Indian govt faces difficult policy choices amid slowing economic growth: Global Times


BEIJING, Oct 25 (APP):With an unexpectedly weak growth rate of 5.7 percent in the April-June period, India’s economy is at a critical crossroads. During this difficult time, determination to pursue reform expressed by the Narendra Modi administration will determine the country’s future.
India’s economic growth slid to a three-year low in April-June as manufacturing weakened and the impact of the demonetization shock in late 2016 and the goods and services tax (GST) roll out in July lingered on into the April-June quarter, according to a report published in Global Times on Wednesday.
The Modi administration has been one of the most ambitious governments in India in terms of economic reforms since 1991, when India started major reforms to liberalize its economy.
The GST, reportedly the nation’s biggest tax reform since independence, was expected to boost growth by replacing many indirect taxes with a unified tax regime, improving India’s business climate.
This was a necessary reform that was conducive for India’s long-term growth prospects, but the GST is under increasing criticism for dealing a short-term blow to the economy.
The Modi administration has already come under pressure for its attempt to take a tough stance on pursuing economic reform. The social and political climate in India is quite different from that in China, where the Communist Party of China (CPC) has a strong ability to lead economic development.
India’s Bharatiya Janata Party (BJP) is weaker than the CPC in terms of policy implementation and the promotion of economic reform.
The dilemma, the Indian government faces is the limited influence it has when different interest groups express their opinions. It will not be easy for Modi to let Indian society form a consensus over his ambitious reform agenda.
The next general election is due in 2019. If the Indian economy does not revive soon, the BJP will face a difficult task in that election.
It is possible that economic reform will be abandoned halfway through if Modi focuses on the short-term economic growth rate.
India has been criticized for its lack of economic reform in recent decades.
Now, the country is at a crossroads as its economy cools. If the government fails to build its capacity for policy implementation and cannot continue to drive economic reform, India’s economy will go into a downward spiral.
Although the US and the Western world praise India’s democratic politics, the Modi administration always takes a tough stance on economic reform. Now the most critical and urgent issue is building more capacity for policy implementation. We are not sure whether Modi can achieve this. Concern over the future of the Indian economy is well-founded.