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http//carnegieendowment.org/2015/05/26/modi-s-first-year/i8td?mkt_tok=3RkMMYW...

31.5.2015

Vostok magazine (No. 5, 2015) published a review of the book "Getting India back on Track: An Action Agenda for Reform". Editors Bibek Debroi, Ashley J. Tellis, Reese Trevor (Gurgaon, 2014, p. 333), published in the midst of the 2014 election campaign with the participation of leading economists and sociologists, professors of national universities in India, as well as researchers at the Carnegie Endowment. Despite all the differences in the positions of the authors, the book had a cross-cutting idea-to outline ways to overcome the difficulties experienced by the country in order to achieve an increase in the pace of development.

Elena A. BRAGINA-Doctor of Economics, Chief Researcher of the Center for Development and Modernization Problems; braglen@mail.ru

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growth. A year after its publication, the discussion started by the authors was continued on the Internet, in which most of the same authors expressed their opinion. This extensive afterword was timed to coincide with the first anniversary of the Bharatiya Janata Party (BJP) (People's Party) government led by Prime Minister Narendra Damodardas Modi. Panelists on India's current economic challenges expressed their views on the specific steps the Government has taken (or failed to take) since the second half of 2014. This continuation of the discussion has retained the form adopted in the book: each author presents his own position, and there is no general conclusion.

The publication is preceded by a short phrase that defines its essence: "Modi's First year". This is followed by the full title of the book, but with a fundamental difference. It ends with a question mark. This anticipates a certain disappointment of the authors of the book with the processes in the Indian economy after the 2014 elections, which promised drastic changes in the country. The BJP's pre-election slogan "Economy first", the basis of its program, responded to public sentiment. Many promises were made to change the state of the economy in the first place, to stop the decline in growth rates. Judging by the election results, the majority of voters, including the national business community, hoped for such changes. But the experience of millennia has proven that promises and their fulfillment rarely coincide, both at the state and personal level. In addition, a year is a very short time to reform a country with a population of 1.3 billion people and many accumulated problems. The BJP has received a mandate of confidence from the voters, but its implementation has faced the difficulties that are inevitable when trying to change the current socio-economic relations.

The authors of the afterword, noting the gap between election programs and real politics, strive to be correct, without highlighting the inevitable failures in the practice of the government of N. Modi. They admit that it is difficult to achieve noticeable changes in a short period of time, repeating this position even too often. Maybe to hide his own frustration. But their positions deserve attention, because they clarify the viscosity and traditional nature of the rules in force in the Indian economy, the interrelationships and contradictions behind which the interests of various groups of the population stand.

Almost all the authors of the afterword agree that the promised changes have begun, but, in their opinion, they only partially meet the expectations with which voters went to the polls. When reading the afterword, one gets the impression of a kind of rejection of the authors in relation to the economic policy of the government as a whole. Consciously or not, none of the authors mentioned such a fundamental shift as the beginning of India's GDP growth. Although different sources indicate different indicators, they are all higher than 4.5-5%, which was in 2013/14 FY.At the end of 2015, GDP growth was 7.3% with the prospect of increasing to 8% next year, one of the highest indicators in the world economy. However, the indicators changed due to the new baseline introduced by the Central Statistical Organization of India. International institutions also gave a positive assessment of India's progress. IMF Chief Christine Lagarde called India a "bright spot" against the dark backdrop of falling growth in most countries.

In the afterword, the authors did not mention such a politically and economically significant landmark measure as the termination of the activities of the Planning Commission of India, which developed 12 five-year plans on the basis of which the country's economy, including its industrialization, was largely built after gaining political independence, starting from January 1, 2015. Planning and closely related public sector support were the guiding principles of J. R. R. Tolkien's policies. Nehru, which was followed by all the governments of India, regardless of their party composition. The Modi Government has replaced the Planning Commission with the National Institute for Transforming India (NITI), a think tank dedicated to developing strategic and technological recommendations on key economic and policy issues.1 It is headed by the Prime Minister of the country, and the Governing Council of the Institute includes the Chief Ministers of all states and territories. The lack of mention of the new state institution seems inexplicable, especially given that the book expressed negative opinions about Nehru's socialist course, and the Planning Commission was its integral and most striking feature.

1 http://pib.nic..in/newsite/PrintRellase.aspx?relid=114268.

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The afterword opens with an article by Milan Vaishnav, a participant in the South Asia research program, with the expressive title "Waiting for the implementation of the historical mandate". He acknowledges that the government in its first year of operation, led by Narendra Modi, achieved some macroeconomic stabilization, thus creating the prerequisites for further progress. This should be recognized as an undoubted success of the new government team. In the difficult conditions of a prolonged recession, which can be considered a recession, India managed to reverse the trend and raise the GDP growth rate, as previously indicated, above 7%. It should be noted that Modi's predecessor as Prime Minister, M. Singh, who carried out liberal reforms in 1991 that significantly changed the economic landscape of India, believed that the country needed such annual economic growth for its progressive development.

Recognizing the government's activity, M. Vaishnav could not resist remarking that it was behaving "even too actively". He approved of India's foreign policy in the region, rapprochement with its neighbors, Nepal, Sri Lanka, Pakistan, as well as strengthening the previously adopted course "Look East", expressing this by changing it to "Act in the East", focusing on Southeast Asia. Modi was very far-sighted in this area, and if it is possible to pursue it consistently, India can expand its foreign economic position in the Asia-Pacific region. Today, the region, a recognized growth leader in the global economy, has significantly increased its economic and political role due to two developments.

The first one took place in October 2015. After years of negotiations and approvals, 12 countries, including the United States, Canada, Australia, Japan, as well as the growing economies of Southeast Asia and Latin America, signed the Trans-Pacific Partnership Agreement. In fact, this is a free trade agreement, which fundamentally changes the balance of power in the Asia-Pacific region. Just after the birth of this new international association, the member countries of ASEAN, one of the oldest and most established associations in the global economy, announced the final stage of negotiations to transform themselves into a regional organization with broader economic functions. In November 2015, a statement was published that the ASEAN Economic Community (AEC), the "ASEAN Economic Community", is becoming a single market based on the "four freedoms" - freedom of movement of goods, services, capital, and skilled labor. The Agreement comes into force on December 31, 2015. Previously, the ASEAN leadership has already completed 79.5% of all the preparatory procedures necessary to consolidate the new status of the organization. It is emphasized that the" AEC is an economic organization", apparently, in order to avoid excessive politicization and highlight the key direction in the activities of the new community. This does not mean that there are no disputes on individual issues within the AEC. As always, in the discussion about the "four freedoms", participants stumbled on the point about the movement of labor. The influx of refugees to Europe in 2015 has increased its severity. This probably explains why MAR (mutual arrangement recognition), the mutual recognition of professional and qualification certificates, applies only to 1.5% of the total AEC2 workforce.

The AEC focuses on integration and regionalism issues. The overall objective is designated as "outward regionalism", improving the conditions for entrepreneurial activity that increase the attractiveness of Southeast Asia for investment and business. This position reflects a shift of attention from globalization to "local", regional problems. Such an orientation corresponds at this stage to the foreign policy and especially foreign trade interests of India. The country is in dire need of new markets for its agricultural products and rapidly growing services, as well as possible diversification of foreign investors. N. Modi confirmed this interest with his participation in the ASEAN Summit on Trade and Investment in November 2015, when it was already known about the creation of the AEC.

M. Vaishnav was critical of Modi's policy of revamping public administration. Admittedly, this is one of the most conservative areas that requires not only modernly trained personnel, but also shifts in their consciousness in order to reduce corruption. N. Modi has taken a number of measures to computerize public institutions, but given the size of the country and excessive employment in the state apparatus, this measure requires further efforts. (Unfortunately, Bibek Debroi did not contribute to the afterword; his book article on the problems of public administration in India was one of the most interesting.) According to Vaishnav, the gap between the BJP's election promises and their implementation will have a negative impact on

The Economist 2. January 2, 2016. P. 53.

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the BJP's position in the country's state elections. He was right. In November 2015, the party was defeated in Bihar, India's most populous state, with negative political and economic consequences. As a result, the government failed to pass through the upper house of Parliament an important law to change the Goods and Services Tax and postponed it for the spring session of 2016. To avoid a repeat of the failure, Modi invited Sonia Gandhi, president of the Indian National Congress, the main opposition party with a majority in the upper house of Parliament. and former Prime Minister Manmohan Singh for a joint tea party, hoping to secure their consent to approve the law during the spring session of Parliament on 3.

A short article by Ashok Gulati (Indian Research Council on the World Economy) on the agricultural issue recognizes the success of the Modi government in reducing food inflation, which is largely due to the fall in world prices for agricultural products, and not to government measures. Prospects in the agricultural sector are complicated by the drought, falling incomes of farmers, which forced the government to impose a 50% compensation for losses incurred. According to Gulati, which is shared by other authors, the inefficiency of food and fertilizer subsidies, as well as the management of a collapsing irrigation system, remain a chronic problem. The Government, as Gulati writes, has set up a regular committee to develop appropriate solutions, a well-known method and, as a rule, unsuccessful.

A certain contradiction can be seen in the opinion of Barun Mitra, director of the Free Institute (Delhi). He is categorical in his analysis of land relations in India, saying that the Modi government has missed its chance. Mitra refers to surveys conducted in rural areas, according to which 40% of farmers would like to stop farming, and 60% hope that their children will not devote themselves to this work. It turns out that everyone who works in agriculture is ready to stop this occupation. How then can we understand the mass protests of the peasants against the seizure of their land for industrial construction? Is it only the size of the payments that drives them to protest? Who does B. Mitra consider farmers? It does not mention the size of land plots. If these are large farms, then the desire to stop working in agriculture seems unfounded, given that it is extremely difficult for a former villager to find paid employment in rural or urban areas. B. Mitra correctly writes that land problems concern rich and poor, and the formation of a modern land market by codifying property rights can significantly revive the entire economy. But he does not answer the question of how to overcome these negatives in the conditions of confusion and complexity of land relations, high prices of land transactions, growing demand for land and lack of available space.

Rajiv Kumar (Center for Policy Studies, Delhi) in his article "Industry: Work in Progress" tries to be optimistic, but only partially succeeds. In his view, Modi's experience as governor of Gujarat prompted him to boost the industry, primarily as an opportunity to create jobs. Kumar positively assesses the policy of supporting primarily the manufacturing industry, emphasizing that it is necessary to achieve an increase in investment in the industry - both national and foreign. It is logical that he supports 100% participation of foreign private capital in a number of industries. There are positive developments - the government has decided to allow private capital to enter the coal industry more widely. This is an important step, as India's energy balance is based on coal. This situation is expected to continue until 2040, although the government is taking advantage of the fall in oil prices to increase its reserves in oil storage facilities.

R. Kumar is one of those who supports government policies with a greater focus on business interests ("pro-business manner"). In his opinion, this is evidenced, although very cautiously, by the reform of labor laws, including the right to dismiss employees without special approval, which is primarily sought by owners of large enterprises. As a test step, the law has only been implemented in the states of Rajasthan and Madhya Pradesh. (When it comes to the shortcomings of the investment climate in India, one of the first negatives mentioned is the rigidity of labor laws.) At the end of 2015, N. Modi took active measures to encourage national start-ups, providing them with a number of benefits, including a three-year tax exemption for enterprises that will start operating after April 1, 2016.

The Economist 3. January 2, 2016. P. 39.

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In general, according to R. Kumar, investor confidence is recovering slowly, they are clearly in no hurry to finance the Indian industry. Local commercial banks have reduced the scale of lending by 40%, and the government's Income Tax Department, as R. Kumar notes, has a negative attitude towards business. His explanation is not entirely clear, as Finance Minister Arun Jaitley is among the supporters of Modi's policies. In addition, because of the Prime Minister's personality, he is unlikely to tolerate opposition, especially when it comes to an industry that should primarily fulfill his motto "Do in India".

The problem of employment is always in the center of attention of Indian economists and sociologists. In India, youth unemployment, which makes up the majority of its population, as expressed by the OECD abbreviation NEETS (no employment, education, training), reaches almost 30% of all unemployed people.4 This is one of the highest rates in the world.

Omkar Goswami, the former publisher of Business India, was clearly keen to highlight the positive aspects of Modi's activism, referring to the "Make India Clean" and "Do in India"campaigns in this regard. He highlighted plans to build 100 "smart cities" to create jobs. O. Goswami rightly emphasizes the difficulties of providing employment, when it is necessary to employ 10-12 million people annually, while the manufacturing industry is becoming more capital - and knowledge-intensive, reducing the demand for labor, especially unskilled. Of course, the construction of cities, even if not on such a huge scale as Modi's planned 100 "smart" ones, can significantly increase employment. But first of all, it requires the construction of large modern infrastructure facilities and, accordingly, massive investments. Still, there is a beginning - the first city was significantly laid out by N. Modi at the end of 2015. This will be the new capital of the state of Andhra Pradesh, being built according to a special plan, called Amaravati. It is assumed that the construction will not damage the environment, will be a complete architectural complex, will not be divided into a rich quarter and impoverished suburbs inhabited by migrants.5 The future city will be part of an urbanisation programme being developed by the Federal Government of India.

O. Goswami, the only author of the afterword, stressed the need to coordinate the construction of infrastructure and the development of the service sector, to stimulate the interest of entrepreneurs to participate in this process (apparently, his experience as an economic adviser and former publisher of Business India). After making these assumptions and admitting that their implementation takes time, Goswami called 8% economic growth the main task of the government. This position is shared by almost all authors. It was mentioned earlier that India achieved a GDP growth rate of about 7% in 2015, but will the growth be sustainable? This is the same question mark that the authors of the afterword put in the title of their discussion without giving an answer.

According to sociologist Sanjoy Joshi, director of the New Delhi Research Center, Modi's task is to overcome distrust, even suspicion, of market liberalization and reforms that limit state participation in the economy. Joshi believes that this is a consequence of the entrenched patronage system of the "kingdom of licenses" period, when officials through licenses - to grant or not to grant permission for any changes in the activities of enterprises, could control them and receive "rewards". Simply put, we are talking about the distribution system and related corruption. This evil is difficult to fight. N. Modi stated during the election: "I don't take bribes and I won't let others do it," but the bureaucracy has its own unwritten but tenacious laws.

This is confirmed by the position of Devesh Kapoor, director of the Center for Contemporary Indian Issues at the University of Pennsylvania, and the already mentioned Milan Vaishnav, who analyze legislative reform, one of the tasks of which was to eliminate outdated laws that hinder the passage of reforms. Modi's "soul cry" is characteristic: "If I could repeal at least one law a day, I would be happy." According to one of Modi's biographers, the Prime Minister's working day begins at 4 a.m. with obligatory yoga and ends late in the evening. The laborious nature of the Indian legislative review process is demonstrated by the fact that two laws required 126 legislative amendments to pass through Parliament.

The Economist 4. January 23, 2015. P. 6.

India. Perspektivy 5. T. 30, vol. 1. January-February 2016. p. 60.

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add-ons. Next up is another law that needs to be accompanied by more than 700 legislative clarifications. How can you not recall the novel Bleak House by Charles Dickens - the legal proceedings in the case of the inheritance "Jarvis v. Jarvis" dragged on for decades. British law is useful, but it requires sacrifice.

Traditionally, articles on such acute social issues as education and health care look pale, which is typical not only for India. Priority areas that should be supported in these sectors are identified, such as universal vaccination, further reduction of infant mortality, financing of higher education institutions, etc. Complaints about the lack of budget allocations allocated to these sectors (they were cut in the 2015/2016 federal budget) are no less traditional, but the hope is expressed that a "Health assurance for All" strategy will be developed in accordance with the pre-election promises.

The afterword ends with. Raja Mohan, who approves of Modi's foreign policy activism. He considers his main success to be the departure from the policy of "strategic autonomy "and the promotion of the idea of"India is a leading country". He considers it particularly important to strengthen contacts in Southeast Asia, as mentioned earlier, as well as to intensify ties with the Diaspora. This is the only mention of the diaspora, whose meetings with representatives, especially in the United States and Great Britain, brought Modi great success. There is no doubt that they will result in the expansion of scientific and technical ties, along with financial revenues from the diaspora to the country of origin. According to this indicator, India ranked first in the world, overtaking China. But S. Mohan emphasizes that in order to realize his vision of foreign policy, N. Modi must first of all" fix things on the home front", and he repeats this phrase twice word for word.

The afterword is generally ambivalent. This is probably natural. Inflated promises and expectations are a mandatory feature of election campaigns. But it would be a mistake not to see that the social climate is changing as a result of the victory of the BJP, or rather of Narendra Modi, the first prime minister born in independent India. He managed to overcome public apathy and awaken the country's energy. Difficulties remain, and overcoming them requires further economic reform through new measures that inevitably affect the interests of different segments of the population. According to polls, the policy of the government of N. Modi is supported by 79%, including the active urban middle class, large capital, not without reason, the main stock exchange index of the country is steadily growing. How sustainable this support will be if the reforms start to stall or their burden becomes too heavy remains to be seen.

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