India will remain popular with investors , either way – Modi Bihar win or lose

                                       Will he sweep polls in Bihar?

Whatever BJP may say, PM Narendra Modi’s image as some one who can pull it through, is very much at stake in Bihar elections, considered crucial for India’s political economy. A victory for the BJP will embolden the  Modi Government at the Centre to go whole hog for the economic reforms, popular or unpopular. There would be a new confidence of sorts on the faces of his Cabinet colleagues, chiefly Finance Minister Arun Jaitley, IT and Telecom Minister Ravi Shankar Prasad. In fact, he does not have too many high profile ministers. External Affairs Minister Sushma Swaraj will keep her composure –either way, win or lose.

But what if BJP loses in the eastern state of Bihar  and Nitish Kumar returns as Chief Minister with the help of Lalu Prasad who would have then revived several notches and carry much more authenticity at the national level. Several other Chief Ministers like Mamata Banerjee from West Bengal, Akhilesh Yadav from Uttar Pradesh, Navin Patnaik from Odisha may then be cosying up more to each other in the hope of sewing a national alternative to Narendra Modi.

Will it then make the Modi Government weak at the Centre and how will the domestic industry and global investors take it?

Well, my guess is the Indian economy at this point of time is enjoying certain circumstantial advantages, cheap oil and other minerals being the main contributors. The country is net importer.  Industrial growth may not happen at the pace required, but with raw material prices dropping, the margins would eventually improve for the companies, especially those who do not carry huge debt on them. The services sector comprising tourism, hotels, trade and transport would keep moving the economy between 7-8 per cent on the growth trajectory.  

Onion prices would drop with fresh crop arrival and the pulses prices would get stable at some level, possibly and the people would then find Rs 100-120 a kg as new normal. Prices of vegetables like potato, tomato, etc would also get a new normal of Rs 40 to Rs 50 a kg.

When it comes to global investors, investment would continue to come in areas like telecom, automobile while the pace of the same in sectors like infrastructure such as roads, ports and renewable energy would depend on the kind of morale the Modi Government is able to retain even if it loses politically crucial Bihar.

As for the stock markets,  the experience tells us the movement is largely in sync with global cues with China and the US being movers and shakers, but still India would continue to remain on the radar of fund managers for the same reasons listed above.

Some of the touted reforms like Goods and Services Tax may get delayed, but my sense is GST is over-hyped. India achieved plus 8-9 per cent without GST.

But what will really scare the investors is this non sense of beef, communal frenzy around such issues, which must stop. Hopefully, after Bihar polls, it should subside.

So, India will remain popular with investors , either way –win or lose BJP in Bihar ! 

Pic: PMO