Around his Bharatiya Janata Party ( BJP) is crashing down the veneer of strongman immunity that has ensnared India’s Narendra Modi for nearly 25 years.
The prime minister’s reliance on friends to form a government is already the subject of market sentiments. If enough seats are secured, a BJP alliance could form a state.
Modi’s group fell little of the 272- chair majority on its own. The National Democratic Alliance, led by BJP, seems on course to safe 293 tickets. 229 chairs might be won by the antagonism Indian National Developmental Inclusive Alliance.
It’s anything of a social “black bird” for a guy who’s dominated Indian politics since 2014. But whose tale had been permeated ever since he became Gujarat’s deputy minister in the early 2000s.
He was given folk-hero reputation that captivated the nation as a result of the northern state’s economic successes during Modi’s presidency. Year after year from 2001 to 2014, Modi’s plans typically generated faster gross domestic product, greater productivity and innovation, less government and fraud, and better facilities than the national statistics.  ,
In 2014, citizens returned the BJP to strength in hopes Modi may use the” Gujarat , type” throughout Asia’s third- biggest market.
Clearly, the last decade did n’t go as many of India’s 1.4 billion people had hoped. This time around, Modi’s inability to win a majority of parliament chairs speaks to the growing distance between soaring economic reform speech and real-world application. Modi’s , Gujarat , unit, it seems, is n’t as flexible as voters had hoped.
But there’s a silver lining to Modi’s vote fail: forcing Modi’s inner circle to rely less on his Hindu nationalist agenda and more on spreading the benefits of India’s 7 % progress. The BJP will probably change its position in light of rising inequality by changing its liberal constitution.
According to economist Shilan Shah at Capital Economics, Modi will start his second term with a weaker mandate that will make the passing of controversial economic reforms more challenging. However, he did continue to serve as the leader of a steady partnership.
Shah added that” the new government could still do much to maintain potential progress at 6 %- 7 %” given the wider acceptance across the political spectrum of the value of financial reform. That may allow the economy to grow by more than doubling over the next ten years.
In recent months, says Ian Bremmer, chairman of Eurasia Group, extended- time India watchers had noticed “scant mentions in his campaign rhetoric of the Hindu- patriotic agenda that dominated many of , Modi’s previous two terms, and with good reason. Modi , has mostly fulfilled his vows to the propagandists”.
Bremmer adds that” then firmly in strength,  , Modi , is looking to turn the volume down on social issues as he pursues economic growth”.
Not as firmly as hoped, though, leaving Modinomics at anything of a fork in the road. Current actions by China to restore its house sector, which may help to sharpen the BJP’s focus on financial retooling, are emboldening the plot.
The China versus India argument broke out in the lead up to an vote that started in April, with Mumbai frequently taking the lead. The almost US$ 7 trillion Foreign investment fall from 2021 to early 2024 sent ripples of investment Mumbai’s method.
China, however, has since resurrected its capital march game by telegraphing significant steps to end the property crisis. Chinese President Xi Jinping’s team released new information in the middle of May, including urging local regulators to buy empty properties and lowering the amount that home buyers need for a loan.
It’s the most forceful move to handle a crisis that has hampered Asia’s largest sector for years. And there is growing hope that Xi and Premier Li Qiang are on the verge of a policy combination that will positively affect China’s financial outlook.
As his celebration plots its third-term plan, Modi’s math becomes more complicated. For India, the idea of a powerful Chinese bounce is a dual- edged sword.
Rising Taiwanese need is an obvious plus for India’s manufacturing sector, which grew in fame on Modi’s view. However, China‘s luring again trillions of dollars worth of worldwide investment, of which India Inc. flocked, would be a depressing blow for Mumbai shares.
Researchers at UBS speculate that one of the factors contributing to India’s wealthy prices might have been the political stability and plan certainty that a strong government provided. ” Some of those beliefs may appear under question” given the vote results.
Carlos Casanova, scholar at Union Bancaire Privée, says buyers have been cheered by the ruling government’s capital market- helpful reforms. They include the company’s” Make in India” initiative encouraging local businesses to establish local factories and foreign companies to place bets on local businesses.
” Besides, Modi has also published plans for India to become a developed nation by 2047,  , which will require , investment into infrastructure and growth of around 8 % per annum”, Casanova notes.
” Given the structure of Indian markets, we observe a strong correlation between GDP growth and]earnings per share ] growth. High quality, high visibility earnings may fuel Indian equities higher in the months ahead”, he adds.
According to UBS analyst Sunil Tirumalai,” the bargaining power shifts materially within the alliance as BJP does not have a simple majority.” In contrast to expectations last week, the market may have taken the majority of the possible scenarios from this.
According to Goldman Sachs analysts,” India needs to continue to adhere to structural reforms, such as land and labor market reforms, while creating a conducive environment for millions of workers to be earnfully employed, to realize its true growth potential.”
This could be the equivalent of Warren Buffett’s famous observation that “only when the tide goes out do you discover who’s been swimming , naked”. China’s growing appetite for international capital may reveal how policy-wise Modi’s government has been policy-stylish for a while.
” When I hear India called the world’s fastest- growing economy, I get very agitated”, Princeton University economist Ashoka Mody, author of ,” India is Broken”, tells the Guardian. That is not the paper they’re written on, the numbers are not worth.
Mody is hardly alone in arguing that, below the surface, India’s supposed economic boom under Modi is n’t all it appears.
” All that glitters is not growth”, write economists at Nomura , Holdings in a recent note. Underlying growth is “less than what the headline suggests.”
The reason,  , Nomura , reckons, is that India’s growth “is primarily supported by strong public capex growth, while private consumption and private capex remain subdued”.
India’s vital agricultural sector, meanwhile, has “underperformed”. To be fair, as , Nomura , points out, certain industrial sectors are indeed “resilient”. Look no further than the fact that more than 7 % of Apple Inc.’s iPhone production is currently done in India.
Yet there are growing worries that India’s 7- 8 % growth is n’t producing nearly as many new jobs as hoped.
Arvind Subramanian, a top former chief economic adviser to New Delhi, has warned that GDP data trends are “absolutely mystifying” and “do n’t add up”.
Subramanian believes that the government’s implied inflation figures range between 1 % and 1 %, but that actual inflation ranges between 3 % and 5 %. ” What’s more, he says”, the economy is growing at 7.5 % even though private consumption is at 3 %.”
” So it’s a lot of stuff about the numbers which you know, I do n’t understand,” Subramanian says”. These are not incorrect, in my opinion. That’s for others to judge.”
India’s economic momentum is n’t a mirage, but it also does n’t seem as efficient in sharing the fruits of rapid GDP as widely as Team Modi likes to argue. It echoes, in some ways, what befell Modi’s party back in 2004, when it lost power.
At the time, then-prime minister Atal Bihari Vajpayee fought for re-election with a opulent” India Shining” campaign that highlighted the optimism that was rumored to be sweeping the country.
Yet hundreds of millions of Indians not feeling , Vajpayee ‘s , economic magic showed the BJP the door. Fast- forward 20 years and the BJP seems to have reached another Wile , E , Coyote , moment where the Indian masses realized the road below had disappeared.
For Modi, this moment must really sting. He largely influenced the outcome of the election. His face and the slogan” Modi’s Guarantee” were displayed on the nation to persuade voters that better days are yet to come.
What Modi’s disappointing election showing means for Indian foreign policy is anyone’s guess. Few observers anticipate much to change about Modi’s dual-track plan to maintain a leadership position in the Global South, or developing nations that account for the majority of the world’s population.
Yet for Modinomics, this electoral reality check could indeed refocus attention on much- needed steps to reduce bureaucracy, attack corruption, increase productivity, up investments on education and training and rewrite laws concerning land, taxes and the legal system.
And to prevent the significant economic lead that China has positioned against India in his third term from widening even further.  ,
Follow William Pesek on X at @WilliamPesek ,