India under Modi –an entrepreneur’s view

He has made a decent beginning with his cabinet of ministers. These people come across as highly motivated and will hopefully bring about a paradigm shift in the way this government governs. To put it in Mr. Modi’s words, ‘Less government. More governance.’ Mr. Modi has also had the beginners luck of rapidly dropping international prices of oil and commodities. An excellent opportunity to push through his agenda for growth, lower government subsidies and significantly reduce the fiscal deficit. Inflation too has been dropping rapidly. So the mood in the country is pretty upbeat right now.

Whilst six months is too little a time to judge a government, one needs to still take a dispassionate view of the actions taken thus far. Reforms have not gone to plan. Rather, they have fallen way below expectation. Besides some token gestures in this direction nothing significant has been forthcoming.

No significant move to stem corruption. Key instruments of change to address the issues of corruption, like the Whistleblowers Bill or the Lokpal (Ombudsman) Bill are yet to see the promised changes and legislation. Another disappointment in people’s mind is the number of ‘U’ turns that this government has done on issues that it had strongly opposed while in the opposition benches as recently as a year ago, like the Insurance Bill, illegal money in foreign banks, rail fare hikes, fuel price hike are just a few examples. But the biggest step back is on the issue of retro taxes on foreign companies, a controversy created over the Vodafone issue. This government has done nothing very much on this in the recent Budget and just ducked the issue in the real sense. Something that would not have gone down well with overseas companies looking to invest in India.

On the positive side, one of the significant announcements in recent weeks is about labour reforms. This is in line with his ‘Make in India’ propaganda giving more focus on manufacturing. Labour reforms have been pending for far too long and as a result the manufacturing sector has been facing severe constraints, limiting investments. Knowing that overall growth can only happen with growth of the manufacturing sector, Mr. Modi has rightly focused on the real pain that this sector has been plagued with. Hopefully we will soon see some key legislations in this direction.

Mr. Modi and his team are still getting warmed up to the job and are still expected to come good on what they promised. They have thus far spent their energies on tweaking processes rather than on any significant legislation. But surely those will follow. Mood of business is still very upbeat. They are confident that Modi will deliver on his promise of making it easy to do business in India. In that hope, investments are flowing in and the stock markets have been showing their appreciation.

The real and present danger for Mr. Modi is the shrill presence of the fringe right wing parties, who seem to have suddenly found their voice and mojo, egged on by the their parent organization the Rashtriya Swayam Sevak Sangh (RSS), In fact, Modi himself is a RSS follower and has risen from the ranks. With the Bharatiya Janata Party (BJP) in power under Mr. Modi, these fringe elements believe that they can have a field day promoting their own virulent version of hinduism. These last 2-3 months have seen some unfortunate incidents of conversions and reconversions, moral policing and pushing the ‘hindu’ agenda, whatever that may be. The more unfortunate part is the fact that Mr. Modi is yet to make any comment on these developments. His studied silence is probably giving these people more courage to push hard. This could be counter productive to what the present government is trying to achieve and the first fallout could be in the Foreign Direct Investments (FDI). Suddenly, India may just stop being so attractive as an investment destination. I hope the Prime Minister will start controlling these fringe elements.

I would say that the current effort is to put in place the building blocks for development and growth. It would be interesting to see what I would be writing 2 year from now. That would be a reasonable timeframe for this government to start showing results. The mood is still upbeat and optimism is still high. Opposition will hopefully play a more constructive rather than an obstructive role.

I believe we need to keep the faith and let Mr. Modi weave his magic as he has done in his home state of Gujarat.