Tuesday, 20 May 2014

In India, new government looks business-friendly

Results from the Indian Lok Sabha election announced over the weekend show a landslide victory for the opposition Bharatiya Janata Party (BJP).

Free trade with New Zealand could now be on the fast track as a more business-friendly government takes the reins.

The BJP’s leader, Nahendra Modi, will serve as the new prime minister. As the results become clear it appears the party won more than the 272 seats needed to form a government without a coalition.

In total the BJP won 282 seats. According to the Election Commission of India, 814.5 million people were eligible to vote, with an increase of 100 million voters since the last general election in 2009, making this the largest-ever election in the world. 563 million people cast votes.
Around 23.1 million or 2.7% of the total eligible voters were aged 18–19 years. A total of 8,251 candidates contested for the 543 Lok Sabha seats. The average election turnout over all nine phases was around 66.38%, the highest ever in the history of Indian general elections.

New Zealand India Research Institute director Sekhar Bandyopadhyay says the BJP has emerged as a national party in a true sense.

“Previously the BJP did not have any presence in South or East India but they have won a large number of seats throughout the country.

“It does not mean the BJP has overwhelming support of the entire electorate. Their vote-share is only 31% and they did not receive support from more 50% of the population. So they will have to reach out to this large group of Indians.”

In terms of representation, the BJP might have power, but they don’t command full national support. However, Mr Modi’s government can speak for a larger percentage of the population than has been possible for a ruling Indian party for some time.

Mr Modi’s government has received initial support from the New Zealand government. Minister of Trade Tim Groser is encouraged by Mr Modi’s strong pro–business stance and hopes now to reinvigorate stalled free trade talks.

India is a key partner for New Zealand and the country’s 12th largest export market with considerable room to grow. The National-led government considers a free trade agreement with India as a top priority.

Both governments will be looking for an appropriate time in the next few months to conduct a new formal negotiating round.

Mr Bandyopadhyay says New Zealand and India are already in their ninth round of trade talks, which haven’t gone anywhere. He thinks a new leadership offers a better time to push that agenda.

“The problem is that we don’t really know yet what the exact polices of this new government are. They have promised a lot of things throughout the campaign but they have been thin on actually policy details.

“Their election manifesto promises more economic development and growth. This means thinking in a Chinese model and openly welcoming foreign direct investment. But they want investment not in multiple brand retail trades, but in manufacturing, infrastructure, technology or research and development.”

New Zealand trade will benefit from a closer relationship with India especially, according to Mr Bandyopadhyay, in technologies New Zealand does very well.

“India needs many things New Zealand can offer, particularly around improving agriculture. A large problem in Indian agriculture is cold storage.

“India is a major milk producing country. So what India really needs is more agricultural, dairy, and cold-storage technology and New Zealand is a world-leader in those.”
New Indian prime minister Nahendra Modi

He thinks the new Indian government has the power to enact some of the promised economic and business changes.

“Mr Modi has a very clear mandate. For the first time in about 30 years there is a one party government in India with an absolute majority. It will be a stable government and if it wants to pass any legislation it can do so without depending on any other political party.

“He is also backed by some of the top business houses in the country. He is publicly projected as a business-friendly prime minister. So there is every reason to be optimistic that he will promote a more positive business environment.

The new government is expected to think outside the box of normal Indian politics by bringing technocrats and business leaders into ministerial roles.

Mr Bandyopadhyay says some rumours suggest a businessman or a banker will sit as the finance minister, but it remains to be seen. Mr Modi is expected to do things differently because he has “created a huge amount of optimism” in the minds of the Indian middle-classes.

“He has to show within one or two years that things are changing.”

The vote for the BJP reflects public dissatisfaction with the previous Congress Party government, particularly its economic policies. But despite the optimism, Mr Modi will face significant challenges in jump–starting India’s sagging economy, upgrading its infrastructure, and modernising the rural areas.

Despite the impressive victory there are also concerns that Mr Modi and his Hindu party will deepen divisions between the Hindu majority and Muslim minority. Mr Modi has pledged to improve ties with the international community, including China, but New Zealand and other developed countries will be watching his treatment of the Muslim minority closely.

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