India elections: Political continuity in a tight race
The incumbent government is set to take office for a third term, but with a reduced majority.
Group Research - Econs, Radhika Rao5 Jun 2024
  • Election results were a tighter race than anticipated with the incumbent NDA set to return.
  • Performance of the opposition alliance was surprisingly strong.
  • The election outcome poses near-term uncertainty but is unlikely to alter the economy’s path.
  • We retain our real GDP growth forecast for FY25.
  • The RBI monetary policy committee is on course to keep rates on hold on Friday.
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Tight race to the finish line

The ruling Bharatiya Janata Party-led National Democratic Alliance (NDA) coalition is on course to run the Indian central government for a third successive term, a first for any party/ coalition since the early 1960s. The margin of win was much narrower than the exit polls had suggested (see our note India rates: Markets cheer strong data and signs of political continuity). By late-Tuesday, the NDA was leading in 293 parliamentary seats vs 350-370 predicted by the exit polls. The ruling BJP emerged as the single largest party, but below the halfway mark, leading with 240 seats vs 303 in 2019. None of the exit polls had predicted that the ruling party BJP’s seat tally will fall below the 2019 count, as well as a sub-300 by the coalition NDA. The BJP is likely to be reliant on its partners to form the next coalition government.

Economic implications

Notwithstanding the tight race to office, the incumbent NDA coalition is expected to form the next government and follow through with policies that had been set into motion in the previous term, including expanding the manufacturing footprint, capex push and existing development programs. With much of the recent emphasis on supply-driven reforms, authorities might explore introducing consumption driven stimulus and directed support for the agricultural sector, but a complete shift towards competitive populism is not our base case. Changes that required deeper constitutional changes, which were not particularly growth-accretive, remain out of scope.

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Radhika Rao

Senior Economist – Eurozone, India, Indonesia
[email protected]

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