Six months since storming into office for its second term, the government is now facing some unexpected challenges. The economy is sagging. BJP has lost power in a politically significant state like Maharashtra. And, in the bigger picture, it has to strike a working relationship with more Opposition-ruled states as compared to, say, two years ago.
What does this effectively mean? GoI may taste more success with its legislative agenda because of its majority in Lok Sabha and being the single largest party in Rajya Sabha. But it’s likely to face more resistance on the governance front.
The state of the economy presents such a question. The political intent to do whatever it takes to correct the situation is very much there, which is reflected in the string of periodic announcements that GoI has been making on this count. And yet, there’s no shift in perception in so far as negating fears of a meltdown.
The problem is that the purchase for GoI’s narrative among stakeholders remains suspect. That has a lot to do with the fallout of the Centre’s larger effort to ensure better compliance in the conduct of business. Now, that’s a goal GoI can’t just abandon, simply because it will undermine its highly effective anti-corruption plank. However, it can alter the grammar of the conversation from being top-down to becoming somewhat collaborative.
This essentially means adopting a stakeholder’s approach to minimise the backlash. In the case of economic decisions, the current context makes this a governance compulsion, since without a critical mass of stakeholders on board, the success of any policy move, however well-intentioned, will be limited.
In many ways, the change is already visible at the higher levels, given the way North Block has been conducting stakeholder discussions. But this will now have to percolate down to the last mile, largely because — as the implementation of the goods and services tax (GST) is showing — reform decisions may be difficult to take, but are equally complex to implement.
GoI will need to realise that what worked for its successful social sector schemes — where the Centre could directly reach the beneficiary by cutting down corrupt intermediaries with the help of digital technology — may not necessarily work with implementing growth-oriented reform decisions. By nature, these initiatives require more stakeholders to take ownership, especially from those outside the government system.
Hauled Over the Coalition
On the political front, the way in which power has been wrested from BJP in Maharashtra, it shows the extent to which political entities can go just to keep BJP away from power. That such an experiment was pulled off, even in the face of BJP having swept the general elections six months ago and holding all the levers of power in the Centre, points to problems in coalition management. Again, the stakeholder’s model comes into play. Because losing Maharashtra – the state with the secondlargest representation in Parliament after Uttar Pradesh — despite winning nearly 70% of the seats it contested, clearly shows BJP cannot afford to underestimate smaller political parties. Or, for that matter, count on the fact that ideological divisions and historical anti-Congress sentiments will prevent parties from forging alliances against it.
The only way BJP can counter this is by reaching out and establishing fresh connect with smaller parties, raise the stakes for them to unite against BJP. Some may be positive, while others may try to take advantage. But that’s a risk the party now has to take. In this context, the bigger picture of having to deal with more Oppositionruled states adds complexity to BJP’s, otherwise clear, political and governance matrix. From implementing legislations to schemes, from funding to tax-sharing, a whole list of plausible Centre-state problem areas can be mapped out.
These existed even earlier, but are likely to gain more political wind. The Centre will have to rely more on its skills of persuasion, even indulge other parties a bit more, to get the job done. The challenge, of course, would be that in case of any special gesture to anon-BJP state government, it will have to actively consider helping out its BJP-ruled states in much the same way, even if it’s for the sake of parity.
As it is, all indications from RBI are that states are generally facing a difficult time with their finances. Most of them have found it difficult to keep their fiscal deficit within recommended limits. State after state has told the 15th Finance Commission, which is likely to submit its interim report any of these days, that it should increase its allotment to the state pool to 50%. The commission will undoubtedly find it difficult to meet these requests. But it will have to recognise the overall financial crunch. In this backdrop, the nature of GoI’s overall economic conversation with Opposition-ruled states will be delicate and, thus, have a political bearing.
Prying Off the Handle
One way to look at the situation is that the Centre has enough political and economic levers to keep all kinds of potential stakeholders, including state governments, on tenterhooks. In a crisis-like environment, this would undoubtedly hurt.
But typically, a crisis also allows space for gaining broader acceptance for reforms, regardless of allegiances and ideology. And if that’s the choice, then political capital will have to be spent on building more bridges across all sorts of divides than on strengthening fences.
Source: Economic Times