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Ever since PM Modi came to office, his government has prioritised social reengineering over economic growth. Look where that led us.


While most world capitals have been waiting for significant economic reforms since Prime Minister Narendra Modi’s election to office in 2014, his government has prioritised social reengineering over economic growth in India.


Putting vote-getting religious sentiments above economic and strategic goals has diminished the enthusiasm with which other countries support Indian foreign policy.


And as a result of lacklustre economic policies, India’s rate of growth has declined to 4.5 per cent. What was once described as the fastest growing economy in the world, is now in its worst phase in 42 years.


In 2015-16, India’s GDP stood at US$ 1.99 trillion and it had a labour force of 860 million people. Both the World Bank and the International Monetary Fund predicted that India’s economy would grow between 7.3-7.5 per cent over the next two years. The World Bank even asserted that a “resilient” India would help drive economic growth in South Asia. But now India’s eastern neighbour, Bangladesh, has become the fastest-growing economy in the region.

www.568z.com_【官方首页】-澳门永利高2015- 2016年,印度国内生产总值为1.99万亿美元,劳动人口8.6亿。世界银行和国际货币基金组织都预测,未来两年印度经济增长率将达到7.3%至7.5%。世界银行甚至宣称,一个“有弹性”的印度将有助于推动南亚的经济增长。www.568z.com_【官方首页】-澳门永利高但现在,印度的东部邻国孟加拉国却成为该地区增长最快的经济体。

And the latest Budget offers little hope of reviving India’s stagnant economy.


Social slide


The lack of focus on economic growth over the last several years can be traced to an over-emphasis on socio-cultural issues and majoritarian politics.


For instance, the Modi government’s launch of a programme to encourage foreign investment in India in February 2016 was overshadowed by the arrest of students from one of India’s top universities, the Jawaharlal Nehru University (JNU), on grounds of sedition. The narrative that emerged was that the Modi government was using a colonial-era law against university students while asking Indian and foreign corporates to bring state of the art technology and skills to India.


It is difficult to convince investors of a government’s promises about capitalist freedom when it is accompanied by visible repression. For years, India’s greatest strength globally was its reputation as a secular, inclusive, and pluralist democracy. India’s socialist economic frxwork did not attract capital, and the consensus among economists was that the country needed free markets alongside its political and cultural freedoms.


Starting in late 2014, there has been a steady decline in India’s reputation for tolerance. Attacks on religious minorities, especially Muslims, including lynchings tied to the demands of a ban on cow slaughter and beef consumption, do not bring investment. And neither do attempts to ‘re-convert’ Muslims and Christians to Hinduism through ghar wapsi (‘return to the fold’).

从2014年年底开始,印度宽容的声誉稳步下滑。对宗教少数民族,尤其是穆斯林的攻击,包括与禁止屠宰牛和食用牛肉相关的私刑,并没有带来投资。试图通过ghar wapsi(“回归宗教”)运动,让穆斯林和基督徒“重新皈依”印度教的企图也是如此。

Illiberal majoritarianism coupled with an unwillingness to dismantle controls that have limited India’s growth are probably the reasons why India is performing below expectations in the economic realm.


China’s rise


The Modi government’s decisions on Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC) are positive steps, but their impact so far is small. A lot needs to be done to improve India’s British-era infrastructure (rail, road, air, and ports), or accessibility to basic amenities like electricity and water.


None of these can be accomplished through culture wars. Businesses seek countries with secure tax regimes and political and social steadiness. But India’s complex and confusing taxation structures, the presence of retroactive taxation, and the government’s punitive approach to businesspeople have created an environment of fear within the business community.


At a time when many US firms are moving out of China, India’s policy should focus on wooing these investors, improving ease of business, and offering incentives.


Instead, xenophobia, hyper-nationalism, and a desire for absolute political control seem to be pushing those who have already invested in India away. And the BJP government has been more protectionist than even its predecessors.


Moreover, India’s friends and rivals will take New Delhi seriously when they see India investing more on defence and security. But instead of spending more on defence, India has been spending less. This year’s defence budget (excluding pensions) stands at only 1.5 per cent of the GDP.


Some apologists have blamed India’s bureaucracy, the ‘babus’, for India’s current economic mess and the lack of reforms. But the same bureaucracy had effectively implemented the 1991 reforms when commanded by the political leadership of the time to do so. The ‘babus’ would have gladly done the same under instructions from their current political masters.


Given its focus on social and cultural issues, the Modi government does not seem to have the desire to significantly change the way India does business. Instead of shifting blame away from the political leadership, honesty demands recognition of the incompatibility of the current leadership’s social agenda and India’s economic and strategic aspirations.