It seems Indian Prime Minister Narendra Modi has a dilemma: As he campaigns for another term in office, taking a tough stance toward Pakistan after the Pulwama terror attack is likely to help him win voters’ hearts. But escalated tensions will deal a blow to India’s economy and have a negative effect on his political aspirations, if he fans nationalist sentiment.
As the election nears, the Indian economy appears to have been losing momentum. GDP growth decelerated from a stunning 8.2 percent in the April-June quarter in 2018 to a slower pace of 6.6 percent annually in the October-December quarter.
Modi is already facing voter discontent as some reports showed India witnessed its highest unemployment rate in 45 years at 6.1 percent for 2017-18. If the Indian economy continues its downtrend in the coming months, Modi’s pledges to deliver growth and jobs will sound less persuasive.
Nationalism generally rises as economic conditions worsen. The Indian fighter pilot captured by Pakistan after his plane was shot down in a dogfight has been hailed as a hero. His return to India successfully shifted people’s attention from the economy and aroused a sense of pride and national dignity.
However, this sort of event cannot solve the fundamental problems of the Indian economy. As its effects gradually fade, the attention of the Indian public will return to the problems of the economy and jobs.
The Modi administration has already announced it will withdraw Most Favored Nation status from Pakistan. If New Delhi takes further steps like this, a trade war will deal a further blow to its own economy.
Economic growth should be top priority for the Modi administration ahead of this year’s election. A key to helping the economy gain momentum is cooperation instead of nationalism.
If India pursues a maximum-cooperation policy with its economic partners to boost growth, New Delhi will need to exercise maximum restraint in the ongoing dispute with Pakistan to offer a stable macro environment for economic development.
The Modi administration has made it easier to do business in India. Modi noted recently that India has jumped 24 positions to rank 57th in the Global Innovation Index in a mere four years, and it’s keen to break into the top 25 tally soon. It will be regrettable if the Modi administration gives up halfway on its economic reform in exchange for support from Indian voters ahead of the election.