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Atlantic Council: Narendra Modi's Third Term Means the Rise of India's global clout

31.05.2024
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According to G.Nadadur

In May, Narendra Modi celebrated ten years as Prime Minister of India. Politicians in democratic countries rarely remain in power for more than ten years. Voter habit or fatigue, among other factors, can weaken support and energize challengers. Modi's tenure is all the more remarkable because he remains popular: 79 percent of Indian adults view him very or fairly favorably, according to an August 2023 Pew Research Center report. As the world's largest democratic election draws to a close (the long-running voting process ends on June 1, with more than 950 registered voters in India), Modi's Bharatiya Janata Party (BJP) is projected to win enough support to stay in power for a third term.

India's rising economy is one of the reasons for the BJP's favorable position in opinion polls. When Modi became prime minister in 2014, India had the world's tenth-largest economy. Today she is fifth. So what can the world expect from Modi 3.0 in terms of economic priorities if the elections go as expected? And will this political stability mean the end of political uncertainty?

The administration appeared to be rushing to discourage political statements that could sway voters before the election. On March 10, the government signed a free trade agreement with the European Free Trade Association and on March 15 announced a new policy to open up the Indian market to the world's leading electric vehicle companies. He also approved three new semiconductor projects, revised LPG prices and formalized rules to implement the Citizenship Amendment Act.

This surge in activity may continue after the election.It is reported that Modi has asked his cabinet to come up with an ambitious 100-day agenda for the third term. Assessing the BJP's election manifesto and other signals, the following are the likely economic priorities of Modi 3.0.

Efforts have been intensified to expand India's presence in global value chains, including pharmaceuticals, medical devices, electric vehicles, green energy and electronics. Policymakers are also likely to continue their trade push, with a free trade agreement with Oman expected to be signed after the elections, and negotiations with the United Kingdom, the Gulf Cooperation Council and the European Union, among others, at various stages of progress. Overall, economic reforms will depend on the size of the BJP's majority in Parliament and the support of state governments, which have significant powers to implement them.

Continued focus on physical and digital infrastructure, as well as the green energy transition. The government is likely to maintain high budget allocations for initiatives to expand and modernize its infrastructure. Its initiatives will include accelerated development and modernization of roads, railways, airports and ports.

The government will also continue to build Digital Public Infrastructure (DPI) based on India Stack. DPI's approach to payments has enabled it to rapidly increase financial inclusion. The government can then prioritize access to credit for individuals and small businesses.

While oil will remain a key part of the energy mix, the government is likely to maintain its goal of using clean energy sources to meet the majority of India's growing energy needs. Policymakers will seek to continue to prioritize solar energy, including major efforts to increase the use of rooftop solar power, as well as hydrogen, ammonia and methanol, batteries, and electric vehicles. Nuclear power, especially small modular reactors, may be a new area of ​​focus.

Protecting and empowering groups most vulnerable to economic shocks. The administration could roll out a combination of current and new programs—including benefits, credit, job training, and job guarantees—targeting women, youth, the poor, farmers and small business owners. Such groups are both the most vulnerable, especially given global technological trends and the ongoing transformation of the Indian economy, and also among the most influential from an electoral perspective.

The administration has already asked the International Labor Organization to help develop a living wage system to replace the current minimum wage approach. The government is also considering expanding social safety nets to better cover informal workers.

Further growth of India's global authority and leadership. The government will likely redouble its efforts to represent the voices and interests of the Global South and win a permanent seat on the UN Security Council. While this may seem like a purely geopolitical goal, there are also economic factors involved. The government will continue to collaborate with like-minded countries in areas such as security, supply chain diversification, and critical and emerging technologies. The Administration will seek to develop its relationships with the governments of Bangladesh, Bhutan, Nepal and Sri Lanka to continue to develop ties, trade and other contacts in South Asia.


India's economy is expected to become the third largest in the world in the coming years. But the administration is likely to face challenges both abroad and at home as it seeks to keep the economy growing at about 7 percent of gross domestic product annually.
Domestically, even if the Modi administration returns to power with a strong mandate, there will be times of political uncertainty. For example, some politicians support a more open approach to trade, while others advocate protectionism. Overall, if the election manifesto and ongoing political discussions are anything to go by, Modi 3.0 could be a driver of change for India and the world.

 

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