Electricity key to Modi's success at India's economic turnaround

Narendra Modi's crushing election win has given rise to hopes for an economic revival in India, but much will depend on whether he can replicate the electricity success of his home state.

India's financial markets have been buoyed by Modi's victory, betting the Hindu nationalist politician can work the same economic wonders for the whole country he did while running the western state of Gujarat for 13 years.

India is structurally short of electricity, and it's hard to see how the economy can be ramped up significantly, especially in power-hungry sectors such as manufacturing, without the provision of reliable power at prices high enough to ensure sustainable supply, but not so high as to choke growth.

One of Modi's key accomplishments in Gujarat is said to be his reform of the power sector, making the state the only one with a consistent power surplus.

What Modi did in Gujarat was less to do with building new power plants and more to do with reforming how electricity was distributed and paid for. His government renegotiated purchase agreements with private power companies, set up a police unit to stop thieving of electricity and ended unmetered supplies to rural areas.

What Modi didn't do was have the state build more power plants, rather its share of generation has gone down while that of the private sector has gone up.