One year later, India’s economy brightens under Modi

When Narendra Modi became prime minister a year ago on a promise to revive India’s once-sparkling economy, inflation was running at 9% and economic growth had slowed to less than 5% — half the pace of two years earlier. Today, inflation is down to 5%, and the International Monetary Fund forecasts India’s economy will grow 7.5% this year, outpacing China’s growth for the first time since 1999.MODI_1_1905125g

That turnaround is winning praise from an increasingly influential business community, which helped Modi and his Bharatiya Janata Party (BJP) win the first outright governing majority in three decades. “The five years before Prime Minister Modi took over were really bad,” said Vineet Mittal, vice chairman of Mumbai-based Welspun Renewables, a wind and solar energy company.  “When we traveled abroad on investor roadshows, we wasted a lot of time allaying doubts,” he added. “Potential investors had a lot of apprehensions. All they heard about India was a constant string of corruption scams and crony capitalism.”

Mittal was among a delegation of Indian business leaders who joined Modi on recent trips to Germany and China to spread the word that India is open for business. India’s $2 trillion economy will remain much smaller than China’s $10 trillion powerhouse for years to come. But, boosted by low oil prices — the country imports 80% of its oil — the world’s largest democracy and its young, skilled population have plenty of room to grow. International Monetary Fund Managing Director Christine Lagarde, who visited India in March, said the country is “at the top of the list” of countries that have benefited from the drop in oil prices, calling it “a huge windfall.”

During his first year in office, the Indian prime minister visited 19 countries on trade missions, including an appearance before an American-Indian audience at Madison Square Garden in New York. He also has visited China, Germany and France. Everywhere, he paints India as welcoming investors. “I am here to assure the German companies that India is now a changed country,” Modi said at the Hannover Trade Fair in April. “Our regulatory regime is much more transparent, responsive and stable and we have removed a lot of regressive taxation regimes.”

His remarks were aimed at puncturing long-held views of India as a country with a byzantine, bloated bureaucracy and rigid regulations that make it exceedingly difficult to do business in the country. On Tuesday, Modi pledged to change India’s tax system. On a trip to South Korea, he told business leaders the government has already addressed tax issues affecting foreign investors and would focus now on making the tax system “more stable, predictable and transparent.”