A BJP leader felicitates Prime Minister Narendra Modi during his election campaign rally for assembly election in Lunawada town of Panchmahal district of Gujarat on Saturday. (Source: PTI) 

In Gujarat, Modi's Government Faces a Wake-Up Call

(Bloomberg View) -- This weekend, residents of the western Indian state of Gujarat began voting in an election whose outcome should've been a foregone conclusion. Prime Minister Narendra Modi served for 12 years as Gujarat's chief minister and remains a hugely popular figure there. His political party, the Bharatiya Janata Party, has ruled the state uninterrupted for more than two decades, dominating all forms of political, cultural and even social life. The opposition Congress is derided there as a "party of Muslims"; Hindu nationalism in Gujarat is even more virulent than in the rest of the country, as the world discovered during the 2002 riots that remain the biggest blot on Modi's record.

Yet, somehow Congress, with practically no organization on the ground and against the finely-oiled political machine that is Modi's BJP, has emerged as a contender in the last state in which it should have been competitive. The best-quality survey released last week had the two parties in a dead heat in terms of vote-share.

Following the BJP's amazing sweep of India's largest state, Uttar Pradesh, earlier this year, it was assumed that the opposition to Modi was down and out for years to come. So how has a revolt emerged in Modi's own state, the home of the "Gujarat model" of development he promised to implement across the country?

Perhaps the answer begins with that question. The "Gujarat model" was always more hype than reality. While nobody can question Gujarat's open-for-business ethos, that had long predated Modi's term as chief minister. Very little actual policy innovation took place during Modi's tenure; he mainly did well at inviting large companies to set up shop in the state.

Many of them grew swiftly, adding large numbers to the state's GDP and to their owners' bank balances. But jobs and social welfare grew nowhere near as fast. As employment stagnated, many influential caste groups -- one in particular, the Patidars -- realized that they were being left behind. They poured into the streets in protest a few years ago and almost spontaneously found a leader, an angry 24-year-old named Hardik Patel.

For their part, Dalits -- those castes identified by India's Constitution as deserving of special protection and consideration because of centuries of oppression by "upper" castes -- were infuriated by public lynchings carried out by newly assertive Hindu nationalists. They found their own leader as well, as did various other groups that had been ignored or poorly served by the BJP.

Congress swooped in, collected these disparate groups, gave them an umbrella and then released them to campaign against Modi. Congress leader Rahul Gandhi himself largely stuck to a script that focused on the shortage of jobs and Modi's fondness for large industry at the cost of small business. He never attacked Modi himself; Gujarat's favorite son is too dangerous to touch. (In fact, when an old Gandhi family loyalist spoke slightingly of the prime minister last week, Rahul Gandhi condemned him on Twitter and the party suspended him post-haste.)

But the other, younger leaders suffered under no such constraints. Hardik Patel in particular has attacked the prime minister at every turn. Various dirty tricks -- such as a tawdry leaked recording of Patel apparently in a hotel room with a woman -- have not worked to discredit him; if anything, they've backfired on the BJP, which looks like a party of out-of-touch sexagenarians.

Rhetorically, roles have reversed since Modi swept to power in 2014. The prime minister now runs a negative campaign, mocking the Gandhis at every turn. Sensing that Modi's credibility on the economy has been dented, his party doesn't mention the "Gujarat model" at all; instead, the big talking point for the BJP last month was whether or not Rahul Gandhi was a believing Hindu. It is Congress, meanwhile, that's talking about jobs, development and the ease of operation for small business.

No one expects Congress to win the state. But, like the prospect of the Democrats winning a Senate seat in blood-red Alabama, the fact that the election is considered competitive is itself remarkable. The big question is this: If Gujarat, home of the famous model, has produced so many dissenters, then what will happen between now and the next general elections in 2019, given how few jobs have been produced under Modi so far?

The danger is that, given the Congress counterattack, Modi will abandon his attempts at attracting investment and easing rules for business and go on the defensive -- fighting elections instead on questions of nationalism and Hindu revivalism. That would be a disaster. Yes, small and medium enterprises need more attention. But big factories in labor-intensive sectors, streamlined business regulations and foreign investment are essential to create jobs going forward. Modi and his government need to keep focusing on the policies that create jobs -- and on the politics that support such policies.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mihir Sharma is a Bloomberg View columnist. He was a columnist for the Indian Express and the Business Standard, and he is the author of “Restart: The Last Chance for the Indian Economy.”

To contact the author of this story: Mihir Sharma at m.s.sharma@gmail.com.

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