Modi's China Trip Won't Ease Regulations on Indian Industry

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Indian Prime Minister Narendra Modi attends the India-China Business Forum in Shanghai May 16, 2015. Aly Song/Reuters

Two days after the prime minister of India, Narendra Modi, ended his trip to China at the weekend, the state-run Global Times ran a critical article on Modi's Make in India campaign, saying that the "private business sector [is] skeptical about the whole idea" and that "even if New Delhi keeps persuading investors how promising it is to do business in India, the current situation is far from reassuring."

This damning verdict, albeit from a newspaper that ran a critical piece on border issues last week, underlines the failures so far of Make in India which, with its strange lion logo made of old fashioned engineering cogs, has been the main slogan drummed out by Modi and his ministers and bureaucrats for many months.

It is surely time for India's prime minister to adopt a personal slogan to Make Things Happen because there will not be many foreign investors responding to his call until he personally focuses on making India's rules and regulations operate more easily.

That thought must have been in the minds of many people who played a part in Modi's three-day trip to China at the end of last week, and maybe also on his visit on Monday to South Korea as part of a three-country tour that included the first visit by an Indian prime minister to Mongolia.

"For the moment, there is little evidence of success for foreign investments from private enterprises," it stated in an opinion piece titled Economy a dilemma for globe-trotting Modi. "In the end, if any country tries to encourage investments to India, most of the programs will be led by the government itself, with most of the private business sector skeptical about the whole idea," it said. "Even if New Delhi keeps persuading investors how promising it is to do business in India, the current situation is far from reassuring."

Modi spent the first anniversary of his general election victory on May 16 doing one of the things he does best: wowing a huge crowd of several thousand adulating overseas Indians in a foreign country. Previously he's done this in friendly places like America, Australia and Canada, but this time he was in potentially enemy territory: Shanghai, China's commercial capital, where some 5,000 Indians had been encouraged to flock to hear the political rock star perform.

He was a little more restrained than his earlier shows that began in New York's Madison Square Garden with some 20,000 people last September. He was also more soberly dressed in a buttoned-up dark Indian style formal suit instead of the salmon pink sleeveless kurta jacket and yellow shirt he wore in New York. That reflected his more conservative style since he was mocked for wearing pin stripes with his name stitched in gold when he met President Barack Obama in Delhi four months ago.

Foreign trips to some 17 countries have been the high spots of Modi's first year. His energy and focus, and the charm and friendly informality that he displays on these tours, has broadened India's international relationships.

Conversations, including those with Chinese leaders, are more direct, and personal relationships seem to be stronger, though there is little to show yet in terms of concrete outcomes.

A Delhi businessman said to me last week that the only significant result so far from all the trips was uranium supplies from Canada that are urgently needed for India's power reactors.

The China visit tested Modi's skills of mixing tough diplomacy, especially on the two countries' disputed Himalayan border, with his main target of rapidly expanding business links with Chinese infrastructure and other investment in India. As usual, a multibillion investment target was rolled out—$22 billion on this occasion for 21 projects, which was slightly more than the $20 billion when President Xi Jinping visited India last September, but far less than the $46 billion Xi promised Pakistan on a visit last month, and less than the $50 billion-plus that Brazil expects on a visit by Chinese Premier Li Keqiang that began Monday.

Indian sources said that Modi did some straight talking about India's unease over aspects of China's foreign policy, telling Beijing that it should "reconsider its approach on some of the issues that hold us back from realizing the full potential of our partnership"—by which he mainly meant the two countries' disputed 4,000-kilometer (2,500-mile) Himalayan border that Chinese troops frequently cross.

India formally complained on the eve of the visit about the $46 billion Pakistan investment because it includes infrastructure for a trade route through territory that India officially claims. That complaint may have been in response to an authoritative Chinese writer complaining that Modi in February had visited Arunachal Pradesh, an Indian state that China claims, two days before he went to Beijing. This squabbling did not seem to do anything to spoil the visit, but it enabled India to show more toughness than it might have done in the past.

There was no real progress on defining the border, despite expectations among some China watchers in Delhi a few weeks ago that Xi had a dramatic new proposal to unveil. There was, however, agreement on military exchanges and expanding direct links between both sides' army commanders. There also seems to have been no change on China's intentionally provocative way of only issuing visas stapled into passports of Indians from Arunachal.

Modi did, however, surprisingly agree to introduce e-visas for Chinese visitors, making it the 77th country to get that facility. Modi announced it addressing students and faculty at Tsinghua University in Beijing, even though, just a few hours earlier, his usually well-informed foreign secretary, Subrahmanyam Jaishankar, had briefed journalists that "no decision has been taken yet."

Jaishankar chooses his words carefully, and the "yet" should maybe have led journalists to realize that it was still possible Modi would overrule objections from security officials in the Home Ministry. It is not clear, however, what, if anything, he got from the Chinese in response to the controversial decision.

Like the oratory and official statements, the dollar investment figures do little to indicate how many projects will come about, and statements during the visit implied that there is little sign yet of the ease of doing business in India really easing.

That is something that Japanese companies are complaining about since Modi's apparent failure after he visited Tokyo last year to set up a special investment management team, with two Japanese nominees, in his own Prime Minister's Office. (The team has been moved to the industry ministry's investment promotion department.)

This all indicates that, while Modi has done well on his foreign trips, he has failed in his first year to work hard enough in India to clear investment blockages and ensure that bureaucrats at all levels implement the changes that have been made.

He was elected a year ago, primarily to make India work better. As I wrote here on May 11, he now needs to have fewer grandiose trips abroad and personally focus on running India.

John Elliott's Implosion: India's Tryst With Reality is published by HarperCollins, India. He can be read at ridingtheelephant.wordpress.com.

Modi's China Trip Won't Ease Regulations on Indian Industry | Opinion