While most world capitals have been waiting for significant economic reforms since Prime Minister Narendra Modi’s election to office in 2014, his government has prioritised social reengineering over economic growth in India.
Putting vote-getting religious sentiments above economic and strategic goals has diminished the enthusiasm with which other countries support Indian foreign policy.
And as a result of lacklustre economic policies, India’s rate of growth has declined to 4.5 per cent. What was once described as the fastest growing economy in the world, is now in its worst phase in 42 years.
Unemployment is at an all-time high, industrial production is not growing and investment is declining. The agriculture sector is in distress, and the fast-moving consumer goods sector is seeing its ‘worst slowdown’ in a decade.
It is clear more than ever that social division and strife do not attract investment and is not conducive to economic growth.
Also read: Modi-Shah discrediting Shaheen Bagh not just for Delhi polls but also because of Trump visit
Economic slide
For a nation of more than one billion people, such stagnation does not augur well. Global rating agencies Fitch, Moody’s and S&P have cut their forecasts for India’s growth. The World Bank and the International Monetary Fund have also dampened their past optimism about India, noting that India’s slowdown is diminishing the prospect of global economic expansion.
For many observers, the situation is disappointing because of the hopes they pinned on the rise to power of a conservative government in New Delhi. When he was first elected in May 2014, Modi promised ‘minimum government, maximum governance’. He brought to his office the image of a business-friendly chief executive whose no-nonsense style of functioning had brought prosperity to Gujarat when he was its chief minister.
In 2015-16, India’s GDP stood at US$ 1.99 trillion and it had a labour force of 860 million people. Both the World Bank and the International Monetary Fund predicted that India’s economy would grow between 7.3-7.5 per cent over the next two years. The World Bank even asserted that a “resilient” India would help drive economic growth in South Asia. But now India’s eastern neighbour, Bangladesh, has become the fastest-growing economy in the region.
And the latest Budget offers little hope of reviving India’s stagnant economy.
Also read: Modi’s Budget lures foreign capital but has precious little for Indians
Social slide
The lack of focus on economic growth over the last several years can be traced to an over-emphasis on socio-cultural issues and majoritarian politics.
For instance, the Modi government’s launch of a programme to encourage foreign investment in India in February 2016 was overshadowed by the arrest of students from one of India’s top universities, the Jawaharlal Nehru University (JNU), on grounds of sedition. The narrative that emerged was that the Modi government was using a colonial-era law against university students while asking Indian and foreign corporates to bring state of the art technology and skills to India.
It is difficult to convince investors of a government’s promises about capitalist freedom when it is accompanied by visible repression. For years, India’s greatest strength globally was its reputation as a secular, inclusive, and pluralist democracy. India’s socialist economic framework did not attract capital, and the consensus among economists was that the country needed free markets alongside its political and cultural freedoms.
Starting in late 2014, there has been a steady decline in India’s reputation for tolerance. Attacks on religious minorities, especially Muslims, including lynchings tied to the demands of a ban on cow slaughter and beef consumption, do not bring investment. And neither do attempts to ‘re-convert’ Muslims and Christians to Hinduism through ghar wapsi (‘return to the fold’).
Illiberal majoritarianism coupled with an unwillingness to dismantle controls that have limited India’s growth are probably the reasons why India is performing below expectations in the economic realm.
Also read: India’s polarised politics is a bigger national security threat than Pakistan, China
China’s rise
The economic and military rise of China has led many around the world to woo India as a potential rival to China. But New Delhi appears unable or unwilling to take advantage of these opportunities.
Indians often like the comparison that many around the world make between India and China. The two Asian powers have the world’s largest populations and have great potential as global powers. But they forget that China maintained a laser-eyed focus on building its economic and military capability for over two decades before it projected itself as a world power.
India, on the other hand, speaks incessantly about its potential for greatness without implementing economic reforms that can pave the way for that greatness to materialise. India’s last major economic reforms took place in 1991. It badly needs the next generation of economic reforms that will focus on critical areas of land, labour, and capital.
Also read: No more riots. In Modi and Amit Shah’s new India shooters are becoming the norm
Getting on the right track
For now, India seems embroiled in debates about identity and ideology. And vigilante attacks, campus protests, and news stories about repression of minorities hardly paint a picture of stability.
The Modi government’s decisions on Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC) are positive steps, but their impact so far is small. A lot needs to be done to improve India’s British-era infrastructure (rail, road, air, and ports), or accessibility to basic amenities like electricity and water.
None of these can be accomplished through culture wars. Businesses seek countries with secure tax regimes and political and social steadiness. But India’s complex and confusing taxation structures, the presence of retroactive taxation, and the government’s punitive approach to businesspeople have created an environment of fear within the business community.
At a time when many US firms are moving out of China, India’s policy should focus on wooing these investors, improving ease of business, and offering incentives.
Instead, xenophobia, hyper-nationalism, and a desire for absolute political control seem to be pushing those who have already invested in India away. And the BJP government has been more protectionist than even its predecessors.
Moreover, India’s friends and rivals will take New Delhi seriously when they see India investing more on defence and security. But instead of spending more on defence, India has been spending less. This year’s defence budget (excluding pensions) stands at only 1.5 per cent of the GDP.
Some apologists have blamed India’s bureaucracy, the ‘babus’, for India’s current economic mess and the lack of reforms. But the same bureaucracy had effectively implemented the 1991 reforms when commanded by the political leadership of the time to do so. The ‘babus’ would have gladly done the same under instructions from their current political masters.
Given its focus on social and cultural issues, the Modi government does not seem to have the desire to significantly change the way India does business. Instead of shifting blame away from the political leadership, honesty demands recognition of the incompatibility of the current leadership’s social agenda and India’s economic and strategic aspirations.
The author is a Research Fellow and Director, India Initiative at the Washington DC-based Hudson Institute. Her books include ‘Escaping India: Explaining Pakistan’s Foreign Policy’ (Routledge, 2011) and ‘From Chanakya to Modi: The Evolution of India’s Foreign Policy’ (Harper Collins, 2017). Views are personal.
People seem to have forgotten that China is still a communist nation with state-controlled media and severe repercussions for whoever dissents. Their people pretty much have no rights. Also, the severely negative sex ratio, high levels of corruption and class disparity faced by its society. The horrors of the one-child policy are still very much alive in the memories of millions of Chinese families which lead to millions of children growing up in orphanages. Not to mention the brutal treatment of the Uighur Muslims. The memory of the people is certainly short-lived.
Political theorist, John Dunn, is recently quoted to have observed that India’s is ““the most surprising democracy there has ever been.” Characterized by daunting poverty, sustained relative peace amid diversity, and the persistence of regular elections despite abuses of power, the democracy is not structured to deliver, the most stinging evidence being that the country has remained “home to world poverty” ever since its birth in 1947. The latest “surprise” has been that PM Modi promised Achchhe Din and massive job opportunities in 2014 election but ended up adding to the penury of India’s poor and middle class. Then, he goes to win even a bigger majority in 2019 by staging a firefight with Pakistan, and now subjects the country to the most divisive of measures such as CAA, NRC, NPR, and tampering with Kashmir autonomy, while none of them should have been the priority in the face of the persistence of daunting poverty, steady economic slowdown and mounting joblessness. While India must seek its future in Asia, it has done everything in its power to alienate the emergent economic powerhouse, China that could have been of massive help for rebuilding India economically. In short, unless India redefines and restructures its democracy to make it more responsive to the needs of the people and its leadership genuinely accountable to the electors, the country would continue to be “the most surprising democracy” at the world stage.
Your sentiment is appreciated but your figures are incorrect.
Nowadays Nigeria has the largest amount of poor people in the world. And India’s total population is more than 5 times Nigeria’s.
Speaks volumes about the progress India has made. But yes a lot more needs to be done to truly make India a world power.
The policies the author suggests are not what China did. It did mercantalism. Outside firms were only invited in if they were going to allow technology transfer, as a general rule.
Do what they did, not what you’ve been taught, but what actually works. (It also worked for Japan.)
Good article by the author. I’m generally a supporter of Modi, but have been concerned about lack of economic growth in India. Let’s hope GST and IBC start to have positive impact on the economy soon. One thing we need to realize about India is that it is hard to implement major reforms. It is a very complex environment. So anyone who rolls out these initiatives, will face these obstacles.
I do not really agree with the author that social reforms should wait while we carry out economic reforms. However, implementing these will also cause major headaches. The Government should decide carefully, how much social reform to push as implementation of these will also be a challenge and could negatively impact the economy (as the author points out). Would like to see more focus on reviving the economy. Also would like to see the Government take feedback from the country on its social agenda so that the economy is not negatively impacted.
Don’t make the mistake of comparing Chinese model of economy with India. It is an authoritarian country and can implement any plan without regard to public opinion. China has ruined its environment as a price for rapid economic growth and now paying price by way of polluted rivers, polluted air, unhygienic living conditions.
We have the same polluted air and water and none of the per capita GDP. Think before commenting
And Indian rivers and air are the cleanest in the world…
China did their asat test in 2007, when their economy was the size ours is today.
Another brainwashed leftist, spreading the same canards as done by other comrades. Never go by the names of these comrades, they are full of hate towards anything remotely Indian, Hindu & Traditional. These same people, when they get depressed practice ‘mindfulness’, they are too ashamed to call it meditation. These people have immense love for Islamic atrocities, Islamic Terror & they call most terrorists with sympathetic names like ‘Headmaster’s Son’. But, they refer to Indian army & Indian Martyrs as ‘oppressors’. They will celebrate China’s growth, but never talk about the immense suffering, atrocities that China has heaped upon its population. You will never find them speaking about China’s treatment of its Muslim population. These people look in India for non-existent concentration camps, but never criticise Chinese detention camps. They find intolerance in India, they find indian EVM’s faulty. But, they never mind the theocracy & lack of democracy in China. A brutal extermination of Hindus from Kashmir is projected as ‘rightful anger of poor towards prosperous pandits’, but invasion of india by economic insurgents is celebrated as a symbol of democracy by these ‘intellectuals’. When an Indian leader, a man born to a poor mother who washed utensils in other’s homes, a man from a backward caste, rises to the top of the political landscape & dwarves the demigods that these leftists worshipped for decades, these people cannot digest this phenomenon. They find excuses, spread canards, spread intellectual terror, use social media for spreading violence. But their opponent emerges stronger after each of their devious schemes. Now, in their complete helplessness they get together and write a dime a dozen such falsehood spreading articles, which only no one reads except maybe a few stupid people like myself, with perhaps too much time on their hands! At the end of the day, Modi is everything that You were afraid of and he will demolish the underground tunnel systems of Naxalism, Terrorism, Appeasement & Votebank polictics built by You. For You, the worst is yet to come.
if the author of this article was based in India, she’d already be dead in the hands of a jobless hindu fanatic. women or minorities are not safe in India.
You mean jobless “Islamic terrorist”. Hindus are having jobs more than muslims, they contribute and work , not busy like you in 5 times arabic prayer drama. If India gets rid of 19 cr or whatever number of people with Arabic followers, we would work better similar to what China did
you are spreading these canards & lies. You look very safe to me! We dont kill liars in india. We just counter their lies by truth. Thats what they hate most.
Dil se garib, stop proviking unnecessarily.!
Another NRI pseudo liberal calling herself a researcher, does not live in India or China, and conveniently forgets that the very same criticisms she makes about the Modi government [except for headline which is true, of course, but is a necessity for democratic elections to work unlike that of China], which has been going on for 6 years has been happening in China for the past 60 years.
Let me make a point by point rebuttal:-
1. GDP Growth – China’s economic figures are always suspect in the eyes of the world and China calculated GDP provincially and in a piecemeal manner unlike the centralised, uniform, international accounting standards followed in India.
2. Corruption – China has the luxury to allow excessive corruption to boost growth and then making a turnaround and summarily executing several government officials within a period of 1 year for corruption
3. Religious persecution – Author seems to have forgotten that Chinese do not have the right to religious freedom & the persecution of UIGHURS including the sale of their organs in the Chinese organ donation market which is a big medical tourism business there. If India or the US were allowed to conduct such a business, imagine the earnings. We are atleast not selling the organs of our minors on an industrial scale to foreigners.
4. Sedition – Let us say our sedition law is of the colonial era but where does the Chinese law come from. Even if modern, does anyone have the guts to say the same things in China? How many artists & intellectuals have been in jail for decades without trial in China? Can the author name one person in India who has been denied judicial trial with full public disclosure and complete media coverage?
There are many more points but I understand that the American University system is just as shitty if someone like you is called a researcher when you lack complete objectively. Reviewers on youtube of cars etc have far more objectivity in India and yet, they do not call themselves researchers.
TO THE EDITORIAL BOARD OF THE PRINT – Sir, could your editorial board atleast please vet your articles for objective presentation rather than going by the fancy titles from American & British Universities of NON RELIABLE INDIANS?
Why bother about rise or fall of others. We should focus on our economic problems instead of turning Nelson’s èye to them.
Completely agree to you Dr. Mahesh. ..
Amen. You said it. Sadly, the lesson is still lost on India. Current boast is since 1 AD, India was the super power for 75% of the time until 259 years ago !!!,
Did the author mean to say social “engineering” instead of social “reengineering”? There is no doubt that Modi’s second term is putting “society and culture” above Economy and law & order, but “reengineering” implies the previous regimes also indulged in engineering. So is this a simple case of the wrong word or is the author unwittingly holding the previous regimes too to account?
At a broad level, the statement that China built its economy and military power before announcing itself as world power (though it ignores the dark period of cultural revolution), along with the fact that India is still mired in social engineering rather than building a strong economy is fine. Rest of the article is however, usual rant of a left liberal sickular. However, what Modi has failed to do is to initiate basic structural reforms to get economy out of the quagmires of Nehru Indira socialist days and deeply obstructive role of bureaucrats in economic matters. He can do this even while going ahead with his outreach to poor under various schemes. That Modi has finished most of the contentious issues of India polity is a fact and there is no going back ever in future on Art 370, Ram Mandir, Triple Talaq, UCC, reservation for general category, consolidation of Hindu castes versus minority appeasement, CAA and NRC etc or even how to deal with Pakistan. Having achieved this new normal, the next milestone has to be India’s economic rise, which should be his real legacy. There is a hardly any point in debating on numbers like GDP growth rate, unemployment rate or inflation etc; as they will keep moving up and down due to many factors temporally, Modi or no Modi. What is fundamental is that Modi must re-architecture the framework of economic management and in this task which at this time the country expects from him, he has so far failed.
Very true. There is not much hope left for this country. There will be no progress. Most parties are not convinced about economic reforms. For 29 years, no major effort was made to sell reforms to the people. Instead what was done was by stealth. Reforms by stealth have run their course.
Indians just talk too much with no effort or desire to make long term changes. India is not on its way to become a great power. Political parties are just stoking people’s egos by talking big. The Govt is not making the needed investments in education, healthcare, infrastructure, maintenance of law & order, and defence to build up state capacity. The less said about science & technology, the better. Apart from making some investments in ISRO for showboating, there is complete neglect…. even in agriculture which affects nearly half the population.
The overall picture of India looks quite bleak because after this demagogue, his best pal will take over. He doesn’t inspire much confidence either given his track record. Just as hundreds of successful entrepreneurs have voted with their feet and already moved their base abroad, abandon ship!
Beautifully summarised article.
Excellent article, as a Muslim son of Indian parents, i couldn’t agree more. India is a nation that is known for bigmouths and no results. Its infrastructure, economy, military, academics, sports, foreign service and every other measure trail China but it still imagines itself a major power while being a large Bangladesh basically.
Hindu nationalists are the worst and are most blind to India’s foibles. Modi is their even more blind leader!
China is kicking your religion out, they solved their social problem first then moved for addressing economic problem and now India is doing the same. I know that is why it is hurting you.
China treats Muslim Uighurs very different from Han Chinese Muslims who have halal restaurants, mosques, preachers. Plus they treat all religions poorly. But India only mistreats Islam!
Note China provides MuslimPakistan with nuclear, biological and chemical weapons to hit Indian Hindus. They can’t hate Muslims that much if it ensures the survival of 200 million Muslims!