India's Narendra Modi focuses on economy in election campaign

Indian Prime Minister Narendra Modi is aiming to win a third term in the upcoming general election. His re-election campaign is already focused on economic glory.

The largest democratic exercise in human history is taking place in India in April and May. Nearly a billion people are eligible to vote in parliamentary elections in more than a million polling stations stretching from the Himalayas to the Indian Ocean.

Prime Minister Narendra Modi, who is seeking to extend his mandate by a decade, is optimistic on one key issue: the economy. He and his ruling party, the BJP, frequently speak of Viksit Bharat 2047, which translates to Developed India 2047, a commitment to making India a fully developed economy by its centenary of independence.

Yet there are a variety of views and data on the performance of the Indian economy under Modi.

India heading towards world top three
Arvind Panagariya, a professor of Indian political economy at Columbia University in New York, was recently appointed by Modi to chair the influential Finance Commission of India. He told DW that data suggests India will become the world's third-largest economy by 2026 or 2027.

There is a lot of optimism about India's economic growth and that, given the global environment, we are among the fastest growing economies in the world, Shumita Deveshwar told DW. Chief Indian Economist at GlobalData TSLombard.

India's strong growth currently makes it an exception among major economies. Its GDP grew 8.4% in the final three months of 2023 from a year earlier, and almost 1% higher than the previous quarter. This places it well ahead of the other 10 largest global economies.

Question marks over high unemployment
There are question marks, however, and one particularly persistent problem is unemployment. It is particularly high among young people and is a major problem given the country's massive and rapidly growing population. Unemployment is currently close to 10%.

Sushant Singh of the Center for Policy Research in India says there is no plan to solve the problem. The demographic dividend has become a demographic disaster, he told DW.

It identifies other economic problems that emerged under Modi and highlights India's relatively weak data on manufacturing and foreign direct investment (FDI).

Net FDI in India today is lower than it was when Modi took power a decade ago, according to HSBC data. This is serious, says Singh, because it means people are not investing in manufacturing, nor in industry, nor in businesses.

Although Modi has spearheaded a national manufacturing program called Make in India, the manufacturing sector still accounts for only about 12% of jobs in the country. We have moved from an agricultural economy to a service-oriented economy, with manufacturing stagnating in between, says Deveshwar.

Economic reforms in India
Panagariya says Modi introduced key reforms in taxation, bankruptcy law and real estate, which made a major difference to the economy.

Deveshwar says the record of economic reforms is more mixed. I don't think we can get to where he says we can get without the kind of difficult economic structural reforms that India needs to undertake to achieve these lofty goals, she says.

She says Modis' ruling National Democratic Alliance, of which his BJP is the largest party, has failed to meet its annual targets for privatization of state-owned enterprises. She also highlights the three controversial farm laws that the Modis government introduced before repealing them in 2021 following mass protests.

Poverty and inequality
Yet Deveshwar believes Modi is popular as much for his ability to harness public opinion on economic issues, as evidenced by the repeal of the farm laws. It must be recognized that he really has the pulse of the nation. And if he feels something is not going to happen in India, he will withdraw, she says.

This explains another reason for Modi’s appeal. India remains an extremely poor country by many measures, but World Bank data shows that the share of Indians living in extreme poverty has continued to decline during Modi's term.

Panagariya says the government has been particularly active in terms of social welfare programs in rural India. The country's huge agrarian and rural population is seen as vital for Modi if he is to win a third term.

Particularly in rural areas, everyone gets something or the other from the central government, says Panagariya. He cites rural housing projects, toilet construction initiatives, cash transfers, food security legislation and the widespread distribution of cooking gas as evidence of how Modi has attempted to distribute resources to the most vulnerable regions. poor people of the country.

But there is much disagreement about how India's poorest have fared under Modi. Sushant Singh says inequality has increased over the past 10 years.

India has become more unequal, he says, pointing to data from a recent World Inequality Lab report. These inequalities have really increased under Modi, both in terms of income inequality and wealth inequality.

On a per capita basis, India is the poorest country in the G20, he adds, pointing out that Sri Lanka and Bangladesh have both overtaken India in per capita wealth. Bangladesh was a desperate economy, but India today is poorer than Bangladesh in terms of population, he says.

Investment in infrastructure Modis
One area where Modi’s economic achievements are quite visible is infrastructure. The pre-election budget for 2024 forecast an 11% increase in capital spending on roads, railways and airports, bringing it to around $134 billion ($125 billion).

Modi has already invested heavily in infrastructure, both digital and physical, during his tenure. Panagariya says this investment is justified and vital if India is to achieve the kind of economic goals the prime minister is talking about.

Deveshwar agrees. You can't really call it populist, she says. It is very necessary. One of the major problems that India has been facing for decades is its creaking infrastructure. And the political direction is now very positive.

This is the only concrete area in which India's journey to developed economic status can perhaps be measured and is among several reasons why some economists, like Panagariya, believe the election is already being considered as a done deal for Modi.

Yet while a third Modi election victory seems likely, focusing on lofty goals such as Viksit Bharat 2047 seems more like a campaign than a reality for some.

It's a comforting speech and far enough away that no one will blame him for 2047, Deveshwar says.

Singh says discussions on Modis 2047 are part of a long-established political playbook. Glories of the past and possible glories of the future, he said. It's a dream, a vision that he's trying to sell to the people.

While polls suggest that the Modis government is clearly on track for a third term, the population seems to believe it.

• Keywords: India, Narendra Modi