MAKING SENSE OF MODI

Since winning the 2014 election on a promise to revitalise India’s economy, Narendra Modi’s government has been engaged in an ambitious reform programme and GDP growth has accelerated. But, as Duncan Bartlett writes, with vast numbers of young people joining the workforce each year, much work is still needed to raise living standards

Prime Minister Narendra Modi is a man of considerable self-confidence and a firm believer in his country’s national strengths. He recently described India as a ‘bright spot’ of the global economy.

He has a point. India’s GDP has recently been expanding at more than seven percent annually (7.7 per cent in the first quarter of 2018), faster than any other economy in the world and even faster than the Chinese economy, if you choose to put your faith in the official figures.

Modi’s record

‘The fastest growing economy in the world’ makes for a good election slogan, especially as economics rises to the top of the agenda ahead of next year’s general election in India.

Mr Modi claims the GDP numbers prove he is a responsible steward of the economy. Yet in a relatively low-income country such as India, which continues to experience rapid population growth, the benefits of GDP growth only really become apparent as more people move into the tax base and become able to contribute a proportion of their income towards infrastructure and services.

Modernising an ancient land

It is common to hear complaints about bureaucracy and inefficiency in India. But the notorious piles of paperwork are diminishing. Many government services are moving online and mobile phone payments are flourishing, as people use fewer banknotes. The demonetisation programme begun in 2016 aims to mop up dirty cash and encourage more internet transactions. There are mixed reports on how effective this move has been in curbing corruption. Critics complain many crooks use other types of graft to avoid getting caught, such as bribing lackeys to open bank accounts on their behalf. Nevertheless, the financial reforms send a signal that change is underway.

Attracting the world’s money

Foreigners who are impressed by Mr Modi’s modernisation programme are inclined to praise India as dynamic. Official figures show foreign direct investment into India is at a record level, although the pace at which that investment is increasing has slowed, suggesting that enthusiasm for India’s dynamism does not always provide a good basis for business.

Mr Modi has been trying to unblock the barriers. He has persuaded international groups to make extensive investments in India’s railways and in its medical sector. Amazon and Walmart have moved into the country’s e-commerce space – a move that not everyone has welcomed. Foreign investment can be presented as a threat to domestic business by its opponents. What would happen if Amazon started delivering groceries on an industrial scale? How would that impact the lives of spice merchants in the markets of Chennai?

Wealth for all

Like many other politicians, Narendra Modi has said that the goal of growing the Indian economy is not just to further enrich the privileged elite but also to improve the lot of the poor. Yet there remains entrenched inequality. According to Barron’s Investment website, India’s richest citizens – those who have at least $1 million in liquid financial assets – hold 48 per cent of the country’s total wealth, well above the worldwide average of 35 per cent.

Official figures show foreign direct investment into India is at a record level

Resentment about such inequality often affects people’s view of politics. Politicians from the opposition Congress Party are becoming inclined to side with those on the Left, who argue that things were often fairer under an old Socialist-style economic system, which India followed until the early 1990s. Voters are sometimes presented with what seems to be a crude choice between prioritising economic growth or supporting policies aimed at helping the poor and reducing inequality.

Populist politics

In India’s robust democratic system, debate about the best path to take can be heated. There are plenty of noisy populist politicians telling voters that the system has failed them, that the ‘big men’ in the capital do not care and that nothing is really changing.

The challenge for Mr Modi’s supporters will be to convince people to be patient. They can point to the number of small but significant changes for which their leader may take appropriate credit. Under the Modi government, there have been steps to ensure safer trains, more reliable insurance, less government paperwork, better medical care, less corruption, cleaner cookers, simpler tax, more e-commerce, and modern payment systems. All of those developments have taken place in a politically stable and largely peaceful country.

India thrives on debate and its politicians expect their every step to be scrutinised. There is much to be gained from regularly reviewing the political and economic situation. But in deciding the way forward, it would be wise for voters to regard recent progress as part of the important initial stage of a long-term plan.


Duncan Bartlett is the Editor of Asian Affairs and a former BBC World Service correspondent

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