Opinion

Ian Bremmer

How far can Modi take India — and how fast?

Ian Bremmer
May 20, 2014 22:38 UTC

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As a result of last week’s parliamentary election in India, three of the world’s strongest and most transformational leaders are now in Asia: Japan’s Shinzo Abe, China’s Xi Jinping, and India’s 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 world’s largest-ever democratic election in a decisive fashion, with his party converting 31 percent of the national vote into 52 percent of the seats in parliament — the first absolute majority in the lower house of parliament since 1984. Meanwhile, the reigning National Congress Party — which has ruled India nearly without a break since its independence from Britain — turned in its worst-ever performance, losing three-quarters of its seats.

Why do Indian voters find Modi so appealing — or, 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, Gujarat’s per capita income outpaced the national average, rising almost fourfold. Modi put his money where his mottos were — “less government and more governance” and “no red tape, only red carpet” —  paring back suffocating state inefficiencies to unlock business potential and competitiveness. This is precisely what the Congress party 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 America’s 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 decentralized, and a sweeping win won’t change that. We won’t see a quick recovery in India’s legislative output, which last year was at its least productive levels in history. That’s because the houses of parliament remain split, with the Congress party and its allies maintaining a plurality of seats in India’s upper house, the Rajya Sabha. Congress holds 12 of India’s 28 (soon to be 29) states, which in turn elect the upper house members; Modi’s BJP has only five.

The next round of elections, where only a third of the chamber’s seats will be in play, doesn’t happen until 2016. And just as the BJP has derailed the Congress party agenda in an opposition role over the last decade, now we’ll 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 labor, energy and agriculture, structural reforms that require legislative fixes will be hard to implement any time soon.

Emerging, maturing, protesting markets

Ian Bremmer
Jun 27, 2013 19:28 UTC

At the beginning of this year, Eurasia Group, the political risk firm I lead, released its top 10 risks of 2013. We forgot to put Pepsi-guzzling whistleblowers on the list, but we did give our top slot to increasing turmoil in “emerging markets.” In a global economy that has become more reliant on countries whose economies are vulnerable to political shocks, emerging markets are our new economic fulcrums. What is causing this growing uncertainty in emerging markets? How much stress can they take without upsetting the balance for everyone else.

The protests in countries like Brazil and Turkey are not Arab Spring-style uprisings: they’re the anger and frustration of newly empowered middle and lower-middle classes, the same consumers who were the catalysts and beneficiaries of this growth in the first place. In emerging markets, politics have at least as big an impact on market outcomes as the underlying economics — that’s why these kinds of protests can strike seemingly out of the blue, and bring business-as-usual to a halt. Compare the impact of protests (and leaders’ responses) in Brazil and Turkey to the Occupy Wall Street movement. In a developed country like the United States, the political system is consolidated in a manner that forces fringe movements to choose one of two paths: go mainstream or lose steam. In emerging markets that have experienced dramatic and rapid changes, governments can’t keep up with citizens’ evolving demands. Protests are far more likely to swell, with severe economic ramifications.

Why are the protests in Turkey and Brazil happening? There are immediate triggers. In Brazil, it was a small raise in bus fares; in Turkey, it was the imminent demolition of sycamore trees in Gezi Park. But these triggers are the narrow manifestations of larger, systemic grievances playing out on a country level, and trends in the global economy at large. So what are the larger factors that make even model emerging markets more ripe for unrest?

2013′s top 10 political risks

Ian Bremmer
Jan 8, 2013 16:18 UTC

It was a close call at times, but we made it through 2012. Now we’re set to encounter a new set of risks ‑ but not in the world’s advanced industrialized democracies, which are much more resilient than feared. This year, with the global recession on the wane, attention shifts back to emerging markets, the economies that are usually the ones that pose the most political risk. You can read the whole report from my political risk firm, Eurasia Group, here, but an executive summary of this year’s top 10 risks, in video and text, is below:

10.) South Africa: Africa overall looks like it will continue its recent growth. But South Africa, one of the continent’s most complex and important economies, is floundering. Its dominant political party, the African National Congress, is resorting to populism to maintain its base among the urban and rural poor. That means more state intervention, more labor unrest and more assertive unions. We’re not predicting a fundamental political crisis, but the country is moving along a path that offers little reason for optimism.

9.) India: We’ve all read the predictions that India is poised to become the world’s next infinite-growth country. Not so fast. Despite initial optimism, the 2009 election hasn’t freed Prime Minister Manmohan Singh to reform the country as anticipated, with the tough choices continually being kicked to the next parliamentary session. (Americans should find this familiar.) Corruption continues to reign, and as we’ve seen in the rape protests of the past few weeks, there are fundamental cultural issues that India has yet to resolve. As general elections draw closer, the government’s ability to execute robust economic policies will decline even further.

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