As the ruling Bharatiya Janata Party (BJP) is headed to form a government in both Gujarat and Himachal Pradesh, Prime Minister Narendra Modi’s popularity seems intact, despite some disruption due to ambitious demonetisation and the implementation of the GST. However, as India enters into the poll-bound 2018, it is likely that ruling party’s reforms spree takes a pause for populist measures.
Before 2019 General Elections, assembly elections are due in eight states, of which, in two states, the BJP has the challenge to retain power for the fourth time. Only in Karnataka, the BJP will be fighting to win the state from the Congress. This would shift focus from new policies to elections, and in most probability populists measures.
“In the run-up to the 2019 Lok Sabha elections, states including Rajasthan, Madhya Pradesh, Chhattisgarh and Karnataka are due for polls in 2018. Inevitably, it would be the popular voters’ sentiment that would be factored by the Centre and the state governments in their policies,” Assocham said.
“Any tough reforms, like flexibilities in labour laws, may not go well with the popular sentiment and thus, India Inc’s expectations on this front should be muted,” Assocham added.
However, in the 2018 Budget, which would be the last Budget of the current government, would give some space to SMEs and the GST. An important take away from the current political-economic environment is that the Goods and Services Tax is expected to be further streamlined and rates further rationalised on the lower side. “The GST had not gone well with the traders, the major political force for the political parties and the issue remained in focus during Gujarat elections. Besides, the SMEs would also get a boost, starting from the Budget proposals,” Assocham said.
Creating employment would be the biggest challenge for the BJP before the elections. It is likely that the entire focus will shift from corporate India to the rural population. Several initiatives like support to farmers, rural and agri infrastructure is likely to get more attention. In the election year, keeping inflation in check is also going to be a key concern for the government.