Abu Dhabi
Indian prime minister Narendra Modi is expected to continue economic reforms but at the same time focus more on populist, social security measures in the run up to 2019 general elections, analysts said as the ruling Bharatiya Janata Party (BJP) clinched two important election victories in Gujarat and Himachal Pradesh.
The BJP came back to power for the sixth time in Gujarat and ousted Congress from power in Himachal Pradesh. With these wins, the BJP increased the tally of states it’s in power to 19.
“The election results effectively reaffirm that BJP remains popular despite the growing criticism and improved its chances to stay in power after the 2019 general election. This bodes well for government stability and a continuity of economic and business reforms – the kind of reassurance investors have been seeking from this election,” Hanna Luchnikava-Schorsch, principal economist for Asia Pacific region at IHS Markit consultancy told Gulf News.
She, however said big bag reforms are unlikely before the 2019 general elections.
“After two controversial reforms in 2016 and 2017, like demonetisation and unified Goods and Services Tax (GST), Prime Minister Modi is unlikely to take more political risks, and will focus more on populist, social security measures as well as on stabilising growth.”
While demonetisation was introduced to tackle corruption, GST was aimed at simplifying tax procedures in the country. Both measures proved unpopular with people and hit the businesses of many traders across the country.
Commenting on India’s economic growth next year, she said the economy is expected to recover due to stronger domestic demand and grow at 7.4 per cent in fiscal year 2018.
“The current slowdown in household spending should see a turnaround from the last quarter of fiscal year 2018, supported by the state government salary and pension hikes and farm loan waivers by several states,” said Luchnikava-Schorsch.
“Business investment should also improve on the back of stronger consumer spending, easing financial stress among Indian corporates, and improving bank credit. After slowing to a projected 6.7 per cent growth in fiscal year ending March 31, 2018 (FY2017), Indian economy is expected to recover to 7.4 per cent in FY2018.”
Echoing similar views, a New Delhi-based commentator and a faculty with Observer Research Foundation, MP Vidyadharan, also indicated about more reforms in the next two years to boost economy and create employment.
“We can see more reforms coming in the next two years of Modi’s term as he tries to improve creation of jobs for youth and lessen the burden on the agriculture sector.”
With the economy now gradually moving towards stability after demonetisation and GST, it is expected to become stronger in the years ahead and attract more FDIs [foreign direct investments] with the reforms, Vidyadharan said.
