Modi’s Economic Agenda: Encumbrances Ahead but an Opportunity Looms

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As the hoopla about Prime Minister Modi’s blow-out electoral ​triumph dies down, the constraints on his policy agenda are becoming clearer.  One of these is that the need to combat chronic inflation means ​the continuation of ​tight monetary policies at least for the foreseeable future.  Another is that rival political parties still ​control the upper house of parliament, which ​for now ​will have the power to disrupt important parts of Modi’s legislative agenda.  A third is that these parties also control most of India’s ​state governments, which have immense discretion over the major infrastructure projects he wants to accelerate.

​A key development in Modi’s favor, however, is the emergence of a large bloc of states in the northern and western parts of the country governed by administrations now looking to emulate the very​ economic model he crafted in Gujarat.  These states would do well to copy the reforms he enacted in the electricity sector, labor market regulation, and land clearances for industrial projects.

(UPDATE, June 10: The BJP government in Rajasthan is preparing legislation to enact critical labor market reforms.)

The emergence of a “Saffron economic bloc” of state governments would be a powerful force offsetting the other elements of the Indian system that will act to stymie the impatient Mr. Modi.  Its success also would have a potent demonstration effect for the rest of the country.​

Read the entire article at Fair Observer here.

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One thought on “Modi’s Economic Agenda: Encumbrances Ahead but an Opportunity Looms

  1. A very well written article on challenges and opportunities for Modi’s economic policies. Some of the responsible political parties such as AIDMK, BJD etc who are not alliance partner of NDA government led by Modi will support in passing those legislation in Rajya Sabha which are beneficial for state governments. Inflation is not big issue, provided economy keeps on moving at desired pace. Slow progress in opposition ruled state in inter-state infrastructure project involving BJP and allied ruled state and opposition ruled state will put opposition parties on back foot if it is caused by opposition parties ruling the state. Modi will be able to show case development in BJP ruled state and put the pressure on other states to follow good practices. It is true that more development will be visible in those states govern by BJP and its allied within two to three years time frame, and if the gap between rate of development between BJP and its allied ruled states and opposition ruled state increases, it will be disastrous for opposition parties. As there will be a number of models like Gujarat to show case for forthcoming State Assembly elections.

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