India’s new PM likely to remodel our world
Narendra Modi is promising to spread the perceived successes of Gujarat to the rest of the country
Narendra Modi, the next prime minister of India, in Ahmedabad yesterday. He will change Indian politics and economics. Photograph: Amit Dave
Surjit Bhalla, an Indian economist, has written to me that India’s is “the most momentous election in world history”. I disagree: the elections of Abraham Lincoln and Franklin Delano Roosevelt were more significant. But the idea is not absurd. India’s population is 1.27 billion. Soon it will overtake China as the most populous country. If the election of Narendra Modi were to transform India, it would transform the world.
It is already possible to identify at least three ways in which the election is remarkable. First, India has shown yet again the virtue of democracy: the peaceful transfer of legitimate power. That this is possible in such a vast, diverse and poor country is an inspiring political achievement.
Second, Indians have rejected the dynastic politics of the Congress party, which, alas, brought to a sad end the distinguished public service of Manmohan Singh, a man I have known and admired for four decades. The most important Congress-led government since the days of Jawaharlal Nehru was that of Narasimha Rao in the early 1990s, under whom Mr Singh served as reforming finance minister. If Modi succeeds, it will be because he builds on that foundation.
Third, Modi is a self-made man. Even though his party won just 31 per cent of the vote, he has gained an overwhelming majority in the lower house. He has done so by promising to spread the perceived successes of Gujarat to the rest of the country. There is debate in India over whether Gujarat is the model it is alleged to be. Yet that is not the main point. What matters more is that Indians have chosen a man who promises to improve their lives. He is not chosen for his origins. That is testimony to India’s transformation over the past quarter of a century.
The outgoing government is condemned as a failure. Yet, as Shankar Acharya, former chief economic adviser to the Indian government in the 1990s, points out, “economic growth has averaged 7.5 per cent a year, the fastest in any decade in Indian history. This rapid growth in gross domestic product has raised average income . . . by nearly 75 per cent in real, inflation-adjusted rupees.” This sounds good. But, he adds, it also hides the truth.
Growth slowed sharply over the past three years “because of the cumulation of bad economic policies”, while consumer price inflation has risen to between 9 and 11 per cent over the past five years. At the same time, Acharya says, the government’s policies became steadily worse. He points to exorbitant spending on subsidies for oil, food and fertilisers, wasteful entitlement programmes, exorbitant pay settlements and huge fiscal deficits. Other failures include the refusal to lift disincentives to employment, crony capitalism, capricious regulation, retrospective taxation, excessive jumps in food procurement prices and corruption.