Analysis-Unusual election year budget in India signals Modi's sky-high confidence


  • World
  • Monday, 05 Feb 2024

FILE PHOTO: India's Prime Minister Narendra Modi waves to his supporters as he arrives to attend a rally in Guwahati, India, February 4, 2024. REUTERS/Anuwar Hazarika/File Photo

NEW DELHI (Reuters) - India's finance minister presented an austere budget last week despite upcoming general elections, a strong display of the administration's confidence that Prime Minister Narendra Modi would return to power for a third straight term.

Instead of the usual voter-friendly measures announced in election years, Nirmala Sitharaman's interim budget focused on fiscal discipline and cut subsidies on food, fertiliser and fuel.

In the interim budget before the last general election in 2019, Modi's government announced direct cash support of 750 billion rupees (then about $10.5 billion) for poor farmers, extended income tax exemptions to more people and offered various other sops which led to a wider-than-estimated fiscal deficit.

But Sitharaman left little doubt who she thought would be back after the elections, to be held by May, to present the full budget.

"In the full budget in July, our government will present a detailed roadmap for our pursuit" of a developed India by 2047, she said.

The ruling Bharatiya Janata Party (BJP) is high in confidence ahead of the election, with Modi delivering on key parts of a nationalist agenda aimed at pleasing the country's majority Hindus as well as the country's stellar economic growth.

"The BJP will do very well because people have confidence in the prime minister and there are so many other factors like the economy," said Tariq Mansoor, a party vice president.

India's economy is now the fifth-largest in the world, from the tenth-largest when Modi first took office a decade ago, and the fastest expanding among major nations.

Growth, however, has been centred in urban areas and not in the vast hinterlands where more than 60% of India's 1.42 billion people live. Some critics have noted that similarly lopsided growth led to a shock loss for the party in the 2004 general election.

But most analysts say there is little chance of a surprise in this election and it is all but certain that Modi, 73, would romp to a rare third term in office.

The reasons, they say, include Modi's high approval ratings, effective implementation of welfare measures like free rations for 800 million poor and the inauguration of a grand temple on the site of a razed mosque that has energised the BJP's Hindu base. The opposition, they added, is in disarray.

"There will be no repeat of the 2004 debacle unless there is some Black Swan event in the next three months or so, which is very unlikely," said Yashwant Deshmukh, founder of polling agency CVoter Foundation.

"It's not only because of the economy but more importantly that he has delivered on emotive issues for the cadre, the rank and file of the BJP, and at large the Hindutva (Hindu right) vote base."

CVoter is in the midst of a new survey but Deshmukh said "numbers are suggesting that they are going to get a majority on their own very easily at this point of time".

OVER 400 SEATS

The BJP-led National Democratic Alliance coalition won more than 350 of the 543 directly elected seats in the decision-making lower house of parliament in the 2019 election.

"We are looking at beyond 400 for the alliance this time," the BJP's Mansoor said. That number would give the coalition more than a two-thirds majority in the legislature, which will allow it to bring in changes in the constitution.

Harsh Mander, a human rights worker and political columnist, said the budget was an indication of the government's thinking.

"Normally a pre-election budget would have a certain kind of last-minute set of promises," said Mander, who has been critical of many government policies.

"The fact that they don't feel the need to do that, asserts a high level of confidence that their policies, not economic policies but their social policies of basically Hindu supremacy, will trump whatever discontent is there."

Modi's current government has already delivered on two of the BJP's long-running promises: building a temple on the site of a razed mosque in the northern city of Ayodhya where many Hindus believe the god-king Ram was born, and removing the autonomy of the Muslim-majority region of Jammu and Kashmir.

The consecration of the Ram Temple last month, overseen by Modi, sparked unprecedented nationwide celebrations.

The main opposition Congress party said the government had failed in its promises to double farmers' incomes by 2022 and create millions of jobs every year. But the party's INDIA coalition has been badly hurt by the defection of a major regional leader to the BJP alliance last month and it has yet to formulate an effective counter to Modi's muscular pro-Hindu agenda.

Elara Capital analysts said the budget deliberately steered clear of any major announcements "in a studied step to showcase confidence as regards a re-election encore".

Modi himself has also not disguised his confidence.

"In my third term ...," he said in a speech to business leaders on Friday before being interrupted by claps and chants of "Modi, Modi".

"A word to the wise is enough," he said with a smile when he resumed. "In my third term, our country is bound to become the third-largest economy in the world."

(Editing by Raju Gopalakrishnan)

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