Opinion

INDIAN ELECTIONS – IN THE PRICE

Mahesh Singhi Mahesh Singhi - 18th March 2017
Indian state elections were announced over the weekend and the ruling party led by Prime Minister Modi- Bhartiya Janta Party (BJP) were the clear winners with a sweep in the key state Uttar Pradesh (UP) as took 312 of the 403 seats available. The strong show by BJP is shown in it getting 50 more seats this time round than the best show by Congress in UP in 1985 when they swept the state shortly after Indira Gandhi’s assassination. Even in the state of Goa inspite of a hung outcome, BJP will be returning to power as the India’s defence minister returns back to become Goa’s Chief Minister again.

These state elections outcome was always going to be about a downside surprise element if BJP won less than expected. Expectations for a good show by BJP was best illustrated by BJP losing the state of Goa as got a lot of surprise tones to that possible outcome. On Goa, BJP will be coming back to power but that would be on it cobbling a coalition and yes Congress having it seems at-least 5 claimants for the Chief Minister position. Goa is never a day without drama in its political annals.

Instead focus on the slower growth which seems to be showing no impact on GDP as of now - Well looking at economist forecasts on Indian growth they seem to have no view at the aggregate. On Bloomberg consensus, economists are forecasting Indian GDP to drop to 6.8% in FY17 and then tad move up to 7.4/7.6% respectively in FY17/18.

So the slower growth (which has always being given a premium by overseas investors) as it pans out, should be put brakes on this outperformance.

To stress inspite of a more sanguine view on these elections near term, do see a positive fallout long term. These elections let BJP continue with its current policies which could have brought uncertainties if lost ground to the opposition this round. So yes long term policy positive for India.

These winnings at the state elections 2017 played a critical role because it will lay the foundation for the 2019 general elections for the BJP. This win for the BJP in UP will increase Prime Minister Narendra Modi’s political capital and enthuse his party rank and file.
Moreover, this win at state elections has surely turned out to be a mini-referendum on Modi, giving India a definitive taste of the mood on the ground as to what is to be expected in 2019.


Mahesh Singhi
Managing Director - Partner,
Singhi Advisors Pvt. Ltd.


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