Skip to main content

India’s Prime Minister Narendra Modi delivers a speech from the Red Fort to mark the country’s 68th Independence Day in New Delhi on Aug. 15, 2014.Prakash Singh/AFP / Getty Images

In the fading days of India's last administration, it was easy to locate the country's top bureaucrats: They were usually down at the Delhi Golf Club in the heart of the capital, thwacking balls past the historic course's imposing Mughal-era tombs. Starting early in the morning, senior civil servants could sneak in a round before making the short journey from the course – which was founded during the British Raj – to nearby government offices in time for a mid-morning start.

At the time, the Indian National Congress government was embroiled in several high-profile corruption scandals, and ordinary government business had essentially stopped. Bureaucrats and ministers sat on files, afraid to approve anything that might get them in trouble. India had gone from being the world's most promising emerging market to a dysfunctional mess.

Last May, a frustrated, tired nation voted in droves for a regime change and a tough new prime minister: Narendra Modi.

Nearly a year after he took power, tee time is officially over: Honorary golf-club memberships have been cancelled, government employees sign in on tablets that display their attendance on a public website, and newly enlivened bureaucrats are finally stamping files again. "The Delhi Golf Club is like a ghost town now," says Harjeet Bajaj, a Canadian businessman who manages various projects in India.

Mr. Modi's election was nothing short of historic: The right-wing Bharatiya Janata Party (BJP) he leads won the most decisive electoral majority in 25 years in this country of more than 1.2 billion people. His victory demolished the venerable Congress Party's hold on parliament, ending a long string of fragile coalition governments that had become paralyzed by corruption and constantly shifting political alliances.

After a year in office, Mr. Modi has brought stability to the capital, optimism to the business community and momentum to foreign relations, with frequent trips abroad to foster renewed faith in his country – including a forthcoming one to Canada. Mr. Modi will arrive here for a three-day visit on Tuesday, during which he will meet Prime Minister Stephen Harper, financial leaders and Indo-Canadian groups. Among his specific goals: inking a major deal with Cameco Corp. to secure a steady source of uranium to meet India's growing nuclear-energy needs.

Though he started his term with huge expectations, Mr. Modi has proved more cautious and incremental than many had expected. He's slowly repairing damage wreaked by previous governments' corruption, while avoiding big-ticket reforms and instead tinkering around the margins: lifting foreign-direct-investment restrictions here, slashing education and social spending there, and allotting new funds to select infrastructure projects. He has also launched an ambitious program to encourage global firms to manufacture their products in India – a scheme that may take years, but that his government hopes will bring millions of well-paying jobs to a country where the majority of people struggle as farmers, urban labourers or small-time shopkeepers.

There are signs of progress: The country's GDP is predicted to rise to 7.5 per cent this year, after hovering around five per cent in the previous two years.

But Mr. Modi's promises of sweeping economic development remain largely unrealized: Factories have not begun to spring up, and there are no gleaming new highways. Few expected instantaneous change, but even some who welcomed Mr. Modi's election see little evidence that he is making a difference. The stock market may be soaring, but India still ranks 142nd out of 189 countries in terms of ease of doing business. And although Mr. Modi has got the government moving again, India is a massive, complicated country. Many of its poorest have seen little improvement since his election.

There are other concerns, as well. Those who feared the ardent Hindu nationalist would be unable to control his party's more radical elements cite a resurgence of religious prejudice, and sometimes religiously motivated violence. Others worry about increased restrictions on civil society, and inaction on social issues such as women's rights.

To create the millions of jobs his nation desperately needs, Mr. Modi will need to implement deeper, structural reforms. He has had a year to settle in. Now, India wants real change.

From chai stand to parliament

Mr. Modi is the most polarizing mainstream politician in modern India. Unlike most of the nation's political class, he grew up poor, in the dusty town of Vadnagar in the rural state of Gujarat, selling tea from his father's chai stand near the local railway station. He eventually drifted into the radical Hindu nationalist Rashtriya Swayamsevak Sangh (RSS), where he began working as one of the giant volunteer organization's propagandists, leaving behind the woman his parents had arranged for him to marry, and living an austere, solitary life, wandering for years as an ascetic in the Himalayas.

The RSS, which feeds the now-ruling BJP with many of its top leaders, has long been associated with the violent, khaki-shorts-wearing foot soldiers of the Hindu nationalist – or Hindutva – movement. Mr. Modi, too, joined the BJP. He rose through the party's ranks, eventually becoming Gujarat's chief minister; as the state's leader, he served four consecutive terms, winning each election more decisively than the last.

It was in his 12 years as chief minister that Mr. Modi shaped his reputation as a pro-business autocrat who ran a clean government. He simplified the approval process for new businesses and wooed companies to set up factories in Gujarat with cheap land, low-interest loans, and promises of reliable supplies of power and water. Bombardier and McCain have plants there, as does Ford. Famously, Ratan Tata decided to move a planned manufacturing plant for his new Tata Nano car from another state to Gujarat after he received a text message from Mr. Modi.

His record in other areas is more troubling. Like others in the BJP, Mr. Modi was not afraid to use religious tensions to his political advantage: His state government resisted giving compensation and housing to survivors of Gujarat's infamous 2002 riots, in which more than 1,000 people, mainly Muslims, were killed in vicious religious violence. He once likened resettlement camps for displaced Muslims to baby-making factories.

Mr. Modi was cleared – by a Supreme Court-monitored special investigation team – of complicity in the attacks, but some believe he can never be fully exculpated, citing his inaction as the riots unfolded: Police often stood by while people were killed, or helped abet the killing. In the years since, Mr. Modi has never apologized.

An unfinished economic revolution

People talk about India as an economic success story only because of reforms introduced in 1991, when the Congress government brought into being a dramatic liberalization process – one that makes Mr. Modi's efforts so far look timid by comparison. The government effectively dismantled the so-called Permit Raj of rigid licences, import approvals and other legacies of India's socialist postcolonial period. The reforms unleashed the country's talented business class, and growth soared. Indian universities now churn out a steady stream of brilliant software engineers, scientists and globally competitive business people.

Over the next decade, many new businesses surged: call centres, back-office outsourcing, and eventually more advanced research industries in pharmaceuticals and technology in southern cities such as Bangalore and Hyderabad; as well as some manufacturing around cities such as Chennai – a car-making hub – and Gujarat's Ahmedabad, which both have access to ports. But it was an unfinished, and unequal, revolution. The services sector, which now accounts for half of India's GDP, employs a comparatively small segment of the country's vast population.

India has the second-largest labour force in the world – about 500 million people – but roughly half of them work in the fields, on unproductive small plots of farmland that have been subdivided over generations. While the country has world-class institutes of technology and management, it also has an abysmal record of giving children a basic education, partly because of resistance from rural Indians, who want their children to work rather than go to school. Many businesses also complain that graduates from all but the elite colleges and universities have few usable skills, and can require up to six months of training before being ready for work.

Which is why Mr. Modi is casting a much wider net in his quest for economic development – for example, by pushing for hundreds of millions of Indians to open bank accounts, so that the central government can transfer subsidies to them directly rather than through corrupted middlemen.

Making things, to make jobs

Between 1997 and 2011, India's economy grew on average at around 7 per cent a year. But even while the economy was surging and some sectors were on the upswing, there was no commensurate gain in the industrial-scale, export-oriented manufacturing that propelled China's masses out of poverty.

There are several reasons for this. Outside of India's big cities, the roads are often flooded, potholed and gridlocked with bullock carts. Ports, railways and other infrastructure are in terrible shape, making it costly to move goods around the country: It is often cheaper to ship something from Mumbai to Africa than to ship it within India. Power cuts are a regular occurrence, contracts are essentially unenforceable, legal disputes can take several decades to wind through India's clogged court system, regulation has been unpredictable, corruption has been a problem at all levels of government, and acquiring land for new projects can take years.

In contrast to the services industry, where companies can simply move into pre-existing real estate, industrial firms in particular can't easily purchase plants – and since they often require more land, equipment, power and other supplies than do businesses such as research labs, manufacturing has been particularly stunted. The World Bank ranks India 184th out of 189 nations in "dealing with construction permits" – making it literally one of the worst places in the world to build something.

Changing this state of affairs is one of Mr. Modi's priorities. And it seems to be working. "The biggest change is hope," says Shailesh Pathak, executive director of the Bhartiya Group, an Indian conglomerate that spans fashion and real-estate. "Last year, the feeling was despair. This year, it is hope."

Mr. Modi is making a concerted effort to improve India's manufacturing sector – acknowledging, in the process, that economic progress, without jobs, is not the way forward. "What we need is not just more production," he has said, "but mass production and production by masses."

Inside a complex of cream-coloured government buildings in New Delhi, Amitabh Kant is a man besieged. It is 6:30 p.m. on March 31 – the last day of India's fiscal year – and a half-dozen people are waiting outside his office. He has to catch a flight to China, but the phone keeps ringing, and a staffer has just dumped three overflowing manila envelopes in front of Mr. Kant, who is secretary of India's department of industrial policy and promotion within the Ministry of Commerce and Industry. "I'll miss my flight if I don't clear these," he says, removing his glasses and rubbing his nose with his thumb and index finger. "I don't have time for a long Q&A."

Mr. Kant is the man responsible for Mr. Modi's "Make in India" campaign, a high-profile initiative to convince the world's manufacturers to build their products on the subcontinent. It aims to boost manufacturing in 25 key sectors, from transportation, mining, electronics and chemicals to biotechnology, food processing and wellness. The campaign includes practical measures – the government recently revamped import duties on electronics, doubling the fees for finished devices, while cutting the duty on components to zero – but the biggest focus has been on outreach.

In addition to that campaign, Mr. Modi has begun to dismantle the vestiges of more than 60 years of socialist state policies, selling off stakes in public companies, opening some sectors to foreign investment, and abolishing India's Planning Commission, a 500-person group that churned out Soviet-style five-year economic plans under successive Congress governments. He is now also embroiled in a political battle to significantly alter India's arduous land-acquisition policy. While Congress and other liberals see this as a corporate land grab, Mr. Modi and the BJP say they want to make it easier for businesses and government to buy land from farmers for factories, roads and other infrastructure projects.

There are some indications that this emphasis on manufacturing is beginning to have an impact. The Canadian electronics company Datawind, for instance, which makes inexpensive smartphones and tablets for the Indian market, announced that it would relocate production from Chinese factories to India now that import duties have been changed. "This will shift manufacturing to India," says Suneet Singh Tuli, Datawind's chief executive officer, who has pledged to create roughly 1,000 new jobs in the country.

Other global gadget makers are also said to be looking at opening factories. And the foreigners' registration office in New Delhi is full of Japanese nationals representing huge companies such as Sharp and Mitsubishi, seeking new countries in which to invest.

Fomenting dissent

Down a series of back alleyways off the main road – past butchers of beef and lamb, and motorcycles negotiating the narrow laneways with shrieking horn blasts – a school in a Muslim neighbourhood of Muzaffarnagar, in the poor northern state of Uttar Pradesh, sits beside a flowing canal of raw sewage. The city of about a half-million people is just a three-hour drive north of New Delhi. Nearby, children play cricket on a field of garbage. A clean hit sends the ball sailing into an open sewer. A boy runs over, picks it out with his bare hand, and throws it back to his friends.

Shandar Ghufran, headmaster of the 600-student school and a community activist, points to a new elevated entranceway and a small brick wall with three concrete steps at the front door; they were recently built to prevent sewage from flowing into the school when it rains. Others in the predominantly Muslim neighbourhood are not so lucky: Their homes are flooded with filthy, disease-carrying water when the rains are heavy. Mr. Ghufran says that no Hindu student has ever applied to come here, and that Muslim students applying elsewhere in the city are regularly turned away.

Since Mr. Modi's election victory, Mr. Ghufran says, already-simmering tensions in Muzaffarnagar have gotten worse. Urban-development funds, he says, seem to have stopped flowing to Muslim communities. Posters have gone up in alleyways imploring Hindu women to bear more children, playing on the Hindu right's constant refrain that Muslims have larger families. Other posters have gone up, too, reading "Long Live Nathuram Godse" – a reference to Mahatma Gandhi's assassin, a one-time member of the RSS, who shot India's pacifist icon for appeasing India's Muslims around the time of Partition. "The pressure is building," Mr. Ghufran says.

Muslims have a long history in India, and the present population is enormous: about 180 million. But more than 80 per cent of Indians are Hindu; and so it doesn't hurt Mr. Modi politically to ignore Muslims or to inflame tensions. Conversely, making concessions to India's Muslim communities could result in a significant backlash from the BJP, the RSS and hardline Hindu volunteers and supporters.

Muzaffarnagar and its surrounding villages exploded with anti-Muslim riots in 2013 – violence that led to more than 60 deaths and caused tens of thousands of Muslims to be displaced from their homes. It was one of the worst incidents of religious violence since the Gujarat riots of 2002.

Amit Shah, president of the BJP and a close confidant of Mr. Modi, visited the city during the 2014 election campaign – and besought the area's Hindus to get revenge on local Muslims by voting for his party. Although Mr. Shah was subsequently censured by India's Election Commission, he remains close to the Prime Minister, even as Mr. Modi himself has toned down his own comments in recent years, after international condemnation of the Gujarat riots.

Amir Khan, a 55-year-old Muslim cloth merchant who operates a roadside shop in Muzaffarnagar, says that since Mr. Modi took office he has seen his business drop by about 85 per cent. "I used to get a lot of [Hindu] Jat customers," he says. "Now, there are not many who come here. It started after the riots. But after the elections it got even worse."

The Muslims who were driven from their homes in Muzaffarnagar have been left with little recourse. In early April, The Globe and Mail visited Uttar Pradesh's Shamli district, where a ragged, morose group was dismantling two large displacement camps after local officials had arrived that morning with bulldozers to evict them – two years after the riots, they still don't have a home.

Riyahat Meerhasan, a wizened 60-year-old man with nine children, had his house destroyed in the riots and was piling bricks one by one into a horse-drawn cart. He and many others here say they are petrified of returning to their villages, where their homes and possessions were left behind. Says Mr. Meerhasan, "I don't know where I'm going to go now."

None of these displaced villagers has received any compensation from either the state or central government. Human Rights Watch has demanded that authorities stop the forced evictions, properly investigate the violence and provide aid. But the only relief seems to have come from a nearby Muslim farmer, Haji Dilshad, who donated his land to build permanent dwellings with funding from the Al Falah trust in the United Kingdom. But even he faced hurdles: The local government tried to prevent him from building the structures on his land, he says, because a permanent refugee community of concrete homes would be proof of how widespread the displacement actually was.

Out here, Mr. Modi's India is not changing: It remains as polarized, poor and underdeveloped as ever.

The riots were rooted in the movement that fuelled Mr. Modi's rise, but none of the displaced Muslims I spoke with expressed any anger at their new prime minister. They simply wanted to send him a message as he makes another of his frequent trips abroad. "He has all the power. He controls the government. If he wants to, he could help us. He could put a roof over our heads. That's my request," says Saddam, who did odd jobs in local villages before he fled to the camp. "I hope you will communicate our plight to the Modi government as he visits Canada."

Christians in the crosshairs

In addition to Muslim communities, India's Christians – who make up 2.3 per cent of the population – have also felt besieged under Mr. Modi. In New Delhi late last year, there were a number of attacks on churches. In February, several men forced their way into a convent and school in West Bengal and over the course of two hours raped a nun and desecrated the chapel.

Just last week, the discrimination even hit a Supreme Court judge – Kurian Joseph, a Christian – who was reprimanded by the Chief Justice after refusing to attend a judicial conference, that included a meeting with the Prime Minister, because it took place over Easter Weekend. Mr. Joseph, alluding to the fact that such events would never be held on Hindu holidays, penned a letter to Mr. Modi, asking him, as "the guardian of Indian secularism," to "benevolently show equal importance and respect to the sacred days of all religions."

In December, one Bharatiya Janata Party MP suggested that the nation celebrate "Good Governance Day" on Dec. 25 in honour of former BJP Prime Minister Atal Bihari Vajpayee's birthday – another obvious offence.

John Dayal, the secretary-general of the All India Christian Council, says that while Hindu nationalists tend to view Indian Muslims as potential secret agents for Pakistan, they also worry that Christians are secretly trying to convert the more than 167 million lower-caste Dalits (formerly known as Untouchables), as well as indigenous, or so-called tribal, people in remote areas, to Christianity.

In early February, while protesting the government's silence over the issue, Mr. Dayal and dozens of other Christian activists and nuns were detained by police. "We've always had a base level of violence against Christian and Muslim communities under different governments," Mr. Dayal says. "The RSS, when another party is in power, is more surreptitious. But when their own government is in power, they become fearless."

The end of the honeymoon

In February, Mr. Modi's long victory streak finally ended. After winning elections repeatedly since the early 2000s – in Gujarat as chief minister, in the national elections of 2014, and then with several party triumphs in state-level elections, Mr. Modi's surge came to a spectacular halt in state elections in New Delhi. Despite campaigning personally, Mr. Modi's BJP was defeated by the Aam Aadmi (Common Man) Party, which grew out of India's recent anti-corruption movement and promised cheap or free water and electricity. Of Delhi's 70 seats, AAP won 67 – just nine months after being routed by the BJP in the national elections.

Mr. Modi's critics saw this as a clear sign of dissatisfaction with India's direction under the BJP leader, while supporters downplayed the loss, saying the BJP was punished for refusing to promise economically unsustainable government services. Either way, the loss was a high-profile setback for Mr. Modi and his party.

This has been compounded by other public stumbles. When U.S. President Barack Obama visited India in January, Mr. Modi greeted him in a suit with pinstripes made up of his name – Narendra Damodardas Modi – repeated over and over again. It was widely mocked as politically tone deaf.

More seriously, Mr. Modi has been criticized for being slow to address a mounting agricultural crisis. Heavy rains have destroyed many winter crops in northern India's fertile plains, and there have been suicides as the government failed to step in and compensate farmers. In rural Uttar Pradesh, standing at the edge of a flooded field, an 80-year-old Muslim labourer named Wazir, who has worked on the farm all his life, offers a grim verdict on Mr. Modi's first year in power: "He looks out for the industrialists only. He has done nothing so far."

On a narrow patio off the laneway office of the Centre for Equity Studies in south Delhi, Harsh Mander is enjoying the mild spring weather as a woman pulls down laundry from an adjacent rooftop. A social activist who resigned from the Indian civil service over the Gujarat riots, he has just eyed proofs for his new book on inequality and indifference in India – a book in which Mr. Modi appears multiple times.

To Mr. Mander and other social activists, Mr. Modi's promises of development ring hollow. "There's nothing in the growth model that actually provides jobs. That is going to be the Achilles heel of this government," Mr. Mander says. "For a big percentage of people, life is as hopeless as it ever was."

He's not the only one who is skeptical. Many of India's liberals and intellectuals, who are living through dark days after Congress's defeat, remain broadly disillusioned with Mr. Modi's plan.

Saumitra Chaudhuri, a former member of India's Planning Commission and an economic adviser to the last prime minister, says Mr. Modi has struggled because of his new government's inexperience. And he agrees with critics such as Mr. Mander that the Prime Minister is promising something that he never delivered in Gujarat: jobs. "There are no labour-intensive industries in Gujarat," Mr. Chaudhuri says over a whisky and soda at the India International Centre, a cultural hub in Delhi. "He just wants industry. But not jobs."

Activists also worry that, under Mr. Modi, civil society is getting squeezed. The government is giving extra scrutiny to foreign-funded environmental NGOs, such as Greenpeace, which it blames for stalled development projects. And just a few days ago, the Prime Minister made controversial remarks about "five-star activists" clogging up the judicial system, adding to the ominous sense that Mr. Modi's India may be becoming less tolerant of vibrant democratic debate.

Recently, the government also banned the documentary India's Daughter, by a British director, about a prominent New Delhi rape case, despite Mr. Modi's strident rhetoric about protecting Indian women. Charu, a medical student who only felt comfortable providing her first name to a journalist, says Mr. Modi does not back up his talk with action and has only paid "lip service" to women's safety in India. "I don't feel like Modi has done anything, he is talking only," she says. "It's not safe."

To Sunayana Walia, a women's rights activist from Gujarat, these developments are all too familiar. When her work brought her into contact with Muslim survivors of the Gujarat riots, her organization – SEWA, the Self-Employed Women's Association – found a project's funding abruptly cut off. And a national program through which NGOs helped run crisis centres for women was recently shut down, she says. "This stuff was already happening in Gujarat, but now one sees glimpses at the national level," she says. "It's making people very nervous."

What next?

Although Mr. Modi has a majority in India's lower house, or Lok Sabha, this does not enable him to implement a truly ambitious agenda. Under India's bicameral system, he also needs to win state-level elections, because it is possession of those state legislatures that gives parties advantage in the upper house, the Rajya Sabha.

The BJP is currently outnumbered in the upper house, which means that Mr. Modi's big-ticket reforms could stall unless he is permitted to call a rare joint session of the two houses – or he wins more state elections.

And that's important, because it is at the state level that businesses run into the most frustrations. Dinesh Singhal, who runs a big industrial business in the city of Meerut, applied one year ago to the state government of Uttar Pradesh to get permission to expand his plant. "I would have had to give a big bribe, which I am not giving, then I would get approved," says Mr. Singhal, the CEO of Kanohar Electricals, as the power goes out in his office. "The states are not serious. They take money and eat it up. They are not concerned about manufacturing or jobs."

For the Prime Minister, says Ambarish Datta, the CEO of the BSE Institute, a training arm of the Bombay Stock Exchange, the real work of his five-year term begins now. "Sentiment is good. Investor inflows are high. But people now want to see action on the field," he says. "The last year is doling out freebies and basically preparing for another election. And the first year is settling in."

"It's a little like cricket," he adds. "The real action is in the middle."

Shilan Shah, an India economist with the London-based research firm Capital Economics Ltd., says that Mr. Modi has made some progress on easing regulations and opening up some sectors – such as defence, insurance, and railways – to foreign investment, but that he has underwhelmed the market on the "really big-bang reforms."

He has not opened up the much larger financial and retail sectors to foreign competition – with retail, in particular, being politically sensitive in a nation with so many grocers and hawkers.

Another key area in need of reform: labour-market regulation, which is governed by a complicated system of roughly 200 laws at both the national and state levels. These prevent large-scale manufacturing, by making it necessary for firms with more than 100 employees to seek government approval for firing people. As a result, companies resort to hiring off the books. "The upshot to all of this is that the economy should slowly recover over the next few years," Mr. Shah says. "But growth will probably fall short of India's immense potential."

Vinod Sawhny, a prominent business executive in Mumbai, sees many of the current political difficulties as an extension of the sheer magnitude of Mr. Modi's task: trying to wrench India out of an economy – and a political system – that still treats, and seeks to preserve, India as a nation of farmers and villages. Taking full advantage of the country's demographic dividend – every second Indian is below the age of 25 – and turning the country into a manufacturing– and service-based economy is going to require a "a huge mindset change," he says. Not to mention more than just one year.

"We have a golden opportunity," Mr. Sawhny says. "The next 24 months will determine whether a new India takes shape. It will be an absolute lost opportunity if we don't prove it. The time is now."

Interact with The Globe