By the time this editorial is read, initial trends will be coming in of the Assembly elections in Bihar, which, by all accounts, seems a cliffhanger. For the first time since 1990, the contest is essentially between two fronts, one led by the BJP and the other by the JD(U) in the person of Bihar Chief Minister Nitish Kumar. Although the contest has been presented as a “make or break” struggle for both sides, the reality is that the loser may be down, but will certainly not be out. The BJP in particular has been elected to run the country till May 2019, and the results in Bihar will not affect this timetable in the least. Unfortunately for both the party as well as the rest of us, Prime Minister Narendra Modi has been made to campaign in state after state, thereby cutting away at the already limited time available to the Prime Minister to devote full attention to the task of ensuring that the promises made by him and his party in the 2014 campaign get fulfilled. Even should the BJP lose every state election that takes place till 2019, it is on course to win that contest provided the economy moves into the double digit growth league, thereby bringing inflation under control and ensuring that the young get jobs. There is much talk of a “demographic dividend”, but the bulge in births causing such a phenomenon may become a disaster in the absence of growth sufficient to absorb them in lawful and socially productive occupations. This will need significant reforms in economic policy, including the creation of a tax structure which places emphasis on long-term growth rather than on the immediate mopping up of as much money as can be squeezed from corporates and individuals. Relative to the benefits available, taxation is very high in India, and this is an important reason why so many hundreds of millions avoid getting into the list of those paying direct taxes. A system of lower rates would increase compliance as well as revenue, not simply because of the added numbers, but because of the bounce in growth that lower taxes would result in.
Initiatives such as Swachh Bharat, Digital India and Make in India need to be implemented in a manner designed to meet the ambitious goals set by Prime Minister Modi for both his team as well as the nation. This will require concentrated and undiluted attention, most crucially from the Prime Minister’s Office, which has once again become the core of the policy process after a decade during which the PMO functioned in a subsidiary role to Congress headquarters. Rather than exchange barbs, often in language less than acceptable in polite company, what is needed is for the government to ensure that adequate support develops for it to ensure the passage into law of major initiatives, such as the GST Bill. Caps on foreign investment are of diminishing relevance in a world where it is child’s play to camouflage the origins of any investment made. Also, a country as big and stable as India has the means to ensure that any investor complies with the laws of the land, hence to keep caps even on matters such as defence production make no sense in a context where several international groups look upon India as an alternative to China in the location of large-scale manufacturing plants. Now that the Bihar elections are over, it is time for Team Modi to resume playing full attention to getting the economy moving again.
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