Foreign banks and brokerages have flagged the stark contrast in the pre-poll manifestos of major national parties —BJP and Congress — They have observed that the ruling party’s manifesto prioritises policy continuity, whereas the main opposition party’s manifesto leans towards populism, which could hurt the fisc.

While BJP’s manifesto announcements foresee limited fiscal implications in the absence of new big bang promises, Congress document — as most opposition election manifestos go — entailed significant fiscal costs, which could lead to sharp widening of fiscal deficit, said economists.

“Our analysis suggests that implementation of populist schemes announced by the Congress in the manifesto could entail taking the fiscal deficit higher to 7-8.5 percent of GDP vs 5.1 percent of GDP projected by the BJP government in their FY’25 interim budget”, wrote Tanvee Gupta Jain, Economist at UBS Securities India, an affiliate of Swiss major UBS AG, in a research note.

“Fiscal expansion (as proposed by the Congress) will hurt the macro stability narrative and could delay the private corporate capex recovery”.

She also noted that the BJP manifesto’s focus on policy continuity could bode well for business sentiment and the much anticipated private corporate capex recovery. “Congress on the other hand did try to hit some right notes in their election manifesto but has a populist skew”, Gupta said in the research note.

Opinion/exit polls

UBS Research highlighted that it was not predicting the election outcome and noted that the opinion/exit polls have been wrong in the past.

Meanwhile, Singapore-headquartered DBS Group Senior Economist Radhika Rao highlighted that the ruling party emphasised continuity rather than major changes while the main opposition party’s manifesto carried populist hues. 

“We foresee limited fiscal implications from the BJP manifesto announcements as the document did not outline any new reforms or fresh social welfare spending programme.  We maintain FY’25 fiscal deficit assumption at 5.1 percent of GDP with the existing borrowing programme”, she said.

Although a broad based push towards more contentious structural reforms (land, labour, farming etc) did not receive a mention in the BJP manifesto, DBS Group Research is quite hopeful that they still will be prioritised if the party returns for a third term, Rao said in a research note.

On the other hand, Rao noted that implementation of Congress Party manifesto’s social welfare and populist measures will entail significant fiscal costs, necessitating subsequent revenue enhancing measures, in the absence of which, the target 5.1 percent of GDP might be missed by a sharp margin.

“There is lack of clarity as to what extent of these measures will be implemented and whether the inherent costs could act as a natural speed breaker to plans”, Rao added.

Basic universal income

For a start, a basic universal income, depending on the coverage, annual income threshold and intended beneficiaries, could amount to 1 percent to 2.6 percent of GDP, according to DBS Group Research. This may be akin to previous nationwide debt waivers (eg 1990 and 2008) that carried sizeable fiscal costs. 

“In all, voters are likely to weigh these manifestos against their own ground realities, living costs, employment opportunities and growth prospects”, Rao said.

DBS Group Research also highlighted that the debate has seemingly shiftd away from whether the ruling party will win, to the margin with which the party might extend its lead vs 2019 (303 seats).