How doable does the BJP manifesto look to you?
Swaminathan Aiyar: This BJP manifesto is something that very few people will read. But what the big message is, Mr Modi is guaranteeing more of the same. This is not a manifesto that shows significant changes. There are a very large number of minor small changes. But basically, the message is that Mr Modi has given you 10 very good years and is going to guarantee you more of the same. Many of the programmes will be scaled up. As you said, Mudra loans may be scaled up or some other, the number of houses will be increased. There is some scaling up. But fundamentally it is more of the same because Mr Modi has already been so successful. He has met your aspirations so well. No major change, of course. There is more of the same scaling up.

More of the same is also good news. It is like saying that if you want to stay healthy, eat well and exercise well. That is the mantra which you need if you want to stay healthy. So, the Indian economy is healthy and if the manifesto is more of the same, an extension of the existing model, that is actually great news.
Swaminathan Aiyar: Yes, stability in policy is seen as positive and one notable thing is that there is no attempt to compete in new freebies. When the Congress party offered Rs 1 lakh per year to every poor family, there was some question whether the BJP would try to compete with this in its manifesto? No, absolutely no attempt. In fact, you will find that on some things, PM Kisan, they have not increased PM Kisan in line with inflation.

So, in real terms, the PM Kisan has actually fallen. So, one major freebie has actually been reduced. And while they said, we are going to get 300 units of free electricity, I find it to be just a continuation of the rooftop solar scheme. So, the notable thing is that the BJP is so confident that it does not think it has to compete in freebies. This again, I think is a very positive thing from the point of view of investors.

There was explicit mention of agriculture. This has been the pain point and would remain the pain point for the foreseeable future. But the fact that India should now become self-sufficient, at least when it comes to pulses and like manufacturing has worked in defence, they want to kickstart India becoming more like an agricultural superpower. Do you think this is a good thought but will be difficult to implement?
Swaminathan Aiyar: Many past governments have attempted self-sufficiency in pulses. Many have wanted to increase production of oil seeds, that is our biggest single deficit. We are an enormous importer of edible oil. So, others have made the effort and failed. As far as I can see, there are some fundamental issues regarding agro-climatic conditions and the ability to create more high yielding varieties in these particular areas.

For instance, in the case of oilseeds, the world over, the most efficient ones are genetically modified varieties and we do not allow it. So, if you do not allow it, how are you going to compete? As far as I can see, there is talk of atmanirbhar or talk of being an agricultural superpower, you cannot really be an agricultural superpower at this point, but we are surplus overall in agriculture and that is a positive. It is not a new condition. We have already been positive for a long time.

In fact, we have been by far the biggest exporter of rice in the world. So, in rice, we are super. On the other hand, you can say that this is a ruinous practice because we are producing rice in Punjab by emptying out the aquifers and tubewells are having to go lower and lower. So, environmentally, this may not be sustainable. As I said, you can promise lots of things, but I think at the end of it all, we will be large importers of some agricultural products just as we export other agricultural products.

One has to look at the Modi 3.0 versus Modi 2.0 based on the current setup and what the BJP manifesto looks like. In your understanding, how do you think Modi 3.0 could be strikingly different from Modi 2.0.
Swaminathan Aiyar: As I said, the emphasis is on more of the same. The thing is not to be different. The aim of the exercise is saying I am guaranteeing you that I have done so well for you. I am such a fantastic guy, the world looks up to me, I have improved India’s stature in the world, I have defended you against Pakistan, so I am such a great guy. I am giving you more of the same and I am giving my guarantee that I am more of the same. So, the emphasis really is more of the same, I would say, rather than saying how it is different.In terms of energy transition, lot of emphasis on the fact that India needs to be energy atmanirbhar or self-dependent by 2047. And for the first time, we have seen the wheel in motion, where solar rooftops are becoming a reality. Electricity 24×7 is almost a done deal. Can I say that in terms of the highlight of Modi 3.0, this is one space which could see maximum economic impact going forward?
Swaminathan Aiyar: I would first say that it is not up to a manifesto right now to make a promise for 2047 because you have no idea who will be in power at that particular point of time. But yes, there is an enormous emphasis on renewables. In fact, there is an emphasis on both. We have said that we will get to net zero only in 2070, which other countries have criticised as being too late. But we are very clear that on the one hand, thermal power will have to increase, atomic power will have to increase but above all renewables will increase and the emphasis is trying to make India a global leader or at least a competitor with China in renewables. Solar is there, wind power is also there. There is now this new emphasis on green hydrogen. These are areas of enormous emphasis. I would say that they would be a very strong part of the increased investment that we are going to see in the next five years.

Given the fact that this time around as well there has been a push on infrastructure development, etc, will they be a lot more aggressive in terms of execution on the infra side?
Swaminathan Aiyar: Infrastructure development has already been a success. In fact, the manifesto boasts about it. They say, look at this huge number, we are doing 5000 km of railway track, we are doing so many miles of road, we have done better than ever before and they are promising, as I said, once again, more of the same.

I would say in some sense, the infrastructure bottleneck is over. It was the problem of the previous 10 years and the Modi administration has substantially solved this particular problem. It will, of course, continue going forward. But I think part of the reason why India is doing 8% growth today has been the success of infrastructure in the last five years, where it really has been pushed forward by government investment and they will continue with, as I said, more of the same. This has been a successful venture and it will continue. It will be an area of very substantial investment, as it has been in the past.

Many brokerages are critiquing the manifesto this morning and are saying, like you said, it is more of the same as the manifesto. It completely lacks or skips any reference to structural reforms. There is nothing on changes to, say, the labour or the land laws in its manifesto.
Swaminathan Aiyar: Well, as they say, if it ain’t broke, don’t fix it. They are boasting how fantastically good the current model is. If it is already such a good model, why should you be doing structural reforms. It is not that structural reform is not required. For instance, India currently has the most filthy, polluted cities. Six of the 10 most polluted cities in the world.

Does the manifesto say anything about how it is going to address that particular problem? I do not see anything. On education, you still have Pratham’s reports showing that in rural areas, guys in class five cannot read a class two text and fellows who are graduating cannot do simple mathematical things and there is no improvement in the last 10 years.

Is there anything in the manifesto to track that one? No. On employment, what do they say? We are going to fill vacancies. I would say that if you have already been in power for 10 years, why are there so many vacancies? You had plenty of time to fill them. Why don’t you fill them? So, these key issues like employment, education, environment, and the final, I would say, is the police judicial system, which is still so useless.

Well, frankly, it is being misused to harass opposition politicians as far as the police system is concerned and courts remain as slow as ever, I do not see any structural change there. In four areas – education, employment, environment, and the police judicial system, major structural reforms are required, but they have not been attempted. And they have not been attempted because they are not easy areas to do. The attempts so far have not got very far. The BJP does not want to rock the boat at this particular point of time, even though it does have the political capital to do so. So, it is not attempting to do structural change in these four very important areas.

What is important for taxpayers? India is growing, income is growing, but taxes are not coming down and there is an explicit mention this time around that honest taxpayers would be rewarded. Can I assume that the indirect messaging now is that individual tax rates should start coming down gradually? Now the government is really hungry for tax collections, but a small cut at individual taxpayer level could go a long way in terms of messaging and winning hearts?
Swaminathan Aiyar: Mr Modi has not been notable for cutting taxes in the last 10 years; if anything they have gone up. So, I do not think this is part of his agenda. There was an argument earlier that you are reducing corporate taxes, corporate tax rates closer to the level of your ASEAN competitors, but your income tax rates are much higher. So, why don’t you reduce those? That argument so far has not carried conviction with Sitharaman or Modi. And as far as I can see, they are not going to change that.

In fact, they believe that public sector investment is so important that they would like the ratio of tax revenue to GDP to increase from the current 17 or 17% to 18% and they would like to increase it to 20%. So, I do not think the emphasis is going to be on cutting individual rates at all. I am not quite sure how exactly they will identify who is an honest taxpayer and who is not. They certainly want to say that people who have only salaried income, we will try to treat them better. This is part of their appeal to the middle class. So, maybe you can have improvements and things like a standard deduction for such people. But fundamentally, I do not see much change in income tax rates.