India’s recent general elections recorded one of the most spectacular performances by any party in the past three decades.
Will this decisive victory bring stability to the market? Our Indian Managing Director discusses the highlights of the BJP’s manifesto.
Led by Prime Minister-designate Mr. Narendra Modi, India’s incumbent ruling party Bhartiya Janta Party (BJP) has single-handedly won the requisite majority to form the government, meaning the next government will not be held hostage by a messy coalition. It’s been a very long time that the people of India chose a single party to rule, giving the country enough stability to last for the next five years and the ability to take decisive actions.
The stock markets too have shown the faith with significant leap in run up as well as on announcement of the results.
The BJP has committed to deliver good governance, and a contrast to the decision and policy paralysis seen in last few years.
We have reason to be hopeful that India now presents a bright and bullish arena to investors; the following highlights from BJP’s manifesto will help to settle any nerves that may remain.
Characterising the taxation policy of the outgoing government as “Tax Terrorism” and “Uncertain”, which created a negative outlook on the Indian economy and investment climate, the BJP manifesto instead promises: tax certainty; a non-adversarial and conducive tax environment; the adoption of a GST by state governments; and a rationalisation and simplification of the current tax regime. To that extent, substantial tax amendments may be expected to make the tax environment simplified and more predictable.
Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialised expertise. BJP is committed
to protecting the interest of small and medium retailers, SMEs and those employed by them. The FIPB’s (Foreign Investment Promotion Board) functioning shall be made more efficient and investor-friendly.
Corruption is a manifestation of poor governance. Moreover, it reflects the bad intentions of those sitting in power. BJP will establish a system which eliminates the scope for corruption through:
- Public awareness
- Technology enabled e-governance - minimising the discretion in the citizen-government interface
- System-based, policy-driven governance - making it transparent
- Rationalisation and simplification of the tax regime - which is currently repulsive for honest tax payers
- Simplification of the processes and procedures at all levels - bestowing faith in the citizens, institutions and establishments
The BJP manifesto seeks to focus on manufacturing, healthcare, energy, infrastructure and so on, seeking to expedite the development of freight corridors and industrial corridors, border and coastal highways and encourage public-private partnerships. The manifesto also sets to establish certain ‘next generation’ infrastructure such as gas grids, nationwide optical fibre network to enable wifi zones, modernised railways (bullet trains) and so on. To that extent, concessions, incentives and optimum models for private sector participation may be expected, which may attract foreign investments in the currently languishing infrastructure sector.
Employment and entrepreneurship
BJP will accord high priority to job creation and opportunities for entrepreneurship and will:
- Strategically develop high impact domains like labour-intensive manufacturing (namely textile, footwear, electronics assembly, etc.) and tourism
- Strengthen the traditional employment bases of agriculture and allied industries, and retail through modernisation as well as stronger credit and market linkages
- Harness the opportunities provided by the upgrading of infrastructure and housing, for its job generating potential
- Encourage and empower our youth for self-employment - incubating entrepreneurship as well as facilitating credit
- Address the employability issue by initiating a multi-skills development programme in mission mode with focus on job creation and entrepreneurship, in both rural and urban areas
- Transform the Employment Exchanges into Career Centres - connecting our youth with job opportunities in a transparent and effective manner through the use of technology; as well as providing counselling and training
With such a decisive majority, the new government should be able to take the tough and pragmatic decisions which may be necessary in the current scheme of things to restore lost investor confidence.
The short term looks very bright and bullish indeed for India. The formation of the new cabinet of ministers and the first budget in coming few days/weeks will further indicate shape of things to come in mid and long term.