On the internet today (19 June 2014), an Indian Express article by T P Sreenivasan titled, This way to Delhi, sets the tone for our blog post: “Kevin Costner’s famous line, “Build it and they will come”, seems to have proved true of Narendra Modi’s India in the making. Both friends and foes are making a beeline for India, not just out of curiosity, but also out of a conviction that exciting things are ahead and they should have a piece of the pie…
This time, there is less anxiety and more hope. First, because it is not a hotchpotch coalition that has come to power in India. Second, it is well known that Prime Minister Narendra Modi has a definite agenda to build an economic power in collaboration with the world, which would mean further liberalisation of the economy. The surprise invitation to SAARC leaders and his conversations with them have strengthened the impression that changes in foreign policy will be thoughtful, purposeful and gradual. World leaders must feel comfortable with the signals emanating from the new government in Delhi.”
Whether the Bharatiya Janata Party’s (BJP’s) Election Manifesto says it or not, India believes our new Prime Minister Narendra Modi is pro-business – and, though he has been rooted in Gujarat for many years, is pro-global in his outlook. Probably that’s what has pushed him onward to a ground-breaking victory in the recent Parliamentary Elections. Confidence is high and, if we go by this month’s improvements in industrial growth and anticipated drop in inflation, the signs do favour an economic turnaround for India.
Of course, three weeks is too little time to judge a country’s leader, a government or an economy, but since India’s new Prime Minister Narendra Modi took office on 26 May 2014, the economic and business sentiments in the country have been looking up. This positive sentiment is evident – and spreading – in spite of uncertain rains which could harm agricultural output this year and push food prices up. In fact, there is already a cry over rising prices of onions.
However, Mr Modi is no stranger to agriculture and pricing and, for 12 years or so, has responsibly brought in improvements in agriculture in Gujarat under his management. In fact, a recent news story in IBNLive.in.com, Expect agricultural reforms from the Modi government, says Arun Shourie, indicates that Mr Modi’s government will pursue high growth without letting agriculture down:
“Senior Bharatiya Janata Party leader Arun Shourie has said that one can expect major agriculture reforms from the Narendra Modi government. In an exclusive interview to CNBC-TV18, Shourie talked about what he expects from Modi’s government in the field of economy.
He said that Modi government has to put India back on the high-growth path, scrap controversial laws like the retrospective taxation law, revive investments and bring in big bang reforms. Arun Shourie also said that increasing the minimum support prices without letting it have an impact on inflation is impossible.
“I am not an expert on agriculture, but certainly the idea that you go on raising the Minimum Support Price and it will not affect the inflation is certainly not possible,” Shourie said.
Undoubtedly, Prime Minister Modi will take time to produce results. Reforming the agriculture market will not be easy, but Mr Modi promises to curb high inflation and high interest rates by finding ways to increase consumer demand and consumer goods output. Economists expect Mr Modi’s focus to be on industry (rather than agriculture) with a confident pro-business attitude.
To this end, Mr Modi’s agenda will most likely be to set priorities in increasing industrial production, encouraging foreign direct investment, reducing bureaucratic hurdles, improving tax policies, strengthening international trade, and creating employment for the growing young population which is joining the Indian workforce by larger numbers every year.
Global sentiment seems to be in favour of India’s new government and media reports suggest that Prime Minister Narendra Modi is inundated with invitations from foreign leaders congratulating him and inviting him over with hopes of building and strengthening relations with India. A 2-day ‘friendship’ visit to Bhutan a few days ago is simply the beginning. Japan is next on Mr Modi’s itinerary – scheduled for 3-4 July 2014.
Earlier this month, in a story by Deepak Nagpal titled, Invitations pour in as foreign leaders scramble to meet PM Narendra Modi, Zee Media Bureau reported that Mr Modi “is today one of the most sought-after world leaders – that too in just over 10 days into office. As per Syed Akbaruddin, spokesperson, the Ministry of External Affairs, Modi has received invite from a number of world leaders. Speaking to the press, Akbaruddin said, “The inbox of the Prime Minister is pretty crowded. Multilateral visits from BRICS, UNGA, E Asia, ASEAN, SAARC, G20 are on agenda.””
Foreign tours aside, Prime Minister Narendra Modi’s responsibility as the key agent of India’s economic transformation remains a challenge. What should he do to put India back on track? Opinions abound, but we thought we’ll share with you a perspective from USA which (kind of) sums up what many global leaders are likely to respect. This perspective (quoted as excerpts) was presented in Huffington Post last week by Robert Atkinson, President, Information Technology and Innovation Foundation (ITIF) and is titled Modi Should Foster Innovation Climate to Transform India:
“India should seek out an alternative approach to restore robust economic growth: a “modern economy path” which holds that the best way for India to sustainably grow is by encouraging market-based competition (including among domestic and foreign competitors), embracing an across-the-board productivity growth strategy, and investing in the innovation potential of its economy.
If Modi truly plans to transform India and restore its status as a global economic powerhouse, he should start by overhauling the country’s IP laws. Indeed, the BJP’s party platform has a specific provision devoted to reforming the intellectual property regime. While this is a promising sign, it remains to be seen what specific policy reforms he will enact. In addition, Prime Minister Modi should embrace opportunities to expand free trade, by having India join negotiations to expand the Information Technology Agreement (ITA) and by indicating India’s interest in joining the Trans-Pacific Partnership (TPP) in the coming years.
These reforms should be paired with a comprehensive innovation strategy that includes a plan to raise the across-the-board productivity of Indian industries, which would make the economy as a whole more competitive. In addition, India should focus on increasing research and development and technology transfer in targeted industries which can spur advancements in next-generation products, technologies, and businesses. In this regard, it’s promising that the BJP’s Election Manifesto calls expressly for “a nation-wide, district level incubation and accelerator programme encouraging innovation and entrepreneurship” and for expanded “tax incentives for investments in research and development.”
It’s also promising that the platform has stated that “FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure, and acquisition of niche technology and specialized expertise,” although it is disappointing that the platform specifically excludes the multi-brand retail sector from this renewed openness to FDI. Still, it points India in the direction of seeking to attract, rather than to compel, foreign direct investment in India in industries such as ICT and the life sciences.”
So far, the Indian corporate world seems to be in alignment with Prime Minter Narendra Modi’s agenda. A week ago, an article in The Economic Times titled, India Inc endorses Narendra Modi’s vision of India, quoted several representatives from the industry. Here are some excerpts:
Endorsing Prime Minister Narendra Modi’s vision of India outlined in his address to Parliament, India Inc said the efforts to improve farm productivity, rein in price rise and impart skills to youth will transform the nation in the days to come.
“His (Modi’s) response in the Parliament reaffirms government’s commitment to deliver on the expectations of people of India. The address reflected a true national vision for enhancing India’s global standing, which has been one of the key imperatives suggested by us,” Ficci President Sidharth Birla said.
“We fully endorse his (Modi’s) dream of providing housing for all and ensuring that modern amenities, including electricity, broadband connectivity, sanitation and education reach every household,” CII President Ajay Shriram said.
“We are happy to note that a special mention of skill development was made by the Prime Minister as a means to empower our workforce. According to CII, the existing educational framework needs to be overhauled in order to develop a relevant framework to provide skills training to the vast majority of our labour force,” Shriram said.
“The Prime Minister has caught the right pulse by laying out the road map focusing on use of technology and skill development to make a breakthrough in addressing social and economic issues. Having an employment ready workforce is an imperative for meeting the aspirations of the youth for social stability,” Birla said.
We, too, believe that Prime Minister Narendra Modi has the pulse of the nation and its place in the global map. We believe his agenda for transformation to put India back on track, economically, politically and socially, will be fulfilled. The rest, only time will tell.