Will a Proven Pro-Business Leader With a Clear Majority Be Enough to Fix India’s Economy ?

Pro-business leader Modi has become the Prime Minister of India and his party BJP has won a clear majority with about 338 seats. [272 is a majority]

Modi had run the Indian State of Gujarat [population 60 million] for about a decade to double digit GDP growth each year.

Pritchard at UK Telegraph thinks India is stuck in poverty.

The Talk of matching East Asia’s growth rates has been exposed as wishful thinking. Superpower dreams are giving way to the same old reality of poverty, depleted ground water and graft.

We can now see that growth averaging 8.2pc from 2004 to 2012 was an anomaly, kept alive by fiscal largesse at the top of the cycle. A torrid global boom masked all sins, itself the result of negative real interest rates in the West, the yen carry trade from Japan, China’s reserve accumulation and ultimately a flood of dollar liquidity that leaked everywhere from the US Federal Reserve.

India’s manufacturing industry remains stuck at 14pc of GDP. This is a far cry from levels in Thailand (30pc), South Korea (31pc) or China (32pc), or Japan in its day, the typical threshold for catch-up economies graduating to a higher league. India has actually lost 5m manufacturing jobs over the past decade, slipping from 55m to 50m.

India does have terrible infrastructure with half of road still unpaved.

However, an advantage for India is that all they have to do is open up the country and projects for construction companies in China to sweep in and build out infrastructure on a large scale. Those Chinese companies have proven they have the capacity to build on infrastructure on a China scale.

China’s companies can build the road, high speed rail and buildings and power plants for cities that India needs.

We will then know how functional India can be with completely working and modern infrastructure and how much of the problems are because of other social and regulatory issues.

We will see how much a competent leader in India can do to sweep away the regulations or how much entrenched interests fight it.

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