The recent election results in the critical northern state of Bihar, India's third most populous state, are the first big roadblock that has hit the Modi juggernaut. Out of a total of 243 seats, the BJP-led National Democratic Alliance (NDA) only won 58 seats of which the BJP won 53. The Mahagathbandhan (or Grand Alliance) coalition won 178 seats, with former Chief Minister Lalu Prasad Yadav's party Rashtriya Janata Dal (RJD) winning 80 seats, former Chief Minister Nitish Kumar's party Janata Dal (United-U) winning 71 seats and the Congress winning 27 seats. How critical the Bihar elections were for the NDA can be gauged by the fact that the Prime Minister Mr. Modi addressed 26 election rallies in Bihar and more than 90 top BJP officials addressed over 600 rallies during the election cycle phased out over six weeks.
The 2014 parliamentary elections in India that brought the Narendra Modi-led Bharatiya Janata Party (BJP) back to power, after ten years in the wilderness, reflected the desire of a young Indian electorate that wanted robust foreign policy (and economic reform). Mr. Modi was brought to power not because of any Hindu wave or the illusionary Hindu vote bank but he came to power on the strength of the moderate voter. That voter sought the Gujarat model of economic growth, not religious and social arguments amid violence.
The election of Mr. Modi in May 2014 raised expectations around the world of the likelihood of far-reaching changes in India's economic policy. India was, for the first time in its history, being led by a conservative government with a clear parliamentary majority and a Prime Minister with prior governance experience. Before his election as Prime Minister, Modi successfully diminished concerns about the religio-cultural conservatism of his party. Modi was expected to be a catalyst for India's economic growth, removing the shackles of over-regulation quickly.
However, as Hudson Institute's 'Modi One year On' report states eighteen months later, "it seems that caution characterizes the Modi government's performance just as enthusiasm had defined Modi's election promises." India's economic growth has increased primarily because of global economic factors, such as lower oil prices, and not because of governmental reforms. Some government actions, such as 'tax terrorism' -- imposition of retroactive taxes on multinational corporations -- and the lack of implementation of tax and labor reforms, continue to hurt India's economic outlook.
For the last year analysts, and government advisers alike, argued that the primary reason the Modi administration was unable to implement economic reforms was because while it had a majority in the Lok Sabha, lower house of parliament it lacked a majority in the Rajya Sabha, upper house. The argument put forth was that the BJP-led National Democratic Alliance (NDA) needed to win critical state elections, like Bihar (November 2015) and Uttar Pradesh (2017) to boost its majority in the upper house.
With the devastating loss that the NDA coalition has faced in the Bihar elections it is time Delhi reevaluated its policy. Instead of framing the policy, and discourse, on the need to win every state assembly election, the government needs to focus on implementing economic policies that are tied to bureaucratic reforms and boosting economic growth.
Economy is not an independent silo; it is impacted by what is happening in foreign policy as well as the broader society. If there is a rise in religious intolerance and communal violence that too will affect how both domestic and foreign investors view the country.