Traditionally, Gujarat has always been a state where trading has been the principal business activity. Its transition towards emerging as a manufacturing giant is a more recent phenomenon. The large trading community has been averse to change, and any policies that threaten the status quo have always made the business community nervous.
The introduction of GST in India has been the most significant economic reform since independence, and most agree that in the long-term it will be beneficial.
However, it’s the short-term impact that has caused maximum angst among traders who are still trying to come to terms with the negative impact of demonetization on their businesses.
This is bad news for the BJP as the dates for election in Gujarat draws closer. The party has failed to placate the trading community which forms a significant segment of voters. Congress is trying to maximize its political gains riding on this discontent.
Economics and politics share a close relationship, and so, the process of introducing and implementing GST has largely been an outcome of that relationship. All political parties, national and regional, have tried to draw maximum political mileage for themselves and their respective states in the run-up to arriving at a reluctant consensus.
As the ruling party, BJP rushed introducing GST in the hope of political gains but is now having to face general discontent. The timing has been bad.
Gujarat assembly elections are crucial to BJP, and the PM, Narendra Modi in particular. The result in Gujarat will impact how the opposition responds and comes together to put up a fight in 2019. With most small traders and businessmen unhappy with GST slabs, the government has been in firefighting mode and has been forced to shift some items to lower tax rates.
The states are unhappy as this might impact their revenue collections. On the other hand, the business community wants the government to do more. But with Legislative assembly elections in Himachal Pradesh and the forthcoming one in Gujarat, the model code of conduct is preventing BJP from announcing any further steps.
The trading community in Gujarat has made up its mind, and any changes at this stage are unlikely to influence the voting results. Furthermore, 2019 is too close for the positive impact of GST to begin showing results, and this is a disadvantage for BJP.
So is the Congress going to win in Gujarat? That’s unlikely. The trading community may be unhappy, but they also realize they have more to gain with a business-friendly BJP at the state and centre than a rudderless Congress.
In the extended time that Congress has been out of power in Gujarat, it has not been able to rebuild its political base at the grassroots level. Today, the party is devoid of any clear economic or political agenda and is only riding the anti-BJP sentiment in the state. That’s unlikely to deliver the seats needed to come back to power.
People have largely made up their minds on caste lines. Most may be unhappy with demonetization and even the GST, but they still agree that there is no alternative to BJP at the centre and in Gujarat. The trading community, comprising mostly men, will vote based on their opinion on demonetization and GST, while female voters are likely to vote along caste lines.
That’s why predicting results in this election is difficult. Development was a common agenda in previous two elections where general opinion was unanimous, this time around; divisions of caste and economic fallout of central decisions are going to impact the voting pattern.
Congress has no real agenda of its own other than reacting to BJP’s moves and trying to exploit the negative sentiment. Congress is expected garner higher vote share than in 2012, but will it be enough to dethrone BJP remains to be seen.