The Opportunities and Pitfalls of Modinomics

By Derek Scissors

Derek Scissors is a resident scholar at the American Enterprise Institute (AEI), where he studies Asian economic issues and trends. In particular, he focuses on the Chinese and Indian economies and US economic relations with China and India. He is author of the China Global Investment Tracker and the Chinese Investment in the US Dataset.

Before becoming prime minister, Narendra Modi became famous for developing the “Gujarat Model” for economic growth. Despite being poor in tourism and natural resources, Modi’s state government in Gujarat attracted foreign investment and developed a booming local industry based on trade and manufacturing. By the end of his 14 year term as Chief Minister, the state boasted, on average, a 10 percent economic growth rate and accounted for 22 percent of India’s total exports. Now as prime minister, Modi has saught to scale up on a national level.

A key piece of Modi’s national economic policy is the “Make in India” initiative, which seeks to entice foreign businesses to set up manufacturing in India and provide skilled jobs for India’s growing—and increasingly well educated—workforce, and from that, build domestic capacity and expertise. The initiative has already gained the interest of U.S. aerospace firms that hope to build fighter jets in India. The proposal, backed by the Pentagon, is also indicative of the growing trust between the two nations. The Cipher Brief spoke with Derek Scissors, resident fellow at the American Enterprise Institute, to learn more about the objectives of Modinomics and the challenges to still be overcome.

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