On the morning of 4 June 2024, counting centres across the country were all geared up to finally open the ballots, marking the end of nearly 2.5 months of election campaign, the second longest since the country's independence.
Three days before that, various exit polls had given the incumbent Bharatiya Janata Party (BJP) a victory surpassing its 2019 performance. Many suggested that the BJP-led National Democratic Alliance (NDA) would cross the 400-seat-mark and turn the BJP's' “Abki Baar 400 Paar” slogan into reality.
With the exit polls having got their numbers right in the previous elections, most people believed that Prime Minister Narendra Modi would enter his third term with a greater mandate.
As the counting of votes polled on electronic voting machines (EVMs) began at 8:30 AM, 30 minutes before the stock market's opening, the initial trends hinted at a tight contest.
As the markets opened at 9 AM, it began with a cut. By 10:30 AM, the realisation had started sinking in that something different was happening, contrary to what the exit polls had suggested.
The benchmark index, Sensex, crashed nearly 6,000 points intraday as investors realised that the BJP on its own might not attain a simple majority and would have to depend on its allies, making them wary of the return of coalition politics and the progress of hard-hitting economic reforms. By closing time, the result trends had stabilised and both the main indices - Sensex and Nifty- ended nearly 6 per cent lower.
The next day, both the indices recovered 3 per cent on the back of NDA allies supporting Prime Minister Modi's third term in office. Brokerage firm Emkay Global Financial Services summed up this sentiment very succinctly. "The power equation and possible political compulsions could lead to policy re-think by the NDA, but we do not think there will be a material change in the broad macro backdrop,” Emkay said in a note.
The first test for the BJP in steering these political compulsions arose when media reports stated that its two key allies, the TDP and JDU, may lobby for important cabinet portfolios such as home, finance, transport and railways. On the evening of 10 June, a day after the oath-taking ceremony of Modi's largest administration, the portfolio allocation of ministries saw the BJP retain all key portfolios. This was a strong signal of continuity by the Prime Minister on the policy reforms front as well as on the political front, asserting his authority over coalition politics dynamics.
At the time of writing, both the indices, buoyed by this sentiment, closed at their fresh all-time highs with their sights fixed on the upcoming full budget in July.
After the oath-taking ceremony and the allocation of portfolios, BW Businessworld surveyed 500 business leaders to determine their expectations regarding various policy aspects of this government. The survey results indicated that four ministers among Team Modi 3.0 will be crucial in propelling India's next economic surge.
The survey respondents indicated their expectations of economic reforms, national defence, infrastructure development, doing business, foreign investment, and skill development.
Economic Reforms
Under economic reforms, 48 per cent of the respondents rated tax reforms as their top expectation. Tax rationalisation is keenly anticipated every year in the budget. In its previous two terms, the government acted on this by bringing in the Goods and Services Tax (GST), raising the rebate limit in income tax and reducing the corporate tax rate.
During the elections, a video clip went viral when a stock broker asked Union Finance Minister Nirmala Sitharaman about certain taxes on stock market transactions, and the masses echoed the sentiment of the broker and the burden of taxes.
The expectation is to revise personal income tax slabs, the limits for 80C and standard deduction, reclassify certain items and the tax levied on them under GST. The summer in India this year, for example, clearly made people realise that air conditioners are no longer a luxury but a necessity; hence, the 28 per cent GST on it may not be justified.
“In its previous tenure, the government aimed to enhance fairness and transparency through initiatives like faceless assessment and appeals, digital filing of various tax forms, simplified compliance procedures via pre-filled returns, and capturing taxpayer information in the Annual Information Statement (AIS), says Rakesh Nangia, Chairman, Nangia Andersen India.
“Moving forward, the government may consider lowering progressive slab rates for individuals to align them more closely with existing presumptive taxation schemes for businesses and professionals. Additionally, there may be an initiative to decriminalise certain old provisions, replacing them with penalties and/or interest to ensure stricter but fairer compliance measures,” Nangia adds.
National Defence & Security
While the majority (53 per cent) of respondents voted for modernising the armed forces and strengthening border infrastructure given the hostile neighbours, the country has a big business opportunity in promoting indigenous technology and the Make in India programme, which the government pushed in its last two terms.
In one of its recent reports, Nomura says that India's defence sector presents an ordering opportunity worth $138 billion between FY24 and FY32. "India's defence sector is witnessing significant growth driven by increasing defence budgets, modernisation efforts, and the government's emphasis on indigenous manufacturing through initiatives like Make in India,” says the research and broking house.
"India's strategic location in the geopolitically significant South Asian region makes defence a priority area for national security as it continues to strengthen its defence capabilities to address regional security challenges," it adds.
The upbeat commentary will likely give the sector enhanced attention in this third term, besides promoting cutting-edge defence research.
Infrastructure Development
If there was unanimity on one thing this election season, it was on this government’s work towards building the road network. Nearly 38 per cent of the respondents voted for the thrust on transportation to continue in this third term.
As the minister in charge of roads, Nitin Gadkari will be responsible for strengthening the road connectivity ecosystem to 15,000 km of access-controlled highways.
The mounting debt of the National Highways Authority of India (NHAI) has also been a persistent concern, standing at Rs 3.4 trillion. The ministry may look at paring it in the next five years.
Finally, after the strides made in the last ten years in promoting and adopting electric vehicles, the government would want to double down on it. Hence, it would have to develop related charging infrastructure and green highways.
For railways minister Ashwini Vaishnaw, his term could not have begun on a worse note. On 17 June, the Kanchanjunga Express was rammed into by a goods train, leading to many fatalities.
The past couple of years saw many such incidents, with the most notable one being the Odisha train collision in June 2023, leading to calls to expedite the development of the Kavach, the indigenously developed Automatic Train Protection (ATP) system. The safety systems, resolving overcrowding and capacity addition will be on his radar.
Then, 22.4 per cent of the respondents voted for doubling down on the energy infrastructure, particularly renewable energy systems. The unprecedented heat wave across the country this summer led to peak power demand smashing previous records, reflecting the need for stability in the grid. With its thrust on renewable energy and the ambitious target of 500 GW by 2030, the government has taken the lead in diversifying India’s energy mix.
However, experts note that challenges remain on the execution front, the exposure to module prices given the import dependency on cell and wafer in module manufacturing and the weak financial position of state distribution companies.
“The tendering activity during FY 2024 reached an all-time high with 47 GW RE capacity bid out, with a greater focus on tenders for round-the-clock and firm and dispatchable renewable energy (FDRE) supply. However, timely signing of the power purchase agreements and execution thereafter also remain important to achieve the scale-up in RE capacity, going forward,” said Girishkumar Kadam, Senior Vice President and Group Head – Corporate Sector Ratings, Icra.
Icra further expects the policy focus to continue towards strengthening of transmission and distribution as well as in storage infrastructure, given the grid integration requirements of renewables & the increasing share of renewables in the generation mix.
Education And Skill Development
Arguably, the most contested issue this election was unemployment. The unemployment rate in India rose to 8.1 per cent in April from 7.4 per cent in March, according to the Centre for Monitoring Indian Economy, compared with around 6 per cent before the Covid-19 pandemic.
While this government was rapped for falling short of its promise of creating two crore jobs a year, many experts call for bridging the skill gap through higher industry-academia collaboration.
Tata Consultancy Services (TCS) recently reported 80,000 open positions due to skill gaps. In our survey, 38 per cent of the respondents called for enhanced industry-academia collaboration, with 20 per cent calling for reforms in higher education and another 20 per cent emphasising vocational training programmes.
“We look forward to a complete overhauling of the education system, with a focus on increasing the Gross Enrolment Ratio in higher education to 50 per cent by 2035. We also hope that the new government will lay a special focus on multi-disciplinary learning, research, innovation, academia-industry partnership, skill-based education and internationalisation of education so that in the coming years, we may succeed not only in improving the GER but also become a global leader,” says Neelima Gupta, Professor & Vice-Chancellor, Dr Harisingh Gour Vishwavidyalaya.
"At IIT Guwahati, we are enthusiastic about the new government directives that prioritize innovation, sustainability, and societal impact. These directives align perfectly with our institution's mission to foster a culture of excellence and entrepreneurship. We are committed to ensuring that our graduates not only excel in their careers but also make meaningful contributions to the nation's progress and development. Through rigorous academic programs, cutting-edge research, and a supportive environment for startups, we strive to cultivate leaders and innovators who will propel India forward on the global stage.
Furthermore, we are particularly excited about the government's focus on enhancing support for translational research and entrepreneurship. This initiative is crucial in bridging the gap between theoretical research and practical applications. By facilitating the transition from laboratory discoveries to real-world innovations, we can accelerate technological progress and deliver widespread societal benefits. Our researchers and entrepreneurs are eager to contribute to this endeavor, working on projects that have the potential to transform industries and improve quality of life," said Prof. Devendra Jalihal, Director, IIT Guwahati.
"Introduction of skill-based subjects such Information technology, Financial Marketing Management, Food Production, Health Care etc and plan to set up multi-disciplinary system have been a very welcome step. These subjects, such as vocational training and practical skills development, aim to equip students with hands-on knowledge that is directly applicable to real-world scenarios. Advantages include preparing students for careers immediately after graduation, reducing unemployment rates, and fostering entrepreneurship from an early age. There is a growing consensus on integrating skill-based subjects into the curriculum. More planned efforts are needed in this direction," said Mohina Dar, Director, Academic Projects, Amity International and Global Schools.
The education ministry will also be tasked with bringing in massive reforms in competitive examinations in light of the recent Neet exam controversy and paper leaks in different states to address the growing distrust in the examination process.
Foreign Investment
India's merchandise exports surged by a mere 1.07 per cent to nearly $35 billion in April, despite global market uncertainties stemming from economic slowdowns and geopolitical tensions, as per data from the Union commerce ministry. Imports, meanwhile, saw a significant increase of 10.25 per cent during the same period, reaching $54.1 billion, primarily due to heightened gold purchases.
The BW Survey saw a whopping 50 per cent of the respondents voting to strengthen the export infrastructure and 21 per cent pushing for the finalisation of key free trade agreements (FTAs).
The World Trade Center, Mumbai, says that finalising mega FTAs with economies such as Oman and the UK may boost India's export of labour-intensive goods and contribute to the country's economic growth.
Apart from expediting these FTAs, Commerce and Industry Minister Piyush Goyal will have the task of addressing liquidity challenges faced by exporters due to the geopolitical tensions and charting out a roadmap to boost merchandise exports to align with the government's target of $1 trillion merchandise exports by 2030.
All Eyes On The Union Budget
The survey reflects broad expectations of the business community regarding what they wish to see the government focus on and how it builds on the progress it achieved in the last ten years. For Prime Minister Modi, reforms with respect to factors of production, mainly land and labour, will be crucial, as well as the continuation of welfare policies of the “Four Major Castes” - Garib, Mahilayein, Yuva and Annadata.
This was reflected in the very first decision that Modi took after taking charge. It included the signing of the release of the 17th instalment of the PM Kisan Nidhi and the first Union Cabinet meeting approving three crore rural and urban houses under the PM Awas Yojana.
Modi’s third administration kicks off with strong economic indicators. India’s GDP growth stood at 8.2 per cent in FY24, and RBI Governor Shaktikanta Das has stated that the momentum is also being “well-sustained” in the first quarter of this fiscal year.
The industry and the markets will keenly await the upcoming Union Budget and the direction it will give to unleash the animal spirits of the Indian economy amid this momentum and continuity in the administration.
