By now it is well-known that the NDA campaign, led by Narendra Modi, is wildly popular with corporate India. But what does corporate India want from this new government?
Ask and you get a mist of buzzwords: ‘decisive leadership’, ‘strong government’, ‘pro-market’, etc. These terms, however, can mean almost anything. What concrete policies are being sought? Everyone seems to have a slightly different list, but three demands are consistently highlighted.
The first is easier environmental clearances and land acquisition. The second is a ‘stable policy environment’, in which the primary concern is against taxes — such as the levying of minimum alternate tax on SEZs. Third, cuts in the fiscal deficit.
Are these goals achievable? Let’s take the first one. It’s often been noted that 96-99% of the clearances sought are given. Moreover, it was only in 2011 that clearances suddenly came into public debate. What is the issue then? It seems likely that the rise in the importance of clearances was linked to three sets of events. First, there was the scrutiny of government discretion, which emerged with the 2G scam. Second, the infrastructure sector slid into debt. Between 2010 and 2012, the non-performing assets of public-sector banks rose by 95%, with the power sector accounting for the largest proportion of those, and infrastructure accounting for 35% of all loans to industry. Under pressure, companies blamed the clearance process.
But infrastructure projects were anyway getting the clearances they desired, and since 2012, the UPA government has been as committed to ‘fast clearances’ as the NDA will be. The real obstacle has been the third change — growing public anger, both against legal violations (corruption) and in specific project areas. In 2010, just before clearances were suddenly put forth as a ‘key issue’ for business, the central government was compelled to reconsider forest clearances in two major cases due to popular protest. Indeed, many power projects are held up precisely because of protests in these cases.
The demand for ‘clearances’ is, therefore, essentially a demand for the government to use greater force against protests. However, in the long term, in order to exercise repression frequently, a government must have a certain degree of popularity. This is where corporate demands two and three — for ‘stable’ lower tax demands and cuts in the fiscal deficit — come in the way.
The second goal points to the true interpretation of the third one; it’s not about the fiscal deficit as such but about reducing spending on public services while increasing tax exemptions and loan ‘restructuring’ for companies (and they’re going to need a lot of that). In short, it’s a demand for transferring resources from public services to the corporate sector. This will increase unpopularity even more. This government will also be even more constrained than the previous NDA, with easy availability of foreign finance increasingly a thing of the past.
Then, of course, comes the last hope for dealing with popular anger — the belief that, as Manas Chakravarty put it candidly in Mint, “The BJP has its Hindutva ideology, which diverts attention from issues of social justice... that is why the markets believe it will be less populist.” Ironically, corporates saying that the BJP will only ‘focus on development’ are creating a situation where the opposite will happen.
Corporate India wants both to have its current policy agenda and a politically stable government that will deliver that agenda. But it fails to realise that the first goal will undercut the second, and meanwhile harm us all.
Shankar Gopalakrishnan is member, Campaign for Survival and Dignity, an NGO
The views expressed by the author are personal