The damage has already been done by the recent warnings by the international credit agency Moody’s. 'Modi must keep his members in check or risk losing domestic and global credibility,' the Moody’s report ‘India Outlook: Searching for Potential’, warned, adding already investors were already less optimistic about India's economic prospects. Although, the brouhaha over the “warning” coming from a junior associate economist at Moody’s Analytics and not from Moody’s Investors Service (the actually credit rating agency), has been used by the government of India to issue notices saying that there’s no intolerance problem in India. However, official or not, Moody’s advice that the politics need to improve and the government’s reform agenda needs attention to achieve long-term growth, has not gone unnoticed. Whether this is exaggerated or not, it is clear that the investors are disappointed at the pace of reforms.

Significantly, as early as January 27, the visiting US President Barack Obama’s parting shot at the town hall meeting in Delhi was that India would succeed if it didn't “splinter along religious lines.” He echoed similar sentiments in his National Prayer Breakfast address in Washington in February. Many interpreted this as a warning to Prime Minister Modi.

What is the connection between intolerance and economy? Firstly, perceived or real religious majoritarianism and the resultant disharmony are bound to hold up economic growth and also divert the narrative to disharmony from development. Secondly, if the perception grows investors would take their money elsewhere (read China). Thirdly, if the BJP does not win Bihar and the foreign money also does not come in, then Modi’s domestic image also will take a dent.

In India, the political timetable is always in conflict with economic imperatives. Modi, therefore, needs to start his action after November 12. For this he has to take some political measures as well. The first is to assess the performance of his ministers. It is almost 18 months since he took over and it is time to take stock, particularly about those who are heading the economic ministries and bring new people who can inspire confidence both internationally and at the domestic level. If necessary, he should even look for technocrats with good record outside the politics.

The second is to build consensus on the reform measures both at the national level as well as with the opposition parties. A bipartisan approach would help enforce the reforms, as after all the Congress and the BJP do not have much difference on their economic policies. If the BJP wins Bihar, this may be a little easy but win or lose efforts should be made to reach out to the opposition. If the Congress adopts a confrontational approach, the non-Congress opposition parties like the AIADMK, BJD and others should be approached. In Parliament, a better floor coordination could help.

The third is to pacify some of the BJP allies like Shiv Sena, Akali Dal and PDP who are showing their discomfort quite openly. TDP wants more funds for rebuilding Andhra Pradesh; Akali Dal also wants money from the Centre and so does the PDP in Jammu and Kashmir. Even if Modi cannot give the bonanza they expect, doling out some money will go a long way for these states. If there is a reshuffle he can also give them some weighty portfolios to keep them in good humor. The post Bihar period is the best time for this.

The fourth is to quicken the pace of reforms. The domestic as well as international confidence can be restored only if Modi can put the reform measures in place. The key to success is to give a push for the much needed banking, power, and infrastructure and labor reforms. The Railways too needs a good push. The government should concentrate on things that will give a push to the economy through executive orders where possible. As industrialists like Kiran Mazumdar Shaw feel that the two big challenges Indian companies face in terms of investing or expanding their ventures are stressed balance sheets and the flip flop in policies. Clarity in these two issues will go a long way. The GST, Land Acquisition Bill and other reform measures which are held up in Parliament should be pushed through at the soonest. The next budget is not very far and signals emanating from that will go a long way in restoring investor confidence not only in India but also abroad.

Win or lose, the Bihar elections will have important implications for the political fortunes of the BJP. If it loses, it will mean Modi magic is waning. If it wins, it will be a shot in the arm for prime minister’s development agenda and politically the loss of Delhi was only a blip. If Nitish wins, he will emerge as an alternative to Modi. If he loses it will be his political demise. A win would certainly make Modi go back to his reform pitch and make his slogans like Digital India, Make in India, Stand-up India and Start-up India will be a reality. (IPA Service)