India Election: What 10 Years of Modi Has Meant for the Economy

As Narendra Modi was storming to victory in the election of 2014, he said that “acchhe din aane waale hain” — good times are coming.

Now as Mr. Modi stands set to secure another term as prime minister in elections starting on April 19, the value of India’s stock market has grown threefold since he first took office. India’s economy is almost twice as big as it was.

Stocks have risen so much because the number of Indians with enough wealth and appetite for investment risk has jumped — to nearly 5 percent of the population from barely 2 percent.

But the economic gains have been widely unequal. The bulk of India’s growth depends on those at the top of the income ladder, including a coterie of huge and tightly controlled businesses.

Ninety percent of India’s population of 1.4 billion is estimated to subsist on less than $3,500 a year. Yet in the poorest rural districts, life has been made more bearable by welfare programs that have expanded under Mr. Modi. Many of the benefits are solid and visible: sacks of free grain, toilets, gas cylinders and housing materials. Purely commercial developments have transformed village life: LED lights, cheap smartphones and nearly free mobile data have changed the nature of idle time.

While America was experiencing a “vibecession,” feeling glum despite upbeat economic news, India has been doing the opposite. Here many of the signals are mixed — but the vibes are fantastic. International surveys show India’s consumers have become the most upbeat anywhere.

Foreigners are also feeling good about the Modi economy. Banks like Morgan Stanley and JPMorgan Chase are rushing to upgrade India’s weighting in their global stock and bond indexes. Chris Wood, one of the best-regarded market strategists in Asia, warned that if Mr. Modi were not re-elected this year, Indian markets could crash by 25 percent or more.

A strange thing about the spirit of optimism about the Modi economy is that India’s rates of growth over the past 10 years have been very similar to those of the decade that preceded it, under a government that Mr. Modi often blames for wrecking the country.

As real as it is, the Indian economic success story is also an attribute of what could be the singular characteristic of Mr. Modi’s years in the top job: his ability to control all levers of power, with showmanship as the first priority.

Mr. Modi’s face is everywhere, perhaps more present in New Delhi than that of any democratically elected leader in any other capital. In the run-up to the Group of 20 summit last September, his slogans took credit for virtually every positive development that could be found in this inexorably emerging economy.

In the bullish climate surrounding the Indian economy, even the pessimists are optimistic. While official statistics anticipate growth of 7.3 percent in the current fiscal year, most finance professionals in Mumbai peg the figure at 6 to 6.5 percent. The lowest estimate touches 4.5 percent, which would still beat the United States and possibly China.

Expressing even mild skepticism is avoided. Economists who depend on government work must be careful not to speak frankly. Economists who do not work with the government are becoming scarce, as independent think tanks are raided and shuttered.

Message control is much more pronounced than it was under Mr. Modi’s predecessor, the award-winning economist Manmohan Singh. India became known as a “flailing state” during Mr. Singh’s time in office, even with growth occasionally hitting the 10 percent mark.

Mr. Modi has been busy remaking the institutions of Indian governance. Political competition has been all but eliminated at the national level, and he has exploited animosity against the country’s Muslim minority of 200 million.

Mr. Modi has also used state power to make things happen in strictly economic affairs, mostly for better though sometimes for worse. Infrastructure is on a tear. There is some overbuilding, but the fact that building gets done is a welcome relief. Welfare programs have become more responsive.

India — especially in banking and business transactions — has made a widespread digital leap. The push began during the previous management of Mr. Singh, but Mr. Modi has run with it. The “India Stack,” a suite of software platforms that runs on the base of Aadhaar, a biometric identification system, means that Indians now have access to faster and cheaper peer-to-peer transactions than Americans.

Taxes have been overhauled. India has driven more of the economy into the formal sector, for instance by enacting a Goods and Services Tax like Europe’s value-added tax, allowing more revenue to be extracted from more people and businesses. That has freed up money for public spending and, by lowering corporate tax rates, private financing.

One minus on the digitization ledger came on Nov. 8, 2016, when at 8 p.m. Mr. Modi abruptly declared that all large currency notes were suddenly worthless. That was supposed to deprive criminals of “black money.” Instead, it crippled economic activity.

There are other ways the Indian government’s power to act decisively and usually without check has created distortions and inequalities. The biggest companies have profited wildly. Of the $1.4 trillion in wealth created by the most prestigious stock index from 2012 to 2022, 80 percent went to 20 companies, Marcellus Investment Managers in Mumbai estimated in 2022. Those companies are the ones that can talk directly to the government.

No one better illustrates the concentration of corporate wealth, and the risks associated with it, than Gautam Adani. Outside India, few knew his name until 2022, when he suddenly appeared on lists as the world’s second-richest person, after Elon Musk.

The flagship stock of Mr. Adani’s conglomerate nearly doubled in the year after Mr. Modi was elected and grew eight times larger after he was re-elected in 2019. The Adani Group became, in effect, a logistics arm of the government, building up ports, highways, bridges and solar farms at speeds never before seen.

Then last year Mr. Adani’s empire was accused of fraud by a New York short-seller, costing Mr. Adani $150 billion on paper. Though Mr. Adani, who denied the claims, has recouped most of the money he lost, the episode exposed a risk in the Modi strategy of allowing the few at the tippy top to amass enormous clout.

Companies aside, on an individual level, India’s recent growth has been uncomfortably unequal. Having the world’s biggest population explains why so many foreign investors are attracted to its consumer market. Most Indians are rural, and 75 percent of them are by most measures poor, qualifying for free food rations intended to prevent malnutrition. Though that warrants some caution, it leaves room for growth.

Sales of luxury goods have been booming, especially since the pandemic, generating yearslong waiting lists for vehicles like the Mercedes G 63. Sales of motorbikes and scooters, which transport far more Indians than all the four-wheeled cars combined, have been stagnant.

The most painful aspect of the economy is the jobs situation. Officially about 7 percent of Indians are unemployed. Vastly more are underemployed. In the past month, Indians desperate to find better incomes abroad have died trying: crossing the United States’ borders, fighting as underequipped mercenaries for Russia in Ukraine and filling positions left empty by Palestinians forced to stop working in Israel.

And yet, the ascent of India in the world economy seems preordained. It has moved ahead of Britain to become the world’s fifth-largest economy, and it is expected to surpass Japan and Germany to become the world’s third largest within the next few years.

More multinational businesses are expected to flock to India, creating opportunities for Indians. Only a small proportion of consumers can expect to enjoy living standards taken for granted in the United States, but they are becoming more numerous by the year, and can now be found even in small cities.

Red tape remains to impede businesses without connections to the top of government. But the direction of movement is promising: Projects that used to require two years of permission-seeking can now be completed in 15 days.

Along with the acchhe din he promised in 2014, Mr. Modi pledged “minimum government, maximum governance,” sounding like a 1980s America free marketeer. In practice, his economic approach has not been defined by theory or ideology. He has thrown everything against the wall to see what sticks. He has thrown persistently, and with force. When economists talk about India, they have stopped talking about the “flailing state.”