India’s Prime Minister Narendra Modi shows his inked finger after casting his vote at a polling station in Ranip, Ahmedabad on May 7, 2024.
Sajjad Hussain | Afp | Getty Images
Indian Prime Minister Narendra Modi will likely have to seek power-sharing arrangements to secure a historic third term as his Bharatiya Janata Party is unlikely to win an absolute majority in the country’s lower house.
According to the Election Commission of India, ongoing vote counts as of Tuesday afternoon suggested Modi’s BJP is expected to win only 239 seats. The Indian Parliament has 543 seats and the party or coalition that wins at least 272 seats forms the government.
The surprising deficit raises doubts about his popularity – and risks nipping in the bud any immediate policies the BJP wanted to implement. Instead, Modi will have to look for smaller allies in the larger, BJP-led National Democratic Alliance (NDA), which is expected to win a total of 294 parliamentary seats, according to local media.
Meanwhile, the opposition Indian National Developmental Inclusive Alliance (INDIA), led by the Indian National Congress, is expected to win 231 seats – a much better result than previously forecast.
If the numbers are correct, the BJP alone would lose 64 seats, compared to 303 seats in the 2019 general elections. The broader BJP-led alliance won 353 seats in 2019. Modi reportedly said in March that he was confident that the NDA would win more than 400 seats.
“The shine has worn off”
“While Prime Minister Modi remains a popular figure, his luster has faded as everyday realities like unemployment, inflation and governance dominate voters’ minds,” said Yamini Aiyar, former president of the New Delhi-based Center for Policy Research said CNBC’s “Street Signs Asia.”
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According to a survey conducted in April by the Center for the Study of Developing Societies, unemployment was the top concern for 27% of the 10,000 people surveyed. More than half (62%) of respondents said finding a job has become more difficult over the past five years during Modi’s second term.
According to the Center for Monitoring Indian Economy, the unemployment rate in the world’s most populous country rose to 8.1% in April compared to 7.4% in March.
Markets are slipping
India’s benchmark indices, the Fancy 50 And BSE Sensexplunged 8% on Tuesday as it became clear that the BJP might not win a majority.
“There were high expectations based on yesterday’s election polls, but the numbers appear to be below forecasts. The opposition has gained strength and the entire narrative has changed,” said Kranthi Bathini, equity strategist at WealthMills Securities.
Market heavyweights Adani Ports and Adani Enterprises both fell more than 20% during Tuesday’s session, while State Bank of India and ICICI Bank fell 17% and nearly 9%, respectively.
On Monday, both the Nifty and Sensex hit record highs, posting their best intraday gains since February 1, 2021, up 3.25% and 3.39% respectively, after weekend election polls predicted an overwhelming majority for Modi’s BJP had.
The Indian Rupee weakened 0.5% against the dollar on Tuesday after rising 0.41% on Monday.
Modi’s decades-long rule
Under Modi, India, home to 1.4 billion people, experienced robust economic growth. The world’s fastest-growing economy recorded gross domestic product growth of 8.2% in fiscal year 2024.
The International Monetary Fund forecasts India’s economy to grow 6.8% in 2024 and 6.5% in 2025, compared to China’s growth prospects of 4.6% in 2024 and 4.1% in 2025.
“Prime Minister Modi needs to flex his muscles against opponents like China. This also includes signaling his support for domestic defense production capabilities,” emphasized Kapadia.
In the BJP’s manifesto for the coming term, Modi said the government would make India one of the world’s three largest economies, aggressively fight poverty, open new avenues for growth and fight corruption.
“We have evolved from a nation that was among the ‘Fragile Five’ to a nation that is among the world’s five largest economies,” he said in the manifesto.
While India enjoyed robust economic growth under Modi, observers and critics warned of the country’s “democratic decline.”
“For example, the ruling anti-pluralist Hindu nationalist Bharatiya Janata Party (BJP), with Prime Minister Modi at the helm, has used sedition, defamation and counterterrorism laws to silence critics,” the Sweden-based V-Dem Institute said in a statement 2024 report.
Others, however, pointed out that the country’s huge electoral campaign was evidence of the country’s strong democratic foundations.
“The election also shines a light on India as a rising star built on democracy, and I am pleased that it draws much attention to the dynamic growth we are currently seeing in the country,” said Malcom Dorson, senior portfolio manager and head of the Emerging Markets Strategy at Global X ETFs.
—CNBC’s Sumathi Bala contributed to this story.
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2024-06-04 14:40:40
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