The Buzz

What to Expect from Modi's India

India's May 2014 election received far less attention from the U.S. media than it deserved.  The landslide victory of Narendra Modi and the BJP is significant for both India and the Indo-Pacific region. Notwithstanding important achievements - like the Indo-US nuclear deal - the previous Congress-led coalition government of Manmohan Singh, seemed to the electorate like a decade of missed opportunities and drift.  Internationally, many of India's friends and partners often found it too cautious.  In contrast, Modi will have an increased focus on Asia, leveraging Indian diplomacy to increase Asian investment in India.

Internal Focus

Modi's priorities are internal and focus on returning to high growth.  In recent years, the economy has grown just 5-6 percent annually instead of the 8-9 percent of a decade ago.  The view in Delhi is that India needs 7-8 percent growth rates.  Voters were concerned about issues like high commodity prices, job creation, corruption, and inadequate infrastructure. To achieve this growth, Modi seeks to develop infrastructure, build transit corridors, and increase the effectiveness of the Indian bureaucracy.  

Internal security will be a priority for the government, as seen by the selection of veteran counter-terrorism intelligence chief, Ajit Doval, as National Security Advisor.  In its election manifesto, the BJP stressed that it will have a "zero tolerance" policy toward terrorism, indicating that in the event of another terrorist attack, this government will take action unlike the passive response of Singh's government to the 2008 Mumbai attacks.  Beyond responding to the domestic call for a more hawkish stance, this emphasis on domestic security is necessary for growth. It will prove difficult to attract needed investment if foreign investors feel India is unstable.  In the 2000s, India was one of the countries most often struck by terrorist attacks, just after Iraq and Afghanistan.

Southern Asia

During his inauguration ceremony, Modi took the unprecedented step of inviting the heads of government from South Asia, including controversial guests like Nawaz Sharif of Pakistan, Mahindra Rajapaksa of Sri Lanka, and Tibetan Prime Minister-in-exile Lobsang Sangay.  His first foreign visit was to Bhutan.  Modi wants to be seen as the "leader of South Asia" to increase his status and expand regional economic ties.  This will prove difficult: South Asia is one of the world's least economically integrated regions and the regional organization, SAARC, one of the most ineffective.  In addition, China has invested heavily in both infrastructure development and military assistance to several of these states (in particular Sri Lanka and Bangladesh) so Modi will be playing catch up to balance Chinese influence in the region.

China

The most delicate relationship that the new government will have to manage is with China.  Although bilateral trade has grown 30 percent annually in recent years, the trade imbalance (favoring China) is a source of irritation.  China is India's largest trading partner, but India is only China's 10th largest.  Modi's government would like to increase India's access to the Chinese market for its IT and pharmaceutical industries, and increase Chinese capital and capital goods investment in Indian infrastructure.  The recent visit by Chinese Foreign Minister Wang Yi focused on economic issues, in particular getting increased Chinese investment in India's industrial parks and railways.  Beyond economics, there have been murmurs of India becoming a full member of the Shanghai Cooperation Organization (which is unlikely). 

Potential spoilers remain, however, such as the border dispute (last April there was another confrontation), Chinese support for Pakistan, and other issues.  Modi's government has indicated to China that while improved economic ties are important, India will remain firm against Chinese assertiveness.  Among these signals are: inclusion in the government of several figures known for their harder stance on China (VK Singh, Kiren Rijiju, etc.), Modi's invitation of the Tibetan prime minister-in-exile to his inauguration, and plans to develop infrastructure in border areas in Arunachal Pradesh (parts of which are claimed by China as "South Tibet").  When campaigning in Arunachal Pradesh, Modi criticized China's "expansionist mindset."

ASEAN

Modi will also look to resuscitate India's "Look East Policy" (LEP) of economic and security engagement with Southeast Asia.  The Singh government delayed initiatives for increased trade because of domestic politics.  Since one of Modi's priorities is to develop Arunachal Pradesh and other northeastern states, the LEP seeks to bring trade and investment to one of India's least developed areas.  For decades, Delhi has lost great sums of money and suffered many casualties in attempting to prop up these states in the face of violent insurgencies, minimal infrastructure, and poor economies.  Promoting economic ties between Northeast and Southeast Asia is part of a long-term strategy for developing (and bringing peace) to this region of India. 

India has also sought to engage Southeast Asia through military exercises (like the Milan exercises it hosts), and involvement in soft security issues like humanitarian assistance and disaster response.  It has positioned itself as a benign regional power in contrast with China's more assertive posture.  As India becomes more interconnected with Southeast Asia, it risks upsetting Chinese sensibilities, however.  In particular, India's cooperation with longtime friend, Vietnam, both in terms of oil exploration in the South China Sea and defense cooperation could be a spoiler for Sino-Indian relations in the future.

Japan

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