A top exec’s view of Modi’s H-I-N-D-U political buffet

General Elections in India are an absolute miracle. With close to 1 billion Voters, and 15 million polling staff it is the largest democratic exercise on the planet. For curious emerging markets watchers like me, these are incredible crucible moments to observe the evolution of India’s psyche and its maturing conventional wisdom. During past weeks, I had the privilege to cover multiple parts of the country including the highly rural agrarian, and tribal landscape with India’s foremost editors. Three ‘Ahaa’ observations from our travels below: 

1st: Urban Middle Class & Business Elites are in Deep Romance with PM Modi

We found that Mr. Modi's pitch is a buffet offering which can be summarized as the ‘H-I-N-D-U’ framework. This helps the PM to capture the imagination of a large majority of Indian voters by providing them various options to find identity with his leadership.

‘H - Hindutva’ includes delivering a Grand Ram Mandir in Ayodhya after 500 Years of struggle, appointing a ‘yogi’ as the Chief Minister for India’s most populous state, and projecting to restore the unapologetic Hindu Pride.

Under the ‘I-Infrastructure’ theme the government continues to lead the spending (Rs 10 lakh crore in 2024), and PM Modi draws attention to the fact that unlike prior regimes, his government has overseen an end-to-end completion of large infrastructure initiatives. People across spectrums credit the governments infra push and describe the experience of using new highways, airport terminals with a sense of charm.

With ‘N – Nationalism’, the government pronounces to have established India as a dominant geo-political force. It scores credit for successfully hosting the G20 summit and has been able to protect its interests (oil imports, rescue of students) amidst the Russian invasion of Ukraine. I found that foreign policy, and diplomacy has found a brand-new audience amongst the urban middle class who reflect belief in ‘India’s Increasing Global Stature’, with a feeling of novel pride & honor.

The ‘Delivery of Welfare’ pitch follows the headline of being able to deliver last mile benefits across the nation. The government cites of building & delivering over 40 million low-cost houses, providing 50 million LPG cooking cylinders, and over $9 billion of direct cash transfers to over 1.5 million families. I found that the people embrace government’s ability to ‘make the things happen’, are highly appreciative of the ‘direct transfer’ model, as well of the governments push on digital payments infrastructure.

With ‘U: Un-corruptible’ the Prime minister projects an image of a hermit striving for the national mission, of having no friends and family to plumb kick-backs to. His regime also draws a stark contrast to his predecessors where ministers were directly accused of corruption. While the PM has been accused of favoring some (the Adani-Ambani remark); I found that most people do not translate this alleged favoritism into a direct impact to their daily lives; causing limited drag on PM’s reputation

Owing to the ‘H-I-N-D-U’ framework, 80% of university educated urban audience indicate that they favor Mr. Modi’s strong leadership style and cite it as necessary for India’s development. His push on infrastructure development, coupled with rollout of GST (Goods & Services tax) helps to unify the otherwise complex Indian landscape as a common market. And the focus on improving ease of doing business, coupled with improved access to capital, together fosters confidence in the business community.

2nd: Rural Poor are the Powerhouse of Indian Democracy

A large portion of Indian population (64%) is based in rural areas and tends to consistently measure the governments performance on “how better off I am” basis. Although only under 9% of adults in rural areas have university education, their intelligence to vote for real benefits over emotive narratives seems dramatically higher. For instance, travelling through Chhattisgarh – a region where 80% of population is rural, and is primarily engaged in paddy (rice) production. 

We found that a popular Congress led state government who invested heavily in building & instilling a regional Chhattisgarhi Identity pride; was recently overturned (in 2023) in favor of an underdog BJP alternative. The BJP which lacked strong leadership in the state, promised to deliver tangible benefits with highest ever paddy crop procurement prices, and a direct monthly handout (Rs.1000) for women. I found that while the rural poor population are vocal in sharing their grievances, they tend to be significantly more private or secretive in expressing their political inclinations.

They manifest a strong compass to determine when corruption or inflation is too much, and at what point they need to prioritize local issues over national narratives. This is a stark contrast with their urban middle-class counterparts who vocally articulate political opinions and are strongly tied with national-emotional narratives. BJP’s vote share has been significantly lower in rural areas (6% lower) vs urban, and it currently rules over only 13 out of 28 Indian states (down from 21 in 2018) – demonstrative of the rural poor population’s conscious voting patterns.

3rd: Youth Unemployment & Economic Divide are India’s Biggest Achilles Heels

We met hundreds of unemployed youths devoting years to secure a government sector job. From 2014 to 2022, over 220 million filed applications with the central government alone. Of those, just 720,000 or less than third of 1 % were successful. We met Amit, a 27-year-old law graduate who has spent years to crack the civil service; and is now awaiting an appointment letter since past three years in despair. His neighbor Swati, a Commerce Graduate has had 4 failed attempts, and believes she might have to take up a private accounting job paying $110 per month.

About 54 % of Indians in the 20-29 age group are currently unemployed due to stagnant manufacturing growth, and a lack of skills for the services sector. “I can’t find fitting hires for my design and marketing team; while I am often required to recruit graduates for my blue-collar labor roles,” said Harish, setting up a fabrication factory in Uttar Pradesh. We also met hordes of farmers, like Ajay Thakur from Amethi, operate on meager annual income of $1500 (family of 5) with limited irrigation and face challenges in achieving economies of scale. About 60 % of country’s working population is engaged in agriculture, in turn contributing only 17-20 % to GDP, implying paltry nominal incomes.

The Prime Minister, usually well in tune with public sentiment, has appeared reluctant on these issues. The National Skill Development initiatives, as well as manufacturing-focused policies like PLI and ‘Make in India’ have had limited success. He was also unsuccessful in building consensus for necessary agricultural and land reforms since 2014.

While global enthusiasm touts India story as an economic bright spot, travels through its populous northern states reveal a grim reality. Uttar Pradesh, with over 240 million people, has a GDP per capita of $1000 (at par with Tonga). Only about 10 % of India’s 900 million-strong workforce is projected to earn more than $10,000 annually by 2030, which limits opportunities for high domestic consumption. Currently, Government-subsidized grain procurement and ration schemes ensure enough food for everyone, but over 10% of national budget is tied in these.

To achieve the dream of ‘Viksit Bharat’ (developed India) with $14K GDP per capita by 2047 requires finding ways to free a significant of its population from low wage agriculture, free-up government capital allocation from grain subsidies, and enable skill development to elevate the employability of its youth.