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India launches Chinese-style economic revival plan

June, 10, 2014

Narendra Modi’s new government in India on Monday announced ambitious, Chinese-style plans to revive the struggling economy with everything from a nationwide high-speed rail network and a better tax system to improved schools and more toilets.

“The people of India have given a clear mandate,” President Pranab Mukherjee told parliament in a formal speech outlining the Modi government’s programme for the next five years.

“They want to see a vibrant, dynamic and prosperous India. They want to see a resurgent India, regaining the admiration and respect of the international community.”

The election of Mr Modi as prime minister in May at the head of a Bharatiya Janata party administration after a decade of increasingly lacklustre Congress rule has raised hopes among business leaders and ordinary Indians that the new government will boost investment and growth and create millions of jobs.

Mr Mukherjee’s speech, prepared by Mr Modi and his team, touched on almost every aspect of national life and mentioned a series of “national missions” – for example on health services – but did not mention specific legislation to be put before parliament. As he spoke, the Bombay Stock Exchange indices climbed to new highs.

Among the pledges was a commitment to a “Diamond Quadrilateral project of high-speed trains” – which echoes the “Golden Quadrilateral” of highways launched by the previous BJP government – and another to the construction of 100 new cities focused on specialised economic domains and “equipped with world-class amenities”.

Mr Modi has made clear he wants to emulate China’s building of infrastructure and its welcoming of foreign investment as a way of ensuring accelerated growth for India. “We need to transform ourselves into a globally competitive manufacturing hub, powered by skill, scale and speed,” Mr Mukherjee said.

The speech also addressed one of the key complaints of big businesses such as Vodafone and Shell, which have been hit with hundreds of millions of dollars in tax demands, based either on a retroactive law introduced by Mr Mukherjee himself when he was Congress finance minister or on unexpected tax assessments that are contested by the targeted companies.

Mr Mukherjee, now holding the ceremonial post of president and head of state, said the Modi government would be “predictable, transparent and fair”, rationalising and simplifying the tax regime to make it “non-adversarial and conducive to investment, enterprise and growth”. It would also seek to introduce a long-awaited general sales tax across the country.

The government, however, was “dedicated to the poor” and saw its greatest challenge as ending “the curse of poverty in India”. It would tackle corruption, seek to ensure that a third of seats in parliament were reserved for women and clean a nation renowned for filth and poor sanitation. “We must not tolerate the indignity of homes without toilets and public spaces littered with garbage,” Mr Mukherjee said.

Financial Times