BJP manifesto may bode well for business sentiment in India: UBS Securities

Implementing poll promises in the Congress manifesto would entail an additional fiscal cost of 2-3.3 per cent of the gross domestic product, it said in a note

The election manifesto released by the Bharatiya Janata Party (BJP) on Sunday focuses on policy continuity and it could bode well for the business sentiment in the country and may lead to the private corporate capex recovery, economists at UBS Securities India said in a note on Monday.

It said that, on the other hand, Congress' manifesto has a populist skew.

"The BJP election manifesto largely focused on policy continuity and highlighted the work done by their government over the past 10 years when in power," said UBS Chief India Economist Tanvee Gupta and associate economist Nihal Kumar in a note titled "Will Modi Win? Election Manifestos: Policy Continuity vs. Populism".

"We believe the focus on policy continuity could bode well for business sentiment and the much anticipated private corporate capex recovery," it added.

Watch: BJP Manifesto, key promises and initiatives

BJP's manifesto talked about expanding existing welfare programmes, including extending a free health insurance programme to senior citizens over the age of 70, piped cooking gas connections, free food rations for the next 5 years, and free electricity to poor households, among others. It also mentioned a broader government push towards supply-side reforms including higher infrastructure spending, a manufacturing push and creating employment opportunities.

Earlier in the say, Citi economists said that BJP's manifesto skipped any reference to "big-bang" structural economic reforms. They, however, added that reforms like privatisation, land reforms and opening of foreign investment may be announced at a later stage.

For Congress, UBS note said that the promises may lead to a higher fiscal deficit as compared to the 5.1 per cent projected by the BJP in their FY25 interim budget.

"Our analysis suggests that implementation of populist schemes announced by the Congress in the manifesto could entail taking the fiscal deficit higher to 7-8.5 per cent of GDP vs 5.1 per cent of GDP projected by the BJP government in their FY25 interim budget," it said.

The note also said that the implementing poll promises by Congress would entail an additional fiscal cost of 2-3.3 per cent of the GDP.

"In our view, the arithmetic does not add up unless there is a significant economic recovery or higher taxes. However, Congress talks about stable personal income tax rates throughout the term, limiting union cess and surcharges to 5 per cent of gross tax revenue," it said.

The 2024 Lok Sabha elections will begin on April 19 and will be held in seven stages until June 1. The results are expected on June 4.