Narendra Modi in Washington, DC: Good show so far, but difficult questions remain unanswered

Prime Minister Narendra Modi’s face-to-face chat with CEOs of major US firms didn’t deviate from the usual script. Modi made a strong case for the moneybags to not lose time to get into the Indian-bound queue citing the return of the reform-momentum, the power of 7,000-reforms for ease of doing business and plenty of opportunities the country offers to investors.

The arrival of the Goods and Services Tax (GST) shows India can take big decisions and implement swiftly, Modi said. The rest of the script so far has remained the same as any other Modi foreign trip—showmanship, exuberant NRI crowds and cheering bureaucrats to support the PM’s claims and the constant message from the PM to the rest of the world—India is the place to be at this point of time, if you miss it’s your loss. So far, so good.

As far as the magic number of 7,000 reforms, the methodology used to arrive at the number isn't clear. Unless and until someone in Delhi sits down and adds each and every decision signed by this government in the past three years as ‘reforms’, it is impossible to have that count. But, for an impartial observer, all of that might not count as reform, per se. That should be an original idea that can have a palpable, lasting impact on the society and economy. Going by that definition, yes, Modi has presided over the completion of a series of incremental reform steps.

The big ones in the list are the GST about to get rolled out from 1 July, the progress made on direct benefit transfer using the Jan Dhan, Aadhaar, Mobile trinity, efforts to rationalize the process of channelizing subsidies and enactment of the crucial Insolvency and Bankruptcy Code, among others. These indeed offer the Modi-government the aura of a pro-reform government, but only in areas where it doesn’t hurt its political prospects. There are a slew of critical issues all global CEOs are worried about in India but no one would talk about it in the open fearing the wrath of the right wing government that isn’t very open to criticism. Remember the government taking on global rating agencies for not extending rating upgrades.

File images of Prime Minister Narendra Modi (left) and US President Donald Trump

File images of Prime Minister Narendra Modi (left) and US President Donald Trump

For instance, in Modi’s three years in office, there has not been much progress on the much needed reforms in critical areas such as acquisition of land and labour for business--one of the big deterrents for businesses looking at India and resolution of problems in the banking sector. The promise of ‘the government has no business to be in business’ remains a promise as far as the banking sector is concerned. Still, 70 percent of the banks in the country by assets remain under the control of the government. Many of them are bleeding with high bad loans and low capital--problems which have been puzzling the government with no real solution in sight.

The GDP is faltering post-demonetisation, with a percentage point dip in the economic growth caused by slowing manufacturing growth and bank lending to industries at the lowest pace in decades indicating a not-s0-rosy-picture. The farm sector is facing a major crisis with many states being forced to go in for loan waivers that together surpass the 2008 disastrous Rs 70,000 crore by UPA by a big margin. Employment generation has been declining raising a big question mark about millions of youngsters entering the workforce every year. These are facts no investor can ignore before putting the money on the table.

In a recent article, the The Economist magazine launched a scathing attack on Modi’s reform claims, saying he is not much as a reformer as he seems.

The article said. “…he has not come up with many big new ideas of his own (the GST and the bankruptcy reforms date back long before his time). His reputation as a friend to business rests on his vigorous efforts to help firms out of fixes—finding land for a particular factory, say, or expediting the construction of a power station. But he is not so good at working systematically to sort out the underlying problems holding the economy back.”

The Economist goes on a step further to say that Modi will not hesitate to create communal tensions to cover up his failures in building the economy.

“The fear is that, if the economy falters, Mr Modi will try to maintain his popularity by stirring up communal tensions. That, after all, is how his Bharatiya Janata Party first propelled itself to government in the 1990s. Mr Modi himself was chief minister of Gujarat in 2002 when rioting there killed at least 1,000 people, most of them Muslims. To this day, he has never categorically condemned the massacre or apologised for failing to prevent it,” the magazine said.

Further, under Modi, critics of his policies, particularly about communal issues, have been dealt with unfairly, the paper argues. “Hindu nationalist thugs intimidate those who chide the government for straying from India’s secular tradition…One of the few media companies that dares to criticise the government has been raided by police on grounds that would not normally attract such heavy-handedness,” the piece says.

To progress on his path, Modi has to first fight these perceptions and acknowledge the faulty areas before going on to chest thump the government’s achievements, many of which are ideas from the past. Hard-selling India story overseas is the first priority of any prime minister, but it needs to be backed with credible progress on areas that really require action.

Coming back to the context of his first meeting with US President Donald Trump today (Monday) afternoon, there are two tasks cut out for Modi. One, to make a pressing case in India’s favour with respect to the HI-B visa problem that has put many Indian IT firms and workers under severe stress. The second is to bring the issue of climate change on the table where India has openly contradicted US stance by supporting the Paris climate accord.

The issue of work permits in US is most critical for India. With 60 percent of total revenues of Indian IT firms coming from US, this should be the big priority of Modi more than photo-ops and mere optics. According to a report in the Financial Express, any progress is unlikely on this front. But, one needs to wait and watch.


Published Date: Jun 26, 2017 11:00 am | Updated Date: Jun 26, 2017 11:53 am


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