Signalling continuity

BJP to build on its govt's work over the last decade

The Bharatiya Janata Party (BJP) on Sunday released its manifesto, or Sankalp Patra, for the 2024 Lok Sabha elections, highlighting what its government has achieved over the past 10 years and how it intends to take the country forward if voted back to power for the third consecutive term. From the economic standpoint, the manifesto signals continuity, or building on the achievements, with some significant reforms. One of the noticeable achievements of the Narendra Modi government over the past 10 years — one that is perhaps not adequately appreciated — is bolstering macroeconomic stability. The macroeconomic outlook in 2014 — with a near-currency crisis in 2013 — was very different from today. India now has large foreign exchange reserves and the banking system is in its best position over the past decade. India’s restrained fiscal-policy response to the pandemic and the central bank’s commitment to a legally mandated inflation target have helped boost investor confidence. Thus, the BJP has done well to reiterate its commitment to sustaining macro-financial stability, which is necessary for growth and development.
 

The two other important promises that stand out are strengthening statistical institutions and facilitating fiscal autonomy for panchayati raj institutions. Both these commitments should help improve governance. Making policy decisions in a rapidly developing country like India requires timely availability of data. Although India has a robust statistical system, it requires an overhaul to align with the evolving nature of the economy’s demands. The national accounts data, for instance, comes with a significant lag and is subject to multiple large revisions, affecting policymaking and making decision-making for business more difficult. One important aspect of reforming the statistical system will be to ensure that institutions engaged in this area are made independent and credible. Timely availability of data will improve decision-making and help boost investor confidence.
 

Further, one of the valid criticisms of the Indian governance structure is that power is not adequately decentralised. As a result, the third tier of the government, or local bodies, which are best-placed to deliver a variety of services to citizens, are not adequately empowered. In this regard, the BJP’s promise to facilitate fiscal autonomy for panchayati raj institutions must be welcomed, though how it will be done remains critical. Despite enabling constitutional provisions, not much has happened over the years. As highlighted in this space earlier, the average revenue per panchayat, including grants, was only Rs 21.23 lakh in 2022-23. The fiscal autonomy of local bodies can be improved by both empowering them to raise resources and through a predictable devolution of funds. One of the possible ways out, subject to legal changes, could be to allocate resources directly through the Finance Commission. Granting a share in revenue from goods and services tax collection could also be an option.
 

Among other commitments, if voted back to power, the BJP will continue to focus on investment and building infrastructure, which should help boost economic activities and create employment. It also intends to build on initiatives in the manufacturing sector to enable job creation. In this context, it would be useful to review the trade policy. A sustained increase in exports can be a big driver of both economic growth and job creation. One big political promise with economic reasoning is “One Nation One Election”. While the idea promises to reduce policy uncertainty, the way forward suggested by the high-powered committee must be extensively debated.