The 2014 election of Narendra Modi as the 15th Prime Minister of India elicited optimism from international investors and Indian citizens alike. Modi – renown for his economic successes as Chief Minister of Gujarat – promised to reform Indian economic and societal institutions marred by decades of corruption, graft and regulatory red tape. Indian GDP – which had risen rapidly for much of the early 2000s – stagnated in the aftermath of the global financial crisis. And, for the past three years, annual Indian GDP growth rested below five percent. So, how has the Modi administration fared since the May 2014 inauguration? It’s the subject of intense debate, international inquiry and domestic concern.
Despite initial public optimism and the promise of extensive reform, the tenure of Narendra Modi has thus far been characterized by calculated and deliberate action—not rapid change. And, in recent months, external commentators and observers have been quick to criticize the Indian government. In a recent op-ed piece, Indian economist Surjit Bhalla penned that, “a leader [Modi], operating from a position of one of the most voted governments in Indian history, should be making policy with conviction, not emulating tactics of a defunct government.” He is not alone with his dissatisfaction. Other prominent economists, business leaders and public intellectuals have voiced their displeasure and frustration about the slow pace of governmental improvements.
However, as recognized by Governor of the Reserve Bank of India, Raghuram Rajan, “if you are looking for grand, big picture reforms it may take some time coming…but in terms of decentralizing, in terms of doing the small stuff which adds up to the big stuff I think that is already happening.” Broad public policy and regulatory reform will not occur overnight. Therefore, it is important to review the actions of the Modi administration with an eye toward the future.
Yet, substantive reform has already begun. In August of 2014, the Modi government approved a series of changes overturning longstanding colonial labor laws and regulations. The laws – originally aimed at protecting workers in the organized manufacturing sector and preserving hierarchic social institutions – now appear archaic, misplaced and highly inappropriate. For example, the Industrial Disputes Act “requires companies employing more than 100 workers to seek government permission to let go of employees” and under the Factories Act of 1948 “women aren’t allowed to work on the night shifts in many industries.” While the proposed regulatory modernization plan still needs approval from Parliament, the reforms indicate a desire to challenge existing centers of power—notably unionized labor.
Moreover, the 2014 budget proposed moderate reforms with long-term payoffs. Under the budget outlined by Minister of Finance Arun Jaitley “the government pledged to open the defense and insurance industries wider to foreign investors, bring down the budget deficit more rapidly, press ahead with much needed tax reform, improve the country’s inadequate infrastructure and support manufacturing to create more jobs.” However, critics contend that the budget is a “missed chance to take tough measures on subsidies” and that it lacks a cohesive long-term vision. Coupled with a perceived lack of leadership from the normally outgoing Modi, many feel as though the era of graft is here to stay.
However, their sentiment is misplaced. Reforming long-standing colonial institutions grounded in graft, favoritism and inefficiency goes beyond the passage of laws and regulations. Ideational change among the populace and governmental legislative reform must occur simultaneously. Criticisms on leadership style, the pace of reform and a short-term outlook do little to change the realities on the ground. Legislative moderation does not indicate a change in India’s long-term strategic outlook—and Prime Minister Modi should be granted deference and time in enacting institutional reform.
The views expressed by these authors do not necessarily reflect those of the Glimpse from the Globe staff, editors, or governors.