Importance Of Modi's Decisive Victory – Business Insider

Importance Of Modi's Decisive Victory – Business Insider

REUTERS/Danish Siddiqui

Narendra Modi

When it comes to elections, it’s not about whether you win or lose. It’s about whether you crushed your opponents.

And according to the exit polls, that’s exactly what opposition leader Narendra Modi appears to have done in India’s election for prime minister.

“The votes are still being counted but Narendra Modi appears to be on the cusp of a historic victory in India’s election that could deliver an outright majority to his party, the BJP,” wrote Capital Economics’ Mark Williams and Miguel Chanco. “At the very least, the BJP-led National Democratic Alliance (NDA) will have a large majority. Either result would give a significant boost to hopes for economic reform.”

Modi has been widely acknowledged as the champion for economic progress, something the BRIC economy desperately needs as it struggles to achieve growth. India, however, is notorious for its inability to push through reforms. It can also be a nightmare to operate a business in the country (There’s actually a magazine circulating in India called “Bureaucracy Today“). As such, it was crucial that Modi win big.

“The equity and currency markets have chosen to be optimistic about policy action and growth implications in the coming 12 months,” wrote Ridham Desai, Morgan Stanley’s India equity strategist.

At its high of the day, India’s Sensex index exploded 6.1% to an all-time high of 25,375.63.

“We considered a decisive majority as probably the best scenario, or our bull case for the market,” wrote Desai. “This election result could herald a sea change for India’s economy, which has struggled with stagflationary-type conditions over the past few years. We think the incoming government will have to de-anchor inflation, raise capital productivity, improve the investment climate and de-lever private balance sheets to engineer a new growth cycle.”

But it’s still important to manage your expectations.

“The new government won’t have everything its way since power is dispersed in India,” added Williams and Chanco. “Many reforms require the cooperation of state government. Nonetheless, the new government will without a doubt be in a stronger position to push through reforms than anyone had thought likely even a week ago. The onus will now be on Mr Modi to demonstrate that investors are right to put their faith in him.”

Bloomberg.com

SEE ALSO:
RUCHIR SHARMA: India’s Modi Is ‘Selling A Dream’

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Importance Of Modi's Decisive Victory – Business Insider

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