Modi May Wait Before Pursuing Land And Labor Reforms in India
Modi’s party still lacks the majority required in the upper house to pass controversial legislation.
(Bloomberg) -- Prime Minister Narendra Modi has once again taken control of India’s lower house of parliament. But it’s the upper house, which has thwarted him in the past, that might now define his reform agenda -- and his position there is set to improve.
That could place long-awaited but politically controversial land and labor reforms back on the political agenda, a move that would be welcomed by investors in a country where it is notoriously difficult to acquire land.
Modi’s thumping victory in India’s election, which saw the ruling Bharatiya Janata Party win 303 seats in the 543-member parliament, provided him with a single party majority and raised expectations that he will turn to reforms that eluded him in his first term in office. But Modi’s party still lacks the majority required in the upper house to pass controversial legislation.
The make up of the upper house is determined by the performance of political parties in India’s state assemblies.
Elections are now due in three states -- Maharashtra, Haryana and Jharkhand -- by October, which means Modi could secure a majority in the upper house by 2020, said Akhil Bery, South Asia analyst with consultancy Eurasia Group.
"Many investors have approached the Modi election with the belief that he will approach the beginning of his term with the same vigor towards reform as he did his first term," Bery said in a note on May 28. "However, it is our belief that this is misguided; BJP’s election manifesto had no mention of the types of reforms that investors are expecting."
Instead, Bery said, Modi’s priority in the short term will be infrastructure development and spending on farmers, rather than pressing for big reforms. The government may also focus on less controversial changes like creating a national minimum wage and universal social security coverage.
In his first term, Modi struggled to push legislation that would make it easier to hire and fire factory workers and buy farmers’ land. He’s also faced hostility from unions and his party’s allies since he first sought to reform labor laws after coming to power in 2014.
To contact the reporter on this story: Shivani Kumaresan in New Delhi at skumaresan2@bloomberg.net
To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Iain Marlow, Unni Krishnan
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