India's Modi faces huge burden of expectation

India's Modi faces huge burden of expectation
Narendra Modi.

NEW DELHI - Indian shares have soared on hopes newly elected leader Narendra Modi can revive a slumping economy, but analysts warn impossible expectations are riding on the right-winger's free-market "Modinomics".

His Hindu nationalist Bharatiya Janata Party (BJP), which ousted the left-leaning Congress with the best results in 30 years, will take power with India's economy growing at its lowest rate in a decade.

The chief minister of prosperous Gujarat state criss-crossed India in what the media called a "shock and awe" campaign, pledging faster growth, new infrastructure and more jobs to employ a mushrooming young workforce.

But the promises of the 63-year-old barrel-chested leader have also stirred cynicism even as foreign investors have poured billions into local financial markets.

"Indian politicians promise the earth to get elected," said economist Rajeev Malik from the CLSA investment bank.

Analysts warn it would be simplistic to believe Modi can quickly transform India, but the PM-in-waiting fed optimism on Friday by saying he could make the 21st century "India's century" within 10 years.

"There's no magic wand," warned D.K. Joshi, chief economist of credit rating agency Crisil.

For a start, India is gripped by stagflation - growth has crashed to 4.9 per cent from nine per cent two years ago and consumer inflation is at a wage-eroding 8.6 per cent, the highest among top emerging economies.

For another, there are still a number of no-go areas in India's economy such as its inflexible hire-and-fire labour laws which discourage employers from taking on new workers.

Infrastructure needed to underpin the industrialisation process is poor in large parts of the country and a new land acquisition law has further complicated the process of buying space for new factories.

Arun Jaitley, who is tipped to be finance minister, told a small group of foreign reporters last month that there was little prospect of early reforms of the labour market or any major rollback of pro-poor welfare programmes.

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