That was then.
The July16th 2012 cover of Time magazine hailed the same man as an”underachiever,” questioning his ability to reboot the flailing Indian economy.
The economy is in far worse shape than it was a year ago. GDP growth is 5.5%, down from 9% in the last decade. The rupee is down 43% against the US dollar since 2010. The fiscal deficit is heading for atleast 6% of GDP while inflation remains stubbornly high at 7.6%. Investment has dried up and the country is in danger of its creditrating being downgraded to junk.
This is now.
But last Friday, Mr. Singh’s government announced plans to revive the economy by unveiling massive policy changes that have historically been opposed by members of his own coalition.
In addition to increasing diesel prices, the government said it would open up the retail sector to foreign supermarket chains and remove the bar on foreign investment in airlines, broadcasters and power exchanges. It also approved the sale of stakes in four state-run industries.
Stockmarkets reacted jubilantly climbing to their highest level in 14 months on expectations of a step-up in overseas flows into India. The Rupee increased to its highest level since May. The foreign investment decisions were announced after markets closed onFriday September 14th.(Bloomberg).
All this begs the question – Is this the big bazooka that India has been waiting for?
Up until now, Mr. Singh has not been able to withstand pressure from coalition allies and party colleagues who are opposed to any action that could possibly alienate voters. Nor has he received much support for reforms from Sonia Gandhi. In the last year, his government rolled back increases in petrol prices and rail fares, and even ditched an attempt to push through retail reform after protests led by the Congress’s largest coalition partner, West Bengal Chief Minister Mamata Banerjee.
There is no question that Mr. Singh’s government will face a political backlash over the newly announced reforms. That said, India’s economic crisis is deeper in the gravy now than before and Mr. Singh is fast running out of alternatives. So will he stick to his guns this time?