What the likely next Prime Minister needs to get done is obvious, but whether he can press quickly on reform is not
Narendra Modi is set to win himself what may be the toughest job in the world. A coalition led by the Bharatiya Janata Party (BJP) is about to be declared the victor in India’s latest general election, and Modi, the controversial chief minister of the state of Gujarat, will almost certainly become the nation’s next Prime Minister. His mission: To revive one of the world’s most promising emerging economies.
Can he do it?
What Modi will have to do is no secret. More than two decades afterManmohan Singh (now the outgoing prime minister) began dismantling the web of controls on private enterprise known as the License Raj, the bureaucracy has struck back.
The deregulation never went far enough, and that has allowed India’s meddlesome civil servants to impede the progress of critical investments. Many large-scale projects have stalled, while new ones have almost evaporated. Businessmen struggle to acquire land and get environmental approvals and other permits.Modi will take over an economy badly in need of change. Growth in the last fiscal year is expected to clock in under 5% — well below the 8%-9% pace enjoyed only a few years ago. Such sluggish growth just won’t cut it if India intends to lift the incomes of its 1.1 billion, still generally poor people.Hopes are running in the stratosphere. After years of almost nonexistent economic reform under the outgoing, paralyzed Congress-led coalition government, business leaders are itching for change, and fully expect Modi to deliver. During his tenure in Gujarat, Modi earned a reputation as one of the nation’s most aggressive economic change-agents, streamlining the notoriously obstructive bureaucracy and making much-needed improvements in infrastructure. Now there is great anticipation that Modi will do the same on a national scale. The stock market in Mumbai and the value of India’s currency, the rupee, soared on the news of the BJP victory.
The bigger problem may be the very hopes Modi has raised. Reviving an economy of the size and complexity of India, amid its often conflict-ridden political system, cannot happen overnight. The impact of many reforms, once introduced, will take years to register their full effect. “Modi does not have a magic wand to turn around the economic fortunes of the country,” warned Societe Generale economist Kunal Kumar Kundu. Great expectations can also be a great burden.