India’s elections: Analyzing the biggest event in the world

Market Realist

Must-know: Will India's new government affect your portfolio? (Part 2 of 6)

(Continued from Part 1)

How significant are India’s elections?

Nine phases, 41 days, 814 million voters, and 8,000 candidates. India’s 2014 general elections were a major event in themselves. Two main national political parties, the Indian National Congress (or Congress) and the Bhartiya Janata Party (or BJP), and a plethora of regional political parties campaigned hard during these elections.

With an electoral population of 814 million spread across the vast expanse of the country, the polls were divided in nine phases across 543 constituencies. The first phase was scheduled on April 7 and the last phase on May 12. With a growing youth population, nearly 100 million new voters were added to the electoral list since the last general election in 2009.

The party with support of over 272 elected members can form a government and choose the country’s prime minister. BJP led the national democratic alliance and won over 300 seats, well ahead of the threshold, with BJP crossing the threshold of 272 on its own. With an absolute majority, BJP has an opportunity to push through reforms without really worrying about coalition politics.

The key issues during the elections were lagging GDP growth, rising prices (or inflation), and corruption.

India’s growth slowed to nearly 4.5% in 2012 and 2013 from an average of over 8% from 2004 to 2011 on the back of a lack of policy initiatives. The low growth rate coupled with high inflation has weakened the country’s economic prospects. Corruption has emerged as one of the key issues, as many scams—including scandals in telecom spectrum allocation and coal mine allocation—dented the prospects for re-election for the Congress Party that ruled the country from 2004 to 2014.

Tensions in Ukraine have attracted much of the emerging market news over the past couple of months. With their sheer scale, India’s elections should have gotten more media attention than they did. This series is our attempt to decipher the impact of India’s general elections on U.S. ETF investors.

With BJP gaining the majority in the Lok Sabha (or House of Representatives), the prime ministerial candidate of the BJP, Narendra Modi, will be the next prime minister of India. We’ll talk more about Modi in the next part of this series.

We’ll also talk about the policies stated in the BJP’s manifesto and their impact on companies like Walmart Inc. (WMT), Boeing (BA), CISCO Systems (CSCO), Monsanto (MON), and Colgate-Palmolive (CL).

Continue to Part 3

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