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New hope for Modi govt’s economic reforms agenda after big win in assembly elections

BJP leaders feel pro-welfare schemes like free food grains and DBT transfers during pandemic have worked electorally. This will embolden govt to undertake pending reforms.

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New Delhi: An emphatic victory in four out of five assembly elections for the ruling Bharatiya Janata Party (BJP) is likely to give the Narendra Modi government a much-needed boost to push for big-ticket reforms — like privatisation of two state-owned banks and implementation of labour codes — that it has resisted so far, fearing an adverse impact on the poll outcome.

According to the final results shared by the Election Commission of India, the BJP and its allies are coming to power for a second consecutive term in Uttar Pradesh, Uttarakhand, Manipur and Goa. The only state where it failed to make an impact — and where the Aam Aadmi Party witnessed a landslide victory — is Punjab.

While in UP the BJP won 255 of 403 assembly seats, in Uttrakhand the party won 47 of 70 seats. In Manipur, the BJP won 32 of 60 seats, while in Goa, the party won 20 of 40 assembly seats.

BJP leaders feel that a plethora of pro-welfare schemes, like giving free food grains under the Pradhan Mantri Garib Kalyan Yojana and cash transfers to the poor through the Direct Benefit Transfer (DBT) scheme to mitigate the migrants’ crisis during the early part of the Covid pandemic, have worked electorally, and the results will further embolden the government to undertake pending reforms.

With assembly elections due in two BJP-ruled states of Gujarat and Himachal Pradesh later this year, nine states next year and the Lok Sabha elections in 2024, government officials, political analysts and economists ThePrint spoke to said the Centre would want to move ahead with economic reforms, but with caution.

Some of the pending decisions include privatisation of two state-owned banks and one general insurance company announced in Union Budget 2021-22, implementation of the four labour codes that has been pending since 2019, rationalisation of Goods and Services Tax (GST) slabs, and correcting the inverted duty structure under GST.

Replying to a question in Parliament in December, Finance Minister Nirmala Sitharaman had said the Union Cabinet is yet to take a decision on bank privatisation. While on the GST slab rationalisation, the revenue secretary had earlier told ThePrint that it would be taken up in the next GST Council meeting, likely to be held towards the end of March.

Dr NR Bhanumurthy, vice chancellor, Dr BR Ambedkar School of Economics University, Bengaluru is of the view that reforms to some extent will be de-linked from state elections. “The BJP will not only go ahead with its reform agenda but may also start a rethink on some of its agricultural reforms related to dismantling the markets.”

According to Prof Bhanumurthy, BJP’s response to push through its policies will also depend on the states going to election.

“For instance, states like Gujarat and Rajasthan are very pro-reforms. They are the states that have pushed through labour reforms. So I don’t think the assembly elections in Gujarat later this year and nine states including Rajasthan, Madhya Pradesh will deter the party from pushing through its reform initiatives.”

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Govt’s reforms so far

Political analysts say that in its seven years, the Modi government has initiated a few major reform measures, be it GST, Insolvency and Bankruptcy Code, labour codes, etc.

“Some good efforts have been made by the Centre regarding financial market reforms to enable inflow of investment by increasing the ceiling for FDI limits. But results are not enough,” a government functionary told ThePrint on condition of anonymity.

A major criticism of the government has been that despite initiating reforms, it didn’t take many of them to their logical conclusion.

Take the four labour codes for instance. Despite the Parliament passing the wage code in 2019 and three others (Industrial Relations Code, Occupational Safety, Health and Working Conditions Code and Social Security Code) in September 2020, the Centre is yet to notify the rules on the ground that many states are yet to notify the rules under their jurisdiction.

“Labour market is one that is crying for reforms. The NDA government enacted the labour codes but this is yet to be operationalised,” said a senior government who didn’t wish to be named.

Another example is the three farm laws that the Modi government enacted in 2020. Wary of being seen as “anti-farmers” ahead of elections to five states, the Centre repealed them in December 2021 despite being firm on its stand earlier that it won’t withdraw the legislations.

The government’s rethink, analysts say, was necessitated by the year-long farmer agitation.

Very early in its first term as well, the Modi government put on hold the land acquisition law after a hue and cry by various stakeholders.

The government functionary quoted earlier said that land reform was much-needed to give a fillip to economic activity after the previous UPA government made land acquisition exorbitantly prohibitive.

“PM Modi knows the virtues of winning every electoral battle and takes steps in that direction only. Some initiatives like building toilets, Housing for All, Saubhagya scheme, tapped water supply were all welfare oriented, which continue to constitute a major political investment,” the government functionary said.

These initiatives are more pro-welfare than populist and the BJP and PM Modi have been reaping rich dividends both in terms of popularity and electorally, the government functionary added.

According to political analyst Suhas Palshikar, the Modi government has been successful in decoupling election outcomes from reforms. “The victory in the four states is bound to give BJP a boost, so far as pushing its reform agenda is concerned. But I think more than economics, the impact of the election results will be on culture. It will give a boost to BJP’s Hindutva agenda,” he said.

Palshikar added that the second term of the Modi government has been characterised by its thrust on the Hindutva front. “It’s an insurance against the government’s less-than-impressive performance on the economic front,” he added.

(Edited by Amit Upadhyaya)

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