Goodbye reforms, welcome populism? Gujarat results may soften Narendra Modi the reformer

NEW DELHI: The BJP's less-than-expected performance in the Gujarat elections can have a deep significance for the country's economy. Prime Minister Narendra Modi had pushed through radical economic reforms such as note ban and the Goods and Services Tax (GST) despite expected negative impact on people.

Before elections, BJP had set a lofty target of 150 seats in Gujarat. Now that the party may fall short of the target, Modi might be forced to reconsider his economic reform strategy. He is likely to drop the radical reformist agenda and launch major populist measures during his remaining term.

Modi is not expected to continue with his streak of disruptive reforms. Another reform like demonetisation or GST will be too risky for BJP as the 2019 Lok Sabha elections will start looming over the party soon.


While Modi is likely to shun reforms, expect him to take populist steps and do a lot of social spending—the measures that are seen to win votes.

Barclays India had said in August that the Modi government was unlikely to undertake any major reform in the remainder of its term till 2019. It said the government would rather focus on publicising government's achievements.

"Rather than look to conquer new ground in the run-up to the 2019 hustings, we expect the Prime Minister Narendra Modi to focus on cementing the success of his economic reforms and infrastructure projects already started. More focus will be on administrative initiatives and not new legislative reforms on the macroeconomic front," Barclays India chief economist Siddhartha Sanyal had said in a note.

"Notwithstanding his aggressive reforms since 2014, we believe Modi will be selective in picking his battles and deploying his political capital ahead of the 2019 polls. A likely absence of near-term benefits will likely remain a constraining factor against launching new reforms in the run-up to the polls. Closer to the 2019 elections, Modi might consider deploying his political capital more to boost BJP's 'nationalist' credentials rather than its 'reformist' image," Sanyal argued.

After the BJP's less-than-impressive show in Gujarat, Sanyal's analysis sounds all the more convincing.

With the impact of demonetisation still lingering on and the GST woes still not over, Modi is expected to spend his energy on consolidating his position rather than launching new disruptive reforms.

After a tough fight by the Congress in Gujarat, caste mobilisation by BJP's opponents will increase in other parts of the country and the Congress president Rahul Gandhi will get more aggressive.