The world is watching the ongoing election for India’s federal government, the biggest voting exercise ever, with 814 million people eligible to vote. Narendra Modi is seen as the next Prime Minister (PM). In anticipation of a major expected positive shift in the economy, Indian stock market has gone to its highest ever. The rupee has been strengthening.
Is India, a laggard, ready to make its presence felt? Should the investment community pay attention?
The outgoing PM, Manmohan Singh, who has never won a popular election—ironically, in the biggest democracy of India, is seen as weak, and as a puppet to the Gandhi dynasty. He is being blamed for choking India’s economic growth, stagnating infrastructure, and for heading a government that has faced a series of financial scams. A mere 10 years back, he was seen as a hero, a decisive figure, and an extremely honest technocrat, educated at Cambridge. Singh was then India’s hope. Western media couldn’t stop showering their praises on him.
People can conveniently reorganize the history, seemingly rationally, to conclude whatever they are emotionally in favor of today. For investors, the key is not to fall for euphoria, but to stay anchored to reason.
A movie, “Bhoothnath Returns”, has recently been released. In it, a ghost returns back to earth. He fights criminals, helps sort out infrastructural problems, and then stands for political office. The last half an hour is devoted to encouraging people to vote. This movie is likely to get a tax-free status for its “social contribution.”
People often erroneously believe that movies show the culture of a society. In reality, movies tell you about the fantasies of the populace. Having watched it recently, among the applauding audience, I can garner two things… Indians are hoping for a strong, almost mythical figure to come to their rescue. The only individual contribution that they see making to the good of the country themselves is through voting.
Enters Narendar Modi.
Modi is seen as a strong, decisive figure. He is seen as pro-business, having successfully lead high-growth of the province of Gujarat, which he rules. Alas, most of this is nothing but clever marketing of the right-wing, Hindu nationalistic party, BJP, and a lot of good luck.
Gujarat has always been a frontrunner in India, given its relatively entrepreneurial and business-minded culture. It has also been relatively safe, with a populace with a relatively higher work-ethic. The low-hanging fruits of high-technology revolution led to high-growth in Gujarat, as it did in most other developing nations. A coincidence has been seen as causality. Gujarati lobbyists in the US have then packaged all this very nicely to attribute it all to Modi’s brilliance.
Gujarat has indeed done well, but it might have done better without Modi. He was seen as behind the massacre of Muslims that happened in 2002. That massacre was responsible for bringing India to the verge of major communal tensions. The US government has since banned Modi from visiting the US. Europe has recently removed similar restrictions on him, perhaps because criminality gets washed away in the holy river of democracy.
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