What to expect from India’s election? Probably not much no matter who wins

NEW DELHI - No matter who wins, coalition politics are here to stay in India, says BBVA Research in a note on the pending elections. “Modi’s victory is not a done deal, as opinion polls may be underestimating the support of the rural population for the ruling party,” BBVA says. “The worst outcome would be a fragmented government/weak coalition. In any event, the elections’ results – once we exclude extreme cases of a fragmented Government – may not be too important after all.”

Beginning April 7, 815 million eligible Indian voters representing 543 seats will visit the polls. The election result is due May 16t, with most opinion polls indicating a victory for the chief Opposition party, BJP-, led coalition (the National Democratic Alliance – NDA).

BJP leader Narandra Modi has an impressive performance as Chief Minister of Gujarat State, which grew at an average 10.3% y/y over the past decade, surpassing national GDP growth of 7.8% over the same period. Gujarat has evolved as a premier business destination in India, contributing nearly 17% to India’s industrial output and 25% to India’s overall exports. What sets it apart is the state government’s clarity in policy, speedy decision making, a robust infrastructure support, and an uninterrupted power supply (power cuts are rampant in India).  This has catalysed foreign private investments with global corporate heavyweights such as General Motors, Ford, Abbott, and Nestle choosing Gujarat to set up manufacturing units.

BBVA says: “The perception of BJP as reform-minded, and a broad-based presumption of its imminent victory, has bolstered investor sentiment, sparking a pre-poll rally in Indian equity markets, which have breached record levels even as India’s macro backdrop stays weak.

“Since 2010, India’s GDP growth has more than halved (from 9.7% y/y to 4.7% in 2013), dragged in part by slowing global growth but more due to domestic issues associated with a high fiscal deficit, rising interest rates to curb inflation and delays in policy reforms, which have fallen short of reviving investment activity.” www.bbvaresearch.com (ATI).