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- The pre-poll manifestos of key national parties diverged.
- The ruling party emphasised on continuity rather than fresh big-bang changes.
- The main opposition party’s manifesto carried populist hues.
- We discuss likely economic implications.
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Ahead of the first round of polling (which starts on Apr 19), the two main political groups – the ruling party, Bharatiya Janata Party (BJP) and Indian National Congress (INC) tabled their election manifestos in the past week. The pre-election opinion polls continue to point towards an overwhelming win for the incumbent coalition led by the BJP. The debate has seemingly shifted away from whether the ruling party will win, to the to the margin with which the party might extend its lead vs 2019 (303 seats).
BJP’s manifesto: Continuity over Big Bang
The manifesto highlighted the work done by the government in the past decade of being in power. Besides reiterating that previous poll promises (for instance, the abrogation of Article 370 in Jammu and Kashmir and the construction of the Ram Temple in Ayodhya) have been achieved, forward-looking plans are to introduce ‘One nation, One Election’ by 2029, besides pursuing the Uniform Civil Code.
Similar to the pre-poll interim Budget, where the ruling central government prioritised prudence over populism (Budget), the manifesto signalled a continuation of existing reforms and social welfare schemes rather than lean towards new big-bang promises, which could carry significant fiscal costs. The ‘Modi’s Guarantee’ document highlighted macro and financial stability as priorities, marked by low inflation, strong external balances, high growth, and fiscal prudence.
Against this backdrop, the government signaled a continuation of the infrastructure push, policies to expand the manufacturing sector, and establishing the country’s position as a voice of the Global South. On the first, the focus will be on improving physical and digital infrastructure, marked by new metro networks, new railway tracks, new-age trains, improved connectivity, new bullet trains, roads, and energy infrastructure. Concurrently, besides expanding the 5G network, improving rural broadband connectivity, exploring 6G technology and the digitisation of land records, amongst others, were highlighted in the to-do lists. Secondly, Make-in-India and PLI schemes are likely to be expanded, with an emphasis on employment creation, simplification of regulatory processes, appropriate infra for manufacturing hubs, and R&D. A mix of traditional and new-age sectors will likely be prioritised, including a globally competitive food-processing industry, and core sectors (steel, cement, metals, engineering etc), besides a push towards indigenous defence manufacturing, pharma, new age semiconductor & chip manufacturing, auto and electric vehicles, amongst others.
Existing social welfare programs are likely to be enhanced with better outreach, including,
- Middle class focus through the provision of high-value jobs, quality healthcare, and infra to improve ease of living, amongst others;
- Affordable housing program to be expanded, with a focus on slum redevelopment, sustainable cities, etc.;
- PM Garib Kalyan Anna Yojana to be a priority, which will continue to provide free foodgrain ration to about 800mn residents;
- Healthcare - will continue to be provide quality free health treatment to up to 500k poor families under Ayushman Bharat;
- Utilities - Under PM Ujjwala Yojana, which has already benefited 100mn with cooking gas connections, will be expanded. Subsidies for solar panels on roofs of ~10mn households up to <300units/ month under the PM Surya Ghar Muft Bijli Yojana;
- Unorganised workers, farmers (continuation of financial assistance to farmers under PM Kisan, farm self-sufficiency, etc.), start-ups, and micro-credit enterprises, will be the other focus areas to boost the economy from a bottom-up approach.
Economic implications
We foresee limited fiscal implications from these announcements as part of these were included in the interim budget and the manifesto did not outline any new big-bang reforms or fresh social welfare spending programs. We maintain our FY25 fiscal deficit assumption at -5.1% of GDP with the existing borrowing program. A broad-based push towards more contentious structural reforms (land, labour, farming, etc.) did not receive a mention in the manifesto, which we are hopeful will still be prioritised if the party returns for a third term. In our view, the incoming government is neither limited by nor will be restricted by the poll promises. To that extent, the scope of reforms can be wider than what has been laid out in the respective manifestos.
INC’s manifesto – shades of populism
As opposition pre-election mandates go, the INC‘s manifesto carried populist undertones to woo votes. Plans are afoot to prioritise macro and market stability reforms, infrastructure push, provisions towards healthcare, etc. Other key announcements included:
- Farmers: After the manifesto’s release, the INC party leader announced plans to waive farm loans in one of the campaign rallies. Details are scant. The manifesto leaned towards providing legal guarantees to the minimum support prices (MSP), which currently works well for selected food groups, including rice and wheat, which the government procures regularly.
- Employment: Under the new Right to Apprenticeship Act, eligible young people will be guaranteed a paid, one-year apprenticeship with a private or public sector company, with the aim of enhancing skills and providing employment.
- Cash transfers: Under a proposed Mahalakshmi scheme, INR 100k per year will be provided to every poor Indian family as an unconditional cash transfer.
- Healthcare facilities will be universal and free in public health facilities, with a state-based model of cashless insurance (up to a threshold) to be adopted.
- Reservations: Plans are afoot to conduct a nationwide Socio-Economic and Caste Census to enumerate the castes and sub-castes and their socio-economic conditions. A constitutional amendment might be conducted to raise the 50% cap on reservations for Scheduled castes (SC) and other groups. A 10% reservation might be made for jobs and educational institutions for Economically Weaker Sections (EWS) across castes and communities.
Economic implications
Implementing these social welfare and populist measures will entail significant fiscal costs, necessitating subsequent revenue-enhancing measures, in the absence of which, the target -5.1% of GDP might be missed by a sharp margin. There is a lack of clarity as to what extent of these measures will be implemented and whether the inherent costs could act as a natural speed-breaker to plans. For a start, a basic universal income, depending on the coverage, annual income threshold, and intended beneficiaries, could amount to 1% to 2.6% of GDP. Besides affecting the repayment capacity of farmers and hurting future access to formal sector lenders, the previous nationwide debt waivers (e.g., 1990 and 2008) have carried sizeable fiscal costs. For instance, the 2008 debt waiver, which targeted certain classes of cultivators for 100% waiver entailed 0.9% of GDP (~37mn farmers), much more than initially estimated. Notably, states have been tapping the loan waiver as a pre-poll sweetener in recent local elections, increasing the fiscal strain on their books. Data shows that the indebted households are primarily farmers with the smallest holdings and the lowest income levels.
In all, voters are likely to weigh these manifestos against their own ground realities, living costs, employment opportunities and growth prospects.
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