When candidate Narendra Modi ran in 2014, he promised that when it came to development, he would replicate the Gujarat model of governance to the rest of India. Most voters saw this to mean public-private partnerships (Kutch Railway); FDI (Ford’s Sanand plant); or innovative solutions (Narmada canal solar panels).

In four years at the national level, Modi has indeed replicated some of these ideas, such as a pact with France to develop solar farms over rural India. His political capital is so vast that voters consistently overlook his decisions, even if ideated or implemented poorly because he has the nation’s best interests at heart. So why is his BJP in such political trouble, just having lost the heart of the Hindi belt to an opposition?

One answer is that Modi misread his overwhelming 2014 mandate. Rather than create a strong India which thrives on a robust private economy, where the government is an umpire, he injected the government into everything. Governance, to Modi, means efficiency of outcomes even if the outcome itself is suboptimal.

Modi’s accumulation of power has come at the expense of States who have been robbed of their abilities to be “Laboratories of democracy”. During the last 25 years, it is from these labs that came out innovative policies which differentiated one State from the other. West Bengal and Kerala historically spent more money per capita on education than Madhya Pradesh or Rajasthan. This was what catapulted India to the global stage when IT companies descended on Bengaluru and Hyderabad, but manufacturing companies arrived in Chennai, Surat, and Pune.

States could do this because they controlled State-specific taxes which directly fed State coffers. Today the new GST regime — while certainly more efficient than the old regime — subsumes all State taxes into one tax and centralises all indirect taxing power into New Delhi. For a person who ran against the very idea of Aadhaar during the elections, presumably because its reach was too broad and invasive, Modi has embraced Aadhaar even more wholeheartedly than its original promoters. In aggressively prosecuting his case for demonetisation, Modi appears to have forgotten his roots as a chai seller. The informal economy where cash — even if ill-gotten — is king was what drove India’s economy since the Manmohan Singh-led privatisation programs of the early 1990s. It was during this time that the economy approximated to as close of a laissez-faire model as ever, with all of its imperfections.

Centralising power

But the Modi vision changed it all. All power now emanates from New Delhi, because the Centre knows best. Each Modi idea is rooted in some transformative, utopian goal — a clean India; a corruption-free India; a digital India; an India which takes care of the teeming masses — with which no reasonable person can have an argument about.

To implement his ideas, Modi has asserted the use of central power, building it through courts if he must. In this model, the government is extremely aggressive in collecting revenues because it alone is the arbiter to spend it wisely on development. His model aligns much with the structure of the central EU authority in Brussels. The problem is that the EU has had a terrible track record of growth, employment mobility and solvency during the last 20 years, socialising outcomes and depending heavily on just a few countries to keep the union afloat.

Today, India is struggling with under-capitalised banks requiring massive infusions of taxpayer money. Bad loans to big business are crippling growth. The common person is forced to comply with every government diktat while the big guy escapes scot free.

Modi would do well to discard the failed European model and embrace the American model of free enterprise and minimalist government intervention.

India needs Modi, his integrity, charisma, work ethic and passion for one more term but to implement the right governing model, not a failing one. If Modi accepts this and campaigns as such, he could well return to power. Otherwise, all bets are off.

The writer is Managing Director, Rao Advisors LLC, US

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