Bengaluru: Even as Prime Minister Narendra Modi prepares for a historic third term, the mandate of the voters means he will have to recalibrate his economic agenda.
In his second term, Modi could afford to push bills and amendments through Parliament. The brute majority of 330 to the National Democratic Alliance had ensured that any economic bills or even bills like the farm laws, would not spend much time languishing in committee.
However, now that the NDA is below 300 seats, the Bharatiya Janata Party itself below the halfway mark and coming in at 240 seats, and the INDI alliance at 234 seats, the Prime Minister and his cabinet will find that implementing promised economic reforms and business-friendly measures will become that much more complicated.
This is because of two simple reasons: A coalition without which he loses power, and a much stronger opposition.
A direct consequence of the election results is that every policy proposal will have to be deliberated and debated more carefully, in Parliament and in the ‘court of public opinion’. In that context, what are known as factor reforms - land, labour, capital - and will largely require Parliamentary nod, may not be as easy to implement.
There is already talk of the government wanting to bring in a revamped labour code, which will guarantee better pay and work conditions, including for gig economy workers. The buzz is also about laws affecting deep tech.
In her interim budget speech in February, incumbent Finance Minister Nirmala Sitharaman had said that the government is working on a scheme to help deserving sections of the middle class to buy or build their own houses. She had said that all small outstanding direct tax demands or disputes will be withdrawn.
She had also said that the Centre will promote private and public investment in post-harvest and food processing activities and bring in a comprehensive programme to support dairy farmers, and promised a government-driven push for the electric vehicle sector.
Meanwhile, the BJP’s manifesto had hit the right notes for businesses, saying that it will work to make India a global manufacturing hub for electric vehicles, semiconductors, smart phones, toy exports, and equipment for railways, aviation and shipbuilding.
The manifesto stated that the government will expand the existing Startup India Seed Fund and the Startup Credit Guarantee Scheme, help in incubating more startups and include more of them in government procurement, across sectors.
It held the view that its effort to create jobs through production-linked incentive scheme (PLI), infrastructure investment and focus on services like tech and tourism has generated employment, and will continue to do so.
“We will reduce compliances for small traders and MSMEs to enhance their ease of living and ease of doing business. We will work with state governments and encourage them to simplify State legislations,” it said, on providing ease of doing business for micro, small and medium enterprises. It also said that Goods and Service Tax will be simplified further.
The manifesto also promised to make India a ‘trusted Global Manufacturing Hub’ through a series of schemes including simplification of regulatory processes and laws, infrastructure investment and availability of capital.
A number of these reforms are executive decisions. But many will have to be passed in both Lok Sabha and Rajya Sabha. Simplification of regulatory processes, laws, amendments to GST Act or the Insolvency and Bankruptcy Code, or Companies Act, all of these could take multiple sessions in Parliament, and the government will have to reach out across the aisle more often.
The prospects of policy uncertainty is why the markets reacted the way they did on Tuesday. However, the inherent strengths of the Indian economy and markets, the healthy domestic demand, and the democratic make-up of Indian society, means that it may not be a bad thing that reforms go through more debate, and not less.