Following the announcement of the results of the national elections that led to Prime Minister Narendra Modi's election to a third straight term in office, investment bank Nomura stated on Wednesday that India's economic fundamentals are still strong.
The Election Commission of India counted votes polled for all 543 seats, where the BJP won 240 and the Congress 99. Nomura said India's economic foundation continues to be robust, and the reforms have broadly endured under different political regimes. It observes obstacles in the form of labour and land reforms as well as the government's continued push for administrative and governance reforms.
Despite the ongoing political unpredictability and changing political landscape, Nomura observes continuity in the reform agenda, macroeconomic policies, and economic trajectory.
Now, attention will be on government formation, with reports suggesting it could be done on June 9. There is wild speculation on who would be in the new Cabinet, and the focus is increasing on the next budget in early July, which will be a clear barometer of policy orientation.
Nomura anticipates that the enhancement of infrastructure, industrial development, digitalization, and governance changes will be the incoming government's top goals in the short term. The outcome of the election may cause spending priorities to change, with revenue expenditures likely to carry greater weight than capital expenditures, but the bank is confident that the government will continue its path towards macroeconomic rectitude. It anticipates that the government will adhere to the 5.1% GDP intermediate budget objective, but acknowledges that there is a greater chance that consolidation may proceed more slowly if political pressures demand reflationary measures.
