Nationwide protests raise fears that Modi's agenda may hurt economy

PM Modi's appeals to a base that wants India to abandon its secular roots could undermine his efforts to attract foreign investment.

Escalating protests against India’s new citizenship law have raised concerns that Prime Minister Narendra Modi has taken his hardline Hindu agenda too far, increasing the risk of communal bloodshed and threatening to undermine his plans to attract foreign investment.

Police stormed university campuses across India—from east to west, including the capital Delhi—to quell week-long protests by students against a law that bars undocumented Muslims from neighbors Pakistan, Bangladesh and Afghanistan from seeking citizenship while allowing in migrants from other religions. India’s secular constitution puts all citizens on par before law.

Protesters have vowed to intensify their demonstrations, showing that Modi’s appeals to a base that wants India to abandon its secular roots could undermine his efforts to attract foreign investment. The unrest has also fueled concerns about internal stability and whether Modi can sustain the foreign policy momentum to attract investment to India’s struggling economy and raise its profile as a counter to China.

“India may be moving into a phase of domestic turmoil so intense as to preoccupy the country and put its foreign policy on a slower or more disrupted track,” said Alyssa Ayres, a former U.S. diplomat and senior fellow for South Asia at the Council on Foreign Relations in New York.

Seen as a precursor to Modi’s plans to implement a nationwide citizenship drive to weed out undocumented migrants, the law is the third major move since May that’s affected the country’s Muslim population. In August the government scrapped the autonomous status of India’s only Muslim-majority state of Kashmir, where Modi’s local political opponents have been held in detention ever since. Some 1.9 million people in Assam -- many of them Muslims -- risk losing their Indian citizenship after the state enforced a citizens register in August. And in November, the Supreme Court handed Hindus control of the disputed site of a demolished mosque.

Alienating friends

The rising anger is the first major public rebuke for Modi, who has so far enjoyed unparalleled personal popularity since he was first elected in 2014, despite deeply disruptive policies like his decision three years ago to demonetize 86% of the country’s currency, which led to a prolonged period of business instability and personal hardship.

“This is the single biggest challenge Modi has faced,” said Delhi-based political analyst and Modi’s biographer, Nilanjan Mukhopadhyay. “With this citizenship law, people think things have probably gone too far. People are genuinely worried about whether India is becoming an illiberal society.”

Modi has made efforts to pitch India’s diversity as an advantage for investors. But protests following the new law have also hit the nation’s foreign policy after a planned visit by Japanese Prime Minister Shinzo Abe to meet Modi in Assam was postponed. Another trip by foreign Minister A.K. Abdul Momen of Bangladesh, a key ally in Asia, was also called off.

His recent decisions are on the radar of India’s crucial diplomatic partner, with the U.S. State Department urging the nation to “protect the rights of its religious minorities in keeping with India’s Constitution and democratic values.”

This latest move coincides with deepening economic discontent. Asia’s third-biggest economy is growing at its slowest pace in more than six years and unemployment is the highest in more than four decades.

“If the protests become bigger and gain momentum, that might have a bearing on the market,” Abhimanyu Sofat, head of research at IIFL Securities Ltd. in Mumbai. “For now it has changed the focus from economic issues the country is grappling with, like lower growth and higher inflation. More of the government’s bandwidth may be taken up with handling the protests, which is a concern.”

Opposition strengthens

Modi’s political opponents joined forces on Monday, demanding a judicial inquiry into police forcibly entering the Jamia Millia Islamia university in Delhi. Hundreds of protesters demonstrated outside capital New Delhi’s police headquarters till past midnight on Sunday, calling for an end to police brutality and demanding the law be overturned amid chants against Modi and and his powerful home minister Amit Shah.

Rahul Gandhi, leader of the main opposition Indian National Congress, called the citizenship laws “mass weapons of polarization.”

Opposition parties announced a nationwide protest on Dec. 19 and three large states said they would not implement the new law. The defiance of state governments comes within days of Modi losing his hold over Maharashtra state, where opposition parties and a former ally have joined hands to rule India’s richest province.

Shah showed no signs of trying to calm the dissent on Monday, pledging at an election rally in Jharkhand that work on the controversial Ram temple would soon begin after the Supreme Court handed complete ownership of the site to Hindus over Muslims on Nov. 9. “The Supreme Court has given its verdict. Now within four months, a temple of Lord Ram touching the sky will come up in Ayodhya,” Shah said.

(With assistance from Ronojoy Mazumdar)