Election loss could bring focus back to reforms

Economists and analysts say the govt will need to work with Opposition and Modi should rein in 'hotheads' and shift narrative back to jobs & growth

The Bharatiya Janata Party (BJP)-led alliance’s loss in the Bihar elections might not lead to a drastic change in the Narendra Modi’s government’s reform roadmap in favour of populist social welfare schemes, according to economists and analysts.

According to them, the mandate is an opportunity for Prime Minister Modi to get his government’s and party’s focus back to the path of reform, a refrain echoed by India Inc. They add the government would now need to work more closely with the opposition to ensure passage of reform initiatives.

The alliance with Nitish Kumar as its administrative face, romped home to a comfortable majority in the 243-seat Bihar Legislative Assembly. The National Democratic Alliance won 64 seats, much lower than what most exit polls said, with many suggesting the results to be a referendum on the performance of the Modi government.

“The time has come now for Prime Minister Modi to be a statesman and not just the leader of the people who got him elected. He has to change the discourse and perhaps elbow out the people who perhaps form his party’s core ideological constituency,” said former Planning Commission member Arun Maira.

“This is a good opportunity for the Prime Minister to shift the government and party’s focus and discourse back on the development agenda and to rein in the extreme elements within the BJP,” said N R Bhanumurthy of the National Institute of Public Finance and Policy.

“The verdict in Bihar is not good news for the development agenda of India but the fringe and intolerant elements hope-fully will be reined in,” tweeted RPG Enterprises Chairman Harsh Goenka.

Biocon’s Kiran Mazumdar-Shaw said on Twitter that the government could now give undivided attention to the economic agenda; she hoped the opposition parties would work with the government on key reforms.

Business chambers Assocham said India Inc expects the Centre and states to work together for reform. “We hope political parties with different hues will rise to the call of the national interest,” said Assocham Secretary-General D S Rawat.

The Centre has a legislative agenda-heavy Parliament session two or three weeks away, even as it is said to be preparing a number of policy reform initiatives in labour, infrastructure and ease-of-doing business.

It is understood the government will not wait to announce all the measures in the upcoming 2016-17 Budget and will implement measures over the coming months. These include freeing up labour laws, setting up a National Investment and Infrastructure Fund, eliminating corporate tax exemptions, easing foreign direct investment limits, the proposed monetary policy committee, public debt management agency, and bringing in effective bankruptcy laws.

A number of other legislative matters, including the long-delayed Constitution amendments for the goods and services tax Bill, will likely come up in the winter session of Parliament. “This is a chance for the government to have a broad-based dialogue with opposition parties, industry and other stakeholders regarding the economic reforms it plans to push through Parliament or otherwise,” said Ravi Srivastava of Jawaharlal Nehru University.

Official estimates peg the gross domestic product growth in 2015-16 at 8.1-8.5 per cent. However, the Reserve Bank of India now estimates  7.4 per cent and most multilateral organisations and ratings agencies see India’s economy growing between 7.2 and 7.6 per cent.