SRIPERUMBUDUR, India — China’s economy is slowing. Brazil is struggling as commodity prices plunge. Russia, facing Western sanctions and weak oil revenue, is headed into a recession.
As other big developing markets stumble, India is emerging as one of the few hopes for global growth.
The stock market and rupee are surging. Multinational companies are looking to expand their Indian operations or start new ones. The growth in India’s economy, long a laggard, just matched China’s pace in recent months.
India is riding high on the early success of Prime Minister Narendra Modi and a raft of new business-friendly policies instituted in his first eight months.
Small factories no longer need to shut down every year for government inspectors to spend a day checking boilers. Foreign investment rules have been relaxed for insurers, military contractors and real estate companies. A broad tax overhaul is underway.
Renewed optimism from outside investors is spurring business expansion in cities around the country like Tiruppur, a hub of India’s yarn and textile industry. “Most of the factories in Tiruppur are doubling or tripling their capacity, and these are huge factories,” said Pritam Sanghai, the director of Arjay Apparel Industries.
As multinationals look to expand their Indian operations or start new ones, the country’s manufacturers are increasingly upbeat about new orders.
NEW ORDERS
Purchasing Manufacturers’ Index for new orders
65
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Foxconn faced hundreds of young workers who held a one-day hunger strike on Jan. 27. The company offered them 22 months’ severance. They wanted six years’ severance, and ended up settling last Thursday for roughly three years.
Rohini, a 25-year-old Foxconn worker who earned $220 a month at one of the factories in the complex, said she had been saving money from the job to create a dowry that would make her a better marriage prospect. So she was devastated when she heard from a co-worker that they would lose their jobs.
“I felt both anger and sadness. I cried a lot,” she said. “I know that according to the law, I must be given employment until age 58,” she added.
Those labor law protections are starting to erode. Many companies rely increasingly on contract workers, whom they require to leave after a single year, circumventing the employment guarantees.
For Mr. Modi, the most immediate challenge is on the political front.
While his party dominates the lower house of Parliament, the deeply divided upper house has delayed action on bills for his longer-term reforms. So Mr. Modi has relied on executive orders that automatically expire in late April. They can be renewed, though not indefinitely.
Needing support from minority parties in the upper house of Parliament, he sent Arun Jaitley, the finance minister, to the home of Jayalalitha Jayaram, the longtime leader of an influential regional party here in Tamil Nadu state, with flowers on Jan. 18. The trip was controversial since Jayalalitha, who is known by her first name, is out of prison on bail pending her appeal of a conviction last year in a corruption case.
The government has also been criticized for revising the way it calculates gross domestic product. The move on Jan. 30 brought India into line with the practices of most developed nations and produced a sharp increase in the country’s reported economic growth. But critics viewed the timing as a political move intended to give Mr. Modi more support.
Even some of Mr. Modi’s supporters are cautious about what he has accomplished so far. “Lots of people have been blindly jumping into India on euphoria and hype,” said Rajeev Chandrasekhar, a wealthy financier and a member of the upper house of Parliament who wants more extensive reforms when the prime minister sends the new budget to Parliament on Feb. 28. “He hasn’t introduced any new ideas, and that is what he needs to do in February.”
Mr. Modi’s senior advisers say that they have begun making significant changes and that critics are too impatient. “There are a lot of inherited, legacy issues we had to work through,” like budget deficits and persistent inflation, said Jayant Sinha, the minister of state for finance. “You have to give us a little bit of time for every business to feel the difference.”
