Despite India becoming the first nation to successfully send a satellite into orbit around Mars on its first attempt, Narendra Modi knows that economic success will ultimately be the only barometer his legacy will be judged on.
Timely it may be that the day after, Modi?s government launched the new ?Make in India? initiative to promote India as a global manufacturing hub nationally and abroad, thereby boosting the country?s economic prospect.
This is a great opportunity for the government to position India as a manufacturing powerhouse able to match China?s dominance on the world stage. The chance to create employment for over 10 million people and encourage foreign direct investment (FDI) will be the prime minister?s main concern. However, India has always been a pivotal part of the world?s manufacturing community and the issues that plague it?s rise is that of economic reforms which remains largely unresolved.
Take for instance, the government’s urgent need to reform archaic laws to facilitate economic growth and infrastructure growth. The surge in economic growth in the mid-1990s was only achieved after a radical set of reforms were put in place. Policymakers must avoid partisan politics for the sake of swift reforms.
There are also concern among the foreign investors that Indian law does not go far enough to protect their interest. To give an example, the government must address intellectual property rights regulations and enforce the rule of law whenever it has been violated which will protect foreign investors investing resources, technologies and business know-how in India. Greater protection will ensure higher volume of FDI in industries, infrastructure and pharmaceutical sectors.
Infrastructure, transportation infrastructure in particular, remains India?s Achilles? heel and is quite frankly inadequate to meet India needs. Conversely, India requires further FDI to invest in its roads, railway capacity. The benefits of an improved transport connectivity and capacity will bring the workforce closer to the cities, allow seemless movement of goods and people and increase economic efficiency. Infrastructure is a vital component to achieving Modi?s ambitions ? be it telecoms, retail, defence & security and transport.
It?s not all bad news, Modi?s government in attempt to make India more competitive, will tackle several long entrenched issues such as ease of doing business, labour reforms and urbanisation.
According to World Bank, India ranks 134 out of 189 countries in the category for ease of doing business. There is a clear disconnect between the government?s ambition to attracting FDI and the reality of doing business in India. The country is largely encumbered with poor governance. India scores poorly when its governmental departments deal with companies on matters like obtaining licences, permits, paying taxes, etc. The ?Make in India? will address many of these issues to a certain degree.
Labour reforms remain a very sensitive topic politically in India, yet, with China experience a surge in labour unrest amid economic slowdown, this is India?s opportunity to position itself as an alternative to China and deliver on its promise of economic growth and employment. The government has already began making progress on this front with proposed changes to allow businesses to make greater use of apprentices, allowing workers to work overtime and allow women to work night shifts.
It is estimated that two thirds of all Indians live in villages. Should the ?Make in India? drive be successful it has to cater to the millions of workers expected to work in the manufacturing sectors based in cities. However, it seems the Modi administration is keen on urban growth; the finance minister?s first budget speech reflects the government?s ambition to creating ?smart cities? across the nation.
It?s no doubt India is entering a decade of change and growth, however, the rate of success will be determined by how far this government is willing to implement the reforms it needs to achieve this newly found ambitions. Just like the scientists behind the Mars Orbiter Mission have made us proud, Modi government must do what?s necessary to achieve the unthinkable ? an India finally at its potential.
By Sarosh Zaiwalla