India faces persistent challenges in Modi 2.0 era

By Hu Weijia (Global Times, 28 May 2019) – As Narendra Modi gets his feet back under the desk for his upcoming second term as Indian prime minister, a set of deep-rooted problems is waiting for him. Perhaps the biggest challenge for Modi is the economy.

As India prepares to embrace Modi 2.0, the economy appears to have slowed down. After a months-long election campaign and an emphatic win at the polls, economic issues will likely return to the top of Modi’s in-tray.

The new government will have to tackle issues such as consumption and unemployment as it searches for new economic spin-offs. A key to propping up the economy is the development of manufacturing, but it’s not an easy thing.

Modi launched the “Make in India” campaign in 2014, with the goal of turning India into a new global manufacturing center. Now, as the US-China trade war continues, some labor-intensive companies are looking to shift their manufacturing base from the world’s factory to other nations. It’s clear India wants to seize the opportunity to push forward its “Make in India” strategy. 

The era of cheap labor in China is over. As China tries to move up the value chain, some low-end manufacturers are shifting production to India. That’s just normal and Beijing seems to have no intention of interfering in this process. This creates space for China and the new Indian government to build cooperation and trust.

India’s shift to an export-oriented economy is likely to increase trade friction with the US, which is busy reducing its ballooning trade deficit. But New Delhi may need to keep a close relationship with Washington as the Indian economy relies more on the US market. Bilateral relations will likely grow increasingly complex during Modi’s second term.

A tough test for the new government will be its relations with the US and China. This requires more wisdom and patience as India plays the big power game. An appropriate relationship with both the US and China is a prerequisite for making India the world’s new factory. Besides, there are challenges ahead, such as backward infrastructure and a weak education system. 

However, the new Indian government has no other choice but to move forward. Whether it can achieve a manufacturing takeoff will be a key issue in the era of Modi 2.0.

The author is a reporter with the Global Times. [email protected]

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