Coalition may open space for more reforms: CEA

As the NDA government prepares to take oath for its third consecutive term, questions arise regarding its capacity for reform amid a reduced mandate. Fitch Ratings indicated that while broad policy continuity is expected, the coalition politics and a weakened mandate could present significant reform challenges. However, Chief Economic Advisor V Anantha Nageswaran holds a contrasting view.

"This actually makes some of the difficult reforms more feasible incrementally because it opens up space for dialogue," Nageswaran told The Indian Express.

In its previous two terms, the NDA government struggled with major reforms due to a lack of consensus, often deferring to state governments. This was evident with land reforms during its first term and labour reforms in its second term, which stalled due to insufficient state-level support. Similarly, farm reforms might have seen different outcomes had states been engaged earlier.

Despite expected continuance in capital expenditure and infrastructure projects, other reforms may progress slowly. Moody’s noted policy continuity, particularly in infrastructure spending and domestic manufacturing boosts, supporting growth. Fitch Ratings echoed this, emphasising continued focus on infrastructure capex, business environment improvements, and gradual fiscal consolidation, though coalition politics might complicate ambitious reforms.