The Economist USA - 26.10.2019

The EconomistOctober 26th 2019 Special reportIndia 7

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W

ithin a fewyears, Indian planners hope that bullet trains

will reduce the time taken for the 500km (310 miles) journey

between Mumbai, the commercial capital, and Ahmedabad, the

biggest city in Mr Modi’s home state of Gujarat, from six hours to

just two. For now, laws that protect tiny properties are holding up

the railway’s construction. Two years after breaking ground, the

Japanese-financed project has not yet managed to acquire even

half the land it needs. By contrast, China added another 4,000km

of track for its nationwide high-speed network in 2018 alone.

Historians reckon that the two Asian giants have had roughly

equal economies for much of their history. Only since the 1990s,

when China began its daring, deep-seated economic reforms, has

it raced ahead. Its nominal gdpis now five times India’s. The dra-

gon has slowed its pace, but even so, notes a report by Rakesh Mo-

han, a Yale professor and former deputy governor of the Reserve

Bank of India (rbi), the country’s central bank, it is still adding the

equivalent of a quarter of India’s economy every year. If India were

to sustain its gdpgrowth per person of 7%—about its average for

the past two decades—to 2030, it would barely have got to where

China is today. And even that may prove ambitious.

Now, with alarming speed, India has gone from being the

world’s fastest-growing large economy to something more like a

rumbling Indian railway train. In the quarter to June, growth

slipped to 5%, the slowest in six years. Other indicators are more

worrying still. Sales of trucks and buses fell 45% in the year to Sep-

tember, and even sales of cheap biscuits and soap have contracted.

The 88% drop in overall credit flows to businesses in the two quar-

ters to September compared with the same period last year sug-

gests a virtual freeze on lending.

Believing its own boosterism, the government failed to see the

signs. Yet even as the slowdown became more pronounced, Mr

Modi still managed to get himself re-elected in May with a huge

majority. The first budget of his second term, announced in July by

the incoming finance minister, Nirmala Sitharaman, signalled

Wake-up call

A downturn reveals the desperate need for deeper reform

Economy

All hat, no cattle

Foreign policy remains cautious and unimaginative

I

ndia stayedaloof during the cold war,

happy to be the flag-bearer for non-

aligned nations. With the rise of China

and the retreat of America transforming

international relations, and with India’s

growing sense of its destiny as a soon-

to-be great power, some observers be-

lieved its foreign policy might change,

too. Yet Narendra Modi has struggled to

match the country’s big ambitions with

its still-limited capabilities.

The relationship with America has

grown closer. But for all the razzmatazz

of Mr Modi’s recent rally with Donald

Trump in Houston, there has been little

progress on difficult issues. A mooted

trade deal fizzled as the American team

blamed India for protectionist policies.

Mr Trump shook his head at India’s “very

aggressive” tone towards Pakistan. And,

though Mr Modi loudly endorsed Mr

Trump, that may look less wise as im-

peachment proceedings against the

erratic American president unfold.

There are particular pitfalls to dealing

with the Trump administration. Yet the

mix of going big on public relations

while reaping relatively small political

dividends seems to be a signature of Mr

Modi’s foreign policy. He has shared

photo opportunities with Vladimir Putin

and Xi Jinping as often as with Mr Trump,

with similarly scant returns. Russia, long

India’s main source of weapons, now

sells weapons to Pakistan, too.

Mr Xi has avoided direct friction with

India at disputed spots on their long,

mountainous frontier. But China has made

deep inroads in India’s backyard, wooing

countries such as Nepal, Sri Lanka and

Bangladesh. It has also grown even closer

to Pakistan, propping up its economy with

billions of dollars worth of arms, infra-

structure and investment. China’s navy

intrudes with growing frequency into the

Indian Ocean, challenging India’s tradi-

tional dominance of its own back yard. Yet

although the Indian fleet struggles to keep

up, Mr Modi still seems to fear partnering

with maritime powers that share his un-

ease about Chinese intentions.

So non-alignment has continued. This

means that, although it has no real ene-

mies apart from Pakistan, India also has

few friends. That would be fine if it were

stronger militarily or economically. But

among larger powers it stands out as the

only one that relies chiefly on imported

arms, and whose military budget is spent

largely on salaries and pensions. In addi-

tion, its relationship with Pakistan seems

stuck, never able to get beyond the ugly

tit-for-tat that has characterised the past

70 years. When India struck a guerrilla

training camp in Pakistan last February, in

retaliation for a terror attack that killed 40

of its soldiers in Kashmir, the Indian pub-

lic cheered loudly, but the ensuing crisis

between the nuclear-armed neighbours

necessitated emergency intervention by

outside powers.

It says much that Mr Modi’s biggest

foreign-policy success may be to have

achieved a relatively muted global re-

sponse to his recent actions in Kashmir.

Yet the lack of international condemna-

tion may reflect compassion fatigue and

dislike of Pakistan more than Delhi’s dip-

lomatic skill. Abroad, as at home, Mr

Modi’s dreams are bolder than his actions.

New best friends