Top-level Bloomberg View columnist William Pesek has termed much of what Prime Minister Narendra Modi spoke on the Independence day as rhetoric, phrasing it as a “loud hissing noise you hear coming from India is the air escaping from the Modi bubble.” Pesek, who won the 2010 Society of American Business Editors and Writers prize, regrets, “Since taking office, Modi has scuttled a global trade deal, sidestepped much-needed subsidy cuts, and refrained from letting foreigners hold majority stakes in key domestic sectors. He remains vague about the broader structural reforms partisans hoped he would inaugurate.”
Pesek comments, Modi may have sought to open up India's insurance industry a bit wider to global investors and announced a bold scheme to turn India into a manufacturing superpower, but all this is “without providing any details.” It is not clear, for instance, how would the talk of “better infrastructure, less red tape, increased training” might pull off “such a feat”. In fact, according to him, all this is going along familiar lines: “Modi's all-rhetoric-no-reform shtick is becoming all-too-familiar in Asia.”
By way of example, Pesek says, “The region's three biggest economies are being run by self-described reformers -- Modi, Japan's Shinzo Abe and China's Xi Jinping. All three wooed their populations -- and global investors -- with talk of epochal change, pledges to shake up fossilized political systems, and proposals to replace stagnant industries with new. Buyer's remorse shows signs of setting in.”
Japan’s Prime Minster Abe's policies “have created more inflation than economic growth”, Pesek comments, adding, “Twenty months ago, Abe promised to lower trade barriers, modernize the tax system, loosen labor markets, encourage entrepreneurship, and prod companies to fatten wages. So far, none of the above has happened.”
According to Pesek, “The 6.8 percent annualized plunge in second-quarter gross domestic product is but the latest reminder that Abenomics is in trouble as the world economy grows more uncertain around Japan. While optimists claim the plunge reflected a one-time growth-hit related to a 3 percentage point sales-tax hike, more recent data hasn't been much sunnier”.
Pointing out that the same goes for China's Xi, Pesek says, “For all the chatter about a ‘new normal’ and ‘tolerating’ slower growth, Beijing's full attention seems to be on meeting its 7.5 percent growth target. That means more borrowing by local governments, increased credit creation by the shadow-banking industry, less political will to stomach debt defaults -- and an even bigger crash down the road.”
“And then there's Modi”, says Pesek. “In his fiery Independence Day speech last Friday, as in almost all his public addresses, he signaled that India was open for business again. The message is welcome, with the economy growing more slowly than it has in a decade, and government paralysis blocking investments India desperately needs.”
Modi has also “built his reputation as a tough modernizer while chief minister of the booming western state of Gujarat”, where “limited government, pro-business pragmatism, anti-graft initiatives and a welcoming environment for foreign investment produced 10 percent-plus growth rates.” Even then, Pesek underlines, “But Modi is stumbling in his efforts to translate that success into national prosperity.”
While agreeing that “Modi deserves more time to devise and implement his vision for Asia's third-biggest economy”, Pesek says, “But if the prime minister expects patience from a global community that's watched India squander its potential during the past decade, he's mistaken. Really, if a supposed maverick with the fattest parliamentary mandate in three decades can't deliver on easy reforms like opening the insurance industry, how much can the world really expect?”
“Like China and Japan, India can't afford to keep putting off more serious, big-bang reforms. The 2.7 billion people in those countries need less talk from Modi and the rest of Asia's axis of reform, and more action”, Pesek concludes.
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