The prudence in the Bharatiya Janata Party’s 2024 election manifesto is striking as it shows the evolving maturity of the party after being in power for a decade. In the run-up to the 2014 elections, the party had not only promised substantive shifts in the country’s policy paradigm, internal political dynamics and the worldview, but was also specific about the targets: A “strong” rupee, reducing import dependence on oil to 65%, bringing back “every penny” of black money stashed abroad, 20 million jobs every year, doubling of farmers’ income, and so forth. A decade later, these have proven to be difficult, being in many ways driven by externalities. The rupee’s relative value against the US dollar, or its real effective exchange rate, for example, is significantly a function of variables like (global) inflation and interest rates.
The realisation of this may have led to the current restraint, as much as the rich experience gathered in administration. To be fair, notwithstanding the rhetoric at the hustings, the Modi government has never been fiscally extravagant. It managed to limit the consumption booster even during the strenuous period of the pandemic to an affordable level, by boldly defying the global trend of much larger fiscal handouts. While the Centre’s budgetary capital spending has increased above trend in the immediate aftermath of the pandemic, a corresponding reduction in capex by central public sector enterprises and state governments ensured that even this wasn’t at the cost of the fiscal consolidation. Whatever monetary or in-kind concessions the government gives out, notably free ration to a mammoth pool of 810 million people, have been targeted and efficacious.
Of course, the BJP manifesto bears the imprint of the ruling dispensation’s political convictions. The pledges to work towards ‘One Nation, One Election,’ and implement the Uniform Civil Code are reflective of the regime’s resolve to complete its unfinished agenda. The economic implications of these contentious moves need to be gauged. That said, continuity and fiscal responsibility are the hallmarks of the BJP manifesto, in sharp contrast to largesse offered to the electorate in the Congress’ Nyay Patra. Bounties such as income transfer of `1 lakh/annum to each woman in the (still-to-be-defined) “vulnerable/poor families” would cement the entitlement culture. These could draw the country’s public finance and the larger economy into a vicious vortex, which would not be easy to escape. Such concessions would require substantial additional resource mobilisation (like hefty new taxes) that could further undermine the aggregate demand, when the economy is struggling to win its spurs.
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However, the (unspecified) “next-generation reforms” that the BJP says will undertake, if voted back to power, must also include certain course correction. It must be recognised that more even distribution of financial and other resources is needed for the growth of both the economy’s productive capacity, and the government’s fiscal capacity. Reasonably speaking, the global economy can’t be expected to provide a higher level of support for India’s growth over the next few years given its prolonged crisis-handling mode. Domestic demand creation has greater relevance now, which requires solid support to the informal economy, without endangering the fisc. Also needed are policies aimed at rapid job creation and addressing income stagnation, and a greater role of the private investors in infrastructure sectors. The plan to strengthen fiscal autonomy of Panchayati Raj institutions is welcome, but states need to be encouraged to put skin in the game.
The prudence in the Bharatiya Janata Party’s 2024 election manifesto is striking as it shows the evolving maturity of the party after being in power for a decade. In the run-up to the 2014 elections, the party had not only promised substantive shifts in the country’s policy paradigm, internal political dynamics and the worldview, but was also specific about the targets: A “strong” rupee, reducing import dependence on oil to 65%, bringing back “every penny” of black money stashed abroad, 20 million jobs every year, doubling of farmers’ income, and so forth. A decade later, these have proven to be difficult, being in many ways driven by externalities. The rupee’s relative value against the US dollar, or its real effective exchange rate, for example, is significantly a function of variables like (global) inflation and interest rates.
The realisation of this may have led to the current restraint, as much as the rich experience gathered in administration. To be fair, notwithstanding the rhetoric at the hustings, the Modi government has never been fiscally extravagant. It managed to limit the consumption booster even during the strenuous period of the pandemic to an affordable level, by boldly defying the global trend of much larger fiscal handouts. While the Centre’s budgetary capital spending has increased above trend in the immediate aftermath of the pandemic, a corresponding reduction in capex by central public sector enterprises and state governments ensured that even this wasn’t at the cost of the fiscal consolidation. Whatever monetary or in-kind concessions the government gives out, notably free ration to a mammoth pool of 810 million people, have been targeted and efficacious.
Of course, the BJP manifesto bears the imprint of the ruling dispensation’s political convictions. The pledges to work towards ‘One Nation, One Election,’ and implement the Uniform Civil Code are reflective of the regime’s resolve to complete its unfinished agenda. The economic implications of these contentious moves need to be gauged. That said, continuity and fiscal responsibility are the hallmarks of the BJP manifesto, in sharp contrast to largesse offered to the electorate in the Congress’ Nyay Patra. Bounties such as income transfer of `1 lakh/annum to each woman in the (still-to-be-defined) “vulnerable/poor families” would cement the entitlement culture. These could draw the country’s public finance and the larger economy into a vicious vortex, which would not be easy to escape. Such concessions would require substantial additional resource mobilisation (like hefty new taxes) that could further undermine the aggregate demand, when the economy is struggling to win its spurs.
However, the (unspecified) “next-generation reforms” that the BJP says will undertake, if voted back to power, must also include certain course correction. It must be recognised that more even distribution of financial and other resources is needed for the growth of both the economy’s productive capacity, and the government’s fiscal capacity. Reasonably speaking, the global economy can’t be expected to provide a higher level of support for India’s growth over the next few years given its prolonged crisis-handling mode. Domestic demand creation has greater relevance now, which requires solid support to the informal economy, without endangering the fisc. Also needed are policies aimed at rapid job creation and addressing income stagnation, and a greater role of the private investors in infrastructure sectors. The plan to strengthen fiscal autonomy of Panchayati Raj institutions is welcome, but states need to be encouraged to put skin in the game.
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Shift course, push demand
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19.04.2024
The prudence in the Bharatiya Janata Party’s 2024 election manifesto is striking as it shows the evolving maturity of the party after being in power for a decade. In the run-up to the 2014 elections, the party had not only promised substantive shifts in the country’s policy paradigm, internal political dynamics and the worldview, but was also specific about the targets: A “strong” rupee, reducing import dependence on oil to 65%, bringing back “every penny” of black money stashed abroad, 20 million jobs every year, doubling of farmers’ income, and so forth. A decade later, these have proven to be difficult, being in many ways driven by externalities. The rupee’s relative value against the US dollar, or its real effective exchange rate, for example, is significantly a function of variables like (global) inflation and interest rates.
The realisation of this may have led to the current restraint, as much as the rich experience gathered in administration. To be fair, notwithstanding the rhetoric at the hustings, the Modi government has never been fiscally extravagant. It managed to limit the consumption booster even during the strenuous period of the pandemic to an affordable level, by boldly defying the global trend of much larger fiscal handouts. While the Centre’s budgetary capital spending has increased above trend in the immediate aftermath of the pandemic, a corresponding reduction in capex by central public sector enterprises and state governments ensured that even this wasn’t at the cost of the fiscal consolidation. Whatever monetary or in-kind concessions the government gives out, notably free ration to a mammoth pool of 810 million people, have been targeted and efficacious.
Of course, the BJP manifesto bears the imprint of the ruling dispensation’s political convictions. The pledges to work towards ‘One Nation, One Election,’ and implement the Uniform Civil Code are reflective of the regime’s........
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