A new business idol

INDIAN industry is in a funk and has decided that one man is the answer. “We’re waiting for NaMo,” says a tycoon. It is only a slight exaggeration to say that almost everyone in a suit and with a pulse in the private sector wants Narendra Modi, the chief minister of Gujarat state, to become prime minister after elections due by May 2014. Private-equity types, blue-chip executives and the chiefs of India’s big conglomerates all think he can make the trains run on time. Some Western investors hope Mr Modi, the son of a tea-stall owner, will be India’s Margaret Thatcher, a populist reformer who forces through measures that put the economy on a higher growth path. Bankers in Mumbai reckon the stockmarket will jump by 20% if Mr Modi wins.

Indian firms do not win elections. But some do influence them by illicitly funding political parties, often on a royal scale. And companies’ reaction to politics matters. The current coalition, led by the Congress party, has been a slow and reluctant reformer. This helps explain why private corporate investment has slipped from 14% of GDP in the year to March 2008 to 10% or less now. Partly as a result, the economy is misfiring, with growth down to about 4% from a peak of 10%.

Big business has not always been so infatuated with Mr Modi. When anti-Muslim riots in Gujarat in 2002 killed over 1,000 people, several prominent bosses criticised him for turning a blind eye to the violence, or worse (he says he has nothing to apologise for). Whereas Mr Modi’s Hindu-nationalist Bharatiya Janata Party (BJP) has always been popular with small entrepreneurs, big firms have historically cosied up to Congress, which has run two cranky coalition governments since 2004.

India’s chattering classes still see Mr Modi as beyond the pale, even if he is the front-runner in the opinion polls. But Indian bosses have become so fed up with the status quo that they are prepared to overlook Mr Modi’s past. Ratan Tata, the widely admired former boss of Tata Sons, India’s biggest firm, has signalled his approval. Mukesh Ambani, India’s richest man and its most politically savvy tycoon, lauds Mr Modi, even though his family firm, Reliance Industries, was built partly with the blessing of Congress during the 1980s.

Mr Modi has courted big business assiduously. When Mr Tata needed a new location for a car factory after a plan to build it in eastern India fell through, Mr Modi sent him a text message welcoming him to Gujarat. By the standards of Indian politicians that is tender loving care. Mr Modi runs a summit every two years at which executives are roused into an evangelical fervour about Gujarat. It features creepy sycophancy towards Mr Modi and hyperbolic pledges of investment, all captured on camera to be webcast by the media-savvy chief minister.

But the love affair has substance, too. Mr Modi has run Gujarat well. It is one of India’s faster-growing and most industrialised states. His critics say the poor have been neglected and it depends too much on petrochemicals, including a big Reliance plant. But businesspeople see good roads and ports, reliable electricity and a lack of graft or red tape—in contrast to the rest of India. Mr Modi is more than a personality cult. He implements the policies he promises, and has built a credible administration beneath him. Foreign firms including Ford and GM have flocked to Gujarat.

Corporate support for Mr Modi has also risen because relations between business and the Indian government have broken down. During the 2000-09 boom, crony capitalism became rampant in industries with links to the state, such as infrastructure, mining and telecoms. This has produced a fierce public and legal backlash. Several tycoons have faced investigation. On October 15th police said they were investigating Kumar Mangalam Birla, the boss of Aditya Birla Group, as part of an inquiry into an alleged coal-mining scam. The firm denies wrongdoing.

Optimists argue that the system is healing itself. A basket of the shares of 75 politically connected firms has underperformed the wider stockmarket by 50% since late 2010, according to Saurabh Mukherjea of Ambit, a broker. A Tata executive argues that clean firms are no longer at a disadvantage. But the business environment is chaotic. Banks are unable to foreclose on bankrupt firms. Officials avoid decisions for fear of being accused of favouritism. Hundreds of vital public-private partnerships, from power plants to roads, are in financial distress but no mechanism yet exists to restructure them. Regulation in some industries, such as telecoms, is broken. India has become a tougher place for dodgy firms. But until it creates better institutions and new and clearer rules it is a more unpredictable place for clean firms, too.

A different Modi operandi

It is this mess that many businesspeople hope Mr Modi can clean up. Few imagine he could run India as he does Gujarat. Even assuming a big swing to the BJP he would have to manage a coalition government with rebellious smaller regional parties, and cope with India’s rowdy states. Perhaps over time Mr Modi could build a more ambitious agenda for reform—for example, liberalising labour laws—and try to win public consent for it, much as Margaret Thatcher did. But that is some way off.

Instead, companies have a more mundane wish list. They hope Mr Modi will make decisions fast. They want to see him unleash his administrative skills on the central-government machine, banging heads together, rationalising Byzantine procedures and making rules predictable. Clean firms also hope he could use his oratory and force of personality to combat graft. Plenty of people may feel India Inc’s support for Mr Modi is unprincipled. But at a time when confidence in the country’s economy is at a low, it is easy to see why firms are drawn to pragmatism, and backing their best hope for a government that works better.

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