Modi-Led Bloc Wins Biggest India Mandate in Three Decades
Comment of the Day

May 16 2014

Commentary by David Fuller

Modi-Led Bloc Wins Biggest India Mandate in Three Decades

Here is the opening of Bloomberg’s report on this historic election:

Narendra Modi’s opposition bloc swept to power with the biggest Indian election win in 30 years as voters tired of sluggish economic growth and corruption handed a historic defeat to the Gandhi dynasty that has dominated politics since the country’s founding.

The Bharatiya Janata Party and its allies were leading in 340 of 543 seats up for grabs, more than the 272 needed for a majority. Rahul Gandhi, who led the Congress campaign, conceded defeat with his bloc leading in 58 seats, which would be the worst ever for a party that has governed India for most of the time since independence in 1947. Smaller regional parties were ahead in 145 seats, according to NDTV television station.

“The era of divisive politics is over and it is time for unification,” Modi, 63, told a rally today in Gujarat, the western state he’s run since 2001. “I see the dawn of a new era for our country.”

The results boosted stocks the most in five years and lifted the rupee to an 11-month high as investors bet a stable government would make changes needed to bolster growth in the world’s largest democracy. While Modi’s opponents accused him of inflaming tensions between Hindus and a Muslim minority that stem from the country’s founding in 1947, on the campaign trail he offered a message of economic development.

“It marks the beginning of a new era in Indian politics,” said B.G. Verghese, a visiting professor at the Centre for Policy Research in New Delhi and a former aide to ex-Prime Minister Indira Gandhi. “This clean break offers a fresh look at basic policies -- economic, security, social -- and that has to be a good thing.”

David Fuller's view

While we still await the final results for this historic election, counting is well advanced and strongly suggests that Narendra Modi has won a convincing majority victory.  If so, this is an astonishing result exceeding everyone’s expectations.  It is a tribute to Modi’s economic and political skills.  Most importantly, it shows that the majority of Indian citizens from all backgrounds are fed-up with corruption, the stultifying class system in their country, and the bureaucratic socialism that has stifled economic development. 

India now has a politically astute and economically sophisticated prime minister in Narendra Modi, plus an extremely capable central bank governor in Raghuram Rajan.  Other countries should be so lucky.

The Sensex Index (weekly & daily) is a little overextended in the short term and it would not be surprising to see some consolidation before long.  However, many of the large advisory services had rated India lowly until the latter stages of the recently concluded election campaign.  Moreover, there was no consensus for an outright majority for Mr Modi. 

India is not an easy country to lead from the top, to put it mildly, but Modi’s mandate will help.  Governance is Everything and billions of investment capital will flow to India if Modi’s leadership continues to inspire success.  India suddenly looks a lot more interesting among emerging markets.   

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