Prime Minister Narendra Modi's decision to reach out to India Inc and meet top businessmen comes at a time when the global operating environment has become increasingly complex. Since he came to power in a blaze of glory 15 months ago, a lot has changed in the world and not enough, in a positive sense, for business in the country. The two biggest changes have little to do with India but cast a long shadow. China appears to be heading for its first growth crisis in decades, and the United States is well on the road to recovery. The former poses a challenge because if Shanghai sneezes, the emerging markets catch a cold, and foreign money heads for the exit at a rapid pace. A fall in Chinese demand for goods, and an erosion--however controlled--in the value of the yuan are both bad for Indian exporters. The other big development, a US recovery, could lead to an interest rate increase by the Federal Reserve next week, a move that could accentuate the outflow of foreign money. In all this, the rupee has repeatedly hit two-year lows; if it weren't for the fortuitous softness in global crude prices, India's import bill would have gone through the roof.
There is some talk of India replacing China as the engine of global growth. This is delusional thinking. China's economy is about five times the size of India's; its foreign reserves are $3.6 trillion, about 10 times India's (and this after a record $93.9 billion fall in the Chinese kitty last month). China is still a manufacturing powerhouse; a short-sighted focus on services and red tape ensured that India's factories never came close to threatening global domination. That said, it is probably a fair point that India could use the current discomfiture of its neighbour to some advantage, but then it needs to get its act together fairly rapidly. So Mr Modi's three-hour meeting with the heads of Indian industry was timely, and suggestions appear to have flowed freely: Focus on agriculture to spur rural incomes, tackle corruption, get stalled projects moving. The PM noted the greater risk-taking ability of private sector firms and asked them to increase investments. Everyone would like a rate cut, but the Reserve Bank of India will act on data, as it should.
Dialogue is all very well, but the government needs to get its act together on the law-making front. Attempts to rewrite the land Bill ended in a fiasco; political point-scoring has ensured that it's touch and go for the Goods and Services Tax to come into force by April. India Inc was one of Mr Modi's biggest constituencies going into last year's elections, and support has, by and large, held. Using a crisis in global markets as an excuse to get the country's economic house in order is one way of keeping that relationship healthy.