The withering maxim holds good still for Indian trade and commerce. Riding on the back of years of policy intervention and economic reform, India has found pride of place worldwide as a trade hub and market. This pride of place comes with a caveat – that without fail, reform has to keep galloping. Thus, even in today’s aftermath of a ‘no majority’ ingredient thrown into the Parliament potpourri, the economic broth has to keep brewing. Reform and business policy overhauls just have to continue.

There is no other option before India, coalition or not. Delicate domestic compulsions and a highly volatile global economic equation have already decided the future for us, so much so that not even the life- and longevity-threatening pushes and pulls of a coalition Government can rein in this runaway steed anymore. If this horse stops running, it stops being. Period.

That no political party could muster a majority in the 18th Lok Sabha elections is already in the past. Gone are the days when elements in a patched-up Government stalled economic initiatives. Even historically, such incidents have never really borne fruit. Let’s take a look…

Congress Minority Government, 1991-1996

In the context of this article, it is quite remarkable to mention that India’s liberalisation process  was initiated by a minority Government in the 1990s led by the Congress, and supported by the Janata Dal. Manmohan Singh, the then Finance Minister, is considered the architect of economic reforms, working under the benevolent gaze of Prime Minister PV Narasimha Rao. 

Through the tenure of that Government, from 1991 to 1996, industrial licensing was abolished, except for a handful of strategically important industries. Under the Monopolies and Restrictive Trade Practices (MRTP) Act, companies with assets exceeding Rs 100 crore came under special scrutiny at that time, the intent being to restrict the concentration of economic power; these restrictions were summarily abolished.

Earlier, Foreign Direct Investment (FDI) was allowed only in a few ‘priority’ industries after a case-by-case processing of applications. The Government, however, freed FDI up to 51 per cent, with even higher stake selloffs considered on the merits of each case. Foreign technology agreements, earlier needing individual approval, became eligible for automatic approval, provided that royalties and technology transfer fees were within specified parameters. Substantial liberalisation of trade policy was also undertaken.

Financial sector reforms were also initiated, with qualified foreign institutional investors (FIIs) being allowed to invest in shares of listed companies on India’s stock exchanges.

United Front Coalition Government, 1996-1998

The Narasimha Rao Government was tailgated by another coalition, this time involving 13 political parties. The United Front (UF) government was in power from 1996 to 1998, with P Chidambaram as the Finance Minister. The UF Government continued to further streamline tax reforms initiated by the earlier regime, while also pushing for the opening of the insurance sector to private players, with foreign companies allowed to acquire up to 26 per cent equity. However, political resistance saw this move being shelved temporarily.

The Government also initiated the process of reducing the number of products reserved for small-scale sectors. It also set the stage for the privatisation of public sector enterprises by setting up the Disinvestment Commission. Import duties were slashed to bring customs duties down to East Asian regional levels by 2000. The big-ticket shift in trade policy came in 1997, with India signing the World Trade Organization draft, along with 127 other countries.

National Democratic Alliance Coalition Government, 1999-2004

Continuing the trend of coalition governments at the Centre, the next Government was a 13-party National Democratic Alliance (NDA) government led by Atal Bihari Vajpayee of the Bharatiya Janata Party. The post of Finance Minister was held by Yashwant Sinha till July 2002, after which Jaswant Singh took over till the end of the term.

A new, separate disinvestment ministry was created and the Government divested stakes in PSEs such as Bharat Aluminium Company, Hindustan Zinc, Indian Petrochemicals Corporation, and Videsh Sanchar Nigam Limited. The first NDA Government’s greatest achievement was perhaps the ‘Golden Quadrilateral’ project, connecting India’s four major metros. Highway projects were undertaken under the National Highway Authority of India (NHAI) based on the private-public partnership (PPP) model.

This Government also began the process of further opening up the telecom sector. The Fiscal Responsibility and Budgetary Management (FRBM) Act was introduced in 2003 to move to a targeted fiscal and revenue deficit regime.

In the Year 2000, the Government constituted a committee headed by then West Bengal finance minister Asim Dasgupta (CPI-M) to initiate a countrywide goods and services tax (GST) regime. The ban on imports of consumer goods was also lifted in 2002.

United Progressive Alliance Coalition Government, 2004-2014

The next coalition Government was the United Progressive Alliance (UPA), supported by diverse political parties. Initially, the Left parties also extended their support before pulling out in 2008. The UPA government reaffirmed its commitment to fiscal consolidation, as prescribed in the FRBM Act.

The gradual approach of import duties’ reduction continued and the scope for FDI was expanded in telecom from 49 per cent to 74 per cent and in aviation from 26 per cent to 49 per cent. FDI in retail was introduced, initially for ‘single brand retail’. Extending the PPP model, UPA also launched an ambitious infrastructure development programme cutting across sectors such as roads, ports, airports and power generation. The dominant strategy was to rely on the PPP model, wherever possible.

Apart from initiating Aadhar (to boost financial inclusion), the UPA government carried on the process of implementing GST. A Bill was introduced in Parliament but was stalled due to opposition from BJP-ruled states.

National Democratic Alliance Government, 2014-2024

In 2014, the second NDA government came into power. Though there was an alliance in that year and subsequently in 2019, the BJP on its own crossed the majority mark in Parliament both times. NDA-II carried on down the FRBM path, with added emphasis on ease of doing business. To attract FDI, the defence sector was opened up, along with raising the equity cap in the insurance sector from 26 per cent to 49 per cent. The government also carried on infrastructure development through a mixture of public investment and PPP.

However, in the aftermath of the US-China trade war, customs duty was raised on several items, a notable break from the past.

The Code on Wages (passed in August 2019), the Industrial Relations Code, the Code on Social Security, and the Code on Occupational Safety, Health and Working Conditions (all passed in September 2020 in Parliament) were introduced, but are yet to be implemented.  Central trade unions organised strikes against these codes, alleging that they would take away social and economic security from workers, particularly in the informal sector.

The now-infamous farm laws were passed to deregulate the system of Government-run wholesale agriculture markets, allowing farmers to directly sell to the big corporate buyers. However, protracted protests by the farmers compelled the Government to repeal the laws.

Brute Majority Can Fail Where Even Coalitions Succeed

From the instances cited above, it is quite apparent that neither a single-party majority nor a coalition Government can decide the trajectory of economic reform anymore. What matters most are issues and current relevance, combined with the mood of the people. Look at the three farm laws, which even the brute majority of a single party could not implement.

Different parties are scrutinising the mandate of the 2024 elections. What every single one of them will end up identifying as pivotal points are growing inequality and unemployment across the nation. Inferences drawn from such analyses, not the coalition nature of the Government or otherwise, will decide the future course of action.

Internationally too, many an epoch-making event has occurred since 2018 – the US-China trade war, the COVID-19 pandemic, the Russia-Ukraine war and the Israel-Palestine conflict, amongst others. Under the changing circumstances, economies are looking inward to protect domestic industries and employment.

In turn, multilateral organisations such as WTO are struggling to remain relevant, unable to keep up with the paradigm shifts taking place across the globe. Again, compelling global considerations, along with domestic post-poll political post-mortems, will determine the future of economic reform, similar to what is being witnessed in India. Over time, a concerted picture will be drawn, one that clearly depicts the fact that coalition is now trivial.