Seize the moment, Mr Modi
Published on May 19, 2014 7:15 AM
SKY-HIGH expectations will have to be gently brought down to earth as Mr Narendra Modi and his Bharatiya Janata Party (BJP) assume power after a landslide victory in India. A widespread yearning for change was inevitable following the Congress Party's years of stalled economic policies, large-scale corruption and a dysfunctional political system that conspired with bureaucratic sloth to bring about legislative-executive gridlock. But popular expectations are overdone as there are limits to what Mr Modi can do to speedily restore growth, check high inflation, multiply jobs for restless youngsters and fix shoddy infrastructure.
A rapid revitalisation for India is beyond anyone as substantive changes on the ground will take time - even with the return of badly needed investment, it will require a gestation period of three to four years to yield sufficient productive capacity, according to a former governor of the Reserve Bank of India.
Mr Modi is seasoned enough to know the art of politics is to moderate overweening hopes while delivering incremental changes as he gets into his stride. Confidence is best sustained by focusing on high standards of governance with a firm eye on long-term structural improvements. Policy certainty will be the crucial game changer. Its absence was the key reason why investment nosedived, as the International Monetary Fund had noted.
Running a tight ship will be a signal accomplishment given the political bickering (the BJP itself was divided a year ago), vested interests and bureaucratic stonewalls that Mr Modi will have to contend with. Foremost among his obstacles is the difficulty of persuading state governments to give a fillip to worthy projects. For example, land acquisition at the state level is said to account for the fate of over half of the top 50 projects (measured by value) that have ground to a halt, according to the Centre for Monitoring the Indian Economy. "All told, 75 per cent to 80 per cent of the problems on the ground are outside the direct jurisdiction of the central government," says a JP Morgan economist.
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