Aug 20, 2014

    India open for business? Not quite

    THAT loud hissing noise you hear coming from India is the air escaping from the Narendra Modi bubble.

    In retrospect, expectations that India's new Prime Minister would revolutionise a troubled economy overnight were wildly overblown.

    But three months on, even some sceptics of Mr Modi may be wondering if they have been too easy on the great moderniser from Gujarat.

    Since taking office, he has scuttled a global trade deal, sidestepped much-needed subsidy cuts, and refrained from letting foreigners hold majority stakes in key domestic sectors.

    He remains vague about the broader structural reforms partisans hoped he would inaugurate.

    Recently, he was outmanoeuvred by opposition lawmakers on opening India's insurance industry a bit wider to global investors.

    On Friday, he announced a bold scheme to turn India into a manufacturing superpower without providing any details - better infrastructure, less red tape, increased training - of how he might pull off such a feat.

    Mr Modi's all-rhetoric-no-reform shtick is becoming all too familiar in Asia.

    The region's three biggest economies are being run by self-described reformers - Mr Modi, Japan's Shinzo Abe and China's Xi Jinping.

    In a June 10 column, I explored the bullish case.

    The basic idea: a serendipitous coincidence had put the region's main economic powers in the hands of three leaders who not only appreciated the need for change, but also enjoyed uniquely strong mandates.

    So far, time has not been kind to this thesis.

    In Mr Modi's fiery Independence Day speech on Friday, as in almost all his public addresses, he signalled that India was open for business again.

    The message is welcome, with the economy growing more slowly than it has in a decade, and government paralysis blocking investments India desperately needs.

    Mr Modi's Bharatiya Janata Party won a landslide victory in May because voters were convinced he would change this trajectory.

    He built his reputation as a tough moderniser while chief minister of the booming western state of Gujarat.

    There, limited government, pro-business pragmatism, anti-graft initiatives and a welcoming environment for foreign investment produced 10 per cent-plus growth rates.

    But he is stumbling in his efforts to translate that success into national prosperity.

    Granted, it is early days. He deserves more time to devise and implement his vision for Asia's third-biggest economy.

    But if he expects patience from a global community that has watched India squander its potential during the past decade, he is mistaken.

    Really, if a supposed maverick with the fattest parliamentary mandate in three decades cannot deliver on easy reforms like opening the insurance industry, how much can the world really expect?

    Talking about a manufacturing revolution that involves "zero imports" and "zero defects" is catchy stuff, but gimmicky.

    Like China and Japan, India cannot afford to keep putting off more serious, big-bang reforms.

    The 2.7 billion people in those countries need less talk from Mr Modi, and the rest of Asia's axis of reform, and more action.