Source: MaceNews

Date: 29 August, at 6:20am AEST

A sustained break of support at 5450 after Nvidia's earnings report would suggest the latter scenario. In contrast, a sustained break above 5669 would support the former and could open the way for a move towards 5800.

India’s national elections, held from April through June, resulted in a coalition government after almost a decade of one-party rule. Prime Minister Narendra Modi will remain in office but will be forced to negotiate with coalition partners for the first time in his career. Although India’s foreign and economic policies remain consistent, we can expect changes on the domestic front as the ruling Bharatiya Janata Party (BJP) and the opposition alliance face off in the approaching state elections.

India views the current global geopolitical landscape as favorable for its domestic, economic and foreign policy goals. The United States-China rivalry, the potential for a multi-polar world order and the rise of the global majority (sometimes referred to as the Global South) all increase India’s international leverage. At a time when popular sovereignty seems to be under fire, India’s elections have reinforced its status as the world’s largest democracy. On the economic front, it remains the fastest growing big economy, in spite of the array of challenges posed by market forces, protectionism and populism.

Modi’s coalition

The election result was a surprise. Instead of a clean sweep, Mr. Modi’s party won only 240 out of 543 seats in the lower house of parliament. Although still the largest party in parliament, the BJP will need the support of the two other big parties in its National Democratic Alliance (NDA) coalition – Janata Dal United or JUD(U), led by Bihar Chief Minister Nitish Kumar, and the Telugu Desam Party (TDP) of Andhra Pradesh Chief Minister Chandrababu Naidu – as well as smaller groups. It will face strong opposition from the Indian National Developmental Inclusive Alliance (INDIA), led by Indian National Congress (INC) leader Rahul Gandhi.

The election results cast a shadow over Mr. Modi’s personal achievement of being elected for a third term – a feat previously managed only by India’s first prime minister, Jawaharlal Nehru. To deliver effective governance, Mr. Modi and his advisors will need to put their commitment to Hindutva ideology on the back burner. This step away from the party’s ideals, combined with the need to manage its coalition partners, will pose a new challenge for the prime minister.

Still, managing demanding coalition partners may prove easier than dealing with a reinvigorated opposition. For the last decade, the BJP’s dominance meant that there was little resistance to the government’s policies in parliament. Now, parliamentary debate will be robust, as was apparent in the monsoon session held in July and August. The recent rollbacks of three contentious pieces of legislation – on the broadcast bill, on the Waqf amendment and on lateral entry all show that the government will find it easier to advance populist welfare policies than to trudge through contentious legislation on social or economic issues.

Control of the upper house of parliament is at stake in the upcoming elections in India’s 28 states and eight union territories. Polls are due before the end of the year in Jammu and Kashmir, Haryana, Maharashtra and Jharkhand, as well as in Delhi and Bihar in 2025. The BJP needs to retain power in Maharashtra and Haryana, and make gains in others, to garner sufficient support in the upper house to prevent the opposition from impeding legislation.

Reforms stymied

Though historically unstable, coalition governments in India have generally been capable of implementing some changes in the economy; the last major reforms, in 1991, were carried out by a coalition government. But the demands of electoral politics may prevent large-scale change in the coming months. The election result suggests that much-needed reform of the markets for land, labor and capital will be difficult to implement. Although India seeks to become more integrated into global supply chains, a strong protectionist tradition makes it skeptical of foreign trade.

The swing to the opposition revealed widespread economic distress despite India’s status as the world’s fastest growing emerging economy. Unemployment stands at 6.1 percent and youth unemployment is at 45.4 percent. In large parts of the country, first- or second-time young voters indicated that they were not impressed by the prospect of India becoming the world’s third largest economy by 2030, as they were unlikely to benefit from the growth. In the months ahead, the government might embrace welfare economics to improve the ruling party’s electoral appeal.

Multipolar world

One area where the effect of the election will be minimal is foreign and security policy. India continues to pursue its ideal of a multipolar world, maintaining close ties with all major powers, as well as countries in East Asia, Southeast Asia and especially the Middle East.

During Mr. Modi’s third term, India will continue to favor the U.S. as its partner of choice in order to solidify its position as a regional counterweight to China, acquire advanced technologies and expand the economy. Closer alignment between the U.S. and India has garnered strong, bipartisan support in both countries, but India still seeks to maintain its strategic autonomy and is unlikely to give in to U.S. demands to minimize ties with Russia.

In addition to India seeing Russia as its continental backer on the Asian landmass, providing balance against the rise of China, over 62 percent of India’s military hardware is of Russian origin and Russia has remained a major oil supplier. The hope is to prevent Russia from becoming so dependent on China that it begins to disregard India’s interests.

Source: GIS REPORT SONLINE

Speech by BOE Governor Bailey