India’s State Sector Is Thriving. That’s a Problem

Ten years ago, when Narendra Modi — then chief minister of business-friendly Gujarat state — rode an electoral wave to the prime ministership in New Delhi, many expected that he would be far more supportive of the private sector than previous Indian leaders. As a candidate, Modi was quoted as saying: “I believe government has no business to do business,” and one of the many slogans of that 2014 campaign was “minimum government, maximum governance.” That seemed as close to laissez-faire Thatcherism as one could reasonably expect in India.

Nobody who looked closely at Modi’s tenure in Gujarat, however, believed this easy narrative. His proudest achievement there was turning around the state government’s own public-sector companies, particularly in the energy sector. And that’s been his focus in national office as well. In one recent interview, when asked to cite an example of how the markets should react to his expected re-election, he pointed specifically and solely to how he had revived the stock prices of public-sector companies.