Manifesto tension sends out poor signals
News reports suggest that the inordinate delay in releasing the BJP’s manifesto—letting it go down to the wire, literally, if the unveiling is to be done on the day of the first poll—is due to prime ministerial candidate Narendra Modi not being happy with what the party’s old guard has drafted. Given the delay means the manifesto’s live telecast may also be hit due to the Election Commission rules that no publicity can be done 48 hours before the polling ends, this suggests a pretty wide gap between what was drafted and what Modi wanted—why else would Modi risk losing a big chance at nation-wide television coverage for the party’s programmes? Going by his speech at the event organised by traders in the capital some weeks ago, where Modi skirted the issue of not allowing FDI in retail, possibly the prime ministerial candidate wants the party to tone down its anti-retail-FDI rhetoric. Possibly, he wants more FDI in areas like defence and agriculture. The exact details, of course, will only be available on Monday. And if the poll promises are along expected lines of being more reformist and pro-development, markets are certain to cheer it.
Markets, however, may also see this as a signal of the tough task ahead of Modi, assuming he does get to head the next government, more so if the BJP gets under 200 seats. Apart from the issue of dealing with fractious allies, Modi will have to deal with party satraps who will feel more emboldened. But even if Modi is able to handle his divisive colleagues, reviving the economy is going to be a long haul. The fractured Parliament is a reality that needs to be taken into account while trying to pass, for instance, the GST and the DTC Bills. Interesting, in this context, is the increasing cautionary advice coming from banks to their clients. A recent note from JP Morgan, for instance, talks of how 80% of the top 50 stalled projects—in terms of value—are stuck due to clearances/solutions that can only be delivered by state governments, not the centre. It restates the fact that India Inc has a big debt overhang that needs to be fixed before investments can resume—among the BSE 200 non-financials, 17% have operating incomes that are less than the perilous threshold of 1.5 times their debt service obligations. In parallel, the banks need to be cleaned up. And, given the over-ambitious 19% revenue growth projections in the interim budget, along with the large roll over of subsidy payments to the FY15 budget, the new prime minister will have to act decisively on many fronts, and simultaneously at that. Presiding over a divided house can’t make it easier.