India’s general elections kicked off on 19 April. Over the next six weeks, 970 million voters will cast their ballot in seven staggered phases across the country, with the results expected on 4 June. Prime Minister Narendra Modi and his Bharatiya Janata Party-led (BJP) National Democratic Alliance (NDA) look well positioned to secure a third consecutive victory, a pending success largely driven by three key factors:
- Modi’s unparalleled popularity: In February, a poll conducted by the US-based Morning Consult revealed that Modi has a 78 percent approval rating, and unlike other democratic leaders, he has consistently maintained this level of approval over a five-year period. This popularity has reinforced the BJP’s political dominance, with polls suggesting that the BJP-led NDA will secure 365 of 543 seats in the lower house of parliament (Lok Sabha) – a marginal bump of 3.4 percent on the 353 seats secured in the 2019 general elections.
- An uncertain opposition alliance: The Indian National Developmental Inclusive Alliance (INDIA) – an opposition alliance that was formed in July 2023 by more than two dozen opposition parties including the largest opposition players; the Indian National Congress (INC), the Aam Aadmi Party (AAP) and the All India Trinamool Congress (TMC) – has failed to put forward a unified campaign platform. The bloc is also leaderless, placing it at a disadvantage to the ruling alliance, which has benefited greatly from shaping its campaign around their central figure, Modi. In the lead-up to elections, INDIA has also lost key member parties due to the inability to reach seat-sharing arrangements in states such as West Bengal, Punjab and Kerala.
- Notable economic accolades: In 2013, before Modi came to office, India was classified as a vulnerable emerging market, with exposure to capital flight, unsustainable deficits and limited economic growth. A decade later, under Modi’s leadership, India has emerged as the world’s fifth largest economy, consistently recording growth above 6 percent over the last 10 years (excluding 2020 amid Covid-19 pandemic restrictions). The country’s infrastructure has been transformed with the construction of necessary roads, ports, airports, railways, power, and telecommunications that have set the country firmly in the sights of international investors. Further, the prospect of continued pro-business reforms, which have driven economic benefits for India and its citizens, continues to drive Modi’s appeal across various voting groups
Despite this strong foundation, India’s commercial landscape is not without its challenges for India's next prime minister. India’s business environment continues to face issues such as a complex taxation system, high trade barriers, difficulty in acquiring land for commercial purposes, stringent labour laws and an inconsistent business dispute settlement system. The BJP’s election manifesto details extensive plans to tackle these issues. However, the party’s growing ideological campaign – which holds divisive marginalisation rhetoric – has raised concerns among international investors that the BJP’s nationalist agenda could undermine necessary economic reforms.
Appealing to the ‘Hindi heartland’
Alongside a progressive economic program that has yielded positive results, the BJP has pursued a nationalistic-Hindu agenda, which has materially improved the party’s appeal and prospects across voters in the ‘Hindi heartland’ – an area comprising 10 states with majority Hindi-speaking populations and observers of the Hindu faith. 170 of the BJP’s 353 Lok Sabha seats come from its dominance in the heartland region, which has been matched with a slew of government-led initiatives in this vein. Over the past decade, farming-sector reforms have come to marginalise Sikh minorities who make up around 40 percent of India’s farmers, for example.
But, more recently, on 11 March, the government revived the 2019 Citizenship Amendment Act (CAA) – which was put on hold following protests against the act in 2020—and announced the rules that would govern it. These rules set out to expedite citizenship for refugees from India’s neighbouring countries who are Hindu, Sikh, Christian or from other religious minorities, but proves discriminatory against those who are Muslim. The BJP is also behind the consecration of the Ram Mandir temple in Ayodhya, built atop of a 16th century mosque which was destroyed in 1992. The BJP’s visible involvement in the temple consecration has emboldened Hindu litigants to mount court appeals in multiple states to tear down mosques claimed to be erected on holy Hindu sites. While these initiatives have bolstered the BJP’s popularity among important heartland voters, they are increasingly disenfranchising India’s minority groups.
India’s minorities take a stand
However, the clout of India’s minority communities, which include a 200 million strong Muslim community and a Sikh population of around 23 million, is not insignificant and these communities have already protested their growing marginalisation. In March, for example, following the CAA rules announcement, Muslim communities held protests in multiple states countrywide – activists in the northeastern state of Assam burned copies of the law and called for a statewide shutdown, and protests also broke out at the Jamia Millia Islamia University in New Delhi. The protests sparked fears of a recurrence of violence that engulfed New Delhi in early 2020, in which more than 100 people were killed in the violence across the country following the CAA’s parliamentary approval. Sikh farmers also regularly take to the streets, staging rallies across major national highways to block the transport of goods and services to the capital. Under the BJP’s leadership over the next five years, minority grievances are set to worsen.
The business impact
Foreign businesses have been largely unimpacted, but not wholly insulated, from such communal tensions. In August 2023, violence broke out 15 minutes away from Gurugram – a satellite city with foreign company presence including Google, Accenture and Meta – following the passage of a Hindu religious procession through a Muslim-majority neighbourhood. Rioters set fire to shops and religious sites, forcing authorities to impose a curfew and a temporary internet blackout in parts of the city to de-escalate violence. While foreign companies were not targeted by rioters, their operations were temporarily disrupted by the internet shutdown, and many advised staff to stay at home to mitigate personal security risks.
Could impact the attractiveness of growing investment opportunities over the longer term."
Thus far, the business environment has been able to absorb temporary disruptions from occasional communal tensions. However, a continued advancement of marginalisation policies and rhetoric will challenge India’s ability to stave off increasingly frequent riots and anti-government protests with occasional violent outbreaks, which could impact the attractiveness of growing investment opportunities over the longer term.
A friend in the west
On the global stage, with a third term and a strong economy behind him, Modi will be more assertive. This could take the form of India repositioning its priorities and visibility in strategic global alliances including the QUAD, BRICS and the UN Security Council, where it has previously followed the lead of its counterparts. India’s improving military, which still leaves it reliant on allies such as the US and Australia, will limit its ability to outrightly challenge western-led decisions.
However, with the West seeking to forge stronger ties with India to counter Chinese influence in the Asia Pacific region, the US is not pressing India over indications of democratic backsliding and human rights violations. The US has further not commented on India’s domestic affairs, including the BJP’s crackdown on the opposition which has included the arrest of the Arvind Kejriwal, the chief Minister of New Delhi and head of the opposition Aam Admi Party, and the freezing of the INC’s bank accounts. Meanwhile, similar opposition sidelining measures by the ruling Awami League Party in Bangladesh were met with targeted US sanctions in January. The US has also downplayed allegations that the Indian government was connected to the killing of a Canadian-domiciled Sikh Separatist leader on Canadian soil and a plot to kill a US-domiciled member of the same separatist movement on US soil. The lack of international punitive action against the Indian government is a testament to Modi and India’s geopolitical importance.
India’s regional peers show bark but little bite
An emboldened Hindu-nationalist agenda is unlikely to be received well by other countries in the sub-region – like Pakistan and Bangladesh – which are majority Muslim. This could see tensions brew within diplomatic relationships, but with unlikely ramifications for the BJP’s nationalist campaign as South Asian countries will be restrained in their critique of Modi as they continue to benefit from spillovers from India’s strong growth. However, the marginalisation of Muslim communities in India could increase the risk of extremist Islamist factions along India’s borders, raising the frequency of skirmishes or attacks.
Going forward
With minimal forces of resistance, Modi’s success at the polls may mean that the BJP’s nationalist agenda could continue unchecked. However, elections are ultimately won on bread-and-butter issues. India’s strong economic trajectory bodes well for the BJP’s electoral prospects in the current election cycle. But, with India facing a host of underlying issues, any failure to maintain economic prosperity or to limit the negative impacts of a growing nationalist agenda on the commercial environment risks undermining Modi’s prospects in future elections.
