27/01/2025
The National Democratic Alliance (NDA), led by Prime Minister Narendra Modi, has narrowly secured a majority in the recent elections (292 seats).
During NDA’s second term, the government’s capital expenditure (capex) surged, impacting fiscal discipline and resulting in a substantial debt increase. This spending led to notable projects, especially in the Railways, such as the Vande Bharat trains, Dedicated Freight Corridors, and the unfinished High-Speed Rail. However, these investments did not significantly boost the Railways’ economic contributions, as its share in passenger, freight, and gross value added further declined.
For a decade, Government has driven India’s economy with aggressive reforms and dynamic policies, making it the fastest-growing major economy and positioning it to become the world’s third-largest. Initiatives like “Make in India,” which seemed ambitious when launched in 2014, have contributed to this growth.
The BJP’s lack of a majority could influence the new government’s decisions on politically sensitive reforms, though less contentious reforms may proceed. In the short to medium term, the government may need to adjust its priorities, considering allies’ concerns.
There are two primary concerns: first, whether the policy direction will shift away from the capital-intensive, pro-business measures seen in previous budgets; and second, whether the ‘ease of doing business’ will become more complex and slower due to increased decision-making points and extended deliberation processes.
To achieve sustainable 8%+ growth rates, India needs to implement challenging economic reforms, particularly in labor and land policies, according to economists. These reforms are crucial for maintaining the growth momentum and addressing structural issues within the economy.