General Election 2024: Return of the coalition Government

NDA, led by Narendra Modi, will make the record bid to comfortably form the central government third time in a row, a record earlier held only by Jawaharlal Nehru in 1962. However, BJP loses the majority of its own as it will need support of TDP and JDU to run the government. At the same time, INC and regional parties like SP, AITC and DMK made a strong come back to form a meaningful opposition in the parliament.

  • Markets, expecting a stronger NDA led government on account of numerous exit polls, tanked by over 5% on Election Day on prospect of a weaker government and slower economic reforms.
  • However, the concerns were quickly put aside as markets touched lifetime high in only three days post the elections. Analysts are clearly believing that NDA returning to power for third consecutive term is a big positive and India’s growth story will continue unabated.
  • Going forward, we may see some attention towards revenue expenses or subsidies at the cost of CAPEX. Job creation and rural areas may also become focus areas of new government. However, this is unlikely to change macro stability as continuity of government will ensure long term financial stability of the economy.

S&P upgrades India’s sovereign rating outlook

  • After 10 Years, in May, 2024, S&P Global raised India’s sovereign rating outlook to “positive” from “stable”, citing the country’s strong economic fundamentals. However it kept the rating at “BBB-“.
  • Earlier in January, relying on a robust medium-term GDP growth outlook and sound external finances, Fitch had affirmed India’s sovereign rating at ‘BBB Minus’ with stable outlook.
  • All three global rating agencies, Fitch, S&P and Moody’s, had the lowest investment grade rating on India with a stable outlook, until May 2024.

 Rationale behind Outlook Upgrade

  • Robust economic growth, pronounced improvement in the quality of government spending, political commitment to fiscal consolidation.
  • Growth dynamics expected to continue to play out in the medium term, with GDP expanding close to 7% annually over the next three years.
  • Improvements in infrastructure and connectivity in India.
  • Government again able to depict a more concrete (albeit gradual) path to fiscal consolidation. Expects general government deficit to dip to 6.8% by fiscal 28 from 7.9% in fiscal 2025.

Upside & downside scenarios:

  • S&P may raise the ratings if India’s fiscal deficits narrow meaningfully such that the net change in general government debt falls below 7% of GDP on a structural basis.
  • S&P may also raise the ratings if they observe a sustained and substantial improvement in the central bank’s monetary policy effectiveness and credibility, such that inflation is managed at a durably lower rate over time.
  • S&P could revise the outlook to stable if they observe an erosion of political commitment to maintain sustainable public finances or if current account deficits widen materially to weaken India’s external position.


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