From the Managing Editor: September 14, 2014
The day after the general election results showed the immense faith the Indian electorate had posed in Narendra Modi and the coalition he led, I wrote for these columns how the most important factor in the ex-Gujarat chief minister's premiership would be his learnability.
By the time you read this letter, the National Democratic Alliance (NDA) coalition government would have spent 100 days in office and in this time of the Pro Kabaddi League that is long enough for a quick review of Modi's rule. The Prime Minister has so far shown fine qualities of a (relatively) young and operations-focussed leader: choosing big impact projects, setting unreasonable goals, an eye for detail, frequent reviews, and Energizer Bunny-like drive.
The NDA government has hit the ground running with promises of changes in labour, mining and environment laws. His government's strategic and trade policies have been firmly driven by "what's good for India" and "we mean what we say; don't second-guess us" principles.
In his Independence Day speech, Modi put sanitation-for-all targets into mission mode. He talked of Indian factories that produce not just for India but also for rest of the world ala the Chinese and the Koreans. The latest is the Digital India project that will cost Rs 1,13,000 crore in less than five years and promises to yield much more in jobs and efficiencies. All through this, Modi has been the disciplined administrator.
He has weekly reviews with his important ministers and secretaries (as the top bureaucrats in a ministry called). At those meetings, often, it is the secretary who gets more attention of the Prime Minister. The minister accepts this and the secretary knows better than selling his boss's boss a lemon. Finally, Modi's no-nonsense image got a leg-up with the avuncular yet cold dressing down he gave the son of one of his top ministers when he came to know of the son's involvement in something that was not above board. So far, so good.
The Prime Minister knows all too well that he needs to get the economy back on track before he can do the big stuff that will legitimise his aspirations of statesmanship. That is still a work in progress - Modi looks like he can be coached alright, for sure - but the question is: will he go the Reagan way or the Roosevelt way?
We need more than 100 days to have that answer. A lot is going for the economy, meanwhile. Business confidence is up (a survey by BT shows a 11-quarter high), the RBI sees the capital investment cycle turning, growth in six sectors -manufacturing, mining, construction and trade, hotels, transport, and communications - that make up half of the country's GDP is accelerating, the problem of twin deficits (fiscal and current account) is easing, and the buoyancy in equity markets makes capital cheaper to raise. But at the centre of all this is a vulnerability that could trip India up: debt defaults and restructured loans, which have ballooned to more than one-tenth of total bank assets.
Some senior bankers say that will grow to 15 per cent if you include loans that are nearly in default. Add the need for fresh funds to meet capital adequacy norms at the lenders and things look grim. An Indian bank going belly up is a remote possibility, but a high-profile bribes-for-loan case is a good time for some much-needed reforms. The issue has the story of the rot in the banking system, warts and all. It is tough to spot gems among the millions of small and medium businesses in India, but it's something that we're good at. The issue has the stories on fifth Best SMEs survey done together with YES Bank. Two other stories I'd recommend: how Tata Motors is breaking with its past in cars and an interview with one of the smartest businesswomen I've met, Padmasree Warrior.
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