Millennium Post

Modi must look beyond Bihar polls

After the Bihar elections,  Prime Minister Narendra Modi will have to pay attention to the economy and quicken the pace of reforms. Or else all his excellent marketing abroad for attracting investments will lose steam. There is no doubt that the Bharatiya Janata Party desperately needs to win, particularly after the party’s rout in Delhi Assembly polls in February. Modi has addressed about 40 rallies in the state, far more than any other Prime Minister has done so in a state election. The sheer number of rallies undertaken by the Prime Minister shows the importance he has given to the Bihar polls. Due to the hype created by the media, the BJP’s fight against the Grand Alliance in the Bihar polls has caught  immense attention. The BJP also needs a big win in Bihar to increase its tally in the Rajya Sabha, where it is in a minority.

Suffice to say, the damage has already been done after recent warnings by the international credit agency Moody’s. “Modi must keep his members in check or risk losing domestic and global credibility,” the Moody’s report India Outlook: Searching for Potential, warned. In addition, the report also stated that investors were already less optimistic about India’s economic prospects. Opposition parties have used this report as a stick to beat the government. In response, the government reported that the “warning” came from a junior associate economist at Moody’s Analytics and not from Moody’s Investors Service, which is the actual credit rating agency. The government of India has issued notices accordingly, saying that there’s no intolerance problem in India. However, official or not, Moody’s advice that the politics need to improve and the government’s reform agenda needs attention to achieve long-term growth, has not gone unnoticed. Whether such a claim is exaggerated or not, it is clear that the investors are disappointed at the pace of reforms.

Significantly, as early as January 27, the visiting US President Barack Obama’s parting shot at the town hall meeting in Delhi was that India would succeed if it did not “splinter along religious lines”. He echoed similar sentiments in his National Prayer Breakfast address in Washington. Many interpreted these statements as a warning to Prime Minister Modi.

What is the connection between intolerance and economy? Firstly, perceived or real religious majoritarianism and the resultant disharmony are bound to hold up economic growth and also divert the narrative from development to disharmony. Secondly, if this perception grows investors would take their money elsewhere (read China). Thirdly, if the BJP does not win Bihar and the foreign investment also does not arrive, then Modi’s domestic image will take a dent.

In India, the political timetable is always in conflict with economic imperatives. Modi, therefore, needs to start his action after November 12. To achieve his goals, Modi has to take some political measures as well. The first is to assess the performance of his ministers. It is almost 18 months since he took over and it is time to take stock, particularly about those who are heading the economic ministries and bring new people who can inspire confidence both internationally and at the domestic level. If necessary, he should even look for technocrats with good record outside politics.

The second is to build consensus on the reforms both at the national level as well as with the opposition parties. A bipartisan approach would help enforce the reforms, as after all the Congress and the BJP do not differ much on economic policy. If the BJP wins in Bihar, this process may become a little easy. However, win or lose efforts should be made to reach out to the opposition. If the Congress adopts a confrontational approach, the non-Congress opposition parties like the AIADMK, BJD and others should be approached. In the Parliament, a better floor coordination could help.

The third is to pacify some of the BJP allies like Shiv Sena, Akali Dal ,and PDP that are articulating their discomfort quite openly. TDP wants more funds to rebuild Andhra Pradesh; Akali Dal also wants money from the Centre, and so does the PDP in Jammu and Kashmir. Even if Modi cannot give the bonanza amount they expect, doling out some money will go a long way for these states. If there is a reshuffle he can also give them some weighty portfolios to keep them humoured. The post-Bihar election period is the best time for these concessions.

The fourth is to quicken the pace of reforms. The domestic, as well as international confidence, can be restored only if Modi can put reform measures in place. The key to success is greater push for banking, power, and infrastructure and labor reforms. The Railways too needs a good push. The government should concentrate on matters that will give a push to the economy through executive orders where possible.  Industrialists like Kiran Mazumdar Shaw feel that the two big challenges Indian companies face in terms of investing or expanding their ventures are stressed balance sheets and the flip-flop in policies. Clarity in these two areas will go a long way. The Goods and Services Tax (GST), Land Acquisition Bill, and other reform measures that have been held up in the Parliament should be pushed through at the earliest. The next budget is not very far and signals emanating from that will go a long way in restoring investor confidence not only in India but also abroad.

Win or lose, the Bihar elections will have important implications for the political fortunes of the BJP. If it loses, it will mean Modi magic is waning. If it wins, it will be a shot in the arm for the Prime Minister’s development agenda. If Nitish Kumar wins, he will emerge as an alternative to Modi. If he loses it will be his political demise.  A win would certainly allow Modi to revert back to his reform pitch. Also, slogans like Digital India, Make in India, Stand-up India and Start-up India could become a reality. (The author is a senior political commentator. Views expressed are strictly personal)
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