By S. Sethuraman
Riding a breathtaking national wave, Mr Narendra Modi, rid of a controversial past, will lead a virtually BJP-dominated government of stability at the Centre to embark on his style of governance with a promise of “good days” ahead for a “Shining India” in the twenty-first century. With a total strength (336) closer to a two-thirds of the 16th Lok Sabha for NDA, and an absolute majority of its own at 282, BJP is in a position to make all critical decisions in reshaping economic, political, security and external policies over the next five years.
Soon after his taking over as Prime Minister this week, Mr Modi is expected to make a statement setting out the broad directions of his Government, in the midst of great expectations for strong growth revival, price stability and jobs, especially on the part of over 170 million people coming under his spell. He has promised effective governance and development.
A series of major decisions over the next four to six weeks are keenly awaited on quickening the processes of project approvals, clearing hurdles, institutional and otherwise, for investment revival and generally facilitating business starts without too much of hazards. Some structural issues are involved including land acquisition and Mr Modi has the will and overwhelming support for whatever steps are required in these areas.
An early opportunity would also be availed to explore avenues of bringing down consumer inflation – which is increasingly recognised the world over as the benchmark to guide monetary policy – and some early and tough decisions would be likely on the monetary and financial stability policies, with particular reference to distressed banking sector.
Tax and fiscal and other policy reforms may be adumbrated in greater detail in the revised Budget for 2014-15 that would be presented in July while a general outline of all policies, domestic and foreign, as well as legislative business plans of Modi Government would be unveiled in the President’s Address to new Parliament.
It remains to be seen what new look the Modi Government would give to GST and fiscal road map, the policy on administrative pricing in a way that fosters output but keeps down subsidy outgoes, also linked with scale of minimum support prices which cover not only foodgrains but a host of other agricultural commodities, all adding to burdens on the budget. Successive annual increases, some hefty, have contributed to the bulge in subsidy through procurement.
Although the economy, after two years of below 5 per cent growth, is on the mend with certain degree of success in controlling fiscal and current account deficits, domestic savings need to be given a boost, stability of the rupee within a limited band has to be ensured and export promotion should get a new thrust with the steady recovery in advanced economies.
So far, global institutions as well as RBI are confident that Indian economy would begin the recovery this year to record 5.5 per cent growth, even as CPI hovers around 8 per cent, and with approved projects coming on stream, growth could be tweaked to above 6 per cent in 2015-16. One uncertainty in the current year is monsoon which could add to inflationary pressures. But after a record crop estimated at 264 million tonnes in 2013-14 and a large stockpile of foodgrains with FCI, food prices could be held in check.
Mr Modi is also likely to give a new look to the inclusive development agenda as part of an agenda of institutional changes which would involve a reconstitution – not abrogation – of the Planning Commission with a relatively limited set of relevant objectives as well as the National Development and Inter-State Councils. Mr Modi has always argued for a larger role for States in decision-making even in national matters.
He has assured a triumphant Ms. Jayalalithaa, TN Chief Minister, who took 37 of the 39 Lok Sabha seats for the State in Lok Sabha, that he would extend all support to Tamil Nadu. Mr Modi may also count on the Chief Minister among others for support to the BJP minority in Rajya Sabha. That apart, some of the flagship programmes could be recast and there would also be a greater devolving upon states of centrally-sponsored social and welfare programmes.
This may also go concurrently with decisions on the 14th Finance Commission on the devolution of Central revenues to states for the next five years beginning April 1, 2015. The Commission’s report with recommendations will be received by October 31, 2014. Early decisions would be necessary as revised flows to states and net revenues to Centre would be incorporated into the new budgets, Central and State, for 2015-16 onwards.
The Commission would have gone into potential for additional resource mobilisation including via GST for next year. Meanwhile the Centre could finalise with the states on the compensation and other matters for the implementation of GST along with the pending direct tax code. Mr Modi is reportedly drawing a few experts from outside as advisers in specific fields and would name the next Chief Economic Adviser in the Finance Ministry, who could be one of the US-resident Indian economists lauding Gujarat model.
World leaders have warmly praised Mr Modi for his victory and extended cooperation in working together on global issues. President Obama has invited him to USA where there is both official and business optimism on a “re-set” in Indo-US relations. However, the new Lok Sabha will lack a strong opposition party, basic for a vibrant democracy, with the shattering defeat of the Congress which has forfeited for the present its national stature over a century.
The Congress has to take a re-birth from the ashes of the 2014 battle. While the party’s strength is reduced to 44 seats, other vocal players in Parliament from UP and Bihar have been cut to size or their parties drew blank. Ruling SP in UP has only 5 seats, JD(U) in Bihar, a former BJP ally, recorded two seats forcing the Chief Minister Mr Nitish Kumar to offer resignation. Wily Mr Karunanidhi’s DMK and Vociferous Ms. Mayawati’s BSP have no seats in the new House. (IPA Service)