Indian Elections 2014: Agenda for the New Government

India would have a new government in place and while the investors are looking forward to the NDA coming to power and weaving their magic, the sobering assessment of the ground realities is something that they would have to contend with when they take up the onerous task of governing the behemoth that is India with all its contradictions.

There are several challenges that the new government would have to tackle and these include the endemic corruption, the demand stagnation, supply side bottlenecks, the specter of inflation, and last but not the least, the prospects of a failed monsoon wreaking havoc on the growth prospects for the next year.

Added to these are the aspects of sclerosis of governance, the policy paralysis, the bureaucratic inertia, and lethargy, and a general sense of gloom and doom. Further, it is certainly the case that India cannot remain insulated from the global headwinds in a globalized world. Therefore, the challenges are many and the roads ahead strewn with obstacles.

While the investors are optimistic that the new government especially if it is the NDA would succeed in rejuvenating the country, this report calls for a balanced assessment of the hopes with that of the realities, and the hype with that of the facts.

This report concludes with the hope that whoever comes to power would take the right path, stave off the likely implosion, and set the country firmly on the path to rejuvenation. This is the message that this report seeks to impress on the readers.

Introduction: High Hopes and Expectations Meets Reality

As the election, campaign winds down and the formation of the new government takes center stage, all eyes are on how the new government would have to balance the high hopes of international and domestic investors with regards to stability, governance, and progress with that of the realities of the Indian economy. For instance, the markets have already started going north in the expectation that the NDA (National Democratic Alliance) alliance which is perceived as more business friendly than the UPA (United Progressive Alliance) would come to power and help them prosper. Whether these hopes are misplaced or too ambitious would be known once the new government settles down and the “honeymoon” period is over. However, the fact remains that with most of the things associated with India, the expectations sometimes are ahead of the realities that include an overriding sense of despair at the state of the Indian economy.

Next, whichever dispensation comes to power, the fact remains that the Indian economy that is heavily dependent on Agriculture which in turn means that the fortunes of the economy are tied closely to that of the Monsoon. With the predictions of El Nino impacting the GDP (Gross Domestic Product) by a couple of percentage points, one has to be realistic about the new government being able to lift the Indian economy out of the Abyss. Having said that, it must be remembered that at least, the hopes of the investors for faster clearances and lesser red tape which means that the “cobwebs” of mal-governance are likely to be dusted is definitely something that the NDA is better equipped to do than the UPA. Considering the fact that the UPA has had a straight ten years in power during which time it has seen both euphoric highs and depressing lows means that perhaps the investors are right in anticipating that the NDA should be in a better position to start afresh.

Third, given the fact that the youth form a large chunk of the voters this time around, it is conceivable that the youthful optimism which characterizes this segment might likely to be the decisive turning point for the NDA. With jobs and infrastructure being high on the agenda for this demographic, it is certainly the case that there are high hopes from the youth about the new government. Indeed, as has been the theme in this section, while the whole country goes into frenzy about the NDA returning to power, one has to temper this irrational exuberance with the sobering realization that the ground realities are somewhat different.

Kickstarting the Economy

Talking about the ground realities, it is certainly the case that the Indian economy needs to be urgently spurred and kick started if growth has to resume its buoyant above 5% levels that were seen in UPA-I. for this to happen, there are several things that need to be done and primary among these are the imperative of wooing international investors who had flocked to India in the last decade but have abandoned it in recent years.

Apart from that, the other imperative would be to stimulate demand and remove the supply bottlenecks that are holding up investments and blocking the flow of goods and services throughout the economy. As we shall discuss in the next section, there are some structural aspects which the incoming government would have to address if they are serious about jumpstarting growth.

Third, the inertia and the policy paralysis that has been the case for the last few years has to be overcome and optimism must replace cynicism for the Indian economy to pull itself out of the deep depression that it is in. this requires political will and courage which many experts believe that the NDA coalition has. In other words, the Indian story has lost momentum and the Indian economy has frittered away its Mojo which places recovering and regaining these two aspects at the center of any attempts to kick-start the economy.

Tackling Structural Challenges and Endemic Problems

Perhaps the biggest challenge that the new government would face is to overcome the endemic problems like corruption and lack of governance in the country. As has been mentioned earlier, while it is good to be optimistic and bright eyed about the future, one has to necessarily wake up and smell the coffee (as the saying goes) and bring oneself back to the ground. The dizzying expectations would have to sooner or later meet the ground realities of the widespread corruption, lack of governance, the breakdown of the social order, the overweening structural problems of lack of demand and supply bottlenecks etc.

It is certainly the case that the Indian economy is going through a structural transformation from being agriculture dependent to a service oriented economy. Having sad that, it must be remembered that countries rarely make the transition from agriculture to services without going through the Industrial stage. This means that the new government would have to urgently tackle the overriding need of addressing the concerns of the manufacturing sector without which the Indian economy cannot transition from the past to the future.

Third, while demand can be stimulated through “pump priming” or a loose monetary policy, supply side bottlenecks have to be taken into consideration as well. This means that the new government would have to address both the demand and the supply side equations.

Fourth, the specter of high inflation looms over the Indian economy and this leaves the policymakers with very few options. Considering the fact that this year’s monsoon might not be favorable to India, it is certainly the case that the new government would be staring at the abyss of high inflation, lack of demand, supply shock all at once. This is a lethal cocktail which would translate into a perfect storm that has the potential to make or mar the chances of the new government and derail the rejuvenation of the Indian economy.

Conclusion: India and the Road Ahead - Implosion or Rejuvenation

India desperately needs a miracle if it has to avoid imploding because of the convergence of the economic, political, and social factors coming together in a perfect storm. India is at a crossroads where one road leads to chaos and implosion and the other road leads to stability and rejuvenation. Without recommending, which coalition would help the country choose the right path, the fact remains that no matter who forms the government, addressing the issues discussed in this report are crucial to the trajectory that the country would take in the months and years to come. In concluding this report, it needs to be mentioned that whoever comes to power might not have the magic wand but at least an honest and earnest attempt to set things right would certainly help the cause of the country.


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Political Science