BJP's setback in Delhi polls may lead to course correction in Budget 2015

NEW DELHI: The Modi government is unlikely to alter the course of its reforms but is expected to include more "propeople" initiatives that have a visible impact. For a government that has spent the first eight months talking of propeople reforms in governance, the verdict in Delhi is expected to prompt a rethink to ensure that the approach followed by it has "greater connect".

Pushing legislative business through Rajya Sabha may become a tough task given the change in mood after the Delhi polls. The opposition may feel rejuvenated, which could translate into hardline positions on key economic issues.

The 2015-16 budget is expected to grab bigger attention now and the Modi regime and finance minister Arun Jaitely will be under pressure to emphasize more on "pro-poor" policies. "This verdict is a setback politically and will weaken Mr Modi's political capital. It has the potential of making policymaking more difficult," said Saumitra Chaudhuri, economist and ex-Planning Commission member.

Will it impact on the budget? At the macro level, there is unlikely to be a big change. Fiscal correction and the emphasis on reforming government spending are likely to stay . But tax breaks to woo the middle class are expected to be high on the budget priority list now to add some "feel good" factor.

When it comes to excluding tax payers from the benefit of subsidized cooking gas cylinders, there may be a rethink.Some experts say the BJP government may include populist measures in the budget to regain ground lost after the Delhi verdict. After all, anyone who was part of the Vajpayee government would tell you that then finance minister Yashwant Sinha's move to reduce returns on small savings schemes such as public provident fund did not go down well even within a section of the socalled upper middle class.

Similarly , labour reforms which have so far been pursued, albeit at a slower pace than NDA-1, may slow down. In any case, there was a recognition even before the Delhi elections that an aggressive disinvestment approach may be good for government finances but doesn't win any friends.

"This aspirational class is the backbone of the economy but somehow has felt left out of the mainstream. It is now asserting itself and it has no patience for long," Assocham president Rana Kapoor said.