A seemingly commonsensical line of thought prevailing through the election season was that a government with a clear majority was essential for economic growth and stability.
As India steps back into the coalition era after a decade of rule by a majority government, it warrants the question — is that narrative actually true?
Throughout the elections, BJP had accented on its ‘strong leadership’, and had mocked the opposition INDIA as a hastily put together coalition that will be disastrous for the race towards ‘Viksit Bharat’.
It was a perspective that found endorsement with many in India Inc., even if their jargon-speak dwelt on ‘strong governments’ and ‘decisive leadership.’ Bharti Airtel chief Sunil Mittal in an interview with a pink paper a few days ago had reminisced how one meeting with PM Modi saved his company, during the troubled days of Jio’s entry into telecom and the intense price wars that followed.
With the results going against India Inc.’s expectations of a ‘stronger’ Modi mandate — ruling BJP-led NDA’s majority dropped from 353 seats to just 292, there is now consternation in industrialist and investor circles.
The worry is over two things — one, whether the direction of policymaking will shift away from the capital-spending intensive, pro-business measures visible in the Sitharaman budgets, and second, whether the ‘ease of doing business’, at least for local businesses who’ve grown comfy at getting things done with one linear hierarchy, would find the going complex and chaotic with more decision-making points and even slower decision-making processes involving more discussions and deliberations likely becoming the norm.
International rating agencies said exactly what many local industrialists were thinking, but are afraid to say on the record. “(A weakened majority for the ruling party) could pose challenges for the more ambitious elements of the government’s reform agenda,” Fitch said in a note. Reuters quoted Moody’s (another rating agency) senior vice president Christian de Guzman as saying that it looked like “The prospects for even more aggressive consolidation are not as bright as before they were prior to the election results.”
However, a cursory look at headline reforms of the post-liberalisation era would argue otherwise. Even liberalisation, with its scrapping of industry-shackling rules and the infamous ‘license raj’, spawned from the Narasimha Rao-Manmohan Singh combine presiding over a government that didn’t have enough seats in the parliament (or enough money in the banks).
Since then, landmark economic reforms came about from various coalition governments — the two United Front governments during the 1996-1998 period were shaky at best, but were the ones who slashed personal income taxes to levels that unleashed the ‘animal spirits' of entrepreneurs, besides simplifying rules related to equity and share markets. Vajpayee’s rule, at the helm of a BJP coalition government at the turn of the millennium, saw successful scaling up of disinvestment and a push for infrastructure development, with schemes like the Golden Quadrilateral project. Vajpayee also oversaw the liberalisation of the telecom segment.
The Congress-led UPA I and II took economic empowerment to another level with the likes of the MGNREGA job guarantee scheme and Right to Information, even while laying the foundation for Aadhar, GST and UPI — building the backbone of a digital system which the subsequent majority NDA government fleshed out and claimed as its own.
In fact, political commentators and experts point out how some of the worst policy decisions the country has seen came from governments with a majority of their own — from Indira Gandhi’s progressive tax regime that stifled Indian industry in the 1970s to PM Modi’s demonetisation in 2016.
In fact, a coalition government being compelled to consult and build consensus could actually work out bottlenecks to several pending reforms, if you believe what the government’s chief economic advisor V. Anantha Nageswaran said at an investor meet in Singapore after election results came out. “I would even say that the election outcome increases the probability of (land, energy & labour) reforms happening rather than lowering it because it creates avenues for dialogue and consensus building,” he said.
