The sharp defeat of Narendra Modi’s Bharatiya Janata Party in the state of Bihar has put the prime minister’s reform plan and political legacy at risk. He still has time to act, but governments usually grow more timid the longer they hold office.
A trading people who had succeeded at commerce around the globe, Indians long were held back by an officious bureaucracy notable for its inefficiency and corruption. The first systematic economic reforms were implemented in the 1980s, but a succession of weak governments never allowed their people to fulfill India’s high promise. According to the Economic Freedom of the World report, in 2013, the latest year for which numbers are available, India ranked a dismal 114 out of 157 nations rated.
Eighteen months ago Modi won a dramatic victory and seemed poised to transform India’s economy and more. Some called him the Indian Reagan.
However, his government has not delivered much change. One reason was that the opposition continues to control the legislature’s upper chamber. Moreover, Modi always was more pro-business than free market.
Finally, the government has been timid despite its sizeable legislative majority. Deficits continue. Banking remains state-directed. Privatization has disappointed. The law still discourages creation of family firms.