Polls Over, Business Keeps Its War Plans And Policy Wishlist Close To The Chest

The elections are done and dusted and it should be time for corporates to get on with the brisker side of business. But Indian firms appear to be waiting for greater clarity before reeling off their wishlist of policy sops and booster shots

Jun, 06, 2024 · 6 min read

The nitty-gritty of elections and poll results is done and over with. This is typically the time that corporates stand tall before the easel with paint and brush in hand, getting ready for the task of re-designing the business canvas. But after a decade of ‘normalcy’, the picture is markedly different this time. In the new political scheme of things, India’s companies seem inclined to play wait-and-watch for a bit, seeking more clarity before revealing their wish list of policy sops and booster shots.

As if in planned unison, Indian companies and trade bodies contacted for their expectations from the new Government sought more time. A few politically correct individuals did insist, though, that even in the fresh, after-results scenario, “business will remain as stable and robust as in the the last five years”. Trade federations and analysts from overseas were more forthcoming, admitting that the new, numbers-slimmer Government may not be able to “sustain its preferred brisk pace, especially in policies related to fiscal tightening”.

The last two elections gave a thumping majority to the Bharatiya Janata Party-led NDA Government and policies were pushed through quickly. “A narrow margin this time could decelerate ambitious moves,” Moody’s Ratings said. “There is also the risk of increased populist spending to maintain political support,” it added.

In simpler terms, this means that operating in the unfamiliar setting of someone – read ‘coalition partners’ – keeping a close watch on all financial moves, the new Government would be hard-pressed to push through initiatives or indulge in policy announcements that do not easily go down with the common man.

By and large, India Inc. expects the new Government to continue driving Corporate growth by addressing taxation issues such as the variable Goods and Services Tax (GST) regime, despite the latter’s depleted numbers in the Lower House of Parliament. GST has been a contentious issue since its implementation. It was a burning election plank as well, with detractors calling for its immediate consolidation into a single-rate system. Other policy expectations include sustainability and green initiatives. A few favoured the MSP regime on foodgrain too, and expressed hope that its implementation would happen soon.

What is being sought by industry is a continued focus on infrastructure development, particularly in sectors such as roads and highways, real estate, airports, and dedicated freight corridors. The inception-to-execution model adopted by the central and state governments has spurred growth, said Gaurav Mavi, Co-founder of real estate firm BOP Group in an interview. “Infrastructure and real estate should remain a top priority for leaders and bureaucrats.”

The real estate sector has been seeking a revision of the GST rate from the current 5 per cent to zero to help average homebuyers, arguing that India’s middle class needs this fillip, especially as it already faces stiff capital gains tax (CGT) and high stamp duty payments. The sector has also been seeking lower long-term capital gains tax (LTCG) on property re-sale, insisting that this would lead to increased investments and grow the industry.

Maruti Suzuki Chairman RC Bhargava underlined the need for flexibility and duty relief on green initiatives. “We are starting production of Electric Vehicles by the end of the fiscal and our EVs will be available in 2025,” he said. The Government has been focussing strongly on this space and has already launched a Production-Linked Incentive (PLI) scheme to boost local manufacturing of advanced chemistry cell batteries (ACC) and solar photo-voltaic (PV) cells to provide an impetus to electric and hybrid vehicles.

The freshly-dissolved Government – sitting MPs and the Prime Minister tendered their resignations as per the norm on Wednesday – had targeted a lower fiscal deficit of 4.5 per cent of the Gross Domestic Product (GDP) in FY 2025-26, from the projected 5.1 per cent in March 2025. That could now be a tall order, market watchers feel, adding that the fiscal deficit is likely to be nearer to 4.9 per cent in the changed scheme of things.

The saviour from the fiscal perspective is the Reserve Bank of India’s (RBI) record Rs 2.11-lakh-crore surplus transfer to the Government, announced on May 22. This payout, 141 per cent more than the Rs 87,416 crore transferred last year, would standalone be enough to shore up the deficit by a massive 0.4 per cent. But again, the additional spending of such a large corpus may be difficult for the Government to pull off in the eight months left in the financial year after the announcement of the full Budget in July.

As mentioned, the fragile Climate Change sentiment is demanding renewed emphasis on sustainability and attendant commitments to green industrialization. Pressure is mounting, especially as poll results were announced just as the Capital city of New Delhi reeled under sizzling temperatures of around 50° Celsius for the first time in recorded history. Perhaps sensing the heated emotions, PM Narendra Modi said after the results: “Be it green energy or green mobility, we will take India to the forefront.”

In turn, policy experts remained unanimous in their view that the new Government, likely to be sworn in on Saturday, would continue with its focus on infrastructure-led growth, investor-friendly policies, enabling reforms, and ease of doing business. Last week, S&P Global said historically, India had been on a high growth path with consensus on key economic policies. “Pro-growth policies, sustained infrastructure investments, a drive to reduce fiscal deficit – all have produced good outcomes and this will continue in the coming years,” an S&P analyst said.

Even as time to file this report closed in, repeated outreach to three of India’s four-largest corporate groups elicited no response. The fourth only stayed on the line long enough to mutter: “Everyone is watching quietly. Any hunter worth his salts studies the lay of the land and the direction of the wind before entering the jungle.” Thus, it appears it will be a while before India’s corporate jungle pulls out its roses, thorns, and spears and makes its presence felt through its policy wishlist.

The Bombay Stock Exchange Sensex had no such qualms, though, and continued with its roller-coaster joyride. Having peaked at a lifetime high on the announcement of Exit Polls, which predicted a record victory for the BJP, it shed just as much weight when the results were actually announced. A day after the results, the Sensex decided that its appetite had been whetted enough for it to jump right back in and regain lost ground. That, perhaps, is the reason it is called the ‘Sensitive Index’.

(The writer is a veteran journalist and communications specialist. Views expressed are personal.)

Polls Over, Business Keeps Its War Plans And Policy Wishlist Close To The Chest

The elections are done and dusted and it should be time for corporates to get on with the brisker side of business. But Indian firms appear to be waiting for greater clarity before reeling off their wishlist of policy sops and booster shots

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