Message from Davos: PM Modi's signals should be transformed into action

In his keynote address to the World Economic Forum’s annual meeting at Davos, Prime Minister Narendra Modi outlined three main challenges that the world was facing: Terrorism, climate change, and protectionism. As the first Indian prime minister to address Davos in two decades, Mr Modi’s speech was hotly anticipated; he arrived in Davos as part of an Indian contingent that may be the largest ever. Chinese President Xi Jinping gave the equivalent address last year and delivered a strong defence of globalisation at a time in which Donald Trump’s assumption of office as president of the United States had led to concern about the future of global openness and integration. Mr Modi, too, had a similar role to play and highlighted the Indian belief that nimbleness, and not self-centred policy, was the answer to the tensions brought about by globalisation. To make his point, he cited “new types of tariff and non-tariff barriers” and stoppage of bilateral and multilateral agreements and negotiations. On terrorism and climate change, the prime minister underlined India’s commitment to robust global responses to what are essentially global problems. He pointed out that there was no such thing as “good terrorism”, indicated that Indian values do not support the exploitation of nature for “greed”, and called the rising tide of anti-globalisation “worrisome”.

The speech was a complex exercise in signalling: It signalled externally that India was on the side of globalisation, still; and it signalled internally that the government’s priorities continue to be reform and growth. These signals are welcome, and now must be transformed into action. Mr Modi was greeted with a standing ovation. This is a reflection of India’s rising global stature, but also of the high expectations of its future economic performance. The International Monetary Fund has just raised its estimate of economic growth in India to 7.4 per cent in the current year, 2018-19. Other macro indicators have also given rise to hope, whether it is the solid gains made by the equity markets, the heavy foreign inflows into Indian debt, or even the decision by an international credit rating agency to upgrade India’s sovereign rating. India may be finally emerging from the shadow of a growth slowdown largely caused by policy missteps and administrative slowness.

However, it is important to note that Mr Modi was listened to respectfully precisely because of these expectations of future growth and prosperity. This increases the pressure on the forthcoming Union Budget to be prudent and forward-looking rather than populist. The prime minister, in his recent media interactions, has indicated that this is his preference, too. Less than a fortnight before the Budget, Mr Modi said it was “a myth” that people wanted sops and freebies and that Budget or no Budget, development would remain the theme for his government. But the proof of the pudding is in the eating, as the pressures to introduce populist elements to what will effectively be an election Budget would naturally be high. Mr Modi’s government must live up to the messages of his Davos speech and his other recent media appearances. Fiscal prudence, trade openness, and commitment to global targets such as climate change and the sustainable development goals must be prioritised to provide India the leading role it deserves on the world stage.