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Modi operandi

Modi will be itching to spread the Gujarati rate of growth across India.

Written by Bhaskar Chakravorti |
Updated: June 12, 2014 12:28:59 am
The third principle relates to how Modi views India in relation to the world.  (Source: PTI) The third principle relates to how Modi views India in relation to the world. (Source: PTI)

Now that the Modi raj is officially in place, pundits in the West have been left scratching their collective head in their efforts to provide some insight into the real Narendra Modi and what to expect in the years ahead. He could be a Ronald Reagan or a Richard Nixon or even a Deng Xiaoping. Maybe, going from being a tea seller’s son to a strongman on the cover of The Economist is a journey that parallels that of a grocer’s daughter who became Britain’s Iron Lady, in which case, he is surely a Margaret Thatcher. In the absence of any meaningful analysis and without much of a breadcrumb trail to follow in India, Narendra Modi has become a victim of analytical laziness. The real Modi seems destined to be caricatured by competing canned — and false — analogies.

Ironically, more so than any leader in modern Indian history, Modi is already showing signs that he is intent on writing his own narrative. In fact, we should prepare for several parallel Modi narratives. He has already defied predictability. Consider this: he choked up on his first day in Parliament’s Central Hall, suggesting that beneath that singularly robust exterior may lurk more than just a singular Modi; he bypassed the “Hindu nationalist’s” hard power playbook and opted for a decidedly soft power photo-op with Pakistani counterpart, Nawaz Sharif.

How, then, do we anticipate what Modi raj might mean for India and the world? A good place to start is to ask: no matter which Modi ends up governing the country, what are the constants? Here, three fundamentals —  Modi operandi, if you will —  stand out.

The first principle stems from the central objective that will drive his agenda. Modi will be itching to spread the Gujarati rate of growth across India. This was, after all, the central argument for his mandate. It is also the experience he is likely to draw from. The second principle has to do with his beliefs about how to achieve the objective. Given his outsider status, Modi will emphasise less government at the Centre. His lean ministerial ranks are an early signal of this belief being put into practice.

The third principle relates to how Modi views India in relation to the world. Even though foreign policy was not a significant part of his campaign, it is clear that he derives inspiration from abroad. Here, his admiration for China, Israel and Shinzo Abe’s Japan means he will take a more assertive and “business-like” stance on foreign policy.

Interestingly, these principles as a collective also encompass a bundle of contradictions. Navigating past them successfully may need more than one Modi at the helm.

Consider each in turn. First, on scaling-up the Gujarati rate of growth. It has been argued that the market has already sent a strong signal of its confidence in Modi. The stock market has rebounded and foreign institutional investments, which had hit a low of $29 billion in 2013-14, are projected to double in the excitement following the elections. However, most of these investors are going to be interested in India’s relative strength: the services  sector. But meaningful growth in India, given the state of the country’s development and size of its population, cannot happen without growing the manufacturing sector. The services sector produces fewer jobs for each rupee it contributes to the GDP and since the population is young and relatively unskilled, services jobs are predominantly lower value-added in nature. Currently, manufacturing makes up no more than 15 per cent of the economy. Even bringing the national share of manufacturing closer to that of Modi’s Gujarat, to, say, 25 per cent, could create 100 million jobs in India. Enabling such a transformation will be no mean feat. Gujarat has a long history of trading and manufacturing. To up-shift manufacturing nationwide to Gujarati levels will require many structural changes — from infrastructure and reliable energy to tax relief, among others. The Modi administration does not, as yet, have the leverage to bring about fundamental but necessary reforms in labour regulations or land acquisition.

Making structural changes will require more government intervention. But this runs counter to Modi’s second principle —  achieving mean governance with lean government. Modi favours a lean government model, with power moved to the edges and, preferably, to the private sector. The idea, in theory, is sound: move decision-making closer to where the decisions have an impact, where information is better, and where actions can be better monitored. Also, by removing hierarchical layers, you reduce red tape and opportunities for corruption.

However, this decentralised model can undermine the first principle. It may diminish the resources that are dedicated to true public goods, which will, in turn, make it harder to create the environment to enable a robust manufacturing sector. A second implication is that with lean government there is potentially less oversight of the middle level and of the point of interface with the grassroots level. Much of the corruption and red tape in India happens in the middle and at the edges. With less oversight, there is less leverage that the Modi government has to effect change in the most opaque parts of the bureaucracy and the public sector.

From his record in office in Gujarat, it would seem that one of Modi’s closest international allies would be Japan’s Shinzo Abe. Japan has been supportive of a greater role for India in Asia and the world. In addition, Japanese investments in India will be invaluable. Japan has already played a crucial role in signature projects such as the Delhi Metro Rail Corporation and the ongoing Delhi-Mumbai Industrial Corridor, and India is one of the top beneficiaries of Japan’s overseas development aid.

Continuing down this path would be just fine, since there are mutual benefits to stronger India-Japan ties. However, this places India on the wrong side of the growing tensions between China and Japan, particularly over the Senkaku-Diaoyu islands. Excessive closeness to Japan will limit Modi’s leverage with the most significant emerging global power, a potential saber-rattler along the northern borders and India’s largest trading partner. This dilemma is even more acute when one takes into account the fact that Modi has expressed open admiration for both Japanese industrial prowess and the Chinese model of lifting a nation out of poverty. Making friends on both sides of an international divide is easier when one is operating out of Ahmedabad; not so when your letters of friendship are addressed from 7, Race Course Road.

In sum, Modi has his work cut out for him. In most of the crucial arenas, he will have to take positions on opposite sides of an issue and devise policies that may be in collision with each other. There is only one solution: we may need more than one Modi in office. Maybe, he can continue to use those campaign holograms even while he is in office. It is just that he will not be transported into the persona of a Reagan or a Thatcher. The inner contradictions of Modi operandi may demand his simultaneous transportation to different avatars of himself.

The writer is the senior associate dean of international business and finance at The Fletcher School at Tufts University and founding executive director of Fletcher’s Institute for Business in the Global Context

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