Analysis

Will India’s political monsoon season drown the next push for reform?

28 Nov 2011
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Region: 
Asia

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Summary

  • Ministers, the media, business leaders and the civil service in India openly describe 2011 as the worst year for governance in India’s recent history and a political inflection point in the seemingly unstoppable upward trajectory of the last decade. 
  • The pressure is now on the UPA Coalition Government to reassert its ability to govern, and to produce a strong electoral platform for the state elections in 2012 and national elections in 2014.  The coalition has other things on its mind.
  • For Indian corporates, the politics are deeply frustrating. Although the prospects for organic expansion in the coming 6-12 months are good, many Indian companies are looking outward from India, both to mitigate political risk and for diversified growth and sources of technology.
  • India is a country of low patience and huge expectations. High growth has raised popular Indian expectations to a point that the economy is not structurally able to deliver at present. Populist politics help ensure that the development dividend and the expectation gap are simply addressed by subsidies and forms of social welfare prone to corruption and other leakages. 
  • For now, the Indian system seems to prefer to wait. Its economy will continue to grow. It has demographics broadly on its side, if it can continue to create jobs. But the risk of political immobility means that India’s latest stumble could be a sign of things to come.

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Authors

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