UP election victory may put Modi govt’s reform agenda back on track

New Delhi: The scale of the Bharatiya Janata Party’s (BJP) victory in Uttar Pradesh may embolden the central government to push for economic and social reforms.

Experts say that the remaining two years of the current government at the centre will see bolder initiatives than even the politically risky demonetisation move. These may include labour reforms, revisiting the issue of land acquisition and improving governance.

BJP leaders say that the focus will now be on compliance and improving the ease of doing business. Also, a far more aggressive campaign against illegal wealth is expected, with focus on the implementation of the new benami law in property transactions.

“The win in UP enhances the willingness and the ability of the government to push reforms. Willingness, because the results have made it clear that the people are receptive to signals even if they hurt initially. And ability, because in terms of required numbers in the Rajya Sabha, BJP will make headway. It will take time but they will reach there. These two combined will lead to aggressive economic reforms,” said D.K. Joshi, chief economist at Crisil Ltd.

Prime Minister Narendra Modi on 8 November invalidated high-value currency notes as part of his government’s fight against black money. The currency crunch that followed the demonetization impacted consumption, driving down economic growth.

“There is a need for education and health reforms followed by reforms on land and labour, for which bold public policy measures are required. There is also a need for administrative and legal reforms,” said N.R. Bhanumurthy, a professor at the National Institute of Public Finance and Policy.

“Aadhaar (unique identification numbers) will be integral to the next set of reforms. Land reforms could be taken up aggressively. I am not so sure about the government being aggressive about labour reforms at this point of time,” said Kannan Sivasubramanian, executive vice-president at Aranca, a research and advisory firm.

The mammoth victory pulled off by the BJP in Uttar Pradesh is seen by some as an endorsement of the demonetization drive.

“It (BJP’s win) reconfirms that the politics of development and positive change got accepted over the politics of arithmetic and disruption,” said BJP spokesperson Nalin Kohli.

These reforms may involve efforts to amend contract labour laws and the Factories Act, allowing freer mobility of labour and incentivizing greater participation of women in the work force.