Brookings India Column: India’s New Government

Excerpted from http://brookings.in/

Brookings India Fellow Dr. Shamika Ravi, and Mr. R.N. Ravi,  former Special Director, Intelligence Bureau of India, address questions on the economic and foreign policy priorities for the new government:

How will Narendra Modi govern? Is he the right person to lead India during this challenging time in its history?

Narendra Modi has won an overwhelming majority in the 2014 general elections of India. So one can say that he is the most popular political leader in India today. The electorate of India has given him a clear mandate to govern – by that token he is the right person for the job. He is riding on enormous aspirations and promises of the population. What he does with this great opportunity remain to be seen.

The data from Gujarat indicate that he will run an efficient government. But one must also appreciate that Gujarat is one state of the Indian union and to extrapolate from there would be simplistic. Maneuvering an entrenched Delhi bureaucracy will be a challenge. Redefining center-state relationship by devolving more powers to state Chief Ministers will be a fundamental structural change that Modi will attempt. His immediate focus will be on selecting a group of ministers and functionaries to run a decisive government and to kick start a stalled economy by giving confidence to domestic and foreign investors.

India’s economy has been battling its worst slowdown in a decade, struggling with weak growth and high inflation. However, one of Modi’s most notable successes as Chief Minister of Gujarat was his transformation of the state’s manufacturing base that contributed to economic growth.

What are the top things that the new government could do to rescue India’s economy from its slowest growth rates in a decade?

Growth is an outcome, not a policy tool. The top priority for the new government has to be governance. An efficient and fast moving governance structure is critical to restoring the dwindling investor confidence (both domestic and foreign investors) as well as arresting corruption. The new government, therefore, has to focus on bolstering infrastructure – both physical and financial – which is critical to realizing full growth potential. In the medium run, the government has to address some major structural changes such as: overhauling the restrictive and archaic labor laws, administrative reforms and devolving powers to state governments. Urban planning should be another key area of policy emphasis and implementation. This is, by no means, an exhaustive list of recommendations.

What is fundamental in the long run, however, is investment in health and education in India. These are basic requirements for any developing economy and specifically for a government that aspires to pull a large section of the population out of poverty.

What challenges will Modi face in translating this success to economic growth throughout India?

For growth to benefit all sections of the society/economy, the government has to overwhelmingly emphasize on efficient and fair governance. All sections of the society must have equal access to good governance and faith has to be restored in public institutions. Investments into health, education and infrastructure are critical.

Being areas of policy focus, some of these features of the Indian economy are also the key challenges to realizing the full growth potential:

• Poor health and nutritional standards in the population
• Low levels of literacy and skill
• Low capacity of legal infrastructure – leading to delays and high costs
• Poor urban planning making it difficult for cities to accommodate an ever increasing rural-urban migration as well as growing urban population
• All pervasive gender inequality

The new Modi government will be confronted with a series of international challenges that will have a direct bearing on its domestic policies and development agenda.  What should the foreign policy priorities of the new government be?

Given the overwhelming mandate in the elections, the new government has to seize the opportunity and develop a strategic framework for its foreign policy. For long, India’s foreign policy has been largely ad-hoc and episodic, rather than strategic and consistent with long-term national interests. India’s foreign policy has to be well defined and compatible with its geostrategic assets and its core strengths. Given the size of the country and its robust plural democratic traditions, India is critical to regional and global peace and prosperity.

India’s relation with many of its neighbors is defined by a palpable mutual trust deficit. Overcoming this should be a strategic priority. Within this context, Modi’s decision to invite the SAARC (South Asian Association for Regional Cooperation) leaders at his swearing-in ceremony is a welcome first step. It reconfirms Modi’s position as stated in his election campaign, to build India’s relations with its neighbors on the basis of equality and mutual respect.

Peace, stability and growth of robust democracy in the neighborhood are in the interest of India and the region. India’s foreign policy towards its neighbors has to be framed distinctly and should be commensurate with it being the geo-strategic and geo-cultural center of gravity of the region.

Despite its existence for 29 years, SAARC as a regional multilateral body is far from achieving its founding vision of economic integration. India should play the lead role in fulfilling this vision.