newdigital

Tonight, Narendra Modi will be sworn in as India’s new Prime Minister. And there is no shortage of advice on what he should do once he takes power.

Today, India’s daily newspapers and the world’s financial press have been publishing articles telling the new man in charge just what he needs to do to help India reach its potential, and there are some common themes. As context, it’s worth noting what the stock market tells us about expectations: Mumbai’s benchmark Sensex index rose 15% between the announcement of the elections in early March, and the declaration of Modi’s victory on May 16. The rupee gained 4% too. “This,” writes Sanjoy Narayan in the Hindustan Times, “on account of nothing else but a heightened sense of exuberance about what the markets think the new government can do.”

So what can it do? And where should it start?

The Hindustan Times asserts, in common with most other press, that the economy will be a priority, and suggests that there are “some low-hanging fruit that Mr Modi and his government can pluck right away.” An example is to start projects that are easily begun, such as road-building, which will generate jobs and have a multiplier effect on iron and steel, construction materials and transport. It is believed that he will set a target of building about 25 kilometres a day of new highways, the paper says. The HT also recommends tackling inflation – part of the reason the predecessor UPA-II ruling party is perceived to have lost the election – and suggests he use a price stabilisation fund to subsidise prices of six to 10 essential items.

The New Indian Express EXPR 0% believes the first priority should be infrastructure, and in particular power. “Far too many industries have suffered or shut down because of low availability of power” in states like Tamil Nadu, the paper says. “If Modi delivers on his promise of cutting the bureaucratic red tape – remember his catchphrase of less government, more governance – he would make life easier for foreign investors.”

Moneycontrol.com, an Indian web site, lists 10 economic reform challenges for the new prime minister. One is the proposed goods and services tax which would replace existing state and federal levies with a uniform tax, “boosting revenue collection while cutting business transaction costs.” The site reckons this could boost India’s economy by up to two percentage points, but notes that the reform requires broad backing because it would involve a change in the constitution. Other challenges include a proposed change to the act that governs the Reserve Bank of India , which would, among other things, remove the debt management functions from the RBI; the privatisation of holdings in state-run firms in order to trim India’s fiscal deficit; reforming subsidies on basic commodities, which cost an estimated 3.3% of India’s GDP in 2013-14; reformed labour laws, so as to boost job-intensive manufacturing and create up to 10 million jobs a year for young Indians; welcoming foreign investment in defence; raising the cap on foreign investment in Indian insurance; helping state-run banks with rising bad loans; implementing a new model for power distribution; and changing the national gas pricing formula.

The Hindu reckons that bullet trains are on top of Modi’s to-do list. In election, he emphasised infrastructure development, and the newspaper believes he plans a blueprint for high-speed trains similar to those in Japan and China. “The government would work towards evolving the public-private partnership model into a people-public-private partnership, or the 4P model, that will involve citizen groups, professionals and retired experts in designing, implementing and monitoring public service projects,” the paper says.

Outside India, the FT says the first item on Modi’s agenda should be “restarting hundreds of stalled investment projects across the country – a task Mr Modi says he will relish, having earned a formidable administrative reputation during his tenure as chief minister of the state of Gujarat.” The FT points out that the same target confounded previous Prime Minister Manmohan Singh, “who spent more than a year trying – and largely failing – to get a range of derailed industrial development projects back on track.” Investment in India’s economy has slumped to almost nothing over the past two years, the paper says, while the number of troubled investment projects has increased dramatically – more than 300 under the last government, worth $356 million, according to Goldman Sachs.

Beyond all of these challenges are two, so immense as to be hardly worth stating in the press: the inequalities of Indian society that leave about 150 million people in poverty, and the difficulty of bringing any kind of government to the world’s largest democracy within which so much power resides not at the federal but at the state or local level. As always, the potential in India is just as immense as the challenge.

More...