From an economic perspective: After a surprisingly clear election victory, the new BJP government under Narendra Modi in India has now been in power for almost 100 days. Time for an initial interim assessment. A comment from the experts at India Consulting Dr. Wamser + Batra GmbH.
No matter who you talk to, it seems the whole country is full of hope. India has had a new government since June this year, led by Prime Minister Narendra Modi. Many have longed for this political change, especially the economy. India currently appears to be in its deepest crisis since 1990/1991. Economic growth has fallen to less than five percent, the inflation rate has been (almost) double-digit for years and the investment climate is at its lowest point. The high national debt, hefty foreign trade deficits and the weakening currency have put the manic-depressive Indians into a collective lethargy. In times like these, it was not difficult for the media and the opposition to place the collective blame for this situation on the ten-year-old Congress government. Modi was able to take full advantage of the mood for “change” and achieve an election victory in May that had never been seen before in India.
Who is afraid of the strong man?
PM Narendra Modi – the man of business!?
Just two years ago, most Indians could not imagine a polarizing Narendra Modi, who was then prime minister of the state of Gujarat, as head of government in Delhi. Even sharp critics of the Congress party did not believe in a Prime Minister Modi and saw national integrity at risk. The criticism in most Western/German media was even harsher. “Modi was immediately put in a drawer with various dictators from the last century,” said Dr. Johannes Wamser, managing director of Dr. Wamser + Batra GmbH. All the more surprising was his party's clear electoral success and the resulting apparent “Modi”ification of India. The fear of the “strong man” seems to have disappeared – at least in India. The entire country is obviously behind the “maker” from Gujarat. The hysteria has also subsided abroad for the first time and reporting is much more moderate. Apart from the renewed hope for a better future, India is currently facing a historic opportunity that must be seized. The BJP can rule with an absolute majority and does not need to compromise with other parties. Indian and foreign investors are now expecting clear economic policy accents from the new strong man in Delhi.
Modi's agenda for the economy
Narendra Modi is considered a business man - he has already proven that in Gujarat. He has been able to industrialize “his” state over the last 10 to 15 years, develop a usable infrastructure and establish an efficient administration. Even if critics repeatedly put his “successes” into perspective, objectively speaking, the investment climate in the western Indian state is probably the best in the entire subcontinent - and the corruption is probably the lowest. But it also seems that Modi subordinates everything to the economy and investments. He is a supporter of the Chinese development model - with a strong state and an efficient bureaucracy that autocratically makes decisions that ensure growth and industrial development. The government program focuses, among other things, on combating inflation, expanding the infrastructure and energy supply and investing in health and the education system, as well as improving bureaucratic structures. The investment climate should improve quickly and India should be put back on the fast track.
Realism for the economy instead of excessive expectations!
Modi can be trusted to do that. So far he has acted very carefully, is careful not to undo the sensible and courageous projects of his predecessors and relies on continuity. Otherwise he stays quiet. But people and the economy are already impatient. Many believe that the new head of government will solve all problems (regardless of what nature) within the next few months. But logically that won't happen. India's economic development is influenced not only by the Indian government, but also by geopolitical developments, the currency and raw material markets, the economic growth of the USA and many others. Realistically, even the impact of the monsoon on economic growth, inflation and other economic metrics is likely to be similar to the impact of the new government. If there are no major economic and financial crises in the world, one can expect better news from India in the coming years. Certainly not overnight. “But within the next five to ten years, India will once again become a very interesting and sustainable investment destination,” says Mike D. Batra, Managing Director of Dr. Wamser + Batra GmbH, sure. The existing problems will certainly not be eliminated, but they can be addressed with courageous reforms. Realism and patience are therefore required – “as is so often the case in India,” adds his colleague, Werner Heesen, head of the “Human Resources Consulting” department at Dr. Wamser + Batra GmbH and former head of Lufthansa India and former president of the German-Indian Chamber of Commerce. “You can’t expect miracles from Modi – even if he is currently being celebrated as a messiah.”
About Dr. Wamser + Batra GmbH
The India consultancy Dr. Wamser + Batra GmbH supports European companies in the planning and implementation of projects in India. Mainly in the areas of finance & law, personnel consulting, sales & market entry, purchasing & production and – if necessary – crisis management. The Dr. Wamser + Batra GmbH consists of a team of around 20 experienced experts in Europe - especially former managers and managing directors working in India. In India we have around 30 Indian specialists at several locations. We develop tailor-made solutions, implement your projects reliably on site, protect you from critical situations and accompany you to sustainable success.
