As the elections come to an end, I’ve decided to throw my hat in that deafening ring of predictions! But before I dive right into it, let me give the uninitiated, some quick background on the scale of this event.
800 mm registered voters (170 million first time voters). 543 seats up for grabs. Almost 30 days of voting. Why, one month? Because we don’t have the infrastructure to do it faster. It’ll cost billions of dollars according to official sources, but unofficially it could cost tens of billions. No country spends as much on its national elections as India does (but that’s a story for another time).
In order to win, you need a majority. But, because there are so many parties, it almost impossible to get that majority. Instead, major parties create coalitions and hope those coalitions can create a majority. Often, even that coalition finds it difficult to get a majority without the support of small regional parties. Of course, the more support you need from either your coalition or parties outside your coalition, the less of a mandate you have and the less influence you will wheel when you take power. That is the nature of Indian politics.
The Gossip Mills
I love political gossip – it’s always over the top! Over the past few days I’ve been shocked over and over again with predictions that the NDA (The BJP-led coalition) will breach the 300-seat mark. Now that’s a mandate! If that happens, mass hysteria will prevail (at least in the economic markets and probably only in the short to medium term). For example, many have assumed that the markets have baked in about 240 for the NDA. Anything more than that should see the markets go up and how. And of course, the rupee should fall, slightly at first against the dollar.
3 big reasons why I think 300 is improbable:
One, regional parties will play an important role in this election. We can’t underestimate them. State parties like the BJD in Odhisa, AIADMK in Tamil Nadu and TMC in West Bengal are out performing earlier estimates and might even sweep their respective states.
Over the past couple of days, two states have thrown a wicked curve ball to the NDA plans. The BSP in UP and Mr. Lalu Prasad Yadav in Bihar. Both are, unexpectedly, showing major gains. (Of course, Mayawati (BSP) always does better than what others expect). These two alone, could technically offset the BJP by 15-20 seats.
Two, Congress has a lot of resolve with rural India and we can’t discount their success there.
And three, Elections in India are fraught with corruption. Money is given away hand over fist to win votes and it’s done in many ways. And when elections are corrupt, it’s hard to discount anything!
Sid’s PredicationAlright, here it is. BJP gets 205. NDA gets 235. Congress pulls of 95. UPA gets about 115.
Impact 101Here’s what I think this means. Mr. Modi will form a government but will need big support from people he was hoping he wouldn’t need to pull favours from for this. As a result, all those changes, that so many people thought would take place before the monsoons hit Mumbai this year (including me), will be on hold for a while, which will create a great deal of disappointment.
Of course, expectations are so high right now, that no matter how many votes Modi get and what Modi does, he’s bound to disappoint – a circumstance not too unfamiliar with American voters.
The markets will go down slightly very short term as a knee jerk but will stabilise. The rupee will hover around 60 against the dollar. FDI will start but not come flooding in until global powers-that-be can see what kind of grasp Mr. Modi has on influencing his peers.
But anything can happen
Of course, I could be totally wrong. If the NDA does get a mandate, I think a lot of changes could take place – but this will take time. Especially for the economy and economic policy.
If, by some miracle, Congress squeezes out 130 seats, there’s a possibility that they could form the government. Wow! We’ll be in for a roller coaster ride the likes of which few have seen before.
And finally, if the BJP gets below 180, Mr. Modi might just decide to sit in the opposition and not even stake claim for forming the government. If we’ve learned anything about him, it’s that he will not step into anything he can't control.
I will continue giving my views on this as and when relevant news actually comes out.
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