Everyone agrees that voters are looking for national leadership that will improve their economic lot, while also reducing the day-to-day travails of dealing with government corruption. Voters also care about their particular identities (caste, religion and so on), but these factors look likely to be swamped by an overwhelming weariness and frustration with the drift of the last few years.
Voters are likely to be pleased in the short run, and maybe even for the full-term of the new government. After all, Indias growth potential is clearat current investment rates, and given the nations demographic trends, 8% growth should be achievable routinely, once the extreme political uncertainty that has weighed down the economy is removed. Global growth, too, looks to be reasonably good over the next few years, barring political eruptions in places such as Ukraine or the Middle East.
Narendra Modi has made it clear that he will be a strong leader, focused on encouraging business investment and economic growth. He is likely to put together a governing team that carries out this mission reasonably effectively. Without the need to placate additional coalition partners, the NDA will be able to avoid the kind of disastrous corruption that the UPA got when it gave the telecoms ministry to the DMK. The new NDA clearly has close ties to Indian business, and Japanese or South Korean style collaboration between government and big business may indeed yield growth pay-offs, including structural changes that can come from pursuing large new global opportunities. Foreign investors, too, are likely to welcome the NDA. Despite the economic nationalism of the old-style BJP, that can be no worse than the confusion and rapaciousness of the UPA government in matters such as retrospective taxation.
Sustaining growth will require investment in human capital, and here is where the nationalist ideology may be tested. Higher education needs a rapid increase in investment, and that will require not just money, but human capital that is in short supply in India to begin with. Will the new government be willing to allow foreigners in with ideas as well as lessons for Indias youth The UPA had taken steps in the right direction, albeit halting and confused in some ways, and that progress needs to be accelerated and not put on hold or reversed. Perhaps professional and technical education from abroad will not cross swords with Hindu nationalist views of what education should be. There can be longer-term concerns of how ideology might shape school curricula, in terms of interpretations of history and what it means to be Indian. The new government will deserve kudos if it can put these kinds of goals in cold storage, and focus on delivering the goods, literally, to all of Indias citizens.
Another challenge for the new government could be areas such as retail FDI. Its traditional constituency may be hurt by FDI in retail, and the NDA may wish to go slow or halt progress on this front. In fact, the UPA had already been dithering, and had put in enough caveats that potential investors have not been rushing in. In any case, as I have argued in previous columns, there is already FDI in wholesale, and if that has not led to efficiencies in the supply chain, perhaps other, more direct measures need to be taken to improve that supply chain, instead of relying on some magic from foreign retailers.
Providing certainty and boosting confidence will go a long way toward ensuring economic success for the likely new government. What are more specific, positive things that it can do One is working toward and implementing a sensible energy policy, which includes a range of fuel sources, and puts the focus back on efficiency and innovation, as well as realistic measures for long-run sustainability. Another is an integrated agricultural policy, which should deal with food security, water management, market access and insurance for farmers. A third is the need to finally implement the Goods and Services Tax, which will shore up government revenues and further reduce some tax-induced distortions.
To get things done, the new government will have to coordinate across ministries at the Centre, and work collaboratively with the states. A decisive win for the NDA, with its strong leadership, could make both these avenues of institutional collective action, horizontal and vertical, more likely to succeed. These are all possibilities to hope for. None of them require promoting divisiveness or suffocating the heterogeneous identities and pluralism that are inherently part of India. Realising these possibilities may be the best possible outcome after the elections.
The author is Professor of Economics, University of California, Santa Cruz