BJP and more specially, its leader and presumptive Prime Minister Mr Narendra Modi have been overly upbeat on ousting the Congress-led UPA Government in their campaign rhetoric. Mr Modi has evidently carried conviction even to a section of intellectuals hitherto perched on objectivity, let alone a sizeable chunk of multi-media won over to partisanship at an early stage.

With some Indian economists in USA strongly backing him for months and causing some division among their counterparts at home, Mr Modi can be said to have achieved “politicalisation of economics”. Such backing is as much for Mr Modi for the mystical “Gujarat model” as for his being “enabler” with a market-friendly attitude.

But there is no escape for a new Government, irrespective of who dons the mantle of Premiership, from confronting overwhelming challenges, mainly economic for the immediate, to strengthening macro fundamentals against vulnerabilities, domestic and external, and reviving investments, public and private, for infrastructure and growth and jobs.

A whole range of policies would have to be unveiled urgently and the revised budget presented to the new Lok Sabha before mid-June, for it to take effect from July 1, the nine months left in fiscal 15. Markets have been bullish counting on a Modi victory with underlying assumption of a stable government.

But the problems ahead in reviving projects, even cleared ones, to trigger investment in an inflationary environment amid fiscal and external imbalances and global risks rule out “irrational expectations”, as noted economists point out. New policies would need their own time lag, inflation would not disappear, and the euphoria would meanwhile peter out.

In the run-up to poll outcome, foreign security firms and forecasters lately have been busy at work, drawing from the bullish behavior in stock markets, and begun to predict a clear victory for what they conceive to be a definite trend on the reform path. They have their own interests at stake in this leading emerging nation with projects of infrastructure stalled for clearance, of some Rs.100.000 crores.

In their view, a stable post-election government and a continued push to resolving execution bottlenecks remain key to reviving capital expenditure. Foreign bank analysts assume that new private project announcements would follow in coming months once India has voted for a stable government to bring back the era of high economic growth.

Be that as it may, the new government’s agenda to restore economic growth to its potential would have to address fiscal issues, first, by framing a policy that re-creates investor confidence at home and abroad, provides for public investment and yet adheres to the path of fiscal consolidation. What it would do in regard to bringing about a drastic reduction of subsidies, especially fuel, and raising additional resources by widening the base of taxation would count for credibility.

The new dispensation must get through during 2014 with the two major tax reforms that UPA had pursued, not without some success, the Direct Tax Code and GST, the latter left dependent on consensus among states firstly and the level of compensation that the Centre could then provide for loss of revenue in any state.

For industrial revival out of stagnation in 2013/14, hopefully, some of the projects cleared by the Cabinet Committee on Investment in the latter months could go on stream. Signals of some corrections in both fiscal and external deficits in year ending March with a rise in foreign exchange reserves augur well. Both domestic and global institutional expectations now are for GDP to grow by 5.5 per cent in fiscal 2015 and then pick up to 6.4 per cent in 2015-16.

The economy is in dire straits no doubt but a slow recovery can also be reasonably expected, which should help the new government, provided 2014 is not unduly exposed to vagaries of the monsoon, an uncertain element. Also, inflation is still high, with a surge in WPI (to 5.7 per cent) and CPI (to 8.3 per cent). RBI’s tight monetary policy remains with no room left at present for a policy rate cut from the present 8 per cent.

Governor Dr Raghuram Rajan hopes that the new fiscal policy while moving forward on consolidation would be designed more toward investment rather than increasing government consumption. This along with supply-side measures including moderation in commodity support prices would be helpful to contain inflation and facilitate a stable monetary policy.

When Dr Rajan comes up with his second bi-monthly policy review on June 3, he would have had the benefit of consultations with the new Government on monetary policy framework. By then, fuller April-May data would emerge as also CSO’s final estimate for GDP growth in 2013-14 in the light of the last quarter performance.

Against this background of key issues for the next government, it is of interest that at last the aspiring leader, Mr Narendra Modi has thrown several hints of the economic policy he would seek to pursue. These may be his first or firm ideas, in the midst of his unrelenting tirade and personal attacks against Congress personalities, as he moves to file his own nomination at Varanasi on April 24.

Strikingly, in his interview to CNBC-TV, he has ruled out cut in subsidies (a principal base for fiscal correction) by a “pro-people Government”, which, he said, would certainly cut “crony capitalism”. This line runs counter to expectations of greater fiscal prudence and of other reforms entertained by foreign investor firms and institutions and which are crucial for credit rating agencies.

Mr Modi has talked of GST – which would need a technology framework for its success and states’ approval as some might lose revenue. His caution is understandable for as Prime Minister he would count on states, many of which are BJP-ruled. But he is not right to suggest that UPA had ignored States which were yet to agree among themselves before the Centre indicates compensation levels. Also, at this stage he must await the poll outcome for the major regional players of states.

Among other ideas, Mr Modi says he would give a push for infrastructure, especially railways to be made a growth engine, prefer privatization of some undertakings based on professional studies, fresh “thinking” on FDI while protecting domestic manufactures and small players for job creation, such investment being sought mainly for niche technology and asset creation.

The BJP leader says on FDI for multi-brand retail, “we have to think fully”, given the reservation voiced in the party manifesto. His views on other equally relevant factors for sustainable growth such as promotion of savings and investment, broadening the base of taxation, inflation, exchange rate and exports and on social and rural development would be awaited. (IPA Service)