IN INDIA: Economic revival coming, but may not be fast enough

Mr T.N. Ninan says India’s vital signs are improving.
Mr T.N. Ninan says India’s vital signs are improving.ST PHOTO: NG SOR LUAN

EXPECT India to shake off the sluggishness that has plagued its economy for the last few years. But whether it can transform into a high performer in line with the expectations unleashed by Prime Minister Narendra Modi is another matter.

At The Straits Times Global Outlook Forum, one of India’s top business editors opened a window into Mr Modi’s India and offered insight into his leadership style.

India’s vital signs are improving, said Mr T.N. Ninan, chairman of the Business Standard newspaper.

After growing at a rate of under 5 per cent in the last two years, the economy is expected to grow at 5.5 per cent this year. Inflation, which had been raging at close to 10 per cent, has begun declining.

But the revival is not at a pace expected by voters who handed Mr Modi a landslide victory in April. He has raised hopes with his development-focused agenda, including projects that have caught the public’s imagination: 100 “smart” cities, fast trains and clean energy.

His government thinks big. In solar energy, for example, India’s initial target was to go from generating 3,000MW today to 20,000MW by 2022, thought to be a tough goal. But Mr Modi set sights even higher – 100,000MW.

That scale of ambition, however, does not extend to the reforms needed to actualise the targets.

He has chosen the “third way” of reforms – not the policy paralysis of the last government nor radical market-oriented reforms. “He only wants to do politically acceptable reform,” said Mr Ninan. The flip side is that this “opportunistic” approach to reform can be waylaid by “political accidents” which might consume Mr Modi’s attention.

Further, the Modi-centric government with heavy reliance on one individual could lead to slower decisions as officials wait for cues from the very top.

So, how much can be expected from the Modi government? Mr Ninan’s advice was to wait for the next Budget in February. “We’ll know then if the optimism is justified or we need to moderate expectations,” he said.