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Children play in the streets of a resettlement community for survivors of anti-Muslim violence that tore through Gujarat in 2002 on the outskirts of Ahmedabad, the state’s largest city. (IAIN MARLOW/THE GLOBE AND MAIL)
Children play in the streets of a resettlement community for survivors of anti-Muslim violence that tore through Gujarat in 2002 on the outskirts of Ahmedabad, the state’s largest city. (IAIN MARLOW/THE GLOBE AND MAIL)

Subcontinent stagnation: How India botched its economic miracle Add to ...

The total value of stalled projects is currently estimated at more than $10-billion, according to London-based research firm Capital Economics.

As things got worse, many prominent Indian companies – which were going global anyway – began to vote with their wallets, investing overseas rather than in India. In the depths of India’s telecom sector scandal, Bharti Airtel spent $9-billion to buy Zain Group’s wireless properties in 15 African countries.

In 2012, India’s coal sector was rocked by a $34-billion scandal that once again revealed the extent to which politicians siphon cash out of licence-reliant industries regardless of the impact on India’s citizens. At the same time, restrictive, unreformed labour laws continue to prevent the expansion of India’s tiny manufacturing sector, where owners are uncomfortable hiring in good times because firing in bad times is so onerous. Large welfare schemes were expanded, despite their often corrupt and inefficient administration.

Over coffee at a hotel restaurant in New Delhi, Mr. Pathak breaks out more analogies to describe India. “Our states are larger than most European countries,” he says. “We have our Germanies. And we have our Greeces.”

Land-locked Uttar Pradesh, for example, has 200 million people and is generally quite poor – an example of an Indian Greece. Coastal Gujarat, though, where Mr. Modi has been chief minister, has more than 60 million people and a strong economy – a sort of Indian Germany, with roughly the same population as the U.K.

He then turns his attention to the table, which keeps rocking despite a napkin placed under the leg. “And this is a bit like the UPA government,” he says, referring to the Congress-led coalition, as he rocks the table back and forth with a laugh.

A model state?

Many contrast economic policy paralysis at the national level with what’s happened in the state of Gujarat under the leadership of Mr. Modi.

Many business people hope that with momentum on his party’s side, the BJP will seize power and orchestrate the type of economic reforms that occurred under the earlier BJP government. But in some ways, that will depend on the number of seats the BJP and its coalition partners win. What the business establishment realistically hopes for is that Mr. Modi brings to the central government the type of predictable, pro-business leadership he showed through more than a decade ruling Gujarat, where his government won successive majorities.

Although Gujarat has long been an export-oriented trading hub, with a renowned business class, local business people say Mr. Modi has had a profound influence on the way the state operates – and in attracting business. Most famously, Mr. Tata, the revered chairman emeritus of the Tata Group conglomerate, received a personal SMS text from Mr. Modi when he was having difficulties erecting a factory in the state of West Bengal. The business titan ended up bringing his factory to Gujarat.

“You’re stupid if you’re not here,” Mr. Tata told a crowd at the Vibrant Gujarat investment summit, a meeting that Canada has co-sponsored more than once. “This state is one of the most progressive states in the country ... It has a government that works.”

Over a decade in power, Mr. Modi has launched road-building initiatives, built a rapid bus network, constructed irrigation systems for farmers, and dramatically improved the power grid by threatening to jail those caught stealing electricity. He is famous for his decisiveness and for following up with bureaucrats to ensure they’re actually working. Unlike at the national level, the approval process in Gujarat has become streamlined. “They’re giving clearances, and not having people going from ministry to ministry, begging for approvals,” says Dinesh Kanabar, deputy CEO of KPMG India, who worked with Mr. Modi on Vibrant Gujarat.

He gives cabinet ministers broad mandates and expects them to perform, but although he does not let them appear often in public, he supports them when there is pushback. “People think he’s a dictator,” says Saurabh Patel, a cabinet minister in Mr. Modi’s government who is responsible for energy and mines. “He just expects people to stick to the policies and systems ... He makes people work.”

Mr. Modi is well known for being a harsh taskmaster, but local business people in particular remember him not just for ramming through change, but for specific kindnesses.

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