The Rise of Narendra Modi

The BJP's recently concluded national executive meeting in Mumbai will be remembered for marking a decisive shift in power within the BJP. One of the reasons for the main opposition party's inability to make political gains from the UPA government's series of corruption scandals and mismanagement of the economy is the power vacuum, apparent for eight years now, after the exit of AB Vajpayee and failure of LK Advani to fill the gap.

As we could see for the first time in eight years, the party's Gen Next, represented by Arun Jaitley, Narendra Modi and Nitin Gadkari have stepped up to take control of the party. This means the party's central leadership which is full of urban elites has finally acknowledged the merits of having a mass leader like Modi at the front in the run-up to the next big general elections in 2014.


The Modi-Gadkari alliance has already set off waves of realignment within the party. In the coming months, CMs of BJP ruled states and other central leaders will have to take a call and start making peace with Modi or stay neutral or openly oppose him. 2013 might see leadership changes at the state level too because of the newly emerged power equation at the centre. The rise of Modi does not mean LK Advani is irrelevant to the future of the party. He is still the tallest leader the party has and may play a very crucial role in finding allies in the post-election scenario. 


Modi is the development icon of the party and displays an aggressive style. As a intensely polarising figure at the national level, he might have many drawbacks. But clearly, Modi is the best bet the BJP and in fact the country has today.

Why 8-9% growth isn't coming back

For a country that grew at 3-4 percent GDP famously called 'Hindu growth rate',  8-9 percent growth of some recent years made for a giddy experience. While the economy was on an uptrend, largely on the strength of 'easy money' in the global economy and the delayed effect of the reforms of the 1990s and the early 2000s, policymakers began talking of India achieving double-digit growth rates and overtaking China by 2020.

That dream was never realised and may never ever be realised unless our policymakers push some hard reforms. Policy paralysis at home and turmoil in the euro zone has caused our growth rate to fall to 6-7%. Yet, our policymakers like Montek Singh continue to delude themselves with claims that India can continue to grow at 8-10 percent for 20 years.

But the “golden age” high growth rate isn’t coming back. Between 2003 and 2008, the world was full of 'easy money' owing to the US Federal Reserve’s low interest rate. That period of high liquidity lifted up economies evrywhere in the world, specifically Asia and particularly India due to the shift of global manufacturing jobs to China and service sector jobs to India. And when the 2008 financial crisis struck, and global liquidity dried up, Indian government stepped in with large scale welfare policies which included petroleum, urea subsidies, tax exemption to big corporates and low interest rates to keep the growth rate high.

But by then, policymakers had gotten used to years of high growth without any effort on their part to take forward the reforms of the early 2000s and common man gotten used to petrol and diesel subsidies. Thus the withdrawal of subsidy regime became politically suicidal. The high spending of those years, failure to address structural economic reforms, fiscal mismanagement, coalition politics, pending tax reforms, failure to check inflation add to India's woes today.

Today, the Indian economy is completely out of juice. Here on, 5-6 percent growth may become the new normal, and even that can be sustained only by fast-tracking pending reforms.