MSLGROUP IN INDIA
Public Affairs Round-up
May 2014 | Vol 2 | Issue 2
Contents India under Narendra Modi: Expectations soar, challenges persist
03
The results
05
The numbers
06
Who said what
07
03
India under Narendra Modi: Expectations soar, challenges persist
On May 16, an electoral tidal wave swept across India. The Narendra-Modi-led National Democratic Alliance (NDA) won a staggering 336 of the 543 seats in India’s Lower House of Parliament, the Lok Sabha. Modi, who is from the Bharatiya Janata Party (BJP), won over India Inc as chief minister of Gujarat and the expectations of his government are sky-high. Modi, often accused of a strong anti-Muslim prejudice and of doing little to prevent the communal riots in Gujarat in 2002, focused on development and job creation as his election planks, plugging into the disquiet over the slowing economy and rising prices.
He has his work cut out. Economic growth was projected to be less than 5%, turning the heady days of 8%9% into a distant memory. The Planning Commission estimated last year that poverty levels were at 22% – that’s more than 240 million people. Sub-5% growth won’t be good enough to lower these numbers.
It was as finance minister in the early 1990s that outgoing prime minister Manmohan Singh kickstarted reforms, untangling red tape and governmental roadblocks to release the potential of India. Despite that, the economy remains far from unfettered. The bureaucracy remain slowpaced by international standards and resistant to change; permits for critical projects are stalled and – especially over the past few years – faith in the India story has evaporated fast. Modi’s priorities should be clear. The World Bank has ranked India 134 out of 189 countries on its ease of doing business index. Unless the new prime minister can change this fast, the economy will take a body blow.
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Here’s what Modi’s priority list would look like:
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Remove roadblocks: Unless businesses can achieve cost efficiency and get speedy permissions, investment and growth will remain distant dreams. Achieving this will be tough because of the oftenreluctant bureaucracy and strong lobbies of vested interests. An overburdened judiciary is adding to the problem. India has a backlog of more than 31 million cases, many of them related to business and large infrastructure projects. More judges, courts and arbitration systems are the need of the hour. Labour reforms: With more than half its population under 35 years of age, employment generation may well be make or break for Modi. China successfully turned itself into the manufacturing hub of the world. India needs to walk down that path too. However, laws that make it tough for manufacturers to reduce workforce when required are a disincentive. ‘Time’ magazine recently reported that Goldman Sachs estimated that if India overhauled its labour laws, 110 million new jobs could be created over 10 years, boosting GDP growth by 1.2%. Food inflation and agriculture: Rising prices of essentials was cited as one of the main causes of the United Progressive Alliance’s (UPA’s) downfall. Retail inflation stood at 8.31% at end of the 201314 financial year. Urgent measures are needed on the supply side, including the weeding out of intermediaries in the farm-to-plate supply chain. A hike in procurement prices and investment in irrigation are vital, as are better storage facilities. The weather department has predicted a poor monsoon this year. A fall in supplies could make food prices soar and make the government lose
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face. It might even lead to a loss of confidence in it, undermining its authority in implementing fasttrack reforms. Project clearances: The BJP has identified massive investments in infrastructure – ports, railways, roads – and has also promised quick clearances of stalled projects. Modi needs to deliver on these promises. Fiscal discipline: Implementing all of the above without piling up a deficit will require a deft balancing act. The current account deficit can be deflated through an aggressive focus on exports. Financial sector reforms will be required, especially to curb banks’ non-performing assets and to introduce a uniform tax structure across India. While in the Opposition, BJP-ruled state governments had refused to implement the uniform Goods and Services Tax. Now, it will require political adroitness to ensure that non-BJP governments accept the reforms Modi tries to implement. Subsidies and social sector schemes will require an overhaul, too, to reduce wastage and to ensure against an unmanageable fiscal burden. Modi rode to office on a wave of euphoria and high expectations, based on the endorsements he received as administrator of Gujarat. However, managing a country will not be as easy. The challenges listed above will not be as easy to tackle – not just because of their scale but also because of the greater intensity of the opposition. The sobering realities of realpolitik at the national level will require grit – no matter the number of seats held – and statesmanship.
05
The results Party
Seats
Vote share (%)
Bharatiya Janata Party
282
31
Indian National Congress
44
19.3
All India Anna Dravida Munnetra Kazhagam
37
3.3
Trinamool Congress
34
3.8
Biju Janata Dal
20
1.7
Shiv Sena
18
1.9
Telugu Desam Party
16
2.5
Others
92
36.5
Total
543
100 Source: eciresults.nic.in
Alliance
Seats
NDA
336
UPA
60 Source: eciresults.nic.in
Voter turnout in recent national elections
Kenya 2013
% of registered voters 85.9
Malaysia 2013
84.8
South Africa 2014
73
India 2014
66.4
Mexico 2013
63.1
US 2012 Pakistan 2013 Bangladesh 2014
57.5 55 51.4 Quartz | qz.com
Data: Country data, IDEA
06
The numbers Highest margins of victory
Year
Candidate
Party
Constituency
Votes
(in lakhs)
2004
Anil Basu
CPM
Arambagh
5.93
2014
Narendra Modi
BJP
Vadodara
5.70
1989
Ram Vilas Paswan
JD
Hajipur
5.04
2009
CM Chang
NPF
Nagaland
4.83
1991*
S Mohan Dev
INC
West Tripura
4.29
* 5.81 lakh was margin of victory for PV Narasimha Rao in the Nandyal bypoll
Source: The Times of India
400+
56 million
Number of rallies addressed by Narendra Modi between September 15, 2013, when his campaign started, and May 10, 2014, when it ended
Number of election-related tweets in 2014
300,000 KM The distance Modi covered, across 25 states, during the campaign
65% Ratio of women in the overall voter turnout. In eight states and union territories – Puducherry, Kerala, Manipur, Mizoram, Daman and Diu, Meghalaya, Goa and Arunachal Pradesh – women voters outnumbered men
13.4 crore Number of voters in Uttar Pradesh, the highest in the country
35 days Duration of the voting process. This was the longest after 1952, when voting was spread across 119 days. In 1980, the polls were shortest – a mere three days
$600 million The money pumped in by foreign institutional investors into Indian stock markets after the results on May 16. This was among the highest investments this year, taking the year’s total to $6 billion
07
Who said what
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Rahul Gandhi, after the defeat
India looks set to be the first BRIC to rebound. Overall, the BJP victory should set the stage for a revival of India’s economic fortunes.
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Rajiv Biswas, senior director and chief economist, APAC, IHS Global Insight
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With such a decisive mandate, the new government is expected to undertake some bold reforms… The need of the hour is to bring back business confidence through swift and decisive policy making.
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Sunil Mittal, chairman, Bharti Group
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This is a mandate for governance. The immediate priorities must be to resolve issues in existing projects, clear pending receivables to corporates, clarify tax laws, implement Goods and Services Tax and take steps to contain inflation. Chanda Kochar, MD and CEO, ICICI Bank
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To young Indians: Celebrate the privilege of being citizens of a country where you have freedom of expression and the power to choose your rulers.
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The Congress party has done pretty badly. There is lot for us to think about and as the VP of the party I hold myself responsible for what has happened.
Venu Srinivasan, CMD, TVS Motor and Sundaram Clayton
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Narendra Modi’s tweet proclaiming victory. It was retweeted more than 66,000 times and favourited more than 41,000 times – a record in India
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This is a vote for progress and liberalisation and against policy stagnation. We look forward to the country getting back to solid growth.
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India has won! Bharat ki vijay! Achhe din aane wale hai. (India is victorious. Good days lie ahead.)
Anand Mahindra, chairman, Mahindra Group
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Public Affairs Round-up
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