Saturday, Nov 01, 2014

When PM becomes CEO

Modi has indicated great admiration for four other countries whose leaders have similar CEO styles: China, Japan, South Korea and Singapore. Modi has indicated great admiration for four other countries whose leaders have similar CEO styles: China, Japan, South Korea and Singapore.
Written by Walter Andersen | Posted: July 15, 2014 12:18 am | Updated: July 15, 2014 7:42 am

When reviewing Prime Minister Narendra Modi’s six weeks in office, the analogy that seems most appropriate is that of a chief executive officer of a large corporation who knows that his future depends on growing the enterprise while satisfying the sometimes conflicting expectations of its chief stockholders. The prime minister presides over what he and others hope will be India Inc. His budget signalled a focus on economic growth. Indeed, the rush of money from global investors to India in the past several months has pushed the Sensex to a record high above 26,000.

Modi has indicated great admiration for four other countries whose leaders have similar CEO styles: China, Japan, South Korea and Singapore. The leaders of Japan and China were quick to respond very favourably to his electoral success, in part because they saw a new leader who is committed, above all, to economic development and growth, and could thus provide opportunities for them to deepen the bilateral relationship.

Modi’s task as India’s CEO in pursuit of a similar growth model is helped by the BJP’s strong parliamentary majority, his unchallenged control of the BJP and a public that seems prepared to give him a lot of slack, at least for now, This gives him some initial room to make bold decisions early in his tenure.

Fiscal discipline has been a major theme in the early days of Modi’s tenure. Finance Minister Arun Jaitley said that the Modi government will avoid “mindless populism”, and railway fares and freight rates have been increased to raise the money needed to cover the costs of operations, maintenance and expansion. The government responded to protests by partially rolling back the fare increase, suggesting that it will not let economic reforms get too far in front of public opinion.

On the primary task of growing the economy, there are, however, policy differences within his ranks. A large part of the Sangh Parivar supports economic self-sufficiency, while Modi’s own record as chief minister in Gujarat suggests that he favours increased foreign investment. This dilemma comes out clearly on the topic of foreign investment in the multibrand retail sector. His initial opposition is likely shaped by the resistance to any opening up of this area by one of the BJP’s core constituencies, the small “mom and pop” retail store owners.

Now in power, he may modify this earlier stand on foreign investment in retail. One area of reform that has been discussed is changes to investment policy in the foreign online retail sector. India currently allows 100 per cent FDI in business to business (B2B) e-commerce but not business to consumer (B2C) e-commerce. Jaitley’s budget speech signalled that the government plans to open up e-commerce to foreign investment.

In continued…

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