Year 1 for India’s Modi’s Undermined by 'Chilling Effects'

America’s ambassador to India certainly did not mean to deliver a verdict on the first year of Narendra Modi’s time as prime minister when he referred on May 6 to the “potentially chilling effects” of current government threats to restrict or close organizations such as the Ford Foundation and Greenpeace.

But as I sat listening to a speech that the ambassador, Richard Verma was making in Delhi, it occurred to me that “chilling” is as good a word as any to describe at least half of the reasons why the government has lost a lot of its appeal in the past few months.

May 14, is the first anniversary of the vote count that produced the Bharatiya Janata Party’s landslide victory, and Modi will be in the Chinese city of Xian with President Xi Jinping at the start of a three-day country visit. The timing is appropriate because it is on the world stage that Modi has performed best, though there are few concrete results yet to show after all the razzmatazz in Japan, the US, Australia, Canada and elsewhere.

At home Modi is perceived to have achieved far less than had been hoped, even after discounting for the fact that expectations generated by his election campaign a year ago were euphorically unrealizable. What has been achieved is being undervalued partly because Modi’s egotistical persona has not morphed well from being the chief minister of Gujarat and presidential style general election campaigner to the post of prime minister. His autocratic style has upset fellow ministers, MPs of his own party, and bureaucrats, and he has not emerged as a leader with the measured authority of a potential statesman.

He seems to frighten more than inspire which, reports suggest, makes many ministers and bureaucrats reluctant to take decisions – a development accentuated by the centralization of decision-making in the prime minister’s office, and by Modi bypassing many ministers to deal direct with top bureaucrats.

That authoritarian approach fits with the “chilling” aspects of the past year where religious tolerance has been undermined and attempts have been made to curb freedom of expression. The autonomy for educational and other institutions has been under attack and, as the US ambassador mentioned, there have been recent curbs on the Ford Foundation – plus Greenpeace and, more understandably, several thousand other (often spurious) non-governmental organizations (NGOs).

Two authoritative and widely differing views on the first year have appeared in the past 10 days – one from a former BJP minister and the other from Modi himself. Both are worth reading in detail.

The first was a tv interview on May 1 with Arun Shourie (below, right), a distinguished former newspaper editor and minister in the last BJP government, who expected to be finance minister or have some other post, but was sidelined by Modi. He delivered a formidable critical analysis on the Headlines Today TV channel, which hit all the right points.

He praised Modi’s energy and efforts but “didn’t know “what other ministers were doing or what was happening. On foreign policy he gave “very high marks for focus and energy,” but was concerned about a lack of real effects. On the economy he said the government was “directionless” and a “great disappointment.” On my “chilling” theme, he had “great anxiety” about social relations and “anxiety bordering on apprehension” on institutions.

Time magazine cover story

The second, on May 7, was a cover story and interview given by Modi to Time magazine. This was only his second big media interview, though there may be another one soon, and he is expected to hold his first prime ministerial press conference on May 23 as part of an anniversary public relations blitz in the coming days.

In Time, he described his first year in positive terms that gently countered the sort of points made by Shourie and other critics. He claimed a “meeting of minds” on what he described as “federal government structures” (which however is far from apparent), and he bypassed allegations of his autocratic style by saying the country did not “need a powerful person who believes in concentrating power,” His government, he said, would “not tolerate or accept any discrimination based on caste, creed and religion” (though of course his party’s activists think and act otherwise).

He then said that “so far as the expectations of the people are concerned, both in the country and internationally, we are moving very rapidly to fulfil those expectations” (which is certainly not the perception).

The government’s image problems began towards the end of last year when arch Hindu nationalists within the BJP’s Sangh Parivar (family of organizations) voiced extreme views about minorities such as Muslims, which Modi took a long time to rebut. One minister implied that everyone apart from Hindus were born illegitimately. There were also mass conversions of Christians and others to Hinduism, and a government minister turned the Dec. 25 traditional Christmas religious and public holiday into a working day for many bureaucrats.

This was the first bad patch that Modi had hit since the general election, and it gave opposition parties a base on which to build criticism to his government, which spread to economic and other subject. The BJP then unexpectedly lost badly to the Aam Aadmi Party (AA) in Delhi state-level elections and did not do as well as it had hoped in Jammu & Kashmir, further harming its image as an effective government.

The Congress Party, which was devastated after its electoral defeat last year, began along with other parties to put the government on the back foot. Rahul Gandhi, the re-energized Congress deputy president, is now leading an attack on the government for being anti-poor and pro-corporate – an image that stems from insensitive proposed land-use legislation (now blocked in parliament) and other measures, plus a sense that the days of crony capitalism are far from over.

Modi has done nothing to hide his closeness to the Adani group from Gujarat, and even apparently to Anil Ambani, one of the two Reliance brothers.

The Ford Foundation and other NGOs’ troubles are the latest example of authoritarianism and lack of tolerance of dissent. The issue stems partly from the government’s need to get investment moving on stalled projects, and its opposition to organizations that raise objections. It claimed Greenpeace, which can be controversial in the way that it opposes projects such as mining in rural areas, had allegedly “prejudicially affected the economic interest of the state.” Greenpeace’s bank accounts were blocked a month ago, and there is a risk that its registration as an NGO might be cancelled. The Ford Foundation has backed social and other organizations since the 1950s, but the government apparently objects to it funding an organization that helps victims of the 2002 Godhra riots in Modi’s Gujarat, and now wants to vet its financial allocations.

Such moves have done serious damage to India’s international credibility and are undermining attempts to attract investment.

At the same time, multi-billion dollar tax demands on international companies long-established in India, plus unexpected $6.4bn historical revenue charges against global investment funds, have further worried investors. In the past few days, this has led to serious falls in the stock markets, and the value of the rupee dropped to 2013 levels (prompting Arun Jaitley, the finance minister, to set up a committee to defuse the matter).

The tax issues seem to stem from parts of the finance ministry acting against the policies of the government because Jaitley has repeatedly said he is trying to stop what has become dubbed as “tax terrorism.”

I have heard many reports from businessmen of bureaucrats that tax and other officials at all levels in the ministry act on their own, and this fits with other conversations I have had about bureaucrats failing to change their old blocking and restrictive tactics, despite Modi’s promise of change.

It is not clear whether the finance ministry problems are exacerbated by Jaitley, whose health was not good last year, having too many wide-ranging government responsibilities to be able to focus his able lawyer’s mind on detailed financial and economic policies (he is also information minister and the government’s chief spokesman).

Image problem

India is therefore suffering from an international image problem, both for “chilling” social issues and because it is still not regarded as an attractive place for investment in many areas.

The government has of course got several achievements to its credit over the past year. It has tackled the policy paralysis that developed under the Congress-led government, and various long-delayed measures have been introduced including higher foreign direct investment limits in defense manufacturing and insurance. Diesel prices have been deregulated and natural gas prices have been raised, and new rules have been introduced for controversial coal mining leases. A major tax reform that has been under discussion for 15 years could also come about if the government can persuade the opposition to approve new goods and services tax (GST) legislation.

Spurred by lower international oil prices, the fiscal deficit has eased. Inflation has fallen and economic growth is picking up – the IMF and other international observers are forecasting 7.5 percent both this year and next, beating China.

Various high profile schemes have been introduced by Modi such as cleaning India, spreading financial inclusion and involvement and cleaning the Ganges river, and more are being announced. All of them are well meant, but he has not shown how some of them are or will be implemented.

A key Make in India campaign which is intended to make the country an easier place to set up and run manufacturing and allied businesses, has seen few results. It was undermined last month when Modi cancelled a potential contrat to make 126 Rafale fighter jets in India and instead ordered 36 to be made in France. Defense preparedness and manufacturing arms in India should have been a relatively easy subject for Modi to tackle, but far from enough has been done – the Comptroller and Auditor General (CAG) has just reported that a massive ammunition shortage means that stocks are 50 percent below requirements and would barely last 20 days of intense fighting.

Overall the image of the government one year on is of an unreformed bureaucracy performing far below its potential, despite some improvements at the senior levels. Many ministers lack experience and authority and are topped off by a troika that exerts overall control – Modi and Jaitley plus Amit Shah, the BJP president, who packs a tough image personifying the “chilling” theme.

The responsibility for that rests with Modi, who was elected last year to change the way India is run. That of course was a totally unachievable goal in the short term, and Modi said he would need 10 years to “take India into the 21st century”.

He has not however in his first year shown how he is going to drive that change through the national government and the states, and generate an investment-friendly image. Maybe he needs to have fewer grandiose trips abroad in the four years he has left before the next election and personally focus on running India in India.

John Elliott is Asia Sentinel’s New Delhi correspondent. His blog, Riding the Elephant, can be found at the lower right-hand corner of Asia Sentinel’s home page