Indian election 2014: Domestic economic constraints and the external impacts of the world’s greatest exercise of democracy by Lawrence Saez and Elena Hoyos Ramirez

By Lawrence Saez |April 22, 2014|Bharatiya Janata Party (BJP), Corruption, Economy, Foreign Policy, Indian National Congress (INC), Opinion Polls|

Starting in 7 April and continuing for five weeks, Indians are casting their votes to elect the representatives to the 16th Lok Sabha, India’s lower house of parliament.  Early voter sampling suggests that this general election may be one of the most atypical elections in India’s political history given the high number of young, first time voters.  Such voters are demanding a change amidst the inability of the Congress Party-led coalition, the United Progressive Alliance (UPA) to address India’s most pressing needs including energy and transport infrastructure, inflation, women’s rights, and mismanagement of the nation’s general budget.  In addition, the issue of corruption has taken center stage prior to the election.

Under this scenario, the Hindu nationalist Bharatiya Janata Party (BJP) led by Narendra Modi is widely expected to win a plurality of the seats in the election. However, it is equally certain that the BJP will not win a majority of the seats and that it will be forced to form a coalition government.  Based on the prior experience of a BJP-led coalition in government, the National Democratic Alliance (NDA), it is likely that the new government will have to act within some constraints.  Nevertheless, a BJP-led coalition government will represent a shift in both domestic economic policies and in international relations. However, given the gravity of India’s economic malaise, it is uncertain to what extent pressing domestic economic considerations would allow a BJP-led coalition to focus on its external policy goals.

Indian voters seeking credible alternatives

Since 2009, India has experienced a slowdown in real GDP growth, from 8.5 percent to 5.4 percent in the first quarter of 2014.  Likewise, despite a nominal commitment to fiscal discipline, India’s fiscal deficit as a proportion to GDP has approached 4.6 percent in 2013-2014.  A more worrisome indicator has been India’s current account deficit, which reached was equivalent to 1.9 percent of GDP in 2009 and reached 4.7 as a percent of GDP in 2012; though it appears to have rebounded in recent months.  India’s macroeconomic downturn combined with rising inflation has generated a decline in consumer confidence and to a growth in popular discontent against corruption.  The strength of Anna Hazare’s anti-corruption movement in 2011 and 2012 followed by the impressive performance of the Aam Aadmi Party (AAP) in the 2013 Delhi legislative assembly elections suggests that voters across all social classes are fed up with corruption. The BJP has been quick to attempt to seize on the popularity of the anti-corruption issue, though once in power it is unlikely that it will be effective at addressing this issue any better than the Congress Party.  Corruption in India is pervasive, structural, and endemic and no large scale political party has an incentive to eliminate it from within its ranks.

The BJP’s election manifesto is surprising in its lack of attention to foreign policy and external security issues.  Only two pages (in a 42-page manifesto) are devoted to foreign policy and external security.  Compared to previous version of BJP election manifestoes, the 2014 version uses bland language and offers anodyne solutions to India’s foreign policy challenges.  For instance, the 2014 BJP election manifesto makes no direct mention of Pakistan or China.  Instead, it suggests that “in our neighborhood we will pursue friendly relations.”

The main foreign policy concern if the BJP reaches power is the evolution of US-India relationship.  In previous BJP-led coalition governments, India managed to enjoy closer relations with Washington.  This time around there is a great deal of uncertainty as to what a BJP-led coalition government will mean for the pursuance of India’s foreign policy objectives. Despite Modi’s embrace of globalization in the form of foreign direct investment, he is still banned from entry to the United States due to his alleged involvement in the massacre of Muslims during the 2002 riots in Gujarati riots. This is one of the reasons why the BJP has been avoiding confrontational positions on the subject.  No references to the US-India relationship are to be found in the 2014 BJP election manifesto.

However, the BJP’s emphasis on creating a business-friendly environment is likely to shape the direction of the country’s foreign policy.  This will translate in the development of closer commercial and diplomatic ties with North and South East Asian countries, largely in order to counteract China’s growing influence in the region. At the same time, closer ties with Japan will indirectly improve the relationship with the US, given the fact that Japan is the main US ally in the region. With respect to China, a BJP-led coalition government will have to find a way to balance China’s expansionist aspirations, both regionally and globally.  Nevertheless, India’s new government will have to understand the importance that China represents in economic terms. Although the volume of bilateral trade between India and China has grown tremendously in recent years, this has resulted in growing trade deficits for India. The BJP has offered no concrete solutions to this fundamental challenge to India’s macroeconomic stability.

Finally, with respect to Kashmir and Pakistan, the BJP manifesto has pledged that “where required we will not hesitate from taking strong stand and steps.”  This forceful language could lead to the conclusion that a BJP-led government will be less hesitant to respond to provocations from its neighbor. Fortunately, there have been no flare-ups in the India’s relations with Pakistan since the 2008 terrorist attacks in Mumbai and there is no evidence that bilateral relations could not continue on a positive footing.  Nevertheless, the BJP has announced a strong commitment to enhanced defense manufacturing, therefore a surge in military spending is a likely scenario.

There are well-founded concerns that a BJP-led coalition government could embolden extreme Hindu nationalists and ignite communal tensions within India.  However, given the overwhelming importance of domestic economic issues and good governance in the electoral campaign preceding the general election, it is unlikely that the BJP’s Hindu nationalist agenda will gain much traction after the election.  Similarly, much remains unfinished in India’s foreign policy aspirations. The new government should attempt to regain its comparative advantage in terms of trade in services.  This will require a more pro-active role from India’s diplomatic front.  Ultimately, India will face to the same dilemma it faces with China: normalize and stabilize trade relationships while protecting the nation’s interests in the region.


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