By Eric Bellman and Bill Spindle
NEW DELHI -- Indian Prime Minister Narendra Modi appears on
track for a second term if exit polls bear out, but less clear to
investors and executives is which version of Mr. Modi would take
charge: the business-friendly leader or the divisive
nationalist.
While Mr. Modi's first term started in 2014 with ambitious plans
to boost investment and growth through reform in what is now the
fastest-growing large economy in the world, momentum for overhauls
has sputtered in recent years. The 7-week election was dominated by
Mr. Modi's nationalist rhetoric and sharp criticism from opponents
who are concerned that he is moving India toward a system dominated
by the Hindu majority.
Exit polls indicated Mr. Modi's Bharatiya Janata Party will
likely garner the most seats in the next parliament and he could
even win an outright majority for a second straight election. That
would be a huge blow for the BJP's national rival, the Indian
National Congress, which once reigned over Indian politics but has
struggled in recent years.
Results of India's election, in which more than 500 million
people voted, are to be announced on Thursday. In the world's
biggest democracy, exit polling has sometimes failed to accurately
reflect the actual voting results in past elections. But a
consistent overall trend in a variety of polls has usually proved
reliable, and the polls this election have uniformly indicated a
strong showing by the BJP.
Mr. Modi and the BJP leadership took a populist tack in the
election, all but dropping the pro-business rhetoric that dominated
their 2014 campaign. They fanned nationalist and Hindu religious
pride by trumpeting a recent military confrontation with Pakistan,
touting the country's newly demonstrated ability to shoot down a
satellite, and boasting about the government's efforts to protect
cows, which Hindus view as sacred.
"The people of India are at the forefront of the 2019 campaign,"
Mr. Modi tweeted. "They have taken it upon themselves to elect a
strong, stable, honest and nationalist government."
Some observers dismiss the nationalist pivot as a temporary move
to win votes. The BJP, they say, will be able to use a new mandate
to push through critical reforms that will expand the economy and
create the nearly million jobs a month needed to employ its
burgeoning youth population. The expansion of India's economy has
been slowing and dipped below 7% late last year.
But others say a dominating repeat victory driven by the BJP's
populist base could kill critical overhauls.
"He has veered away from economic issues and doubled down on
traditional BJP Hindutva issues," said Vivek Dehejia, an economics
professor at Carleton University of Ottawa, using a term that
refers to a form of Hindu nationalism. "A win sends the message
that they don't have to worry that much about the economy, they can
get re-elected without a major economics reforms push that would
use political capital."
Hindu nationalist organizations that worked closely with the
ruling party believe their time has come. They are demanding a
Hindu temple be built at the site where a mosque was destroyed in
1992 -- an explosive issue that has led to violent sectarian
clashes in the past.
Many of these organizations want a national ban on the slaughter
of cows, which would hurt the part of the economy that supports
many poor and Muslim families. They are pushing to end any special
treatment of Muslims, which make up about 14% of the populace.
One top BJP official referred to illegal immigrants -- most of
whom are Muslim -- as termites, and the party caused an uproar by
fielding a candidate who is being tried for alleged involvement in
a 2008 terrorist attack that killed six Muslims.
"Hindus are expecting much more," said Vinod Bansal, a national
spokesman for Vishva Hindu Parishad, a Delhi-based Hindu
organization affiliated with BJP's nationwide parent body Rashtriya
Swayamsevak Sangh.
In Mr. Modi's first five years in office, his administration
eagerly publicized the launch of new government services such as
broad-based health care and free bank accounts for the poor, and
promoted initiatives to extend access to electricity and install
tens of millions of new toilets as part of a campaign to promote
cleanliness.
His government also introduced a new bankruptcy code and a
unified national taxation system, important changes that will
eventually make doing business in the country easier, according to
most economists.
But he has failed to push through changes that were intended to
spur growth over the long haul but would cause painful dislocations
and were unpopular with many voters.
To achieve the higher growth rates needed to employ and enrich
its young and growing population, India needs to privatize
state-owned companies such as Air India, loosen outdated
restrictions on hiring and firing workers, free up agricultural
markets and reduce lending rates, Surjit Bhalla, an economist who
has worked with the Modi government, told a group of business
leaders in an event this week.
"We have done well but not good enough," he said. "In order to
compete in this world we need to change some of our most basic
policy assumptions which have held us back."
The stock market in Mumbai opened this week with a 4% jump after
exit polls pointed to the return of a BJP-led government. In the
six months after their first landslide victory in 2014 the
benchmark index, the Sensex, surged more than 20%.
Mr. Modi has been popular with foreign investors for his efforts
to streamline the economy, including a new nationwide goods and
services tax, replacing some government subsidies with direct cash
transfers and a new bankruptcy code, said Samir Arora, founder and
fund manager of Helios Capital Management in Singapore.
But they shouldn't expect some other changes that they would
like to see, including changes to laws governing labor and land
use, Mr. Arora said.
"Foreigners have liked the things that were done in the first
term," he said. "More reforms may happen but labor and land are not
likely."
--Krishna Pokharel and Corinne Abrams contributed to this
article.
Write to Eric Bellman at eric.bellman@wsj.com and Bill Spindle
at bill.spindle@wsj.com
(END) Dow Jones Newswires
May 22, 2019 12:41 ET (16:41 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.