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Whats Next For India:

Opportunities for Growth and Investment

nature of this election is that its a truly national vote
in favor of Modi by the youth and by the neo-middle
class, in contrast to previous electoral victories
that were based on caste and religious and regional
combinations.

he recent election in India and its impact on the

global economy and foreign relations served as
the focus of APCOs recent International Advisory
Council (IAC) meeting. What follows below is a
summary of the discussion led by IAC member Lalit
Mansingh, former Indian ambassador to the United
States.
Not many people could have foreseen the scale of Narenda
Modis victory in last months election in India. People
expected that he would earn a majority in a coalition
government, but the fact is the BJP Party by itself has a
complete majority in the Parliament. Despite this, Modi
is still going ahead with the coalition. The strength of his
campaign was addressing groups that had not previously
engaged in Indian politics; groups that Modi called the
neo-middle class and the youth. Nearly 20 percent of
the voters in the 2014 Lok Sabha election (more than 150
million people) were first time voters, and most of them
were younger citizens. The neo-middle class, as Modi calls it,
combines the existing middle class with those who are not
yet middle class but aspire to join it. The size of this group
amounts to some 650 million people. So, the watershed

Modi has promised that his priority will be to restore the

economy to high growth and bring the fundamentals
back on track. In other words, with economic growth
gone down to 4.5 percent in 2014, he wants to raise
it to the level of 8 and 9 percent, as it was in 2008. His
focus is on employment generation, infrastructure
and manufacturing under the slogan of minimum
government/maximum governance. He promised to
upgrade the essential services like education, health
care and public transportation. There is also talk about
restructuring the government, including reducing the
number of ministers in the cabinet from 75 to 50, and
grouping different ministries together to foster a more
efficient, effective government.
Modis election has been welcomed almost unanimously
by the business community. Indias stock market, the
SENSEX, responded by going up from 22,000 in April
to close to 25,000 at the time of this publication, so its
an overwhelming vote of support by the Indian business
community.
Modi is going to jumpstart the economic reform
process, which has been in the doldrums over the last
three years. He said that he will have a close look at
the tax problems that foreign investors face. Modi is
sympathetic to the problems of foreign investors, in
fact, he criticized the previous government for what
he called tax terrorism, and reform will be one of his
highest priorities. He will also look at raising the foreign
investment levels in many sectors, including insurance,
pensions and defense industries. What we see now are
many companies that were once hesitant about investing
in India are now making inquiries about coming back, so
there is a tremendous opportunity. Also to note is that
Modi has made it clear that he is not planning to be a
one-term prime minister, seeking at least two terms in
order to make a difference. So, India is looking forward
to a strong and stable leadership for the next 10 years
with a lot of progress on the economic front.
1

Of course, everybody has such high expectations of Modi:

he cannot wave a magic wand and solve every problem. Yet,
so far the indications are that he is serious, and he will take
Indias challenges seriously. One of the first priorities he has
repeatedly indicated he will tackle at the onset is a thorough
examination of the specific problems facing the economy.
Everything that we know about Modi suggests that he is in
favor of free trade and there are not any protectionist ideas
coming from him. In fact, it is clear that he wants ceilings for
foreign investment to be raised in areas like defense, which
has always been a very sensitive area, and also in insurance
and pensions. And even in the case of China, where people
have had reservations on the grounds of security, he said
that he would be happy to have more Chinese investment
in India. Thus, the signals are clear that he will not be a
protectionist.
There will not be any dramatic departures from foreign
policy, but Modi will bring his own style and his own
sense of priorities into foreign policy as would any new
government. That said, it is clear that economic diplomacy
will take priority over political analysis where external affairs
are concerned. Modi wants Indian embassies to focus
on promoting trade and investment. Although Modi has
not been exposed much to the international community,
he has visited a few countries in the last few years when
he was chief minister of Gujarat, among them are Japan,
China, Singapore, Israel, Russia, Switzerland, Guinea and
Uganda. Of particular interest to him are Japan, China and
Israel. Japan because he has a good rapport with Shinzo
Abe. Indeed, they have exchanged very warm greetings
with one another after the election and Modi is even
sometimes called the Shinzo Abe of India, by bringing
his own right wing politics and his economic activism into
the government. With China, it is perhaps because Modi
has been to China several times, and the Chinese leaders
have always treated him very well. However, he is also aware
that China, while offering economic opportunities, also
poses in the long-term a strategic threat to many of Indias
security interests. Accordingly, he will be very firm on border
issues and Chinese claims to Indian territories. He has said,
Chinese expansionism is not going to be acceptable,
and that will have an impact on Indias policies in Southeast
Asia and East Asia. Regardless, he is open to more Chinese
investments in India, and he will certainly want to have a
more economically balanced relationship with China going
forward.
Regarding the United States, the relations are at a low ebb,
some say the worst since Indias 1998 nuclear test. Yet,
Modi understands the importance of the United States for
investments, technology transfers and security. With this and
other affairs in mind, he is determined to keep the strategic
partnership alive and strong. Even though he has previously
faced personal disappointment at having been denied a
U.S. visa, he welcomes greater interaction with the United

States, and in fact, President Obama already invited him to

the United States. My personal guess is that they might have
a bilateral meeting in September when the U.N. General
Assembly takes place.
Modi also has a special interest in Israel, and the country sits
firmly on his list of foreign priorities. This is mostly due in
part to his previous visit to Israel in 2006 and his belief that
Israel serves as a good model for agricultural development
and water management. He is also keen to promote Israel
investments and joint ventures in India.
With all of these new foreign policy considerations for India,
now everyone is watching to see how Pakistan will respond.
The BJP has always been hard on Pakistan, but Modi was
remarkably restrained during the campaign. In fact, he
has said that he would be happy to do more business with
Pakistan, especially since some discussions have already
taken place on the sale of electric power from India to
Pakistan in addition to opening up trade relations between
the two countries. However, a much greater concern,
terrorism, sits front and center, and on the issue of terrorism
and Pakistan, Modi is very clear. This is one area in which
he will not comprise. If the Pakistanis dont come up with a
credible end to terrorist attacks sponsored from Pakistan,
Modi will give a very tough reply, so we are left waiting and
watching to see what Pakistan will do to thwart terrorists
within its borders.
The biggest contributor to Modis success is that he is a
self-made man and is the first person from what would be
called the backward castes of India to rise to such heights.
It is the first time that somebody from the lower classes
of society is reaching the position of the prime minister
of India. It is like an Obama moment in Indias history!
Modi is proud of the fact that he sold tea as a tea boy in
the railway stalls in Gujarat in his youth. He is proud of his
humble origins. He is a man of grit and great determination,
immensely proud of his humble roots and therefore able
to connect very well with the population at large. He is also
an outsider to Delhi. In his first meeting inside the Indian
Parliament, he stooped and kissed the ground before
entering, saying it was the first time in his life that he was
entering the Indian Parliament. He is not bound by ideology.
Even though his party is very right wing and very ideological,
Modi has kept ideology away from his election program
and focused on the economy and on governance. We are
going to see a lot of bold new ideas coming up from Modi
because he has the experience of running the State of
Gujarat for 10 years where he made record-making advances
in the GDP growth of Gujarat, and he is anxious to put his
Gujarat experience to implement similar and greater reforms
across the entire country to make such growth common
across the whole country.

Driving Global Dialogue

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