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As the votes from India’s six-week general election were tallied on Tuesday, it quickly became clear that Narendra Modi was on course for his third term as prime minister. His satisfaction ends there.
Early results also showed Modi’s Bharatiya Janata Party losing its majority for the first time since 2014 – a stunning blow to the authority of India’s most powerful leader in decades that would leave him dependent on junior partners in his National Democratic Alliance to govern. .
As of Tuesday evening, the NDA was leading 291 of the 543 seats in India’s lower house of parliament, well below the more than 350 it held before the vote and the 400 Modi had set as his target. The motley coalition of opposition parties against the BJP, known as INDIA, was on track to nearly double its numbers to 234.
Confirmation of the shock result would leave Modi in a weakened position from which to tackle the enormous economic challenges facing India and implement the difficult reforms needed to help the world’s most populous country secure its status as a rising global power.
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Modi has lost his “aura of invincibility”, said Ronojoy Sen, a political scientist at the National University of Singapore.
“Knives won’t be out, but … Modi stands in the party and outside it [could] defeat,” he said, adding that BJP’s coalition partners “will take their pound of flesh”.
Before the results, the Modi government exuded confidence. At his final campaign rally last week, the Prime Minister prematurely crowed that he had achieved a “hat-trick” of absolute majorities in three consecutive elections. Pre-election polls released over the weekend also predicted a clear victory.
Modi on Tuesday evening brushed off concerns about the result. “Our opponents combined did not win as many seats as the BJP alone won,” he told a crowd of supporters, referring to the roughly 240 seats where the ruling party was leading in partial counts. “The country will write a new chapter with many big decisions in the third term.”
International banks and investors, who have bet on India as a key “China plus one” economy and a growing consumer market, will be keenly watching to see how durable a coalition government Modi can build.
Modi sold himself to both the Indian public and foreign investors as a strong, decisive leader capable of implementing tough reforms and maintaining a stable government. But analysts warned that reliance on NDA partners, which include several smaller regional parties, could force the BJP to make concessions such as offering ministerial posts and abandoning politically unpopular reforms.
The early results triggered a sharp sell-off in Indian stocks on Tuesday, with the benchmark Nifty 50 stock index down 6 percent.
Emkay Global, a brokerage, warned in a client note that key parts of the BJP’s reform agenda, including privatization and the kinds of labor and land market reforms demanded by foreign manufacturers, would be “off the table” if its majority is lost. confirmed.
Shumita Deveshwar, an economist at GlobalData.TSLombard, warned that coalition politics could force the BJP – which has been pitching its responsible fiscal policy to foreign investors – into “competitive populism”.
“Any whiff of political volatility makes markets nervous,” she said. “Markets see that if the BJP does not have a majority, then it will be more difficult to push reforms through parliament.”
Both the BJP and the INDIA alliance may now seek to shift the balance of power by getting rival members of parliament to defect to their side.
“It will be back to pre-2014. . . It will be the compulsion of coalition politics,” said Seshadri Chari, a pro-BJP commentator. However, he added that the prime minister knows the “art of management”
“Politics is primarily about management. I don’t see any difficulty as far as Modi is concerned in handling the situation,” Chari said.
Modi went into the election, which ran from April to June 1, enjoying high popularity thanks to his strong mix of Hindu nationalist politics, pro-big business economic reforms and development spending.
His government has talked of building a $10 trillion economy by the mid-2030s, more than double its current size, and has promised to elevate the country to developed economy status by 2047.
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But analysts said Modi appeared to have miscalculated the depth of anti-establishment sentiment and economic discontent. The BJP appeared to be struggling on the campaign trail as the opposition seized on India’s growing inequality.
Unable to effectively address widespread unemployment despite rapid economic growth, Modi responded by doubling down on polarizing religious rhetoric about India’s Muslim minority. But the prime minister’s margin of victory even in his own constituency of Varanasi was on Tuesday on track to decline from last election.
The Indian National Congress, the BJP’s main rival, ran on a platform of increasing social spending and creating more government jobs.
“I am happy with the verdict,” said Sumit Kumar, a 22-year-old job seeker in Delhi. “I did not vote for Modi because he could not give jobs to the youth.
However, some foreign investors were optimistic about Modi’s prospects. “I don’t expect Modi to change his policy,” said Alessia Berardi, head of emerging macro strategy at the research arm of European asset manager Amundi. “Even if we continue with what we’ve had, I think it’s good for investors and good for business.”