When Vodafone Chief Executive Nick Read said the company might have to shut down shop in India this month to reporters in London, New Delhi’s response was swift and unambiguous.
Nearly as soon as Read had finished his press conference–in which he pointed to two cases leaving the company owed US$ 55 million due to changes to spectrum licensing laws –media reports expressed the “displeasure and disdain” of reading’s “voice and tenor” by the Indian government.
Read had apologized to the Indian government just 24 hours later, accusing the media of misquoting him and claiming that he remained “invested in India.”
Ironically, as it worked out, Prime Minister Narendra Modi attended a meeting of Brazil’s emerging BRICS economies, where he said that India is “the freest, investment-friendly economy in the world.”
According to critics, the two episodes illustrate either myopia or an outright denial on the part of New Delhi over the headlines of the economic challenges. Just as the indicators of trouble are appearing in its economy–with early estimates showing development in the second quarter may have been as weak as 4.2%, the lowest since 2012–many worries whether the posture of the government towards the business sector makes matters worse.
This week, a Cambridge-educated economist, former Prime Minister Manmohan Singh, wrote in The Hindu newspaper that “a climate of fear and suspicion” impeded economic growth.
“Most industrialists tell me they’re living in fear of government bullying. In fear of compensation, banks were reluctant to make new loans. Entrepreneurs hesitate to set up fresh projects… Technology start-ups, an important new engine for economic growth and jobs, appear to be living under a shadow of constant surveillance and deep suspicion. Government policymakers and other institutions are afraid of telling the truth or engaging in intellectually honest policy discussions.
Singh’s economic concerns are not only reflected in the decline in GDP growth. Rural demand has fallen by 8.8%, the sharpest decline in more than four decades, whereas production in manufacturing–one of India’s largest employers–is flat-lining and last quarter was only 0.6%.
Most global rating agencies have lowered their forecasts for India’s growth to less than 5% in the next two quarters. Such a figure may be enviable to some countries, but it is worrying in India Over the past 70 years, the country’s real GDP growth rate has risen during 6% and achieved an all-time high of over 11% in the first half of 2010.
With many companies switching to cost-cutting steps, there is a huge spectrum of large lay-offs. Since August, more than 110 power plants have been shut down, with operators claiming lack of demand, although due to low prices, at least six large automobile plants are forced to stop development.