PRIME Minister Narendra Modi has spoken of harsh decisions on the economic front to make up for the leeway left under the UPA government. In the next couple of years his main job will be to enforce financial discipline even if that is at the cost of populism. In the long run, he expects to secure rich dividends. The budget next month will be a challenging task. A forward looking economic agenda is on the anvil. Of course, the public will have to cooperate with the government. Inflation will have to be contained. Subsidies will be cut down. An investment friendly policy will be adopted. As the government commands a huge majority in the Lok Sabha, it would be in a position to implement its economic policy without facing hurdles from allies and the opposition. Modi will have to trap the power of markets and the buoyancy of the economy. The Congress has no alternative but to lean on the left which is a very small component. Modi will have no difficulty in carrying out his reformist agenda if he can buttress it with a strong rationale.
Previous governments failed in their economic mission because of political impediments. Modi not merely has a consensus backing him but also leads a political group which has faith in his ideas so that he can be prepared to face risks. Previously the Prime Minister took all the decisions. Modi can rely on collective support. But he will have to contend with allies like Chandrababu Naidu who has announced a tax waiver of Rs 54,000 crore which is the biggest ever in any state. The Centre will have to bear the burden or the money will have to be raised in bonds. It goes against Modi’s doctrine of fiscal responsibility. He has to create a new political structure to sustain economic sense.
