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Monday, June 9, 2014

The Start Of An Economic Tsunami




The Start Of An Economic Tsunami

Poverty is not socialism. To be rich is glorious.
Deng Xiaoping

Twenty three years ago, in 1991, the first stage of India’s economic liberation, the unshackling from failed socialist ideas, took place for the first time. It occurred in the context of a balance of payments crisis, enabling the Congress Government led by then Prime Minister PV Narasimha Rao and his Finance Minister Manmohan Singh, to take some bold steps.

Unfortunately, instead of pressing on from that excellent start that helped India to unprecedented high speed and consistent growth over a number of years; the follow through never came via the successor regimes. Still, it changed India so substantially that many features of an earlier time, full of shortages, restrictions and red tape, largely disappeared for good.

But things did not proceed apace as expected. Instead, there was a slide back to the old ways. This was to the general disappointment of business and industry and the investment community both domestic and international. Myths of growth that benefited the few with nothing for the majority were belied by the statistics, but still remained rife in the Liberal-Left political discourse.

Whilst what was done at first was not rolled back, neither was it built upon to quicken the pace of India’s development. This was even most marked in the ten UPA years just past, reminiscent, and almost a throwback to the low growth Indira Gandhi era, which resulted in confusing the country’s policies and initiatives. And slowed the economy to a decade low near standstill.

This year 2014, counting from 16th May 2014, when the electrifying election results came in, has changed our possibilities, and is another watershed. This date, will, without doubt, be written up twenty years from now to mark the start of the Second stage of Indian Reforms.

This new stage in our modernisation, will, at last, fulfill the promise of 1991, but this time in transformational and continuous motion. Like the initiatives of the visionary Deng Xiaoping of China,  Narendra Modi’s bold developmental policies will take this country into the first rank of  nations while carrying all of its people into prosperity.

Speed, scale, skill, and boldness, is of the essence, for we have lost much time. And judging from the plethora of initiatives announced in just two weeks of Narendra Modi’s Government, we need not worry on this account. Prime Minister Narendra Modi is aware that his grace and favour period, the ‘honeymoon’ interlude, will be short. The millions of young people, his impatient fans and voters, want to see quick results. Having said that, the mandate ensures a free hand and the wherewithal to do things his way.

Nevertheless, of the many pressing demands on a prime minister’s time and attention, top emphasis must be given to the revival of the economy. Winning the several Assembly elections coming up is very important, as are various security issues and other aspects of good governance. Many of these broader concerns and emphases have been recently outlined in the President’s address to the joint houses of Parliament. But the money must be urgently seen to start flowing again, like life-giving water,  into the stalled and parched economy. This, through the revival of domestic and foreign direct investment, in a manner that mimics the ramped up FII into the stock and debt markets which has  swelled in anticipation of the expected growth over the next year and more.  

The President’s address has indeed laid out a road map of exciting and far reaching intentions. The Annual Budget, coming in July, is expected to demonstrate and delineate a strong reformist flavor and reinforce the bullish excitement of a country and economy on the move. This will enthuse business, industry, the prospective and existing foreign investor, security analysts, international rating agencies, think tanks, foreign governments, private industry, the middle class, urban and rural people, farmers, students, job seekers etc. and mark a departure from the timidity and sluggishness of the past government.

With an excellent symbolic start made with the SAARC countries already, a number of foreign visits are already scheduled in short order. The visit to Bhutan may be to underscore India’s commitment to this strategically located nation, and economically important too for its robust electricity generation, actual and potential.

Substantial and specific results are expected from Modi’s forthcoming visit and interactions in Japan. This particularly on the projects stalled in the Delhi-Mumbai Industrial Corridor.  

And though there was no mention of Iran in the Presidential address, it must be noted that there has already been an early meeting with Oman’s foreign Minister, who reportedly came about reviving the Iran-India Gas Pipeline project hanging fire for long.  Israel, another country not mentioned in the President’s Address, could do much to contribute to the 100 per cent in Defence Production initiative.

Similarly, the swift meetings with the Chinese Foreign Minister, followed by one expected with President Xi during the BRICS Summit scheduled for August, should yield substantial news - on the modernisation of the Indian Railways for example, high speed trains, other infrastructure, and perhaps even defence related investment.

Modi’s meeting with President Obama, slated for September end, is being viewed as a fresh start to the stuck ‘strategic’ relationship between the two great democracies. Some reports suggest that the US will seize the initiative and set India on its path to becoming an ‘$10 trillion economy’, that is, five time our current size. This has strategic geo-political implications of course, but does America have the consistency of purpose to execute this?  The Modi Government, in any event, must be mindful of the momentum it must generate. It cannot afford to be stymied by the typical US ifs and buts when it comes to execution.  

The proposed Vibrant India Summit, chalked in for November, should do great things on the national platform going by the success of the Vibrant Gujarat Summits over several years. The proposal to deepen and widen the stock markets to absorb more FII is also most welcome, and reports that suggest the Debt Market ceiling for FII in Government Bonds is to be raised  will also be enthusiastically received.

The expectations raised by Narendra Modi’s extraordinary and visionary election campaign are very high. By the end of just 100 days of Modi’s governance, a self-imposed thing,  he fully intends to let the public feel, believe, and trust, that his Government is going to transform their lives.  

It is the credibility of Modi’s promises, he knows, the strength of his personal determination and calibre that is at stake; but Narendra Modi seems undaunted by the prospect, and continues to exude supreme confidence.

(1,104 words)
May 9th, 2014

Gautam Mukherjee

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