To say that it has been an interesting time to be in India this week would be a massive understatement as we have indeed witnessed an election outcome which is even more historic than, in its margin, it was unexpected, ie a second straight BJP parliamentary majority (and an increased one at that).
The initial stockmarket reaction was euphoric and a more accurate reflection than was the later (profit-taking) sell off of the sense yesterday emanating from most Indian business leaders with whom I was in touch during my stints on the ET Now business TV channel.
Personally, I am more cautious. This paragraph from an article by Amy Kazmin and Jyotsna Singh for the Financial Times (subscriber access only) sums up much of my sense:
"The question now is how Mr Modi will utilise his renewed — and strengthened — mandate at a time when people are looking to him to deliver on his original promises of more jobs and economic opportunity".
- The BJP has had virtually nothing to say on the economy during the campaign so we really have no clear idea as yet of where the incoming government's priorities will lie;
- Mr Modi himself is essentially statist in his outlook (contrary to his pledge in 2014 of less government and more governance) and, in many countries, would be labelled a socialist rather than 'business friendly' (acknowledging that such a description is not unfair in India in relative terms);
- Structural reform will remain challenging despite the lower house majority and a far stronger position in the upper house (where it now holds 101 out of the 245 seats) than was the case in 2014, not least if we see another cabinet made up of individuals unwilling to challenge the premier's autocratic instincts and actively promote a pro-reform agenda (and especially at the Finance Ministry where most people with whom I have spoken here expect Arun Jaitley to continue, health permitting).
My own top three socio-economic priorities for the incoming government would be as follows:
- A major privatisation programme, starting with the state-owned banks, which would also have the advantage of easing the very tight fiscal situation at a time when the impact of an economic slowdown would be eased by a stimulus;
- Investment in human capital, especially health and basic education, in rural India; and,
- Major 'field to fork' investment to facilitate getting fresh farm produce to market be it for immediate consumption or processing (including for export).
These are all priorities identified in a major report I co-authored in 2006 for my then employer, Lehman Brothers. They remain so today. And, for all we know of Mr Modi's plans for the next five years, may still do so in 2024.
So, my message to the BJP is this. Congratulations on your resounding victory. But please remember that the 2024 campaign effectively starts today and, ultimately, Bill Clinton was right back in 1992 — it is the economy.