Comment on the outcome of Indian elections

According to Gaurav Narain, Manager of the London-listed India Capital Growth Fund:

“The BJP led National Democratic Alliance (NDA) coalition has won the 2024 elections with a full majority (296 out of 543 seats) for an unprecedented third consecutive term. The numbers are however well below expectations and even lower than the verdict in 2019 (353 out of 543 seats). However, the disappointment is that BJP, the lead coalition partner has been unable to maintain its single party majority, having won 241 seats (vs half way mark of 272+ seats), compared to 303 seats won in the 2019 elections. This reduces the dominance of the BJP and essentially highlights the formation of a weaker alliance govt. in the offing.”

“While we expect policy continuity, with the Government continuing its investment led economic agenda, it may tweak priorities to support rural consumption and employment.”

“A challenge the new Government would however face is that it would need support from its coalition partners in decision making. This would constrain it in making bold reforms – particularly in areas of agriculture laws and labor reforms. It may also steer away from contentious issues like implementing a uniform civil code etc.”

“From a market perspective, we expect a stronger focus towards demand revival in rural India, benefitting consumption stocks. The investment led stocks, particularly the Public Sector Unit (PSU) could see some pull back.”

“A positive outcome of the election has been that it strengthens India’s democratic credentials. Ahead of the elections there were a) allegations that the Modi Government was influencing the outcome of the elections and b) an even stronger 3^rd mandate for the NDA alliance would give it too much power with speculation they would make constitutional amendments, questioning the secular nature of democracy. All this has been laid to rest.”