In a strategic move, Pawar, a senior member of the Nationalist Congress Party (NCP), was appointed as the deputy chief minister for the Maharashtra government, while eight of the 53 NCP lawmakers also took their oaths to become part of the government.
This comes at a time as BJP is striving to fortify their presence in key states after losing the assembly elections in some of those regions.
In recent years, BJP faced defeats in West Bengal by a big margin to Mamata Banerjee-led Trinamool Congress that is seen as a fierce rival to BJP and lost in Himachal Pradesh and Karnataka in May that gave a big momentum to opposition Congress party. BJP is in power in 10 out of 28 states.
The Congress party managed to regain power in Karnataka after a decade, displacing the BJP from its only stronghold in the southern region. This victory was a critical milestone for the Congress, as they seek to revive their electoral fortunes ahead of the 2024 Lok Sabha polls. Indian economist Swaminathan S. Anklesaria Aiyar had opined that, following the Karnataka elections, the BJP’s victory in 2024 is likely but no longer assured.
However, the defections in Maharashtra could potentially assist the BJP in securing more parliamentary seats in the upcoming general elections, which may take place in less than a year. Prime Minister Narendra Modi’s BJP currently does not hold power in any of the southern states, making the challenge of reclaiming the supreme chair for a third consecutive term even more demanding. However, foreign investors are already betting on the BJP’s return to power in India.The state of Maharashtra, which encompasses the financial capital Mumbai, has experienced several political upheavals since the 2019 state elections. In those elections, the BJP won 105 out of the 288 assembly seats and formed the initial government. However, the BJP’s rule was short-lived as an alliance comprising the NCP, the Congress Party, and a faction of the Shiv Sena party swiftly toppled them. Uddhav Thackeray, leader of the local Shiv Sena party, became the chief minister through this coalition. Subsequently, a splinter group of the Shiv Sena aligned with the BJP to seize power from Thackeray’s government, with Ajit Pawar serving as the deputy chief minister. Maharashtra, with its alliance of the Congress, NCP, and Shiv Sena (under Uddhav Thackeray), had emerged as a model of opposition unity against the BJP in preparation for the upcoming parliamentary elections. With 48 seats in the Lok Sabha, Maharashtra is second only to Uttar Pradesh in terms of representation.
Several opposition parties, including the Trinamool Congress (TMC) and Arvind Kejriwal’s Aam Aadmi Party, have emphasized the urgent need for opposition unity to challenge the Modi government.
However, Pawar’s alliance with the BJP in Maharashtra is perceived as a setback to these efforts, not only in the state but also nationally.
Meanwhile, most foreign institutional investors from the key US and Europe region have grown optimistic about India and have also largely priced in Modi winning the upcoming parliamentary elections.
Market experts, such as Chris Wood of Jefferies, believe that the incumbent BJP government, led by Modi, will be re-elected in the 2024 Lok Sabha elections. Nonetheless, he anticipates that Modi’s victory may be accompanied by a reduced majority.
Despite underperforming emerging markets by 4.6% this year, India is still trading at a premium of around 62% on a 12-month forward price-to-earnings (PE) basis, UBS said. According to UBS, more than 50 FIIs have expressed their positive outlook on India, resulting in equity flows recovering to $9.5 billion since March 2023. This rebound comes after a $4 billion outflow from India in the previous three months, amid China’s reopening and negative news regarding certain Indian corporate groups.
UBS’ India strategist Sunil Tirumalai said this optimism is driven by a perception of better economic, political, and geopolitical outlooks, as well as strong domestic flows.
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