GEOFF HISCOCK. Key Indian states go to the polls in February

Jan 31, 2017

While most of Asia-Pacific focuses on the beginning of the Trump presidency and China’s prickly response so far, a substantial slice of the world’s biggest democracy, India, is about to enter a crucial round of state elections that will also have an impact on regional stability and economic growth.  …  in India’s most populous state, Uttar Pradesh, where 140 million of its 200 million people are on the electoral roll — more than the 130 million American citizens who cast votes in the US presidential election.  

India is the fastest-growing of the world’s major economies, with the International Monetary Fund projecting growth of 7.6% in 2016-17 after a similar rate of 7.6% in 2015-16. China grew at 6.9% in 2015-16, according to the IMF. China is by far Australia’s dominant trading partner, but India’s growing needs in services, energy and food are destined to propel it to greater market prominence.

The polls open on February 11 in India’s most populous state, Uttar Pradesh, where 140 million of its 200 million people are on the electoral roll — more than the 130 million American citizens who cast votes in the US presidential election. In four other states – neighbouring Uttarakhand, and Punjab, Manipur and tiny Goa — another 90 million people are registered to vote between February 4 and March 8.

While state-based issues will dominate these contests, the results will also say much about how Indian Prime Minister Narendra Modi’s national administration is perceived, halfway through his five-year tenure.

In Uttar Pradesh, for example, Modi’s Bharatiya Janata Party (BJP) and its main opposition, the Indian National Congress (INC), will do battle with big regional parties such as the incumbent Samajwadi Party (SP) and rival Bahujan Samj Party (BSP), against a backdrop of bickering over shortcomings in infrastructure, economic reforms, law and order, corruption, social inequality, poverty, the ever-present threat of domestic and external terrorism, and the financial turmoil that followed Modi’s controversial November 2016 demonetisation order withdrawing old 500 and 1000-rupee notes in a bid to target “black money.”

Modi came to national power in India in May 2014 after more than a decade as Chief Minister of the northwest coastal state of Gujarat. Like Trump, he evokes a pro-business “can-do” style that mixes bluster with bluff. He has taken control of planning in an effort to speed up infrastructure projects and job-creation. He favours a lighter touch on environmental and labour protection, and in a country that is chronically short of reliable power supplies, he has promised 24/7 electricity for all by 2020. Delivering on that promise depends in part on an ambitious domestic solar and wind power program, and continued access to imported energy, be it coal from Australia or gas from the Middle East.

While pushing his “Make in India” agenda, Modi has welcomed foreign investment and attempted to cut the bureaucratic bloat that turns off potential investors. With the benefit of a favourable monsoon, he has presided over robust economic growth since taking office. But high government spending means there is little room to cut the budget deficit, with Moody’s Investor Services warning on January 26 that its positive outlook on India’s credit rating was predicated on continued policy reforms allowing balanced growth and government debt reduction.

Modi was one of the first world leaders to phone Trump after his election victory, and Trump reciprocated after his inauguration, calling Modi ahead of any contact with the Chinese or Japanese leadership. Trump has promised that his administration will treat India as the best of friends, telling U.S.-based Indian business people that the two countries have a “phenomenal future together.”

India is the most complex country in our region – 1.3 billion people (about 300 million of whom live below the poverty line), 29 separate states and seven territories, a volatile mix of religions, language, caste and ethnicity, a culture of state-based antipathy to national governments, an economy that must achieve annual growth of at least 7% a year just to keep pace with the burgeoning demands of its growing population, and a turbulent neighbourhood made up of China, Bangladesh, Myanmar, Sri Lanka, Pakistan, Bhutan and Nepal that requires constant monitoring.

Uttar Pradesh is part of the Indian heartland, adjoining the capital New Delhi and stretching across much of northern India, from Agra and the Taj Mahal in the west to the capital Lucknow in the centre and eastward to the holy city of Varanasi on the Ganges River. It is 80% Hindu and 19% Muslim, with a smattering of Christians, Buddhists, Jains and other religions. It is home to parts of India’s high-tech information technology sector, but is largely agricultural, with the largest rural population of any Indian state, at 155 million people. Average household income is only about half the national average.

Its Chief Minister since 2012, 43-year-old Akhilesh Yadav, is also national president of the centre-left Samajwadi Party that has a comfortable majority in the state assembly. Yadav, who has a master’s in environmental engineering from Sydney University, is the son of Mulayam Singh Yadav, founder of the Samajwadi Party and himself a three-term Chief Minister of Uttar Pradesh. The Yadav family is riven by feuding, but is still favoured to win the state elections, ahead of the BSP, BJP and INC. As always, law and order, corruption, poverty and religion will dominate the election campaign.

For Modi, the “Trump glow” gives him a bit more international exposure, but the domestic challenge in 2017 is to keep the national economy ticking along at 7% plus, and riding herd on a bunch of fractious states that can make substantial contributions to GDP, but equally can pose a threat to stability through communal rivalries.

Geoff Hiscock is the author of India’s Global Wealth Club, India’s Store Wars, and Earth Wars:  The Battle for Global Resources, all published by Wiley.

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