India Politics


India: India holds the world's largest democratic elections, no major change to economic outlook expected

April 17, 2014

India's general elections are taking place from 7 April through 12 May. The elections represent the largest democratic vote ever held with 814 million registered voters, 100 million of whom will vote for the first time. This is nearly 15.0% more people than were eligible to vote in the 2009 elections, which adds a high degree of uncertainty to the election results. Political analysts broadly agree that the Indian National Congress party (INC), which leads the ruling United Progressive Alliance (UPA), will lose the elections to the Bharatiya Janata Party (BJP), which is the leading party in the National Democratic Alliance (NDA). It is unclear which parties will support the BJP if it doesn't come away with a clear majority.

Of the leading party candidates, most analysts see BJP leader Narendra Modi-currently Chief Minister of the State of Gujarat-as the most likely to implement “market-friendly” reforms. Modi has already implemented such reforms in Gujarat and achieved strong economic growth. However, some analysts are worried that Modi's nationalistic stance could generate conflict with the Muslim community.

The INC candidate has not yet been defined, although party vice president Rahul Gandhi has the highest chance of being nominated. The INC is seen as more oriented toward social cohesion and wealth redistribution, although it has lost credibility in recent years due to corruption cases and disappointing economic delivery.

If one party coalition does not win a majority, the so-called “Third Front”-a loose coalition of left-leaning and regional parties-may have a role in forming the government. Furthermore, the relatively-new Aam Aadmi Party (AAP - the “common man party”) has recently emerged as yet another alternative option. The AAP's program, which is aimed at curbing rampant corruption, is becoming more appealing to voters disenchanted with the high level of political graft. Thus the AAP is expected to take votes away from the main parties, especially the INC.

Economically speaking, BJP and the INC are running on very similar platforms. Both parties agree on the need to improve the country's fiscal position and reduce the budget deficit. To this end, both parties favor the creation of a goods and services tax (GST) in order to boost revenues. In addition, both BJP and INC aim to reduce public investment as several stalled investment projects are dragging on the budget.

Within this context, analysts don't expect the final result of the elections to have a strong impact on the country's outlook, at least in the short run. Analysts are concerned about whether the elected government will be strong enough to implement its program quickly and with less opposition. A weak coalition would delay national-level agreements, especially if the junior coalition parties turn out to be state-level with constituent-specific interests.


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