The working middle class in the West faced difficulties due to globalisation. But unlike in the West, the rise of right-wing populism in India does not have an economic rationale. Instead, it actively sabotages the economic openness which has worked well for India in the past.
The global financial crisis of 2008 had important long-term political consequences. Many experts see the event as the catalyst which accelerated the dominant political trends we see around the world today – de-globalisation, trade protectionism, right-wing populism and anti-immigrant sentiments. The rise of the first two trends is primarily the result of the increasing integration and uniformity of developmental policies that countries followed, particularly after the fall of the Soviet Union. That means that if the West – which actively promoted globalisation and foreign investment – de-globalises and turns inward, developing countries will likely follow suit.
No other country depicts this phenomenon more accurately than India. Prime Minister Narendra Modi campaigned for power in 2014 as an economic reformer: He actively liberalised Gujarat’s economy, made land acquisition easier, and turned the state into a favourable foreign investment destination. But when he became prime minister, the global situation around him changed – countries in the West were beginning to turn suspicious about trade and globalisation.
Modi actively tried to change the tide in his first term; he routinely spoke in various global forums about the importance of trade, globalisation and economic openness. But increased protectionism in the West, along with India’s woeful infrastructure, under-skilled labour force and land acquisition difficulties, made the objective of economic liberalisation difficult for him. When Modi came back to power in 2019, he accepted this reality and turned inward himself, by levying trade tariffs and banking on populism and Hindu nationalism to stay in power.
While the U.S. and Western Europe also saw a similar populist rightward shift in their politics, the reasons for that were completely different from India’s reasons. In 2013, Serbian economist Branko Milanovic published a graph called the ‘elephant graph’, which explained the rise of populism in developed countries. It showed that in the age of hyper-globalisation through the 1990s, two classes benefited disproportionately: the middle class in developing countries like China and India, and the ultra-rich of the developed world.
The working middle class in the developed countries experienced either stagnation or only marginal gains in income due to globalisation. Owing to economic efficiency gains, companies moved their production units to developing countries, where labour and raw materials were available at a lower cost. The resulting job losses made the working class in the developed world anxious and insecure about their future. Their predicament was further exacerbated by the 2008 financial crisis and the influx of immigrants following the refugee crisis in the Middle East. Automation and artificial intelligence further exacerbated the situation by eliminating jobs in the manufacturing and the services sectors.
This lack of job prospects – along with the fear of cultural change – made the situation ripe for right-wing populists. The rise of Trump, the popularity of right-wing parties in Europe and the Brexit referendum were all logical extensions of the anger of the working class towards the establishment.
In India, however, the working middle class saw rapid gains in income during the same time and poverty was reduced drastically. India became the world’s fastest-growing economy, overtaking China. Even though economic growth plummeted in the final years of the UPA-2 regime, it was too early for India to reject the model of trade liberalisation and globalisation, which had clearly worked wonders for the country. What then explains the acceptance of Modi and his populist regime – arguably the most statist and inward-looking government India has had in about 30 years?
The truth is that, unlike in the developed world, the rise of right-wing populism in India does not have economic reasons. It is largely the result of a lack of alternatives, a fragmented opposition, successful propaganda by the BJP and the charisma of Modi. In the U.S., if Trump is the result of the grievances that the working class has faced over the past 30 years, then in India, it is Modi who decides the grievances that the working class should care about.
Take immigration as an example. Immigration is a dominant electoral theme in American and European politics. The influx of migrants from the Middle East and North Africa have threatened the job prospects of the working class in recent years. Many working-class Americans and Europeans have also been irked by the fact that their legislative assemblies increasingly see representatives who do not look like them. Terrorist attacks carried out by Muslims born within Europe and America also created further fear and paranoia.
In India, however, none of this is true. In an article in Livemint titled ‘India is not being overrun by immigrants’, Chinmay Tumbe states that the immigration rate in India is less than one percent, as compared to the U.S. and Western Europe, where it ranges between 10 and 15 percent. The number of foreign residents born outside India actually fell between 2001 and 2011, taking the immigration rate down to a mere 0.4 percent. By contrast, the percentage of people born outside the UK doubled between 1993 and 2015. Though immigration is a genuine and complex issue in northeast India, the fact that the BJP was able to use it in the Jharkhand and Delhi elections – while even increasing its vote share in those states – speaks volumes of their ability to control the popular narrative.
It remains to be seen how long ‘manufactured’ issues such as this will sway voters in the BJP’s favour. But India faces several other challenges which need immediate responses. With a sputtering financial sector unable to revive domestic private investment, and falling tax revenues severely curtailing government spending, India badly needs foreign investment. India needs a globalised and open world more than any other country. As Fareed Zakaria rightly pointed out in an interview with India Today, “The United States and China can float with protectionism because they are much more open than Indian economy. Indian needs openness; it needs foreign investments; it needs competition to be world class. If India starts closing itself off then it’s not good for India.”