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Back to the Future

Why trying to guess the sector and companies that will benefit from the new government is a futile exercise

If you are trying to figure out what the business or economic or investment scenario under a new government, then don’t rely on all the wisdom that poured forth from experts till last week. They were all wrong, even though almost all predicted an NDA victory. In the months leading up to the elections, practically every analyst thought that the BJP would be the largest party, but way short of majority. It was clearly the balanced, sane, consensus view that Narendra Modi would be Prime Minister but would need to get various regional parties on board. We’d be in for yet another five years of good ol’ coalition compulsions, and glacial movement on any fundamental economic reforms.

It’s not my brief to speak about the politics, but on fundamental economic reforms, we are in a whole new world. Even the Narasimha Rao government pretty much shut the reform shop after the initial wave of the bare minimum that needed to be done. Rao faced considerable internal opposition in the Congress to his reforms, especially after heavy assembly election losses halfway through his term.

Now, for the first time ever, there is a government, which of its own free will, will move forward on reforms. There’s no room for doubt on Narendra Modi’s reformist vision, and no scope for any credible opposition to him either within or outside his party. Make no mistake--the genetic blueprint of socialist-leftist economic ideas have burrowed deeply in India’s political template, including in the BJP. If there was a possibility of a government committed to a real move forward on the economy, it was that of a Modi government, distinct not just from a NDA-led coalition government, but even a BJP government in which Narendra Modi was just one element.

Which is just as well, because the fundamental economic challenges that face the country are not of the kind that are going to be solved while wringing one’s hands apologetically about coalition dharma. Take jobs for instances. The numbers tell us that we have added no more than 1 crore jobs in the formal sector in the last decade. For the next twenty years, well above 1 crore young people will enter the jobs market every year. In fact, this number doesn’t even take into account the increasing rate at which women will want to enter the job market. It also doesn’t take into account the fact that in agriculture, half of our workforce together produces 14 per cent of GDP. Have no illusions, there is utterly no way that these many jobs can be created without a massive expansion of manufacturing. And there is no way that can be done without someone putting a large part of the business and labour-related regulatory superstructure to the sword.

It won’t be easy, not the least because of opposition from the Rajya Sabha, but at least we have a government that’ll push hard to get it done, including the great deal that can be done without legislation. In any case, the NDA’s massive numbers in the Lok Sabha have already created the solution to anti-reforms Rajya Sabha. In a joint session of the two houses (which is the constitutional fallback if the Rajya Sabha rejects bills passed by the Lok Sabha), the NDA already has a majority.

For those trying to read the tea leaves in terms of the new government’s impact on business and investments, the message clearly is that all bets are off. You can try and figure out what will happen in the next three or six months. But what Indian industry looks like five years from now, simply cannot be predicted. You can bet on India, you can even bet on many sectors, but perhaps not on any actual company. If the PM can implement the reforms agenda that he has been given the tools to do, then we are bound to get some new and unexpected champions.

The future is unknown as it always is, but hopefully, in a good way.