India Needs Dramatic Growth, and Modi’s Not Helping

The prime minister’s tenure has been marked by tepid reform and world-class policy errors.
Source: BJP; Photo illustration: 731

It was a sight to warm the heart of an Indian nationalist: Prime Minister Narendra Modi, at the Republic Day celebration on Jan. 26, welcoming one by one his 10 chief guests, the leaders of the Association of Southeast Asian Nations, or Asean. They stood alongside Modi and watched an hourslong parade that, in its cheerful mishmash of tanks, marching sailors in spats, kilted bagpipers, female motorcycle daredevils, camels, ballistic missiles, dancing schoolchildren, and tableaux representing such abstract concepts as ethical taxpaying, is a fair representation of this bewildering and vibrant country. You could see the presence of Asean’s leaders as a sign of India’s rise and allow yourself to hope that this most diffident of countries was finally stepping into a global role. Just the previous week, Modi had held forth at Davos’s opening plenary about India’s democracy, its diversity, and its resilience.

But, as is always the case with India, the reality is somewhat different. Truthfully, the nation isn’t quite ready for the role that most Indians—and many in the rest of the world—want it to assume. One day, perhaps, it will help stabilize the Indian and Pacific oceans and beyond. One day, certainly, it will seek to aggressively counter Chinese influence in Southeast Asia and Africa. One day it may serve as a beacon of liberal values and a counterexample to Beijing’s authoritarianism. But, if you look out at the country and the world from New Delhi, it’s clear that day hasn’t yet arrived. Even at Davos, as veteran journalist Shekhar Gupta pointed out, the sessions dealing with India were mainly filled by Indians. “Unless the world starts lining up to attend these,” he says, “India won’t have arrived on the world scene, never mind our chronic love of self-congratulation.”

India has underperformed for decades, and it’s still underperforming. It comes down, in the end, to how fast the economy is growing. When Modi was elected prime minister four years ago, his ministers promised that double-digit growth was around the corner. His tenure, however, has been disappointing, marked by a lackadaisical approach to structural reform punctuated by world-beating policy errors, including the arbitrary decision to withdraw 86 percent of India’s currency overnight. This year the economy may grow at a little more than 7 percent, and we’re supposed to celebrate that. India, the land of the constantly lowered bar.

Seven percent growth is great, right? Sure it is—anywhere except India. This is a country that adds 1 million young people to its labor pool every month, most of whom can’t find formal employment. To get them jobs, India will have to transform its economic landscape the way China has for the past two decades. But there’s no sign of that sort of sustained double-digit growth on the horizon. India grew at that rate for only a few years, in the mid-2000s. Since then, the reform process has stalled. The economy looked like it was ticking along nicely for a while after Modi took office, but that was mainly because of a sharp decline in crude oil prices—India imports massive amounts. The World Bank may claim it’s easier to do business in India, but little has changed on the ground. Regulations that govern the hiring and firing of employees are still the toughest in the world, tax investigations remain arbitrary and intrusive, and legal cases continue to take years to wind their way through court. As a consequence, investment is low and business is hesitant. Visitors don’t return from India thinking this is a country about to take off, but one that is, as always, muddling along at its own pace. Meanwhile, month after month, another million people turn up demanding a job, a home, a future.

Nor does the government show any sign of urgency. On Feb. 1 the finance minister presented the central government’s budget—usually the occasion when the broad thrust of economic policymaking for the year is mapped out. But little in it goes beyond the sort of token reforms and quasi-socialist populism the country has seen countless times before. There’s some good news: The government’s attempt to increase the meager tax base seems to be working. But sadly, there’s much more bad news than good. In Davos, Modi warned that the specter of protectionism was as worrying a global problem as terrorism or climate change. But his budget raises tariffs across the board, reversing a 25-year-old bipartisan consensus that India’s best interests lay in integrating with world markets.

The budget was clearly aimed at pleasing India’s farmers and the rural poor. Modi is playing defense after a surprisingly narrow win in local elections in his home state of Gujarat; the national elections are only a year away, and the pressure to turn on the spending tap is enormous.

It’s unlikely that a trickle of more government spending will satisfy an increasingly restive country. Over the past years, groups of angry young men, usually organized around caste, have spilled into the streets demanding government jobs, reserved spots in colleges, or sometimes just “respect.” India has always been a deeply divided society, and the threat of violence lurks just below its calm surface—especially in its villages. For the first time in decades, these cleavages are spilling over into the insulated world of its globalized upper class.

The first week of 2018 set the tone: The country’s financial capital, Mumbai, ground to a halt because of protests by Dalit organizations—Dalits are what India’s former untouchables now call themselves. The protesters were angry that one of their festivals, which commemorates an 1818 battle in which Dalits fighting for the British defeated an oppressive local empire, had been attacked by those who saw the celebration as an insult. India is a young country, and Indians are even younger, but they carry the weight of centuries of grievances.

The headlines in the past few weeks have been dominated by the controversy over the movie Padmaavat, an over-the-top, pseudo-historical romance that ends with its heroine, a fictional Rajput princess, throwing herself into a fire rather than surrender to a Muslim sultan of Delhi. Liberals are sort of upset about the glorification of the barbaric practice of jauhar, or mass suicide of women by fire—which was usually not “self-immolation” so much as a death that was forced on them.

But liberals just write outraged blog posts. The Rajputs are angry because this imaginary princess is shown dancing. Their protests endangered cinemas across northern India, even in glitzy South Delhi malls. A bus full of children from a well-known school that caters to the city’s elite was attacked by stone-throwing protesters.

Even the Jaipur Literature Festival—a bubble of globalized privilege if ever there was one, a sort of literary Davos—had to cancel an appearance by the poet and advertising executive who runs India’s film censorship board. The venue, it was feared, would be overrun by young men furious that he’d cleared the movie for release. Nobody trusted the state to be strong enough to contain the men if they decided to target the festival. College students who’d gathered to listen to the executive booed his absence. Just down the road, the other young people, who’d intimidated the man into silence, were presumably celebrating their victory. India’s divisions aren’t being moderated by growth and development. Instead they are deepening and being passed on to a new generation.

Is this then a country that can play a global role? India can hardly be a liberal counterweight to China unless it creates a more liberal society domestically. It will struggle to project power overseas until it builds a stronger state at home, and it won’t have the global influence it craves until its economy stops underperforming. One day, yes, these problems may be sorted out: This miracle of a country, a bustling, continent-size democracy, has overcome enough difficulties in its 70 years of independence. But that day hasn’t yet come.
Sharma is a Bloomberg View columnist.

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