Day after Bihar election results, NDA puts up a brave face
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New Delhi: Seeking to brush off the electoral debacle in Bihar, the National Democratic Alliance (NDA) signalled business as usual in government on Monday, as stocks fell and the rupee weakened on concern that the defeat would set back economic reforms.
Finance minister Arun Jaitley assured investors that the government is committed to its reform agenda—including obtaining legislative approval for the goods and services tax (GST) bill. The government also said the month-long winter session of Parliament will start on 26 November.
Jaitley also reiterated the government’s willingness to reach out to opposition parties to ensure smooth functioning of Parliament so as to obtain passage for key bills that have been stuck in the Rajya Sabha.
“I don’t see it (Bihar verdict) as a setback to the economy... structural reforms will continue. They should continue at a rapid pace,” Jaitley said in an interview, according to PTI.
The Grand Alliance comprising Janata Dal (United), the Rashtriya Janata Dal and the Congress won the Bihar elections with 178 seats in the 243-member state assembly. The Bharatiya Janata Party and its allies in the NDA won just 58.
On Monday, the rupee weakened past the 66 level against the dollar, closing 1% down at 66.45, its steepest fall since 24 August. The BSE’s benchmark Sensex fell 0.55%, or 143.84 points, to close at 26,121.40.
“Worries are that these election results might derail the reform process and tilt the balance away from developmental reforms and encourage a populist agenda,” said Radhika Rao, an economist at DBS Bank Ltd in Singapore.
The government swung quickly into damage-control mode to dispel such notions.
“All concerned need to understand the Bihar verdict in the right perspective. People of Bihar want development just like people in the other states. To realize rapid economic growth, we need to have the right environment in place, which requires considered reforms. To interpret Bihar verdict in any other manner only amounts to questioning the wisdom of the people of the state,” parliamentary affairs minister M. Venkaiah Naidu said. “All parties have to understand it and enable Parliament to pass the reform measures. Bihar verdict is a clear statement of people’s aspirations. It should not be interpreted as a mandate to obstruct Parliament,” he added.
The government initially wanted the rollout of GST—seen as the single biggest tax reform since independence and meant to remove inter-state barriers to trade—to begin from 1 April 2016, but later pushed its implementation to the beginning of any month in the next fiscal year.
The Congress and other opposition parties that are in a majority in the Upper House have steadfastly resisted government attempts to push through reforms legislation, including GST.
The Bharatiya Janata Party (BJP) also faces the risk of its debacle in Bihar emboldening critics within the NDA, such as the Shiv Sena.
The defeat in Bihar “denotes the decline of a leader”, Shiv Sena’s Sanjay Raut said in an apparent reference to Modi. “The results in Bihar will bring a new turn to politics of the country,” PTI cited him as saying.
Senior Congress leaders have indicated that they will reach out to other opposition parties to form a united front to corner the government by raising such issues as a perceived wave of intolerance in the country that has prompted protests by writers, film makers and even scientists.
Senior leaders within the NDA said the BJP leadership should take immediate steps to rein in hardline elements within the party. Controversial statements made by some BJP members are seen to have alienated minorities and damaged the party’s image.
NDA leaders also say the BJP leadership will have to reach out to opposition parties to ensure smooth functioning of Parliament in the winter session.
“If the government fails to reach out to the opposition, the winter session will not get many important bills passed, which is not a good sign,” said a senior NDA leader on condition of anonymity.
That’s something the BJP has already vowed to do.
“I am hopeful that my friends in Congress will see reason and support bills,” finance minister Jaitley said after BJP’s parliamentary board met on Monday to discuss the Bihar assembly election results.
One crucial legislation pending before Parliament is the controversial land bill that the opposition says would undermine the interests of farmers and benefit big business houses by making it easier for them to acquire land. A joint parliamentary committee is likely to submit its report on the bill on the last day of the first week of Parliament.
Among crucial bills that may be taken up for discussion in Parliament are the bankruptcy code and amendments to the Reserve Bank of India Act to set up a Public Debt Management Authority and a Monetary Policy Committee.
One rating agency said the Bihar electoral outcome wouldn’t have any significant impact on the economy.
“The loss may complicate politics for the central government, but we don’t expect major implications on the economic front,” said Thomas Rookmaaker, director in Fitch Ratings’ Asia-Pacific Sovereigns team.
“With continued opposition, the government will likely continue to try and pass legislation via ad hoc political deals, and if that does not work it may continue to resort to implementation of reforms at the state level. While the opposition to some big-ticket reforms, most prominently the land acquisition bill and the GST, has been substantial, the government has gradually rolled out a large number of initiatives and there is no indication it would now change course,” he added.
PTI and Bloomberg contributed to this story.