India's Modi enters third year in office facing tough challenges


Prime Minister Modi likes to do things in style. On May 26, he completed two years in office, and to celebrate the occasion the Indian leader kicked off a two-week long bash touting his government’s policies and achievements.

On Saturday, May 28, the premier and most of his ministers are set to attend a five hour-long event at New Delhi’s India Gate, which will see the presence of prominent personalities like Bollywood star Amitabh Bachhan.

Modi’s time in office over the past two years has been marked by high-decibel events, smart branding of government schemes and programs, growing social tensions, and a dynamic foreign policy.

The nation’s economy, meanwhile, is expanding at an annual rate of around 7.6 percent, making India the fastest-growing major economy in the world. Growth is particularly important as creating millions of new jobs and boosting economic development were among Modi’s core electoral promises.

Although the growth numbers seem robust, critics say the government has so far failed to push through any “big bang” economic reforms, which could increase the nation’s competitiveness and unshackle Indian business from the burden of bureaucratic redtape.

Indien Daimler Truck und Bus-Werk in Chennai

India is now considered to be the world’s fastest-growing major economy

‘Maximum reforms’

In an interview with The Wall Street Journal to mark his second anniversary in office, Modi responded to the criticism, saying: “When I came to the government, I used to sit down with all the experts and ask them to define for me what is the ‘big bang’ for them. What are the reforms that they think would be categorized as ‘big bang?’ I am sorry to say, but nobody could tell me clearly what was the ‘big bang’ that they were looking for.”

“I have actually undertaken the maximum reforms,” Modi said, adding: “I have an enormous task ahead for myself.”

Modi also noted that his government had made progress when it comes to easing restrictions on foreign investment in sectors such as defense and insurance. Furthermore, the prime minister underscored his desire for India’s 29 states to take up the tough task of undertaking land, labor and tax reforms.

“Modi’s not doing spectacularly but it’s not bad,” said Samir Saran, president of the New Delhi-based think-tank Observer Research Foundation.

“There has been some improvement in recent months. There is generally now a perception that the economy may be moving in the right direction. Although the big companies are complaining about the lack of radical reforms, the small and medium enterprises have seen removal of infrastructure bottlenecks and are optimistic,” he said.

Mixed results

Over the past one year, the government has also sharpened its focus on rural India, which has been particularly hit by the ongoing spell of drought. In this year’s budget, it announced an increase in spending on rural agricultural infrastructure. It also approved a new crop insurance scheme in January that should help provide income support to farmers to cope with extreme weather events.

The administration’s other high-profile initiatives – such as “Make in India” to promote the country as a manufacturing hub, and the “Clean India” campaign to improve cleanliness and sanitation – have seen only uneven results, say observers.

“While the Modi government’s emphasis on branding India may have had some positive effect, there is still no sign after two years that it has become easier to do business. There has been too much of an emphasis on taking existing schemes and repackaging them well, instead of removing the bottlenecks in administration,” says Mihir Sharma, a leading economic policy analyst.

While Modi’s Bhartiya Janata Party (BJP) has seen mixed results in state elections since he became prime minister, the main opposition Congress party has lost more ground.

Social tensions

Meanwhile, the BJP’s Hindu nationalist base has grown more assertive; and the ensuing problems – such as the killings of Muslims over allegedly consuming beef – have negatively affected the government’s efforts to dominate the media agenda with its policy initiatives.

Although the extremist acts have been ascribed to Hindu right-wing groups and not to the BJP itself, the party and the prime minister have been accused of emboldening these fringe groups by failing to forcefully condemn their actions.

Modi therefore enters his third year in office facing significant challenges on both the economic and social fronts.