Can Modi reboot business in India?

How much of democracy is too much? As India’s growth almost halved from 2009 to less than 5% in 2013-2014, exasperated citizens were seriously questioning democracy itself.

After tasting growth for a brief period, the India story was forgotten as coalition politics and lethargic leadership allowed growth to slip away.

Faith in democracy has revived somewhat with recent national election results that threw up a decisive verdict and allowed a single party to form a government. The last time a single party formed a government in India was in 1984. Since then, it has been a coalition of unwilling partners that ruled the country.

The new government led by Bhartiya Janata Party’s (BJP) Narendra Modi has started taking steps towards better governance. Already, his cabinet of ministers is about 40% smaller than the previous government led by Congress Party. The previous government had to accommodate more ministers to keep its coalition partners satisfied.

A smaller cabinet means that his office will be able to monitor the ministries more efficiently than his predecessor.

Modi has a single objective: to bring growth back to double digits. And he has promised to do whatever it takes to meet this objective.

As the previous government focused on combating rising inflation, it neglected policy changes that would have accorded faster clearances for infrastructure projects. It also encouraged the central bank to increase interest rates, which further crippled industrial growth.

Modi has begun dismantling bureaucratic structures that were holding back efficient decision-making, and removing entities described as an “empowered groups of ministers”. Such groups of ministers met infrequently and rarely took decisive action. A group that was to decide on allowing private companies to commercially mine coal barely met during a period when lack of supply from the state-run coal monopoly was holding up completion of power generation plants.

Modi is expected to clear many such thickets that have been holding up decision-making. A favourite target for his government is creating 100 smart cities in the country. With a population of 1.2 billion, India is largely semi-urban. Most towns and cities are under-resourced and terribly planned.

The new government is hoping to work with regional governments to create 100 engines of growth that will also take the pressure off existing megapolises like Mumbai, Delhi and Kolkata.

In his plan for reviving India’s economic growth, Modi is not looking at Europe or the US. Instead, he is keen to emulate the success stories of East Asia and even China. The government is likely to expand its linkages with the countries like Japan, South Korea and Singapore. When he was the Chief Minister of the western state of Gujarat, Modi actively wooed investment from China. He turned to leaders of Japan and Singapore for advice on developing the state’s infrastructure.

This relationship will be seen at the national level, too. The $100 billion Delhi-Mumbai Industrial Corridor project has been planned and is being executed with Japanese funds and expertise. This project began a few years ago, but will pick up pace under the new government. Here, the cooperation and coordination between state governments will be hastened by Modi.

India has seen a deficit of governance and implementation. Modi is keen to prove that democracy is not responsible for slow growth. The larger economic policy will be revealed in July when the annual economic budget is presented the BJP government. Modi knows his success will lie in implementation and not just grand announcements. That would be the best way to revive faith in democracy.

Author: Pranjal Sharma is a consulting editor at Businessworld in India and a Member of the World Economic Forum’s Global Agenda Council on India. Follow him on Twitter @pranjalsharma

Image: A supporter of Bharatiya Janata Party (BJP) holds a cut-out of louts, the election symbol of BJP, during celebrations after learning of initial poll results outside the party headquarters in New Delhi May 16, 2014. REUTERS/Anindito Mukherjee