"Lacklustre" economic reforms: Market liberals disillusioned, "cultural warriors" alone Modi's top supporters

By Our Representative

In a sharp critique of Prime Minister Narendra Modi’s economic policies, America’s powerful business newspaper, “Wall Street Journal” (WSJ), has said in an opinion piece that “free-market liberals” in India are fast “losing faith that Modi will deliver on his promise to launch India on a path of prosperity.”

Warning that “lacklustre reform record will likely have electoral consequences”, despite whatever “senior politicians” from Modi's BJP argue, WSJ says, if one takes way “market liberals” from his support, “the only opinion makers left supporting the BJP are a group of culture warriors championing ancient Hindu glory.”

Written by WSJ columnist Sadanand Dhume, who is attached with the conservative Washington-based think-tank American Enterprise Institute, the article says, just two years ago, “a small but influential cohort of market-friendly analysts and commentators were among his most ardent supporters”, which is not the case how.

WSJ says, “Today many of them have lost enthusiasm for Modi, who appears to lack both clarity and appetite for bold reforms. The prime minister's advisors may pooh-pooh this development. India's elections, they say, are won by appealing to the masses, not to intellectuals spouting Adam Smith and Friedrich Hayek.”

Insisting that “they are wrong”, WSJ says,  “Loathed by the cultural left, Modi cannot afford to alienate the economic right. Should Finance Minister Arun Jaitley deliver another lacklustre budget next month – his third dud in a row – it will not only hurt India's economy but also his boss's re-election prospects.”

Giving examples of “most influential market liberals” who have signaled their disappointment, theWSJ says, one of them is “former cabinet minister Arun Shourie, who successfully privatized state-owned firms during Prime Minister Atal Bihari Vajpayee's tenure from 1998-2004”.

If Shourie recently accused the Modi government of confusing managing the economy with “managing the headlines”, investment guru Jim Rogers, once an enthusiastic Modi backer, has accused him of having done little “to change the basic macroeconomic problems facing India”, the opinion piece says.

While the government may have rolled out “red carpet for investors”, WSJ says, “In terms of minimizing government, particularly in business, the slogans have little connection with reality.”

Among the examples WSJ offers on failure of Modi to go in for market reforms, WSJ says, the proposed goods and services tax “to stitch India into a common market won't be rolled out this April as planned”, and the government has been forced to beat a retreat “on a proposal to ease land-acquisition norms for industry”.

Further, WSJ says, the reform of labour laws – which currently discourage job growth by making it difficult to lay off workers during a downturn – has been left to state governments; and the UPA directive “compelling companies to channel some of their profits toward social objectives continues, which is being used by politicians to “encourage” businessmen to fund their favorite boondoggles.

Finally, WSJ regrets, “Instead of winding up the previous government's flagship programme — a rural job guarantee that wasted billions of dollars — Modi plans to increase its funding.”

Pointing out that the Modi administration displays “no philosophical clarity on the economy”, WSJ says, this is clear from the fact that he seems to believe that “he can stem the rot in state-owned companies by picking the right managers rather than privatizing the firms.”