The risk is Modi fatigue A broader reassessment This could be the start of the biggest capital boom in Indian history. India’s macroeconomics remains impressive — the economy is expected to grow 6% to 7% this year — but Mumbai’s dominance rests more on the belief that “Modinomics” is transforming competition in India.
Even before his latest reprimand, Modi’s claimed reputation for global reform was more myth than reality. Under what The Economist calls “the Modi government,” India has cut some of its bureaucracy, opened up some sectors to increased foreign investment, and pursued a broadly business-friendly approach. But reform The most important thing, ensuring a level playing field with regard to land, labor, taxes and the legal system, remains on the to-do list.
Global investors had expected a landslide third term would energize a reformist Modi like never before. But that no longer holds true. A weakened base means the BJP has less political capital to push through tough reforms, especially against a newly emboldened establishment. Modi’s biggest economic mistake is Insufficient job growth – has come back to haunt him.
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Modi’s BJP claims ‘historic’ victory in Indian elections despite smaller majority
Modi’s BJP claims ‘historic’ victory in Indian elections despite smaller majority
The BJP failed to win a majority of seats. Coalition government Work with allies, who are perhaps less keen on economic turmoil and more inclined to a populist spending spree, and who are more likely to support India. Budget deficit.
Late last month, S&P Global Ratings raised its outlook on India’s sovereign rating, citing expectations of “deepening economic reforms.” It’s reasonable to assume that S&P analysts are reconsidering their plans.
Complicating Modi’s support among global investors is the perception that China is finally moving towards its demise. Real Estate CrisisThe sharp fall in property prices was a major cause of capital flight in 2021-2024 that caused mainland China’s stock exchanges to collapse.
Oanda analyst Kelvin Wong recently spoke for many when he noted signs of activity among China’s factory purchasing managers. “The strength of this latest macroeconomic indicator suggests that piecemeal stimulus efforts by China’s top policymakers are helping to counteract a deflation risk spiral caused by a major slowdown in the domestic property market,” he said.
Of course, China still has a lot of work to do. And economic realpolitik is justified. Xi Jinping’s government has repeatedly promised to end the real estate crisis, and that’s what Japan is doing. The bad loan crisis of the 1990sBut this is a trust-but-test moment for Xiconomics. Still, investors have good reason to believe that mainland Chinese stocks are now worth more than Indian stocks.
The Shanghai-Shenzhen CSI 300 Index is trading at a price-to-earnings ratio of about 14, UnderratedThe Bombay Stock Exchange’s Sensex index is over 23. But what’s more significant is the polarized picture of President Xi Jinping’s freedom to mobilize Beijing’s resources to revive the economy in his third term, and Prime Minister Modi’s legislative limitations.
Again, there are plenty of reasons to worry that Xi’s aides will overpromise and underdeliver, but with an authoritarian Prime Minister Modi suddenly having to juggle with opposition politicians, the great China-India debate may once again tip in China’s direction.
At the very least, Modi and his allies will clash over Hindu nationalist policies, hindering the Indian government’s efforts to restructure the economy.
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Why is India’s Citizenship Amendment Act (CAA) so controversial?
Why is India’s Citizenship Amendment Act (CAA) so controversial?
Since his time as chief minister of Gujarat, Modi has pushed pro-Hindu legislation and spouted anti-Muslim rhetoric. His campaign attacks on the opposition’s welfare policies could pose trust problems with the ruling party even if the BJP is in charge. Should Modi go ahead with what the opposition says is an agenda for reforming India’s constitution? Secular ConstitutionPolitical unrest is possible.
It was Modi’s success. “Gujarat model” That helped shape his image as a national hero. From 2001 to 2014, Modi’s policies gave Gujarat faster economic growth than India as a whole and made the state famous for having less bureaucracy, more innovation, less corruption and better infrastructure than many other states. Voters expected him to supercharge those policies and propel India into the G7 club.
Had the BJP received clear and overwhelming support, investors might have been more confident that a third term for Modi would be an attraction for India’s economic strength, but this is now in doubt as China is reforming its economic policies while Modi’s are showing signs of aging.
William Pesek is a Tokyo-based journalist and author of Japanification: What the World Can Learn from Japan’s Lost Twenty Years.
