Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) will form the next Union government in India. In election results announced on 23 May 2019, the BJP and its allies, which together constitute the National Democratic Alliance (NDA), secured 353 out of 542 seats in the Lok Sabha (Lower House of Parliament; also called the House of the People). Out of these, the BJP alone secured 303. Party-wise and constituency wise results of the 2019 general elections are available here. It is very likely that Modi will be India’s Prime Minister for a second term. The composition of the Council of Ministers and the smaller Cabinet of Ministers (Cabinet) will be announced shortly.
A BJP/NDA victory likely means a continuity of the previous government’s policy agenda and positions. The government’s nationalistic stance, which strongly promotes the interests of Indian companies is likely to continue, and manifest itself across policy instruments including the e-commerce policy, and international trade negotiations. As such, policy positions adopted by various other key stakeholders are likely to remain unchanged.
Big picture insights
1. What worked for the NDA?
Substantial resources, a robust campaigning strategy, a radical internal restructuring of the BJP, heavy advertisement of achievements of the government’s previous term, targeting the trading and middle class through the election manifesto and strategy are some factors that are reported to have contributed to the NDA’s victory in these elections. Some opine that voters may have also been swayed by the response of the BJP to the recent terror attacks in Pulwama as well as the Hindu nationalist sentiment promoted by the BJP.
2. Performance in key states
In the 2019 general elections, the NDA performed particularly well in the states of Maharashtra, Karnataka, Delhi, Telangana, Gujarat, Haryana, Madhya Pradesh, Rajasthan, Arunachal Pradesh, and Uttar Pradesh. The BJP has also emerged as a strong contender in the state of West Bengal and Kerala, which are traditionally believed to be strongholds of the Left. Some attribute this to the efforts of Narendra Modi and his multiple public meetings in the weeks preceding the election. The success of the BJP across multiple states in India is particularly relevant for elections to the Rajya Sabha (Upper House of Parliament; also called the Council of States). The BJP currently holds 73 out of the 244 seats in the Rajya Sabha. This is expected to increase as the party has established its mandate in states like Uttar Pradesh and Karnataka where Rajya Sabha seats are up for elections next year. With increased numbers in the Rajya Sabha, a scenario is likely where the BJP and its allies control both houses of Parliament. As a result they will be able to pursue their legislative agenda unencumbered in the coming few years.
3. Ideology and agenda
The BJP led NDA government is expected to redirect its focus on economic programmes that were left to hang in the wake of 2019 general elections. The BJP will likely adopt a ‘Nation First’ approach which could translate into protectionist and inward looking economic policies for India. The BJP’s focus on national identity is likely to manifest itself in continued hard power posturing by investing in counter-terrorism, counter-infiltration, strengthening border security and working on national security. Other areas of focus include agricultural improvements and economic reforms. The BJP’s detailed agenda is available in its party manifesto, released in the run-up to the elections.
The Rashtriya Swayamsevak Sangh (RSS), a right-wing volunteer organization is widely regarded to be the BJP’s parent organization. Its affiliate is the Swadeshi Jagran Manch (SJM), which comments and works on economic policy issues, adopting a nationalistic viewpoint. For example, in the recent past, the SJM has asked the government to create barriers for Chinese companies doing business in India; warned against joining the Regional Comprehensive Economic Partnership, as it would harm small and medium enterprises in India, and called for an e-commerce policy that protected the interests of Indian shopkeepers as American e-commerce companies were circumventing Indian laws, and Chinese products were being illegally sold in India on e-commerce platforms by China based sellers. Modi is a former member of the RSS and continues to believe in its ideology. It is likely that the RSS and the SJM will continue to play a key role in shaping the new government’s policy agenda.
Modi has harped on pro-business outlook and India’s massive youth population. These are encouraging factors for foreign investors and multinationals who have reacted favourably to the NDA’s victory in the elections. However, there are apprehensions about the protectionist stance taken by the NDA. These will need to be addressed. Venture capital investment is also likely to pick up steam again now that the results are announced.
The Government also prides itself on its reformist agenda and has put great impetus on the fact that during its tenure India has jumped by 23 points in the course of a single year in the ease of business ranking as reported by the World Bank in its annual Doing Business Report. The jump in ranking was in part propelled by easing the compliances required for cross-border trade and obtaining building permits. The Government has in its manifesto expressed its intention to continue to ease cross border trade in India by ensuring faster clearance of international cargo, introducing self-declaration, and adopting new scanning technology, amongst others and bringing about significant reform in labour laws in India.
Included in this reformist agenda is the Government’s push to reform the debt recovery mechanism in India. During its previous tenure the Government set-up a committee within 4 months of coming to power to draft a new bankruptcy law in India. Consequently, the Insolvency and bankruptcy Code (IBC) was drafted and enacted by 2016. The IBC has brought about a paradigm shift in the ways and means of debt recovery in India and it is expected that the Government will continue to tinker with and improve the IBC.
The Government has also expressed its intent to continue its program of bringing universal health coverage to India through Ayushman Bharat health insurance scheme. Under the said scheme the Governments targets the setting up 150,000 health and wellness centers in India by 2022 which will be equipped with telemedicine and diagnostic laboratories.
4. Technology policy
Information technology (IT) will almost certainly be an area of focus for the new government. Earlier, Modi has identified IT as one of India’s assets. In their election manifesto the BJP promised to focus on financial technology (fin-tech), digital governance, science and technology, startups, micro, small and medium enterprises and industry related laws. Modi is also likely to continue focus on artificial intelligence, machine learning, the internet of things, blockchain technology and big data. Modi claims to strongly believe in developing and enhancing India’s foreign relations and promoting international trade. However, his government has been characterized as adopting a nationalistic agenda on international trade and investment. India’s draft national e-commerce policy (Draft E–commerce Policy) and amended foreign direct investment policy are some examples of this. These stances are likely to continue with the new government, but foreign investors have voiced hope that the new government will adopt a more business friendly, and less protectionist approach.
The new BJP government is expected to act upon various legislative and policy instruments on key areas of technology policy, set into motion during its previous term. Some of these are:
a. Data: Data localization, restrictions on cross border data transfers, notice and consent requirements, data ownership, and data portability will be key questions that need to be addressed. The Personal Data Protection Bill, 2018 (PDP Bill) may be tabled before Parliament in the first session of the new term which will begin in July, 2019. The Draft E-commerce Policy, which also references data governance issues, is also likely to be finalized by the government, soon.
b. Online content regulation: Regulation of content online, particularly on social media platforms, was a key issue in the lead up to the 2019 general elections. In all probability, it will continue to remain a priority area for the new government. The previous government sought to amend the country’s internet intermediary liability framework through the draft Information Technology [Intermediaries Guidelines (Amendment) Rules] 2018 (Draft Intermediary Guidelines). The Draft Intermediary Guidelines will probably be introduced by the government soon. Since these are by way of an executive order, they do not require the consent of the Parliament. The Draft Intermediary Guidelines dilute the safe harbour available to internet intermediaries under current Indian law against liability for third-party content.
c. Digital payments: The new government is likely to promote digital payment options to promote the transition away from a cash dependent economy. The Payment Systems Vision 2021 released by the RBI recognizes the need for continued emphasis on innovation, cyber security, financial inclusion, customer protection and competition. It highlights the critical need to enhance customer experience while lowering transaction costs for online payment options.
d. Data storage and cloud-computing: With the impetus to data localization, creating capacity for locally storing and processing data in India is likely to be an area of interest for the new government. The Draft E-commerce Policy gives an indication of this, although it also seeks to give preference to domestic cloud service providers. On the policy front, the Telecom Regulatory Authority of India has recently sought more inputs on regulating cloud computing in India, and is likely to update and finalize its recommendations soon.
e. Trade: Negotiations at the World Trade Organization (WTO) and the Regional Comprehensive Economic Partnership (RCEP) will be crucial for the new government. Contentious issues include a proposed permanent moratorium on customs duties for electronic transmissions at the WTO, intellectual property protections and enforcement, data localization and law enforcement access to data, high customs duties on electronic/IT goods, and restrictions on foreign investment.
f. Emerging technologies: The new government is likely to promote the use of emerging technologies such as artificial intelligence, blockchain, and the internet of things. A piece-meal approach to making policy making in these areas is anticipated, that is to say, policy positions articulated through multiple instruments. For example, the earlier government was exploring the possibility of using AI in defence. A task force report to this effect was submitted in June 2018, which will probably be acted on now. Data governance issues will be important for emerging technologies, but these will need to be addressed in a concrete manner under the PDP Bill.
— Policy and Regulatory Team at Ikigai Law
To know more, please reach out to any of us:
Founder and Managing Partner