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India’s 2024 Election Takeaways: Modi Struggles to Stay on Top

Narendra Modi’s first decade as India’s prime minister was full of surprises. None, however, were anything like what happened Tuesday morning, when he won his second re-election, but lost his party’s majority in Parliament.

With that loss, Modi’s air of invincibility also appeared to fade for the first time since he took office in 2014.

The election results were especially shocking because, after nearly seven sweaty weeks of voting across the country, exit polls released just days before the final count showed Modi’s Bharatiya Janata Party would win in a landslide, as it had done twice before.

In contrast, the Bharatiya Janata Party won only 240 seats, far short of the 272 needed to form a government. The opposition alliance, led by the Indian National Congress Party, won 235 seats.

With the 52 seats won by BJP allies, Modi will remain on top. But his appeal has waned and his leadership has fundamentally changed.

When Modi came to power in 2014, he promised economic progress, an end to corruption and promoting Hinduism as a central element of India’s identity. Despite everything, he presented himself as an exceptionally strong leader, capable of rallying his followers to work for the nation.

This contrasted with the previous government. Before Modi was first elected, India spent 25 years governed by coalitions. Prime ministers from the Congress Party, the BJP and smaller third parties took turns governing India by committee. Modi broke with that tradition and led a new one-party system dominated by the BJP.

As a leader, Modi showed little interest in power sharing. When he invalidated most of India’s paper currency in 2016, not even his finance minister knew about the decision beforehand. When he decided to impose de facto martial law in Jammu and Kashmir, India’s only Muslim-majority state, he presented the plan to Parliament as a done deal, without seeking approval.

But those days are gone.

The two major parties that have emerged as new coalition partners of the BJP are led by N. Chandrababu Naidu and Nitish Kumar, veteran legislators known as technocratic moderates. Both are likely to demand greater authority in Parliament. In fact, both have been considered possible prime ministerial candidates, if there were no other coalition led by either the BJP or the Congress.

When the first nationwide electoral maps showing the number of seats won and lost in Parliament were revealed on Tuesday, they showed a striking new pattern.

The maps showed Modi’s party losing swaths of territory in northern Hindi-speaking states that were considered BJP strongholds.

At the same time, the BJP made inroads in regions that had resisted Modi in the past. It lost dozens of seats in the northern state of Uttar Pradesh, but gained many in the eastern state of Odisha and the southern state of Telangana.

The only part of the country that now appears unified by one party is the “tribal belt,” which stretches across the central states. Their relatively poor communities have been cleverly targeted by the BJP’s Hindu politics and welfare benefits.

Investors in Indian stock markets in Mumbai responded enthusiastically to early exit polls. On Monday, they went on a buying spree, driving up the prices of so-called Modi stocks, those associated with the prime minister’s spending priorities or believed to benefit from his fiscal policies.

When the actual voting results were tallied, those stocks plummeted. Shares of the Adani Group’s flagship lost around 19 per cent of their value in one trading day. The blue-chip index lost about 6 percent, nearly wiping out its gains from the first five months of the year.

Modi remains popular among India’s business tycoons, but investors need to figure out which companies will benefit from a new government.

Chris Wood, global head of equity strategy at Jefferies, an investment bank, warned last year that if Modi lost he would “expect a 25 percent correction, if not more” in the Indian stock market. Historically, Indian companies have fared equally well during periods of coalition government. That’s why, Wood said, even without Modi in power, he expects stocks to “rebound sharply” based on the strength of the country’s economy as a whole.

This new era in Parliament will surely begin with some rounds of political retaliation. Politicians who failed to deliver seats to their bosses will be shown the door. Smaller parties are likely to demand cabinet posts, which will mean replacing BJP members.

Policies will need to be reviewed. Will India lean towards export manufacturing, aiming to replace China as the world’s factory? Will you take steps to protect local industries that fear foreign competition?

Milan Vaishnav, a senior fellow at the Carnegie Endowment for International Peace, warned that India cannot exactly return to the coalition politics that preceded Modi. His new partners are likely to make demands that match the authoritarian style that Modi wields from New Delhi.

The kind of state leaders it now needs as coalition partners “are as absolutist as the national government,” Vaishnav said. They could, for example, ask federal police agencies to arrest their opponents, as Modi has done.

India’s elections were the largest held in the history of democracy, with more than 600 million voters voting in six phases. This time there were no complaints about electronic voting machines or fears that India had become a dictatorship under Modi.

In a difficult speech delivered Tuesday night from the BJP headquarters, Modi called the elections a “celebration of democracy.”

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