In just one year under the visionary leadership of Prime Minister Narendra Modi, India has been catapulted into the global spotlight. It has shed its image as a country plagued by cronyism, corruption and policy paralysis to become one of the most favoured countries in the world.
This year, the Indian economy is forecasted to be the fastest growing in the world, surpassing China, thanks in part to lower oil prices and a change in the methodology used to calculate growth. Both the World Bank and the International Monetary Fund have upgraded the country’s growth prospects twice in the past year, indicating that the country is moving forward at a faster pace than anticipated. In fact, India is now on track to become the world’s next economic superpower.
Reflecting the surging economy, India’s stock market was the best performing major market last year and is poised for a multi-year bull run, benefitting the droves of foreign investors who have pumped record sums of money into the market.
And Modi, who has been the architect of India’s transformation, has become one of the most recognizable world leaders, earning him a spot on Time Magazine’s Top 100 Most Influential People – an achievement never before awarded to an Indian Prime Minister.
The globe-trotting Modi who has visited 18 countries and hosted the leaders of nine since assuming office on May 26, 2014 – has boosted India’s image as a country on the move, while securing a myriad of arrangements to enhance trade, facilitate infrastructure development, develop its energy sector, increase foreign investments and promote manufacturing and industrial development.
The investor-friendly Modi’s vision for a “New Age India”, which is premised on four fundamental pillars - economic growth, employment generation, skills development and attaining global quality standards –, has garnered widespread attention among global leaders as well as investors who believe he is on the right track to turn around India.
For example, US President recognized him as “India’s reformer-in-chief” and on a visit to Canada in April and Canadian Prime Minister Stephen Harper spent three full days with him, in an unprecedented move.
Upon attaining power, Modi took steps to address what he calls his biggest challenge: breaking down the barriers in government. Since then, he has fostered greater stability and increased transparency by seeking to eliminate corruption and regulatory bottlenecks that have impeded the country’s progress – although there is still yet some way to go before the country begins to function like a “well-oiled” machine.
He has also implemented structural, policy, regulatory and institutional reforms which are beginning to come to fruition. Among other specific initiatives implemented are Make in India to promote local manufacturing; Digital India to reform government systems and empower citizens; Skill India to harness the country’s demographic dividend; and the National Institution for Transforming India, a think-tank to identify development priorities. In addition, Modi has also proposed building 100 smart cities – a plan that has received support from countries like France and South Korea.
The government has also initiated plans for massive infrastructure development and made changes in a range of areas, among them: reforms to the energy sector, the Land Acquisition Bill and mining laws; implemented the direct transfer of subsidies; introduced the Goods and Services Tax; and lowered corporate taxes.
Steps have also been taken to improve the primary education and health care systems, increase productivity in agriculture and establish a well-designed welfare and subsidy mechanism.
To encourage foreign investment, FDI (foreign direct investment) caps have been raised in the insurance and defence sectors, each from 26% to 49%; FII (foreign institutional investment) limits have been merged to make it more feasible for foreign institutions to invest in India; and there are no limits on investing in railway infrastructure, including high-speed trains, manufacturing and maintenance.
As a result, FDI in India increased by 26% in 2014 to reach a record $35 billion, with $13 billion already been invested in the first quarter of 2015. And there are substantial commitments from major foreign governments to invest in India. For instance, Japan and China have committed $29 billion and $20 billion, respectively, over the next five years to infrastructure development in India.
From a macroeconomic standpoint, inflation which stood at 4.87% in April is within the control band of 4% - 6%; the fiscal and budgetary deficits are declining; foreign reserves reached a record $350 billion in May; and the Indian rupee has been one of the strongest emerging market currencies against the rising dollar.
For now, Modi still has many challenges ahead. For instance, the reaction among foreign investors to the application of the Alternative Minimum Tax, which triggered a sell-off in the equity market in April, is one of the challenges that need to be addressed. It will also not be easy to dismantle decades-old administrative structures and processes overnight. Nor will Modi’s transformation plans be allowed to go through without resistance from some circles.
Notwithstanding, the progress made by Modi during his first year in office is simply outstanding and he is expected to continue to make progress.
(Bhim Asdhir is President and CEO of Excel Funds in Canada. He can be contacted at firstname.lastname@example.org)