Seizing the Reform Moment

Elections, it can be safely said, have consequences. When the Bharatiya Janata Party ended up with a sub-par score in the 2024 Lok Sabha election, Modi 3.0’s political signalling was keenly awaited. The first Budget of the new government reflected the messaging with plans for a major scheme offering corporate internships to non-elite students along with a renewed focus on farmers and women.

There were three schemes for employment and skilling. The government would provide a one-month wage to new entrants in the work force in three instalments, reimburse EPFO (Employees Provident Fund Organisation) up to Rs 3,000 a month for two years for new hires and incentives to employees and employers over a period of four years. There was a skilling programme and an ambitious initiative for internships to non-elite qualified youths, described by an official as fitting “square pegs in round holes”, a process hoped to benefit both sides of the proposed deal.

The agriculture component promised to improve research, develop cooperatives and include one crore farmers in natural farming while developing digital technologies for crop surveys. The constituencies that need acknowledgement in a political document like the Budget received due recognition. But the Budget pledged to review the 1961 income tax act, make litigation and appeals less cumbersome and deepen the tax base. It is on these counts that the forthcoming Budget will be closely evaluated. Has the government moved along this path?

No political party or leader wants to be tone deaf to election results. The employment, skilling and farm centric initiatives took note of the electoral message. In the past too, the Bharatiya Janata Party brass has been fleet-footed in recognising the need for course correction as it did after setbacks in state polls in the winter of 2018 and quickly brought in an EWS (economically weaker sections) quota to allow the backward among forwards to access jobs and education in state-run institutions. Now, the gaze of commentators and political pundits is on the reform push at a time when growth has slowed.

The spending cycle was subdued during elections and the growth rate in the final quarter of FY 24 is expected to shake off this inertia but it is the overall reform signal that is keenly awaited. This would include concrete steps to reduce red tape of compliances for individuals and businesses, better accountability of regulators and measures to make India’s urbanisation less chaotic and messy. The last will involve incentivising reform of local body governance through carrots and sticks.

The slow down in consumption has given wind in the sails for arguments supporting tax rationalisation that will leave more money in the pockets of common people. An even more pressing mission might be initiatives to increase the tax net and deliver visible change in education, health and civic infrastructure. It is not that these impulses have been missing. After all, the central capex has been steadily rising leading to a multiplier effect. Now is the moment to set India on the path to developing institutions that truly meet the needs of an economy vying to be become the third largest in the world.

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