Why has India failed in the past to live up to growth expectations?

India has been the ‘next big thing’ for many years, with analysts and commentators repeating themselves in stating that "this is India's decade”, only to be disappointed by weaker growth than expected, lower investment levels and a disappointing market performance. Its highly autonomous federal states are not willing to relinquish power to the central government, and its national politics has been a family affair for decades, not solely to its benefit.

Can recently elected Prime Minister Narenda Modi substantially change India’s market performance?

Modi’s landslide victory for the Bharatiya Janata Party (BJP) in 2014 was built on a promise of "airing out the closet", shaking up central government, driving change and a pro-business sentiment, transforming the opinion on Indian business and politics. Modi pledged to speed government decision-making and remove bureaucratic hurdles that have slowed development. In his previous role Modi did deliver in the state he ran, creating an economic turnaround in Gujarat.

What can Modi do to jump-start the Indian economy?

Central to Modi's campaign has been a focus on re-launching India as a destination for foreign investment and manufacturing. The automotive industry in India has gone through a few difficult years, with very weak domestic market development threatening the viability of manufacturing investments made when things looked better. Forecasts now call for an improvement in the Indian sales growth, a welcome respite after the 8 per cent sales drop in 2013. For the rest of the decade Indian auto sales are expected to grow by around 10 per cent annually. On the back of recent weakness, Indian auto exports have been boosted, with almost 450,000 units shipped abroad in 2013 by blue chip OEMs to developed markets across the globe.

 


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