As India waits for prime minister-designate Narendra Modi to take charge in New Delhi, many are wondering whether he can reproduce the policies that powered growth in his home state of Gujarat.
While the western state has long been one the richer states in the country thanks to a populace packed with entrepreneurs, it prospered even more than usual under Mr. Modi’s rule as chief minister for more than a decade.
Companies say with his leadership the state has cut corruption and restrictions on doing business. Meanwhile its networks of roads, ports and power plants are among the best in India and have even convinced some companies to move operations from other states to Mr. Modi’s vibrant Gujarat.
“He is a very good administrator and he will try to replicate the same model he had in Gujarat at the national level,” said Gautam Singh, an economist at Spark Capital.
The source of power behind Mr. Modi’s magic is debatable but most agree it comes from his ability to simplify government and set deadlines as well as his facility to push through unpopular policies.
Like he did in Gujarat, he is expected to streamline the number of departments and different ministries to make his entourage of key policymakers more nimble and powerful. In New Delhi, Mr. Modi will likely combine related ministries such as coal, renewable energy and petroleum for better policy implementation, said Mr. Singh.
One of the biggest successes of Mr. Modi was in energy, which has made Gujarat one of the few states in India with a power surplus.
Across India, power companies are often forced to give away power and depend on massive state subsidies. They are also hurt by theft during transmission and distribution. With little incentive or money to expand, the power generating and distributing companies have failed to keep up with demand. The resulting frequent power interruptions force other companies to set up their own expensive, captive power-generating units.
Gujarat has been able to cut power subsidies where many states haven’t been able to muster the political will to do so. It separated the power supply lines for households and farmers, helping target power subsidies. This meant non-agricultural users had to pay higher tariffs but they received a more reliable power supply.
While Mr. Modi was in charge, Gujarat took steps to ease India’s ridiculously restrictive labor laws which make it difficult for larger companies to hire and fire people as they please. Gujarat used its own version of special economic zones to promote industry. In these zones companies were given more freedom to adjust their workforces depending on demand.
One Goldman study suggests that if a similar easing were to be applied across India, 40 million jobs would be created in the next ten years.
Land acquisition is another perennial problem for companies as well as local governments as they look for spots to build facilities and infrastructure. While businesses wanting to set up operations in most states have to go through tedious procedures to get land, Gujarat has been able to significantly cut down on the red-tape by building a huge land bank that was earmarked for setting up industrial units. A recent study by Accenture to identify best practices in different states showed Gujarat’s policies were indeed helping. It now takes just 45 days for applicants to get possession of land in the state, the study showed.
via Will New Delhi Be Able to Translate Modi’s Gujarati Guidelines? – India Real Time – WSJ.
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