Narendra Modi urges India to embrace competition

Mumbai – The opposition party’s candidate for prime minister, Narendra Modi, laid out a broad economic policy for India on Thursday that encouraged family-owned businesses to embrace competition in a country known for its protectionist policies and endorsed a goods and services tax, which his state government had previously opposed.

Speaking at a gathering of the Confederation of All India Traders in New Delhi, Modi, who has been a vocal supporter of small business in the past, said small traders should adapt to a changed marketplace by improving the quality of their goods, so they could work with large online retailers, rather than fear the e-commerce market.

“We should not worry about the challenges from global trade,” Modi said.

He refrained from clarifying his stand on direct foreign investment in e-commerce and multibrand retail markets, a traditionally sensitive political issue. His party, Bharatiya Janata, has been hostile toward New Delhi’s efforts to allow foreign multibrand retailers, like Wal-Mart, to open stores in India, which, they said, would threaten the livelihoods of millions of small-store owners, who form the backbone of the party’s support.

But he emphasized that the Ministry of External Affairs should engage in “economic diplomacy” to help hasten India’s growth.

Modi, who has presented himself as a business-friendly candidate, and his party are the front-runners in the national elections in May, according to a recent survey by the Pew Research Center.

Analysts said his first extensive comments on national economic policy reflected a strong pragmatism that will be required of India’s leader. Satish Mishra, a senior fellow specializing in politics and governance at the Observer Research Foundation, a policy group in Mumbai, said that, although Modi did not mention foreign investors, he was aiming his remarks at them.

“Narendra Modi is trying to send a positive message to foreign investors and those who want economic growth at all costs, while balancing the interests of small-business owners  that have traditionally supported the BJP,” he said. “He is preparing the ground for a shift away from opposition of foreign retail.”

Though the Bharatiya Janata Party has traditionally been a staunch supporter of small traders, analysts said it was clear that Modi was trying to attract big businesses, as well.

“From a pragmatic perspective, he has to take decisions in the broader national interests if he is talking as a prime ministerial candidate,” said Sujan Hajra, chief economist and executive director of institutional equity at Anand Rathi Financial Services in Mumbai. “He cannot be opposed to big-format, organized domestic retail and e-commerce because that is the reality today.”

Later in the day, during a speech at the India Economic Convention, Modi said he favored a nationwide goods and services tax, which would replace a fragmented system of state and central government taxes.

Attempts by the national government to introduce a goods and services tax have long been thwarted by opposition from India’s states, including Gujarat, where Modi is chief minister.

On his official Twitter feed, he denied that his party had ever opposed the tax, only New Delhi’s lack of adequate information-technology infrastructure to support it.

Economists said Modi’s remarks were made by a politician thinking from the standpoint of the country, which would benefit from the increased revenue from such a tax, rather than as a chief minister in charge of a state government, which would lose revenue in the short term.

“Narendra Modi was a politician in the opposition, and he was trying to make things difficult for the Congress, who was, in any case, having great difficulty in passing the GST,” said Surendra Laxminarayan Rao, an economist who was the former director general of the National Council of Applied Economic Research.

“He is no longer talking as the chief minister of a Bharatiya Janata Party state, representing the viewpoint of the party,” Rao said. “He is talking as if he’s the prime minister of India.”