India’s one-man band
The country has a golden opportunity to transform itself. Narendra Modi risks missing it
May 23rd 2015
A YEAR ago Narendra Modi came to office promising to bring India “good times”, by which he meant jobs, prosperity and international renown. His progress has been frustratingly slow. The problem is hardly a lack of opportunity. Voters gave his Bharatiya Janata Party (BJP) the biggest parliamentary mandate for change in 30 years. Mr Modi has concentrated more power in his own hands than any prime minister in recent memory. The problem is that India needs a transformation—and the task is too much for a one-man band.
Helped by oil prices, Mr Modi has presided over an improving economy. Inflation is down, interest rates are dropping, the rupee is stable, and fiscal and current-account deficits have shrunk. Official statisticians claim that India’s growth, at 7.5%, outpaces China’s—meaning the country has the world’s fastest-expanding large economy. Foreign direct investment is up.
So are the prime minister’s visits abroad, where he cuts an impressive figure. This newspaper chose not to back Mr Modi in last year’s elections because of his record on handling religious strife. Though he fails to control the Hindu-extremist bullies who back him, we are happy that our fears of grave communal violence have so far not been realised. But when it comes to reform, Mr Modi’s record is underwhelming—as our special report in this issue explains.
The past year saw auctions of coal deposits. The past few days have brought the tiniest of baby steps towards privatisation: eight state-run hotels may be sold off. Mr Modi points out that foreigners may now invest more in railways, insurance and defence. He is cutting red tape to create a friendlier business climate. Poorer Indians will increasingly get cash welfare, not cheap rations in kind: since April the world’s biggest cash-transfer scheme has replaced artificially cheap canisters of cooking gas.
Massive subsidies on diesel have been scrapped; whopping ones on paraffin should follow. And by encouraging people to open 150m new bank accounts, linked to a biometric database of 850m people so far, the government is creating a structure to provide better poverty relief. As welcome as this is, it sells India short. Mr Modi is making two mistakes. The first is to think that time is on his side and that big unpopular decisions can wait, perhaps until he has control of the upper house as well as the lower one.
That rests on a delusion among Indian leaders that they must consolidate power first and reform later. In fact a brief period exists in which to get change going, early in the parliamentary term. Mr Modi already faces twinges of popular discontent. Surly voters drummed his party out in state elections in Delhi. Some dislike his attention to diplomacy overseas. This week he wrapped up a trip to China, Mongolia and South Korea, completing 52 days abroad in 18 countries over the past year.
Others are put off by his narcissism, embarrassed that he met America’s president, Barack Obama, wearing a dark suit with all 22 letters of his name stitched over and over into its golden pinstripe. As he cracks down on groups like Greenpeace, some complain of his authoritarian streak. The second mistake is for Mr Modi to think that he alone can bring about change.
On the contrary, the only way for him to realise his aims is to draft in help. And it could come from three main sources—India’s states, other national politicians and the power of the market. He has made a start by devolving some power to states. The idea is to create a manufacturing boom (though that would, at a minimum, also require wider changes to the way land is bought, labour hired and roads built).
As they compete in setting priorities for policy and spending, the go-getting states will become models for the rest. Good policy will be rewarded thanks to a national goods-and-services tax that creates a common market—and hence competition—across India. Mr Modi says he wants the tax by next April, as promised, though parliament has just delayed it.
The sooner, the better.
Mr Modi acts as if a lot of small improvements add up to transformative gains. They don’t. He is still thinking like the chief minister of Gujarat, not a national leader on a mission to make India rich and strong. If he is to transform his country, India’s one-man band needs a new tune.