Make India Great Again

In 2014, Narendra Modi swept to power capturing the anti-incumbency mood of a sullen electorate. In 2019, Prime Minister Modi returns to power with an even larger mandate, riding a wave generated by a pro-incumbent mood. The 2014 verdict was historic because for the first time in 30 years, India had a government with an absolute majority in Parliament. Five years later, Modi made history again—both by decidedly moving India out of the so-called era of coalitions and by reinforcing the message of 2014 that the Indian National Congress, now more aptly called the Sonia Congress, had run its course and could only be revived in a new avatar.

In June 2014, I asked a senior functionary of the Modi government what he saw as the biggest challenge facing the new government. “To moderate expectations,” he told me. The victory of May 2014 had generated unrealistic expectations and this senior functionary was under no illusion that the government would be able to meet all of them. It took time for Prime Minister Modi to “moderate expectations” and before he could do that, he was faced with reversals in Delhi and Bihar. A bumptious Rahul Gandhi began his tenure as the president of the Sonia Congress with a clever and devastating slogan dubbing Modi’s government as a “Suit boot ki sarkar (a government of the well-heeled)”. The jibe stuck. The rest of Modi’s term was devoted to erasing that impression from the voter’s mind.

Modi’s adoption of a left-of-centre, populist economic programme and his total capture of a nationalist platform ensured that despite his government’s many frailties and weaknesses, he remained on top of the game. Allowing whatever anger had built up within the electorate to dissipate itself in the Assembly elections of the winter of 2018 was helpful. While Modi favours clubbing Assembly and Lok Sabha elections, he is a clear beneficiary of the two getting delinked. The anger or tiredness with the Bharatiya Janata Party (BJP) governments of Madhya Pradesh, Rajasthan and Chhattisgarh remained limited to the Assembly polls and did not spill over into the Lok Sabha election.

That the voter has differentiated between an Assembly and a parliamentary election is clear from the verdict of 2019. Even when voters have opted for some other party at the state level, they have overwhelmingly gone with the BJP at the national level. The BJP has breached many barriers and entered territories where it hardly had a presence. Equally historic has been the precipitous decline of the communist parties. In part, this has happened because the BJP has usurped the Left’s ideological platform by combining nationalism with pro-poor economic policies.

Modi’s victory this time is entirely his own. The challenge of 2014—of moderating voter expectations—will be amplified this time. Modi will have to move fast to meet some of the expectations even as he moderates others. The task is made more difficult by the fact that the domestic and global economic situation is less comfortable today than in the summer of 2014. Sure, India is still doing better than many other countries and is expected to log over 7% annual growth in national income.

In an assessment published last week, the Paris-based Organisation of Economic Cooperation and Development (OECD)—the rich country’s club—pegged national income growth in India in 2019-20 to be around 7.5%. “This growth will come from higher domestic demand due to improved financial conditions, fiscal and quasi-fiscal stimulus, including new income support measures for rural farmers, and recent structural reforms. Lower oil prices and the recent appreciation of the rupee will reduce pressures on inflation and the current account.” Underscoring the fact that India would still be among the G20s fastest-growing economies, the OECD observed, “Investment growth will accelerate as capacity utilisation rises, interest rates decline, and geopolitical tensions and political uncertainty expected to wane.”

Priority 1: The economy
Not everyone would share this optimism. Not only is the global economic environment expected to become more challenging as the United States-China trade war continues, but even the environment around India may get destabilised if the US injects more instability into West Asia. Clearly, Modi’s priority number one will remain macro-economic management. The fiscal assumptions and forecasts made in the Interim Budget, presented by stand-in Union finance minister Piyush Goyal, in February must hold. Given the sweeping mandate, Modi can afford to go slow on some of his fiscally demanding promises. It is normal for governments in democracies to turn fiscally conservative after an election, ensuring that the political business cycle gets turned down.

Rather than boost growth through public spending, the government should aggressively pursue ease of doing business and reverse the highly arbitrary functioning of various regulatory agencies, including the Securities and Exchange Board of India.

India’s private sector requires a more sympathetic hearing from the second Modi government. One reason why Rahul Gandhi appeared larger than his real self over the past year was because of the support he got from small, medium and even big business, which were unhappy with various measures of the Modi government. It was politically sensible for Modi not to be seen worrying too much about their concerns at a time when his electoral prospects depended on wooing the poor and the middle classes. But now that he is firmly in the saddle, he should pay more attention to them.

An early initiative could be to increase the pace of the ‘Make in India’ programme in defence manufacturing. India’s first industrial era, in the 1930s, was based on the growth of agro-processing industries such as cotton textiles and sugar. Its second industrial era, in the 1950s, was based on the growth of public-sector capital goods industries. The third industrial era of the 1980s and 1990s was spurred by the growth of consumer durables, including automobiles. The share of manufacturing in the national income has stagnated over the past decade-and-a-half at around 16%. Both the Manmohan Singh and the first Modi governments tried their best to increase the pace of manufacturing growth but have largely failed. Given the flattening out of demand for consumer durables, it is possible that many of the industrial sectors may see a slow growth till demand picks up in the next cycle. What can be attempted in the interim is a rapid escalation of investment in defence manufacturing.

Several new policies aimed at boosting indigenisation of manufacturing initiated by defence minister Nirmala Sitharaman are awaiting government approval. The completely pointless Rafale controversy may have discouraged the political leadership from moving fast on these ideas. Modi should push aggressively to ensure that the next phase of Indian industrialisation is triggered by ‘Make in India’ in defence manufacturing.

Priority 2: Inclusive politics
The 2019 verdict means that the BJP has replaced the Congress as the natural and national party of government. However, for it to govern as such, the Modi government must take visible measures to win the confidence of the Muslim community. This is not about minority appeasement; this is about credibly reinforcing the message of Sabka saath, sabka vikas. Prime Minister Modi’s post-victory tweet that said “Together we will build a strong and inclusive India”, is, therefore, of great value and importance. His government and party must get the message loud and clear. The BJP must end its obsession with individual food habits and social choices.

Priority 3: Education & health
An important plank of the BJP’s 2019 campaign was Modi’s healthcare initiative. He must remain focussed on healthcare for all as a national objective. The government must address a concern that its policies are neither helping the needy poor nor supporting healthcare providers. A socially and regionally broad-based national public health and healthcare programme is still waiting to be implemented.

If there is one area in which India truly lags all high-performing economies of East Asia, including China, is education. A report on education reform is waiting to be unveiled. In his first term, Modi allowed his party’s ideologues to mess around with education and educational institutions. This has not served national interest. In his second term, the prime minister must focus on bringing India’s educational system up to speed with the needs of the 21st century.

Priority 4: Foreign policy
For a prime minister, the main area of policy initiative at all times remains national security and foreign policy. Even in the realm of economic policy, a prime minister has to work with other ministers, especially the finance and commerce ministers, and the ministers responsible for infrastructure development. It is, therefore, not unusual for prime ministers to devote greater attention to national security and foreign affairs. Both fronts remain challenging.

A stronger economic performance can help increase the space for foreign policy initiatives. Hence, the economy remains a priority even in foreign policy management. With global economy passing through difficult times, building meaningful coalitions that enable India to remain focussed on her economy remains a priority.

In foreign policy, the past is no guide to the future. India needs a more forward-looking plan for the 21st century. Modi has done well to maintain a balance in India’s relations with the United States, China, Russia, European Union and Japan, not getting drawn into the US-China spat and strengthening strategic relations with technologically advanced nations like Germany, Japan and South Korea. This policy must continue. Closer home, sooner rather than later, Modi will have to focus on Pakistan. What India can achieve with Pakistan is a different matter but New Delhi should, at least, converse with Islamabad. This remained a major gap in Modi’s first term.

The Indian electorate has been exceedingly generous to Modi. It has given him a handsome mandate the likes of which India has not seen in close to half-a-century. After all, the Congress victory of 1984 was a consequence of Indira Gandhi’s assassination. 2019 was a normal year. Modi has, therefore, won a normal but impressive victory. He owes it to the people of India to give them five years of peace, livelihood security and hope for the future.

Sanjaya Baru was chief editor, 'The Financial Express' and 'Business Standard'