Purse is mightier than the pen

In the battle for power in Delhi, Modi appeared as a Messiah to big business, both Indian and foreign. They were convinced that Modi as the Prime Minister would bring it good fortune. They felt mesmerised by Modi’s dynamism and his generous offers of incentives and parcels of land.

Indian business leaders generally lack a long-term vision and are thrilled by the promise of short-term gains. They paid no heed to the signs of coming confrontation and strife in Modi’s election campaigns in Gujarat and then in different parts of India. But his language, his gestures and the content of speeches were all signs that he would bring confrontation where there is harmony.

Perhaps the captains of industry thought that Modi will keep the nation on a tight leash and protect them from labour unions, environmental laws, bureaucratic delays and corruption. So they felt less bothered about Modi’s verbal violence or the provocative statements by his ministers or his party’s MP's. Social harmony was not their concern. They were seduced by the prospects of short-term gains. The poll-eve propaganda to pitch one community against the other had no impact on the share prices. The markets celebrated the emergence of Modi as the Prime Minister.

The Prime Minister-led BJP failure has created shock waves in the domestic financial markets. Many investment bankers and brokerage firms have developed doubts about the ability of the Modi Government to go forward with the economic reforms. An economic daily said that the equity strategists at leading brokerages, some of whom donned the mantle of Prime Minister Narendra Modi’s fan club till very recently, are now singing a very different tune.

This powerful community operating from New York and London fears that the Indian Government might hesitate to increase the pace of economic reforms, in the face of a growing demand for pro-poor policies.

The Government has been confronted by a legislative logjam in the Lower House of Parliament and in the Upper House the BJP and its allies do not have a majority. In Parliament, the Opposition members are paying back the BJP in its own coin. During the Manmohan Singh Government the BJP members did not allow the House to function for two years. Their top leaders then justified their obstructionist behaviour as a legitimate democratic right.

The Modi Government has deployed its ministers to reassure the investment bankers of the world that the pace of economic reforms would not be slowed down. The sentiments of poets and painters can be trivialised. “Business sentiments” have to be taken seriously. The nerves of the minorities need not be calmed, but the markets must be reassured.

The problem is that at this stage the assurances to the markets lack credibility. Some of the “economic reforms” are not approved by the Opposition in Parliament. What is more serious, these are disapproved by BJP’s parent body RSS as well as the labour wing of the ruling party. The Prime Minister of India thus faces a challenge.