Modi-fied India ready to grow at 10% a year
INDIA'S strongest electoral mandate in 30 years puts Narendra Modi in a position to pass measures to bolster Asia's third-largest economy.
Mr Modi's Bharatiya Janata Party (BJP) and its allies won 333 out of 543 seats up for grabs - a mandate that will enable him to push through his own agenda.
If he pursues the anti-corruption policies he has promised, India could grow 10 per cent a year for the next 20 years, said Jim O'Neill, former chairman of Goldman Sachs Asset Management.
"This is the most positive development in India in 30 years," Mr O'Neill - who coined the acronym Bric to refer to Brazil, Russia, India and China - said at the SkyBridge Alternatives Conference in Las Vegas on Saturday.
Mr Modi's victory is a "massive, massive positive", he said.
Stocks and the rupee jumped yesterday, buoyed by optimism that Mr Modi would make good on campaign promises to create jobs and attract foreign investment in all sectors except for multi-brand retail.
India's economic growth is expected to accelerate to 5.4 per cent in the fiscal year ending March 31, from 4.4 per cent in the previous 12 months, according to recent International Monetary Fund projections.
India's gross domestic product grew 4.9 per cent in the 12 months ended March 31, near the previous year's 4.5 per cent - the slowest rate in a decade.
Said Rajiv Biswas, IHS Global Insight's Asia-Pacific chief economist: "Overall, the BJP victory should set the stage for a revival in India's economic fortunes and a stronger growth path for its economy in the next five years."
Standard & Poor's said yesterday that Mr Modi's policies over the next few months would have significant implications for India's rating. It warned that it could downgrade India to junk status if the next government was unable to revive growth.
Now, a rating upgrade might even be considered if the new government cuts the budget deficit, simplifies rules on investment and production, and puts in place crucial infrastructure, said Atsi Sheth, sovereign analyst at Moody's Investors Service.
The currency has surged past 59 rupees per US dollar for the first time since July. The S&P BSE Sensex rose 0.9 per cent to a record 24,121.74 points at the close in Mumbai.
"A government with a clear mandate reduces uncertainty and increases the chances of decisive policy action," said Thomas Rookmaaker, a Hong Kong-based director at Fitch Ratings. "The most salient issue from a sovereign credit perspective would be to get growth back to higher sustainable levels, which would require a pick-up in investments."
Mr Modi seems up for the challenge. Along the banks of the Ganges river in Varanasi yesterday, he told his supporters: "There's a lot of work that God has put me on this earth for. A lot of it is dirty work, but I am up to the task."