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More Modification For India
After an election triumph, Modi faces even harder reform tasks
By Wen Qing  ·  2019-06-03  ·   Source: NO.23 JUNE 6, 2019

Indian Prime Minister Narendra Modi (center) celebrates at the headquarters of his Bharatiya Janata Party in New Delhi on May 23 (XINHUA)

Indian Prime Minister Narendra Modi's sweeping election victory on May 23, where his right-wing Bharatiya Janata Party (BJP) won 303 of the 543 seats in Lok Sabha, India's lower house of parliament, came as a surprise to many.

However, it may not have been entirely unexpected, considering Modi's charisma, his electoral plank of nationalism and a weak opposition. In his new stint, Modi is set to continue his drastic reforms.

Behind the triumph

The election can be viewed as a national referendum on Modi, who advanced several major reforms during his first five-year government.

"The main reason behind Modi's victory is [that] in the eyes of the majority of [Indians], he is the best choice as prime minister," according to Amitendu Palit, a trade, development, political economy and policy studies expert with the National University of Singapore.

However, initially there were forecasts that the BJP might lose seats due to the impact of some of these measures, which though of long-term significance, hurt some in the short run and incurred fierce opposition.

In addition, the BJP lost five state elections last December, which was considered an indication that the party would feel the heat in the general election.

Modi, who says he began life as a roadside tea seller, created a larger-than-life persona and humbled the Indian National Congress, once India's most powerful party that had ruled for over five decades. The Congress secured only 52 seats in the national election and its leader Rahul Gandhi, whose great-grandfather, grandmother and father were all prime ministers and leaders of the party, was rejected by voters, even losing the family seat he had held since 2004.

However, the most important factor for Modi's landslide victory was his electoral plank focusing on national security and nationalism, according to experts. Calling himself a chowkidar, the country's watchman, Modi stressed the national security threat from terrorism and the longstanding feud with neighboring Pakistan, successfully shifting people's attention from criticism, Lou Chunhao, an associate researcher with the China Institutes of Contemporary International Relations (CICIR), told Beijing Review.

During the election campaign, the opposition targeted Modi on economic issues, like the failure to create jobs with unemployment at its highest in four decades at over 7 percent, a farmers' crisis and a hate campaign against Muslims, who constituted over 14 percent of the population in 2015, according to official data.

However, a terrorist attack in the disputed northern state of Kashmir in February, where at least 40 security personnel died, seemed to help Modi. India blamed it on Pakistan-based militants and responded by launching airstrikes inside Pakistan, which strengthened Modi's strongman image.

"Modi's tough stance resonated with most Indians and gained their support," Lou said.

According to him, BJP's parent body—Rashtriya Swayamsevak Sangh (RSS) also contributed a lot to the success of BJP in this election. With millions of unremitting volunteers, RSS helped the party firmly grasp local dynamics and build more strategic social coalitions.

BJP was also by far the best-funded party. "Since the business community expected Modi to advance his reforms, it supported the BJP with lavish funds," Wang Haixia, another researcher on Indian studies with the CICIR, told Beijing Review.

Policy achievements

Modi's first term saw some achievements: a high GDP growth rate, infrastructure construction, an improved foreign investment climate and anti-corruption measures. India's ease-of-doing-business ranking on the World Bank index rose from 142 in 2014 to 77 in 2019. Modi also simplified a Byzantine tax system, and introduced a streamlined bankruptcy law.

But while such reforms are going in the right direction and have long-term significance, hasty nationwide implementation before detailed rules were drafted and other preparations made triggered widespread criticism, according to Lan Jianxue, an associate researcher on Indian studies with the China Institute of International Studies.

According to data compiled by the Mumbai-based business information company Centre for Monitoring Indian Economy in March, economic growth in the past several years failed to generate enough employment opportunities in the country.

As Modi starts his second term, advancing reforms sequentially to create a sound business climate is going to be his focus, Lan told Beijing Review.

Modi's administration also put forward the Made in India initiative to tap new growth potential and create more jobs to address unemployment. However, doing business in India has long been impeded by factors like difficulty in acquiring land and labor unions, CICIR's Wang said.

Modi attempted to overhaul the 2013 land acquisition law so that the government could claim land for development projects. While the move was backed by the business community, it was opposed by landowners. Thus, ahead of the national elections, reform of the law was shelved.

"As Modi sets sail for another five years, efforts in this area may be pushed forward," Wang said.

Similar situations are also seen in the reform of labor laws, the labor contract and bankruptcy systems, which all encountered visible resistance. "Modi will face even harder tasks in reform in his second term," Lou said, adding that Modi needs to focus on three targets: stable growth, improvement in people's livelihood and risk mitigation and prevention.

Stable economic growth can be guaranteed by injecting more investment into infrastructure construction, attracting foreign investment and bettering the business environment. Commitments made during the election campaign should be honored with efforts to raise the state of the people, especially given the high unemployment rate and struggling farmers, Lou said.

As a major oil importer, India should also be careful about its energy security. With U.S.-Iran ties worsening, the international energy market may face risks. India should plan to avert possible energy deficiencies.

Relations with China

On May 23, Chinese President Xi Jinping congratulated Modi on his victory. In his message, Xi said China and India are neighbors, the world's two largest developing countries and emerging economies. Xi said he attaches great importance to the development of China-India relations and is ready to work with Modi to ensure that bilateral ties advance in the right direction.

Last year, Xi held an informal meeting with Modi in Wuhan in Hubei Province, central China, and the meeting put China-India ties, strained due to a border standoff in 2017, back on track.

"In Modi's second term, the sound momentum is likely to continue," Wang said. "Both China and India hope to strengthen cooperation to achieve progress. Therefore bilateral relations are going to enjoy stability."

Lou agreed. "China-India relations remain stable," he said. "Although some structural problems such as territorial and terrorism issues have yet to be addressed, the sound exchanges between the top leaders set the tone for the development of bilateral ties."

Copyedited by Sudeshna Sarkar

Comments to wenqing@bjreview.com

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