Modi Is More Powerful Than Ever — Even as India’s Economy Strains

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1:45India is having a tough year. Energy prices are up, supplies are tight. And because India is one of the biggest fuel importers in the world, the war in the Middle East is putting intense strain on its economy. And yet, up against all these economic difficulties, Prime Minister Narendra Modi has just pulled off one of the most significant political wins of his career. Indian Prime Minister Narendra Modi's BJP has won an historic landslide in West Bengal state, ending 15 years of rule. More than 154 million people voted in elections in five states and territories. That began in April, with results announced earlier this month.

2:25And Modi's party, the Bharatiya Janata Party, or the BJP, delivered a huge surprise. It won control of the state of West Bengal for the first time in history, and extended its reach into a region long dominated by the opposition. In a victory speech in New Delhi last week, Modi told supporters that the success in West Bengal marked a new chapter for the state.

2:58It also marked a new chapter for Modi himself. In the 2024 general election, Modi won a third term, but his party lost its majority in parliament. His popularity seemed as if it had dimmed a bit after the outcome of the 2024 national or federal elections, where his party was not able to make it to majority or past the halfway mark and had to rely on allies to form government in the center. Minnika Doshi is a senior editor at Bloomberg and writes its India Edition newsletter. She says the BJP's breakthrough victory represents an upturn in Modi's political fortunes. Modi has been the most powerful politician for a while.

3:42But what this does do is that it knocks off one very important opposition party by reducing them to just a handful of seats in West Bengal. By winning West Bengal, the BJP party, which is Modi's party, now has the full sweep of East India, in addition to its earliest strongholds of North, West and Central India. It's a remarkable win for a party and a leader that have been in government during a trying time for India. Manika says it could give Modi license to make changes to the Indian political system that will resonate for years beyond his time in office. It offers him an opportunity to strengthen his power, not just at the state level, but at the federal level.

4:27It doesn't change his ability to legislate reform right away. But over time, if he's able to win enough power at the state and central level, then the BJP's ability to rewrite the Constitution, those chances improve significantly.

4:51This is The Big Take Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show, India's regional elections have put Prime Minister Narendra Modi in a surprisingly strong position. We'll look at how Modi and his party managed to pull off the win despite a stressed economy. And what an emboldened Modi might mean for India and the world.

5:27Menika, many of our listeners may not be aware of how Indian politics work and what the key issues are for voters there. Can you give us a feel for that and how these most recent elections played out? Well, in India, elections are fought on a variety of issues. Everyday household expenses, the cost of living. These are all very central to election outcomes, but they're not the only determinant. Identity politics has only grown in size, thanks to Prime Minister Modi's way of campaigning. In this particular election, two things have happened. I think voters have recognized that the energy crisis that India is facing is not the doing of India or its government.

6:10Second, what the government has done very effectively is shield voters from a significant pass through of higher crude oil and gas prices, because at the retail level, these prices have not yet gone up. The household has not yet felt the pain, which is not to say there is no pain, but it hasn't been passed through, because Prime Minister Modi's government held the line on prices of both petrol, diesel, as well as cooking gas. Of course, now that the elections are done, we expect to see an increase in prices, and that's when you'll start to see inflation tick up significantly. Now, why is it West Bengal is more than just another state politically?

6:57West Bengal is amongst India's most populous states. It sends the third highest number of parliamentarians to the lower house of parliament. That's the Lok Sabha. So from a power politics point of view, it is important. The second reason is West Bengal has been a holdout state for 15 years. It has voted for Mamata Banerjee and her Trinamul Congress Party. And Mamata Banerjee has been a fierce critic of Prime Minister Modi and his style of politics. So her loss will impact opposition parties across the country in their ability to come together and have any strength against Modi and BJP. And then the third thing is the geography.

7:39Winning West Bengal now gives Prime Minister Modi and his party, the Bharatiya Janta Party, all of East India, in addition to its traditional strongholds of North, Central and Western India. It's only South India now that remains relatively BJP-free. In the U.S., a win like that would be similar to Democrats taking Florida. But if West Bengal has been such a Trinamul Congress Party stronghold over the years, how did the BJP manage to sway so many voters this time around? You have to break it into why Modi won. But more importantly, why did Mahmouda Banerjee lose? She's been in power for 15 years.

8:19So there was a significant anti-incumbency wave building up against her party, which has also been accused of local violence, arbitrary power politics at the state level and not doing enough in terms of the economic progress of the state. At this point, the BJP had already become the second largest party in West Bengal. What Modi needed to do was to convert that into prime poll position. And he was able to do that by A, playing on the anti-incumbency, B, promising double efficiency because his party is already in power at the federal level. And three, I think he also found more takers for his Hindutva nationalistic style of politics.

9:07Meneka says another significant factor was India's Election Commission's controversial efforts to clean the voter rolls. Just two weeks before the vote in West Bengal, the commission removed about 9 million names, nearly 12 percent of the electorate. Officials said the exercise was aimed at weeding out duplicate entries and illegal migrants. India is right now undergoing in many states an effort to clean up its voter rolls, which is in itself a good effort. But how that is being carried out, the speed at which it's being carried out and the recourse to any appeal that citizens have if their name has been left off a roll.

9:50All of these have been matters of debate in various state elections. But they came to a peak in West Bengal. millions of people could not cast their vote on election day, which in itself is a gravest travesty of democracy in this country. This mass, large-scale disenfranchisement is said to have disproportionately impacted the Muslim community, a community whose votes were expected to go in favor of Mamata Banerjee and against the BJP and could have made the difference between a win or loss in a particular constituency. Despite the controversy, Meneka says the win underscores Modi's enduring popularity.

10:35After more than a decade in office and amid economic headwinds, you'd think voters might turn against him. But the results show the opposite and reinforce how deeply Modi continues to shape India's politics. He's moved India towards a more centralized, leader-driven system with a very strong prime minister's office and a campaign style that's very, very presidential. All elections, the campaign advertising, all of it has Prime Minister Modi's face on it, irrespective of who the local candidate is. And his governance, his politics, it blends nationalism, pro-Hindutwa ideologies, welfarism, big push on things like infrastructure to modernize India, to make India a developed nation in 2047.

11:24You'll hear that a lot if you live here in India. So it's been centralization, nationalism or national development goals. And then there's been a lot of muscle and money involved in being able to remain in power. And I think that broadly defines the kind of politics he's come to represent. And that's despite the fact that Modi remains a deeply polarizing figure. His critics argue he's consolidated power at the expense of judicial independence and has suppressed both the political opposition and the media. Opponents also point to policies they say are aimed at advancing India's Hindu right, such as removing special protections for Muslims and expanding parliament in a way that would favor the states where his support is the strongest.

12:12Menaka, I wonder if you're not a Hindu, if you're not a part of the majority, for example, if you're Muslim in West Bengal, what does this win mean for you? That is a really difficult question to answer because I'm not Muslim. I am a Hindu and I'm not really sure I can give you a fair answer of what minorities feel like under BJP rule. I can add best try and guess. And the basis of my guess or surmise would be this. The BJP is an overtly pro-Hindu party. I am going to draw severe criticism by describing it that way, because those who subscribe to it believe that it is in fact a balancing act towards the pro-minority secularism that India had before Modi rule.

13:04Both descriptions might work. But the truth is that in the last 12 years of the BJP being in power at the center, there has been more polarization across this country. Maybe it always existed. And what Prime Minister Modi and the BJP have done is use that effectively to be able to win votes. But that doesn't take away from the fact that some of the core promises in their manifestos are around appeasing Hindu sensibilities, whether it is the construction of a temple or bringing about a uniform civil code.

13:49After the break, we look at how Modi's renewed political strength could shape India's economy and what it means for India's high-stakes relationship with the U.S.

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16:24Thanks to the BJP's strong showing in these recent regional elections, the party now controls two-thirds of India's states directly or with allies. Bloomberg's Menekha Doshi says the implications are significant for India and for Prime Minister Narendra Modi's ambitions. State elections are a very, very big deal in India. That's because states under the Constitution control many very important subjects like agriculture, land, labor. And so if you want a policy to work from top down all the way to the local level, it is important to have not just control at the federal level, but also control at the regional or state level.

17:10Modi may find that he needs to be able to implement changes at every level of the Indian government because of the challenges the economy is facing right now. He's already plucked what Minnika calls the low-hanging fruit of reforms to boost the economy. That included creating a unified tax system and accelerating infrastructure development. But after a year of tariffs and now several months of war in the Middle East, Modi may need to get creative to keep Indians from feeling too much pain. We saw a very difficult year because of President Trump's trade war. Last year, India at one point was facing a 50 percent tariff on exports to the U.S.

17:54That pressure lifted only when both countries were able to arrive at some sort of informal trade agreement, which has yet to be finalized. So we were only just recovering from the trade war when this actual war has hit the Indian economy. Prime Minister Modi's government at the central level did attempt to take several steps to mitigate impact on growth because of the trade war, monetary easing by the central bank, the lowering of certain trade barriers, the trade deals with other partners such as the European Union or the United Kingdom, Australia, New Zealand, UAE. All of this was meant to help both diversify India's trade, keep exports buoyant, support the currency and restore growth in the face of tariff pressure from the U.S.

18:49Unfortunately, the energy crisis emanating from the war on Iran now threatens that return in growth. Menaka says Modi's government has worked to insulate Indian households from soaring global energy prices. But now that state elections have ended, that insulation is wearing thin. This week, Modi urged Indians to cut fuel use and limit travel as rising oil prices threaten to widen the nation's import bill. Most analysts expect that these companies will raise prices of petrol, diesel and cooking gas. What that will mean is, of course, more pressure on prices across the economy, an inflationary impact.

19:33and will then lead to debate around how the central bank reacts and what the impact on growth will be. That is the direct impact of this election on India's economy. The indirect impact is now that he's won, will Prime Minister Modi have some time and comfort to be able to think of what next phase of economic reforms he wants to carry out? There are some tough decisions to be made around agriculture, around land.

20:03Menika, how does a more emboldened Modi change India's relationship with his neighbors? You know, countries like Pakistan, China, Bangladesh. What does this super strong Modi mean for regional stability? Whether electorally he becomes a bit stronger or a bit weaker, that will have no significant impact on India's foreign policy, the strength it has in the region. I think those relationships work to a different set of criteria. Our relationship with Pakistan continues to be a hostile one. We have been attempting to mend fences with China and allow for more trade with that country as the bulk of our imports come from China.

20:48Our manufacturing industry relies on inputs from China. And then, of course, there is the big relationship with the U.S. There's a good chance that Prime Minister Modi's win might endear him a little bit more to President Trump. But I don't think that will significantly impact what has now become a fairly transactional relationship between India and the US. I think we have a trade treaty to sort of finalize, and we have a security relationship. And both of those, I would say, dance to a different rhythm. I don't think it changes the contour of the fact that the US has and trying to change the nature of the trade relationship between itself and India by getting India to open up the door to more U.S.

21:33exports. And Minika, closer to home, what are you watching for next? Well, the immediate priority is an economic one. We're staring at an energy crisis that could significantly cut into growth. Right now, it's hurting industrial activity. Very soon, it will start hurting household consumption. and how the Modi government fares both at the central level and on state levels in being able to deal with this crisis will also determine its political fortunes next year because there's always an election around the corner in India. Now, amongst the many states going to election next year, the key one will be Uttar Pradesh, that is the Hindu heartland of India.

22:13The BJP has a two-term government there already, So in many ways, it will be fighting the incumbency that felled Mamata Banerjee. So Uttar Pradesh will be a hard fought battle for the BJP. Amongst the other states going to elections are two that are governed currently by opposition parties. And the BJP will fight very hard for those two as well, because it will help consolidate the national footprint.

22:45This is The Big Take Asia from Bloomberg News. I'm Wan Ha. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you like the episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

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