India's Prime Minister Plays the Fear Card After Botching Economic Reforms

Indian Prime Minister Narendra Modi led his party to a landslide victory five years ago by selling himself as the great reformer who'd turn India into a global economic power. It was a heady message for a country that feels cheated of greatness by decades of misrule. But Modi has so badly squandered that mandate that even he doesn't think he can credibly re-up it for the elections currently underway. So he has switched to portraying himself as the "chowkidar"—the guardian angel—who'll protect the nation from threats foreign and domestic.

It's a campaign of fear—and if it sticks, it will be because his opposition has no message at all.

Indian elections are a rolling, month-long process whose results won't be in till May 23. Close to 900 million people are expected to go to the polls, the largest exercise of franchise on the planet. But few people believe that Modi will be able to pull off the feat he did last time when his Bharatiya Janata Party (BJP) won 282 of the 543 seats in the lower house of Parliament, obtaining a clear majority to form a government without having to invite other parties. The country had not experienced anything like this since 1984, when a wave of sympathy following the assassination of Prime Minister Indira Gandhi swept the Congress Party, led by her son, Rajiv Gandhi, into power.

But there was less to Modi's victory than meets the eye.

India, like the United States, has a winner-takes-all system that allowed the BJP to win the Parliament decisively with only 31 percent of the popular vote. What's more, 75 percent of its seats came from just eight northern states, all BJP strongholds. But last December, it narrowly lost three state elections to Congress (which has ruled the country for 49 of the 72 years since India gained independence from the British), suggesting that the Modi romance was over.

The Carnegie Endowment for International Peace's Milan Vaishnav notes that if BJP's December performance is replicated at the national level, the party will lose at least 27 seats in just these three states (and far more across the eight states). This will be enough to deny it the 272 seats it needs in order to form a stand-alone government, especially since there is no sign that Modi has managed to make significant inroads in southern states that have historically been hostile to his party. The most plausible scenario, according to Vaishnav, is that the BJP will win the most number of seats of any party but not enough to avoid a coalition government. There is also a small but nontrivial chance that BJP might lose.

The main reason Modi is in trouble is that he has failed to deliver on any of his economic promises and usher his much-hyped "acche din" (good times).

Even if one buys the goosed up government figures, the Indian economy grew on average 7.3 percent annually over the last five years (compared to 6.7 percent at the tail end of the previous government). The actual figure is at least 1 to 2 percent lower than the official estimate. But even the rosy estimate is nowhere close to the 10 percent that India has the potential to grow every year. Meanwhile, Modi's promise to create 10 million jobs every year to absorb the legions of young people annually entering the labor force—65 percent of the country's population is under 35—was never close to being kept. In fact, government data that Modi tried to suppress shows that unemployment is at a 45-year high.

The reason for Modi's economic failure is that the reforms he attempted were badly botched and the reforms that were sorely needed he didn't attempt.

Sure, he improved India's "ease of doing business" ranking and built roads and other infrastructure, although nowhere near what the country needs. But all that was nullified by Modi's demonetization stunt, which without forewarning or forethought scrapped big denomination bills—80 percent of the national currency—overnight. The ostensive purpose of the exercise was to flush out "black money"illicitly hoarded by the rich and powerful. In fact, it wiped out poor farmers, the self-employed, and small mom-and-pop establishments that held their savings in cash. The fat cats were left unscathed.

Modi's other big reform, replacing India's myriad state taxes hampering the free flow of goods across the country with a unified goods and services tax, was in principle a good idea. But it was so poorly executed that far from giving businesses relief, it complicated compliance even more.

Meanwhile, Modi has done absolutely nothing to reform India's daft labor laws that discourage factories from hiring more than 100 workers because then they need government permission to shut down even if they are losing money. As a consequence, Indian industry has remained trapped in small-scale, capital-intensive ventures, which has kept it from scaling up and absorbing young workers. Worse, Modi has actually rolled back the 1994 trade liberalization that jump-started India's long moribund economy and lifted half the population out of poverty. President Donald Trump accurately called India the "tariff king" last year. As if to prove the point, Modi's budget hiked the already high duties on all kinds of agricultural and manufacturing goods. India has the highest effective tariff rates on food items, automobiles, and industrial inputs among BRIC countries.

Modi, who promised "minimum government, maximum governance," is trying to make up for his economic failure by resorting to the age-old trick of Indian politicos: throwing freebies such as free health coverage for 500 million poor families, among other things.

But the Congress Party is an old hand at the game of welfare populism and has countered with a universal basic income scheme that'll guarantee every family about $2,500 income annually.

Modi can't beat that offer, which is why he is also playing the fear card against India's reviled and persecuted Muslim minority.

Modi and his Hindu nationalist brothers have long regarded Indian Muslims as a threat to Hindu interests—never mind that Muslims are a mere 14 percent of the population compared to Hindus who are 80 percent. Bloodletting of Muslims happens with disturbing regularity in India, including in 2002 when over 1,000 were killed in the state of Gujarat where Modi was the chief minister at that time. Since Modi became prime minister, lynchings of Muslims suspected of consuming or handling beef by Hindu vigilantes, who consider the cow a sacred animal, have become commonplace.

But now Hindu nationalists are going further and openly suggesting that Muslims are "anti-nationals" who don't have the country's best interests at heart—even though the architect of India's nuclear program was a Muslim physicist. The recent suicide attack by a Pakistani-backed Muslim militant that killed a convoy of Indian soldiers in Kashmir, the northern Indian state that both countries have been fighting over for decades, played right into the Hindu nationalists' hands.

It's unclear if Modi's retaliatory airstrikes against alleged terrorist camps in Pakistan accomplished anything beyond cheap symbolism. But they did allow him to pivot and position himself as the nation's "chowkidar," even changing his twitter handle to "chowkidarModi." The diabolical brilliance of this campaign is that it draws an arc between the Muslim enemy outside and within and positions Modi as the decisive and tough leader who will protect India against both. (This is not a theoretical point. Modi sent shockwaves through the country last week when he named Hindu nationalist firebrand Pragya Thakur as the BJP's candidate to contest a key seat in Bhopal, a central Indian city. Thakur's big claim to fame is that she's been accused of involvement in a 2008 bomb attack in a Muslim market, killing 10. Her first remark after being picked by Modi was that she would "defeat" anyone "working against the nation," a thinly veiled reference to Indian Muslims.)

But that means he's left economic reform on the table. A savvy opposition would pick it up and run with it. If India's Hindu majority had a choice between promoting its identity interests versus its economic interests, it would opt for the latter. It is only choosing the former because that's the only thing on offer right now. But Modi's own first-term campaign is proof that if a strong leader proposes a program of liberalization and economic progress, everyone, Hindus included, would go for it.

India's tragedy is that there is no such leader on the horizon. Modi turned out to be a false prophet. And the Congress Party's Rahul Gandhi simply does not have the talent or the credibility to hold Modi to account, much less sell a coherent narrative of growth, even though it was his party that initiated India's liberalization.

If Modi ends up forming a coalition government, as expected, the best that can be hoped for is that his political allies would check his worst sectarian impulses and let India's minorities live in peace again.

Its economic aspirations, however, will have to wait—which is a sad, sad thing for a country where nearly 300 million people, almost the population of the United States, still live in poverty.

A version of this column originally appeared in The Week