The five phase schedule of general elections?counting on May 16 and new government to be in place before June 2?marks the beginning of a political process that will have more than usual economic implications. Given the economic policy imperatives, what kind of government should India have? A government that puts reform back on the agenda is the short answer. The UPA ignored reforms because of its politics but for four years of its term enjoyed the fruits of earlier reforms and a benign global environment. The next government must recognise that India?s next growth phase needs another round of structural reforms as well as restarting the process of fiscal corrections by bringing back disinvestment on the agenda, for example. The economy?s investment rate is in the danger of falling and good economic policy will be a key in preventing that. Imaginative policies on affordable housing and labour market policies that encourage a big jump in mass manufacturing are two examples of politically saleable?in the sense that beneficiaries will be the aam admi?pro-growth initiatives that will have no opposition, bar from vested interests like some real estate developers and trade unions. The next government should have the courage and intelligence to do this.
But what kind of government will India get? This general election promises to be exhaustingly complicated. The only certainty seems that no pre- and post-poll alliance can be ruled out. This may offend purists but is a good market solution to uncertainty and complexity. Ideally, the Congress or the BJP should be at the centre of a ruling coalition and the two big parties should between them get 300 or more seats. That ensures the political stability that India needs. Many non-Congress/non-BJP parties hope that this won?t happen. Hopefully, their optimism will not find reflection in the results. Is the Congress relatively well-situated despite being the incumbent? It looks as if it is, especially given how peculiarly confused the BJP looks. In fact, the BJP is looking like the Congress did on 2004 election eve. But remembering the 2004 result, and remembering the national verdict will really be a sum of state verdicts, national-level perceptions should be discounted a bit. The same reason should make theorising about the impact of slowdown on voters risky. What is safe to say is that the next government will assume power with economic numbers from two quarters?January-March and April-June?that will indicate the short-term trajectory of the economy. Hopefully, those numbers will concentrate the new rulers? minds.
