Prime Minister Narendra Modi’s key focus at this time seems to be boosting Indian manufacturing along with improving foreign institutional investor confidence in India’s economy. This is a welcome move for India’s economy, which has recently shown signs of a reversal in fortunes after years of economic downturn and stagnant growth. Prime Minister Modi’s sales pitch, while visiting Germany, comes close on the heels of the announcement that the government has constituted a committee to recommend a simpler mechanism to replace the labyrinthine permissions needed to start an enterprise.
The Bharatiya Janata Party government has also received a fillip thanks to global crude oil prices crashing and the government trying to push through key pending reforms. These combination of political and public policy maneuvers has created a public relations euphoria of sort, with investor service Modi stating that it remains positive about the Indian economy.
Closer analysis, however, reveals that the BJP-led government has depended more on theatrics and symbolism to boost its image rather than enact actual reforms. The bottlenecks to doing business smoothly in India still persist. The government seems to believe that delivering on foreign and private investments is much more beneficial to the economy than removing the roadblocks to economic progress. The big reforms which need significant political will on part of the present government have been thrown into the fridge; probably never to be taken out again during these five years. The government has tried to fix the food economy but with little success to show for it.
Key reforms like changes in the APMC Act and the creation of a national agricultural market remain out in the cold with no action worth note being taken on them. Further compounding the government’s problems is the fact that some key macro-indicators do not look good. Bank credit growth is at a 21-year low, the corporate industry is unwilling to make fresh investments and growth prospects for existing businesses are failing to get better.
Furthermore it needs to be reiterated that the government faces significant challenges on its way to achieving its long term goals-especially in Prime Minister Modi’s pet projects. The Jan-Dhan Yojana has not made much progress.
The project will not make any progress until government subsidies start accruing to the bank accounts linked to the scheme. The Make-In-India campaign requires that the government has a proven track record and an accessible market for manufacturers to sell their products. This is yet to happen.
The Swach Bharat Abhiyan has more or less fizzled out and has failed in providing improved health and sanitation facilities to the citizens of this country. It’s nice that the Prime Minister is working so hard to raise investor expectations abroad; but if on-ground realities do not change, then very soon positive ratings from foreign investor services will not be of much help. As the Delhi election results showed, the public cannot be misled by good public relation campaigns anymore.