Thursday, March 3, 2016

Business in India - it looks different over there

I live in the United States of America, and as such I have a particular perspective on business in India. From the American perspective, India is a huge market that provides a number of services to the United States.

So a business paradise - right?

Well, it looks a little different from the Indian perspective.

Narendra Modi swept into power in May 2014 on the strength of a charismatic personality and a promise to eliminate India's legendary bureaucratic barriers to business. Today, India’s corporate leaders are losing faith that he can remove those obstacles....

India jumped 12 places on the World Bank’s ease of doing business index during Modi’s first year in office — from 142 to 130 — but many complex regulations and paperwork requirements have not been reduced.

The way the USA Today writer sees it, Modi's efforts are blocked by anti-business legislators in the upper house. And one writer speculates that there is an incentive for opposition parties to oppose business reforms:

If the Indian economy palpably (and not just in terms of numbers) improves over the next three years then more Indians will be convinced of Modi’s growth model. This may improve NDA’s vote share in the 2019 election, to the extent that even if its opposition forms a mega-alliance, NDA will retain the majority in the Lok Sabha. For this to happen, critical reforms must be enacted. While the actual economic impact of any reform will play out in the long term, in the short to medium term they improve certainty about the future and are thus, likely to support the stock market and along with it, the positive sentiment with respect to the government.

However, for the opposition parties, an adverse economic scenario will help them gain vote share against the incumbent ruling party and possibly win more seats. No matter how deplorable, it will be ‘rational’ for them to oppose reforms and dent sentiment, if not the actual economy.

Of course, that's silly. Politicians would never intentionally trash their own country to increase their own electoral prospects.

Would they?
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