A Slowdown in Modi's Backyard

His currency policy hurts export-dependent Gujarat, which he led for 13 years

- Bibhudatta Pradhan & Iain Marlow

Indian Prime Minister Narendra Modi vaulted to national office in 2014 after presiding over more than a decade of robust economic growth in Gujarat, India’s westernmost state. During his almost 13 years as the state’s chief minister, Gujarat’s economy grew faster than the rest of India, and its per capita income almost quadrupled. The “Gujarat Model” became a byword for Modi’s pro-business policies— and a promise of what he might do for India.

Yet his move last year to ban 86 per cent of the country’s paper currency in a bid to stamp out corruption is having a particularly harsh effect on the state’s economy, which is heavily dependent on export, trade, and manufacturing. A new national sales tax is hurting, too. “Development has slowed here,” says Kanti Bhai Yadav, 40, a small-restaurant owner who voted for Modi in the past three elections. Yadav says his situation hasn’t improved since Modi left for New Delhi. “Maybe it’s because as a prime minister, he is thinking of the whole country,” he says.

The economy is slowing across India, with gross domestic product falling to 5.7 per cent in the quarter ended in June from 7.9 per cent a year earlier. That’s fuelled criticism of Modi’s national economic record before an election in Gujarat expected in December. It’s doubtful the disorganised opposition, embodied in the Indian National Congress, will be able to loosen the grip that Modi’s ruling Bharatiya Janata Party has on the state, but the discontent is a warning as he builds toward the next national election in 2019, with jobs and incomes likely key issues.