FOUR YEARS AFTER the shock of the Covid-19 pandemic, the economy seems to be in reasonably good shape. The gross domestic product (GDP) grew at 8.2% in financial year 2023–24 (FY24), which was the third straight year of more than 7% growth. Tax collections have been robust, and private investments too seem to be staging a revival. The Centre’s fiscal deficit was well controlled at 5.6% of the GDP in FY24, with indications that it could do better than the Interim Budget’s target of 5.1% in the current fiscal.
But the results of the Lok Sabha elections show that a coalition government will be formed since no political party has a clear majority. The Bharatiya Janata Party-led National Democratic Alliance (NDA) is just shy of 300 seats in the 543-member Lok Sabha and is likely to form the government for the third term. But there will be at least some changes since the BJP will rely on allies such as the Telugu Desam Party and Janata Dal (United). This will mean that the government will have to hold fresh discussions on several pending reforms. Both the Nitish Kumar-led JD(U) and N. Chandrababu Naiduled TDP are also hoping for special status for Bihar and Andhra Pradesh, respectively. A decision on this may be taken later and its impact on the fisc will have to be seen.
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