India’s Congress may yet revive its fortunes

Significance Congress has struggled to maintain unity at state level as well as nationally. Meanwhile, Prime Minister Narendra Modi remains popular, but the Bharatiya Janata Party (BJP)-led government faces a tough challenge in spurring recovery from the economic fallout of COVID-19. Impacts Priyanka Gandhi Vadra, Sonia’s daughter, will play a greater role in national politics, even if she does not become the party’s next leader. Congress may struggle to avoid further party splits in certain states. The new Congress leader will aim to prompt greater scrutiny of Modi’s track record regarding job creation.

Significance The National Democratic Alliance (NDA) led by Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) won only 58. The result has implications for Modi's economic agenda and the broader use of identity politics for electoral gain. Impacts State-level cooperation for Modi's reform agenda could decline. Public protests against the BJP's political and cultural agendas are likely to intensify. This may generate fresh criticism from key financial institutions such as credit ratings agencies.


Subject Evaluation of the Modi government's performance half-way into its term. Significance Prime Minister Narendra Modi came to power in 2014 on a wave of popular enthusiasm. His Bharatiya Janata Party (BJP) gained the first single-party parliamentary majority for 25 years as he promised to re-energise India's economic and social progress. Nearly half-way into his term, questions are being raised about his record thus far and the direction in which he is taking the country. Impacts Modi's election pledge on job creation will not be fulfilled. Water disputes between state authorities will intensify in coming years. Some renewable energy goals will be met but coal dependence will not change until at least 2040.


Significance Each of these states except Punjab has a government led by Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP). Punjab is one of just three states with a chief minister that belongs to India’s main opposition Congress party. Impacts A poor showing by Congress would further reduce its leverage with other opposition parties in talks over forming a broad anti-Modi alliance. Victory in UP would enhance Chief Minister Yogi Adityanath’s national profile. Election campaigning will likely lead to a spike in COVID-19 cases.


Subject E-commerce in India. Significance Following nationwide protests from small traders in late 2014, key sections of the Bharatiya Janata Party (BJP) government have demanded that Prime Minister Narendra Modi act against India's rapidly growing e-commerce platforms. Particular targets are the largest e-commerce players, mostly Indian, but including Amazon India, which have benefitted from large infusions of foreign capital and stand accused of side-stepping India's strict limits on foreign investment in multi-brand retail. Impacts Any improvement in transport and distribution infrastructure will boost e-commerce. Proliferation of mobile and banking facilities is key to expanding online retail. Small traders will oppose the expansion of e-commerce, causing greater political losses for the BJP than any other party.


Subject Outlook for the new government. Significance Despite opinion polls before the February 25 election indicating a victory for the incumbent People's National Party (PNP), the opposition Jamaica Labour Party (JLP) won a narrow one-seat victory and JLP leader Andrew Holness was sworn in as prime minister for a second time on March 3. The PNP ran a lacklustre campaign that failed to galvanise its core supporters. In contrast, the JLP offered a positive message of tax cuts and job creation. Impacts Absent rapid economic improvements, public opinion may turn against the new government. Juggling IMF targets and popular demands may prove beyond the JLP's capabilities. The government has only a narrow window of opportunity before the PNP recovers from its surprise defeat.


Significance Presenting his government's programme on November 25, Prime Minister Ahmet Davutoglu promised to keep his election campaign pledges, complete major infrastructure projects, maintain fiscal stability and implement structural change. Impacts Domestic demand will strengthen in the short term. However, firms in labour intensive sectors may face financial difficulties, and new job creation may be slow. Currency and capital markets are likely to remain volatile and overreact to trends in monetary policy and the current account. Opportunities exist for those investors able to tap into the government's priorities and avoid political risks.


Subject Prospects for India to end-2016. Significance Policymakers are counting on improved agrarian performance, cheaper credit and economic diplomacy to drive growth in coming months. On the political front, after a modest triumph in the last round of regional elections, Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) are emboldened but still politically encumbered.


Subject 'Competitive federalism'. Significance Since Prime Minister Narendra Modi took office in May 2014, India's drive for economic development has placed renewed emphasis on 'competitive federalism' in which the states, rather than the federal centre, play the leading roles. Yet not all states have an equal capacity for self-development. There are risks that growth will become more skewed and social inequalities deepen. Impacts Growth driven by non-industrial sectors is essential for some states, but out of favour with the centre. Institutional protections on social spending are being eroded, despite vast demographic needs -- and risks. Regional growth -- and deprivation -- may come to hinge increasingly on state-level political leadership with declining central mediation.


Subject Prospects for India in 2016. Significance Prime Minister Narendra Modi's government has accelerated its agenda of piecemeal and sequential reform following his Bharatiya Janata Party (BJP)'s defeat in the Bihar elections last month. As difficult state elections approach in the first half of 2016, the government is banking on these reforms and headline growth to secure voter and investor support. In foreign policy, the government is likely to focus on regions of strategic importance, especially Russia and the Middle East.


Subject The likely strategy of the BJP's opponents. Significance The opposition to Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) lacks a coherent strategy at national level ahead of elections due in 2019. However, the large turnout at a public rally in Patna late last month, where Lalu Prasad Yadav brought together representatives of 18 opposition parties, suggests that there is popular support for a challenge to the BJP. Impacts States in which elections are due are more likely to see outbreaks of communal violence. Sonia Gandhi will come under increasing pressure to relinquish leadership of the Congress party. The BJP may support the creation of a separate Gorkhaland, at the risk of alienating support in the rest of West Bengal.


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