For economic reforms, BJP needs to keep allies in loop
Following the general election results, the stock markets were volatile, but they have since turned positive (and bullish) as it became evident that the Bharatiya Janata Party (BJP) is not only heading the National Democratic Alliance (NDA) government but also controlling important economic portfolios. Some of the ministers who have retained their portfolios include Nirmala Sitharaman (finance), Ashwini Vaishnaw (electronics and IT), Piyush Goyal (commerce and industry), and Hardeep Puri (petroleum and natural gas).
Despite the presence of familiar faces, the new government will inevitably now be subject to the pulls and pressures of coalition regimes. Competing demands will be made to support regional aspirations as even the smaller alliance partners seek gains for their states as a consequence of supporting the coalition. The big question is whether broader economic reforms can still be carried out with this milli-julli sarkar. It cannot be denied that previous coalitions or minority governments have managed to carry out such measures. The most striking instance is that of the minority Narasimha Rao-led Congress government which was able to push through the initial pathbreaking reforms that opened the economy in 1991.
Since then, there have been a series of coalition governments including the A B Vajpayee-led NDA and two terms of the Manmohan Singh-led United Progressive Alliance. In several of these tenures, there was a deepening and strengthening of the 1991 liberalisation and reforms. So, it would be unfair to say only single-party governments have the confidence to push through bold economic measures.
This time around, however, there are significant differences in the coalition scenario compared to the past. The biggest is that Prime Minister Narendra Modi has had the comfort of leading a party with a majority in Parliament for the past two terms. The NDA may have nominally been a coalition with long-term allies like the Shiromani Akali Dal (SAD) and the Shiv Sena as part of the government, but effectively the BJP played the dominant role. This went to the extent of ultimately alienating these parties which then left the NDA.
The turning point for the SAD was the failure to hold consultations on the farm laws, while the Shiv Sena had similar complaints of poor communications, though it exited due to differences over who should become Maharashtra chief minister.
This brings one to the second difference in the new coalition. This is the fact that allies are now probably more wary of the BJP owing to past experiences of being within the NDA. The two biggest partners, the Telugu Desam Party (TDP) and the Janata Dal (United) were coalition partners in previous terms of the Modi government, but parted ways on bitter notes.
All may seem to be well right now, but the fact is that both the party leaders, N Chandrababu Naidu and Nitish Kumar are not only seasoned politicians, they are likely to be more canny in seeking special assistance for their states than in the past. Any differences on this are not likely to emerge immediately as these parties will be waiting and watching to gauge the situation. The success of the coalition will thus depend on the BJP’s tact and diplomacy in handling not just these two larger parties, but the numerous other smaller partners.
Having said that, the current NDA government could gain further steam on economic reforms as support is likely to be forthcoming from both Naidu and Kumar given their performance in governing their respective states. The former is acknowledged as the architect of Andhra Pradesh’s rise to become a centre of the knowledge economy. Tech giants like Microsoft and Google set up giant campuses in Hyderabad during his tenure while roads and infrastructure expanded rapidly in the state. Kumar is renowned for progressive welfare measures to promote girls’ education while bringing Bihar back on the track of development and largely eliminating the Naxalite menace.
In fact, it would be a wise move to have deeper consultations with Naidu on proposals for improving the ease of doing business. Media reports indicate that this is an area that the finance ministry wants to focus on immediately to promote investment growth. It would also be productive to study the systems adopted in Andhra Pradesh that made it so attractive to foreign investors.
The major allies are not averse to economic reforms and would probably embrace change with enthusiasm. At the same time, this presupposes that there will be prior consultations with them. The farm laws, which ultimately had to be withdrawn, are an object lesson in the fate of reforms taken without sufficient debate and discussion with stakeholders. The BJP must learn from past experiences and adopt a new strategy of keeping its allies close through better communications. Only if it does so will it be possible to go ahead with much-needed economic reforms in the historic third term for the Modi-led NDA.
(Sushma Ramachandran is a senior journalist.)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.
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