Within six weeks, Narendra Modi is expected to win a third term as India's prime minister, cementing his position as the most important Indian leader since Nehru. The electoral success of this son of a tea seller reflects his political skill, the potency of his Hindu nationalist ideology and his erosion of democratic institutions. However, it also reflects the feeling among ordinary voters and elites that he brings prosperity and power to the country.
Modi's India is an experiment in how to get rich in the midst of deglobalization and under the leadership of a strong man. Whether the country can grow rapidly and avoid unrest in the next 10-20 years will shape the destiny of 1.4 billion people and the global economy. Modi's formula is working... to some extent. Now, there are questions about whether India's success will endure and whether it depends on him remaining in power.
India, the fastest growing large country in the world, is expanding at an annual rate of 6-7%. Recent data indicates that private sector confidence is at its highest level since 2010. The country is already the fifth largest economy in the world and could occupy third place in 2027, behind the United States and China. India's influence manifests itself in new ways. American companies have 1.5 million employees there, more than in any other foreign country. Its stock market is the fourth most valuable in the world, while the aeronautics market is third. Indian purchases of Russian oil move world prices. Increased wealth means greater geopolitical weight. After the Houthis disrupted movement through the Suez Canal, India deployed ten warships to the Middle East. Both President Joe Biden and Donald Trump have courted her without questioning that she remains an independent agent.
If you are looking for “the next China” (a manufacturing-driven miracle), it is not India. The country is developing in a context of stagnation in merchandise trade and factory automation. Therefore, you need to pioneer a new growth model. One of its pillars is familiar: a massive infrastructure program to unite an immense single market. India has 149 airports, double the number a decade ago, and adds 10,000 kilometers of roads and 15 gigawatts of solar energy capacity each year. Some of those infrastructures are intangible, such as digital payments, capital markets and modern banks, as well as a unified digital tax system. All of this allows companies to exploit national economies of scale.
What recognition does Modi deserve? His most successful policies are based on the liberal agenda that emerged in India in the 1990s and 2000s, but there is nothing wrong with that. He deserves credit for pushing through stalled reforms, personally overseeing key decisions, and subduing holdouts and naysayers in the bureaucratic apparatus. Some say he has encouraged crony capitalism. However, although some large companies obtain favors, corporate concentration is declining, corruption has waned and companies are richly diverse. Modi, a cross between a CEO and a populist, enjoys PowerPoint presentations as much as rallies. If he manages to win five more years, India will continue to grow strongly. So will its middle class: 60 million people earn more than $10,000 a year; in 2027, there will be 100 million, according to estimates by Goldman Sachs, a bank that now has 20% of its staff in India.
Still, India faces a problem of enormous proportions. Of a population of 1 billion people of working age, only about 100 million have formal jobs. The rest are mostly stuck in casual jobs or unemployment. Modi's humble origins help him address such people. To absorb some of the available labor, he is turning to a state incentive plan that promotes the manufacturing industry. In any case, even if the plan achieves its objectives, it will only create 7 million jobs. President Xi Jinping's initiative to increase Chinese exports will only make the task more difficult.
The Indian economy must generate massive employment to sustain its growth. One path would be a larger information technology sector acting as a node of a digitalizing world and a cluster of export sectors, including digital finance, food and defense (where stronger links with USA). Spending by workers in those sectors would in turn create more jobs in other sectors, from construction to hospitality. A single and efficient internal market would increase overall productivity, and well-targeted social services could help those left furthest behind. To do this, India would have to transform education and agriculture, and allow much greater emigration from the populous north to the big cities of the south and west.
Judged by those epic standards, Modi has very little to say. His Indian People's Party (BJP) has some talent and some ideas, but it focuses mostly on ideology and the attack on Muslims. Growing illiberalism has repressed political opposition and freedom of expression. The fact that companies fear Modi may explain why investment has not yet surged. The process of preparing the population for enormous social change in the 2030s has only just begun. Remaking education, cities and agriculture will require the cooperation of state governments not led by the BJP and social groups exposed to disruption, but Modi's disruptive politics have alienated many of them.
¿El Lee Kuan Yew de la India o Erdoğan?
The question for India and its great economy is not whether Modi wins or not, but whether it will evolve. At 73 years old, his management skills may fade. To create a new reform program on par with the one that emerged in the 1990s and foster a thriving knowledge economy that rewards people for thinking for themselves, he will have to moderate his autocratic impulses. To attract more local and foreign investment and find a growth-minded successor, his party will need to rein in his chauvinistic policies. Otherwise, Modi's national renewal mission will not live up to the promises.
© 2024 The Economist Newspaper Limited. All rights reserved Translation: Juan Gabriel López Guix
