Who wouldn't love the Indian story now? Modi's bigger-than-expected win means he will have the majority, at least in the lower house of Parliament, to accomplish what his predecessor could only dream of. The incoming leader has the power to remake the Indian economy, and the betting is that he will do so. Already, he is being called "SuperModi" and the Margaret Thatcher of India. Indians speak of the "Modi wave."
Modi himself is feeding the extraordinary hype. He is not only talking about "shining India," a nod to a past BJP slogan, but has also proclaimed our era to be "India's century."
This century is already supposed to belong to China, but that pronouncement is not heard as often now. China's economy, the motor of its rise, is sputtering and on the edge of an historic failure. At the same time, Beijing is intensifying its discriminatory investigations of multinationals. Last week, for instance, authorities accused Mark Reilly, the former head of GlaxoSmithKline's China unit, of bribery while largely letting domestic corporate malefactors operate unimpeded.
In a deteriorating economy, Beijing's blame-the-outlanders policy may be good politics, but it is very bad economics, especially in the long run. China, unfortunately, is unlearning the wisdom of the Chinese leader who launched reforms at the end of the 1970s, Deng Xiaoping.
Manmohan Singh, once called India's Deng, has now left office in failure. Among his shortcomings, he was not able to open up his economy. At the moment, the environment for foreign companies in China is still way better than that in the subcontinent. Yet it is trend lines that are important for investment flows. In China, things are getting worse for foreigners, and in India they are going to get a whole lot better. A central tenet of Modinomics, as it is now called, is that large businesses create jobs, prosperity, and a better society.
Just ask Walmart. Modi ran on a platform affirming existing rules that keep foreign companies out of India's retail market, a sector in desperate need of modernization, but the plank is largely thought to be a bow to political expediency. In any event, it did not deter the world's largest retailer from upping its involvement in India. In anticipation of a Modi win, the Bentonville, Arkansas-based behemoth last month announced plans to open 50 new wholesale stores there as well as grow its e-commerce operations. You can be sure that Walmart did not do this with the expectation that it would forever be kept from participating directly in India's $500 billion consumer market.
Analysts point out that Modi is an "old friend" of China, but he may be the worst thing to happen to that country in a long time. At a moment when the Chinese economy is teetering, he is indirectly giving it a shove in the wrong direction. The "giant sucking sound" you will soon hear is money, once headed for China's shores, on its way to India's instead.
