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What Cards Will BJP Play For Elections?

By A K Bhattacharya
June 26, 2023 10:44 IST
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Elections may be a few months away, but the government may get into election mode much earlier than that, predicts A K Bhattacharya.

IMAGE: Union Home Minister Amit A Shah at a pre-election meeting in Durg in Chhattisgarh, June 22, 2023. Photograph: ANI Photo
 

The Union government will soon be in election mode. This should cause no surprise.

With five state assembly elections to be held in December 2023 and the general elections scheduled for May 2024, this is only to be expected.

At the political level, the leadership of the Bharatiya Janata Party has already started deliberations over the kind of campaigns the party should launch for the forthcoming assembly elections and the Lok Sabha polls.

Should the BJP campaign in the states focus on the 'double engine' factor (the benefits of having the same government at the state and at the Centre) or lay more emphasis on the performance of the state governments and of their local schemes?

As for the national elections in May 2024, should the BJP campaign rally around the question of leadership (Narendra Modi versus Rahul Gandhi)?

While these political strategies will certainly hold the key to the ruling party's electoral fortunes, no less critical will be the role of the government's decision-making on economic policy matters in the run-up to the elections.

From that perspective, it would be interesting to assess whether the government has already got into election mode or what decisions it could make in the coming months to improve the BJP's electoral prospects.

In this exercise, reviewing what happened during the run-up to the 2019 general elections would be instructive.

In early July of 2018, the government announced a steep hike in the minimum support price (MSP) for kharif crops for the 2018-2019 marketing season.

According to Citi Research, the kharif crop weighted MSP index rose by 15 per cent in July 2018.

This was the first year when the Modi government was implementing its promise of fixing the MSP in a way that farmers received a 50 per cent margin over the cost incurred by them in producing the crops.

Remember that this was followed by the announcement of the Pradhan Mantri Kisan Samman Nidhi in February 2019, under which the Centre began distributing ~6,000 every year as minimum income support to each farmer family with land holdings.

The strategy of raising MSP for kharif crops before the elections was employed earlier as well.

In the last week of June 2013, the United Progressive Alliance government increased the MSP for kharif crops for the 2013-2014 season by an average 19 per cent, and five years earlier, in May 2008, the increase was by 34 per cent.

The increase in the MSP during the pre-election years has been much more than that in other years.

In December 2018, the government also facilitated a sharp cut in goods and services tax.

The GST Council met to approve a reduction in rates for 17 categories of goods.

There were no increases in the GST rates to adjust for the revenue loss on account of the reduction, even though many states were apprehensive about the move.

There was no attempt at reducing the number of GST rate slabs either.

This was clearly an attempt at tailoring the GST rates in a way that the ruling party's electoral prospects improved.

The Reserve Bank of India is an independent body that apart from regulating banks also reviews and manages monetary policy.

The trajectory of retail inflation in the last quarter of 2018 was quite benign, with the Consumer Price Index showing a rise of 3 to 4 per cent during this period.

Yet, the RBI, led by a governor who was responsible for setting the inflation goal of 4 per cent and was keen to prevent any breach of that target, maintained the repo rate (the rate at which banks can borrow from the central bank against securities) until December 2018 at 6.5 per cent.

The repo rate did come down to 6.25 per cent, under a new Governor. But that was in February 2019, a couple of months before the general elections.

What are the signals that one notices now in the run-up to the assembly elections in December 2023 and the general elections in May 2024?

The MSP for kharif crops, announced in early June, saw an average increase of about 7 per cent, much higher than the increases announced in the previous four years.

No major cuts in the GST rates are on the cards. GST collections so far have been maintaining a decent growth rate.

But whether the GST rates are reduced in the coming months before the forthcoming elections is not clear, although that possibility is not ruled out completely.

The RBI has taken a firm stance on maintaining the repo rate at 6.5 per cent and has so far resisted the temptation to cut the rate.

But four more monetary policy reviews are to be undertaken before the end of the current financial year.

Will the central bank cut the repo rate before the elections?

That will depend on whether the retail inflation rate is reined in at the target rate of 4 per cent and if the central bank's stance is influenced by the government's political imperative of doing a good turn to borrowers by lowering interest rates.

What else could the government do to improve the ruling party's electoral prospects in the coming months? Three possibilities cannot be ruled out.

One, retail prices of petroleum products, which have stayed unchanged from what they were almost a year ago despite a fall in international crude oil prices, could be cut.

On paper, oil companies are free to fix retail prices of petroleum products, but in the last few years it is the government that has been influencing such decisions.

With elections approaching, it would be an ideal time for the government to nudge the oil companies to cut retail prices for these petroleum products and improve the electoral prospects of the ruling party.

Two, last December, the government had decided to supply free food grain under the National Food Security Act to an estimated 810 million beneficiaries till the end of December 2023.

The government will have to take a call on whether to extend this scheme or stick to the deadline announced a year ago.

Given that five assembly elections would take place in December 2023 and the general elections would follow five months later, the government will be tempted to extend the free food grain supplies for a few more months, if not make the scheme permanent.

Three, the interim Budget will be yet another opportunity. The sanctity of interim Budgets avoiding any major policy announcements or fiscal policy changes is no longer honoured.

Many finance ministers in the past few years have announced taxation or policy changes through an interim Budget.

The most egregious of all such instances was in 2019 when the interim Budget announced the launch of the Pradhan Mantri Kisan Samman Nidhi scheme with an annual outlay of over Rs 75,000 crore (Rs 750 billion) and offered tax concessions to individual taxpayers.

The next interim Budget to be presented in February 2024 could follow that tradition and even go beyond that by extending the scope of job reservations to further bolster the ruling party's electoral prospects.

In sum, elections may be a few months away, but the government may get into election mode much earlier than that.

Feature Presentation: Aslam Hunani/Rediff.com

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A K Bhattacharya
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