India’s General Elections and how they affect its Economy

While the world might view India’s elections as nothing more than a “mela” with as many distractions, noises and pulsating energy, there is another aspect to it that most folks other than those who look closely tend to miss out. That it’s the outcome of these elections which decides the economy’s trajectory and socio-political thoughts from reservations, opening the economy to foreign investors, industrial reforms from statist thoughts to open-market economy and so on means it remains an imperative. In fact, it’s always been that way. Our first PM, with his socialist bent, went about putting in place the “modern temples“ of the economy. By the time his daughter, Mrs Gandhi, became PM, the trends pointed towards things like Bank Nationalization and the creation of larger and more established PSU. Rolling it all back and against the wall was PM Narasimha Rao in 1991 when he opened and integrated India’s economy with the world. Succeeding PMs played their part in consolidating what they thought were essentials, from putting cell phones in every Indian hand to coal allocation for higher power generation to entering into PPAs for power generation and distribution.

The present elections aren’t any different and are, in fact, significant for quite a few reasons, some I mention below:

The present elections hold significant implications for existing reforms. PM Modi’s introduction of the Goods and Services Tax (GST), the RERA Act, and the Insolvency and Bankruptcy Code (IBC) 2016 are all awaiting further adjustments and course corrections. The outcome of these elections could determine the future direction of these reforms, underscoring their relevance to current economic and political discussions.

Continuing tough reforms, including those pertaining to subsidies, land reforms, subsidies, and farm and labor laws, including the part about MSP, and the judicial reforms. Also, expect likely actions on NRC and those related to citizenship-related issues.

And how does it matter to the Economy?

An #economy as imminent and immense as India’s needs steering in the right direction by the right set of eyes and hands that, at the same time, also need to guide things along. An election does just that by devolving power to the “right” set of hands by electing a leader who can be expected to do things as he promises.

Speaking of promises, where India’s elected hands do all the right things, including reforming the old (i.e. agriculture, iron and steel, SSI etc.) and nurturing the new (digitization and related industries in their widest amplitude, and moving to hydrogen, solar power etc for power needs), nothing can stop the economy from growing at an astounding 6.5% to 7.5% or even 8% YoY.

That’s the power of India’s elections. They help power the economy, which we all want badly.