Narendra Modi has taken the oath for his third term as Prime Minister of India. As he embarks on this new tenure, his administration faces several significant challenges that will test both the government’s resources and Modi’s leadership skills.
Coalition Demands
One of the immediate challenges Modi faces is managing the demands of regional parties that are part of his coalition. These parties, including Andhra Pradesh’s Telugu Desam Party and Bihar’s Janata Dal (United), have already made it clear that they expect more funds for their states and key positions in the federal cabinet. They are also pushing for special status for their states, which would allow them to receive more federal development funds under easier conditions.
Economic Disparities
India’s economy has shown impressive growth, with an increase of over 8% in the last fiscal year, making it one of the fastest-growing major economies. However, this growth has not been uniform. The recent elections highlighted a disparity between urban and rural areas, with significant economic benefits concentrated in cities, while rural areas lag behind. Despite rapid growth over the past decade under Modi’s leadership, making India the world’s fifth-largest economy, the country’s per capita income remains the lowest among G20 nations.
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Maintaining Economic Momentum
In late May, S&P Global Ratings upgraded India’s sovereign rating outlook from ‘stable’ to ‘positive’, citing the country’s strong economic expansion as a positive influence on its credit metrics. Modi has emphasized that the middle class is a driving force for the country, promising to enhance their savings and improve their living standards. This entails reviewing and potentially amending existing laws to support these goals.
Inflation and Price Stability
Inflation remains a pressing issue, with the current annual rate at 4.8%, exceeding the central bank’s target of 4%. Food prices have been particularly volatile, with an annual increase of 8.70% in April, slightly up from 8.52% the previous month. Since November 2023, food inflation has consistently exceeded 8% year-on-year. Given that half of an average Indian’s total expenses go towards food, this is a critical area of concern. The Reserve Bank of India has projected an inflation rate of 4.5% for the year, while anticipating economic growth at 7.2%. In response to rising prices, Modi has implemented measures such as banning the export of wheat and rice to control domestic inflation.
Unemployment
Unemployment has also been a major issue, prominently featured in the election campaigns. The Congress party criticized Modi’s government for not doing enough to create jobs for the youth. The BJP lost a third of its seats in rural constituencies, with voters expressing dissatisfaction over job scarcity and inflation. According to the Centre for Monitoring Indian Economy, India’s unemployment rate rose to 8.1% in April, up from 7.4% in March.
Foreign Relations
Under Modi’s administration, India has aimed to enhance its global stature through a proactive foreign policy. However, tensions with China remain unresolved, stemming from a border clash in 2020 that resulted in casualties on both sides. Modi has emphasized the need to address the “long-standing situation” at the border. Additionally, his government is trying to attract foreign investment from countries other than China.
Relations with Canada have soured following the assassination of a Sikh separatist leader, and the U.S. has accused an Indian citizen of attempting to murder someone on American soil. These incidents add complexity to India’s foreign policy landscape.
Conclusion
As Narendra Modi begins his third term, he faces a multifaceted set of challenges that include managing coalition demands, addressing economic disparities, controlling inflation, reducing unemployment, and navigating complex foreign relations. How effectively he addresses these issues will shape India’s trajectory in the coming years. Modi’s promises to enhance the middle class’s quality of life and boost economic growth will require strategic planning and robust policy implementation to overcome the hurdles ahead.