In India, January every year ushers in a euphoric moment for professionals and businessmen alike due to the old debate built around the general budget with a largely reductionist approach focussed mainly on the income tax ceiling. The purpose here, however, is to broaden our understanding of the dynamics of India’s evolving political economy, and its current trend and direction, because a vibrant democracy without creative efforts to reset economic governance is inconceivable.

It is a daunting challenge before the nation because without innovative reforms not only will our growth curve plateau but also the equity aspect, even within an overall neoliberal competitive scenario, will be scuttled. At the same time, we need to be cautious that now the new anxiety of HMPV virus might engulf the Chinese economy. Moreover, the situation in Bangladesh might challenge expected performance of sub-regional groupings like BBIN, BIMSTEC, apart from India’s Look East policy. As a result, efforts to woo foreign investment may not be as successful at the moment. The current economic landscape in India presents both opportunities and challenges, requiring a delicate balance between growth-oriented policies and inclusive development. A comprehensive approach to economic governance could involve assessing tax structures, promoting innovation across sectors, and strengthening regional economic cooperation both at home and abroad.

Advertisement

Additionally, our policymakers must remain vigilant about global economic trends, now inseparable from health and geopolitical concerns that could potentially impact India’s economic trajectory and foreign investment prospects. On the other hand, India’s economic health will depend not on short-term adjustments like the central bank’s repo rate, but on long-term vision. Since the 18th Lok Sabha election in early 2024, when the BJP’s majority got shrunk considerably, it will be interesting to see how the party comes up with a reformist or conservative qua protectionist stance through budgetary policies.

Despite speculation, it seems settled that the party will navigate choppy waters to boost venture funding for start-ups in new sectors like e-vehicles and biotech, while synergising with capital expenditure for robust infrastructure development in trying to accomplish a V-shaped economic recovery post-pandemic through a combination of new projects like freight corridors and even by promoting spiritual tourism. Even the current discourse on “One Nation One Election” is floated on the pretext that it will be immensely cost-saving for the nation. The potential shift in the BJP’s policy approach due to a reduced majority is likely to lead to a delicate balance between populist measures and macroeconomic reforms. This delicate balance may influence key infrastructure projects and their implementation timelines, potentially affecting the pace of economic recovery.

Here it won’t be too much to remember how our pharma industries helped save millions of lives worldwide during the Covid-19 crisis. Hence the government needs to encourage the development of valuable yet low cost drugs as innovation in therapeutics and bioinformatics. Simultaneously we cannot forget the role of NGOs and SHGs working in remote localities who complement government in service delivery and reduce pressure on public institutions, hence requiring reinforcement to enhance their position. So, the empowerment of the economy may thrive from SEZs but people attach more value to support structures that provide them social and psychological relief without which restoring trust is impossible. Hence the government has to think out of the box to ensure accountability as a vital prerequisite to good governance in a holistic sense. Since we are talking about the political economy of the Indian state, let’s look at the dynamics of our federal setup, which has gone from centralized to bargain-oriented flexibility which is also important for the Centre from a socioeconomic perspective. In today’s competitive political perspective, unilateral central directives to the states and manoeuvring through fiscal mechanisms can be counterproductive for the Centre especially in the age of coalition politics. This might not only affect performance of the states but it can also make them resentful and weaponise the state autonomy issue.

What is also noteworthy here is the role of tribal-dominated states in India’s central region and Northeast which likewise need central assistance through budgetary support as an economic development strategy and also as a concession to regional elites who always demand more policy space. It is good to see their own agency as these states in India increasingly take up new initiatives such as the Backward Region Development scheme, and at the same time try to promote the conditions for doing business. This shift in federal dynamics has enabled tribal political elites as intermediaries to negotiate more effectively with both the Centre and local stakeholders, balancing development priorities with regional interests. As a result, in India states are becoming more proactive in addressing economic disparities through targeted schemes while simultaneously fostering a business-friendly environment to attract investments and promote growth.

This promotional aspect has to be kept in mind in the upcoming bu d get, that is, to facilitate reforms with incentives and the need to negotiate with the regional elites, taking into account state-level realities, caste, class and tradition-stricken communities populating constituencies, so that their approach and response to market friendly reforms could be favourably mobilized. For example, land maps, the Land Acquisition Act, a domain of the state, are an important tool for private investment, of course, without fomenting grassroot resentment. So, while a vision like “Vikshit Bharat 2047” could be an ambitious rhetoric on the part of the central leadership, we have to be pragmatic to situate our proposed reforms within a framework of multiculturalism and a regionalist discourse. Today this discourse is not always conciliatory towards the Centre.

Also we cannot just go on talking about meeting regional demands and reaching out to the emerging East Asian or Central Asian markets without addressing our own “demographic dividend” or the need to check infiltration from the immediate neighbourhood. We understand the historic roots of such contemporary issues but the Centre is answerable on why the share of educated youth among all unemployed people is steadily increasing or, as noted development economist Jean Dreze has stated, that there is no significant growth of real wages in India since 2014. Going by this parameter can we be complacent? As many economists surmise, a K-shaped economic pattern is becoming conspicuous in which a hiatus between the rich and poor gets intensified.

So, while the discourse of one-after-another connectivity projects sounds alluring, in real terms it cannot be miraculous. If two other common issues ~ those of corruption and politicization of institutions ~ are added, the balloon of budgetary euphoria may end up in despondency. Of course, there are some bright spots, such as Kerala that qualifies as an exceptional state in many ways. Its Human Development Index is the highest in the country, for example, its literacy rate is higher than the national average. This outstanding performance is largely due to the high level of political awareness and political participation of people, the roots of which go back to the late 19th century. The state provides a unique model of social democracy, incorporating aspects of a “welfare state”. The BJP’s two complete terms have demonstrated that its fiscal strategy has been narrow to some extent while genuine social welfare programmes ought to get priority.

In its third term, although substantial changes to the Central government’s fiscal approach are unlikely, it would be wise for the administration to consider course correction. The government should implement fundamental adjustments to create a long-term fiscal plan that ensures inclusive development while modernising institutions like the Niti Aayog as an impetus to an enlightened view of things.

The writers are, respectively, Professor and Head, Department of Political Science, Sidho-Kansho Birsha University, Purilia, and Assistant Professor of Political Science, Ramananda College, Bankura