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Triumphant Modi must rediscover economic mojo

Without reform, enthusiasm for Hindu nationalism could turn to disappointment

| India
Modi's style is religiously divisive.   © Reuters

In the end, it wasn't even close. Five years ago, Narendra Modi won India's most decisive election victory in a generation. This time he was expected to struggle. Instead he now returns as Prime Minister with a result that is just as emphatic, revealing in the process profound changes in India's sense of itself.

This second win is also different from the first, given it comes with few of 2014's hopes for far-reaching economic change. And if Modi does not quickly rediscover his former focus on competent economic modernization, he will struggle to deliver anything approaching the kind of national resurgence that India's voters appear to expect.

The scale of Modi's latest landslide is breathtaking. At the start of this campaign Indians appeared ready to deliver at least a mild rebuke to their Prime Minister. His economic record was lackluster. Jobs in towns were scarce and rural farmers were struggling. Even the country's famously fractious opposition parties seemed somewhat more united and energetic.

Yet in a nation famed for waves of "anti-incumbency," when voters turn against those in power, his Bharatiya Janata Party executed a nearly perfect electoral strategy, confirming its popularity in the Hindi-speaking north while making incursions into previously untapped regions in the country's east. The secular Congress party (for decades the party of government) and the pluralist traditions it represents were again swatted aside. Prior to this election talk among anxious liberals of an extended period of BJP hegemony seemed far-fetched. It does not seem so any longer.

Yet rather than 2014's promise of economic change, this time Modi rode to victory on a call to nationalism. Helped along by a brief contretemps with Pakistan in April, he cleverly turned a poll that threatened to splinter into dozens of local complaints into a referendum on national pride, in part by alarming voters about external threats, from Pakistan's army to incursions from foreign migrants.

Modi's style was often religiously divisive, scaring Muslims by deploying Hindu nationalist rhetoric to animate hardcore BJP backers. But his message was wider than that too. Visiting India during the campaign, I was struck how many voters talked up Modi's strong leadership, and their own pride in India's rise. Modi's was a message that appealed to Hindu fanatics and moderate middle-class urbanites alike.

In this, Modi's triumph bears some similarity to the nationalistic turn China has recently taken under president Xi Jinping. Once China's Communist Party relied on economic competence as its main source of legitimacy. As China's growth slowed, so Xi has repositioned himself as a kind of nationalist guardian.

Modi faced similar challenges. He has delivered reasonable growth levels and low inflation, while also handing out well-placed tangible goodies, dotting rural India with new toilets and funneling cash payments to struggling farmers. Yet even though few voters had enjoyed dramatic changes in their personal circumstances, they turned to Modi as the only plausible face of India's rise as a global power. Rather than only offering grudging ascent for his second term, they delivered a clear endorsement for more of the same.

The problem is that, having won with this approach, Modi faces two significant dilemmas about how to govern from now on.

The first concerns his Hindu nationalist base, who will now want to remold their country more quickly and decisively in their own image. Modi himself sees no contradiction between promoting economic growth and replacing India's secular nationalism with a more religiously infused model, in which Hindus hold a privileged position. He once ran the state of Gujarat, which was starkly divided along religious lines but also one of India's most economically successful regions. Some commentators worry that an uptick in social tensions between Hindus and the large Muslim minority could now hurt India's economy, for instance by scaring away international capital. But in truth it would take a dramatic deterioration to affect foreign investment one way or another.

The question is whether Modi might mitigate the radical impulses of his hardcore supporters.   © Reuters

Despite his post-election vow to build a "strong and inclusive" India, there must be major doubts about Modi's willingness to take concrete steps that might begin to unify his deeply divided country either. The question is more whether he might manage or mitigate the radical impulses of his hardcore supporters, or perhaps even at times encourage them. Here at least Modi must realize that time spent stoking religious enmity will at least prove to be a distraction from his second and most important dilemma, namely how to rekindle his lost mojo as an economic reformer.

Back in 2014 many hoped Modi would be a radical administrator. They were disappointed. India's record of gross domestic product growth of roughly 7% has been in large part a matter of luck, aided by a robust global expansion and low oil prices. Today the outlook is much trickier. The global economy is turning sour, with trade tensions rising just when India should be seeking a greater role in international commerce. Oil prices are rising too.

The list of immediate problems India faces is also long, from a broken banking system and irksome labor regulations to stagnant private sector investment. The next five years will be decisive for a host of major national challenges as well, from managing climate change and urbanization to improving decrepit education and health systems. Above all Modi needs to build a strong, well-resourced and technocratically competent state, fit to manage all these daunting challenges.

Rapid transformation on any these fronts looks unlikely. But to have hope of making even some progress, Modi badly needs fresh ideas, and to bring fresh talent into his government, if his second term is to avoid being as economically unimaginative in his first. If not, India's slow-moving modernization process will catch up with it, dragging growth down to less impressive levels and undermining the sense of national strength that Modi has come to embody. India's electors might just have voted enthusiastically for more of the same. Following an unimpressive first term, the risk is that Modi may now deliver little more than that.

James Crabtree is an associate professor in practice at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is author of "The Billionaire Raj."

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