Modi’s growth push casts shadow on chances of long-term success

By Dai Yonghong&Wang Jianping Source:Global Times Published: 2016-2-14 22:53:01

At the time when India is becoming the rotating presiding country of the BRICS group, the myth that India's economy has successfully caught up with China's also resonates. Indeed, behind Prime Minister Narendra Modi is his management experience in Gujarat, but this doesn't prepare him for successfully governing a large country, nor can his manipulated economic data be used to prove the arrival of a "catch up with the US and surpass China" era. It can be fairly safe to say that there is still a long way to go before India can actually lead the other BRICS countries.

Of course, Modi has been leading India to search for ways to inject strong momentum into the Indian economy, but at the same time has caused potential problems to India's future.

First, "the paper growth" of the Indian economy has caused some increasingly serious social problems.

India has reportedly changed the statistical method of GDP and other important economic indicators several times in order to moisten the data to make the government seem more credible.

In 2015, India's on-paper GDP growth rate of 7.4 percent has exceeded that China's 6.9 percent for the first time by the "creative" use of a new statistical method of GDP at market prices rather than at factor cost.

Meanwhile, India's laboring people are still struggling on the edge of poverty where survival, rather than quality of life, is the main concern. The number of people living in absolute poverty in India is far greater than any other country in the world, and high unemployment and inflation are still troubling many. Ethnic conflicts, religious conflicts and regional unrest are increasingly serious due to the catalysis of the disparity between the rich and the poor.

Furthermore, Modi's economic policy is also questionable. Currently, India is seeking an investment-oriented growth pattern. Modi's "recipe" is nothing more than efforts to attract investment, with the heat of capital to push development in India.

Indeed, the power of capital can really create the myth of prosperity, but it's presumed that it can also create a bubble trap in which lies the greatest risks for the future development.

The success of China in the past lies in the power and prosperity of the first wave of investment after the late 1970s, but the present China is also suffering some failures stemming from that. The ultimate reason why China is attempting to make a bold economic transition under the leadership of President Xi Jinping is because of the recognition that capital can be a misfortune rather than a blessing.

A highly efficient Chinese government finds it difficult to deal with the troublesome middle income trap, so how can one expect Modi's successors to drag the "burdensome democracy" of India to create miracles?

Although India's development is likely to achieve high growth temporarily, the social and institutional environments in India can not support the huge population and an ethnically and religiously complex country. Modi is too persistent in pushing the image of a bustling and prosperous economy while remains blinded to the root of India's ills.

Modi's "New Deal" may become "a success today but a failure tomorrow" if the Modi government can not grasp the scale of needed transformation.

Dai Yonghong is professor and director of the Center for Myanmar Studies/Institute of South Asian Studies, School of International Relations, Sichuan University, China, and non-resident senior fellow at the Institute of Security and Development Policy, Sweden. Wang Jianping is a research assistant and postgraduate student at the same institution.

Posted in: Asian Beat

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