Economists hail Modi’s victory and express confidence in India’s future

BJP workers celebrate in Bengaluru on May 23, 2019. (IANS)

Prime Minister Narendra Modi’s rollicking re-election victory and BJP’s return to power with an even greater majority than in 2014 has enthused trade and business bodies as well as entrepreneurs, economists and scholars in the U.S.

These people, which included Nisha Desai Biswal, president of the U.S.-India Business Council and former Cisco chairman and CEO John Chambers, expressed confidence that the consolidation of power by Modi and the continuation of the BJP government at the national level will lead to faster fiscal and economic reform and development, inclusive growth, big infrastructure development, and massive job creation, one of Modi’s election promises on which he could not measure up to expectation.

“Modi now has the political capital necessary to make the difficult reforms necessary to build jobs and increase growth. These include labor reform, further deregulation, privatization, and land reform,” Chambers told India Abroad.

Well-known Silicon Valley entrepreneur Vish Mishra said Modi’s re-election for a second five-year-term bodes well for the country and its future development. The renowned venture capitalist from Silicon Valley said while there were many accomplishments on the part of Modi in the previous five years, “structural problems” like unemployment and poverty remained to be firmly addressed.

“With Modi’s return to power, they can now be addressed by economic development through massive infusion of capital which India has to obtain by way of more FDI (foreign direct investments) into the country,” Mishra told India Abroad. “I see this to increase to over $100 billion annually because investors will now see more stability in India,” Mishra said, adding that this FDI will help fuel job growth.

On that issue of FDI, scholars like Eswar Prasad, the Tolani Senior Professor of Trade Policy and Professor of Economics at Cornell University, and a senior fellow at the Brookings Institution, seemed to concur.

“Political stability, if accompanied by improvements in governance and continued strong growth performance, should make India an alluring destination for foreign capital,” Prasad told India Abroad in response to question if he sees infusion of venture capital from abroad in the wake of a stable government in New Delhi with the return of Modi and which can help move stalled, infrastructure projects.

“An infusion of such capital, particularly if channeled through deeper fixed income markets, would provide a robust source of funding for major infrastructure projects and other projects that require substantial long-term financing,” Prasad told India Abroad.

Foreign direct investment into India has risen from less than $25 billion in 2014 — before Modi took power — to around $45 billion in 2018 fiscal year. Much of that growth was spurred by policies and also Modi’s signature “Make in India” campaign to grow the country’s manufacturing base.

Prasad described Modi’s election victory as a “resounding mandate” but added that despite his not keeping up all his 2014 election promises, Modi has certainty delivered in the last few years in terms of economic performance.

Nisha Desai Biswal, president of the U.S.-India Business Council (USIBC), an appendage of the powerful U.S. Chamber of Commerce, said she has the confidence that “with a strong mandate from the Indian people, Modi will have an opportunity to usher in an era of global economic and strategic leadership for India.”

Earlier when the results started coming in, and Modi’s massive victory was a foregone conclusion, Biswal,the former assistant secretary of State for South Asian Affairs in the Obama administration, congratulated Modi on his “commanding victory,” and predicted that the prime minister “has the potential to transform India and forge opportunity for all Indians,” and pledged that the USIBC was committed to work with him.

Her sentiments were echoed by Mukesh Aghi, president of the U.S.-India Strategic and Partnership Forum (USISPF) —and the erstwhile president of the USIBC — which broke away from the U.S. Chamber of Commerce nearly two years ago.

Aghi described Modi’s re-election and the BJP’s romp, drowning the opposition led by the Congress Party to humiliation and embarrassment as “stellar and historic.”

But he made clear that “voters have re-elected Modi for economic development, inclusive prosperity and corruption free government,” and called for “bolder reforms, efficient government and massive job creation.”

Aghi said it was a no-brainer that the hefty mandate that the people of India had bestowed on Modi and his party would necessarily imbue “increased confidence” in the American corporate sector as it reinforces stability vis-à-vis trade and investment and sustained economic growth.

Rick Rossow, the Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies — a leading D.C. think tank — agreed, saying, “We have made good progress in our defense relationship, and despite some tensions between our capitals on trade issues, our economic relationship is deepening considerably.

“These factors are unlikely to change in the near-term, assuming we can avoid any serious self-goals such as pending U.S. sanctions regimes related to India’s ties with Russia and Iran, or a dramatic worsening trade fight,” he said.

Speaking about Modi’s victory, Chambers, who is the chairman of the board of directors of USISPF and has developed a close friendship with Modi and has initiated several start-ups in India as a leading venture capitalist and angel investor, predicted that the “next five years of prime minister Modi’s leadership will lay the groundwork for the next 25 years in terms of economic growth and prosperity for the country.”

He said that under Modi’s leadership, India will be able to increase its GDP and see exponential economic growth and job-creation, with a simultaneous improvement in trade and foreign investment.

Chambers said, “The future is bright for India and we at the U.S.-India Strategic Partnership Forum look forward to boosting ties between the two countries like never before.”

Columbia economist Arvind Panagariya, who is the former vice-chairman of NITI Aayog, the Indian government’s top policy think tank, said the new government must give top priority to boosting the country’s economy and signal a strong commitment to reforms and fiscal consolidation during the first 100 days of its governance.

“During the first 100 days the new government must show strong commitment to fiscal consolidation, inclusive of borrowing by off-budget public entities such as Food Corporation of India, to ensure that private sector is not starved of investment funds,” Panagariya told India Abroad from New Delhi in an email response to questions about the new government’s priorities.

Panagariya, who had served as the first Vice Chairman of the NITI Aayog from January 2015 to August 2017, talked about the tasks ahead for the new government, emphasizing areas requiring attention during the first 100 days of the Modi government.

This includes, he said, privatizing on average one public sector unit per week, which he said is feasible, since more than two-dozen PSUs already have the cabinet approval. Panagariya also said the government should accelerate cleaning up of NPAs (non-performing assets) and infuse capital into Public Sector Banks (PSBs) to ensure that healthy credit growth returns.He also called for privatization of Air India.

“We should also create a new entity with charge for negotiating trade agreements and place it in the PMO along the lines of the USTR in the United States,” Panagariya told India Abroad.

Talking about longer term reforms, Panagariya called for overhaul of higher education, replacing the UGC Act by a modern National Higher Education Commission Act, which grants the authority to govern higher education institutions (HEI) to a governing board of each institution, opens the door to foreign universities, automates entry and exit of universities and colleges with minimal regulatory barriers, and provides for quality assessment of all colleges and universities with private accreditation agencies permitted.

Among his other prescriptions are wholesale reform of labor laws, land laws relating to acquisition, conversion of land from one use to another and tenancy and rental laws.

“Creation of entrepreneur-friendly Coastal Employment Zones covering areas of 500 km or more with a great deal of autonomy, including the power to write their own labor and land laws” are also something the government should consider, he said. Panagariya said he personally believes it would be good if the government in its first 100 days gives “a very strong signal for its commitment to reforms.”

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