The BGA India Team, led by Managing Director Ratan Shrivastava, wrote an update to clients on India’s 2024 general election.

Context

  • The ruling National Democratic Alliance (NDA), led by the Bharatiya Janata Party (BJP), secured 293 of 543 parliamentary seats to return to power for a third consecutive term. The BJP won 240 seats on its own and emerged as the largest parliamentary party, although shy of a complete majority of 272 seats. The Indian National Developmental Inclusive Alliance (INDIA) bloc, an umbrella of 28 opposition parties, led by the Indian National Congress (INC) won 234 seats. The INC won 99 seats, but the numbers for NDA effectively rule out INDIA forming a government.
  • The electorate has proved that democracy and democratic institutions are alive and well. The mandate will make for an effective opposition, which is ideal for the world’s largest democracy. It also signals continuity in capital expenditure in infrastructure, manufacturing supply chains, digital public goods and digital policy, with a focus on sunrise sectors such as semiconductors, electric vehicles, solar and renewable energy. The government will pursue a “China-plus-one” strategy and welfare economics for the lowest common denominators of the economy while creating jobs that match gross domestic product growth.

Significance

  • The NDA as a coalition will return to power, having comfortably crossed the required majority of 272 seats in Parliament. The third stint as prime minister for Narendra Modi will likely be weakened by the pressures of running a coalition government and catering to demands based on regional mandates of its allies. Therefore, bold economic or political decisions could be long in the making as the coalition builds consensus. This may impact swift policy formulation, the financial investments of big corporations and populist measures and fiscal allocations, which the second Modi ministry avoided.
  • This is the first time since former Prime Minister Jawaharlal Nehru’s reelection in 1962 that a ruling government has come to power for a third consecutive term. With the long-term vision of “Viksit Bharat 2047” (a developed India by 2047), the government will seek to enact structural, economic, financial and administrative reforms; remedy the goods and services tax and current account deficit; and create more jobs. In the medium term, the goal is to make India the world’s third-largest economy. For now, the government is expected to focus on coalition stability, with four major state governments elections due in the coming months. The NDA faces anti-incumbency in some states.

Implications

  • Business sectors that will retain the government’s focus include semiconductors and electronics manufacturing, responsible artificial intelligence (AI) applications, renewable energy and the energy transition, manufacturing in other sectors, financial services reforms and health care. With the BJP’s aim to integrate India with global supply chains and transform India into a leading manufacturing hub, the new government is expected to expand policy incentives and subsidies toward manufacturing semiconductors, electric vehicles, defense goods, electronics, solar photovoltaic modules, advanced chemistry cells and emerging renewable energy technologies.
  • In the anticipation of a majority for the BJP alone, the stock markets were bullish June 3 but took a sharp turn and ended nearly 6 percent down on the day the results were announced. Despite the knee-jerk reaction June 4, the markets started to react positively June 5 as clarity emerged on Modi’s third term. As the coalition government settles in and the union budget is announced, markets are expected to stabilize in the medium term. Overall policy continuity, pro-business reforms and continued investments will foster a positive sentiment for the India growth story.

We will keep you updated on relevant developments. If you have questions or comments, please contact BGA India Managing Director Ratan Shrivastava at ratan@bowergroupasia.com.

Best regards,

BGA India Team

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Managing Director

Ratan is a senior executive and management consulting professional who has a proven track record in government, consulting and industry across India and Southeast Asia, with a wide network across stakeholders. He has been instrumental in developing and implementing growth strategies for both the public and private sector and has led diverse teams to secure new market opportunities. Prior to joining BGA, Ratan was at KPMG India where he helped the integration of the small and medium industry clusters, with the domestic and global aerospace, defense and space supply chains. He also served as an advisor at the Federation of ... Read More