AFTER THE SONIA-AND-SINGH SHOW

ALMOST ANYTHING YOU SAY ABOUT INDIA COULD BE TRUE—and the opposite, too. Progress under Manmohan Singh, the prime minister from 2004 to 2014, for example, badly disappointed many observers. Yet the economy had also performed better, on the face of it, than in any comparative period in the past. Singh’s government, led by the center-left Indian National Congress, was supported (and sometimes constrained or compromised) by a gaggle of smaller parties, including Communists for the first five-year term. The real center of political power in any case was Singh’s boss as head of Congress, Sonia Gandhi, a woman with a remarkable political story.

Born just after World War II in Italy’s northeast, Edvige Antonia Albina Maino (she later switched to “Sonia”) was the daughter of a mason who had supported Italian fascists under Mussolini and served in the Italian army. In the 1960s Sonia enrolled at a language school in Cambridge, in Britain, and there she met a young Indian, Rajiv Gandhi, who attended the famous university. Sonia reportedly earned her income as a waitress at a Greek restaurant when the two met. After marriage and moving to India, the two expected no political career: Rajiv trained as an airline pilot and flew for Air India. In the 1970s his ambitious and unscrupulous younger brother, Sanjay, had instead been groomed to join and eventually succeed their mother, Indira Gandhi, in politics. Gossipy accounts depict Rajiv and Sonia as determined socialites, passing their evenings at Delhi dinner parties, uninterested in politics to the point of guilelessness.

But after Sanjay and Indira both died—the first after crashing a stunt plane, the other murdered by her Sikh bodyguards—Rajiv became India’s youngest prime minister yet, at the age of forty. Sonia Gandhi adopted Indian citizenship and then, after Rajiv in turn was assassinated by a Tamil suicide bomber, it fell to her to assert dynastic control over Congress. That took some years, but by the late 1990s she had led Congress and had crushed a rebellion by rival party leaders who said her Italian heritage disqualified her. Having been elected as an MP, and winning devotion from voters in Uttar Pradesh, she went on to head the national opposition in parliament. She grew in confidence. By the time of a general election in 2004, she was a strikingly effective campaigner, drawing on a personal story of family sacrifice (the loss of her husband, the murder of her mother-in-law) and adopting some of the mannerisms and guile she had witnessed in Indira Gandhi. She made a point of dressing like Indira Gandhi and talking of the former leader’s “innate sense of fashion.” Such details mattered: in the early 1980s, Sonia had outdone the widow of Sanjay Gandhi for the affections of their mother-in-law, Indira, by picking out saris for the elder woman, winning endearment and raising her status.

Other democracies have their dynasts. Americans are now used to seeing Clintons, Kennedys, and Bushes vying to be president. But dynastic stories are most remarkable in South Asia. In 2004 Sonia Gandhi delivered a surprise electoral victory for Congress, then shrewdly renounced any claim to be prime minister and appointed Singh to the post. The nominee couldn’t have suited her better: Singh, who reliably wore a pale blue turban and a pleasant but somewhat docile expression, would serve for a decade as her front man. He was bright, kind, and timid, more functionary than politician, often mute in public. Unable to win a seat in the lower house of parliament, he posed little or no political threat to her, however great the office he held. Nor was he troubled with charisma. His old college in Amritsar, in Punjab, offered no sign that this alumnus was celebrated, or much remembered. But he had a reputation for integrity and a record as a sound economic manager. Singh’s presence suited Gandhi, letting her hold political power but without the tedious responsibility of assuming office.

It had been Singh, directed by a previous Congress prime minister, Narasimha Rao, who guided India through its first liberalizing economic reforms in the early 1990s. By 2004 it was clear how those and subsequent changes, though initially painful, ushered in an economic boom, especially in the services economy. The Gandhi-dominated faction of Congress under Sonia nonetheless had denied Rao credit, seeing him as disloyal and objecting to evidence that the party achieved most in the few years when the Gandhis were sidelined, immediately after Rajiv Gandhi’s death. When Rao died, in 2004, an embittered Sonia Gandhi and her supporters prevented his getting a full funeral in Delhi, as a former prime minister is usually due. Rao’s family was told to make do in Hyderabad instead. In a display of abject pettiness the Gandhis even prevented his funeral procession from entering the Congress headquarters in Delhi.

The Bharatiya Janata Party (BJP), the largest on the center-right, had also carried out liberal reforms in the late 1990s and early 2000s. In national office the BJP bragged about “India shining,” rapid growth, and drawing in foreign investment. But Sonia Gandhi and Congress displayed greater electoral skill, convincing voters that the center-left party had the interests of the aam aadmi, the common man, most at heart. Congress promised that economic growth would be matched with more help for the needy, that farmers’ loans would be written off, and that a great splurge of spending would flow to the poor as subsidies, welfare, grants, and pensions.

Congress’s leaders believed that their talk of a “rights-based approach” for voters won them two national elections, in 2004 and in 2009. A “right to work,” for a modest wage, was introduced for one hundred days for villagers who built dams, roads, and other publicly useful things. A right to subsidized food was unveiled, to cover some two-thirds of the population, expanding earlier cheap rations aimed at the neediest. The right to a free, midday meal for all schoolchildren had proved successful in Tamil Nadu, so the lunch was rolled out nationally. Other rights included state-backed health insurance (for some) and universal education: all children were promised places in state schools and minimum standards, at least in theory. Farmers also got rights to cheap supplies of fertilizer, gas, and other rationed goods. Many of these rights, naturally, turned out to be less than ideal in practice, and they relied on officials to administer them. The right-to-work scheme, for example, was often mismanaged, involved officials taking cuts of wages as bribes, or saw the shoddy building of public works washed away in the next monsoon. Right-to-education rules were often little more than an excuse for extortion by inspectors.

The ten years under Singh up to 2014 were mixed, but they undoubtedly gave rise to real improvements for many. The new rights—promoted by an advisory group of social activists and left-leaning thinkers close to Sonia Gandhi—were supposed to improve human capital, of the sort Amartya Sen emphasized. At the same time, Singh tried to deliver economic growth through limited liberal reforms—for example, by allowing foreigners to invest in supermarkets, so as to improve supply chains and markets for food. Singh also tried to remove subsidies on petrol and, more slowly, on diesel—subsidies that distorted markets and rewarded the rich. He also wanted to create a single market, with standard tax rates, across India. Yet liberal reforms were painfully slow in coming. Singh lacked the political clout, or even the appetite for politics, crucial to getting parliament to pass reforms. That goal required active backing from Sonia Gandhi, who remained head of Congress for a record eighteen continuous years (and counting, as of 2016) and who was boss of the ruling coalition of parties. In many matters she directed Singh, appointed his ministers, set policy, negotiated with allies, and haggled with opponents to get bills through parliament.

Singh had limited say over some policies and appointments. But one of his most important achievements, in September 2013, was the selection of a much-respected figure, Raghuram Rajan, to run India’s central bank. Rajan won over international investors, speaking bluntly about widespread crony-capitalism in India and the need to fix up the country’s troubled banks. His influence was benign; his presence somewhat made up for an earlier, awful, decision to make Pranab Mukherjee—an ally of Sonia Gandhi—finance minister. A veteran, Machiavellian figure who cared little about economics, Mukherjee conspired to scare off investment, and bullied timid Singh. Mukherjee was booted upstairs in 2012 to be India’s ceremonial president, a post in which he could do less damage.

Singh’s presence did cheer international observers, plus urban voters. But Sonia Gandhi had to reconcile different camps. Congress was divided, with a left-leaning group opposed to liberal reforms and a minority that saw their benefit. (Inside the opposition BJP, nationalist politicians also fiercely opposed reforms that would let foreigners win access to markets or threaten the interests of small traders.) Congress’s coalition allies, such as the Communists and Trinamool, from West Bengal—the state that included Kolkata (formerly Calcutta)—also opposed any “neoliberal” change, such as easing labor laws so that companies could more readily hire and fire workers. Worse, several big businesses—the cronies that Rajan and others opposed—had strong influence on some in Congress and government. Many business leaders sought official favors, contracts on preferential terms, and minimization of competition. The strongest firms even got direct influence over who should run the energy and telecoms ministries. A scandal known as the “Radia tapes,” in 2010, revealed recordings made by intelligence services of business leaders, or their fixers, trying to shape ministerial appointments and decisions. In effect, big firms donated to politicians and bought political influence. Some coalition partners, such as a party from Tamil Nadu, were brazenly corrupt. Though Singh was personally honest, he utterly failed to get a grip on such graft.

The prime minister was more active in foreign affairs, which helped the economy. He promoted better relations with America, delivering a civil-nuclear deal just before the election in 2009. It was designed to open up imports of uranium and make the running of nuclear power plants easier. That deal, pushed through parliament, broke Congress’s alliance with Communists. (Some opposition MPs apparently were bribed to support the legislation.) It was the highlight of Singh’s career as leader and an opportunity missed to begin pursuing other reforms or initiatives. Singh also yearned to improve ties with Pakistan, showing remarkable restraint after Pakistani-backed terrorists attacked Mumbai in 2008.

But as global economic conditions got harder, as the financial crisis from 2008 onward dragged on, Singh lost his way. He agreed not only to borrow and spend to stimulate the economy and pay for the new welfare but also to write off big loans to farmers (often through crooked agricultural banks, whose bosses no doubt cornered much benefit). Gandhi saw these outlays as politically essential, though years of high public spending crowded out private investment and stoked up inflation. Singh’s economics team presented grand schemes—dressed up, Soviet-style, as “five-year plans” under a “Planning Commission”—for long-term investment, promising over $1 trillion to improve roads, railways, ports, airports, and other infrastructure by 2020. The planners said private capital would fund much of that, along with toll roads and other “public-private partnerships.” But these involved ever more dubious ties between politically connected contractors, officials, and badly managed state-run banks. Back-handers and dodgy spending were widespread and stored up painful problems for later. Roads improved only slowly. The main highway from Delhi to Mumbai, for example, had for years on end the same half-built flyovers and partially finished road-widening schemes, however much official money was dumped on them. Ministers who oversaw such projects became strikingly rich.

None of that seemed to matter for a time. The economy boomed despite worsening tangles of bureaucracy, corruption scandals, and slow decision-making in government. New property rose: forests of concrete towers that sprouted on the edges of cities. Any car journey from Delhi required an hour or two of trundling through the shadows of this concrete sprawl. More homes were needed in huge urban areas, and politicians and tycoons found investing in residential blocks (often sending cash via hard-to-trace funds routed through Mauritius) a handy way to launder stolen and untaxed money. Soaring prices for minerals, and other finite resources such as the land or telecom spectrum, created the impression that the economy was racing. Demand from China pushed up prices of natural resources, such as iron and other minerals. The splurge of public spending kept many incomes rising, and state-run banks, under political pressure, kept on lending to favored companies. Global capital also gushed to emerging markets, as central banks in America, Europe, and elsewhere in effect printed cash. Indian stock markets, property, and other sectors boomed.

Unfortunately, much was destined to come to a juddering halt. By 2012 the economy showed real strains. Despite high growth, almost no new formal jobs had been created. India had roughly 30 million or so formal jobs in 2015, no more than five years before. Large chunks of the economy, such as agriculture and manufacturing, had hardly grown. Power cuts were a national bane, the result of bad management at the state-run coal company and failures of distribution firms. Big firms like Tata invested little new at home, preferring to expand overseas—for example, by buying Jaguar Land Rover in Britain. That was a smart deal (buying British steel mills was not), but the sight of Indian firms rushing abroad suggested they lacked confidence at home. Many firms were also increasingly loaded with debt—much of it in foreign currency, or raised from those dodgy state-owned banks. Local banks, as a result, looked vulnerable to a run.

Many problems got more intense in the last couple of years under Singh. High inflation, especially of food, worsened when droughts and daft rules on trading some food-stocks choked supplies. Rocketing global oil prices punished India, a big energy importer. The government ran up debt, as the country imported far more than it exported; the rupee looked poised to crash. Whopping corruption scandals—estimates of bribes paid to politicians and officials during Singh’s last five years in office ranged from $4 billion to $12 billion—caused public fury and indecision in government. The failure of many “public-private” schemes spread dismay and bad debts. The country’s first high-speed train, from central Delhi to its airport, was trumpeted initially, with Reliance Infrastructure, as a co-owner, helping to build it. But it opened late, then closed for several months amid problems with cracks in iron beams beneath the tracks, and then trains plodded at half speed with often empty carriages. Public anger at Singh’s passive, silent style also spread. The opposition repeatedly boycotted parliament, making it impossible to pass any laws. Some normally sober analysts even muttered about the threat of a revolution.

Singh was a terrible communicator, partly hamstrung by a fear of contradicting Sonia Gandhi or being seen as personally ambitious. He found it difficult to make a case for liberal economic reforms, to explain how foreign and private capital helped the economy grow or to argue that looser labor laws would encourage firms to employ more. Reforms were usually painful for some at first, and always threatened some vested interests. If you cut a subsidy on diesel, the growing car lobby got upset. If you opened up for foreigners to run supermarkets, small traders might be hurt. A better politician would have tried to narrate a story of progress since the early 1990s and explain what gains could come next. Singh’s efforts fell flat. Few listened to his mumbled speeches. In cabinet meetings he was often silent for entire meetings, deferential to those with more political clout. He almost never gave press interviews or even met journalists for conversation, lest he rile Sonia Gandhi or the likes of Mukherjee.

Singh should have sent all sorts of messages, such as saying government would stop running hotels, airports, banks, insurance firms, and companies that made watches, fertilizer, and steel, among other things. He should have spelled out how food could be grown more efficiently at much greater scale, and brought to consumers’ plates at vastly lower cost. Reforms of farming—specifically, letting investors develop commercial agriculture on large plots and freeing markets to be competitive—would boost food supplies. A braver leader would have tried to shift more wasteful subsidies that distorted markets, and pushed investment in irrigation, cold stores, and warehouses. Internal limits on trade should have been scrapped. And Singh should obviously have cracked down on crony ties between business and politics, confronting his most destructive ministers—especially Mukherjee, who demanded “retrospective tax” from foreign firms. Under him, India was listed by the World Bank as one of the worst countries, anywhere, to do business with.

The big question was not why Singh failed to do these things but why he hardly seemed to try. His harshest critics said Singh had no strong beliefs. Early in his career, in the 1970s, he had meekly gone along with daft economic decisions to isolate India and have the state grow ever more intrusive, under Indira Gandhi. Then in the 1990s, he went along with welcome liberalizing reforms, because that was what Rao demanded. He appeared to be a straw that bent as the wind changed. Milder and more plausible criticism suggested Singh deeply understood and believed in liberal economic changes, but he lacked political guile, and rarely dared to push Sonia Gandhi. She in turn had to balance the interests of factions inside Congress and beyond, including those with dubiously close ties to businesses or others that opposed reforms.

Sonia Gandhi rarely spoke about what would make the economy grow faster, preferring (like most politicians) to focus on spending the proceeds. Her son, Rahul Gandhi, whose influence on Congress rose starting in Singh’s second term, rarely expressed thoughts on policy. Amiable and apparently well-meaning, he was also ill at ease amid the aggressive thrusts of politics. No one in his party discussed how some politically connected firms slurped up credit from state-run banks, or how others were held back by terrible bureaucrats. Few seemed to understand the cost of dubious interactions between business bosses and politicians. Populist efforts—for example, a new land law—threatened to make it even harder for investors to function in India without political godfathers to smooth their way.

In 2014 voters dumped Congress, largely in frustration over a slowing economy, high inflation, corruption, and weak leadership. Modi baldly promised acche din, meaning good times, but he would also struggle to change the mood on the ground in the years that followed, even if official (though questionable) GDP figures looked rosier. With little grace, he rubbished Singh personally for what had occurred in the previous decade. In opposition he had jeered that the elderly prime minister, a trained economist, could not stop onion prices from soaring. In office, even abroad, Modi dismissed Singh as a failure and spoke of his own earlier embarrassment over India. In conversations with me he said: “Consider India’s identity in the last years. You would say the key features of the old government were policy paralysis, corruption, weak governance. But if you take my government, we have made major initiatives in the economic sectors, auctioned coal mines, telecom spectrum.” He bragged of touring the world to invite investors to see a new, reinvigorated India. He claimed that blackouts would end and promised to kick-start nuclear civil power and channel hundreds of billions of dollars to solar, hydro-, and wind-power plants. By 2022 renewables, he said, would supply 175,000 megawatts (MW) of electricity, five times more than in 2015.

Rising confidence in the new government and better decision-making brought some gains. Luck helped too, such as a windfall when global oil prices collapsed from $115 a barrel in June 2014 to $40–$50 two years later, lowering a huge import bill. The lower oil price also cut inflation and steadied the rupee and deficits. Meanwhile, Rajan at the central bank calmed nerves, helped to shore up the financial system, discouraged domestic drivers of inflation, and put pressure on banks to get the worst crony-businesses to repay debts. There was no love lost between Rajan and the new government, and the central banker was unusually vocal about many problems, doubting the merits of a new plan to boost manufacturing and skeptical over new official statistics on growth. His comments on social concerns, such as the need for harmony between Hindus and Muslims, infuriated Hindu nationalists. Yet he reassured those who worried about a lack of economic expertise in the new administration.

The trouble was that many early improvements under Modi looked fragile. A series of bad droughts, for example, would threaten to lift food inflation once more. In the early summer of 2016, in rural Maharashtra, villagers had poured into relief camps, battered by the worst local drought in a century. Oil prices would eventually rise again. Eventually Rajan, in the summer of 2016, was hounded out of office by members of the Hindu nationalist right. That sparked fears of an outflow of foreign funds from India.

A more thoughtful politician than Modi would have acknowledged that not everything under his predecessor had been a disaster. The previous decade, for all Singh’s timidity, had brought the highest sustained rates of growth ever in India. The previous leader did not deserve all the credit: benign global conditions helped, as did benefits flowing from earlier stability and reforms. Nonetheless, under Singh many tens of millions of people escaped absolute poverty. Starting in 2000, the size of the economy quadrupled, becoming worth more than $2 trillion by 2016. Keeping up previous growth rates would deliver an economy $3 trillion strong by about 2020.

The new government put an end to the worst corruption of the later Singh years. Dodgy tax officials and ministers’ fondness for extortion-like taxes were largely stopped. Lobbyists and middlemen for bigger companies were mostly chased away—it was remarkable how much quieter the lobbies of ministries in Delhi became after the change of government. Most dramatic, in an evening speech in November 2016, Modi announced that large-denomination 500- and 1,000-rupee banknotes would no longer be legal tender (other than when exchanged in banks). The idea was to force those who held great quantities of such cash as “black money,” unmonitored by tax authorities or for corrupt uses, to deposit their funds into banks instead.

Modi’s “demonetization” program proved to be a big political and economic gamble—perhaps the biggest of his administration. His action appeared genuinely popular with the public as people welcomed a dramatic effort to address corruption. But it had widespread, painful effects. He had ordered the removal of nearly 90 percent (by value) of banknotes from the Indian economy, equivalent to taking $227 billion out of circulation. The economy is hugely dependent on cash to function—98 percent of consumer transactions are done with it—in part because little infrastructure exists, at least in villages, to do anything else. The implementation was botched. New 2,000-rupee notes were issued, but far too few had been printed, and they proved too small to be dispensed from Automatic Teller Machines. For weeks on end Indians formed immense queues at banks, trying to deposit old banknotes or obtain new ones. Banks were ill-prepared to accept, without warning, 8.5 trillion rupees of deposits that flowed to them in the first three weeks after the announcement. The early signs were of a short-term shock to the economy, as small businesses and manufacturers, dependent on cash, suspended work, and as payments for casual labor (the form of employment for most Indians) dried up.

Modi’s action was dramatic and in some cases the corrupt were inconvenienced. One acquaintance told me in December 2016 of a relation, a wealthy businessman who dealt in “black money” and built hotels in Goa, who reportedly had been stuck with enormous quantities of cash, in bundles of rupees worth hundreds of thousands of dollars, at his large home south of Delhi. (My acquaintance urged his relation to burn the banknotes.) A month after Modi launched the initiative, the governor of India’s central bank, Urjit Patel, offered his first full defence of the measure by claiming, not entirely convincingly, that “detailed deliberations” had been made before the cash was withdrawn and suggesting benefits would, eventually, outweigh the costs of the action. But the bank had to admit, at least in the short term, the economy was suffering. Sadly, too, the central bank itself looked diminished as an institution. The dramatic withdrawal of most legal tender, done for political reasons, was widely understood as a decision taken by Modi and not the bank. That raised doubts about the institution’s independence as more than a rubber stamp for decisions of a powerful prime minister.

The cash withdrawal did show a strong desire by Modi to crack down on crime and surprise political rivals who, presumably, had stockpiled banknotes ahead of an important regional election. But the action was an example of the state happily inconveniencing huge numbers of ordinary people who were forced to waste millions of hours, collectively, standing in line at banks. In the weeks following Modi’s announcement, a baffling array of additional rules were introduced by bureaucrats, such as exemptions from limits on currency withdrawals from banks for those who stated they were organising a wedding. Where India needed liberalisation and a removal of the deadening hand of bureaucrats, to help unleash economic growth, Modi instead delivered the most dramatic economic intervention of a strongman in office. The great cash withdrawal was followed by suggestions that tax officials would begin to raid homes and look for families that had suspiciously large stocks of gold. That was further evidence of an increasingly intrusive state.

Kaushik Basu, a former chief economic adviser to the Indian government and chief economist at the World Bank, wrote in the New York Times that withdrawing the banknotes was a “major mistake” and warned that “one inept government intervention against shadow activities can do a lot of harm to the vast majority” of Indians. Far better, he suggested, if India tried to cut corruption by reforming how political parties were funded. Lawrence Summers, a former US Treasury Secretary who had long campaigned for bans on large denominated notes—the $100 bill in America and the 500 euro note in Europe—wrote in the Financial Times that the Indian move was “the most sweeping change in currency policy that has occurred anywhere in the world in decades.” But he also doubted India would see lasting benefits from the disruption, because the most wealthy and corrupt would have anyway stored most of their assets as property, jewelry, in foreign currency or in banks abroad. Amartya Sen, a Nobel laureate, called the demonetization scheme “despotic.”

Few experts spoke in favor of the move. Vivek Dehejia, a commentator on economics in Mint newspaper, did laud Modi’s boldness. He predicted there would be fundamental benefits in the long-term because withdrawing the notes could spur “digitization” and “modernization” of India’s economy. He foresaw a big increase in people using bank accounts, following disruption in the use of cash. In an echo of his earlier clashes with Sen, Jagdish Bhagwati defended Modi’s decision to demonetize, dismissing Sen’s suggestion that the move was despotic. Two months after the first announcement, he called critics of the action “cockeyed” and said they were “shooting from the hip”. He argued that economic hardships, though significant, were only “transitional”. A think tank, the Centre for Monitoring Indian Economy, had estimated that transitional costs over the first 50 days were some 1.28 trillion rupees. Others noted how investment by companies in India slumped in the months following demonetization. Nonetheless, in an article for the Times of India, written with two fellow academics, Pravin Krishna and Suresh Sundaresan, Bhagwati called the move a “courageous and substantive economic reform” that would bring big benefits. He said Indians would begin to conduct more transactions without cash, relying on online payments, bank transfers, credit and debit cards. This would help to reduce the size of the “black economy” and more people would pay tax. Bhagwati did complain that “frequent changes in rules” detailing how people could hand in old cash, or obtain new notes, caused needless confusion. Overall, his support for Modi’s radical change was in tune with the mood of the public. Despite the disruption, it appeared most ordinary Indians believed demonetization showed Modi was sincere in fighting corruption.

Other changes were modest in comparison. The old Planning Commission was abolished. But optimists who had predicted a rush of dramatic, pro-growth reforms, quickly tackling areas where Singh failed, were disappointed. Modi talked of being pro-business, when India really needed a leader who was pro-markets. Unlike Singh, he could communicate brilliantly and had political authority, but he was slow in delivering liberal reforms. He recited slogans, saying he wanted “less government and more governance” and “minimum government,” promising to “unobstacle” problems with government. He said “men, machines, and money must work together.” But he failed to explain such phrases.

When asked during a private conversation a few months into office if he would send a pro-market signal by selling part of Air India, the troubled national airline, Modi demurred, saying he would not battle unions early on because he planned to be in office for at least two terms. “Basically he doesn’t want to sell,” said a businessman friend in Ahmedabad. Even modest schemes prepared by Singh—for example, to sell more state-run airports to private buyers—were scrapped. The new finance minister promised to raise revenue by selling state-owned assets, but he did not deliver much.

Modi cast himself as a modernizer who wanted an economy that looked and felt more like one in East Asia: he seemed to believe in state-capitalism, not the more liberal Western sort. Two years after he came to office, he said nobody had explained to him what “big bang” reforms referred to, but argued that changes he brought about had already made India “the most open economy in the world” for foreign investors. That, sadly, was a fantasy. A ranking by the International Chamber of Commerce, in 2015, listed India as the sixty-third most open of seventy-five countries it measured—behind Russia, China, Vietnam, and Saudi Arabia, for example. But at least India was moving in the right direction, gradually becoming more open to investors and traders than before.

One broad question was how much any Indian government would trust markets, rather than bureaucrats, to bring improvements to the country. Consider those state-run firms. India was never totally dominated by them—they made up less than 10 percent of the economy by 2015. (In China the figure is 40 percent or higher.) But the wider impact of these firms could be large. Dodgy state-run banks, for example, existed beside better-run private ones; but as the state-run ones held the bulk of industry assets and high levels of questionable debt, they posed a threat to the whole banking system. Similarly, though private firms could get involved in energy distribution, India’s power sector relied heavily on production by state-controlled Coal India, which sent the fuel to power plants. Coal India was huge and disastrously run. The government, with enough political will and decent managers, hoped to knock such state-run firms into shape, as Modi had done on a small scale in Gujarat. But if Modi would not sell firms, freeing them from political meddling, doubts would remain regarding how professionally they would really be run. Hesitation on selling firms raised doubts for the long term. It was the same with the railways: the new government repeatedly bet on the state doing a better job than before, and declined to open up quickly to private actors stepping in. Pressed to explain what “minimum government” meant, Modi spoke of efficient administration and cutting red tape—a welcome but limited vision.

Few politicians in India really cheered liberal reforms, and the average voter certainly did not trust the idea of markets doing better than governments—for example, at putting capital to work. Voters didn’t choose Modi hoping for a Thatcherite privatizer but, instead, wanted a strongman to somehow deliver rapid growth and lots of jobs, and didn’t mind at all if that meant jobs in state-run companies. The new government wanted the economy growing, but also remembered how the BJP lost its “India Shining” election in 2004 despite rapid growth. Worried that Congress and others might accuse him of crony-capitalism, Modi also, at first, kept many of India’s richest business leaders at arm’s length. That was a smart calculation. India had perhaps one hundred billionaires by 2016, but only a few, such as Dilip Shanghvi of Sun Pharmaceuticals, could tell stories of creating wealth by building impressive firms from scratch (his began with a $1,000 loan in 1983 and was worth some $14 billion by 2016). Instead, too many billionaires had done well through political connections, had become rich passively from rent on land, or had inherited a lot of their wealth. Mukesh Ambani of Reliance Industries, for example, had a personal fortune worth some $21 billion but received a big leg-up by inheriting valuable assets from his well-connected father.

The new government understood that economic growth had to be seen as helping a broader swathe of people. But two years after Modi came into office, his arm’s-length treatment of billionaires appeared to be changing. For example, Modi’s office, in September 2016, allowed his image to appear in an advertisement for new cellphones being sold by Ambani’s Reliance Industries, and Modi himself granted a rare television interview to Ambani’s television channel (where the interviewer asked only soft questions). These incidents raised the suspicion that cozy old ties between politicians and tycoons might be restored.

Modi seemed to believe much would change in India if only perceptions of the country were different—missing the point that facts also had to change on the ground. He talked up the prospects for India’s economy, with him at the top, as an emerging engine of global growth. In one conversation with me, in 2015, he said that “at the beginning of the twenty-first century, there was great expectation from India. It was said that BRICS [Brazil, Russia, India, China, and South Africa] would change the world. Suddenly, in the past few years, it was felt that the ‘I’ in the BRICS had become a burden.” He said he had rushed around the world in his first year in office to “understand what the international expectations from India were. And I think we have reclaimed the position of ‘I’ in the BRICS, in terms of being an engine of economic growth.” He said there was a “big set of global expectations from India, and it is India’s responsibility to address those.”

The first years of his administration brought limited gains, despite its enormous political mandate. The government might have focused on fixing the frail banking system (in order to get investment flowing fast again) or tried to shake up old laws on labor or do much more to improve public education and health. It might have brought in outsiders to bolster a limited economic team (Congress, in office, had inducted Nandan Nilekani, of Infosys, to run some projects). Outsiders might have known how to sidestep babus who often stifled change. The new government might have used early budgets to send signals to encourage high domestic investment, invested more in schools and universities to improve skills, and cut some wasteful subsidies. Ministers might have made early, possibly unpopular, decisions knowing how rewards from reforms often lag. If wise, they would also have shown grace to the opposition, which still controlled parliament’s upper house, to agree on a core set of reforms—both parties said they favored many of these reforms, such as spreading the pitifully small tax net and trying to create a single market across India—and to share credit for getting difficult laws through.

Modi as a political outsider in Delhi, unused to parliament or to making any political compromise, was also deeply embittered against Congress after years of confrontation in Gujarat. He talked about entirely destroying the other party. And his style of governing was remarkably centralized. He stuffed much of his administration with political lightweights, running much from an unusually powerful prime minister’s office, as if he were still chief minister of a single state. He also got distracted by foreign trips and winning state elections. His finance minister, Arun Jaitley, in poor health, had little interest in economic matters, leaving it to the prime minister’s office to write large parts of the national budgets. The early result, demonetization aside, was mostly a continuation of the cautious policymaking of the prior decade. Two years after the new government took office—and despite grand headlines—many corporate leaders in India were downbeat, confidence remained low, and domestic investment did not flow (though the foreign sort did). For example, investment in industrial production, the bedrock of much expected growth, looked anemic. By May 2016, the value of exports from India had diminished for eighteen consecutive months. Yet despite all this, official statistics claimed the economy was thriving more than any other big one on the planet.

Some old plans were expanded. The new government extended Singh’s old efforts to scrap subsidies on diesel (those on petrol were already gone). It promised, eventually, to replace subsidies-in-kind on cooking gas and kerosene with cash welfare. It oversaw the opening of over 200 million new bank accounts, to allow cash welfare to replace rations eventually. (A great many of these, however, were hardly functional, as they contained only 1 rupee or less.) And it pushed on with a biometric identity scheme—Aadhaar—that was useful for cleaning up welfare, which the World Bank reckoned would save the government $1 billion a year. Parliament agreed to let foreigners invest more in some sorts of shops, the insurance and defense industries, and the railways, though there were sometimes complicated restrictions and foreigners were at times barred from outright control. Big blocks of coal and telecom spectrum were sold to private buyers, an open process that helped to fill government coffers and avoid corruption. A chunk of public spending was also devolved from central government to states. A welcome new bankruptcy law was planned to make it easier to do business. And though the government dared not tackle India’s difficult labor laws nationally, it told willing states to try. It also pushed states to compete to cut red tape and improve the business climate. A few capable ministers did work to improve railways, roads, and the power sector. Public spending was also cut, which helped to lower inflation.

Most of this was welcome, and suggested that the pace of economic change might gradually pick up. It would need to, if faster growth were to be sustained for a long time, in order to match the decades of high growth that China had achieved. Modi did eventually deliver on a particularly important promise to pass a big new tax law, called the Goods and Services Tax (GST), designed to create a single market for India. The GST at last became law in mid-2016, and it was to be implemented during the next year. Investors saw that as a test of his ability to reform, and if implemented well—without too many different tax bands—it could boost growth in India somewhat: the idea was to make it simpler for factories, and others, to sell to all of India as one market.

Talking sensibly about India’s economy was tricky, however, partly because of doubts about new official statistics, introduced in 2015, that appeared to be divorced from experiences of businesses and consumers in the real world. Official statistics showed India’s economy racing at well over 7 percent a year, a much giddier pace than a slowing China. (The same method suggested it had rattled on almost as fast in the final years of Singh’s government, which nobody believed.) On the ground, however, India felt more like an economy in the relative doldrums, growing at perhaps 4 or 5 percent. Construction sites were silent, many malls were quiet, armies of casual laborers remained out of work, perhaps because the flow of dodgy money had slowed. Higher foreign investment could not make up for the fact that domestic investors, especially companies that had become stuck in broken infrastructure deals, were cutting back on spending. Government spending also dragged, though it usually rose prior to national elections.

Modi, naturally, was upbeat. He chatted one evening at Race Course Road, the prime minister’s official bungalow in Delhi, as peacocks bawled like noisy teenagers on lawns outside. He ticked off the reasons for his confidence. “All rating agencies say India’s is the fastest-growing country in the world. I think 7.5 percent growth: this is the highest growth,” he said. “Look at any aspect of economic growth, we have taken so many steps, all vigorously implemented,” he claimed. Investment by foreigners was up by 35 percent in his first seventeen months, compared with Singh’s final seventeen months. More tourists were coming into the country, and manufacturers were thrilled that red tape was getting snipped. “We have focused enormously on bringing strength to our economic progress,” Modi said.

But wariness lingered. Businesses grumbled that India remained a painfully difficult place to work. Improvements came slowly and rewards were often limited. The head of a big German firm, Kion, which sold forklifts trucks—a handy indicator of how many warehouses were in use—dismissed India as still “an extremely small market.” China had 250,000 forklifts compared with India’s 12,000, Kion’s CEO said, in 2015. The boss of another foreign firm rolled his eyes in dejection when asked about investing, telling a grim story of corrupt local judges, apparently in the pay of local tycoons, who postponed a court case long enough to destroy a business opportunity. A boss within a huge American industrial company already investing in India said the country had interesting prospects but was nothing yet compared to China. The manager of one of the biggest investment bodies in the world, who oversaw some $800 billion of assets globally, said he wanted to invest more in India but could not find suitable, big, trustworthy, and attractive targets. Political risk in India remained too high.

But perceptions of India would improve. Assessed over decades, India had notched up real gains. The 1990s brought the first, big, liberal reforms and excitement that the economic restrictions of previous years would be lifted. By the 2000s, the BJP and then Congress were presiding over mixed progress, thanks to mostly benign global conditions. Amid rocketing expectations, as many anticipated that they would get rich quickly and that inequality would grow, India struggled to launch a second big round of reforms. Those years at least coincided with rapid growth, even if far too few formal jobs were created. The 2010s, however, would see even tougher economic challenges: global conditions are indeed difficult for a country hoping to generate lots of new exports, and India will have to move on to deeper economic reforms to take advantage of its great bulk. Those challenges risk dwarfing the achievements that came before.