After the hype, now comes reality. India’s Narendra Modi won a thunderous electoral victory in May. His supporters predicted rapid change as the prime minister began unshackling an economy hobbled by graft and political drift. Comparisons with Margaret Thatcher of the UK and former US president Ronald Reagan were bandied about.
If his early months are an indication, such allusions already seem fanciful. Mr Modi’s debut budget was cautious, verging on the underwhelming. He has demurred on potentially radical reforms, from bank privatisation to corporate tax reform. Last week, he single-handedly blocked a crucial global trade deal. Deeper confusions remain about his economic beliefs as well, which often appear to rest on little more than slight electoral slogans, such as “minimum government, maximum governance”.
Those hoping for market-oriented reforms will take solace, therefore, from Mr Modi’s appearance at the New Delhi launch event for Getting India Back on Track, a collection of essays from prominent Indian academics, compiled by the Carnegie Endowment for International Peace, a US-based think-tank.
The book bristles with examples of problems faced by the new prime minister. Each year 35m tonnes of food, meant for the hungry, are either stolen or left to rot. Disputes over land mean $100bn worth of investment projects lie unfinished or are not started at all. Small industrial businesses are ensnared in more than 1,200 separate sets of regulation.
Co-author Ashley Tellis, a one-time policy adviser at America’s embassy in New Delhi, argues that only a new wave of economic liberalisation can overcome such issues, while also taking on the country’s dominant culture of soggy, leftwing ideas. “Socialism has corrupted the deep structure of state-society relations in India,” he writes. “A slow rollback of socialist policies has been under way since 1991. But unlike the case in China since 1978, this shift in India has been hesitant, conflicted and furtive.”
Some of the collection’s suggestions are indeed bold. One chapter argues for the scrapping of public food distribution, which its author calls the “most corrupt system ever invented”. Another pushes for the break-up of a state-dominated energy system, allowing new entrants into areas such as coal mining or nuclear energy.
These proposals would be unpopular, which is perhaps why the populist Mr Modi shows few signs of adopting them. Here his caution may even be wise. Wholesale privatisation seems an attractive solution to many Indian problems, given the sclerotic nature of its government. Yet it needs careful consideration in a country with few systems of public accountability, and fewer virtuous industrial tycoons.
Other ideas are more moderate, for instance those on labour market reforms. India needs to create as many as 44m new jobs by 2020, a challenge that would be helped by giving more flexibility to manufacturers. The authors conclude that significant changes to laws relating to strikes are politically impossible, however, suggesting instead a range of technical (and thus more publicly palatable) alternatives.
Taken together, Getting India Back on Track provides one of the most comprehensive and broadly sensible sets of remedies for a decade-long malaise, covering everything from the capital account to its mammoth railway network. The more important question is: will Mr Modi follow them?
Here the depth of India’s funk could be a perverse political advantage. Facing so many problems, it should be easy to show early progress, while hinting at radical steps to come. The fact that Mr Modi has done neither with great conviction is discouraging.
That slow start could stem from a sense of prudent gradualism; a recognition that attempts to push big political changes through quickly can backfire in a country whose leaders hold a fraction of the power wielded by their Chinese equivalents.
Yet this seems excessively pessimistic, especially given Mr Modi’s thumping mandate. India does not want for ideas to rebuild its economy. For a decade, however, it has lacked leaders in possession of the political arithmetic and courage to push through unpopular measures. Mr Modi ought to have both, yet he has already missed opportunities to forge a decisive break with this lacklustre heritage.
The risk is that this becomes a habit, making comparisons with other reforming leaders even less apt. True, Thatcher also started slowly, delivering her most far-reaching reforms during her second term. But this can hardly be the parallel Mr Modi’s more fervent adherents had in mind.
The writer is the FT’s Mumbai Correspondent
Getting India Back on Track: An Action Agenda for Reform, by Bibek Debroy, Ashley Tellis and Reece Trevor (editors), Vintage Books, Random House India, RRP$19.95