Tough decisions ahead for a triumphant Modi

When the firecrackers are spent, the drums and cymbals put away and the last of many tonnes of victory laddoos (boiled sweets) distributed, the new Indian Government will have to start taking a series of tough decisions to address problems in an economy which has shown all the signs of drift and neglect over the past few months.

Maybe it was the marathon election itself; maybe it was the sometimes conflicting requirements of Manmohan Singh's Government and the ruling Congress Party hierarchy, but in recent times it seems that a paralysis had gripped the administration as it glided towards its humiliating defeat at the polls.

The first major task for Narendra Modi's resurgent Bharatiya Janata Party (BJP) Government after its Ministers have been selected and sworn in, will be to produce a Budget by next month or at the latest by July. This is likely to be quite different from anything seen in the past decade, containing roadmaps towards fulfilling key BJP election promises such as bringing broadband to every village, WIFI to every town, cleaning up the polluted River Ganges and the creation of 100 new cities to absorb the trend towards rapid urbanisation.

Controversially, it may well start an attack on India's notoriously complicated labour laws, including the previous Government's measure of guaranteeing 100 days paid work a year to the rural poor, which industrialists have faulted for restricting the movement of workers to productive urban jobs.

The industrial sector wants more – cheap land for development, reliable power supplies and above all, better infrastructure. In return it promises to create the 12 million new jobs every year that are needed to absorb a growing young workforce – around half of the nation's 1.2 billion people are aged under 25.

Unemployment is on the rise and the Government's tax-to-GDP ratio has slipped from a peak of 12.5 per cent in 2007-08 to 10.2 per cent now. On the other hand foreign exchange reserves are high and the production of food grains is at record levels.

There is no immediate threat of food shortages and famine which would inevitably lead to significant unrest, but forecasts of a developing El Nino weather pattern could store up problems in the medium term.

The Reserve Bank of India is on record as saying the country's inflation, standing at 8.1 per cent, is its single biggest priority. It wants to cut that by at least two per cent, but three interest rate rises since September have not produced the required results. Further rises would cut across the BJP's plans to reduce the jobless rate by stimulating industry and lead to confrontation between Modi and the bank's hard-line Governor, Raghuram Rajan.

In its manifesto the BJP promised to slash red tape and encourage foreign investment in order to bring down unemployment. This worked when Modi was Chief Minister of Gujarat, but could run into difficulties on the national scale as it is the states which have much of the power to approve projects – and especially as the BJP manifesto has promised more autonomy for state governments.

One factor that will work in the BJP's favour is the size of its election win. With such a clear mandate for change it would be a brave Chief Minister that would stand in the way of Modi's vision for a "new and resplendent India".

Modi did not address foreign policy as comprehensively as domestic issues during the campaign, and this will give him more room for manoeuvre now he is in charge. Past BJP Governments have always talked tough on issues such as relations with Pakistan and the disputed territory of Jammu and Kashmir.

However, Pakistan President Nawaz Sharif was one of the first foreign leaders to congratulate Modi on his victory and during the campaign the BJP leader said he saw no reason why relations between the two countries should not improve as long as there were no repeats of incidents such as the infamous 2008 Mumbai terrorist attacks which killed 164 people.

China has expressed the hope that there will be closer ties with India under a BJP administration, noting that there were a large number of Chinese enterprises investing in Gujarat. However, Modi has been uncompromising on the unresolved border issues between the two countries and will certainly demand that Beijing dumps once and for all its outrageous claim on the whole state of Arunachal Pradesh, which it calls Southern Tibet.

Modi has not travelled a great deal in recent years partly due to visa bans put on him by the United States and several European countries for his failure to halt the deadly Hindu-Muslim riots in Gujarat in 2002 (Modi has always claimed he did his best to stop the violence in which around 1000 people, most of them Muslims, died).

Any remaining restrictions will obviously be lifted now he is the leader of the world's biggest democracy and President Barak Obama effectively ended the US ban by calling Modi to congratulate him and inviting him to visit the White House.

Congratulations have also come from Australian Prime Minister Tony Abbott who said he looked forward to welcoming Modi to the G20 Summit in Brisbane later in the year.

As Modi and the BJP plot India's course for the next five years, there are big question marks over the future of the routed Congress, India's one mighty Grand Old Party now reduced to a rump of around 60 seats in the 543-seat Loc Sabah (Parliament).

I suggested to one dispirited Congress official that this resounding rejection should bring an end to the Nehru-Gandhi dynasty which has dominated the party, and through it the government, since independence in 1947, especially as its latest member, Rahul Gandhi, had made such a poor show against Modi in the election.

The official rejected this argument. "The family are the glue that keeps this party together," he said. "Without them Congress will disintegrate into various regional factions."

Hardly before the final votes were in, Congress insiders were talking about the promotion of Rahul's sister, Priyanka Gandhi Vadra, who did not stand in the election, as its next leader.

Priyanka would probably have made a better candidate than her diffident, colourless brother, but the obsession with the past glories of the Nehru-Gandhis is leading Congress into a blind alley where its ambitious young members are frustrated at having their path to the top job consistently blocked by the latest member of the family.

Democracy requires both a government and an opposition. How a depleted Congress will handle the latter role over the next five years will determine whether it still has a future in India's political life.