Modinomics: an American view

A former American bureaucrat, writing in the Hindu, compares Narendra Modi with Ronald Reagan. One common element, according to him, is that both have humble backgrounds. Modi is looked down upon by the nation's elites as Reagan was in the US  because he comes across as unsophisticated.

This is certainly true. It astonishes me that the elite in the media and elsewhere are unable to respect something as phenomenal as a chief minister of a state, with no experience at the centre, being able to generate a nationwide following, something that his party itself has never enjoyed!

The writer then suggests that Modi's economic vision is somewhat similar to Reagan's and that he has the capacity to unleash the nation's entrepreneurial energies:

As one who lived through Reaganomics, I believe that Modinomics can be the perfect antidote to the kleptocratic crony socialism that has kept India from realising her vast economic potential. If India’s natural entrepreneurial dynamism is ever fully unleashed, the sky will be the limit. I am persuaded by the evidence (hotly debated in an election season, of course) that shows that economic growth in Gujarat under Mr. Modi has been a boon to all segments of society, especially the poor. I am just sharing my view as an observer, and of course respect that it is for the people of India to decide what is best for them. 

One has to be careful not to overdo the comparison. Giving a boost to entrepreneurship is not the same as embracing Reaganomics. In India, no government can afford to move very away from welfarism. Modi's recent pronouncements seem to reflect this recognition. BS has caught this point well in a recent edit:

In the past, Mr Modi has said in speeches that his definition of reform does not include the changing of poorly framed policy, but merely building infrastructure. In his most recent statements, he has outlined a slightly different agenda. He has said, among other things, that "we will not reduce subsidies". As if to underline this point, he said that his economic agenda should be described as "pro-people", and added that "the poor will continue to control the coffers of India". This seems to suggest that Mr Modi's economic vision will maintain the United Progressive Alliance's (UPA's) welfarist policies .

....Mr Modi's attitude to privatisation of public sector undertakings (PSUs) was also disappointing. He said that the idea that PSUs were inefficient has "done much damage"......Most worrying, perhaps, is the one area where Mr Modi has promised a break with the UPA. He has said that a review of policies governing foreign direct investment was necessary: "We have to protect the manufacturing sector. If we are unable to protect the manufacturing sector and small-scale industries, our youth's future will be destroyed." 

This is a far cry from Reaganomics. Those who think that Mr Modi will make a clean break with past policies ignore the compulsion in the Indian context to walk on two legs: growth and welfarism. What we can expect of Mr Modi is that by improving governance, he will boost growth and he will make welfare schemes more efficient. As part of his effort to improve governance, he may tilt towards greater decentralisation. But it would be naive to suppose that Mr Modi will embrace free market economics a la Reagan.