The elections are over. Now comes the hard part…

In my last post I had wondered whether more than 272 lotuses would bloom for the BJP. The people of India have now spoken: many, many more have, in fact, bloomed. It is a resounding result that we have not seen in decades.I was under the impression that the days of one-party dominance had ended in the 1980s. The sheer demolition of the Congress suggests that one-party domination may be here to stay for quite a while.

Was I a Modi/BJP supporter? No, I was not. But, then, neither was I supportive of the Congress. In any case, after 10 years of rule, every party/coalition becomes stale. Turnover of members of parliament is essentially a good thing. Outsiders have the chance to enter the parliament while incumbents face the prospect of being voted out and losing the trappings of power. Without this churning – or electoral turnover – tyranny in the form of individuals remaining in power indefinitely is a distinct possibility. Turnover is important for a variety of reasons: creating opportunities for aspiring leaders or disfranchised groups and for permitting policy changes. In the absence of the possibility of new blood coming in, the polity would be bereft of new ideas and lead to arrogance of power. In the USA, there is concern over the lack of turnover where incumbents have a much better chance of being re-elected (see here and here). In India, by and large, it is the reverse: incumbency is a disadvantage. Incidentally, take a look at my earlier post “Anti-incumbency in Indian Elections” where I have reported some results from on-going research. Specifically, that post had stated that the higher the turnout at elections, the greater the anti-incumbency effect. That prediction seems to have been borne out: the 2014 elections saw a very high turnout and the incumbents were routed right across India.

As far as the negative vote against the Congress/UPA was concerned, I was convinced: the ruling coalition did not deserve to be re-elected. But I was not convinced by the BJP’s and Modi’s claims about the successes of the Gujarat model. Maybe I will write about that in a later post. So, while there were strong reasons to vote against the Congress, I was hard-pressed to find convincing reasons for a positive vote in favour of the BJP. Be that as it may: the nation has spoken loud and clear. And we are to have five years of BJP rule and, considering the shambles the Congress finds itself in, it could even be ten years or more.

Getting such a massive support in elections is certainly daunting and onerous. Hopefully, the BJP is fully aware of this. Living up to the aspirations of the electorate might well make the election campaign look like a walk in the park for the BJP. Let us have a look at what is on the agenda for the new government. I have created the list below by culling out significant items from the election manifesto of the BJP (see here)

• Economic revival
• controlling Inflation
• spur the process of economic growth,
• strictly implement fiscal discipline
• policy framework for investments both foreign and domestic to make them more conducive
• Developing physical infrastructure
• Making India a global manufacturing hub
• Low cost housing for all
• High priority to water security
• Growth of agriculture
• High priority to job creation and opportunities for entrepreneurship
• Skills development
• Food security
• Access to health services
• Equality of opportunity to education
• Eliminating the scope for corruption
• Institutional reform - administrative, judicial, police and electoral

It is difficult to find fault with any of the items listed above. The question is: how long will it be before we see success in the form of positive outcomes? There is no denying the pressing urgency of the first item, namely, economic revival. But there is no magic wand and there will be contradictions between pushing growth and controlling inflation. In the process of controlling inflation, the RBI has had to raise interest rates but this has had the short-run impact of subduing growth. There is an argument that over the longer term, moderate inflation will be good for growth but there has been a price to pay in the short run. The knives (or, more specifically, a single knife belonging to Subramaniam Swamy) are already out for the RBI Governor, Raghuram Rajan (see here). Replacing Rajan would be most unfortunate. Perhaps for the first time after Manmohan Singh, we have a first-rate economist in charge of the RBI. I do hope Swamy does not command any clout within the BJP and that Modi knows who is to be let loose during elections but kept on a tight leash afterwards.

Reintroducing fiscal discipline will also be a challenge. In the fight to keep at bay the impact of global recession (one component of which was the employment guarantee scheme), fiscal deficits have risen quite high. These deficits have to be reduced, but it is equally important how these are reduced. For a very long time now, fiscal deficits have been managed by curtailing capital expenditures due to the (political) inability to lower revenue-account expenditures – these are expenditures on subsidies, administration and so on. Lowering capital expenditures of the government (which includes infrastructure spending) has very adverse consequences for the growth of the economy.

Items 2-6 in the list above will require substantial investments and the results will not be visible in the short-term. Items 7-11 are vital from a social welfare point of view but again much time will pass before benefits are visible. Job creation, especially in manufacturing has been a challenge in India for decades. There seems to be a consensus that India needs to create one million jobs per month. Which sector will create such jobs? Table below shows sector wise share in GDP and share in employment

SECTOR	SHARE IN GDP (%)	SHARE IN EMPLOYMENT (%)
Agriculture	14	53
Manufacturing	15	10.5
Services	67	24.4
Other	4	12.1

Agriculture which contributes just about 14% to GDP, employs 53% of the labour force. This seems a dead end as far as employment generation is concerned. The services sector accounts for 67% of GDP (far too high for an economy at India’s level of development), but has a share in employment of under 25%. Finally, manufacturing contributes 15% to GDP, but has a share of only 10.5% in employment. So, where are the jobs going to come from? Just to get a perspective of the situation in India, share of manufacturing in China’s GDP is 35% and employs 30% of the labour force. This has allowed China to generate employment and absorb surplus labour from agriculture. Why is job creation in Indian manufacturing so low when India has such an abundance of labour? Organised sector employment in India is rather privileged and an individual, once employed, loses the job only in extreme circumstances. So, when exit from jobs is so difficult, entry into jobs becomes highly restricted. Changing this situation has been impossible for many decades now even though the problem and its solution stare us in the face.

Finally, items 12 and 13 require institutional reforms. It is not merely a question of passing a law, which can be done easily enough. From an institutional perspective, laws are only as good as their implementation. Once again, any benefits of these changes will take a long time to emerge.

Clearly, the government will have to be given enough time for it to accomplish what it has set out to do. Possibly, one term will not be enough. But will the vociferous and passionate supporters of the BJP remain patient as the party gets down to the nitty-gritty of governing? My fear is that there will be pressure on the government to show results soon but, as stated above, these will take a long time to emerge. What is the government to do in the meantime? In such circumstances, most governments fall back on populist quick-fixes. The BJP (especially Modi), in its election campaign, has scrupulously avoided any reference to the religious agenda of the Sangh Parivar. But will it be able to stay clear of this once the pressure to deliver starts to build? My fear is that it might not be able to do so. One might well see the issue of the Ram temple coming to the fore in UP. There is also the possibility that the issue of “Bangladeshi” migrants might rear its head in West Bengal. Will Modi have the sagacity to keep the fringe elements of his party under control and suppress such volatile issues? Will he have the strength to focus in a steadfast manner on the development agenda? For India’s sake, I certainly hope so.