Beyond promises

The BJP's election manifesto raises many economic-policy issues requiring a more holistic approach

Election manifestos, released before general elections, say a lot about political parties’ aspirations, promises, and vision. Understandably, such a document attracts more attention when it is from the ruling party and more so when there is a possibility that the party will return to power after the general elections.

The manifesto released by the Bharatiya Janata Party (BJP) before the start of the seven-phase general elections of 2024, therefore, has attracted more than its usual share of attention and commentary. This article attempts an analysis of only three key economic policy promises that the BJP’s manifesto has made. The objective is to understand what these promises might imply for governance in the coming five years, assuming that the BJP retains power at the Centre.

A major element in the economic content of the manifesto is its emphasis on boosting investment in general and, particularly, in over a dozen sectors like infrastructure, automobiles, electric vehicles, semiconductors, aviation services, and textiles. Investment, led by governments at the Centre and the states, has been the hallmark of the BJP rule in the last five years. This strategy helped the Indian economy recover from the Covid shock and the continued focus on investment is only to be expected.

But the manifesto appears to have ignored the absence of a strong revival in private-sector investment so far, which has been a cause for concern. With consumption growth continuing to remain muted, there is a need for concrete steps to attract the private corporate sector to increase its investment. And the task of ensuring the much-needed revival of private investment could perhaps be achieved with less difficulty if the long overdue factor-market reforms become a priority for the government that comes to power at the Centre in June 2024.

It is in this context that the BJP manifesto’s failure to underline the need for specific factor-market reforms like changes in laws on land acquisition for industrial projects and in labour policies to make them more flexible is deeply worrying. A steady increase in capital investment by the government, as seen in the last four years, is welcome, but this trend is yet to encourage the private sector to chip in with higher investment from its side.

One of the ways to expedite private-sector investment is to relax land and labour laws and bring in other policy changes to improve the ease of investing and doing business. The economic manifesto of the BJP does not live up to those expectations of adequate policy changes.

Of course, the promise of judicial reform to accelerate e-courts in mission mode, expedite resolutions of old as well as pending cases, and create an ecosystem for alternative dispute resolution should attract private investment, just as the promise of a more efficient health care system and education infrastructure will be a long-term help. But a clear signal on what the new government should do with regard to ushering in land and labour reforms would have been welcome. Or have those tasks been left to the 100-day action plan or the five-year agenda that civil servants have been asked to prepare?

The manifesto raises two other questions. There is a promise to strengthen the flagship income transfer scheme for farmers, or the PM Kisan Samman Nidhi Yojana, announced a few months before the 2019 general elections. Note that the 2024 manifesto of the BJP talks about strengthening this scheme but there is no hint of an increase in the annual assistance amount of Rs 6,000 for a farmer household. Nor is there any promise of a legally mandated review of minimum support prices for agricultural crops, although the manifesto assures periodic increases in them. In addition, there is a promise for strengthening the crop insurance scheme and encouraging crop diversification as well as increased cultivation of pulses and oilseeds, where the country continues to remain dependent on imports.

Now, all these promises must have been reassuring from both fiscal responsibility and agricultural points of view. But there is no clarity on how these schemes would be strengthened, crop diversification would be achieved, and more pulses and oil seeds would be grown. None of those promises is easy to fulfil. Perhaps more planning would be needed to implement them.

What is decidedly worrying is the wide berth given to the much-needed tasks of reforming the three agricultural laws passed by Parliament in 2020 but had to be withdrawn in the face of a prolonged farmer agitation around Delhi. These laws were well intentioned, aimed at setting up mechanisms to allow farmers to sell their farm produce outside the Agriculture Produce Market Committees, undertake contract farming, and market their produce freely and to exempt a variety of crops from several restrictions like those for holding of stocks under the Essential Commodities Act. The BJP’s manifesto is silent on how the goals of these laws, now withdrawn, would be achieved.

Finally, the ruling party’s manifesto promises fiscal autonomy for panchayati raj institutions to make them sustainable. Fulfilling this promise will certainly bring about a positive change in the country’s governance structure. But once again the manifesto falls short of explaining what kind of fiscal autonomy is being proposed for panchayati raj institutions.

Since 1993, when the third tier of governance was statutorily empowered, all the five Finance Commissions have made several recommendations on enhancing the distribution of resources to urban and local bodies. Even the Tenth Finance Commission, which was set up a year before the law on the third tier of governance was passed, recommended a small portion of total resources to be earmarked for these local self-government bodies.

However, three major issues have emerged. The transfer of resources to urban and local bodies has been lower than what had been recommended. The shortfall has been 5-18 per cent. The absence of accounting and auditing facilities at the level of the third tier of governance has remained a cause for concern. Institutional support to these bodies is sorely missing. Worse, most states have been reluctant to set up state finance commissions at a regular frequency to ensure a smooth flow of resources and support system for rural and urban local bodies. There have been long delays and gaps in their setting up with almost half the states having set up only five or six state finance commissions so far. Clearly, there are serious institutional gaps and weaknesses, which need to be addressed before taking up the challenge of providing fiscal autonomy to panchayati raj institutions.

Promises tend to become irrelevant if care is not taken to create necessary enabling conditions to make them feasible. This is even truer of electoral promises.