Narendra Modi Wins Big. What’s Next for India?
The big question now is how Modi will use his second five-year term at the helm of the world’s largest democracy. India faces plenty of challenges: a high unemployment rate, slow economic growth, changing geopolitical relationships, border security issues, and a deepening religious divide.
Here is a quick look at how Modi handled these issues in his first term and what he will need to focus on in the next five years.
India and its neighbors
One of the most important issues that will demand Modi’s attention will be India’s fragile relationship with Pakistan. On February 14, an attack by a suicide bomber affiliated with the Pakistan-based terrorist group, Jaish-e-Mohammed, left forty Indian paramilitary police dead in Kashmir. The attack pushed the two nuclear-armed neighbors to the brink of war. The United States, the European Union (EU), and China were forced to step in to defuse the crisis.
Ever since an earlier terrorist attack on an Indian Air Force base in Pathankot in the border state of Punjab in January 2016, Modi has taken a strong stand on terrorism. Unsurprisingly, national security was a key platform in the BJP’s election manifesto this year. Another big attack by a group linked to Pakistan could have serious implications for the India-Pakistan relationship.
In Modi’s first term, the Sino-India relationship was strained by a two-month standoff between Indian and Chinese troops in the disputed Doklam area and progress on the China-Pakistan Economic Corridor (CPEC).
Chinese President Xi Jinping, however, has been quick to congratulate Modi on his electoral victory. Xi said in a statement that he attaches “great importance to the development of China-India relations and would like to work with [Modi] to guide the development directions of the bilateral relations, enhance mutual political trust, expand pragmatic cooperation and promote the closer developmental partnership between the two countries to a new height.”
India and China are strong trade partners, but the strategic relationship between the two nations requires some work.
- The economy
India faces a high rate of unemployment and slowing economic growth. In his first term, Modi launched several development programs, announced new tax policies, and promoted various sectors in a bid to enhance economic growth. Many of these initiatives did not yield the desired results.
The Make in India initiative was expected to give the manufacturing industry a boost through foreign direct investment, but the sector has witnessed a significant slowdown. Modi’s controversial demonetization policy has also had mixed results and impacted the lower and middle classes.
Given India’s large youth population, the Modi government is likely to focus on creating jobs. The government has also attempted to empower the working class and farmers through policies announced in the interim budget earlier this year as well as in the BJP’s election manifesto.
- Social issues
In its cover story ahead of the elections, Time magazine described Modi as “India’s divider in chief.” The BJP’s rightwing agenda has exacerbated divisions between Hindus and Muslims and Modi’s re-election is likely to further alienate minorities.
Trade and economy
While the Modi government has maintained strong trade relationships, India has not been immune to the turmoil in the global trade scene. In particular, India’s oil imports from Iran have been impacted by US sanctions on the Islamic Republic. Earlier in May, India was forced to stop buying oil from Iran after the Trump administration ended its policy of providing waivers to importers of Iranian oil in its effort to drive Iranian oil imports down to zero.
The US-India relationship itself hit some roadblocks over the past year. In March, the Trump administration expressed its intention to suspend the Generalized System of Preferences (GSP) status for India. The Office of the US Trade Representative said: “India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.”
US companies have also been impacted by the Indian government’s proposed e-commerce policy and a move for data localization. Technology giants such as Amazon and Microsoft are opposed to data localization because their investments in the Indian market would be impacted if user data is stored domestically—as has been proposed. This could also raise concerns for the security of the data since it will all be stored in one location. Amazon is also opposed to India’s proposed e-commerce policy, which limits the expansion of US e-commerce companies in India. This issue has surfaced as a prominent Indian businessman, Mukesh Ambani of Reliance Industries, prepares to launch his own e-commerce platform. If the Modi government does not address these concerns foreign investment may be withdrawn from India leading to a loss of jobs.
The Indian stock market soared on news of Modi’s victory and corporate leaders welcomed the election result.
In its manifesto, the BJP promised to address all of the issues mentioned above. Implementation of these promises, however, has always been a challenge for governments in India, regardless of the party. Modi would do well to focus on national security, economic empowerment, foreign policy, and strengthening the rights of all of India’s citizens.
In his victory speech, Modi declared “this victory is for united India.” If minorities continue to feel threatened, significant parts of the population are not economically empowered, and businesses don’t grow, the democracy of 1.3 billion people will suffer a massive setback.
Nidhi Upadhyaya is an associate director with the Atlantic Council’s South Asia Center. Follow her on Twitter @nidhi_u.