The BJP Outlook On Key Economic Issues
- Inflation: Unless farmgate to market linkages are improved, the BJP too will have to grapple with this tricky issue
- Rupee: Seeking to avoid an unrealistic value for the currency, to defend it from extreme volatility
- FDI: No rollback likely, including in multi-brand retail; defence sector may be further opened up
- Disinvestment: Strong advocate of govt getting out of running business, so expect more selloffs
- Subsidies: Unlikely to roll back food, fertiliser subsidies; in fact, LPG subsidy may go up to win favour
- GST/Taxes: Rationalisation of taxes, targeting black money; once in power cannot stall rollout of GST
- Infrastructure: Woo more private investment; give greater push to roads, ports and other projects.
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With the Bharatiya Janata Party registering wins in four out of the five states that held assembly elections recently, stockmarkets surged in a roar of approval. The many market experts and country analysts bandied about stock phrases—such as “the prospect of decisive leadership” by a “strong and stable government” that will “put the country back on the road to reforms”—to explain the bourse’s behaviour. But a closer look at the party’s inner workings (in anticipation of a return to power) belies all that euphoria.
To say planning in the party, particularly on the economic agenda, is in full swing would be an exaggeration. The party’s economic cell, such as it is, does not even warrant a mention. Just as nobody knows whether the general elections in 2014 will deliver a decisive verdict in favour of a BJP-led coalition government, little is known about what BJP prime ministerial candidate Narendra Modi thinks on a whole host of economic and development issues—beyond, of course, what he has done, or left undone, in Gujarat.
Sure, one can get some indication of Modi’s economic agenda by speaking to the experts associated with the party (yet another growing tribe). Dr Vinay Sahasrabuddhe, who heads the BJP’s think-tank, the Public Policy Research Centre, states that former BJP president Nitin Gadkari has sent e-mails to around 300 “individuals and experts” seeking their inputs. “The BJP is not shy of taking inputs from governments not of our ideological hues,” says Sahasrabuddhe, who has been travelling to study various good examples of “greater transparency, accountability and governance”.
Thus, in a typical case of outsourcing, there are a lot of experts at work providing BJP top bosses with inputs on issues ranging from FDI to privatisation, infrastructure, education, employment, taxes and even foreign relations, according to informed sources. All these will hopefully help the BJP-led government to deliver in areas where the UPA government has failed to do so.
When Outlook approached some of the BJP’s key economic ideologues, many were reluctant to comment on the party’s economic policies. BJP ideologue and financial analyst S. Gurumurthy texted: “Would it not be better to ask someone on BJP...than me...in distant Chennai, a grown-up village? Can’t talk for BJP.” Similarly, former NDA minister Arun Shourie, who is reported to be in constant touch with Modi though out of sorts with the party, texted, “It will be best to talk to the BJP.”
But speak to the BJP cadres, and the buzz is there is going to be more focus inward, on the core RSS line of ‘swadeshi’. The perception has gained ground that globalisation has failed to deliver on its promise of more jobs and greater wealth creation, whether for small and medium manufacturers or farmers. “You will see more of RSS coming into the government,” says Mohan Guruswamy, former BJP economic policy think-tank member and currently chairman of the Centre for Policy Alternatives. “Vajpayee and Advani were tolerant of the RSS. Now it will be different and pronounced. Manufacturers will be supported to the hilt and protectionism will come back following the RSS philosophy of India first. Even Indian FDI abroad will be tightened.”
Unlike the UPA government’s push for FDI at any cost (given the constant tweaking of rules), the expectation is that the BJP would push for more domestic investment, while incentivising and generating government revenues through a rationalisation of taxes and implementation of the long-delayed gst. The party is also expected to take steps to address the trade imbalance with China, strengthening the rupee through better management besides kickstarting manufacturing to boost employment.
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BJP’s Economic Team-In-Waiting
The A-list of those who will shape the party’s economic policy, should it come to power
| Narendra Modi Corporate-friendly, fast in decision-making; opposed UPA’s gas price hike, which benefits Reliance |
| Yashwant Sinha Former finance minister; continues to be consulted on economic matters; voice in Parliament | ||
| Nitin Gadkari Sangh man; key interface with companies; framing “good governance” roadmap |
| Arun Jaitley Legal whiz; a votary of disinvestment; understands economic matters, both domestic and global | ||
| S. Gurumurthy From the Sangh mainstream; his voice has heft. Consider his “clean chit” to Gadkari. |
...And The Second Rung
| Arun Shourie Out of favour with BJP leaders, but shares ideas regularly with Narendra Modi |
| Vinay Sahasrabuddhe BJP think-tank director looks to provide best practices for economic governance | ||
| Murli Manohar Joshi Heading several important Parliament panels, his insights likely to carry weight |
| Subramanian Swamy Newcomer in BJP, is close to Modi, but old guard remains wary of him |
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On many of the issues, such as rupee management and inflation, the BJP is still fuzzy. “It is not clear what their line is on inflation, but they will not cut down money supply. On protecting the rupee, if you curb imports, the wto will start yelling. They cannot do that. Frankly, the BJP is not capable of handling these issues,” says Guruswamy.
In contrast, on growth and governance, there are many takes. At a recent seminar hosted by the Observer Research Foundation in Mumbai, Shourie gave a clear indication of his vision with a call to bring in professionals with adequate knowledge and experience to head key ministries and usher in sweeping changes in the selection procedures of institutions. Based on inputs from many other quarters, governance has emerged as the key issue on which the BJP hopes to storm to power at the national level. “Two major deficits (which the next government at the Centre will have to bridge) are governance and infrastructure—whether power, roads or railways—which have been left untouched by the UPA government in the last nine years,” says Dr Rajiv Kumar of the Centre for Policy Research.
A common concern among experts is the poor investor sentiment, which some feel improved somewhat after Union finance minister P. Chidambaram took charge. But the larger issue of lack of policy coherence is not helping matters. Subir Gokarn, director of research, Brookings India, lists the three critical challenges ahead of the next government: controlling food inflation, which has been at 10 per cent year on year; infrastructure gaps, with most PPP projects struggling for financial closure; employment.
All these are areas where the market sees Modi as apt choice for PM candidate, given his reputation of being decisive, quick in decision-making and investor-friendly. “I am hoping BJP will be like the parties which talk about one thing when in opposition but good sense prevails once they come to power. So I think they won’t go back on FDI in retail,” says Loksatta Party’s Jayaprakash Narayan.
On another debate in the aftermath of the recent assembly results, it’s clear the party is not averse to doles or subsidies. Despite Modi’s corporate tilt, Chhattisgarh’s Raman Singh said (post-victory) that his first priority will be to implement his pro-poor schemes. Similarly, Madhya Pradesh’s Shivraj Singh Chouhan, another BJP victor, added new ones to his ‘ladli’ kind of schemes. Modi, despite his commitment to the contrary, cannot checkmate his chief ministers. “The Congressification of politics is complete and even the BJP will follow policies of throwing something to the people,” says Guruswamy.
Given that many BJP leaders have voiced their reservations about all kinds of populist policies, Sahasrabuddhe is hopeful that they will shift the public discourse on economic issues from entitlement to empowerment through delivery. “Giving rights is important, but just because right to education, right to food etc are in place, people are not going to be free from lack of education or that of food,” he says. For one, privatisation of the NREGA scheme, with the government picking up part of the funding is also being mulled.
Dr Surjit S. Bhalla, chairman of Oxus Investments, feels that if a non-Congress government comes to power, there will be greater allocation of decision making to states including in “reorganisation of subsidies—with the states being allocated funds to take care of welfare schemes. Let the states decide how to spend the funds.” He cites the case of FDI in multi-brand retail where states have the final say on whether to permit it or not.
Similarly, M.R. Venkatesh, an analyst who is identified with the AIADMK and is perceived to be close to Amma, has been sending, along with some of his associates, inputs to the BJP on reforms in areas like labour laws, medical and health issues, judiciary and taxes. He confidently states that there will be greater participation of states in economic policy formation with greater freedom or elbow room for them to decide on areas like FDI, health and education, power, infrastructure.
Major economic reforms are thus not on the agenda as of now, and top bosses are not thinking of big-ticket projects or measures. Given the jolt the Aam Aadmi Party has dealt to any kind of certainty, there are likely to be more subtle changes in the team. Expect some new faces with the promise of “fresh” thinking.
By Lola Nayar and Arindam Mukherjee
