India has has taken a "Right" turn economically in its history by giving a historic verdict to Narendra Modi. Following Nehru's fascination with the soviet union, India has been burdened with all the leftist concepts of centralized planning, five year plans and planning commission. This created a pseudo communist state that failed to power the aspirations of the people and discouraged entrepreneurship. Successive governments have failed to address this license Raj problem and dealt with it only when we were forced to in 1991. Now,for the first time in our history we have a pro-business leader who is right of center in his approach to economics and business. The think-tanks of the "right" and the corporate world expect him to follow policies of free market economics,low taxes,labor and land law reforms,disinvestment and take us to free market Utopia.But is this a correct interpretation of Modi's rule in Gujarat? Are the markets and the corporate world basing their expectations on Modi on strong evidence? Not entirely.
I believe that the markets are severely over-reacting. If we look at Modi's rule in Gujarat, it was a mix of a Thatcherite in the sense he promoted an adjustable labor force, reduced government subsidies and marginalized trade unions, a Reaganite as he promoted free market policies and argued for lower taxes and a Stalinist in the sense he had complete control over the operations of the all government companies with his vision replicated at all levels.He actually was an anti-thatcharite in the sense he believed more in turning around the loss making PSUs rather than going for disinvestment.
These suggest that the initial euphoria we are seeing is misplaced but there is lot of proof to suggest Modi will bring in lot of investments, reign in populism and reform the archaic land and labor laws.So I expect this initial euphoria to die down when it dawns on the market that this is not an economically ultra-liberal government.The leftist intellectuals will castigate the government for pro market policies and the Upholders of economic liberalism will criticize the government on not being liberal enough.But I believe the Modi government following a mixture of policies across the ideological spectrum will ensure maximum returns in the long run.A pro-market economy which is easy to do business in, that encourages entrepreneurship,smaller government, having low taxes, high investments,revived industrial activity with a strong control over the bureaucracy and the government companies combined with the effective use of subsidies will be what the prime minister would like to show in his report card come May,2019.