Alex Rankine Markets editor
“The new Modi government looks a lot like the old one,” says The Economist. Indian voters recently stripped prime minister Narendra Modi’s governing BJP party of its parliamentary majority for the first time in a decade, leaving it to rely on smaller parties to stay in power. Concern that a shaky coalition could undermine growth saw Indian markets plunge 6%, wiping $400bn off stocks in a single day earlier this month.
However, Modi has assembled a coalition that is broadly “sympathetic to his pro-business” agenda, with many of the key ministers from the last term remaining in place. The result? The BSE Sensex index “clawed back all its losses” within a week and is up 7% since the start of the year.
Modi has already achieved much since coming to office in 2014, says John Reed in the Financial Times. His government has “stabilised” a “wobbly macroeconomy”, implemented much-needed tax reforms and powered into the digital economy. But India still faces “deep structural challenges” in areas such as farming, where “mass protests” have seen off previous attempts at reform. New Delhi wants to build up India’s manufacturing base, but that requires difficult changes to labour and land laws. As one local business commentator puts it, if Modi didn’t manage these reforms in the last ten years, “why would we see them now that the BJP don’t have the majority”?
Complaints about a “two-track economy” that leaves too many people behind gained more traction than expected at the polls, says Jon Sindreu in The Wall Street Journal. That could well force Modi to “shift some of the attention he has paid to infrastructure and investment” toward social programmes to placate angry voters. Nevertheless, growth will continue as already agreed infrastructure projects bed in. Capital expenditure has hit more than a third of GDP. The “India
