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Modi plans more growth for India

The world’s largest democracy is voting in a general election to choose members of the Lok Sabha, its parliament. Voting will take place until 1 June, with the result likely to be declared on 4 June.

| 5 min read

At the last election in 2019, Nardendra Modi’s National Democratic Alliance (NDA) won convincingly with 353 out of the 543 seats, enabling him to govern with a large majority. This time his NDA faces a challenge from the new INDIA alliance including the Congress Party which used to govern India after independence. The INDIA alliance wishes to keep the name India for the country, whilst Mr Modi’s Hindus like the alternative of Bharat.

With a hint of hubris, Mr Modi and his supporters are pressing to win 400 seats, up by more than 10% on last time. Mr Modi first became Prime Minister on 26 May 2014 after winning the election, repeating the success in 2019. He remains very popular, with polls showing him with favourable ratings from around 75% of the electorate. Many other prime ministers and presidents in argumentative democracies would like to know how you do that at any time, let alone after ten years in office.

The NDA campaign is built around his personality, achievements and vision. The opinion polls in the run up to the election showed leads for NDA over INDIA of between 6% and 16%, with NDA support steady at around 46%. Most commentators – including us – assume a Modi victory.

The Modi manifesto

Mr Modi has been seen as a reformer, pushing for a more liberalised economy with more free enterprise and foreign capital. He attempted some labour reforms in his early years, put through a General Sales Tax to create a single market across India, replacing a mish mash of individual states taxes, and made some land reforms. He opened India up to more foreign investment.

This time the manifesto is unambitious, playing down reform. The campaign is built around projecting a strong image of an India gathering confidence and global recognition, revolving around the personality of the leader. The government is proud of landing a satellite on the moon, of modernising the trains and hosting the G20.

The success of the Modi brand has been built around the twin pillars of good economic growth and Hindu nationalism. This time he promises to make India the world’s third-largest economy by 2027. Given the low growth rates of Japan and Germany, which lie above India today, that should be attainable.

He emphasises the importance of the Hindu religion to the culture and education of India and has asserted an independent stance for India globally, neither tied to the US or the China-led blocs. He wishes to build more bullet trains, new roads and improved waterways. He wishes to develop his work on making India an important manufacturing sector, and plans to treble the electronics/digital sector. India has much new infrastructure to show for his decade in office so far, and a sustained growth rate of around 7%. He plans some further improvements to welfare, and more generous grants and loans for small business.

The opposition

The INDIA Alliance offers voters a doubling of the economy by 2034. That assumes a sustained 7% growth rate for the ten years ahead. Much of what they want is influenced by Mr Modi’s work on manufacturing and infrastructure. INDIA would increase public spending and state involvement. It is critical of current levels of unemployment – and wish to give a better deal to workers. It proposes more government jobs, $1200 for poor women, social security for gig workers and apprenticeship allowances for the unemployed young. It claims the government interferes too much in people’s lives. Some leading opposition figures have been subject to investigation over various financial allegations, which the government says comes from non-political agencies.

From polls, it seems the opposition picks up a well of discontent with inflation and with unemployment particularly amongst the young. It also seeks to reach out to the non-Hindu minorities. Despite all this, the voting intention polls remain against them.

India is well placed to be the fastest growing of the G20 countries.

The Reserve Bank of India anticipates a lively 7.6% growth for the current year, with inflation coming down to around 4.5% compared to the 4% target. It expects growth of 7% for the following year. The current interest rate is at 6.5%.

India is well placed to be the fastest growing of the G20 countries, with more scope to put to work its younger talent emerging from a decent education system. Mr Modi might turn out to be a bit more radical if he wins his third term with a good majority. He has options to press forward with land reform, with more foreign capital, better infrastructure and an accent on digital technology.

India is seen as a good alternative by many foreign investors to China. India should grow faster than its neighbour and does not have the same political risks as a single-party communist state. New investors who can take share risks need to consider the suitability of investment vehicles and entry opportunities.

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Modi plans more growth for India

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