Modi Won't Create a Second Miracle in India

With just two weeks to go until poll results are announced in India, local stock markets have soared. Investors are giddy at the prospect that Gujarat's Chief Minister Narendra Modi will lead the opposition Bharatiya Janata Party to a sweeping victory, hoping he can revive growth rates that have dipped below 5 percent a year, half of what they used to be. Under Modi, Gujarat's gross domestic product growth has consistently exceeded the national average: He's hailed as a proven, pro-business achiever.

There are two problems with this overweening optimism. First, the so-called Gujarat Miracle is somewhat overhyped. Although healthy, the state's GDP growth has not exceeded that of other top industrial states like Maharashtra. (The fastest growth has been recorded by poor, backward states like Bihar and Uttarakhand, which are playing catch-up.) Gujarat's social indicators have never been good, which is why a committee on state development levels headed by central bank Governor Raghuram Rajan ranked Gujarat 12th out of India's 28 states.