'India's economic conditions would improve soon'
Global corporations are not dialling India for investment yet, but going by the proceedings of the first India Today Global Round Table in New York on September 26, a windfall seems likely in the near future. Speakers were hopeful Prime Minister Narendra Modi would succeed in pulling the country out of the woods.
While bottlenecks around land acquisition, foreign direct investment, the allotment of coal blocks and infrastructure continue, there is reason for hope. Gita Gopinath, Professor at Harvard University, said that most conditions - such as market opportunity - remain as they were but something has changed. "What has changed is more the software than the hardware. With the new government coming in there is expectation that decisions will be taken, projects might get cleared, (and) bureaucracy will do its work. But there are still problems with the hardware," she told the audience at The Pierre in New York.
Investors, she added, care about three macroeconomic parameters - growth prospects, inflation and current account deficit (CAD). While CAD is narrowing and inflation may be easing, it is still early to talk of growth. "There are still deep issues that need to be addressed. But I am optimistic," she said.
Gopinath summed up the tone of the roundtable well where Indo-US ties were discussed threadbare in the wake of Modi's visit to the country. "We share interests, ideals and threats. Our ideals are identical," said keynote speaker William Cohen, a former US Defence Secretary. "We have the same interests in promoting democracy, commerce, in energising our economies, unleashing the private sector and reducing bureaucratic heavy handedness." Cohen added that American companies were disappointed with bureaucratic obstacles in India. But he was optimistic. "You have a new prime minister who has got a mandate, who has been a successful [chief minister], who has promoted business and has made Gujarat very successful and he is now the head of the Indian government and will change how business is done," he said.
Frank Wisner, former United States envoy to India, said the two countries should move towards a freer trade regime. "We must have a vision of where we want to go, moving towards a freer trade regime. Let's also set some dreams," he said. "The visit (of Modi) is of deep strategic importance. We have the chance, therefore, of fixing strategic relations for up to a decade. Getting our minds together, understanding each other will be the core achievement," he added.
Economist and Professor at Columbia University Jagdish Bhagwati said Modi was making progress but big-ticket reforms will take a year. "In democracy you cannot expect rapid speed. You could be bundled out," he said. While Sangh Parivar outfits with protectionist mindsets are a problem, Modi is the man most qualified to lead the revolt from within, he added.
{blurb}Bhagwati said that Modi was moving in the right direction. "If you look at the last 120 days (of the new government), the prime minister has made news. But some things you cannot do right away... So far I've not been disappointed. But I had hoped for some dramatic moves," he added.
Bhagwati said that labour market reform and raising revenues would be crucial for Modi. "I'll be surprised if he does not push the finance minister to raise taxes and increase revenue," he said. "We need policy proposals. He has scaled up manufacturing... But India needs labour-intensive manufacturing, not all sorts of manufacturing." Indian manufacturing experts have been divided on whether the country needs volume manufacturing, China-style, or high-value one.
Ajit Gulabchand, Chairman of Hindustan Construction Company, agreed that Modi will take time. "The debris of the economic collapse of the last few years is so severe that it will take them (the new government) at least 18 months to clean it up," he said. He also said that it was necessary to reform the Reserve Bank of India as well as the agriculture sector. "But Modi thinks like a capitalist since he has to create millions of jobs. And for that, you have to create an American-size economy. The challenge is urgent," he added.
Noted economist Jagdish Bhagwati said that though Modi was making progress, big-ticket reforms would take a year
Other speakers included Ram Madhav, General Secretary of the BJP; Nehchal Sandhu, former deputy national security advisor; Husain Haqqani, former Pakistani envoy to the US; Kanwal Rekhi of Inventus Capital Partners; and Congress politicians Shashi Tharoor and Jairam Ramesh.
