India Country Risk

India (IND)

India's political landscape has become more complex following the general elections held in April-June 2024. The National Democratic Alliance (NDA), led by the Bharatiya Janata Party (BJP) under Prime Minister Narendra Modi, secured a narrow victory, marking a third consecutive term for the government. The coalition now controls 293 seats in the 543-member Lok Sabha, just surpassing the majority mark of 272 seats. This slim majority means the BJP will need to rely heavily on its coalition partners to govern effectively. Despite these challenges, the NDA is expected to complete its term through 2029. The opposition, led by the Indian National Congress, has significantly increased its presence in parliament, winning 237 seats. The Congress-led alliance, known as the Indian National Developmental Inclusive Alliance (INDIA), was buoyed by the strong performance of regional leaders. These regional figures are gaining importance in national politics and are seen as potential challengers for leadership roles in the future. Despite this resurgence, Congress continues to grapple with internal hierarchy issues that limit its broader appeal.

The current parliamentary dynamics are expected to lead to frequent legislative gridlock. The BJP's narrow majority complicates efforts to pass key reforms, especially in areas like land acquisition and labor laws, which are crucial for boosting business and economic growth. The opposition’s increased numbers have already allowed it to block several government proposals, which could slow down the legislative process over the next few years. More recently the opposition blocked the Waqf amendment bill, which looks to reorganise and assess properties held by the Muslim board in India. Recent political events also include state assembly elections. Key contests took place in Jammu and Kashmir and Haryana in October. The Jammu and Kashmir election is particularly noteworthy, as it is the first since the abrogation of Article 370, which removed the state’s special status. This election saw BJP secure some gains in Jammu but the INDIA coalition emerged with clear majority. Meanwhile, BJP secured a historic win for the third time in the state of Haryana, underscoring that BJP support remains strong.

Regional tensions remain a persistent challenge for India. Relations with China continue to be strained, with frequent border disputes fuelling mistrust between the two nations. Similarly, ties with Pakistan remain difficult, marked by cross-border terrorism and long-standing conflicts, particularly over Kashmir. Meanwhile, political instability in Bangladesh has introduced uncertainty into a relationship that has been relatively strong in recent years.

In terms of policy, the BJP’s narrow majority has affected business confidence, particularly around reforms needed to attract foreign investment and strengthen India’s position in global supply chains. While sweeping reforms in land acquisition and labor laws have stalled, areas such as infrastructure development, renewable energy, and small business support are gaining traction. The government continues to push forward with its Production Linked Incentive (PLI) schemes, which are designed to bolster India’s manufacturing sector. These initiatives have seen success in industries such as electronics, pharmaceuticals, and telecommunications, and the government is placing renewed emphasis on semiconductor manufacturing.

In summary, India’s political scene is marked by a delicate balance of power following the 2024 elections. The BJP-led government, with its narrow majority, faces the dual challenge of managing coalition partners while navigating a strengthened opposition. Although legislative hurdles and regional tensions present obstacles, India’s democratic institutions remain resilient, and the country continues to make strides in economic and industrial policy despite the complexities of governance.