Critical economic reforms in the country

23/10/2014

The Bharatiya Janata Party's victory in Maharashtra and Haryana will help the Narendra Modi Government to more effectively push through critical economic reforms in the country. Both these States are economic hubs. While the Centre can unleash reform measures, the success of these hugely depends on the extent to which the States are on board. Whether in the area of land acquisition or labour Act changes, the States can play a make-or-break role. With Maharashtra and Haryana to be ruled by the BJP, there will be greater synergy between these two States and the Centre. While this is not to say that non-BJP regimes in States will necessarily block reform measures, the fear of politics dominating larger economic interests is always there. For instance, it is difficult to imagine that either the ruling Trinamool Congress in West Bengal or the Samajwadi Party in Uttar Pradesh or the Janata Dal (United) in Bihar will whole-heartedly embrace the reform initiatives. One can only hope that they align with the Centre for the larger national good. The Union Government's decision to go in for e-auction of coal blocks is a fit case to demonstrate the importance of the role of States in marching ahead. Since the proceeds of e-auction would go directly to the States where the coal blocks are located, States such as Jharkhand, Odisha, West Bengal and Chhattisgarh would be the major beneficiaries. Interestingly, all but Chhattisgarh are ruled by non-BJP parties. The Government's commitment is evident from the Centre's recommendation to promulgate an ordinance to facilitate e-auction and complete the process within three to four months. In fact, with nearly 37 per cent of the national gross domestic product now in the hands of BJP-ruled States with the addition of Maharashtra and Haryana to the party's kitty, Mr Modi's Government has the heft to push through further reforms in the coming months. Diesel prices have already been deregulated and gas pricing fixed after months of suspenseful wait.
The Union Government and Mr Modi personally have repeatedly emphasised the need to have States on board in the Government's reform push. The success of his ‘Make in India' campaign and the proposed Goods and Services Tax regime hinges greatly on the cooperation he receives from the States. To that extent, the establishment of a BJP Government in Haryana and Maharashtra makes things easier for the Centre. This also explains the party's aggressive political push to bring as many States as it can under the BJP's umbrella. Barring in Kerala and Karnataka, the Congress does not have its Government in any of the major States that are a key to the BJP's economic drive. Two other economically crucial States, Odisha and Tamil Nadu, are ruled by regional parties that are at least not openly hostile to the Centre's desire for economic reforms. But it is West Bengal that has been a laggard in economic progress and has not yet shown the stomach for changes despite having a Finance Minister who has worked closely with industry for much of his professional life. The BJP is keen to correct the situation, hence its efforts to expand its political base in that State. It is to be hoped that the shine of States ruled by BJP and its partners will dazzle others enough fall in line.

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