When Narendra Modi was charging to victory in the 2014 elections, he said:Aceh din aane waale hain.” — Good times are coming.
The value of India's stock market has tripled since he first took office, even as Mr. Modi is now seeking to secure a second term as prime minister in elections starting April 19. India's economy is almost twice the size it was before.
Stock prices have risen so much because the number of Indians with sufficient wealth and an appetite for investment risk has jumped from just 2% of the population to nearly 5%.
However, the economic benefits were highly unequal. Much of India's growth depends on people at the top of the income ladder, including subcontractors of large, tightly controlled corporations.
It is estimated that 90% of India's 1.4 billion people live on less than $3,500 a year. But in the poorest rural areas, welfare programs expanded under Mr. Modi have made life more bearable. Many of the benefits are tangible, such as free bags of grain, toilets, gas cylinders, and housing materials. Purely commercial development changed village life. LED lighting, cheap smartphones and nearly free mobile data have changed the nature of idle time.
While the US is experiencing a depressing 'vibrancy' despite positive economic news, India is doing the opposite. Lots of mixed signals here, but the atmosphere is great. International surveys show that Indian consumers are more optimistic than anywhere else.
Foreigners also have a positive impression of Modi's economy. Banks like Morgan Stanley and JPMorgan Chase are rushing to increase India's weight in global stock and bond indexes. Chris Wood, one of Asia's most respected market strategists, has warned that Indian markets could plummet by more than 25% if Mr Modi is not re-elected this year.
What is odd about the spirit of Modi's economic optimism is that India's growth rate over the past decade has been very similar to that of the previous decade, under a regime that Mr. Modi often blames for ruining the country. is.
As much as that is the case, India's economic success story is also due to a unique feature of Mr. Modi's years at the top: his ability to control all levers of power with showmanship paramount. There is also.
Mr. Modi's face is everywhere, perhaps more present in New Delhi than the faces of democratically elected leaders in other capitals. In the run-up to last September's G20 summit, his slogan celebrated almost every positive development seen in this relentlessly emerging economy.
The bullish situation surrounding the Indian economy has even the pessimists feeling optimistic. While official figures predict growth at 7.3% this fiscal year, most financial experts in Mumbai expect the figure to be between 6% and 6.5%. The lowest estimate would be 4.5%, still higher than the US and possibly China.
Expressing even mild skepticism can be avoided. Economists who depend on government work must be careful not to speak up. As independent think tanks are raided and shut down, there is a growing shortage of economists who won't work with the government.
The message restrictions are more pronounced than they were under Mr. Modi's predecessor, award-winning economist Manmohan Singh. India became known as an “unstable nation” during Singh's tenure, with growth rates sometimes reaching the 10% mark.
Mr. Modi is passionate about restructuring India's governance system. Political competition has been largely eliminated at the national level, and it exploited hostility towards the country's 200 million Muslim minority.
Mr. Modi has also used state power to implement strictly economic agendas, often for the better and sometimes for the worse. Infrastructure is disrupted. Although there is some overbuilding, the fact that the construction is complete is a welcome relief. Welfare benefits have also become more comprehensive.
India is undergoing widespread digitization, especially in banking and corporate transactions. This push began during Mr. Singh's previous government, but Mr. Modi has also supported it. The “India Stack” is a suite of software platforms that runs on the biometric identification system Aadhaar, meaning Indians have access to faster and cheaper peer-to-peer transactions than Americans.
Taxes have been revised. India can inject more of its economy into the public sector and extract more revenue from more people and businesses, for example by enacting a goods and services tax like Europe's value-added tax. That's what I do. This freed up funds for public spending and lowered the corporate tax rate, making it possible to raise private funds.
One negative mark on the digital ledger came at 8pm on November 8, 2016, when Mr. Modi suddenly declared that all high-denomination currency notes would suddenly become worthless. It was aimed at stealing “black money” from criminals. Rather, it has hindered economic activity.
There are other ways in which the Indian government's power to act decisively and usually unchecked has created distortions and inequalities. The biggest companies make huge profits. Marcellus Investment Managers in Mumbai estimated in 2022 that 80% of the $1.4 trillion in wealth generated by the most famous stock indexes between 2012 and 2022 went to 20 companies. These companies are the ones that can communicate directly with the government.
No one explains the concentration of corporate wealth and the risks that come with it better than Gautam Adani. Few people outside India knew his name until he suddenly appeared on the list as the second richest person in the world after Elon Musk in 2022.
Mr. Adani's conglomerate's flagship stake nearly doubled in the year after Mr. Modi was elected, and grew eightfold after his re-election in 2019. Adani Group will effectively become the government's logistics arm, delivering ports, highways, bridges and solar power facilities at unprecedented speed.
And last year, Mr. Adani's empire was accused of fraud by a New York short seller, costing Mr. Adani $150 billion on paper. Although Mr. Adani, who denied the allegations, recovered most of the money he lost, the episode exposed the risks of the Modi government's strategy of allowing a small number of people at the top to amass enormous influence.
At the individual level, corporates aside, India's recent growth has been disturbingly unequal. Having the world's largest population explains why so many foreign investors are attracted to the consumer market. Most Indians live in rural areas, and 75 percent of them are apparently poor, making them eligible for free food rations to prevent malnutrition. This requires some attention, but leaves room for growth.
Luxury sales have skyrocketed, especially since the pandemic, and vehicles like the Mercedes G 63 have long waiting lists. Sales of motorcycles and scooters, which transport far more Indians than four-wheelers combined, have slumped.
The most difficult aspect of the economy is the employment situation. Officially, about 7 percent of Indians are unemployed. Far more people are underemployed. Over the past month, Indians desperate to earn better income abroad have been crossing the US border, fighting as poorly equipped Russian mercenaries in Ukraine, or stopping work in Israel. Palestinians who were forced to do so lost their lives filling vacant positions.
Still, India's rise in the global economy seems preordained. It has overtaken the UK to become the world's fifth largest economy and is expected to surpass Japan and Germany to become the world's third largest economy within the next few years.
It is expected that more multinational companies will flock to India, creating opportunities for Indians. Only a small percentage of consumers can expect to enjoy a standard of living in the United States, but that number is increasing every year and can now be found in even the smallest cities.
Red tape without links to top government officials continues to hinder business. However, the direction of the movement is promising. Projects that once took him two years to apply for permits can now be completed in 15 days.
together Acchedin In 2014, Mr. Modi promised “minimum government, maximum governance,” sounding like a 1980s American free marketer. In fact, his economic approach is not defined by theory or ideology. He threw everything against the wall to see what stuck. He was tenacious and pitched with power. When economists talk about India, they have stopped talking about an “unstable state.''