priorities and the terms for partnerships.

Anand Mahindra, chairman of the Mahindra Group, believes that India’s future lies in empowering the 28 states and seven territories to compete with one another. Gujarat, he points out, has more in common with Germany than with Bihar. Until recently, the Hindi-speaking states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh were grouped together as BIMARU, a play on the Hindi word “bimar” meaning “sick.” But these days Bihar is showing new vigor, and Madhya Pradesh is regarded as one of India’s best-run states. Mahindra’s idea is worth considering, but will Modi, moving from Gujarat to New Delhi, be prepared to direct a team of possible rivals?

Spare a thought for the outgoing leader. History may be kinder to Manmohan Singh. He is an honest and good man. More than most of his critics, he understands the issues of India’s economy. He got himself trapped in a web of intrigue and corruption that the Gandhi family spun around him, powerless to advance essential economic and social reforms.

Foreign policy is another story. The size of Modi’s majority may tempt him to pursue a policy of making India great again, an aspiring great power, as he hinted in his opening remarks after victory. Japanese reports say that Modi has already become a Twitter buddy of Prime Minister Shinzo Abe.

An alliance between New Delhi and Tokyo might be a salutary warning to Beijing, especially if Modi can maintain India’s traditional friendship with Moscow. But Modi and Abe should be careful. Anything that smacks of an attempt to encircle China would trigger new tensions in a region that is already fraught.

A real 21st-century great power has to be one with a global imagination and conscience as well as military reach. It would be good if Modi’s new India could draw on India’s historic civilizing roots and Abe could remember the pacific lessons of postwar Japan’s economic success, together, to show a new way to China. But that means all leaders have to look beyond national dreams of glory.

Kevin Rafferty was executive editor of the Indian Express newspaper group.