MBA grad Suneet Weling was in town last week, and we had a chance to catch up on events in India. This hasn’t gotten as much attention in the US as it should, but India just had an historic election in which the incumbent Congress Party was soundly trounced, winning just 44 seats in the 543-seat lower house of parliament. The BJP won 282, giving them the first majority government in decades. But what does this mean for India?
- Congress, the dominant party in India’s history, was widely regarded as corrupt and incompetent and got what they deserved.
- Narendra Modi, the new Prime Minister, was described in the Western press as a Hindu nationalist with a history of support for anti-Muslim violence, but I’ve heard less of that from Indians. One of his first steps was to reach out to Pakistan.
- Expectations, I am told, are sky-high. Most expect Modi to implement a pro-growth, pro-market agenda. Suneet writes: We expect his first “budget will focus on infrastructure, tax reform, and fiscal consolidation, including reduced subsidies and improved governance.”
- All of this will take time. However, India’s recent past — and China’s — shows that even modest reforms can have enormous effects on economic performance.
It’ll be interesting to see how this plays out. India has been a wonderful success story, but the last few years have been a disappointment, and that’s putting it diplomatically. The Vodaphone tax case was great entertainment for class, but a complete fiasco for a country trying to attract foreign investment and establish the rule of law. I’m told there was a lot more of the same stripe.