Last week, Moody’s Analytics, the economic research and analysis division of Moody’s Corporation, warned Prime Minister Narendra Modi about growing “ethnic tensions” in the country. “Modi must keep his members in check or risk losing domestic and global credibility,” said the report titled “India Outlook: Searching for Potential”. With several writers, artists and scientists returning awards, pressure is mounting on the prime minister to take serious cognisance of the unease, but this is the first time a major global institution has expressed concern over the recent political controversies in India. The cautionary note comes at a time when the government is celebrating the improvement in India’s ranking, from 134 to 130, in the World Bank’s ease of doing business index. It is instructive to note that in April, soon after the Union budget, Moody’s Investors Service, also part of Moody’s Corporation, had upgraded India’s sovereign rating outlook from “stable” to “positive”, citing the reform measures by the NDA government. At that time, the growth outlook for the current financial year ranged between 8.1-8.5 per cent. Six months later, that estimate stands at 7.6 per cent. Over the course of the year, other agencies and institutions, including the RBI, have revised the growth estimates downwards. The worry is that a government ill at ease with itself will not focus on the issues that plague the economy.
So what has gone wrong since early April? On the economic policy front, the government has failed to push through crucial legislation. These include the GST bill, the land acquisition bill and labour reforms. Second, increasing fears of a climate of intolerance gaining ground have sharpened these failures. No wonder, then, the alarm raised by Moody’s: “…it is unclear whether India can deliver the promised reforms and hit its growth potential”.
