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With right policies, India can be most attractive place for FDI, says FT columnist Martin Wolf

Understanding who 'real Modi' is an issue since PM made some 'strange' decisions, said economy expert Martin Wolf in conversation with ThePrint’s Editor-in-Chief Shekhar Gupta.

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New Delhi: Prime Minister Narendra Modi’s instincts have driven him to take decisions on reforms that are either liberal or top-down authoritarian, said Martin Wolf, associate editor and chief economics commentator at The Financial Times.

Wolf was in conversation with ThePrint’s Editor-in-Chief Shekhar Gupta at the Public Affair Forum of India’s (PAFI) seventh National Forum 2020 Friday.

During the discussion, Wolf asked who was the “real Modi” and if the prime minister listened to a good bench of advisors on economic policy. PM Modi was elected as a “reformer”, he said, but had made some “strange” decisions.

“Who is the real Modi is a big issue given his incredibly extraordinary position in India,” he said. Wolf also said that the “jury was still out” on whether PM Modi could lead the Indian economy successfully.

“He has instincts which are sometimes in the liberalising reforming direction and sometimes in the very top-down authoritarian…and there are other aspects of BJP’s ideology which I am not going to refer to,” Wolf said.

Recalling his fondness for former finance minister Arun Jaitley, Wolf said, “My impression would be that between Modi 1 and Modi 2, the people I recognise as top class professionals have gone…It now feels like this government is completely dominated by the prime minister and his own team which doesn’t include top class economic expertise.”

He, however, said that he was “impressed” and “favourably surprised” by RBI Governor Shaktikanta Das.

Also read: Demonetisation, GST, lockdown sans relief dealt body blow to Indian economy — Raghuram Rajan

‘India could be an attractive place for investment’

Wolf also explained how, unlike China, India’s savings were not generated by the corporate sector. Indian households save a lot, he said.

He, however, said it was “unfortunate” that India’s savings were consumed by government deficits. “There are clearly domestic sources of funds, which in principle, with the right financial system, businesses should be able to tap.”

But he expressed confidence in India becoming the most attractive place for foreign investment. “India, with the right policy environment, should be the most attractive place for foreign investment.”

Wolf also maintained that India was a “colossal” country with talented people and a rapidly evolving market. “I don’t think investable funds are the issue, its profitable investments which look as though they’re going to work. I don’t think that the funding is going to be domestic resources,” he said.

He also said that foreign investors would like to believe that the place they are investing in is politically stable and peaceful, with a “predictable environment”. “They (investors) want to believe that the legal system works.”

The investors seek highly-qualified workers, decent infrastructure and most of all a “predictable” policy regime, he added.

‘Tendency towards self-sufficiency could be crippling’

Responding to a question on what his “prescription” was to revive the Indian economy, Wolf said that some “legacy problems” have to be first fixed.

“In economics, you have to fix the legacy problems, like debt problems. There also needs to be a reconstruction of the financial system, reconstruction of the private sector balance sheet,” Wolf said.

He also said that reforms in labour markets were important for long term growth and emphasised on the importance of an “investment programme”. “You are going to need to work out a very serious investment programme, which will involve private public partnerships but investment is going to have an important source of growth.”

He added, “Trade policy is important too…tendency towards self-sufficiency is going to prove crippling. On the contrary, you should be leading trade liberalisation.”

Wolf also highlighted a crucial issue in which India lacked focus — spending on education and healthcare. If one was to compare India and China, he said, the biggest difference would be the latter’s relative success in educating its entire population to a higher level.

‘India’s politics, security policy and economic needs are going to clash’

Wolf acknowledged that India’s economic growth was slowing even before the coronavirus outbreak. He explained that India has had a long history of “inward looking developments” but they hadn’t worked well.

“After the Covid shock, a tremendous acceleration was needed but it was difficult given the debt overhang, weakness of the banking sector, underlying slowdown in growth which weakens investment demand,” he said.

Wolf then added that India will have to “engage in balancing China”. He also advised the Indian government to “remain open” economically.

The economics commentator predicted that China will be the fastest growing market in the next 10 years. Not engaging with China over strategic breakdowns, he said, would prove “costly” for India.

“The ideal will be to conduct your politics to some degree separate from your economics but that’s difficult…You’re in some big strategic dilemmas in which your politics and security policy and economic needs are going to clash,” he said.

US elections

When asked about the influence of a Joe Biden presidency in the US, Wolf said that an administration led by the Democratic leader will be centrist. “There will be pressure from the Left, the tone of his administration will be very similar to the Obama (former president Barack Obama) administration.”

But he also said that a Biden administration will be “more hostile” toward China. Wolf predicted that Biden’s trade policy won’t roll back all the tariffs imposed on China. “He will use them in a multilateral way,” said Wolf.

“The approach will be more like that of the Americans in the Cold War running an alliance system than America all on its own,” he explained.

‘Covid fuelling populism wave’

Wolf also said there were grave issues in the global economy and politics even before the ongoing pandemic. “We had a huge financial crisis just 12 years ago, we never fully recovered in the West.”

This financial crisis, he said, was one of the reasons that fuelled a surge in populism and nationalism, led to Brexit and even Donald Trump getting elected, he added.

Also read: Every sector is trying to beat the pandemic and revive, says Finance Minister Sitharaman


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  1. Wolf pointed out all India’s obvious problems everyone knows. But what’s the solution, which he dared not said but hinting Modi team has no experts, and its conflicting security vs economy policy with China.

    Embracing of US will spell disaster for India, fighting China to last Indian, paid in rupees.

    India will be cultivated like farm with chemical fertilizer, pesticides & GMO, to be harvested by West capitalists until barren. Ask debt laden Latin America that is once wealthy until West capitalists creep up their shores with usury loans-investments.

  2. We have been hearing this from time immemorial. but when are we going to implement the right policies. All political parties in India are still in a socialistic frame of mind. They want the maximum control by the State.

  3. You claim to be a senior journalist of importance. But I have gathered the impression that you are a sick journalist of no consequence. Inspite of all the excesses committed on journalistic freedom in Maharashtra you have chosen to keep your lips sealed. Is there some sort of caste equation in the journalistic fraternity where some are untouchables?

  4. The problem with these analyses is that these foreigners do not know the realities of India. The economic problems of India are only a part of India’s bigger challenges. The central challenge is to counter the breaking India forces that have been given a free run for 70+ years by the fascist congressi-communist forces – sometimes unknowingly and most of the times knowingly. These foreign “economists” do not know or do not care about the existential threats that the congi-commy fascists pose to India’s survival as a nation. The economic challenge pales in comparison.

  5. My heart tells me Self reliance – unpronounceable in Sanskrit – is just a phrase to be marketed. It lacks deep intellectual content, has not been thought through. Make in India too has fizzled out, but it was a worthwhile idea. Boosting the share on industry in GDP from 16 to 25 % was a national mission that ought to have been pursued, with benefits for employment and experts. As with the assertion that there have been no intrusions, Aatma Nirbharta is something the mandarins and others will tie themselves in knots trying to reconcile with the economic policies everyone understands are good / needed for India.

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