Bloomberg editorial: Weakened Modi could make India stronger

India’s Prime Minister Modi faces unexpected political challenges in his third term, as voters reject BJP’s dominance. Economic concerns trumped divisive rhetoric, signalling a desire for jobs and development. Despite democratic setbacks, India’s resilient institutions prevailed. A coalition government may spur reforms for job creation, fostering a stronger, more reliable global partner.

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By The Editors

 Entering his third term leading the world’s biggest democracy, Prime Minister Narendra Modi is weaker than he expected to be. India is the stronger for it — and will be stronger still if he heeds the message voters are sending.

Modi swept into power in 2014 as the head of the first single-party majority India had seen in a quarter-century. His Bharatiya Janata Party increased its dominance five years later and thought it would do so again this year. Instead, voters delivered a stinging rebuke: The BJP lost 63 seats and its majority. The government Modi heads is now a true coalition. To stay in power, he must cater to other members, including two fickle regional powerbrokers.

Voters turned against the BJP for different reasons in different parts of the country. The ruling party performed worst where it amped up divisive rhetoric, demonized Muslims and looked forward to the constitutional changes a supermajority would allow it to make. Hard-knuckled attempts to co-opt or sideline members of the opposition backfired. Voters were more concerned about inflation, unemployment and inequality. Modi, son of a tea seller, claims a connection to the common Indian. Millions have just told him what they want: jobs, development, prospects for a better future for their families and nation.

The result was shocking given how much the space for dissent and opposition in India had shrunk. Ahead of the vote, a top figure in the opposition coalition was arrested and the bank accounts of its leading party were frozen. Most of the press has been slavishly uncritical. Courts have been accused of bias. The otherwise well-regarded markets regulator has struggled with politically sensitive investigations. Even the selection of new election commissioners raised eyebrows. Freedom House rates India as only “partly free”; V-Dem calls it an “electoral autocracy.”

Geopolitical partners and global investors have long valued India for the independence of its institutions — including its judiciary, news media, parliament and regulators. Faith in India’s democracy reassured companies that the rules for doing business are clear, not peremptory; that information is accessible and trustworthy; and that disputes will be resolved fairly and transparently. Lately, such confidence had been tested. The election vindicated it anew — and if the new government draws the right lessons from the BJP’s setback, India will be stronger.

What’s needed are reforms to promote jobs: lower tariffs to promote trade, investments in health and education, a less interventionist agricultural policy, and more liberal land and labor laws. A parliamentary majority wouldn’t have guaranteed such changes; India’s states preside over important parts of the reform agenda. In fact, being forced to strike bargains with coalition partners, deal with closer scrutiny in the parliament and the press, and compromise with those state governments could be helpful. The reforms that emerge will command wider acceptance and be more durable.

The US ought to welcome a return to political competition in India. The country’s democratic backsliding had drawn little overt criticism from Washington, but it threatened the shared values that are the foundation of their friendship. An India more focused on educating its workers, raising productivity and joining global value chains will be a more capable and trustworthy partner.

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