Modi's Third Term: India's Economic Fundamentals Stay Strong

India's economic fundamentals remain robust according to Nomura, even as Prime Minister Narendra Modi secures a third term. The BJP-led alliance's victory ensures ongoing reforms despite political challenges, with a focus on digitalisation, infrastructure, and governance. Analysts foresee stable economic policies with possible adjustments in spending priorities.

India's economic fundamentals remain robust, according to investment bank Nomura. This assessment follows the country's general election results, which paved the way for Prime Minister Narendra Modi's third consecutive term.

Modi, leading the BJP-backed National Democratic Alliance (NDA), achieved a majority in the Lok Sabha despite losses in some key states. Out of 543 constituencies, the BJP won 240 seats, while Congress secured 99.

Nomura believes that India's economic reforms will continue unabated. "Reforms in India have generally survived the test of politics," the bank stated, anticipating that the new government will maintain the pace of governance and administrative changes.

In the near term, uncertainty remains high, but the focus is on forming the new government. News reports suggest that the swearing-in ceremony could take place on June 9. The first 125 days of Modi's third term are likely to concentrate on digitalisation, infrastructure, industrialisation, and governance-related reforms.

Spending adjustments may occur, directed more towards revenue expenditures rather than capital expenditures. Analysts expect the interim budget target of 5.1% of GDP to be adhered to, barring any necessary political moves towards reflationary policies.

Overall, Nomura forecasts continuity in supply-side reforms while acknowledging challenges in factor market reforms, with minimal impact on monetary policy.

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