The fate of Narendra Modi is a bit more uncertain yet. The conventional wisdom in India Inc is that his choice as BJPs lead candidate will ensure his elevation as the Prime Minister and good things will follow. The market is rational, of course. But the market is always rational even as it changes its mind from day to day. Lehman Brothers was a going company on September 12 by rational market expectations and bankrupt by September 15, 2008.
So, what are the uncertainties facing India in the next eight months before the elections have to be held. Let me rule out the chances of an early election for the moment and, conditional on that, guess what will happen. Most opinion polls converged last month on the prediction that Congress/UPA will lose around 100 seats and come in at 100-120. Make that a wider range of 90-120. They are also quite gloomy about BJP/NDA and put it at no more than140-160. Make that 140-170. This leaves, as of now, the country with the terrifying spectacle of a third-party coalition.
But things have moved on since last month. The rupees collapse despite its slight recovery is a major embarrassment for the UPA and cannot be gainsaid by the usual excuses. Despite Raghuram Rajans valiant efforts, it is doubtful if that situation will improve any time soon. Indian exports are price-elastic and there has been some upsurge in exports, but the inflation continues and the RER will require further depreciation if there has to be any price advantage.
The UPAs gamble is that its rights-based strategyfood security, MGNREGA, land acquisition and Aadhaarmay help it, come election time. That remains to be seen. MGNREGA was not crucial for the 2009 elections. Urban votes were. It is doubtful if Congress/UPA can get urban votes now after what they have done to the urban consumerinflation, high interest rates, a falling rupee and no prospect of good public finance.
Can the BJP win if the Congress loses The gamble is that Narendra Modi will do in 2014 what Manmohan Singh did in 2009. Bring in 50 extra seats from the urban middle class voters. This is why some BJP seniors are saying sotto voce that their projections is 230 seats for the BJP on its own. Modis urgent elevation has been driven by that knowledge (as well as compulsions of Pitru Paksha which designates the month after September 20 as inauspicious!). But there have been disagreements and disputes on the way to that announcement. Advanis objections are not merely selfish, he has been quoted as asking: where is your plan B
This relates to the risks attached to Modis elevation which have to be factored in. The BJP has never crossed the 180-185 threshold. The optimistic assumption is that that number is secure and Modi will add the Manmohan 50 to the bag. Modis approach has been based on development plus governance and he hopes to capture the disappointed urban voters. But there is another route. The BJP is an ideological party. There are people within it who have always believed that a firm Hindutva stance will bring out the silent majority and will propel the party into power. This is what often happens to parties who have lost many elections. The hard core begins to argue that they are losing because their core message has not been shouted loudly enough whereas the core message has always only had a minority support. I know this because my party, the Labour Party, lost four elections arguing this till Tony Blair jettisoned the core message and moved the party on.
The trap for the BJP is whatever Modi may say in public, his core supporters want to launch a hard Hindutva campaign. The riots in Muzaffarnagar give us an inkling of what is in their minds. To capture 40 or 50 seats from UPs total of 80 is, for them, a straightforward task of divide and rule. If that is given the go ahead implicitly or, even worse, explicitly by BJP high command, then the urban vote may well go elsewhere.
This is the main risk facing India Inc now. Will its favourite son tread the straight and narrow or will he be tempted into mandir versus masjid byways This will be the severest test of Modis ability to command the nations loyalty. Watch this space as the drama unfolds.
The author is a prominent economist and Labour peer