After 2 mega trade deals, reforms must be sold to the people by Modi. Reform by stealth is not an option

If 2026 is to go down as India’s next 1991, when the country reformed massively out of fear of external bankruptcy, the current set of reforms have to be sold to the people. They cannot any more be sneaked in by stealth. 

Several reasons why.

First, with two major trade agreements under the belt (there is still some time to go before they get formalised), one with the European Union and another with the US headed by a temperamental Donald Trump, the competitive scenario for our agriculture, business and services is going to change dramatically. Unlike smaller free trade deals signed earlier, these two mega-deals will have both winners and losers. There will be political costs to pay if the government is not proactive in addressing the concerns of those who think they will lose.

Second, our successful software services companies, till recently one of the best avenues for high-quality jobs, will face a crunch as artificial intelligence-based platforms (like Anthropic’s Claude Cowork, among others that may be in the making) are making labour-cost arbitrage-based services less important for global clients. Using engineers to do high-level coding is no longer going to be enough for coding itself is being commoditised. Our most successful businesses will thus face global headwinds even worse than the ones they faced earlier.

Third, with global supply chains being rejigged and countries deciding who they will partner with, India has to to ensure that its own requirements of scarce resources like rare-earth magnets or high technology are not constrained by geopolitics, not least because neither China nor the US can be trusted to play fair without forcing us to choose sides. We have to do most of the heavy lifting by ourselves, or with partners who are willing to do business with us. This means more internal reforms in many laws, including land and agriculture. Labour could also do with additional reforms, though four labour codes have been put in motion.

These disruptions will change the way we manage our economy, which means our people, and various interest groups, have to be aligned with national goals. Many businesses may succeed while others will fail. Small farms and firms may no longer be viable. This calls for effective and reassuring communications from the top political leadership, who now have to actively sell trade reforms and explain why they are critical for the country. There is no visible crisis at hand as in 1991 where reforms can just be sold as a temporary inconvenience. The next set of reforms have to go deeper and farther.

This effort cannot succeed without the Prime Minister himself setting off the national dialogue and explaining to the people why the trade and other reforms are vital, why there could be losers, and how they will be helped to cope. Already farmers are threatening a national strike, and more segments (apple and soyabean growers, for example) could be on the warpath. Uncompetitive firms in other sectors impacted by zero or low import tariffs will also be wailing for bailouts once the big trade deals kick in.

This challenge will have to be met by the political leadership on the front foot, and will need all players, political parties, state governments, farmers’ organisations, businesses, and households to align with the national priorities. They must know what sacrifices, if any, are necessary, and what will be the payoff, and by when, and how everyone must reorient expectations.

Narendra Modi could, ideally, begin with a national address on TV, and follow it up with meetings with other political parties, followed by meetings with state Chief Ministers, and other stakeholders, including farmers and industrial union and business leaders.

The points to make are the following.

One, we are entering a new era where the old ways of doing business will not be good enough, and everyone must be willing to change for the nation to benefit.

Two, the trade deals must be explained, both in terms of the benefits expected and possible negative consequences for some sectors, with the government outlining what it will do to mitigate the problems for sectors that are affected.

Three, a special reform fund ranging from Rs 20,000-50,000 crore must be created at the Central and state levels so that the affected sectors can be helped to transition to either other sectors or improve their own competitive edge.

Four, state-level politicians and governments must be encouraged to do the same, and cascade the message to a wider audience, and state-specific interest groups. Since states ruled by the opposition may feel they can gain politically by opposing the reforms, the centre could offer them additional fiscal powers and funds to get them to sign on.

Five, businesses must be included in the dialogue, for they now have to do the heavy lifting on R&D and investments to create new enterprises and India-owned IPR.

The bottom line is simple: the challenges to India’s growth and jobs cannot be tackled by one party or government. It has to be a national effort. The effort must be led by Modi himself, who has to be proactive and bat on the front foot.

The Prime Minister has talked about his commitment to the Reform Express; it is time he expressed himself forcefully on reforms.