When the Bharatiya Janata Party swept to a thumping victory in the 2014 Indian election, there were hopes for an era of revitalized economic reform, as well as fears of an era of Hindu majoritarian rule. Three years on, the efforts of Prime Minister Narendra Modi to make the world’s seventh-largest economy more business-friendly and efficient have so far been underwhelming. According to the CSIS Modi Economic Reforms Scorecard, the government has only passed two of the ten “difficult” reforms on its agenda— the nationwide Goods and Services Tax and bankruptcy reform.
While Modi’s government in Delhi has certainly made some mistakes, the slow pace of reform is due in part to the nature of Indian federalism, which amplifies regional desires and politics. Although the BJP controls the Lok Sabha, or the lower house of Parliament, it maintains a minority government in the regionally-influenced Rajya Sabha, the upper house, which has served as a major block to much of its economic platform. Gradually, however, the BJP-led coalition is sweeping across influential state legislatures throughout the country, greatly reducing its ability to blame regionalism for a torpid rate of reform.
The Institutionalization of Diversity in Delhi
The Rajya Sabha’s integration of regional interests was conceptualized to force national parties to not neglect the states. More than just an upper house of parliament, the Rajya Sabha was meant to encapsulate India’s diversity through federal arrangements, acting as a sort of council of states. All but 12 of its 245 of its members are elected by members of state legislative assemblies, the rest being appointed by the Indian President. Rajya Sabha members serve six-year terms, so every two years, roughly a third retire, and their seats are filled by votes from the corresponding state legislatures. If the main national parties, the BJP and the Indian National Congress, want to capture the Rajya Sabha, they must turn their attention to these state legislatures, which are often the domains of state and regional parties. Milan Vaishnav, a senior fellow at the Carnegie Endowment for International Peace, explained to the HPR how this disadvantages the BJP; in 2016, the BJP-led coalition held just nine legislatures, with six controlled by the Congress-led United Progressive Alliance, and the remaining 14 by regional parties.
This structure of Parliament has allowed Rahul Gandhi’s Congress, which was walloped nationally in the 2014 election, to maintain more seats than Modi’s coalition in the Rajya Sabha and thus fiercely contest the BJP’s reform agenda. In 2015, for instance, the BJP-led coalition tried to pass an amendment to streamline the labyrinthine Land Acquisition Act of 2013, passed by the previous Congress administration, in order to liberalize India’s real estate market. Smooth transfers of land are critical to Indian industrial development, but businesses wishing to purchase land often have to woo state governments through an opaque process that often leaves neither buyers nor sellers content. While the amendment passed through the Lok Sabha without major incident, it sank in the Rajya Sabha in the face of unified opposition, and has since not been a priority for the Modi administration.
Facing potential electoral irrelevance, Congress has staunchly opposed all BJP-sponsored reforms thus far, even those it pioneered when in power. Several of the reforms that Modi has championed, such as a biometric identification system to streamline public services and a standardization of taxes nationwide, were initially proposed by the previous Congress administration led by Manmohan Singh. In an inversion of roles, Congress led the opposition to the BJP-introduced Goods and Services Tax last year, turning the issue into a politically taxing fight for the government. While it was ultimately passed, BJP leaders have since decided not to squander their political capital on other important reforms, such as those to liberalize the stagnant labor market. Gandhi has doubled down on a political platform slamming the BJP for India’s economic shortcomings, while not advancing any alternative vision for India’s future. However, Congress is not the only party that presents major political challenges to the BJP’s reform efforts.
Multiparty Democracy to the Extreme
Another key political factor slowing BJP-led reforms is the role of regional parties in India’s federalist political system. In any given national election, Vaishnav estimated that regional parties—essentially any party other than the nationally-influential BJP and Congress—receive 50 percent of the vote. “Regional parties have become very, very significant in India in the last two decades,” said Valerian Rodrigues, a former Professor at the Jawaharlal Nehru University, in an interview with the HPR. These organizations, like the Bahujan Samaj Party in Uttar Pradesh and the All India Trinamool Congress in West Bengal, play an important part in the theater of Indian democracy. Rodrigues noted that they “bring in a lot of people within the fold of Indian democracy” and “provide extensive support to … minorities of various kind,” while looking to “wipe out regional imbalances in India.”
State parties typically draw a majority of their votes—and thus, base their platform on—the desires of a particular geographic or demographic group of constituents, a phenomenon which naturally stymies national reform efforts. Regional parties engage in this sort of “vote-bank decision making” that often runs counter to prioritization of “national growth and development,” remarked Siddharth Pradhan, a businessman who runs Rave Moti Mall in Kanpur, in an interview with the HPR. Given that 80 seats in the Rajya Sabha are currently held by regional parties that are neither part of the BJP’s coalition nor the Congress-led political bloc, these decisions have a substantial impact on the national level. The AIADMK, Samajwadi Party, Bahujan Samaj Party, Trinamool Congress, and Biju Janata Dal, regional parties that together held 57 seats in 2015, were unflinching in their opposition to the Land Acquisition amendment, for fear of appearing “anti-farmer.”
Because of the pivotal role of state legislatures, frequent state elections often counterproductively capture the attention of national parties. They also distract regional parties from whatever priority they give national reform at all. During the Uttar Pradesh state elections this year, the BJP neglected its economic platform and focused its campaign around Hindu nationalist issues, such as the controversial proposal to build a Hindu temple on the site of a demolished mosque in the holy city of Ayodhya. A focus on the ‘Hindutva’ aspects of its agenda necessarily distracts the BJP from its economic platform, and can undermine its abilities to build coalitions with regional parties. For example, there were indications that the Samajwadi Party and Bahujan Samaj Party, two parties based in UP, were reluctant to work with the BJP in 2016 in light of the elections. The fact that there are state elections occurring every year makes Delhi’s focus on the short-term almost inevitable. Although the idea of simultaneous state elections every five years has been offered as a potential solution to this quandary, for the time being, it is one the government will continue to face.
No More Excuses
As its hopes for rapid national economic reform have been extinguished, the BJP has encouraged individual states to try to enact the measures that it has failed to pass in Delhi. For example, Rajasthan’s efforts to make hiring and firing easier for businesses and to streamline land purchases show the potential that state-level reforms can have. Modi could further promote state-led reform efforts through the concept of competitive federalism. Under such a system, different states would engage in healthy competition for foreign investment and in initiatives such as general digitalization. Ostensibly, state legislatures would be driven to implement critical economic reforms, such as those put in place in Rajasthan, that would eventually improve the ease of doing business in the country, for which India currently ranks 130th out of 190 countries. Increased emphasis by the BJP on this strategy could possibly yield greater benefits in the future.
This year, after landslide victories in UP and Uttarakhand and the defection of an opposition leader in Bihar to the BJP-led coalition, the BJP now governs 18 of the 29 states. If current political trends hold, the BJP will grab the coveted majority in the Rajya Sabha by mid-2018 and will have an unopposed agenda in the capital. At that point, the coalition will no longer be able to blame regionalism, a legitimate difficulty until now, for the slow pace of reform. The pace of reform will then be dictated by the ability of Modi to keep his own party’s forces in line.
India’s constitution has made balancing state and central interests a key aspect of the country’s federal structure. Although a legitimate excuse for stalled national reforms, India’s cacophonous regionalism must ultimately be transcended in one way or another if the country is to become the economic powerhouse it aspires to be.
Image credit: Obama White House Archives/Pete Souza // Flikr/Liji Jinaraj // Flikr/Sansad Bhavan