India's status quo trap for Modi

Reuters

Article Highlights

  • To be a transformative prime minister, Narendra Modi needs to do much more than just accumulate power.

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  • Less commented upon, but no less significant, is Mr. Modi's tightening grip on his party.

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  • The crowning of Mr. Shah as party president isn't the only sign of Mr. Modi's political ascendance.

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Six weeks may be too soon to judge a government, but two things about Narendra Modi are already clear: He is India's most powerful prime minister in a quarter century, and the most dominant leader in the combined 63-year-old history of his right-of-center Bharatiya Janata Party and its predecessor party.

But while the new prime minister has moved swiftly to consolidate his grip over both government and party, an uninspiring budget released last week raises questions about how he intends to use his power. To be a transformative politician, and not merely a successful one, Mr. Modi needs to show he has the appetite to take risks and challenge the shopworn ideas that have long shaped India's approach to economics, foreign policy and religion. Merely managing the status quo is a recipe for failure.

Powered by promises of economic resurgence and national pride, the BJP won a thumping election victory in May, marking a new era in Indian politics. With 282 seats in the 543-member lower house of Parliament, the BJP enjoys the first single-party majority since former Prime Minister Rajiv Gandhi led his Congress Party to a blowout victory 30 years ago.

Less commented upon, but no less significant, is Mr. Modi's tightening grip on his party. Last week, the BJP appointed 49-year-old Amit Shah, the prime minister's protege and confidante, as its youngest ever president. It gives Mr. Modi control of both government and party. Neither the fact that both men hail from the state of Gujarat, nor some party members' concerns that the move would alter the BJP's traditional model of consensual decision-making could forestall the decision.

Earlier this year, Mr. Shah famously helped secure an overwhelming majority (71 of 80 parliamentary seats) for the BJP in the Hindi heartland state of Uttar Pradesh. On a less savory note, he's also on trial for allegedly ordering the Gujarat police to murder a supposed gangster and his wife in 2005, and an associate of theirs the following year. Mr. Shah denies the charges, arguing they are part of a political witchhunt. While the case winds its way through India's labyrinthine courts, the new BJP president now holds the responsibility of extending his party's successes in a clutch of important state elections due by the end of the year.

The crowning of Mr. Shah as party president isn't the only sign of Mr. Modi's political ascendance. On Monday, parliament amended a law to allow the prime minister to appoint a former telecom regulator as a key aide. Meanwhile, 86-year-old BJP patriarch L.K. Advani, who built the party during the 1980s and 1990s, and tried to stall Mr. Modi's dramatic rise over the past 18 months, has effectively been pushed aside. He still occupies a seat in Parliament, but wields little influence.

For India, marked by a quarter century of cantankerous coalition politics, and a decade of ineffectual leadership under former Prime Minister Manmohan Singh, a strong leader able to get things done is welcome. But while the new prime minister has quickly tightened his grip on power, he has yet to reveal how he intends to wield it.

As a first act, the government's budget, presented in Parliament last week, was decidedly underwhelming. Finance Minister Arun Jaitley did not even take the relatively simple step to repeal what is arguably the previous government's worst law—the 2012 decision allowing the government to impose retroactive taxes. And although India has raised caps on foreign investment in insurance and defense from 26% to 49%, these relatively cautious moves are unlikely to bring in as much investment as a more liberal FDI regime.

Meanwhile, the new government will implement the previous regime's decision to give tax inspectors—who already have a reputation among businesses for being whimsical and overbearing—sweeping powers to crack down on what they deem as tax avoidance. It has also chosen not to pare a profligate program that promises subsidized grains to two-thirds of India's population.

To be fair, the budget is a stopgap measure covering only the remaining eight months of the current fiscal year. Mr. Modi's government ought to be judged more firmly by its first full budget next February. Moreover, moves to loosen India's restrictive labor laws by allowing states to craft sensible legislation of their own, and to roll back a draconian central law that makes land acquisition exceedingly complex and expensive, would restore some of the government's reformist credentials. Harassment of companies by tax inspectors could abate if the government pares back subsidies and handouts that create constant pressure to increase government revenue.

While it may be too early to judge the Modi government's performance, it isn't too early to point out the danger of merely relying on better administration of old policies, rather than inventing an alternative to Congress-style quasi-socialism from the ground up. If Mr. Modi is to fulfill his promise as a transformative leader, he will need to show that he not only knows how to acquire power, but also how to wield it for a higher purpose.

Mr. Dhume is a resident fellow at the American Enterprise Institute, and a columnist for WSJ.com. He tweets @dhume.

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