Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
As votes were counted in India’s six-week general election on Tuesday, it quickly became clear that Narendra Modi was on course for his third term as prime minister. His pleasure will end there.
Early results also showed that Modi’s Bharatiya Janata Party will 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 will leave him dependent on junior partners in his National Democratic Alliance to govern.
As of Tuesday night, the NDA was leading with 291 of the 543 seats in India’s lower house of parliament, far below the more than 350 seats it held before the vote and the 400 that Modi had set as a target. The motley coalition of opposition parties against the BJP, known by the acronym INDIA, was on track to almost 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 undertake the tough reforms needed to help the world’s most populous country secure its status as a rising global power.
See a screenshot of the interactive graphic. This is most likely because you are offline or JavaScript is disabled in your browser.
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 inside and outside the party [could] get beaten up,” he said, adding that the BJP’s coalition partners will “take their pound of flesh”.
Ahead of the results, the Modi government exuded confidence. At his final campaign rally last week, the Prime Minister crowed prematurely about achieving a «hat trick» of absolute majorities in three consecutive elections. Exit polls released over the weekend also predicted a landslide victory.
Modi dismissed concerns about the results on Tuesday night. «Our opponents combined did not win as many seats as the BJP alone won,» he told the gathered supporters, referring to the roughly 240 seats where the ruling party was leading in the partial vote count. «The country will write a new chapter in the third term with many big decisions.»
International banks and investors, who have bet on India as a key «China plus one» economy and growing consumer market, will be watching closely 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 relying on its 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 sparked a sharp selloff 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 market and land reforms demanded by foreign producers, would be «off the table» if the loss of the majority was confirmed.
Shumita Deveshwar, an economist at GlobalData.TSLombard, warned that coalition politics could push the BJP – which has touted its responsible fiscal policy to foreign investors – into «competitive populism».
«Any hint of political instability makes markets jittery,» she said. «Markets see that getting reforms through parliament will be more difficult if the BJP does not have a majority.»
Both the BJP and the INDIA alliance may now try to shift the balance of power by getting rival members of parliament to defect to their side.
«It will go back to the period before 2014. . There will be compulsion of coalition politics,” said Seshadri Chari, a pro-BJP commentator. But he added that the prime minister knows the «art of management»
«In politics, everything comes down to management. As far as Modi is concerned, I don’t see any difficulty in resolving the situation,” Chari said.
Modi went into the election, which ran from April to June 1, enjoying huge popularity thanks to his strong mix of Hindu nationalist politics, big-capital-backed economic reforms and development spending.
His government has talked about building a $10 trillion economy by the mid-2030s, twice its current size, and has pledged to raise the country to developed economy status by 2047.
See a screenshot of the interactive graphic. This is most likely because you are offline or JavaScript is disabled in your browser.
But analysts say Modi appears to have miscalculated the depth of anti-takeover sentiment and economic discontent. The BJP appeared to struggle on the campaign trail as the opposition latched onto India’s widening inequality.
Modi, who has failed 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 on Tuesday was on the way down from last election.
The Indian National Congress, the BJP’s main rival, ran on a platform of increasing welfare spending and creating new government jobs.
«I am happy with the verdict,» 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 policy,» said Alessia Berardi, head of new macro strategy at the research arm of European asset manager Amundi. «Even if we continue with what we’ve had so far, I think it’s good for investors and good for business.»
