I will be a little personal here: as someone who has been coming to India for 43 years now and who considers himself a good friend of the country, I cannot but be thrilled by the opportunities that have been opened by Narendra Modi's rise to power. At the same time, I cannot escape a sense of awe at the magnitude of the challenges facing the new Bharatiya Janata Party government. So far, one can say that, overall, the prime minister has made the right moves, sent the right signals and said the right things. However, after years of debilitating stagnation, the impatience is so great and the expectations so high that the new government has to ensure that the Budget - to be announced on July 10 - is spot on.
Going by what has come out so far, this new Budget will, at long last, put a lot of emphasis on revitalising and boosting the manufacturing sector. Contributing a little more than 15 per cent of gross domestic product (GDP), the sector is abnormally small for a country with such a large population and at the stage of development as India's. By comparison, manufacturing represents about 32 per cent of China's GDP. There is no way that with such a narrow manufacturing base, India could achieve double-digit growth rates or develop the kind of jobs creation capability required to absorb the nearly 12 million people who enter the employment market every year.
This renewed attention to manufacturing as a driver of growth and jobs creation will, of course, be more than welcome. But we also know that industry and manufacturing and infrastructure development are closely intertwined. Launching - and sustaining - a wide infrastructure development drive is clearly a top priority for Mr Modi if he wants to make good on his electoral promises. We have been hearing and reading for years about the hundreds of billions of dollars that India would need to spend over the next 10, 20 or 30 years on infrastructure development, although none of the objectives enunciated in successive Five-Year Plans was ever achieved.
Infrastructure is absolutely key. It is a domain that will turn very fast into a credibility test for the prime minister. However, given the fiscal constraints on India, there is no way that a major infrastructure drive - of the scale that meets the needs of the country - can be launched without the strong involvement of the private sector. Here, beyond the policy announcements that many expect to be part of the July Budget, there is an urgent need to address in a very pragmatic way the number of choke points that have been preventing a full mobilisation of private sector resources. Everybody realises the need for more extensive public-private partnerships (PPPs); at the same time, the difficulties and obstacles that constrain the development of new PPPs remain almost unchanged. For example, the way the arbitration of conflict has been implemented so far is in itself a strong enough deterrent, preventing many corporations from getting involved as much as they could be. The new government has a tremendous opportunity to look for the best practices in this domain, and to quickly create an environment conducive to both the domestic and the foreign private sector interested in infrastructure development in India.
Similarly, it might be time to consider some new ways to address a number of issues regarding intellectual property protection, which have so far proved a major issue for foreign corporations in India - and a permanent source of friction with the United States. While the cost of medicine for the poorer segments of the population is a legitimate concern that no Indian government can be seen as neglecting, there is today a new reality to take into consideration: that is, an increasing number of Indian corporations are themselves becoming a source of intellectual property creation, and will increasingly need that kind of protection.
In the same way, some key state-of-the-art sectors in India, such as aerospace, engineering and information technology, could benefit more from the fast-expanding US-India defence relationship if a number of measures, such as increasing the limit on foreign direct investment, would allow for greater collaboration between companies in the two nations involved in defence and defence-related technologies.
The new mood created by the victory of Mr Modi and his party and the kind of mindset that the new prime minister brings with him to Race Course Road mean there is a unique opportunity to reshape the way India engages with the world and, more importantly, how it looks at itself. For years, too many impatient people in India and in India's friend-countries around the world have watched with sad bewilderment. It seemed that the country would never miss an opportunity to miss an opportunity. And it seemed that a country endowed with so many assets and resources - human and natural - would fail to actualise its potential, thereby consigning to mediocre prospects millions of people who deserve much better.
India is, in fact, a country that has been for too long betrayed by its politicians - and by a political culture in which personal interests, political expediency, greed and short-term calculations have almost always prevailed over the national interest. Mr Modi has been able to ride on the popular rejection of this political culture in order to capture the hunger for some kind of leadership capable of translating a vision of the future into efficient policies. For him, as for most elected leaders, the first 100 days are crucial in shaping perceptions and in setting the tone for the next five years.
There is no underestimating the difficulties and challenges ahead as the new prime minister endeavours to implement his reform programme. The latest surge in inflation and the prospect of a poor monsoon harvest illustrate the limits of the government as it strives to revive the economy. However, Mr Modi has at least two major assets that his predecessor did not have or lost: his reputation and record on decisiveness, and the fact that the private sector - both domestic and foreign - is eager to play ball with him. It is India's moment. Seize it.
The writer is president of Smadja & Smadja, a strategic advisory firm.
Twitter: @ClaudeSmadja
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
