How far can Narendra Modi take Indiaand how fast

Written by Reuters | Updated: May 22 2014, 12:36pm hrs
As a result of last weeks parliamentary election in India, three of the worlds strongest and most transformational leaders are now in Asia: Japans Shinzo Abe, Chinas Xi Jinping, and Indias Narendra Modi. They control a fifth of the global economy and govern two-fifths of its citizens. All have active plans to shake up their societies.

The expectations and the stakes are sky-high for each of these leaders, but none more so than Modi. Last week, Modi won the worlds largest-ever democratic election in a decisive fashion, with his party converting 31% of the national vote into 52% of the seats in Parliamentthe first absolute majority in the lower house of Parliament since 1984. Meanwhile, the reigning Congress partywhich has ruled India nearly without a break since its independence from Britainturned in its worst-ever performance, losing three-quarters of its seats.

Why do Indian voters find Modi so appealingor, depending on your outlook, Congress leadership so repulsive As chief minister of Gujarat, his state of 60 million people, Modi unlocked economic gains reminiscent of China. During his 12-year tenure, Gujarats per capita income outpaced the national average, rising almost fourfold. Modi put his money where his mottos wereless government and more governance and no red tape, only red carpetparing back suffocating state inefficiencies to unlock business potential and competitiveness. This is precisely what the Congress has been unable to solve at a national level, with high inflation, lagging economic growth (at least by historical standards), and legislative gridlock that makes Americas Congress look like a well-oiled machine.

Indian voters want Modi to implement the Gujarat model on a national scale. The question is whether Modi can do so as quickly and dramatically as Indians demand. Unlike China and Japan, power in India remains woefully decentralised, and a sweeping win wont change that. We wont see a quick recovery in Indias legislative output, which last year was at its least productive levels in history. Thats because the houses of Parliament remain split, with the Congress party and its allies maintaining a plurality of seats in Indias upper house, the Rajya Sabha. Congress holds 12 of Indias 28 (soon to be 29) states, which in turn elect the upper house members; Modis BJP has only five.

The next round of elections, where only a third of the chambers seats will be in play, doesnt happen until 2016. And just as the BJP has derailed the Congress party agenda in an opposition role over the last decade, now well see a role reversal, with Congress engaging in rabid obstructionism. Modi will struggle to cut enough red tape to match voters lofty expectations. When it comes to politically sensitive issues like labour, energy and agriculture, structural reforms that require legislative fixes will be hard to implement any time soon.

But even if Modis opponents stymie his national legislative agenda, he will have an immediate impact in three key areas. First, he will focus his efforts on national action he can take without Parliaments assistance. He can use the power of executive decision to liberalise foreign direct investment and permit the streamlining of infrastructure and industrial projects.

Second, Indias decentralised system cuts both ways: even if it makes the national agenda harder, it presents opportunities for change at the state level, where many of the most dramatic structural changes will occur. Modis premiership can enable a Gujarat model of development to spread to some other states, including many in Indias poorer north. Infrastructure development and active efforts to speed foreign direct investment should pick up.

Lastly, Modi will push for his country to play a more significant role internationally. Modi will promote a revitalised India on the world stage, welcoming a second look from multinational corporations and major powers alike. Optimism from foreign investors in anticipation of a stronger, more accommodative Modi government has helped push the rupee to a 10-month high against the dollar and stock markets to all-time records. Modi will welcome closer relations with everyone from the US, Europe and Japan to China and Russia.

In a G-Zero world, with no single dominant voice and a lack of global coordination, India now stands out as a rare oasis of leadership and a prime opportunity for bilateral engagement. Take Indias direct relationship with Washington, where high-profile visa issues, including the arrest of an Indian diplomat in New York, have strained relations. The United States denied Modi a visa in 2005 based on his role in Gujarat riots in 2002. But sometimes winning really does solve everything: after Modis election victory, Obama called to congratulate him and invite him to the United States. For his part, Modi is looking to put points on the board, not settle scores. Expect him to pursue an invigorated, pragmatic approach to international relations.

With a resounding mandate, Modi isnt only focused on a 10-week plan, but also a 10-year blueprint to transform India. Lets hope India can wait that long.

Ian Bremmer