Insight Investment (BNY Mellon IM): Gevolgen verkiezingen India voor beleggers

Insight Investment (BNY Mellon IM): Gevolgen verkiezingen India voor beleggers

Emerging Markets Politics
Vlag India.jpg

By Oliver Williams, Emerging Market Debt Portfolio Manager

Voting finished on Sunday in the Indian general election with results due tomorrow. The median of the various exit polls suggests that the incumbent coalition National Democratic Alliance (NDA) should win 300 out of 543 seats. This is down from the 336 seats they won in 2014 but still enough to secure a majority and see Narendra Modi continue as Prime Minister.

Although this outcome is not final and there is still room for surprises, if the exit polls are broadly correct then this should be taken well by investors. Key agenda items for the NDA include judicial, administrative and agricultural land reforms as well as privatisations. The NDA are targeting India becoming a $5tn economy by 2022 but to do this they know that India has to become a more export and investment driven economy and not just rely on consumption. Other key pledges is to improve access to finance at lower costs, build houses for 50m people and improve ports, highways, railways and airways infrastructure. They say there will need to be $1tn worth of investment into this over the coming 3-5 years. An outright majority for the NDA should also mean that there will be less fiscal handouts to the various states as they will not need support from various regional parties in order to pass reforms. This should improve the supply picture for Indian government bonds.

We currently hold Indian government bonds denominated in local currency, which we believe should perform well if the NDA win a majority and implement a reform friendly agenda with some tighter fiscal controls.