The BJP’s poor show in Bihar election is expected to push the Narendra Modi government to pursue its development agenda more forcefully. But whether they will be allowed to pursue reforms in Parliament still remains a question. While the government is taking a lot of reformative steps to put India’s economy in high growth trajectory, but “the Bihar election results have created an environment of urgency for the government to communicate its economic agenda rather more forcefully,” says Raghvendra Nath, managing director, Ladderup Wealth Management Company. The speed with which the Finance Minister announced liberal rules for allowing more Foreign Direct Investment (FDI) in fifteen crucial sectors shows that the government is indeed following through its promised economic priorities.
While such executive actions would no doubt boost the prospects of the Indian economy but the fate of real reforms like the GST, which requires Parliament’s consent, looks doubtful to many. “That is where the government has to play tactfully,” says Nath. Such a crucial legislation requires smart maneuverability on the part of the Prime Minister. Many analysts feel that allying with the Congress-led opposition would not be a bad idea because the passage of the GST would have many positive outcomes. Not only will the economic growth improve but flow of goods across states would become seamless, thereby, addressing many issues associated with inflation. Moreover, the GST would not only facilitate setting up of businesses in India but also their smooth operations. This will create jobs — which is one of the BJP’s important electoral promise.
The government’s economic policy actions in the last year and a half have indeed helped India to improve its ranking as far as ease of doing business is concerned. FDI, this year, is already up by 40% as compared to last year and a further relaxation of FDI norms in 15 sectors is expected to attract more of it into the country. While economists agree that the impact of all the measures taken so far would be felt after some time, the desperation to perceive its results seems to be growing. “If there is growth then the lowest common denominator must feel it,” says Nath. While appreciating the government’s social initiatives like Jan Dhan Yojaya, opening up of millions of bank accounts, subsidised insurance policies for the poor and such likes, he adds, that “the recent incidence of inflation in dal and onion prices has created an impression that this government has done little to address the issue,” says Nath. Analysts say that the inflation tax pinches the most and that is where the government needs to be more pro-active.