India's optimism a useful antidote to Western pessimism
With a powerful new electoral mandate, Modi looks to engage with the world
Americans suffering a crisis of confidence about the future of their country's democratic institutions under President Donald Trump could use a dose of Indian-style optimism. The country's Prime Minister Narendra Modi, elected on a populist platform in 2014, has just won a landslide victory in elections in Uttar Pradesh, India's biggest state. Results there and in a handful of other states are still being finalized. But it is clear that in his third year in office, Modi has overthrown establishment elites in his pursuit of an ambitious reform agenda that is transforming the country by kindling economic growth and hope. India's experience offers a useful antidote to Western pessimism -- and a reminder that democracy can offer solutions to the growth and governance dilemmas that afflict the U.S. and Europe.
India's economy is expanding at around 7% a year, powered by the demographics of the world's largest population of young people, but also, importantly, by "big-bang" reforms. The country is enacting a national goods and services tax that will rationalize and unify its internal market, currently broken down into 29 state markets. Doing this required revising the Indian constitution, no small task in the world's biggest parliamentary democracy.
Modi's Bharatiya Janata Party-led government has also liberalized foreign investment in a range of sectors, passed a bankruptcy bill to help banks hit by bad debt problems to recapitalize, and made a revolutionary break from an economy 95% dependent on cash transactions by temporarily abolishing most of the currency in circulation. Although the rollout was bumpy, this controversial reform will help transition India to a digital economy, expand tax revenues by placing more economic activity in the formal sector, and clamp down on corruption by curtailing the supply of "black money."
Through a scheme launched by the previous Congress Party-led government, India is creating a national identification number for every one of its 1.3 billion citizens. This will allow the government to provide welfare and other benefits directly to individuals without going through corrupt middlemen who, until recently, skimmed off most of the proceeds from government assistance programs.
The Modi administration has helped create millions of bank accounts for poor, "unbanked" Indians who previously had no access to the financial system, and can therefore now receive government payments directly by digital transfer. The government's chief economic adviser has even flirted publicly with the idea of transitioning to a universal basic income system that would replace a hodgepodge of inefficient individual welfare schemes, potentially creating a financial safety net for every Indian, including the poorest of the poor.
The recent elections, held in five states, featured Uttar Pradesh, which alone contains a population as big as those of Britain, France, and Germany combined. The Uttar Pradesh elections in India's Hindi-speaking heartland were in part a referendum on Modi himself. The strength of his party's victory there should serve as a tailwind for the prime minister's reform agenda, reinforcing his political clout in New Delhi to push ahead with his governance-and-growth program as India moves towards national elections in 2019.
In India, voter turnout is linked to income. But unlike in the U.S., poor people are far more likely to vote than those in the middle and upper classes. Rather than entrenching plutocracy, which critics claim occurs in the West through the corrupting influence of money and special interests, this has the effect of incentivizing politicians to engage with the country's grassroots, including in predominantly rural areas.
India is almost constantly holding elections on a rolling basis, given its enormous population and the fact that only a handful of states vote at any given time. This has negative effects, including the enormous political energies expended on drives to persuade voters to vote, on and coalition-management operations rather than on governance. But it may also encourage good governance, because politicians are subjected to accountability, and state elections serve the dual function of addressing local concerns while acting as referendums on the performance of the national government -- as did these most recent Indian elections.
Aspirational Indian voters increasingly manifest a tendency to reward governments that deliver growth and to turn out politicians who do not meet performance tests. This occurs at all levels of government and has led some states to compete to create the most enabling environment for economic development.
Without question, many unsavory factors distort political outcomes in a country as big and poor as India, a tendency on vivid display in the elections currently underway: criminals run for office to avoid prosecution, money too readily washes around politics, and politicians use divisive issues of caste, religion and ethnicity to mobilize voting blocs.
At the same time, strong anti-incumbency instincts keep politicians on their toes. Emergent political forces like the Aam Aadmi (Common Man) party campaign against corruption and other distorting political practices, even if their proposed governing solutions are not convincing. The ruling party is especially mindful of the experience of the last BJP government to rule India -- because it was deposed at the polls in 2004 in a shock upset from which the party took a decade to recover.
Modi's strong approval ratings -- about 4 in 5 Indians have a favorable opinion of their prime minister -- combined with the BJP's remarkable victory in Uttar Pradesh demonstrate that bold leadership is compatible with public support. India's sheer size and scale make it a fractious democracy -- three dozen parties hold seats in parliament, and powerful regional chieftains resist edicts from the distant capital. But the political polarization and gridlock that characterize Washington are less evident in New Delhi, in part because the prime minister won a strong mandate and is doing something with it.
The Modi administration is also pursuing an ambitious foreign policy at odds with the nativism and retrenchment evident in parts of Europe and the U.S. Of course, India is a new member of the great-power club, without the global responsibilities of a superpower like America. But the country's leadership is determined to engage more with the world, rather than building defensive walls.
India is doubling down on a strategic partnership with the U.S., forming a quasi-alliance with Japan, expanding economic ties with Southeast Asia, Africa, and the Persian Gulf, and investing heavily in stability in Afghanistan, not least as that country's second-largest bilateral donor. The Modi government surprised many by signing the Paris Accord on climate change, after decades in which India saw environmental-protection issues as a way for rich countries to keep poor ones down.
Should globalization further erode in the face of protectionism and mercantilism in China and the developed world, India has perhaps the most to lose: as a poor country it has yet to harvest the fruits of integration with the global economy. India's technology sector, in particular, is at risk from potential new immigration restrictions in the U.S., given the hundreds of thousands of Indians holding U.S. non-immigrant employment visas, whose talent underwrites innovation in hubs like Silicon Valley.
In short, India's economy is strong; its democracy is thriving, if still somewhat chaotic; it is ramping up foreign engagement while other countries retreat into narrow nationalisms; and it increasingly champions key pillars of the liberal world order. This is happening at the same time as economic anxieties in Europe and the U.S. are mounting, producing an insurgent populism that challenges democratic institutions, risks hollowing out multilateral cooperation, and undercuts support for the rules-based global order.
It would be ironic if the U.S. and Europe step back from global economic and political leadership at a time when India is ready to step forward as a partner in underwriting international security and prosperity.
Daniel Twining is counselor at the German Marshall Fund of the United States. He recently visited India with 19 members of the U.S. Congress on a study tour organized by the Aspen Institute.