Politicians for Prosperity
National leaders, such as India’s new prime minister, Narendra Modi, can make or break their country’s business climate.
When
a country elects a new head of state, business leaders watch
carefully. It’s understandable: Any changing of the guard raises
questions for their survival. How friendly will the incoming
government be to their company, and how supportive will it be of
economic growth? For answers, business leaders often look to the
policies and beliefs of the political parties that control the
government. But the skill and temperament of the leader is generally
a better guide.
A
good example is the election of Narendra Modi as prime minister of
India in May 2014. Once poised to rival China, India has seen its
development prospects fall behind since 2012. At that time, India’s
annual GDP growth topped 7 percent, but today it hovers under 5
percent. Modi was elected because he promised to give the world’s
largest democracy what it needs most: economic growth, a government
that reduces corruption and promotes widespread transparency, and
improved quality of life.
However,
politicians should be judged not on their promises but on their
ability to deliver. Even at an early stage, one can anticipate the
impact of a new leader on the country’s business climate by
looking for the following five signals. Applied to Modi within
months of his election as India’s chief executive, they provide a
glimpse of his potential.
1.
How deep is the politician’s insight into the public interest? It
matters whether a leader is a top-down or bottom-up candidate. The
more visible a political leader’s commitment to the common good,
the more effective that leader will be in creating a political
environment that is welcoming to business. That’s because this
type of commitment is closely linked to economic pragmatism and
fairness. The leader’s focus on progress, and on raising the
standard of living, will trump any instinct to play favorites. It
won’t just be the cronies who prosper.
Modi’s
parents were street vendors; before going into politics, he worked
at their tea stall. This background contrasts with that of most of
India’s previous prime ministers, who were born into families of
political leadership. Although a modest background doesn’t
guarantee success, it gave Modi a gut-level appreciation for the
daily lives of the people in his country. He understands the grass
roots, because that’s where he started; he is sensitive to the
needs of his constituents, and he has developed connections with the
business community that will inform his political decision making.
2.
Can he or she get things done? Virtually
all leaders take office with an ambitious vision for their country,
but only a few succeed in transforming that vision into reality. Lee
Kuan Yew of Singapore, Margaret Thatcher of the United Kingdom, and
Sebastián Piñera of Chile are among those who have succeeded.
Although many did not agree with their respective visions, few
disagreed that they were exceptional at implementing them.
Modi
is cut from the same cloth. He has a history of making things
happen. Before his election to India’s highest office, Modi ran
one of its major states, Gujarat—which has a population of more
than 60 million—for a dozen years. His rule was controversial at
the time; he and his Bharatiya Janata Party were blamed for favoring
Hindu interests over Muslim interests, and especially as per NYT
“for failing to stop bloody [anti-Muslim] riots in his home state
in 2002.” As a result, he was banned from entering the United
States for more than a decade.
At
the same time, however, Modi grew the Gujarat economy and created
jobs at a rapid clip. In one oft-cited example, when Tata Motors was
thwarted in 2008 in its effort to build an auto assembly line in the
state of Bengal, Modi sent a text message to the CEO of the
automaker’s parent, saying he would pave the way for the plant to
quickly open in Gujarat. Fourteen months later, the facility was up
and running. Now, as India’s chief catalyst of economic
development, he is promoting similarly favorable practices and
generating momentum.
3.
Does the leader approach governance with a business mind-set? A
head of state is, in effect, the nation’s CEO. It’s a role that
requires quick and decisive action, along with a steady focus on
driving economic growth. Leaders who have a business mind-set find
the obstacles to progress—and look for ways to eliminate them. One
example is unfolding in Mexico, where president Enrique Peña Nieto
pushed through legislation to break up the country’s telecom
monopoly.
Leaders
with a business mind-set find the obstacles to progress—and look
for ways to eliminate them.
Just
11 days after his election was announced, Modi reinforced India’s
standing in the “neighborhood” of nearby countries by inviting
all the national leaders in the region to his inauguration—including
Nawaz Sharif, Pakistan’s prime minister. Among other things, this
was seen as a signal that Modi would not tolerate a bias against
Muslims within India. Then, before taking office, he began opening
doors to other countries (and by extension their companies) that
might be ready to invest in India or partner with businesses there.
Modi has done this before: He brought companies from Japan, Korea,
the U.S., and other countries into Gujarat.
In
September 2014, Modi and Japanese Prime Minister Shinzo¯ō
Abe announced that Japan would invest US$35 billion in India’s
infrastructure over the next five years. For Modi, this was a
powerful move in the first 100 days in office, and it will help
change India’s reputation as a place that rejects foreign economic
involvement. It also suggests an upward trend in foreign direct
investment; it is likely that Taiwan will follow Japan’s lead.
Moreover,
after assuming office, Modi quickly set 10 business-friendly
priorities for his new government. These include building confidence
in the state bureaucracy; welcoming innovative ideas; focusing on
infrastructure, education, health, and energy; strengthening
transparency; and implementing policy in a timely, stable, and
sustainable manner. He’s running the government like a business,
which is new for India.
4.
How skilled is the political leader at engaging others—particularly
senior government employees? One
of the most essential factors for national impact is the ability to
move people to pursue common goals. It is critical for leaders to
surround themselves with the right people, and then to be able to
motivate them to set and accomplish goals that will benefit the
country.
During
his first two weeks on the job, Modi cut the number of government
ministries by almost half. He then appointed ministry
secretaries—the nation’s highest-ranking civil servants—who he
believed were ready for rapid change. He selected people who were
action oriented and battle tested. Modi also asked his ministers for
a set of priorities for the next 100 days, summarized in just a few
PowerPoint slides, compared to the usual hour-long bureaucratic
presentations. And he had them determine what they could tangibly
accomplish. He requires his ministers to maintain visible lists of
these priorities for their departments, and uses dashboards to
monitor progress and ensure accountability. Early results have been
impressive; for example, ministries have accelerated the
traditionally long and complex process for granting licenses to
businesses.
5.
Can the politician attract and hold broad support? There
is always potential for reaching across partisan lines to earn the
goodwill of the general public, but many politicians fail to do so.
The struggles of the U.S. Congress come to mind.
Here,
Modi’s contentious past might suggest he has difficulties, but the
grand sweep of the last election indicates that he must be aware of
the problem, is acting as a pragmatist, and is actively seeking the
trust and confidence of the whole country. He and his party
were given an absolute majority rule in India’s fractious
parliament. Compared, for example, with the divided U.S. Congress,
India’s parliament has relatively broad public support. It should
be able to muscle through useful legislation in the months ahead,
with Modi at the helm. In July 2014, Modi’s government increased
the foreign direct investment limit in the defense and insurance
industries from 26 percent to 49 percent, to help raise the game in
both sectors. It is likely that more business-friendly legislation
will follow.
Of
course, no one can know for sure how political events will unfold.
But any politician with a firm grasp on these five indicators should
inspire confidence; they are universally linked with stability,
consumer confidence, and growth potential. In the case of India,
Narendra Modi knows how to execute, and has the mandate he needs to
do so effectively. India’s vast and growing consuming public has
long made the country a good economic bet, and now its national
leadership may also make it a good investment bet.
By
Ram
Charan,
Michael
Useem
and Dennis
Care
yhttp://www.strategy-business.com/article/00280?pg=all
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