The return of the National Democratic Alliance (NDA)
government to power does indicate a couple of things. First, there will be
continuity in policy stance, which is good for the country. The second is that
some of the economic issues that had taken Centrestage like employment,
economic stagnation, falling consumption etc. did not matter in terms of
affecting the decision of the electorate. It is not surprising that the Bharatiya janata Party (BJP) campaign this time
was not talking about development or the Gujarat model, but other political
issues and economic issues focused on the lowest common denominator which
struck the right cord.
What does this mean for the economy going forward?
The government can take heart at the overwhelming verdict, as two
of the rather brave reforms, which include demonetisation and
implementation of the Goods and Services Tax (GST) that apparently had
not gone down well with the lower income groups, had not changed their voting
patterns. This is in a way a green signal to the government that it can go
ahead with strategic reforms in the areas of land and labour without any
significant fear of reprisal in terms of possible loss of votes. Ideally, such
action in the first two years makes imminent sense as human memory is always
short and the disruption caused here will be forgotten by 2024.
The Budget is
unlikely to have any serious changes as the government had quite astutely
highlighted the farmer scheme of Rs 75,000 crore without upsetting the
arithmetic and can hence manage the main budget with
minimum tweaking. The focus this time can be more on tax reforms where the
direct taxes can be revisited especially for the corporates where so far a
lower rate has been offered to smaller companies and not the rest.
The second term for the government will be useful for
introspection of policies that did not work as was envisaged earlier. Here, in
particular, power sector reforms need to be revisited as this was one area that
promised much, but did not deliver as it is always hard to get the states to
fall in line when it comes to cutting transmission and distribution (T &
D) losses and billing are concerned.
Second, the 'Make in India' campaign needs to be looked at closely
to find out where things did not go right. The fact that industrial production
(IIP) has stagnated in the last few years is compelling for some firm action.
The government should consider choosing specific sectors that can make this
theme work rather than focus on 25 odd sectors which makes it more of a text
book prescription.
Third, it needs to be accepted that there is a problem on the
employment front so that work can begin on creating more jobs. While it is true
that there have been low income jobs created in construction or slightly higher
level cosmopolitan jobs in e-commerce, the same has not happened in
manufacturing or services. This should be addressed carefully especially if
labour laws are going to be brought in as there is a major contradiction here.
Fourth, the financial sector has to be made robust and the fact
that the banking sector’s non-performing asset (NPA) woes seem to be
ending is a good starting point for the government in its second term.
Last, the farm policy approach needs to be made sharper. Here,
too, like the ‘Make in India’ campaign, it should be focused on crops or
regions sequentially so that it is manageable. This would make it feasible and
provide some modicum of stability.
While these ideas are known to the policy makers, having a drop
down of priorities for sequential implementation will make it more effective.
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