Indian election strips Narendra Modi of ‘aura of invincibility’

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As the votes from India’s six-week general election were counted on Tuesday, it quickly became clear that Narendra Modi was on course for his third term as prime minister. This is where his pleasure will end.

Early results also showed Modi’s Bharatiya Janata Party would lose its majority for the first time since 2014 – a stunning blow to the authority of India’s strongest leader in decades and one that would leave him hanging from junior partners in his National Democratic Alliance to govern. .

On Tuesday night, the NDA was ahead in 291 of the 543 seats in India’s lower house of parliament, well below the more than 350 it had before the vote and the 400 Modi had set as a target. A diverse coalition of anti-BJP opposition parties, known by its acronym INDIA, was on track to double its tally to 234.

Confirmation of the shock result would leave Modi in a weakened position from which to confront the huge economic challenges facing India and to undertake the difficult reforms needed to help the world’s most populous country secure the status its status as a rising global power.

Modi had lost his “aura of invincibility”, said Ronojoy Sen, a political scientist at the National University of Singapore.

“Knives will not be out but . . . Modi stands inside and outside the party [could] take a beating,” he said, adding that the BJP’s coalition partners would be “taken away their pounds of flesh”.

Ahead of the results, the Modi government had exuded confidence. At his final campaign rally last week, the Prime Minister prematurely proclaimed that he had scored a “hat-trick” of absolute majorities in three consecutive elections. Exit polls released at the weekend also predicted a landslide victory.

Modi brushed off concerns about the result on Tuesday night. “Our opponents together have not won as many seats as the BJP alone,” he told a crowd of supporters, referring to the roughly 240 seats where the ruling party was leading in the partial counts. “The country will write a new chapter with many big decisions in the third term”.

International banks and investors, who have placed bets on India as a major “China plus one” economy and growing consumer market, will be watching closely to see how stable a Modi coalition government can build.

Modi has sold himself to the Indian public and foreign investors as a strong and decisive leader capable of implementing tough reforms and maintaining a stable government. But analysts warned that relying on its NDA partners, which include several smaller regional parties, could force the BJP into concessions such as the provision of ministerial posts and the removal of politically unpopular reforms.

The early results triggered a sharp sell-off in Indian stocks on Tuesday, with the Nifty 50 stock index falling 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 market and land reforms sought by foreign manufacturers, would be “off the table” if the loss of her majority was confirmed.

Shumita Deveshwar, an economist at GlobalData.TSLombard, warned that coalition policies could force the BJP – which has promoted its responsible fiscal policies for foreign investors – into “competitive populism”.

“Any whiff of political instability makes markets nervous,” she said. “Markets see that if the BJP does not have a majority, then passing reforms in parliament will be more difficult.”

Both the BJP and the INDI alliance may now seek to shift the balance of power by getting rival members of parliament to defect to their sides.

“It will return to pre-2014. . . There will be the liabilities of coalition politics,” said Seshadri Chari, a pro-BJP commentator. But he added that the prime minister knew the “art of management”

“Politics is 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 powerful 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 pledged to raise the country to developed economy status by 2047.

But analysts said Modi appeared to have miscalculated the depth of anti-incumbency sentiment and economic discontent. The BJP appeared to be struggling on the campaign trail as the opposition seized on India’s growing inequality.

Modi, who has been unable to effectively address widespread unemployment despite rapid economic growth, 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 the way down from the last election.

The Indian National Congress, the BJP’s main rival, ran on a platform of increasing welfare spending and creating more government jobs.

“I am happy with the decision,” said Sumit Kumar, a 22-year-old job seeker in Delhi. “I didn’t vote for Modi because he couldn’t give jobs to the youth.”

But some foreign investors were optimistic about Modi’s prospects. “I don’t expect Modi to change his policies,” said Alessia Berardi, head of emerging macro strategy at the research arm of European asset manager Amundi. “Even going with what we’ve had so far, I think that’s good for investors and good for business.”