The new government in New Delhi is struggling this week to get an insurance-industry liberalization bill— an important part of its campaign to revamp the economy—to the floor of the upper house of Parliament.
Opening up the insurance business to more foreign investment was one of the main deregulation measures unveiled in Prime Minister Narendra Modi’s first budget last month.
But already it is bogged down. Mr. Modi’s Bharatiya Janata Party does not control the upper house and other parties want to stall a vote on the bill.
The legislative tussle is a sign of the challenges Mr. Modi faces, despite his party’s landslide electoral victory and the BJP’s lower-house majority, as he tries to push through even modest changes in the way India manages its economy.
Mr. Modi swept to power this spring on a surge of anti-incumbency sentiment and hope that the BJP could break the policy deadlock in the capital. Supporters expected Mr. Modi bring the “achche din,” or good days, back to Asia’s third-largest economy.
But India’s complicated national politics, its decentralized federal system and Mr. Modi’s own desire not to get too far ahead of public opinion in a country long used to large-scale welfare schemes and a heavy state hand in the economy, is likely to slow any change.
The new administration’s national budget, announced in July, was bland and disappointing to many. It did not include the kind of big-bang reforms many optimists had anticipated.
In response to criticism of the budget, India’s new Finance Minister Arun Jaitley told a television news channel that the government is waiting for the right time to implement some changes.
“You don’t do reforms in a manner that the political system is unwilling to accept them,” Mr. Jaitley said during a July interview on Headlines Today. “The more challenging ones, you go on that course in times to come.”
Last week, Mr. Modi’s government blocked an important trade agreement that all 160 members of the World Trade Organization—including India—had agreed to in December. India demanding more freedom ratchet up market-distorting food subsidies.
“This is an inauspicious start for the new Modi government,” said Orrin Hatch, a Republican U.S. senator from Utah and member of the Senate Finance Committee in response to India’s decision.
M. J. Akbar, a BJP spokesman, says the party is happy with its progress. He said the government has focused on dealing with inflation, encouraging growth and reaching out to neighboring countries.
“On the insurance bill, the government has shown complete firmness in pushing it through,” and will use a joint-session of Parliament to vote on it if the upper house refuses, he said.
Still, the gradual deflation of the Modi bubble can be seen in the stock and currency markets. The benchmark Sensex index, has basically been going sideways for the last two months, after a sharp run up as the scale of Mr. Modi’s election win became clear.
The rupee has also been giving up some of this year’s gains against the dollar.
Of course the less excitable analysts and executives have always said the complexity of running the world’s largest democracy means that decision making will remain a slow and often painful process, even with a majority in the lower house of Parliament.
Many of the biggest challenges to improving the lives for India’s 1.2 billion citizens—such as reducing corruption, building modern infrastructure and providing hundreds of millions of good jobs–will take years, if not decades, surmount, even with the right policies and a charismatic leader.
“If a handful of people decide that (the progress so far) is insufficient, we have to ignore them and recognize that the majority of India is both relieved that the return of governance as well as the return of hope,” said the BJP’s Mr. Akbar. “Files are being cleared after ages of stagnation.”
–Prasanta Sahu contributed to this story.
via Insurance Bill Struggle Pokes Another Hole in the Notion of Modi Magic – India Real Time – WSJ.
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