The nationalist Bharatiya Janata Party (BJP) would welcome more foreign direct investment in defence, if elected, but would delay opening up big-box retail to global players now barred from the country’s market of more than 1.2 billion people.
The BJP, which opinion polls show is on course to win the most seats in an election starting April 7, would also introduce a general sales tax and overhaul the financial sector, its manifesto is likely to say.
Party sources told Reuters these concrete steps form the core of a pitch to voters that sets aspirational goals of creating 250 million jobs over the next decade, building up to 100 ‘smart’ cities and constructing a high-speed rail network.
“The manifesto’s priorities, in this order, are jobs, investment, manufacturing and infrastructure,” said one BJP official involved in drafting the document due out next week.
He declined to be identified due to the sensitivity of the topic.
The BJP’s candidate for prime minister, Narendra Modi, is campaigning on his economic record in running Gujarat, where the party trumpets an unemployment rate of less than a third of the national average.
By contrast, the Congress, which was unveiling its own manifesto on Wednesday, is running campaign ads that depict smiling artisans making bricks or weaving by hand – an appeal to its core constituency of poor voters.
While the BJP platform seeks to tap into the hopes of 100 million first-time voters whose job prospects have been hurt by a slowdown in economic growth, the tenets of ‘Modinomics’ remain nebulous beyond a broad focus on supply-side reforms.
“Most of these proposals have been discussed by other parties too,” said Shumita Sharma Deveshwar, a director at Trusted Sources, a policy advisory firm. “The key is implementation of these policies. That is the bigger challenge.”
The BJP’s policy platform takes a cautious stance towards opening up the economy, Asia’s third largest, to foreign direct investment.
There will be no quick move to allow the likes of Wal-Mart Stores Inc. or Tesco to enter so-called ‘multi-brand’ retail, which would pose an existential threat to small traders who form a key BJP constituency.
“The domestic retail industry needs to be first made competitive before allowing foreign investment,” a second BJP source said.
However, the BJP would propose raising a cap on foreign ownership of the defence industry enterprises to 49 per cent from 26 per cent now.
Although India spends only a third as much as China on defence, it is the world’s largest market for arms exports – reflecting a failure of past governments to turn around the state-dominated defence industry.
The legacy of dependence on the Soviet security umbrella has been prolonged by corruption scandals that have held up deals with foreign partners that would have moved production to India.
“We can save huge foreign exchange by producing defence equipment at home,” the source said.
“(We would) raise the FDI cap, (and) allow Indian companies to enter into joint ventures with foreign companies. It could be an arrangement where Indian partners hold the majority stake, say 51 per cent.”
In other points, the BJP is expected to propose a general sales tax – key to getting rid of a hodge-podge of existing levies. More broadly, the BJP will seek to improve tax collection by lowering rates and closing loopholes.
A “broad consensus” exists to overhaul the financial sector to turn India into an international hub, the source said.
Analysts caution that the BJP and its allies, which polls show falling around 40 seats short of a majority, may end up having to strike a series of compromises to cobble together a parliamentary majority.
“A lot of this is theoretical and open to question right now,” said Deveshwar. “Let’s see what kind of coalition is formed after the election.”