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A Greener Planet?
Modi Tackles Fuel Subsidies

Many accused him of dragging his feet and focusing too much on “littler” issues like street sanitation and the like, but now Narendra Modi is pushing for the implementation of some of the big macroeconomic reforms that he ran and was swept into office on. The AP reports:

Modi, who has promised to make India a global center for cheap manufacturing, announced a major overhaul of labor laws last week, hoping to attract investors.

India’s onerous labor laws, many written when the country was a British colony, require reams of paperwork and strictly regulate all hiring and firing of employees, often deterring companies from bringing in new staff. […]

Taking advantage of that dip in crude prices, the Indian Cabinet freed diesel prices from government control over the weekend, targeting one of India’s costliest subsidies.

The subsidy, along with high international oil prices and a dependency on petroleum-based fuels, has caused India’s trade deficit to balloon in recent years, reaching $14.3 billion in September.

The fuel subsidy part in particular is both immensely important and shows political courage. Greens the world over, for one, should be thrilled that a country the size of India will by necessity end up using less fuel due to market-distorting price ceilings if the reforms go through and take hold.

It’s worth remembering that a more opportunistic leader might either further entrench fuel subsidies as a sop to voters or simply be content to trumpet budgetary gains which would be the natural outgrowth of cheaper prices. That Modi has chosen to seize the moment when otherwise unpopular reforms would be least painful—while certainly reflecting Modi’s sense of political comfort after two big victories in the recent elections—is also a testament to how seriously he sees the need for changing the country he is leading.

The obvious next questions are: how will the execution go, and will the reforms work?

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  • Jacksonian_Libertarian

    How can their be any doubt that getting the incompetent Government Monopoly out of the market place will do anything but good? Only when the true value of goods and services are set by the market can the all important “Feedback of Competition” deliver the correct information to force continuous improvements in Quality, Service, and Price.

    • Ofer Imanuel

      Secondary effects? Look at Kansas

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