India economy: Moving into top gear

Hindustan Times
From a slowing economy prone to risky policy inconsistencies, to a country with one of the brightest growth prospects, India’s image has seen a turnaround over the last 10 months.

Ratings agency Moody’s Investor Services last week raised India’s credit outlook to “positive” from “stable”, saying that recent policies will result in healthier public finances and push growth in an apparent endorsement of the Narendra Modi-led government’s reformist moves.

Another agency, Fitch Ratings, echoed a similar opinion praising the government’s reforms agenda for bringing “dynamism back”.

These observations are in sharp contrast to the phraseology used to describe India’s state two years ago: Stalled reforms, policy missteps, mounting deficits, galloping inflation, fractious politics and creaky infrastructure — the rough edges were showing, all at the same time.

Over the last two years, rating agencies had been unsparing about their criticism of the UPA’s management of the economy.  The latest commentary marks a turnaround on how think-tanks and investors perceive India as an investment destination after the new government assumed office.

India is set to overtake China as the world’s fastest-growing major economy this year and the raft of measures that the PM has announced has raised hopes that the government will be able to engineer a quick turnaround.

This paper had long been arguing that India needs not just incremental step-ups in diverse areas but a policy makeover.

The government has vowed to remove red tape, ease rules, and pledged a non-adversarial governance regime to push companies to make India an economic powerhouse through initiatives such as ‘Make in India’.

It has lifted State controls on diesel prices, liberalised foreign investment norms in insurance, transparently allocated natural resources like coal and controlled discretionary government spending.

As Mr Modi told HT in an exclusive interview last week, the government has “taken a series of measures which have restored faith in our capacity to deliver with transparency, efficiency and speed”. The global agencies believe the policy framework has turned the corner.

This should add to India’s attractiveness and help regain its lost status as a darling of global investors.