India’s next prime minister confronts a listless economy

Prior to the global recession that began in the latter part of 2008, India had one of the fastest growing economies, with a vibrant middle class that was the envy of many industrialized nations.

But with the recovery from the downturn still sputtering in the United States and Europe, India is feeling the pinch.

About 13 million young people are entering the job market each year, but not enough jobs are being created in an economy that has slowed to below 5 percent in the last two years.

Food prices have shot up, as has unemployment.

It’s not surprising, therefore, that Narendra Modi, the next prime minister of the world’s largest democracy, ran on a platform of being the one political leader capable of waking the nation of 1.2 billion from its economic slumber.

Indians went to the polls by the millions in the week-long balloting and gave Modi and his Hindu nationalist Bharatiya Janata party a decisive victory.

In so doing, they swept the long-dominant Congress party from power. Indeed, the BJP wound up with 282 seats in the 543-seat lower house of Parliament, while the Congress party, which has ruled for all but a decade since the nation gained independence from the British in 1947, could manage just 44 seats. The rest went to a slew of minor parties.

The rejection of Congress, made popular by the Gandhi political dynasty, has given Modi and the BJP the mandate necessary to govern a country that has one foot in the present and the other in the past.

Widespread poverty, government corruption and an entrenched caste system that undermines across-the-board upward mobility are among the contributing factors in India’s slow recovery.

Modi, who is riding a wave of Hindu nationalism, has a balancing act that will not be easy to sustain. The country’s long history of religious tolerance is being put to the test, especially in the rural areas. The large Muslim population is under attack, while Christians are in harm’s way in villages controlled by Hindu extremists.

Modi, who has ruled the western state of Gujarat since 2001, has had to deal with allegations that he looked the other way amid communal riots in his home state in 2002 that killed 1,000 people, mostly Muslims.

Aware that the people of India are looking for jobs and development, the new prime minister, who has had a strained relationship with the United States because of the strife in the state of Gujarat, has promised to change tough labor laws that make foreign manufacturers reluctant to set up factories in that country.

Cost of doing business

But it isn’t only the laws on the books that have been a deterrent to the expansion of manufacturing, which makes up only 15 percent of India’s huge economy. The cost of doing business includes under-the-table payments to government officials all the way up the line to secure permits, licenses and other authoriziations.

If Modi is to succeed in putting the country back on the path to economic growth, he will have to take on the vast bureaucracy with its entrenched corruption.

It will be no easy task.

The new prime minister — he takes office next week — will also have to address some potentially explosive foreign policy issues, foremost of which is India’s long strained relationship with Pakistan. Both countries have nuclear weapons and have clashed several times over the disputed territory of Kashmir.

As for the United States, President Obama made it a point to express his gratitude to outgoing Prime Minister Manmohan Singh for his “critical role in transforming and deepening the U.S.-India strategic partnership and our cooperation on global challenges.” As for Modi, the president said he “looked forward to further expanding the strong relationship between the United States and India.”