Yasir Khan<\/p>\n
For a decade and more, Narendra Modi\u2019s government has sold its economic brand as a \u201ctransformational agenda,\u201d a promise that India would move from managerial inscrutability to free-market confidence, from regulatory sclerosis to investment magnetism. Reality has proved far less dramatic. When tested by the harshest external shock of the post-pandemic decade\u2013a sweeping 50 per cent tariff imposed by the United States in August 2025, among the highest duties any major economy has faced this century\u2013India\u2019s economic edifice did not flex; it crumbled. Far from bold structural reform, what New Delhi offered was defensive tinkering. The failure is not the tariff itself. It was always a geopolitical risk, but the Modi government\u2019s inability to wield policy to pre-empt, manage, and neutralise such shocks.
\nThe U.S. move was not a bureaucratic irritant. The Donald Trump administration\u2019s decision to stack a secondary 25 per cent penalty on top of a pre-existing 25 per cent reciprocal tariff reflected deep frustration with India\u2019s trade policy and energy choices, particularly New Delhi\u2019s continued Russian oil imports. The cumulative 50 per cent tariff placed India in a league with countries under outright economic sanctions, imperilling export competitiveness in labour-intensive sectors that account for large swaths of middle-class livelihoods. This was the acid test of the Modi economic narrative, and India failed.
\nThe tariff crisis was not merely a geopolitical rupture but a reflection of deeper economic weaknesses. Rather than offering an unequivocal vision of liberalisation and market openness, Modi\u2019s India responded with half-measures and incrementalism. GST reforms, announced in late 2025 with a simplified slab structure and rate cuts, were sold domestically as a big win; in truth, they were reactive, calibrated to cushion the tariff blow, not to overhaul a complex tax system that has confused businesses for years.
\nReform cheerleaders will point to this GST 2.0 as evidence of progress. But this is reform as damage control, a retrofitted policy designed to prop up consumption, not to reinvent the underlying supply-side architecture of India\u2019s economy. The government\u2019s own economic advisers admitted that the overall GDP drag from U.S. tariffs might only be partly offset by tax adjustments, leaving growth closer to the low-6 per cent band rather than surging toward aspirational 7-8 per cent targets.
\nAcross arguably every major vector \u2013 labour law modernisation, financial sector reform, power sector restructuring, privatisation of loss-making public enterprises \u2013 the pattern is the same: promises, delays, and partial packages that stop short of transforming incentives or dismantling entrenched interest group barriers. Labour reforms, for all the rhetoric, never took the decisive step toward making India a genuinely competitive manufacturing destination. Privatisation agendas bogged down in political compromise rather than structural reallocation. Power utilities remain mired in fiscal distress, dragging on state finances and crowding out productive investment. These are not incidental frustrations; they are foundational weaknesses that have been papered over by headline GDP numbers and consumption-led growth. Wall Street Journal commentary has repeatedly noted that Modi\u2019s economic strategy has relied on visual tweaks rather than a comprehensive recalibration of institutional frameworks.
\nThe tariff shock exposed what many international economists have long cautioned: India\u2019s regulated economic model, far from being an engine of friction-free growth, is brittle. A sustained 50 per cent tariff could trim India\u2019s GDP by up to a full percentage point over time, with disproportionate effects on employment in export sectors that are already struggling to absorb India\u2019s demographic dividend. There is a bitter irony here. The Modi era began with grand promises of breaking India\u2019s middle-income trap by unleashing private enterprise and foreign investment. Instead, India\u2019s average trade-weighted tariff remained high compared to peers before the US penalties were imposed, undermining the credibility of India as a liberalising market.
\nThe narrative du jour in Islamabad, of economic resilience amid turbulence, can blind policymakers to the deeper need for structural reform. India\u2019s experience \u2013 a government that relied on protective cushions and gradualism \u2013 demonstrates that growth can be derailed not by global conditions alone but by the absence of credible reform architecture. The argument is not anti-India. It is a critique of policy incoherence at scale \u2013 a reminder that ambition without follow-through breeds vulnerability. Modi\u2019s failure on reform is not the failure of India; it is a failure to align political capital with economic necessity at precisely the moment the world\u2019s most populous nation needed it most.<\/p>\n
The writer is a freelance columnist.<\/p>\n","protected":false},"excerpt":{"rendered":"
Yasir Khan For a decade and more, Narendra Modi\u2019s government has sold its economic brand as a \u201ctransformational agenda,\u201d a promise that India would move from managerial inscrutability to free-market confidence, from regulatory sclerosis to investment magnetism. Reality has proved far less dramatic. When tested by the harshest external shock of the post-pandemic decade\u2013a sweeping […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[13452],"class_list":{"0":"post-526253","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-article","7":"tag-yasir-khan"},"yoast_head":"\n