Can India resurrect its economy?

20th September 2012

But just a few days into the effort, New York Times correspondent Vikas Bajaj reveals that concern is growing about whether the latest steps, which also include reductions in fuel subsidies and changes in aviation policy, go far enough, and whether the government will be able to carry out even these limited proposals in the face of stiffening opposition from political allies and opponents.

Indeed, Reuters reports that schools, shops and government offices were shut  in some states on Thursday as protesters blocked road and rail traffic as part of a one-day nationwide strike against the planned reforms. "If we don't protest now, the central government will eliminate the poor and middle-class families," said Santi Barik as she protested in Bhubaneswar, Odisha. But despite the protests and opposition, Adi Godrej, the president of the Confederation of Indian Industry (CII) said the government should not roll back the recent reform measures under political pressure.

"It is not often that bold measures are announced to take economic reforms to the next level and whenever such announcements have been made, there have been pain felt by many," Godrej said in a statement. "But the merits of the reforms that were first initiated in the early nineties are there for everyone to see. Irrespective of whichever political party has been in the government since then, the reforms have not been reversed," he added.

And once the reforms begin to take place, India could see some profound changes, says Jyoti Thottam, Time magazine's South Asia bureau chief. "India lacks the infrastructure like refrigeration and warehousing that most big retailers are used to, so Walmart, Carrefour, Tesco, et al. would have to build it themselves. That would benefit the entire retail-supply chain in India, decreasing spoilage and reducing time to market. To take advantage of economies of scale, those retailers will also – as Walmart does now on a limited scale – deal directly with farmers."

"Of course, no single company or single piece of economic reform has the scale to transform the lives of 800 million struggling farmers," she warns. Policymakers, therefore, will have to make broad-based changes in everything from water and electricity to education – to lift the living standards of the population because once Walmart becomes a staple of India's retail market; it will instantly become clear that even the largest retailer in the world isn't big enough to change India. Thus, "Singh's bold move is just a small first step," she concludes.

Meanwhile, in an article entitled Indian economy and reforms: How Manmohan Singh got his mojo back, Soma Banerjee of The Economic Times gives us the inside story of how the Prime Minister led the government's reform offensive, how Sonia Gandhi helped him, how Congress is managing political risk and what's coming next.


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