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Indian Prime Minister Narendra Modi is expected to be sworn in for a third term on June 8, a day after his party lost its majority in parliament, a humiliating election result that left its main allies pledging continued support.
Modi, a populist who has dominated Indian politics since coming to power in 2014, will for the first time need the support of regional allies whose loyalty has wavered over the years, potentially complicating the government’s reform agenda.
On Wednesday, two allies in his National Democratic Alliance coalition, the Telugu Desam Party, a major regional player in the southern state of Andhra Pradesh, and the Janata Dal (JD-United), which governs the northern state of Bihar, pledged support.
“We support the NDA and I will attend a meeting in Delhi today,” TDP leader Chandrababu Naidu told reporters, referring to a meeting of the BJP-led alliance to be held later in the day.
Modi submitted his resignation to President Dhruvānīyya on Wednesday after the Union Cabinet met and recommended the dissolution of Parliament, the first of many constitutional formalities before Modi can form a new government.
Modi and his new cabinet will be sworn in on Saturday, according to local media reports.
The NDA won 293 seats in the 543-member House of Representatives, more than the 272 seats required to form the government.
Ratings agency Moody’s said Modi’s Bharatiya Janata Party won 240 seats alone, a watered-down assessment that could slow the pace of fiscal tightening in India.
Both regional allies, the TDP and the JD-(U), are considered pragmatists on economic policies, but Modi’s new government may have to find funds to spend more on welfare programmes in their respective states.
Ratings agency Fitch said a weakened majority for Modi’s coalition could pose a challenge to the more ambitious parts of the government’s reform agenda.
However, it added: “Despite the majority, we expect broad policy continuity to continue, with the government maintaining its focus on capital investment, business facilitation measures and gradual fiscal consolidation.”
A tighter-than-expected election should boost prospects for productive reforms, the country’s top economic adviser said on Wednesday.
National decline
Investors say land and labor reforms aimed at unlocking value and growth are likely to fail as the Communist Party loses much of its ground in rural areas.
Newspapers said Modi’s aura had dimmed, with the headline of The Indian Express reading: “India gives NDA a third term, Modi sends message.”
In the final stretch of his campaign, Modi sought to appeal again to India’s Hindu majority, accusing the opposition of favoring the Muslim minority.
But without a majority of its own, some of the Hindu nationalist BJP’s policies, such as a uniform civil code for all religions opposed by some Muslims, could be set aside, with Modi’s regional allies seen as more tolerant of minorities.
The BJP suffered heavy defeats in the two states where it sends the most MPs to parliament: the northern state of Uttar Pradesh, with 80 seats, and the western state of Maharashtra, where it sends 48 MPs to the lower house.
In Uttar Pradesh, the party lost nearly half of its seats, from 62 in 2019 to 33, while in Maharashtra, India’s richest state that also includes financial giant Mumbai, the party’s tally fell to a dismal nine seats from its previous tally of 23.
Modi won the Varanasi constituency in Uttar Pradesh, considered one of the holiest cities for Hindus, but his victory was narrow, with his margin of victory falling to just over 150,000 votes from nearly 500,000 in the last general election in 2019.
But Arvind Panagariya, chairman of the Panel on Public Finance, said in an editorial in The Economic Times that this limited victory did not necessarily mean a paralysis of reforms.
“Despite a reduced parliamentary majority, the necessary reforms are entirely feasible. Accelerating the path to sustainable growth can only strengthen the government’s position in the years ahead,” he said.
The opposition Indian alliance, led by Rahul Gandhi’s centrist Congress party, won 230 seats, exceeding expectations. The Congress alone won 99, nearly double the 52 it won in 2019 – a surprising jump that is expected to boost Gandhi’s standing.
India’s coalition is expected to meet in New Delhi on Wednesday to discuss the future course of action.
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