What Next for the Narendra Modi Government?

narendra modiNarendra Modi is the new prime minister of India, the world’s largest democracy. After months of relentless campaigning and high criticism for his communal record, Modi and his party were swept to power in the 2014 national elections, ending the two-term rule of the Nehru-Gandhi led Congress Party and its alliances. With millions of people watching the elaborate swearing-in ceremony at New Delhi’s Rashtrapati Bhavan, the colonial-era presidential palace on Monday, the 63-year-old Hindu nationalist leader and his cabinet ministers took their oaths with much fanfare and celebration. But as the revelry and euphoria settle down, a question emerges: what next for the Modi government, for the Indian people?

In a tech-savvy campaign, Modi and his team harnessed the power of social media to gauge public opinion and successfully communicated their messages of economic development, the generation of jobs, and the upward mobility of Indians and India on the global platform, to the electorate. Having won India’s first parliamentary majority after 25 years of coalition governments, Modi has plenty of wriggle room to advance his plans for the country. According to Modi, his paradigm for rule will include “development, good governance and stability.”

Expectations are high as India’s vast population asks what happens next for the Modi government, now that the elections are over. Modi’s supporters have called him India’s answer to the former American president Ronald Reagan and British leader Margaret Thatcher. He is expected to set India on a path of dazzling economic growth. The new prime minister kicked things off on Sunday and announced a move to a more centralized system of governing with a streamlined cabinet that would assist in easier decision-making and aid faster economic growth.

Towards that end, many economic experts are calling on Modi to focus on the manufacturing sector, an area where India is seen as being a poor cousin to China’s robust presence. As China’s economic growth rate dwindles, Ravi Venkatesan, former chairman of Microsoft India says,

For twenty years, China has been a growth engine for many global companies; these companies are now eagerly looking for the next China. No other country is better positioned for this than India.

According to industry experts, there is a need for a new growth model that should prioritize the indigenization of key sectors like defense, power and railways, so as provide a strong impetus to the manufacturing sector and turn India into a global hub.

A huge hurdle for India’s economic development and growth is the structural system in place that requires swift economic reform. According to Pankaj Murarka, head of equity at Axis AMC, “The impact of these reforms can be far reaching in reviving India’s growth.” Murarka points specifically towards areas like agriculture, labor, railways, water, mining, and tax laws, which need immediate structural change, according to him. Even with enormous economic potential and demographic strength of being the largest young labor force in the world, the present system with its poor governance, shoddy management and corruption has resulted in substantial losses for the Indian people and the exchequer, and needs a mindful overhaul.

Poverty reduction is another policy area that requires focus. While poverty in India has reduced in the past decades, it still remains painfully high. According to the United Nations International Children’s Emergency Fund (UNICEF), close to 400 million Indians continue to survive on less than a $1.25 a day. According to experts, raising people above the poverty line is a definitive method of boosting the country’s GDP. But many poverty reduction advocates fear Modi’s economic agenda that leans towards privatization while cutting subsidies and welfare programs. Instead, Modi and his advisors appear partial to free-market ideologies, deregulation-led growth, and a focus on building infrastructure to ease poverty.

While India grapples with lifting its poor above the poverty line, the country is also struggling with declining foreign direct investment (FDI). From $31 billion in 2009 to $19 billion in 2011, the precipitous drop has been blamed on India’s unfriendly and arbitrary business rules, obfuscating tax and labor laws, as well as a corrupt and slow bureaucracy. This is evidenced by World Bank statistics, which ranks India at 134 of 189 countries in terms of ease of doing business. According to Venkatesan, ex-Microsoft India, Modi’s government needs to engage in open dialogue and search for mutually agreeable solutions rather than “announce policy decision unilaterally.”

These are few of the many issues requiring dire and immediate attention from the new prime minister, if he hopes to meet the expectations of India’s vast population. As over 4000 guests, including members of the defeated Nehru-Gandhi family, Bollywood actors, renowned industrialists and the heads of several neighboring countries including Nawaz Sharif, the leader of Pakistan, and the millions watching worldwide ushered in the Modi era, the question remained: what happens next for the new government?

By Monalisa Gangopadhyay

Sources:

Yahoo News

The Economist

NDTV

UNICEF

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