Will nation's watchman be good for investors?

What Donald Trump would give to have rallies like Narendra Modi’s: the adulation, the machismo, the beautiful bigness of it all. Indian democracy makes American democracy seem quaint, puny and rather un-great.

The Indian prime minister’s event in Bhadohi, one of three on a recent May day in the northern state of Uttar Pradesh, has started late and the heat is sweltering. But there are still more than 50,000 people in a field, most of them men. The event surges with testosterone: part open-air concert, part cup final (everyone is wearing saffron, like a stadium of Dutch soccer fans), and part religious ceremony.

“God has sent clouds to protect us,” announces one warm-up act. “Do not eat or drink on polling day until you have pressed the lotus button,” the faithful are told, referring to the symbol of the ruling Bharatiya Janata Party that will appear on ballots. Another speaker shifts straight to the point: “We will destroy Pakistan.” The crowd shouts back: “Long live Mother India.”

And everywhere there is Narendra Modi. Modi masks, Modi flags, Modi songs, mostly focusing on him as India’s chowkidar or watchman. Eventually he arrives, like a rock star, by helicopter. The crowd roars at the first glimpse of him. Then he is on the stage, telling them that he has made India great again. “Don’t you feel proud that countries respect India again?” he asks. “Don’t you feel proud that we carried out surgical strikes on Pakistan? Did you like it when we struck down a satellite in space? Did you feel like you did it? That is the power of India.” He pauses. “And what is the reason for this?” he asks.

“Modi,” the crowd yells back. “No. It is because of you and your support,” he responds.

There is a brief moment of (relative) personal impotence when the Watchman, like Mick Jagger at Altamont, pleads with his devotees, for their own safety, not to push toward the stage. But that is the only sign of vulnerability. The real weakness resides with those who stand in Modi’s way, many of whom are dismissed with Trumpian nicknames, starting with “the Dynast,” which is what Modi calls Rahul Gandhi, the leader of the opposition Congress Party.

Yet amid all this machismo, the subject about which you would expect the Watchman to be both most boastful and most watchful is largely absent: the economy. India is now the world’s fastest growing big economy. But Modi makes only a few references to Bhadohi’s carpet industry, one of the largest in South Asia. This may be because he knows the economy is still not growing quite fast enough to create the 1 million jobs a month India’s growing population needs; or it may be because he wants to concentrate his energies elsewhere in his next term.

Either of those explanations should scare the businesspeople and foreign investors who trust Modi. This year, overseas investors have bought about $10 billion of Indian equities, the most across emerging Asia after China, on optimism that the Watchman will retain power, without bothering to find out much about what he might do.

In fact, India’s long, rolling election, whose result will finally be announced on May 23, deserves far more attention than the West is giving it. Consider this: Even if Modi loses, he will still probably win 50 million more votes (the BJP got about 171 million votes in 2014) than U.S. presidential candidates Donald Trump and Hillary Clinton garnered together in 2016. He will also, paradoxically, represent one of the world’s three largest Muslim populations (even if almost none of them vote for him). That this election is something of a battle for India’s soul — the inclusive, chaotic tradition that Congress and Gandhi represent versus Modi’s tougher Hindu nationalism — only adds to its importance.

And India matters — not just as the world’s other great engine of economic growth but also as the other rising power in Asia, with thousands of soldiers along its contested borders with China and Pakistan. Amid all the words printed and earnest cogitation in the West about the nationalist ambitions of Xi Jinping’s China, the Watchman has been given a pass. And his influence will only grow. According to the United Nations, India will overtake China as the world’s most populous country by 2024 — the year that could also mark the end of Modi’s second term.

It is worth acknowledging both the good things Modi has done and the bad things he has not done since he came to power in 2014. Back then, he swept aside a stale, corrupt Congress-led government on the promise of economic reform and a record as an efficient, business-friendly chief minister in the state of Gujarat. Indian voters, perhaps correctly, ignored critics, including this writer, who worried about Modi’s divisiveness, symbolized by a 2002 riot in Gujarat that left 1,000 Muslims dead.

Since then, Modi has run a much cleaner government than Congress did. He has ushered in a series of economic reforms, notably a simplification of its tax system. India’s infrastructure has improved: There are new roads and, crucially, many more toilets in villages. He has also been less divisive than many feared. True, 36 Muslims have been lynched (mainly for allegedly consuming beef or transporting cattle); the press has been bullied, with anti-Modi editors removed; and Pakistan remains vilified. But in the gruesome arithmetic of Indian sectarianism, none of these things seem especially exceptional.

However, elections are about the future not the past — and here Modi’s shift away from the economy seems part of a trend. Six of his nine main economic reforms were launched in the first half of his five-year reign; they have slowed in recent years. The BJP manifesto is short on new economic ideas while Congress’s is unusually dynamic, with some spotting the hand of Raghuram Rajan, the reformist former head of the central bank. The BJP campaign, like Modi’s speech, has focused on nationalism. The party is even running a candidate who is under indictment on terrorism charges relating to a 2008 bomb blast in a Muslim area that killed six people.

Modi’s supporters have their answers ready. Yes, he is stirring up Islamophobia, again — but what politician doesn’t? He doesn’t want to make a lot of promises about economic reform, because this time he will probably govern in a coalition with another party. Eventually, he will further simplify the national sales tax and push ahead with land acquisition reform. Despite what he says, the Watchman’s focus is really China, not Pakistan.

All this leaves two questions. The first is: Will it work at the polls? Congress is certainly a more potent force than last time. Tactically, it has formed local alliances that should hurt Modi. (For instance, in 2014 the BJP swept the board in Uttar Pradesh, winning almost all 80 seats because the anti-Modi vote was split; this time around Congress is informally supporting local parties.) Rahul Gandhi has been joined on the campaign trail by his sister, Priyanka, who looks like their all-conquering grandmother Indira (any aspiring politician should watch a video where Priyanka calmly picks up a cobra). Congress’s manifesto shrewdly includes a basic income for the poor of 72,000 rupees (about $1,000) a year.

What’s more, Congress’s main pitch is that a second Modi term would be too extreme for a country that wants to remain secular and united. “India is like an ocean,” Gandhi argues. “It doesn't like big waves.” And there is some truth to this. The previous BJP government served only one full term, and Gandhi’s own father, Rajiv, was ejected in 1989 when he turned authoritarian. Plus, some businesspeople who backed Modi last time around privately think that a Congress alliance, with Rajan as finance minister or even prime minister, would be best.

The fact that these views are private reflects not just their fear of Modi, but also their assumption that he will win. The BJP has the superior organization, and it is outspending Congress by a large margin. It also has the more energized base. The best guess is that Modi will be back, but possibly forced to share power in a coalition with other nationalists.

At least this seems to be what markets and investors are hoping for: better the devil you know, goes the argument. But do the traders in New York and London really know Narendra Modi?

This leads to the second question: What would a second Modi term look like? It is likely to be more divisive. Across India, minorities are frightened — not just Muslims but Christians. Other liberties are at risk, too. If you want a gauge of India’s press freedom you need only open a newspaper: The BJP has banned maps that show where the actual border is; you can only show where India thinks it should be. That is fake geography of a sort that even autocracies like China spurn.

And there remains the economy. Under Modi, India has begun to catch up to China, but it is still years behind, in terms of jobs, education, health and, increasingly, the condition of the environment. Beijing is moving away from coal much quicker than Delhi. And there is the desperate demand of those millions flooding into the workforce. One study put the unemployment rate at a 45-year high. That is a little unfair because it does not include the millions of poor Indians who have livelihoods but not formal employment. Yet the pressure to create jobs is there, and so is the pressure to improve basic education — absenteeism is still rampant in state schools.

As the saffron-clad young men stream out of the dusty field in Bhadohi, some of them still chanting the Watchman’s name and yelling for Pakistan’s humiliation, the thought remains that they need something to do in between rallies. That means much more dynamic economic reform, not less. At the very least, foreigners should be praying that Modi picks up where he started in 2014, not where he left off in 2019.