As the election results started showing a resounding victory for the BJP, Motilal Oswal, chairman and managing director of the eponymous financial services firm, said, ‘This is a new beginning not only for the markets but for the whole country. India is on the way to be a superpower leading the world.’ While many of us might feel that statement to be a bit over the top, it sums up the mood that propelled the BJP to power for a second time with a thumping majority, under Narendra Modi’s inimitable leadership. It sums up the aspirations of India’s young and desperately wanting to be upwardly mobile voters. The masses have bought the vision of a New India offered to them by Narendra Modi - lock, stock and barrel.
We now have a dominant party that supports right-wing economic policies, a strong leader, a nationalist narrative, policy continuity, the Left in disarray and a hard state. In short, we have many of the trappings that saw the success of the East Asian nations during their growth spurts. All that is lacking is the double-digit growth rate.
The immediate issue facing the economy is a slowdown in growth. Consumption has faltered a bit, corporate earnings growth is lacklustre, investment demand is tepid, the government seems set on overshooting its fiscal target and some parts of the financial sector are in distress. But the election results should provide a much-needed boost to animal spirits. The prospect of a stable government and the continuation of a business-friendly administration will allow the corporate sector to plan for capital expenditure. The stock market’s high valuations are a signal of optimism. Together with rate cuts by the Reserve Bank of India, a cyclical recovery will happen, although it might take some time, particularly since global conditions are anything but benign.
But a mandate such as this isn’t just for a cyclical recovery. It’s a mandate for a New India. To make that happen, we need a structural transformation of the Indian economy.
The beginnings of such a change were seen in the Modi government’s first term. The introduction of the Goods & Services Tax, the Insolvency & Bankruptcy Code, the Monetary Policy Committee, inflation targeting by the RBI, the Real Estate Regulation & Development Act (RERA) are examples.
There has been some concern that the BJP’s Hindutva agenda will be a brake to development. That concern is misplaced. The BJP’s ideology is best described in the words of political scientist Roger Griffin as a “revolutionary form of nationalism bent on mobilizing all ‘healthy’ social and political energies to resist the onslaught of ‘decadence’ so as to achieve the goal of national rebirth". And how can there be national rebirth unless we have a strong economy? Putting it in terms of the BJP’s Hindutva ideology, the economic development of the nation is a necessary condition for the political, social and military revival of Hindu civilization.
India, for the most part, remains a nation of petty producers, with a vast pool of underemployed labour in unviable farms. It is imperative for productivity growth to get these people off the farms into more productive jobs. Only then can India become a modern capitalist economy. The role of the state should be to facilitate this process. This is far from being an easy task and there’s no guarantee that it will succeed. The supportive global environment that allowed accelerated growth in East Asia no longer exists. New paths to growth must be found. In the process, there will be lots of disruption and many who will lose from it.
But the elections have proved once again that the BJP is the party best placed to manage the tensions between the demands of capitalism and democracy. Whatever be the outcome, we have set out on the journey to a Brave New India.
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