New Government – Modi 3.0 – the coalition saga

The recent parliamentary elections have significantly altered India’s political landscape. The ruling party which secured 303 seats in 2019, now holds 240 seats. Despite efforts to portray it as Modi 3.0, it has ended as a coalition government.

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The present government is based on the support of partners and one is reminded again of coalition dharma, a term used by Atal Bihari Vajpayee to describe coalition politics.

Leadership Challenges in Coalition Politics
Modi’s leadership style is mostly characterised by a strong central command. He has always been a tad authoritarian. Major ministries in the past have been with astute followers who implement what has already been decided. Hence, the PM will now be tested as he must accommodate coalition partners and navigate complex political dynamics. Notably, the two major allies, TDP and JD(U), are led by experienced leaders skilled in coalition politics, a challenge Modi is yet to face. It is pertinent to note that Nitish Kumar had once, not so long ago, asserted that he would die rather than join Modi.

Historically, Modi has demonstrated pragmatism by rolling back contentious decisions, such as land acquisition and farm reforms. However, his ability to adapt to coalition governance will be crucial in maintaining stability and advancing the government’s agenda. This, given the fact that the allies have not always been faithful. It was Atal Bihari’s government that underwent the no confidence debacle and lost by just 1 vote as allies withdrew support in 1996.

Economic Outlook and Foreign Direct Investment

India positions itself as a prime candidate for the China+1 strategy, attracting FDI from global multinationals. With the National Democratic Alliance (NDA) navigating a slim majority, Moody’s Ratings has highlighted potential delays in economic and fiscal reforms. This precarious majority may hinder progress on critical initiatives aimed at fiscal consolidation and economic growth. Despite these challenges, Prime Minister Modi’s administration plans to reduce import taxes on essential inputs for locally manufactured goods, aiming to lower production costs and boost competitiveness.

Further, India’s appeal as a destination for FDI continues to rise, with inflows doubling over the past decade, to approximately USD 600 billion between 2014 and 2023. The momentum has been due to India being a neutral democracy with a burgeoning consumer market. But given geopolitics is one of the major reasons for diversifying away from China, India has to maintain its political stability and present a unified front to the world.

Political Reforms and Controversies
On the political front, Modi’s government is pursuing ambitious reforms such as the Uniform Civil Code and One Nation, One Election. These reforms would need the support of the coalition partners in the house which seems difficult. JD-U, for example has never been a supporter of the UCC or the Agniveer scheme. Hence, it is to be seen whether Modi can successfully implement the promised initiatives. Additionally, the administration is currently dealing with controversies, including alleged irregularities in national examinations and stock market manipulation. These issues have cast a shadow over the government’s credibility, demanding robust responses to restore public trust. The volatility in India’s stock market, influenced by exit poll predictions, has raised concerns about potential market manipulation and insider trading, further complicating the economic landscape. Especially since the rally was being encouraged by none other than Amit Shah, who is also an active investor in the markets.

Navigating Challenges and Opportunities
As the NDA navigates these tumultuous times, it faces the dual challenge of managing political fallout and ensuring policy integrity. The opposition is poised to capitalise on the government’s perceived vulnerabilities, adding pressure to an already strained political environment. The ongoing parliamentary session will be a critical period for the NDA government, as it strives to balance political stability with economic reforms. The outcome will not only shape the current administration’s tenure but also redefine India’s political landscape. As Modi transitions from leading a majority government to managing a coalition, his capacity to foster consensus and navigate coalition dynamics will be pivotal in steering India through these challenging times.

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