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Focus may sharpen on reforms after NDA's Bihar poll loss: India Inc

The Nitish Kumar-led Grand Alliance's overwhelming victory in the recently concluded elections may embolden other parties to unite in their opposition to the ruling NDA; reform measures like GST may face delay

Published: Nov 9, 2015 05:24:33 PM IST
Updated: Nov 9, 2015 06:12:17 PM IST
Focus may sharpen on reforms after NDA's Bihar poll loss: India Inc
Image: Adnan Abidi / Reuters

The overwhelming victory of the Nitish Kumar-led Grand Alliance in the Bihar assembly elections is a clear message to the Narendra Modi-led Bharatiya Janata Party (BJP) government to rein in the fringe elements around it, whose comments and actions are stealing the focus away from the development agenda with which this administration came to power, industry leaders and analysts say.  

The Bihar poll results were declared on Sunday and the Grand Alliance – comprising the Janata Dal (United), Lalu Prasad Yadav’s Rashtriya Janata Dal and the Congress – was handed an overwhelming majority by the state’s electorate, even as the BJP came a distant third.

While some industry watchers are sceptical about the adverse impact that the BJP’s loss in the Bihar elections may have on future state elections that it will contest and its potential to push through critical economic reforms (especially in the Upper House of Parliament where members are nominated by the state legislature and where the BJP is in a minority), others believe the defeat may be a blessing in disguise, allowing the Narendra Modi-led BJP government at the Centre to course correct before it is too late.   

“The Grand Alliance’s thumping victory signals that people want development, but not at any cost,” Kiran Mazumdar-Shaw, chairman of Bengaluru-based Biocon Ltd, wrote on Twitter. “Vitriolic and divisive rhetoric has not worked.”  

In response to a comment on her Twitter feed, Mazumdar-Shaw said the BJP would have done better “if they had stuck with (the) development agenda”.  

“Not good news for the development agenda of India, but the fringe and intolerant elements hopefully will be reined in,” said Harsh Goenka, chairman of RPG Enterprises, on his Twitter handle.    

Analysts are unanimous in their opinion that coming close on the heels of BJP’s defeat in Bihar, the winter session of Parliament that is slated to start on November 26 will be less productive and may even be a washout, with a unified opposition emboldened by Nitish Kumar, Lalu Prasad Yadav, and the Congress’s recent performance in Bihar.  

In the long-run, smaller regional parties may take heart from the RJD and JD(U)’s performance in Bihar and put up a better fight against the NDA (National Democratic Alliance, led by the BJP), which had been gaining ground in 2014 based on the promise of ‘Achhe Din’ by Prime Minister Narendra Modi.   

“The results may embolden smaller regional parties to band together in state elections against the NDA [West Bengal, Kerala, Assam and Tamil Nadu in 2016 and UP, Punjab, Goa, Uttarakhand and Manipur in 2017]. This may be seen as a weakening of leadership at the Centre,” says a research report by Religare Institutional Research, dated November 9.    

A Nomura report dated November 8 states that Nitish Kumar's victory might embolden other regional parties, whose confidence suffered a setback due to Modi's rise. It is possible that these regional parties will coalesce in a united front to fight against the NDA at the Centre in the 2019 general elections, the report said.

Analysts are concerned that the recent political developments unfolding in the country may delay the pace at which economic reform like the much-awaited Goods and Services Tax (GST) are implemented. Reform measures like the GST need to be approved by both houses of Parliament with a two-third majority. While the NDA has the numbers in the Lok Sabha (Lower House of Parliament), it is in a minority in the Rajya Sabha (Upper House). And the defeat in the Bihar elections doesn’t help the NDA’s cause of improving its strength in the Rajya Sabha, though numbers show that they won’t lose further ground either.  

“GST and some other important pending reforms may be put on the backburner for the time being and the focus may shift to reform progress in economic spheres that do not require legislative process,” the Religare report said. “A more conciliatory approach (with respect to the opposition) on the part of the NDA next year along with a possible decline in the Congress’s strength in the Rajya Sabha holds some hope for GST and other pending reforms.”

But the government is confident that of being able to push through with its reforms agenda despite the setback in Bihar. Finance minister Arun Jaitley says that the Bihar poll verdict wasn’t going to be a setback to the national economy and that his government would continue to pursue structural reforms, including introduction of GST.

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