The incoming central government, despite not being a lame duck, will rely heavily on coalition partners known for frequently shifting their political allegiances. However, this does not necessarily spell the end for economic reforms, given the historical track record of coalition governments since 1991-92. according to experts.
The government has laid down a vision of making India a developed nation by 2047.
Although the previous two Narendra Modi-led governments were technically National Democratic Alliance (NDA) regimes with the Bharatiya Janata Party (BJP) holding a majority, this is the first time in a decade that no single party has secured a majority in the Lok Sabha. This scenario may prompt the new government to seek broader consensus on reforms, but it is expected that economic initiatives will continue, much like the introduction of the Goods and Services Tax (GST) and other reforms by previous non-majority governments.
Historical analysis reveals that coalition governments have successfully implemented significant economic reforms despite multi-party challenges. Key periods from 1991-92 to 2013-14 witnessed major reforms under coalition administrations, which removed decades-old controls and licensing restrictions, enhancing the competitiveness of the Indian economy and fostering sectors like IT and telecom.
The single-party majority government of Narendra Modi initiated numerous reforms, including the GST. However, it faced hurdles in passing agricultural reforms, underscoring the need for a broad consensus even for strong governments to implement reforms.
India has seen a variety of government forms since 1991-92, including minority governments, coalition governments, and single-party majority governments. A continuity of reforms has been observed, with no major reforms reversed by successive governments. A coalition with a majority is expected to continue pushing key reforms.
The likely trajectory
A narrow victory for the BJP could accelerate necessary reforms, supporting India’s growth trajectory. However, the new government might need a common minimum program to address alliance partners’ concerns. Major discussions will likely focus on land, labor, and agriculture, which have been pending for long and are not new issues.
Despite some views that factor market reforms such as labour codes and privatisation may be now off the table, there is an expectation of a decisive commitment to formalizing India’s vast informal workforce and bridging the skills-jobs gap.
Infrastructure development, a key focus of the previous Modi governments, is expected to continue, with the NDA government likely to choose projects carefully. Infrastructure expansion is seen as a consensus strategy since it often does not require legislative measures.
Key bills that the new government will need to address include the Data Protection Bill and the Electricity (Amendment) Bill. While the former does not require state government consultation, the latter has been stymied by state regulatory commissions. Reforms in the distribution segment of the power sector may thus be delayed.
Additionally, the new government will need to consider reforms in the bureaucracy, requiring deft handling, as well as socio-political reforms such as a uniform civil code and simultaneous Lok Sabha and Assembly elections, which may face significant opposition.
