Modi, no longer banned from U.S., will run India: Update

UPDATE: He wasn't allowed a U.S. visa, protests kept him from visiting Wharton even by satellite last year; but now that the party he heads has won a thumping majority in India's elections, Hindu-nationalist and pro-capitalist Narendra Modi has been invited to the White House by President Obama, Wall St Journal reports here.

The victory of Indian state leader Narendra Modi's party and coalition in India's national elections has been cheered by Indian investors in securities markets today. Will there be long-term benefit for India's political economy, its role in the world, trade and relations with the U.S.? Depends on the development in power of Modi's two identities:

1) Modi is the veteran pro-capitalist leader of India's fast-growing Gujarat state, which has shaken off the anti-corporate socialist animus of India's formerly-dominant Congress party (led by the Gandhi dynasty) to attract auto factories and other large industries, enriching the state's own big business owners and making them a powerful base of Modi's support.

2) Modi is also the candidate of India's Hindu nationalist movement, which is opposed by India's secular establishment and distrusted by many in its large Muslim minority and smaller Buddhist and Christian communities. As chief minister (corrected) in Gujarat, Modi was blamed for failing to stop or punish fatal anti-Muslim riots, and has been refused a visa to visit the U.S. by the State Department.

The pro-Modi view and a business agenda was articulated today by Rajiv Biswas, a chief economist for Lexington, Mass.- and Philadelphia-based IHS Global Insight: "BJP leader Narendra Modi has won a clear mandate to launch his policies to boost Indian economic growth. The BJP victory is likely to herald a revival in India's economic fortunes, with the potential to boost Indian GDP growth back over 8% by 2017...

"Crucial economic reform priorities for incoming PM Modi will be to release his first Budget, setting out a roadmap for fiscal reform by reducing the fiscal deficit to below 3% over the next three years, including by reducing costly subsidies for energy and food... The Budget also needs to deliver a boost to government investment in infrastructure in vital areas such as power, roads and ports, leveraging [government/private] partnerships. Another fiscal priority will be to implement the long-delayed [goods and services sales] tax... Modi will also need... to attract foreign and Indian corporate investment and accelerate the pace of implementation of new projects."

But when students invited Modi to speak via remote connection at Penn's Wharton School last fall, the outcry from some of Penn's own Indian faculty was enough to cancel the appearance -- leading to a withdrawal of support for the event by big Indian companies led by Modi supporters. My stories here and here.

Should the U.S. welcome Modi as a partner or resist him as a divisive figure? It's not unusual for rising middle classes to elect conservative and religious parties to national leadership as they rise in times of economic prosperity. See the Catholic Christian Democratic movement that ran most of Western Europe and parts of Latin America after World War II, and the faith-affiliated parties elected in Turkey (Islamic Welfare), Egypt (Muslim Brotherhood) and Mexico (the Catholic PAN) in recent years. In each case secular and minority voices argued whether the results would more likely feed extremism or end up moderating religious extremism.

Now that Modi is expected to head India's government, the U.S. is going to have to come to terms with his great popularity, his pro-industry record, the fears of India's minority and secular communities, and the potential that the two largest democracies, with many common friends and enemies, a large and increasing trade, and the development of an influential Indian-American community, can form a closer alliance.