The Modi breakpoint

He is viewed with excitement and anxiety in UK, but is unlikely to prioritise Europe.

Written by Gareth Price | Updated: June 5, 2014 8:05 am
Creating jobs so that India’s demographic dividend can be realised requires a focus on skills development. Here, too, there are hopes that the UK’s experience can be shared. Creating jobs so that India’s demographic dividend can be realised requires a focus on skills development. Here, too, there are hopes that the UK’s experience can be shared.

He is viewed with excitement and anxiety in UK, but is unlikely to prioritise Europe.

Narendra Modi’s remarkable win for the BJP will undoubtedly alter the course of Indian politics. The BJP successfully tapped into popular frustration stemming from the lack of coordinated policymaking and the multiple corruption scandals by promising a stronger, more coherent government. His message would seem to have particularly appealed to younger voters. Over the past two decades India’s economic success and more recent slowdown have been overseen by coalitions. Modi is now in a position to streamline ministries to encourage coherence. All of his public statements suggest his intention to improve governance and service delivery, both of which have been affected by the need to manage disparate coalitions.

For countries such as the UK, which want to build their trade and investment ties with India, these moves will be welcome. Poor governance is frequently cited as an impediment to doing business. The largest foreign investments in India have been by British firms, and better governance — coupled with rising expectations — is likely to lead to higher economic growth. Modi is in a position to take some of the more difficult decisions that successive governments have dodged on account of the interests of smaller coalition partners.

On the domestic front, observers are keenly watching whether he may try and reform areas such as labour law. For foreign investment, the expectation is that liberalisation will continue on a sector-by-sector basis, based on Indian needs. Questions remain over whether foreign investment caps in insurance will be lifted, but there is greater hope for the defence sector.

The UK has, and will continue to, work on building links between its Indian-origin population and India. Further, there is widespread support for Modi, and the BJP in general, among the Gujarati section of the Indian diaspora in the UK.

Expectation management may well be a key challenge for the new administration. In large part, the BJP swept to power on the hope that it will change the tone of politics. While corruption is unlikely to disappear overnight, if Modi surrounds himself with clean and competent ministers, it could send a positive signal to those further down. But India is a complex federation and there are clear limits to what the Central government can achieve. Even though it has a majority in the Lower House, the BJP is well short of a majority in the Upper House. And India’s challenges are significant. Creating jobs so that India’s demographic dividend can be realised requires a focus on skills development. Here, too, there are hopes that the UK’s experience — in certifying skills, for instance, can be shared with India.

Despite the relatively positive mood of many in the UK that the new government will bring India potentially brighter economic prospects, questions remain. First, the new government seems likely to prioritise domestic issues. India’s foreign policy is likely to be focused on India’s neighbourhood. With Nawaz Sharif being the first Pakistani prime minister to attend the swearing in ceremony of an Indian prime minister, the initial signs are positive. China will be on Modi’s radar, both for the economic opportunities it presents and for strategic issues such as border disputes.

The new government is likely to follow the Gujarat model, seeking investment in infrastructure. Here, Modi is likely to look east, to countries such as Japan, Korea and Australia, and even China. Western Europe is unlikely to be a priority. If his first visit is to Japan, this would reinforce its growing importance to India — as a strategic partner and a significant investor.

What implications does this have for the West, and the UK in particular? Modi represents a break from the legacy of Congress rule. Unlike many Congress leaders, he was not educated in the UK. And while he may not bear a grudge, intuitively, he would seem less likely to prioritise those countries that refused to grant him a visa following the Gujarat riots.

In the UK, questions are also being asked about the social implications of a BJP-majority government and the ability of Modi to balance the agenda of good governance and social cohesion. Those concerns will only subside or worsen as the government’s actions unfold, particularly on events relating to communal tension or violence.

British observers of the Indian elections probably view Modi’s rise to power in much the same way as many Indians: an exciting prospect for the hope of economic reform, but with anxiety over the consequences of how that might be achieved. India had long been relegated to the “era of coalition politics” — now, for the first time in decades, there is potential for a different kind of decision-making.

The writer is senior research fellow, Asia Programme at Chatham House, London

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  1. A
    adal singh
    Jun 5, 2014 at 9:08 am
    India is seen with different angles by different countries based on their own interestsdia too is bound first to prefer the national interest. There must be a good coordination in the steps we take at domestic, neighboring, west and easternfront. Gujarat model can't be applied at national level because nation is quite different from a state.
    1. C
      Jun 5, 2014 at 5:58 am
      The comfort level of British people with British educated Congress leaders were high. They understood the basic direction & mental framework of these leaders.Now, with a Non-English speaking & home grown leader at helm, who is extremely confident of himself, the usual comfort level of British/European people is no longer there. They may have to re-calibrate their mental approach to India.BTW, Britishers must have done business with Morarji Desai in 1977-80 too.
      1. C
        Jun 5, 2014 at 11:36 am
        we dont want any east india company concept once again here and it should be clear to british people
        1. S
          Jun 6, 2014 at 5:31 am
          Makes sense. Europe. Who pays attention to them anymore?
          1. G
            GOPAL KULKARNI
            Jun 5, 2014 at 9:55 am
            In today's wider world stage itself, Europe does not figure very prominently , compared to China,an,Korea. Europe is living on reflected glory because of its proximity to the US. Naturally, Europe cannot be a priority area for India either. as rightly apprehended by the writer. As for social concerns in the wake of Modi taking over as Indian PM, these are absolutely misplaced, to say the least. Modi's more than twelve years of rule in Gujarat is a testimony to the excellent social environment there resulting in all round growth and prosperity, which now Modi intends to replicate for the w country. Modi always talks of 1200 million Indians, as he used to talk about 50 million Gujaratis. That should leave no doubt in anybody's minds - including Mr.Gareth Price - about what Modi means to the country.
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