2015 gives Narendra Modi a clean slate. Will he act decisively and deliver to India the good governance he had promised?
1) Economy: The government is hinting that it will answer all its critics with the 2015-'16 budget. In particular, the finance minister is expected to reduce subsidies and channelise them through direct cash transfers. While this may reduce corruption, it would be disastrous if the change were not seamless. If the poor are hit hard, it would be political suicide for the Modi government.
The budget is also expected to make some disinvestments in public sector assets. Selling the family silver may be a good idea if it’s unproductive at home. But the key question is whether this money is invested in making the books look good in the short-term or whether it will be used for long-term investments. The main long-term investments India needs are in infrastructure and human resources. Unless infrastructure gets a major push, “Make in India” will remain just another website. While the Modi government has reduced the previous government’s commitments to subsidised food and a popular rural employment scheme, it needs to increase the commitments to human resources in general.
The investment commission that the government promised as a replacement of the Planning Commission is nowhere in sight. When it comes about, it will be watched for whether it brings in greater economic federalism, giving states more power to decide how they spend their money.
Lastly, a general sales tax is important for making it easier to do business across states. This can’t go through unless the government has the opposition on board in the Rajya Sabha.
2) Foreign policy: Narendra Modi’s first seven months saw greater action in foreign policy than in the economy. Yet, the foreign policy push was merely a hello to the world. It was no doubt a loud and thunderous hello, and sonics (as well as optics) do matter. Modi’s main thrust, to the admiration of many, was about standing up to China, which is incidentally pushing for a trip by the prime minister to Beijing in early February, soon after US President Barack Obama has presided over India’s 69 th Republic Day celebrations.
2015 will be the year when deliverables will be demanded of Modi’s foreign policy. Any number of photo-ops in Tokyo couldn't take away from the fact that Modi failed to obtain a nuclear deal from Japan. The commitment of $20 billion of investment made by China doesn’t mean the money will actually come, or that it will not result in a ballooning of the trade deficit between India and China. Can Modi make substantial progress in solving the border disputes with China and Bangladesh, which have been stalled for want of political will in South Block? As his party pushes to become relevant in Tamil Nadu ahead of the 2016 state assembly elections there, and as China expands its footprint in Colombo, can Modi take a balanced approach to Sri Lanka?
No doubt that Modi’s biggest foreign policy challenge will be the same old western neighbour. Modi’s decision to not talk to Pakistan so far has been his worst. He has not reduced the threat of terrorism or tensions on the Line of Control. Since the nuclear tests in Pokharan in 1998, India has practiced strategic restraint, which has earned Indian foreign policy the reputation of maturity. If there were to be a big 26/11-like terrorist attack in 2015, will Modi see virtue in strategic restraint?
3) Politics: State elections in Delhi at the end of February and in Bihar in November will keep Modi’s aide, Amit Shah, busy as ever. Both states give the Bhartiya Janata Party a good shot at victory, but this is not a given. While the Aam Aadmi Party’s popularity with the Delhi poor will soon be tested, Bihar will see a massive experiment whereby all the BJP’s opponents are coming together. Whether they can defeat a rising BJP in Bihar will determine the next phase of Indian politics.
In these two state elections, as also the ones in the years ahead, the BJP is unlikely to give up its strategy of using small-scale violence to polarise Hindus and Muslims to unite a Hindu vote-bank otherwise divided by caste. Even without elections, there is the BJP’s parent Rashtriya Swayamsewak Sangh, which feels that it has come to power and should have no hindrances in its agenda of making India a Hindu state.
This will make the Rajya Sabha a permanently stalled house, and come in the way of letting Modi deliver on his promises. While Modi can circumvent this situation with an ordinance raj and calling joint sessions of the two houses of parliament, what he can’t do is keep the headlines going his way. Modi has to decide between being India’s prime minister and Hindutva’s head of state. Trying to be both could reduce him to neither.
Most of what Modi wants to achieve can be done at the state level, be it manufacturing, easing the business climate, cleaning up India, and so on. He is lucky to have so many BJP-ruled states, and some more might come his way. However, the relationship between Modi and the BJP chief ministers will be keenly watched.