February 29, 2016


[India’s economy is performing well, with 7.6 percent growth and the lowest inflation in decades, but even by the government’s own admission, growth is below the 8 to 10 percent needed to provide jobs to India’s rapidly growing population of young people.] 


Prime Minister Narendra Modi of India in New Delhi in January. His promise to 
create jobs for the one million people who enter India’s work force each month 
has become subsumed in political turmoil.Credit Bernat 
Armangue/Associated Press
MUMBAI, India A flash fire sent the star-studded audience at Prime Minister Narendra Modi’s “Make in India” convention fleeing into Mumbai’s streets last month. But that was minor compared to the political firestorm caused by his government’s arrest that same weekend of a student leader accused of participating in a university rally in support of a man put to death for a terrorist attack in India years ago.
The arrest, and the government’s ensuing campaign against people deemed unpatriotic, dominated the headlines, once again distracting attention from the promise of economic rejuvenation that lay at the core of the electrifying campaign that won Mr. Modi overwhelming support in elections nearly two years ago.
That has largely been the story of Mr. Modi’s administration. His promise to shake things up and create jobs for the one million people who enter India’s work force each month has become subsumed in political turmoil, often stirred up by radicals in his party pushing a Hindu fundamentalist agenda.
And so, as his administration on Monday presented a $287 billion spending plan for the coming year, its third, it did so amid growing disappointment inside and outside India with Mr. Modi and with Asia’s third-largest economy.
“He came to power with high expectations that have not been met,” said Harsh V. Pant, who teaches international relations at King’s College London.
China’s weakness and a sluggish global economy have given India a rare opportunity to draw foreign investment, but, “When you don’t use it, you lose it,” Mr. Pant said in an interview.
He and other experts say India missed the boat because Mr. Modi’s third budget, like his first two, did not call for major structural reforms. They blame the prime minister’s reluctance to wage those battles on political struggles at home as well as on his party’s losses in local elections last year.
“Unless he reins in the Tea Party elements of his party, he’s not going to be able to take India where it has the potential to go,” said Surjit Bhalla, a New Delhi-based columnist and macroeconomic adviser on India to the Observatory Group, a consultancy in New York.
India’s economy is performing well, with 7.6 percent growth and the lowest inflation in decades, but even by the government’s own admission, growth is below the 8 to 10 percent needed to provide jobs to India’s rapidly growing population of young people.
India faces huge hurdles to growth, including widespread corruption, a suffocating bureaucracy, enormous social spending, a stifling business environment and woeful infrastructure. But Mr. Modi’s spending plan, presented by Finance Minister Arun Jaitley in a 90-minute speech in Parliament, focused mainly on rural India, which has been suffering from two years of drought. The plan called for a raft of new policies, including crop insurance and credit programs for farmers, even as Mr. Modi put an extra $5.6 billion into a program started under the previous government guaranteeing 100 days of work to every rural household.
The budget stuck with the government’s plan to lower the fiscal deficit to 3.5 percent of India’s gross domestic product in the next year, as urged by Raghuram Rajan, the widely respected governor of the Reserve Bank of India, the central bank.
The austerity measures, combined with increased social spending, were accomplished by allocating far less money than needed to recapitalize government banks, which are struggling with bad loans and are less able to lend to India’s cash-starved corporate sector. Infrastructure spending was higher in the proposed budget but fell far short of the enormous infusion needed to spur growth, experts said.
Mr. Modi came to power in May 2014 on the promise of bringing more growth and jobs, with his government pledging to make the economic changes needed to lure private investment.
He did try to change the investment climate, raising foreign investment caps for military contractors and insurance companies to 49 percent, from 26 percent. But the refusal to allow outsiders to gain majority stakes remains a disincentive for foreign investors.
Mr. Modi ran into political trouble when he tried to ease India’s strict land-use laws to make it easier for the government and private companies to build industrial plants and infrastructure. Opposition parties used a Hindi phrase to cast him as running a “suit and boot” government, working only in the interests of the rich, and Mr. Modi stopped pushing the plan.
He also proposed a constitutional amendment aimed at creating a more business-friendly environment by putting in a simplified nationwide tax system to replace a patchwork of state levies, but that stalled in Parliament last year.
And Mr. Modi’s Bharatiya Janata Party suffered a crushing blow in a November election in Bihar, one of India’s largest states. His party had already lost a local election in New Delhi last year to a new anticorruption party.
Adding to Mr. Modi’s woes, he has found himself on the defensive as the right wing of his party and offshoots have adopted an aggressive agenda that has sometimes spilled over into violence.
An offshoot group began a “ghar wapsi,” or “homecoming,” campaign, holding ceremonies to convert Muslims and Christians to Hinduism. Members of Mr. Modi’s party pushed for bans on eating beef, which many Hindus do not eat because they believe cows are sacred. Late last year a Hindu mob killed a Muslim man in a village near the capital, saying — mistakenly, as it turned out — that he had killed a cow. Some members of a local group that initiated the attack were affiliated with the youth wing of Mr. Modi’s party.
There was also a series of attacks on Christian schools and churches.
So outraged were some of India’s top writers that, starting in September, they protested what they called an atmosphere of intolerance by returning awards the government had given them over the years.
Mr. Modi has made some conciliatory steps, including giving a speech at a Christian church in Delhi early last year, saying he would not “accept violence against any religion, on any pretext,” but his efforts fell short in the estimation of many.
“The people who supported the B.J.P. were voting for Mr. Modi, overlooking the radical right wing of his party, because he promised to focus on jobs and growth,” Mr. Bhalla said, referring to the Bharatiya Janata Party. “It’s a mystery as to why he hasn’t acted more strongly to rein in the Neanderthals. He has to take action.”
The latest political frenzy surrounds the government’s arrest of students at Jawaharlal Nehru University in New Delhi on Feb. 12. The students are said to have participated in a rally in support of Afzal Guru, a Kashmiri convicted and hanged for his role in a deadly attack on the Indian Parliament in 2001.
Despite widespread criticism, the Modi government has gone on the offensive, with the education minister denouncing the students in a passionate speech in Parliament last week. Business was adjourned in the ensuing mayhem.
Tarun Das, a former director general of the Confederation of Indian Industry who works informally on Indian relations with the United States, said Mr. Modi had worked behind the scenes to stop the right-wingers in his party, and that the prime minister would do so again.
“He will take action, just give him some time,” Mr. Das said.
“This is India, there will always be a new eruption,” he added. “But believe me, this prime minister is determined not to lose sight of his economic agenda, and calm will return.”
Nonetheless, Mr. Modi’s popularity has diminished as observers question his desire or ability to implement the ambitious agenda of economic changes.
“The economic and the political cannot be separated,” Mr. Bhalla said. “The prime minister needs public opinion on his side to get bills through Parliament. How can he have public opinion on his side if he’s arresting students?”
“It will make economic progress impossible,” he added.
Hari Kumar contributed reporting.

@ The New York Times