May foreign modes

Narendra Modi's government in office for 100 days

“Indian stocks may be trading at peak prices now, about three months after Narendra Modi was inaugurated as Prime Minister, but there are still no signs of the dramatic reforms the people had been hoping for. Asia's third largest economy is only growing about half as fast as in the years before the financial crisis. "

“The ongoing inflation recently fell below eight percent, while the shaky infrastructure is even limiting the supply of basic foodstuffs. At the same time, the government regularly spends more money than it receives from taxes and other sources. "

Modi is now expected to undertake urgently needed reforms, which could, however, significantly reduce its popularity with the people: “Modi has enjoyed a level of popularity that will be difficult to maintain. Because if he is serious about trying to fix the economy, he will have to sign measures that are likely to make a lot of people unhappy. Reducing bureaucracy threatens jobs and opportunities for self-enrichment, cuts in subsidies make people feel poorer, and opening up important industries to outside investment encourages rejection of those who argue that national heritage is being sold cheaply to foreigners. "

“In addition, he must resist the temptation of populist measures that promise short-term help at the expense of long-term side effects.” “If he has setbacks - and he will - then he must not withdraw into a controversial politics of religion, but must Demonstrate the perseverance and skill he has shown during the decade of impressive achievements as Prime Minister of Gujarat. "

Original English commentary by Adrian Lim, Senior Investment Manager at Aberdeen Asset Management.

"After the euphoria comes the reality. Indian stocks may be trading at record levels some three months after Narenda Modi was sworn in as prime minister but there are still no signs of the dramatic reforms that people had hoped for. Asia's third-largest economy is growing at a pace that is around half that of the years leading up to the global financial crisis. Chronic inflation only recently dipped below 8 per cent as rickety infrastructure limits the supply of even basic foodstuffs. Meanwhile, the government routinely spends more than it receives in taxes and other revenue. "

"Modes has enjoyed a level of popularity that will be hard to sustain. That's because if he's serious about fixing the economy, he will need to sign-off on measures that will leave many people unhappy. Slashing bureaucracy threatens jobs and opportunities for self-enrichment; cutting subsidies make people feel poorer; and allowing more outside investment in key industries invites condemnation from those who argue that national heirlooms are being peddled to foreigners on the cheap. However he must resist the temptation to adopt populist measures that provide short-term fixes at the expense of long-term remedies. When there are setbacks - and there will be - he must not resort to the divisive politics of religion and demonstrate all the tenacity and skill he showed during a decade of impressive achievements as chief minister of Gujarat. "

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