Lawrence Solomon: Narendra Modi’s muscular free market

(April 16, 2015) “India’s “clean energy revolution” is based on a doubling of India’s coal production over the next five years.”

This article, by Lawrence Solomon, first appeared in the National Post

Indian Prime Minister Narendra Modi addresses a crowd during an event in Toronto. For the immediate future, India has announced that it will double its coal use by 2020, in the process overtaking the U.S. as the world’s second largest coal consumer after China. The Canadian Press/Chris Young.

Indian Prime Minister Narendra Modi addresses a crowd during an event in Toronto. For the immediate future, India has announced that it will double its coal use by 2020, in the process overtaking the U.S. as the world’s second largest coal consumer after China. The Canadian Press/Chris Young.

A generation ago, President Ronald Reagan created a muscular America through uncompromising foreign policy stances abroad coupled with principled free market policies at home. In Europe, Prime Minister Margaret Thatcher created a muscular Great Britain through an equally resolute foreign policy posture and even more daring free market reforms at home. Now the largest democracy of all — India, with its 1.25 billion people — is being transformed by a similarly resolute, similarly iconic conservative: Prime Minister Narendra Modi.

Politically incorrect Reagan early on in his administration won a defining showdown with the air traffic controllers; Thatcher with the coal unions. Politically incorrect Modi in his first year in office faced down India’s largest strike action in four decades, called by the 300,000-strong coal unions in response to a planned partial privatization of Coal India Ltd, the world’s largest coal company and India’s second largest employer. Modi can now proceed with the saffron component of his “4-coloured revolution,” one for each colour in India’s flag (the others are in agriculture, milk production and shipping).

Saffron — representing India’s “clean energy revolution” — is based partly on increases in nuclear power, partly on increases in solar and chiefly on a doubling of India’s coal production over the next five years. Coal is the linchpin in Modi’s plan to mend India’s environment and soar its economy. The bureaucratized coal industry is so dysfunctional that it can’t reliably supply the country’s electricity system, making long blackouts commonplace in much of the country. Thanks to reforms at Coal India, an opening up of the country’s immense yet under-exploited coal fields to the private sector and a near doubling over the next decade of India’s coal-fired electricity generating capacity, with most of the increment coming from clean coal, electricity will for the first time be available 24/7. As an economic bonus, India will also be able to limit its imports — amazingly, although India has the world’s fifth largest reserves of coal, it is also the world’s third largest importer of coal.

In his whirlwind of free market reforms — the same ones that earned his home state of Gujarat the moniker of “Vibrant Gujarat” — Modi has been cutting red tape, downsizing the government bureaucracy, weakening the grip of unions, eliminating opportunities for corruption, introducing competition, cutting subsidies, deregulating protected industries and attracting foreign investment. The effect has been to revise everyone’s expectations of India’s standing in the world economy. This week, the International Monetary Fund and the World Bank, in separate analyses, each concluded that India’s economy will be rapidly growing, so much so that this year it will increase by 7.5 per cent, letting it overtake China for the first time as the world’s fastest growing large economy. Next year, the World Bank predicts, Modi’s reforms will propel India’s growth higher still, to 7.9 per cent, and by 2017 it will accelerate further, to reach 8 per cent.

Modi is determined that nothing hold back India in lifting people out of poverty, certainly not anti-growth environmental policies by foreign NGOs flouting India’s laws. According to an Indian Intelligence Bureau report, “Concerted efforts by select foreign-funded NGOs to take down Indian development projects,” NGOs retard India’s economic development to the tune of 2 to 3 per cent of GDP, primarily by thwarting coal, nuclear and other needed infrastructure. On grounds of its illegal conduct, Modi’s administration this week suspended Greenpeace India’s registration, saying the “foreign funded campaign and protest creation by Greenpeace India led to wastage of financial resources, prevented creation of productive capital and caused loss of jobs and incomes for locals, apart from depriving the country of energy.”

Among the government’s many specific objections to Greenpeace’s activities is its leading role in a foreign-financed, international effort to shut down some 500 Indian coal plants. This effort complements those of the U.S. and EU to hold back India’s coal economy in the name of stopping man-made climate change. Where another leader might have buckled, or at least paid lip service to the claimed international consensus on climate change, Modi simply stands his ground:

“The world guides us on climate change and we follow them? The world sets the parameters and we follow them? It is not like that,” a self-confident Modi said at a Delhi event. “We can lead the world.”

A reformed coal sector, in fact, will be key to Modi’s drive for a cleaner environment because the country’s government-run coal colossus today accounts for much of India’s environmental problems. According to the New Delhi-based Centre for Science and Environment (CSE), India’s coal plants are among the world’s “most inefficient,” with “immense scope for improvement.” Modernizing the coal infrastructure would not only slash pollution, it would save water — CSE calculates that the coal plants account for more than half of India’s domestic needs.

To make India a great power, Modi is also becoming muscular in defense, with plans to purchase $150 billion in new fighter jets, anti-tank missiles, helicopters and submarines through 2027, $20 billion of which has already materialized in his first year in office. To entrench India’s capabilities, Modi plans to end India’s status as the world’s largest arms importer. Within five years, 70 per cent of India’s arms will be manufactured domestically following Modi’s decision to invite foreign defense industries to develop India’s indigenous arms manufacturing ability.

Free market democracies have been on the ropes in the U.S. under Obama, and in Europe under the soft socialism that has dominated it for more than a generation. The free market is alive and well and flexing its muscles, though, in what is on course to becoming the greatest democracy on Earth.

Lawrence Solomon is executive director of Energy Probe. Email:

About Lawrence Solomon

Lawrence Solomon is one of Canada's leading environmentalists. His book, The Conserver Solution (Doubleday) popularized the Conserver Society concept in the late 1970s and became the manual for those interested in incorporating environmental factors into economic life. An advisor to President Jimmy Carter's Task Force on the Global Environment (the Global 2000 Report) in the late 1970's, he has since been at the forefront of movements to reform foreign aid, stop nuclear power expansion and adopt toll roads. Mr. Solomon is a founder and managing director of Energy Probe Research Foundation and the executive director of its Energy Probe and Urban Renaissance Institute divisions. He has been a columnist for The Globe and Mail, a contributor to the Wall Street Journal, the editor and publisher of the award-winning The Next City magazine, and the author or co-author of seven books, most recently The Deniers, a #1 environmental best-seller in both Canada and the U.S. .
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