On 26th May, 2014, the nation of India welcomed their New Prime Minister, Narendra Modi, to the helm. His overwhelming mandate was considered to have been partly won due to his excellent economic acumen and proven excellence in economic administration. The highly controversial Prime Minister made ambitious promises to the Indian citizens about better human development and economic reform of the country. From 2002 until 2008, India enjoyed an average growth rate of 9% which was stunted by the 2008 world economic crisis. The nation bounced back and showed a 10.26% growth rate in 2010. Nevertheless, recent political instability and numerous billion dollar scams have hurt economic sentiment in the country, reducing growth to 4.74% in 2012. The new Prime Minister has vowed to get India back on the right path, to continue its quest to become an international superpower.
This year, the Indian economy aims to overcome the sub-5 percent growth of GDP experienced since 2012. The industrial sector has particularly suffered. However, the promotion of the industrial sector has been one of Modi’s key focuses in his reign as Chief Minister of the state of Gujarat. The Prime Minister said, “I want to appeal to all the people world over, from the ramparts of Red Fort, „Come, make in India”, „Come, manufacture in India”. Sell in any country of the world but manufacture here. We have got skill, talent, discipline, and determination to do something”, he emphasized in his speech on their Independence Day. The government’s recent fiscal budget shows a bigger leap towards the encouragement of foreign investment in the country as the composite cap was raised to 49%. The Prime Minister has also been rumored to raise the FDI cap in defense to 100% following his recent diplomatic trip to the USA. He has recently approved the formation for the new BRICS bank, while his recent visit to Japan resulted in Japan promising $33 billion in investment. However, the country faces major challenges.
In recent years, inflation has been a major problem for the economy. The government has imposed regulations on export restrictions and food hoarding. The main problem lies in structural deficiencies though, which may take some time to resolve. The inflation has decreased, yet there is a long way to reach the optimum level.
Fiscal Deficit and inefficient allocation have also been major problems for the country, hence the current government has taken a stance in favor of the removal of harmful subsidies. However, the government’s eyes may remain on its target of $41.32 billion. These moves have been greeted positively by economists, who support it as a curbing measure to the dramatic fiscal deficit of the nation.
A fall in crude oil prices has been opportune for the Modi government. The change in prices will certainly help to curb the large Current Account Deficit of the country, while allowing the country to project a growth of 7.5 % in the fourth quarter of 2015. The reserve bank has given way to monetary easing to aid the growth, while policy administration has been in reform as well. The Planning Commission, one of the key bodies in determining economic policy administration, was dissolved and replaced with the new National Institution for Transforming India (NITI). At the helm of the growth plan is the “Make in India“ initiative which promises to revolutionize the industrial sector. Modi has vowed to cut down on red tape bureaucracy and fiscal difficulties to ease business operations, while the M.I.I. initiative’s plans for 17 investments and industrial zones have led to excitement in the economy. Moreover, the Fiscal Budget of 2014 allotted $1.2 Billion to 100 new Smart Cities that may be crucial to the future growth and modernization of the economy.
India shows great promise for the future and shows confidence in the new visionary leader at the helm. India, today, represents a potential economic superpower with 1.2 billion consumers and workers. The country boasts of the third largest army on the planet and shows promise in wielding great political and economic influence across the globe in decades to come. It may be too soon to conclude if Mr. Modi can boost the country’s claim to global dominance, but early results show promise.