Narendra Modi, India’s Prime Minister, invoked the term “reform” over two dozen times in his Independence Day speech at Delhi’s Red Fort earlier this month. Despite his fervent declarations, the Modi Indians heard is not the reformer they once knew.
Traditionally, Modi uses this annual address to lay out his grand visions for India. Last year, he committed to transforming India into a developed economy by 2047. This year’s speech, which focused heavily on Viksit Bharat (“Developed India”), was a record 98 minutes long.
However, Modi’s Bharatiya Janata Party (BJP) lost its parliamentary majority in June for the first time in a decade. This setback has forced Modi to negotiate with allies and, at times, retract previously firm stances on legislation. Recently, the BJP has reversed its position on several bills that it would have previously pushed through parliament with confidence.
While Modi continues to promise “major reforms,” analysts suggest that he will face a tougher battle against a revitalized opposition led by Rahul Gandhi. His current term as Prime Minister appears diminished compared to his earlier terms.
More troubling for Modi, some leaders of the Rashtriya Swayamsevak Sangh (RSS), the Hindu nationalist organization backing the BJP, have made statements that suggest impatience with Modi’s performance since the election results were announced on June 4.
“He had ambitious plans, but the loss of 60 seats has put many of them on hold,” says Pramit Pal Chaudhuri, head of South Asia practice at Eurasia Group. “He now has to deal with coalition partners, the RSS, and a more energized opposition.”
Modi’s left-wing critics are relishing what they see as a weakening of a leader they describe as an authoritarian. Business leaders and analysts are also questioning what the changed political landscape means for a leader traditionally supportive of big business and with a bold third-term agenda.
During the election campaign, Modi had instructed his ministries to develop 100-day action plans to advance the BJP’s legislative and administrative agenda. These plans included creating “super-ministries” to streamline government operations. However, following the BJP’s unexpected loss of its majority, Modi has had to allocate government positions to junior coalition partners, rendering the mega-ministry plan unfeasible.
Recent developments highlight the constraints Modi faces. The government recently returned a broadcasting bill for further revision after backlash from civil society and concerns from business groups. Additionally, plans to overhaul the long-term capital gains tax were scrapped following protests from middle-class Indians. A proposed scheme for “lateral” entry into the civil service for non-bureaucrats was thwarted by the opposition led by Gandhi and some Modi allies, who criticized the lack of provisions for lower-caste individuals.
Both the broadcasting bill and the lateral entry scheme were seen as potential improvements for India’s governance and financial health. The business community had hoped for progress on policies such as privatization, land and labor market reforms, and a revamp of production-linked incentives aimed at attracting investment in sectors like mobile phones and microchips.
The future of Modi’s reform agenda may hinge on the results of upcoming state elections, notably in Maharashtra, one of India’s largest and wealthiest states, expected in November. Additionally, a by-election for 12 Rajya Sabha seats on September 3 could provide a minor boost or setback for the BJP in the 245-seat upper house.
Political experts argue that a weakened Modi in a coalition government is not unprecedented. P.V. Narasimha Rao, the Congress party prime minister elected in 1991 and credited with India’s significant economic reforms, also led a minority government. Even during times when the BJP had a majority, Modi struggled to advance ambitious reforms in the crucial farming sector.
“As far as economic policy is concerned, the specific government in power may not matter as much,” says Shumita Deveshwar, Chief India Economist at GlobalData. “India’s vibrant democracy and numerous stakeholders mean that reforms will always progress incrementally.”