It’s the second most populated country on Earth, has the seventh biggest economy,
has one of the 10 biggest military budgets in the world, and is a nuclear power.
However, India is a stranger in political terms.
If I asked you who was the Prime Minister of India, could you tell me?
Now, I am aware that many of you will know, especially if you are viewing this from India...
But, if you don’t, don’t worry, that happens a lot.
On the 26th May 2014, after an absolute majority which had not been seen in 30 years, Narendra
Modi became India´s Prime Minister.
Modi´s Mission?
It was clear: boost growth, investment, and create millions of jobs.
In conclusion, turn India in a superpower capable of competing with China on an economic,
military and political level.
Now India is, dear VisualPolitik viewers, something of an eternal promise.
It’s always the country which seems to be the next to take off... but never really seems
to take off.
We can see that with a quick look at India and China’s GDP and its development in the
last decades...
So, with Modi´s victory, expectations were high again, and India once again has become
the talk of the town.
Modi himself repeats over and over again that the 21st Century will be India´s century.
But let’s first take a quick look at Modi himself.
-WHO IS NARENDRA MODI?-
Vegetarian, single, and a Yoga enthusiast: Modi escapes the traditional politician profile.
He comes from a family of limited means and he used to help his father sell tea in a train
station when he was a child.
This has helped him to earn the sympathy of many poor people in the country, who see him
as an example that “rags to riches” in India does sometimes work.
His political ideology has always been very attached to Hinduism, but not always with
a moderate approach.
In fact, before getting involved with the BJP party, he was part of RSS, an extreme
right-wing political party who had Nathuram Godse as a member, Mahatma Gandhi's assassin.
For 13 years, between 2001 and 2014, Modi was the regional Prime Minister in the State
of Gujarat.
Gujarat, with its 65 million inhabitants, has become, under Modi´s leadership, India´s
economic driver with an average annual growth of more than 10%.
Alongside these impressive figures, social welfare has also improved.
Almost every home has access to plumbing, electricity, and pre-school education.
While the General election was taking place, Modi promised to replicate Gujarat´s success
through the rest of India.
Furthermore, he promised to do it in 10 years - just two political terms.
That is because, for Modi, 2022 is key: the 75th anniversary on India’s independence.
The country will also surpass China as the most populated, with more than 1600 million
people and, according to Modi, it will become clear that this is India’s Century.
But it will not be easy: India is a country whose population is growing by 28 inhabitants
every minute.
-INDIA’S BIG TROUBLES-
India has several problems, but three stand out as particularly important:
1 - India is bureaucrat's paradise.
In fact, if that were to be the key to prosperity, India would probably be the wealthiest country
in the world.
Unfortunately, bureaucracy, instead of encouraging business, prevents it.
(John Kerry’s statement saying India’s bureaucracy could compromise the economical
success of the country).
According to the Doing Business Report of the World Bank, which estimates how easy it
is to do business, India occupies the 130th position.
Each step on the way to opening a business requires tons of documents, and the taxes
are not only high (even though very few pay them) they are absolute hell to work out.
For example, there are not only different taxes in each state, but sometimes there are
different taxes for each product or for different models of the same product (as happens with
vehicles).
It really is a crazy system.
Further, absenteeism among public workers is so high that there have been situations
critical enough to close hospitals because workers did not show up.
2- The regulations in the market as so complex that it is almost unable to function.
On the borders between states, trucks full of goods have to stand in endless queues.
Not few say it is easier to import that to buy inside the country.
The devastating condition of the country’s infrastructure does not help either.
Further, as a consequence of this, it is estimated that half the harvest goes to waste before
even arriving to the country’s markets.
3 – Corruption is quite common in Indian society.
As an example, 50% of all aid provided by the government to families and the poor end
up in hands of corrupt politicians and middlemen.
This is the country that Modi has to deal with.
-THE NEW GOVERNMENT’S POLICIES-
The revolution some have suggested has not taken place.
However, the truth is the new government has achieved some advances.
We could highlight the following:
- In order to reduce bureaucracy, the government has created a committee with the purpose of
determining which rules and regulations are obsolete and need to be eliminated.
So far they have done away with more than 1700.
- Modi has also eliminated many restrictions on foreign investment, and has passed the
first bankruptcy law, and has set up a powerful plan to promote India as a business destination.
- They have started an ambitious plan to achieve better financial inclusion.
This plan has a pretty unpronounceable name I’m just going to show on the screen.
It has already allowed for 200 million people to have a bank account for the first time.
This way, government subsidies won’t have to go through middlemen any more.
-The government is considering the implementation of a flat rate tax on sales at a national
level to end the chaos of the current tax system.
- Modi has further announced an important investment in infrastructure - $130 billion
will be spent by 2020 on just a railway network
… But his most risky move was announced in November 2016.
-INDIA’S CASH CRISIS-
In order to fight corruption, the government made 500 and 1000 rupee notes illegal, which
represented more than 85% of all the ‘hard cash’ in India, a country where almost all
the payments are made in cash.
The goal was to find dirty money and punish its owners when they went to change it for
the new design notes.
However, the plan has been a total disaster: the government didn’t have enough notes
to change for the old ones and the countries ATMs weren't even working properly because
new notes had different sizes.
This was a botched operation which left the country moneyless, creating significant damage
to its economy.
Sales fell in November by more than 30%.
Many businesses weren’t able to pay their workers and many business transactions had
to be cancelled.
Some studies estimate the damage to be at least two points of the country's GDP.
That would mean the banknote switch cost India almost $50 billion.
Needless to say it is the poorest citizens who have suffered the most.
The government even tried to justify and disguise the mess under the premise of it being part
of a plan to encourage the use of electronic money...
Ahhh politicians!
-FOREIGN POLICY AGENDA-
Now this is the field where the Prime Minister has really excelled.
In his first year alone, he visited 19 countries.
Despite the fact that he has only been in power for a short amount of time, he has achieved
some notable advances: the Pakistan treaty has improved the India/Pakistan relationship,
and a relationship with China has started dealing with some economic and commercial
issues.
However, without any doubt, the greatest strength of Modi’s political agenda has been his
approach to the US.
The chemistry between Obama and Modi has been quite significant and their encounters have
been frequent and friendly.
They both even published an article together in the Washington Post.
What we need to ask now is: Will Modi reach his goals?
They certainly are challenging.
It has been made clear to the Prime Minister how tricky it is to put limits on bureaucracy.
Further, Modi has avoided many essential reforms, such as ending India’s labour regulation,
which is to blame for the fact that 4 out 5 jobs in India are on the grey market.
Modi claims to be an admirer of Lee Kuan Yew, Singapore´s ex-prime minister, but Modi does
not seem to have the same determination to transform India’s appalling model.
So, that’s our opinion, but what do you think?
Do you think the 21st Century will be India’s century?
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and, as always, I’ll see you in the next video!