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Modinomics
Economic Reforms Smothered in Their Cradle?

Indian Prime Minister Narendra Modi came into power with a wildly ambitious liberal economic reform plan aimed at transforming India’s notoriously business-unfriendly climate. The plan relies on parallel measures to slash onerous read tape (known colloquially as the “license raj”), to make the acquisition of land for industrial infrastructure easier, and to federalize the disparate taxation schemes that make taking products or raw materials between India’s 29 states incredibly slow and costly.

Each of these efforts have been watered down and blocked at every turn by an obstructionist Congress Party smarting from its recent losses. And he latest bad news for Modi, who has been forced to give up on the land bill and who is making little to no progress on ousting the license raj, is that the end of the parliamentary session is upon him, and that spells doom for the federal taxation scheme as well. The Wall Street Journal has the details:

After nearly a month of partisan bickering, lawmakers ended a parliamentary session Thursday without passing a centerpiece of the prime minister’s agenda—a constitutional amendment to replace a thicket of varying state taxes with a more business-friendly nationwide levy. […]

It was always going to be a difficult balancing act [for Modi]—wooing investors and industrialists critical to prosperity in a country where large numbers of people live on less than $2 a day. Decades of socialism have sown deep suspicions about the benefits of private enterprise. […]

Unless the government calls lawmakers back for a vote on the tax proposals, they will have to wait until at least the winter session, making it all but impossible for the government to meet its mid-2016 target to implement the changes.

The Indian economy will need to adapt as the population continues to balloon and geopolitical threats, like that posed by China (and, even more important to New Delhi, China’s warm and warming ties with Pakistan) necessitate a strong India to act as a regional counterweight. But the socialist streak in postcolonial Indian politics runs deep, and Modi’s enemies are proving more potent in opposition than many people predicted. If even a man as determined and as popularly-supported as Modi cannot liberalize India’s economic policies, can anyone?

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  • Jacksonian_Libertarian

    Cultures change at Glacial speeds. Modi will just have to work for the changes India needs to make in order to compete.

  • Anthony

    Not only economic reforms are eluding Narenda Modi’s leadership efforts but also Fighter Jet (French Rafale Fighter) acquisition face roadblocks: thediplomat.com/2015/08/indias-36-rafale-fighter-purchase-from-france-hits-roadblocks/

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