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Paranjoy Guha Thakurta

Why the Bihar defeat will force the BJP to become more like the Congress

The party will have to go slow on its corporate-friendly programmes and emphasise its welfare schemes.

Date published: November 9, 2015Publication: Scroll.in Link to original article

It is almost certain that the outcome of the Bihar assembly elections will disappoint investors in shares when stock markets open on Monday. Large sections of the Indian corporate sector, which were gung-ho about Prime Minister Narendra Modi and the Bharatiya Janata Party, are unhappy that Nitish Kumar will again become chief minister of the economically-backward state.

Even before the Bihar elections were over, one section of businesspersons in India had turned critical of the government. This section, which included corporate captains like NR Narayana Murthy of Infosys, Kiran Mazumdar Shaw of Biocon and Rahul Bajaj of Bajaj Auto, publicly censured the Modi regime for its inability to ensure social harmony, arguing that this was hurting speedy economic development.

They were, however, outliers. Their sentiments were not shared by a majority of the country’s capitalist class, which wanted the BJP and its allies in the National Democratic Alliance to clinch a victory over the grand coalition of Janata Dal (United), Rashtriya Janata Dal and the Congress. This section was dismissive of Nitish Kumar because he had partnered in the election with his one-time opponent, Lalu Prasad, the same man who had supposedly brought jungle raj into the state.

These businesspersons believed that despite his party’s loss in the Delhi polls in February, Modi would remain the Supreme Leader of the Second Republic of India, spearheading the creation of a Congress-free India. That confidence has dissipated with the National Democratic Alliance’s defeat in Bihar.

As a result of the pivotal shift on Sunday, there will now be intense pressure on the prime minister to backtrack on his party’s right-wing, corporate-friendly policies and to become more populist by emphasising welfare schemes to provide bijli-sadak-paani (electricity-roads-water) and improve facilities for shiksha (education) and swasthya (healthcare). From now on, he will have to think twice before curtailing subsidies and reducing the role of the Union government in centrally-sponsored welfare programmes in the name of bringing about greater fiscal federalism.

Going forward, the Modi government will have to make a series of changes.

Building consensus
A few months ago, Modi and Finance Minister Arun Jaitley had understood the hard way that they will not be able to amend the 2013 land acquisition law to make it pro-business in the way they wanted. Strident protests from the opposition had made it a real possibility that the tags of “anti-farmer” and “anti-poor” would stick to them. Realisation dawned, albeit belatedly, that the way to change the land acquisition law was not through ordinances but by building consensus with the political opponents of the BJP and the NDA. This will have to be the government’s mantra going forward.

If a more accommodative strategy is not followed, the Modi government may never be able to enact a common Goods and Services Tax, which would unite the country’s fragmented markets and streamline indirect taxation. The GST is being touted as the government’s next important economic policy initiative.

Furthermore, the government will have to do much more to control the prices of specific food items, like pulses, although the overall rate of inflation is well under control thanks to low international prices of crude oil (for which this government can take no credit).

Modi, Jaitley and their supporters in the corporate sector will also have to realise that the government will now have to focus less on cutting the fiscal deficit, disinvesting the government’s shares in public sector undertakings, changing labour laws, improving the ease of doing business and increasing the rate of growth of the country’s gross domestic product – all in the name of economic reforms. Instead, the government will have to concentrate on job creation.

Social welfare schemes
It is all very well for the prime minister to announce packages running into lakhs of crores at political rallies, as he did in Bihar and in Jammu and Kashmir. He followed a similar strategy when he was chief minister of Gujarat: major investments would be announced after memoranda of understanding were signed during Vibrant Gujarat conferences. However, much of the promised investment would never materialise and the memoranda would remain little more than scraps of paper.

The ruse clearly did not work in Bihar. The electorate of the state demonstrated to the Modi government that making promises about large investments is not enough. It has to be clearly demonstrated that employment opportunities are being created.

As a first step, Modi will have to stop mocking social schemes like the Mahatma Gandhi National Rural Employment Guarantee Act the way he did in the Lok Sabha on March 4. On that occasion, he had derided the programme as the epitome of the Congress governments’ failure to generate jobs: the prime minister claimed that the scheme merely entailed digging holes and filling them up. Now at least, he should realise that while there are many flaws and inadequacies in the manner in which MNREGA is and has been implemented, the programme can nevertheless be an effective way of enhancing rural incomes and empowering the poor living in villages.

The economic policies of the BJP and the Congress – the two largest political parties in the country which together account for around half the popular vote – have always been similar. There has been little to distinguish Jaitley from his predecessor Palaniappan Chidambaram. The finance minister may not approve of this prediction, but the failure of the BJP to win the Bihar elections will make its economic policies resemble those of the Congress even more closely.

Date posted: May 25, 2016Last modified: May 25, 2016Posted byParanjoy Guha Thakurta
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