INSIGHT-Advisers to India's Modi dream of a Thatcherite revolution
(Adds background on riots, additional reporting credits)
NEW DELHI, April 6 (Reuters) - When Indian opposition leader Narendra Modi gave a speech on the virtues of smaller government and privatisation on April 8 last year, supporters called him an ideological heir to former British Prime Minister Margaret Thatcher, who died that day.
Modi, favourite to form India's next government after elections starting on Monday, has yet to unveil any detailed economic plans but it is clear that some of his closest advisers and many campaign workers have a Thatcherite ambition for him.
These supporters dismiss criticism of Modi for religious riots that killed some 1,000 people in his home state of Gujarat 12 years ago. For them, Modi stands for economic freedom.
"If you define Thatcherism as less government, free enterprise, then there is no difference between Modi-nomics and Thatcherism," said Deepak Kanth, a London-based banker now collecting funds as a volunteer for Modi's Bharatiya Janata Party (BJP).
Kanth, who says he is on the economic right, is one of several hundred volunteers with a similar philosophy working for Modi in campaign war-rooms across the country. Among them are alumni of Goldman Sachs and JP Morgan trading floors.
"What Thatcher did with financial market reforms, you can expect a similar thing with infrastructure in India under Modi," he said, referring to Thatcher's trademark "Big Bang" of sudden financial deregulation in 1986.
Modi's inner circle also includes prominent economists and industrialists who share a desire to see his BJP draw a line under India's socialist past, cut welfare and reduce the role of government in business.
The BJP is due to unveil detailed economic plans on Monday and is expected to make populist pledges to create a massive number of manufacturing jobs and to restart India's stalled $1 trillion infrastructure development programme.
But conversations with top policy advisers to Modi suggest an agenda that goes further than the upcoming campaign manifesto, including plans to overhaul national welfare programmes. There is also a fierce debate inside his team about privatising some flagship state-run firms, including loss-making Air India.
Bibek Debroy, a prominent Indian economist speaking for the first time about his role advising Modi during the campaign, told Reuters the Hindu nationalist leader shared his market-driven policy platform and opposed handouts.
"It is essentially a belief that people don't need doles, and don't need subsidies," Debroy said. Instead, the government should focus on building infrastructure to ease poverty, he said.
Modi's office did not respond to requests for comment on this article. Senior BJP leader Arun Jaitley, the man often tipped to be the finance minister in a Modi cabinet, said the party would not do away with welfare programmes entirely.
"I don't want to immediately comment on what we will do with each one of them," Jaitley said. "India will need some poverty alleviation schemes, at least in the immediate future, but you could link those schemes with some asset creation."
How far Modi can go down this road if elected will depend on allies in what is likely to be a coalition government. In the last big poll ahead of the election, the BJP was forecast to end up as the single largest party but fall short of an outright majority.
But merely the possibility that India may move to the right has brought free-market champions flocking home from high-flying careers abroad to join Modi's campaign.
Two advisers involved in policy discussions within the BJP's top leadership said partial or total privatisations of Air India and other failing public sector enterprises were being debated.
"We don't foresee any problems in selling a stake in Air India. It is one of those low-hanging fruit," said one of the economic policy advisers, who spoke on condition of anonymity.
Mammoth Coal India, the source of much of the country's electricity generation, is not seen as an easy privatization target, they said.
Possible opposition by allies in government and India's strong labour laws mean that some of these policies will take time.
"If you say is it going to happen in 2014-15, is the finance minister going to stand up and announce privatisation, I'm inclined to think no, but will it figure eventually? The answer is yes," said Debroy, author of a book on the economy of Gujarat, the western Indian state Modi has governed for more than a decade.
When asked about the possible privatisation of Air India, Jaitley said only that it was a difficult issue.
An attack on welfare would mark an ideological shift.
Although India adopted free-market reforms 20 years ago, the man responsible for them, current Prime Minister Manmohan Singh, has refocused on redistribution of wealth in recent years under the influence of Congress party chief Sonia Gandhi.
The battle of ideas between Modi and the ruling Congress party was mirrored in a public spat between two well-known economists of Indian origin, Nobel laureate Amartya Sen and Columbia University's Jagdish Bhagwati.
Sen's belief that public spending on food subsidies and health was needed to end poverty was adopted by Gandhi. The result was a proliferation of welfare schemes, most notably a rural work programme and a giant subsidised food plan.
Modi's economic thinking is closer to Bhagwati, who strongly advocates poverty reduction through deregulation-led growth. Bhagwati's colleague and writing partner, Arvind Panagariya, a former chief economist at the Asian Development Bank, is tipped by some in the BJP for a role in any Modi government.
The Congress party's rural job scheme is credited with lifting rural wages and reducing migration to cities. But critics, including Panagariya, believe the jobs it created - such as maintaining irrigation ponds and village roads - were unproductive.
These ideas have found traction in Modi's circle of advisers, who propose tying such programmes to skills training and putting employees to work on building highways or sanitation projects.
Others in the group propose doing away altogether with dozens of centrally funded programmes.
The parallels with Thatcher don't end with economics.
Like her, Modi is a small-town outsider to the capital's political circles and has a reputation for riding roughshod over opponents, who often pillory him as authoritarian. In Gujarat, critics say he runs a one-man government.
For better or for worse, many Indians fed up with years of weak leadership, find that no-nonsense image part of his appeal.
"We need action, a do-er," said Kanth. "We have seen enough of pussyfooting in the last 10 years." (Additional reporting by Shyamantha Asokan, Nidhi Verma and Doug Busvine; Editing by Raju Gopalakrishnan and Mark Bendeich)
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