Prime Minister Narendra Modi’s bold condemnation of protectionism, which drew huge applause in Davos, shows how dramatically times have changed. Earlier, it used to be the Americans who hectored India on the need to open up its economy. Globalisation and the World Trade Organisation (WTO) were the tools through which they hoped to push this through. Now it’s the United States that has become insular under President Donald Trump, whose loyalists want jobs at home.
Mr Trump’s objective therefore is to bring back jobs to the US and “make America great again”. He is offering incentives to American companies that return and set up businesses at home to create jobs for armies of the unemployed, as the jobs fled to where profits were highest and labour cheap. It’s against this backdrop that India took centrestage at Davos, with Mr Modi’s threefold agenda: battling protectionism, terrorism and stress on climate change. Mr Trump left a void on climate change as he saw it as a hoax. Mr Modi threw India’s weight behind the need to take forward the fight over climate change, and won France’s support.
The PM, however, can’t afford to rest on his Davos laurels. India has a long way to go, as the WEF Inclusive Development Index noted, with India ranked 62nd, way below China (26th) and even Pakistan (47th). Even if Pakistan’s rank is ignored (due to its quality, and its dependence on the US first and then China), India has a lot of catching up to do with China — though some Chinese statistics are suspect, particularly after the recent revelations about growth in some Chinese cities. India is in a good position to overtake the Chinese economic growth rate — its GDP is pegged at 6.7 per cent, against India’s proposed 7.5 per cent. There was a slight setback to India’s growth due to the hare-brained demonetisation of high-value currency notes and the hurried introduction of GST, but there are indications that the economy is now returning to normal.
One of India’s big challenges is unequal growth. Mr Modi has been stressing inclusive growth, but this is yet to happen. A recent Oxfam report noted that one per cent Indians own 73 per cent of its wealth, while India’s poorest half (67 crore people) saw their wealth rise by just one per cent. The PM has floated several initiatives for women and the unemployed, but these haven’t made a difference yet. These schemes depend heavily on FDI coming in. Whether Mr Modi’s hardsell in Davos of the reforms, which his government has started, will draw global businessmen in droves remains to be seen. There are murmurs that land and labour reforms are disincentives. All these point to the enormous task that lies ahead for the PM after his triumph in the snowy heights of Davos.
