The ascent of an apparently decisive man as India's next prime minister has been greeted euphorically by the country's stock market, which has risen to record levels in recent days. Foreign investment may start flowing again, and, with fresh reforms on the anvil, India seems back on track to become the world's next economic powerhouse.
If that induces a sense of déj vu, it is because the reaction to Manmohan Singh's appointment as prime minister in 2009 was eerily similar. India's biggest businessmen, along with foreign leaders and journalists, vied to hail Singh, now universally derided, as an inspirational trailblazer -- the "architect of modern India," in Pakistani dictator Pervez Musharraf's unctuous words.
The expectations for Narendra Modi are even greater. The exit polls predicting victory for his party, the Bharatiya Janata Party, alone roused stock markets to new highs. And it is now time to ask -- momentarily leaving aside questions about Modi's mode of crony capitalism and sectarian outlook, and the dark days his victory portends for political freedom in the subcontinent -- whether the periodic craving of India's shareholding class for efficient economic leadership is a sign of helplessness before intransigent reality.
Certainly, it reflects a failure to acknowledge that all Indian governments elected to power since the economy's liberalization in 1991 have been necessarily torn between their rhetorical commitments to the struggling majority and their real proximity to the tiny minority of the rich who boost growth rates. In India, accelerating growth alone doesn't win you elections -- as the BJP discovered in 2004. You must be seen to be doing something for the poor, as the Congress party did before 2009, when an ambitious rural-works program brought its coalition back to power.
The inevitable conflict between the demands of mass democracy and a capitalism geared to private wealth creation is what makes for indecisive leadership, more than any personal traits (after all, Singh, a trained economist, was hailed as a terrific steward for much of his tenure).
Also, India's economic difficulties are structural and deep-rooted, and they won't disappear with the waving of a charismatic leader's magic wand. India's economic boom -- part of a worldwide expansion before the crisis of 2008 and led by debt and exceptional flows of foreign capital -- was always going to be unsustainable in the absence of a solid manufacturing base and long-term investments in social and physical infrastructure.
Last year, the smallest hint the era of excess liquidity created by the U.S. monetary stimulus might be ending caused India's biggest financial crisis since 1991. In any case, cheap money of the kind that flowed into India wasn't generally beneficial: It enabled easy finance for local corporations, which then garnered national resources such as spectrum, coal, land and iron ore and created artificial wealth on the stock market.
No wonder the much-celebrated double-digit gross domestic product growth in India was largely jobless -- an alarming fact in the world's second-most-populous country, which must produce one million new jobs every month simply to absorb new entrants into the workforce. Employment in manufacturing as well as agriculture has actually shrunk during the past decade.
Nevertheless, India was hailed by its corporate chieftains -- who were naturally keen to see foreign capital flowing in -- and day-tripping foreign journalists as a "tiger" economy. It was repeatedly yoked with China's immensely larger, productive and broad-based economy.
But India needs a manufacturing revolution before it can even be considered in the same economic league as China. This is hardly the work of a day, or even a couple of electoral cycles. And it must begin with the recognition that the regime of crony capitalism and rent-seeking that delivered impressive growth rates for a while has put the country on a trajectory to oligarchydom.
The economists reciting the mantra of "more reforms" clearly had many compelling arguments about the need for less regulation. But they rarely paused to examine the real nature of India's economic growth, let alone to challenge its biggest and mostly undeserving beneficiaries: India's leading business houses, who created much paper wealth through the stock market, then used the money to finance elections (and control the media).
Despite the massive tax concessions they received from grateful politicians, they remain in a huge debt trap, with a massive exposure of close to $200 billion in loans from abroad, their interest payments far exceeding their annual earnings. Stressed loans constitute $100 billion, or 10 per cent of all loans -- a figure expected to rise to 15 per cent by 2015. The Organization for Economic Co-operation and Development's think-tank claimed in a report earlier this month that any modest recovery in capital investment and domestic consumption in India is likely to be offset by the worsening balance sheets of the country's major banks.
Cheap money can engender momentary illusions of growth, even affluence. But it is no substitute for labour-intensive productivity and innovation, especially in a populous country such as India.
It remains to be seen whether Modi will even attempt the necessary reconfiguring of India's economy. Given the country's formidable basic problems, he may well meet Singh's fate: despised by the very same people who once ecstatically heralded him as India's saviour.
Pankaj Mishra, a Bloomberg View columnist, is the author of From the Ruins of Empire: The Intellectuals Who Remade Asia.