Modi says Hey Presto!

Modi says Hey Presto!

India Inc. CEO Manoj Ladwa digs deep into the Indian government's recent Reforms Rush and explores what it means for India and the world economy.

Just when criticism was mounting at the pace of reforms and foreign investors were getting jittery, the Narendra Modi government announced a raft of reforms to open up some of India′s most protected and strategically sensitive sectors, such as defence and aviation to 100 per cent foreign investment and made it much easier for foreigners to invest in single brand retails, food products, e-commerce and others.

Two years after Modi rode to power, accompanied by loud cheers from international and domestic business lobbies, many foreign investors were beginning to wonder if he was indeed an instinctive reformer or an entrenched protectionist like many of his predecessors.

And then came the Hey Presto! moment. The depth and breadth of the recently announced reforms as well as the new sense of urgency evident in the government's actions have led to our cover story - Reforms Rush - for this issue of 'India Investment Journal'.

As Modi tweeted so empathically: “India now the most open economy in the world for FDI; most sectors under automatic approval route.”

Protectionist tendencies look to be on the rise in the battered economies of the West, and now in particular Europe, the UK and the US. Britain's stunning decision to exit the European Union, similar “me too” murmurs in France, Denmark, Italy and some other European nations and the rise of Donald Trump in the US clearly point towards a return to competitive protectionism in the countries that have been the primary evangelists of the free market.

India is taking a diametrically opposite, economically liberal path. Foreigners have begun to embrace the catchphrase Sab ka saath... (as John Kerry, the US Secretary of State and others have oft repeated) but Modi′s approach to governance is yet to be fully understood or appreciated in the same way that perhaps former Soviet leader Mikhail Gorbachov was through Glasnost and Perestroika.

I'm also delighted that India's gritty commerce minister Nirmala Sitharaman took time out from her busy schedule to speak exclusively to India Inc. about the reforms. But while the reforms will go some way in boosting Modi's drive to pull India up the World Bank's "Doing Business” rankings, Rita Ramalho, the World Bank programme manager charged with drawing up the scale annually, writes exclusively for this issue and calls for a more sustained pace of reforms.

The FDI announcement came just two days after India's dapper Reserve Bank Governor Raghuram Rajan announced that he would not be available for a second term. The howls of protests that followed proved short lived as sober analysts realised that India's institutions, however ramshackle they may appear at times, are still robust enough to weather the coming or going of any one individual dawned early.

As this issue of IIJ explains in 'Rexit reality check: Investors don't have much to fear', Rajan's exit may cause some short term volatility in the stock and currency markets but the long-term India story remains intact. Indeed, just to prove the point, Modi went on to announce a major expansion and reorganisation of his council of Ministers, promoting “doers” and sidelining those that were perceived to be underperforming.

And finally, the rain gods have decided to shower their choicest blessings on Modi, finance minister Arun Jaitley - who has had to face the wrath of the heavenly powers in the form of two back-to back droughts - and indeed the rest of the country. At the time of going to the press, the Monsoon rains, after playing truant through most of June, was 1 per cent surplus - a pointer, hopefully, to a bountiful harvest and rural prosperity that could set off a virtuous cycle of consumption-led growth in the Indian economy. I'll keep my fingers crossed on that!

ManojManoj Ladwa is the Founder and Chairman of India Inc. Group.

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