How Modi can fix India’s troubled economy by Curtis S. Chin @FortuneMagazine September 19, 2014, 11:25 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons In India there is a new mood of optimism, but it remains to be seen if recently elected Prime Minister Narendra Modi can leverage his popularity and political skills to translate hope into concrete actions. The United States will get a firsthand sense of the new leader when he travels soon to Washington to meet with U.S. President Barack Obama. This follows Chinese President Xi Jinping’s visit to India, where China agreed to invest $20 billion in India’s infrastructure over the five years. When Modi visits New York later this month, his “common touch” will be on full display when he speaks in Hindi – the language of India’s common man – at the United Nation General Assembly. The prime minister’s supporters think he is a hard driving, disciplined leader who will not easily brook the slovenliness and corruption that critics contend has plagued previous governments. He is for many a savvy politician with an intellect and common sense that will allow him to prove that the disadvantages of not having a formal education can be overcome. To his detractors, however, he is “all talk” with serious dictatorial tendencies. Modi and his government must now move forward to meet the incredible expectations that India’s elections has engendered among not just foreign investors and business people but also India’s own citizens. For India’s citizens, companies and investors, the critical next step is for Modi to win sustained support for the difficult decisions that will be necessary to push progress in three areas where India has fallen short: Job creation: With some 50% of India’s population under the age of 30 and an estimated 1 million new job seekers entering the labor market every month, Modi must rely less on populist welfare programs and subsidies and begin to lay the groundwork for the more sustainable, private-sector led job creation that is essential to employ growing numbers of young people. Doing so will require him to move beyond long-held stereotypes, often negative, of the role of business including foreign companies in Indian society and India’s economy. It will also be necessary to revamp India’s bureaucratic and underfunded education system, and make changes to ensure India’s young people – including in rural and agricultural areas – are better able to compete. Anti-corruption: India ranks only 94th out of 177 nations and territories covered in Transparency International’s global corruption perceptions index, indicating significant challenges. According to TI’s Global Corruption Barometer, a public opinion survey designed to measure the everyday experiences of people, 71% of respondents felt that over the past two years corruption had increased in India. Modi must bring greater transparency and accountability to the vast Indian bureaucracy that has too often – along with private sector complicity – been part of the nation’s enduring corruption challenge. As in an ongoing anti-corruption campaign in China, where President Xi Jinping has targeted both high officials as well as lowly bureaucrats, Modi’s efforts to deliver clean government must reach all levels. Infrastructure: From our perspectives based on our time at the Asian Development Bank, insufficient change has come to India’s core infrastructure – water, power and roads – despite hundreds of millions of dollars from numerous bilateral aid agencies and development banks. Modi spoke during his campaign of the need for “more toilets” and “less temples,” but he must focus not just on improved sanitation and water supply, but also on bringing reliable electricity to cities and villages. Such infrastructure investments will also improve health in a country plagued by both infectious and “lifestyle” diseases, such as diabetes and heart disease. Another urgent task awaiting Modi is the need to build cohesion out of the nation’s diversity. The Muslim population of India is close to 15%, and this community is a vibrant part of India. Yet, on numerous economic and social measures, this segment of the population ranks low. Modi must focus on this community’s grievances and demonstrate an approach that is inclusive and credible to the Muslim population. Real progress in addressing this community’s specific needs, as part of an “all India” economic drive can help prove naysayers wrong. Curtis S. Chin, a former U.S. ambassador to the Asian Development Bank, is senior fellow, Asia, at the Milken Institute and a managing director of advisory firm RiverPeak Group, LLC. Meera Kumar, a former staff member of the ADB, is a New York-based freelance writer and communications consultant. Follow Curtis on Twitter at @CurtisSChin and Meera at @MeeraKumar212.