1. Narendra Modi shines as administrator but fails as reformer, says The Economist

Narendra Modi shines as administrator but fails as reformer, says The Economist

The Economist argues that Narendra Modi has mostly looked for quick fixes to address the symptoms of chronic problems plaguing the Indian economy, while failing to solve the root causes of such problems systematically.

By: | Updated: June 23, 2017 3:28 PM
The Economist says that Narendra Modi needs to do much more if he is to truly unlock India’s huge potential and not squander a golden opportunity. (Image: Reuters)

Narendra Modi is not a big reformer of economy but is rather just a tinkerer of administrative tasks who got extremely lucky with the sharp fall in the global crude oil prices adding to India’s economic growth, despite botching up with demonetisation and shying away from land and labour reforms. That is the message by The Economist, which, in its latest issue’s lead article and Briefing column, has questioned the merit of most of his initiatives ranging from domestic manufacturing push to cleaner India, branding many of those merely as PR blitzes and photo-opportunities.

The Economist, which has been mostly critical of Prime Minister Narendra Modi’s rule over the last three years and even before his election win in 2014, has also in some detail pointed out shortcomings in GST — the most sweeping tax reform in India since independence, due to be implemented on July 1 in a grand midnight ceremony. It has termed GST as an ‘opportunity wasted’, as the complicated version of the tax regime that India is implementing will improve the economic growth by only half of what an ideal solution would have delivered.

The publication has argued that Narendra Modi has mostly looked for quick fixes to address the symptoms of chronic problems plaguing the Indian economy, while failing to solve the root causes of such problems systematically, such as through privatisation of state-owned businesses, development of freer and more functional capital markets and making the business environment more friendly for attracting foreign investments into the country.

By contrast, Narendra Modi’s supporters mostly hail his economic policies, which have led to sustaining and improving an already impressive GDP growth, plugging subsidy leakages by using bank accounts and Aadhaar UID numbers, significantly lowering the inflation to much cheer across the nation, achieving hard-earned cuts in fiscal deficits to nearer to the mandated targets.

Indeed, falling crude oil prices have certainly helped India, which depends on imports to meet about 80% of its energy requirements. Although, Narendra Modi’s administration has been quick to use the fall to deregulate retail fuel prices and make those market-linked, which has freed up a significant amount of money which the government otherwise would have to pay to the oil marketing companies in order to compensate for their losses.

As for the ease of business and foreign capital flows, The Economist itself pointed out that technology giants such as Amazon and Apple see India as the next frontier. Foreign investments into India are surging, with the country attracting nearly $61 billion in foreign direct investment in the last financial 2016-17, a growth of 8% over the previous year.

On the other hand, demonetisation after all did take a toll on the Indian economy, though not immediately, but with the lag of one quarter, as the latest data showed that the country’s GDP growth slowed to 6.1% in the fiscal fourth quarter Jan-Mar of the last financial year.

Many believe that the long term impact of initiatives to get more businesses under the formal economy and thus the tax net would result in the GDP growth accelerating once again after the short-term effects of the demonetisation wane. Fitch Ratings predicts India’s GDP growth to be at 7.4% in the current financial year 2017-18, and improve to 7.5% in the next financial year 2018-19, and further to 7.6% in 2019-20.

The Economist though has submitted that Narendra Modi needs to do much more if he is to truly unlock India’s huge potential and not squander a golden opportunity by just biding his time till he gets greater majority in the Rajya Sabha and a second term in the next Lok Sabha elections.

  1. L
    l k
    Jun 23, 2017 at 7:13 pm
    I agree with the economist. Modi is just fooling around. My dreams of seeing India becoming free market economy has been shattered by socialist Modi.
    Reply
  2. V
    Vishwas Patil
    Jun 23, 2017 at 5:06 pm
    Mumbai-Nagpur Super Highway, Mumbai-Ahmedabad Bullet train are personal projects of Fadnavis and PM Modi with least regard to any alternate solutions, leave aside environment. Any opposition - of farmers or other will be crushed. Remember Sardar Sarovar project. My dream and belief any any cost. I personally had very high hopes but now all hopes dashed. Power and only power with firm belief that only they the best. Only being honest and being harsh administrator does not help. Many good initiated were totally wasted - DeMo, GST ... a long list.
    Reply
  3. V
    Vishwas Patil
    Jun 23, 2017 at 4:57 pm
    Modi, his cabinet colleagues (except Parrikar) are of merchant and lender's mentality. They are honest but not open minded to accept others' contrary views. Unless technology and large projects are boosted through liberal bank funding, we will continue to be slaves exporting cheap labour as exporter of mundane products and services. Who will dare to dream big when bank will jail him if he fails? Once NPA he is totally finished with no chance to retry. This Govt. more more coming out as control freak. GST initiative is wasted by using it more as a toll to control tax evasion. Lower level corruption is same. What is required is enabling good living standard without bribe income. But to buy a home or educate your children need crores. These croney capitalists control this Govt.
    Reply
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    Hari Hara Krishna Kumar
    Jun 23, 2017 at 4:41 pm
    I completely agree with the Economist's view on Mr.Modi and his policies. He is certainly a good administrator, and there are no doubts about it. But, when it comes to strategic thinking (especially on Economics), the general perception is that he doesn't makes the cut. With the economy struggling to grow fast, the demonetization dragged the economy further. Let's hope that Mr.Modi would be able to take corrective actions to bring economy back on track. This government has to stop focusing on the activities that curtail individual's freedom and should start focusing on actions that take our great nation forward. May God bless India.
    Reply
  5. K
    Kaustav Roy
    Jun 23, 2017 at 4:21 pm
    The cancers of 70yrs of mis-rules will take reasonable time to improve, if people gives support. Any great result within 3 yrs is highly unrealistic expectation. But initiatives are transparent, positive,pro-people development oriented hence better results are expected.
    Reply
  6. H
    Hridyesh Khandelwal
    Jun 23, 2017 at 4:21 pm
    The Economist? Lol. This is the same magazine that criticized India's Mars Orbiter Mission.
    Reply
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