With public mandate in Haryana and Maharashtra boosting the morale of the NDA government at the centre, what with the BJP getting a simple majority in the northern state of Haryana, and sitting pretty in Maharashtra as the single largest party with the NCP offering unconditional support from outside and the Sena mellowing down to accept realities, the Narendra Modi government today has ample elbow and head room to push forward its reformist agendas, starting with the winter session of Parliament due to begin soon, and thence express itself through the upcoming 2015 budget thereafter, to set the stage for delivering the promise of “achhe din” .

During the runup to the crucial assembly elections in both the states, the NDA adminis tration had ostensibly put on the backburner several key decisions that it had wanted to take. Now, having fared well in these assembly polls, with the new Haryana CM already sworn in and BJP looking forward to form the government in Maharashtra as well, the government now has the luxury of a clear “one year window” to push forth some tough policy measures. With just the J&K and Jharkhand assembly elections due in early 2015, the government now has the room to take tough policy measures. The next crucial state election will be towards the end of next year, in Bihar, where BJP will make a bid to wrest power from JD(U). We saw a beginning being made on the eve of the announcement of results itself, as the government pushed through fuel pricing reforms – diesel decontrol and the announcement of higher price for natural gas to provide a fillip to oil & gas exploration/production. This was quickly followed up by a strong step toward coal sector reforms through an ordinance, which sent all the right signals to a market already positive about government intentions. “It is a clear signal by government that it will press ahead with all long-pending reforms,” averred a top official involved in policy making who did not wish to be identified. “Whatever reforms are needed will now be carried out and the government is well prepared for it.” Markets apropos, have given a resounding thumbs-up, noting that the BJP wins would result in adding considerable heft to the already formidable political weight of the NDA Prime Minister. Moreover, it is also noteworthy that the BJP previously did not have any extensive presence in these States, and the Modi stratagem of synchronising the development plank with his government at the Centre and the prospective majority State Governments of the BJP seems to have paid rich dividends. This strengthening of his hands has enthused markets further, which now hope that this development would embolden government to aggressively roll-out reforms, the anticipation of which had enthused global & domestic investors into driving up the Indian equity market to touch unprecedented highs this year. Investors hope that the window between now and the Budget in February 2015 would see some long-pending decisions, like steps to reduce other subsidies progressively in items like domestic LPG, kerosene and nitrogenous fertilizers, albeit at moderate pace. More aggressive follow-up on the rolling out of an inclusive GST, including land and liquor, which has been sought to be kept out by vested interests thus negating the impact of a comprehensive GST to a certain extent; the pushing through of crucial legislative agendas during the Winter Session of Parliament like the de-nationalization of coal, increasing FDI caps in Insurance, the redrafting of the draconian Land Acquisition Bill, and the recasting of now-stifling labour laws etal., are all on their wish-list. Government too, seems to be in synch with this sentiment, which was reflected in the major bureaucratic reshuffle that was effected immediately after the state elections were held, signaling that a new a-team was being put in place, for a blitzkrieg action-plan aimed at reviving growth that has all the signs of losing momentum after a strong start, amid an adverse global economic climate. And the next move could turn out to be one of a political nature, starting with an expansion of the union cabinet, and the reshuffle of some ministerial head-honchos. The government has also gone ahead and found a new Chief Economic Ad viser in Arvind Subramanian, apart from bringing in Rajiv Mehrishi to handle the key Department of Economic Affairs. In a nutshell, this new a-team of economic gurus will perforce be tasked with what is on Modi’s immediate agenda – a revival in the investment climate, the speedly auction of coal blocks cancelled by the Supreme Court, ushering in of financial sector reforms as recommended by the Financial Sector Legislative Reforms Commission (FSLRC), some more insurance legislation, the implementation of the goods and services tax (GST), a more coherent strategy on inflation, positive labour reforms and admin measures to make doing business in India much easier.

Economist Rajiv Kumar is of the opinion that the government will have its plate more than full. “They will need to do a lot between now and the next budget just to retain their credibility. If they do not, investors will lose hope and it doesn’t take much time for sentiment to turn negative. Top of the list of reforms is GST and come what may, they should get going with it. Second is following up on the business environment — the whole focus should be on kick starting investment. They also need to come out clean on the banking sector, as there are a lot of misconceptions floating on NPAs so that lending and borrowing can start. The coal sector needs a thorough examination, not just a knee-jerk reaction. The government needs to roll back nationalisation and put in place a robust regulation.” Recent poll results and resulting realignments would certainly be of help in the sense that this essentially means that the NDA can count upon as many as an extra seven favourable seats in the Rajya Sabha, where they currently lack a majority. Though Rajya Sabha elections are due next only in 2016, NDA numbers could get a quick boost if parties once inimical to it lend their support. One such is the NCP which has six seats in the house. This government’s style during the past 150 days or so has been to focus sharply on fixing the nuts and bolts of the economy and executing developmental activities rather than making big-bang announcements. For instance, they remain focused on ensuring that interministerial conflicts do not hold up development. While this approach has oft invited the criticism of some analysts who point to the absence of the so-called big-ticket reforms, it has found good support with India Inc. “Given that the lack of a well-functioning executive under the previous administration was a key driver of the slowdown in investment, this focus is critical for a revival of the ‘right’ kind of growth in India, in our view,” avers Morgan Stanley, in a recent report listing it as three things the government needs to fix urgently. The other two are capitalisation of state-run banks and the need to curb inflation. On these counts, the government is already engaged with the RBI on financial sector reforms and a new monetary policy framework. Auction of the coal blocks cancelled by the Supreme Court is also expected to happen sooner than later, ensuring that the power scenario is not aggravated any further. Legislation to facilitate GST is likely to hit the floor of the house during the upcoming winter session of parliament, and the govt’s disinvestment programme is likely to follow suit soon after. Influential circles within government also suggest that there could be omething more than what meets the eye in the appointment of Arvind Subramanian as the CEA. The co-opting of more such proverbial tinkers, tailors, soldiers and spies could follow, including those to the new ‘think tank’ that is likely to supplant the Planning Commission of yore. Raman Swamy, in his article that follows this one, has more to offer on this aspect, as he seeks to delve more deeply into the possible machinations that may be in the pipeline to set the elephantine Indian economy back on it’s tracks…

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