A possible third term for the BJP-led NDA government, as predicted by exit polls, will be positive for continued economic stability and reforms, believe experts, adding that it would also provide comfort to markets.
“Final outcome, if in line with exit polls, would likely calm investor nerves as political and policy continuity will be good for risk assets in the immediate run and macro stability in the medium term,” said Madhavi Arora, Lead Economist, Emkay Global Financial Services, adding that foreign exchange and rates markets will cheer the outcome, with RBI likely to juggle with the problem of plenty.
A healthy macro balance sheet of both public and private economic agents augurs well for a higher trend growth path, she further said, adding that the agency expects reform-driven targeted expenditure agendas to continue from policy stand point.
A clear blueprint for the next set of policy reforms is expected in the Union Budget 2024-25 in July and Central ministries have also been working on a 100-day agenda to start the term of the next government.
“Once the election event risk is over, all eyes would be on the budget in July, which could continue with the consolidation process while improving the budget internals,” Arora further said.
Giving more comfort to the next government, the economy seems to be better placed with fourth quarter GDP growth at a higher than anticipated rate of 7.8%. For the full fiscal year 2023-24, GDP growth stood at 8.2% as against 7% in the previous fiscal. This is the highest since FY17, except for FY22. Economic growth is however, expected to slow to 6.5%-7% in the current fiscal.
Meanwhile, the Centre’s fiscal deficit in FY24 also improved further to 5.6% as against the revised estimate of 5.8%. The deficit is seen to further improve in the current fiscal and has been projected at 5.1% in FY25 in the Interim Budget.
“We see twin deficit to further improve ahead, which limits external shocks to India further via financial channels in case the global cycle turns averse,” Arora said.
The exit polls have predicted that the BJP will continue its majority position in the Lok Sabha with the NDA tracking solid 365+ mark and better penetration in key states.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services noted that exit polls results which indicate clear victory for the NDA with around 360 seats completely removes the so called election jitters which have been weighing on markets in May. “The bulls will be further emboldened by the better-than-expected 8.2% growth in GDP numbers which came after market hours on Friday,” he said.
The official election results will be declared on June 4.
