The electoral victory of the Modi-led coalition signals policy continuity in India – but also spending cuts

The National Democratic Alliance (NDA) won India’s 2024 general elections, but with a smaller majority in comparison with 2019. According to post-election evaluation by Goldman Sachs, JP Morgan, CLSA, UBS, Bernstein and Citi, this narrower mandate may urge the government – known for transforming India into a worldwide manufacturing powerhouse and making investments in sectors to cut back the country’s dependence on Western countries – to adopt a more populist stance in its third term, prioritizing the demands of lower-income segments and rural development.

A possible NDA victory signals policy continuity for enterprises and startups, with continued investment in infrastructure, digitalization and manufacturing. However, the narrower margin could prompt a reallocation of resources to rural and social welfare initiatives, which could impact some capital spending plans, brokerage firms warned. (About $45 billion in value was stripped from manufacturing giant Adani Group on Tuesday.)

The ruling party’s assertive stance on digital sovereignty and its recent clashes with Big Tech are also more likely to proceed. Over the past five years, Narendra Modi’s government has enforced or proposed a slew of regulations – including pushing to manage web apps, forcing streaming services to examine content for obscenity, and suing WhatsApp for requiring its Meta app to interrupt encryption – which have spooked big tech corporations .

New Delhi argues that it’s attempting to protect the interests of its residents through its proposals.

India, a U.S. ally, is also increasingly attempting to construct a technology stack that may compete with many popular and typically American offerings. For example, Rupay is India’s try and compete with the Visa and Mastercard card networks, while UPI, the interoperable real-time payments system built by Indian banks, has already grow to be ubiquitous in India and processes more transactions than all the card networks combined.

India has rapidly established itself as a worldwide manufacturing hub in recent years, attracting corporations including Apple, Samsung and Google by offering lucrative incentives to shift more of their assembly must India. Goldman Sachs and Citi said it is probably going that India will proceed to concentrate on the manufacturing sector, but fiscal allocation could also be lower than expected in the future.