The political landscape in Maharashtra, India’s wealthiest state, has undergone a significant shift that is set to boost Prime Minister Narendra Modi’s pursuit of power. The ruling Bharatiya Janata Party (BJP) has gained momentum in the state as prominent opposition leader Ajit Pawar and several lawmakers from his former party joined the provincial government.
In a strategic move, Pawar, a senior member of the Nationalist Congress Party (NCP), has been appointed as the deputy chief minister for the Maharashtra government. Additionally, eight of the 53 NCP lawmakers have taken their oaths to become part of the government. This development is crucial for the BJP, as it strives to strengthen its presence in key states after suffering defeats in recent assembly elections.
The defections in Maharashtra could have a significant impact on the upcoming general elections, which may take place within a year. Currently, the BJP does not hold power in any southern states, making it even more challenging for the party to reclaim the supreme chair for a third consecutive term. However, foreign investors are already betting on the BJP’s return to power in India.
The state of Maharashtra, which includes the financial hub Mumbai, has experienced several political upheavals since the 2019 state elections. The initial BJP government was quickly toppled by an alliance comprising the NCP, the Congress Party, and a faction of the Shiv Sena party. Uddhav Thackeray, leader of the local Shiv Sena party, became the chief minister through this coalition.
However, 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. This alliance has dealt a setback to opposition unity efforts, both in Maharashtra and nationally.
While the BJP faces challenges in regaining power in key states, most foreign institutional investors from the US and Europe region remain optimistic about India. They have largely priced in Modi winning the upcoming parliamentary elections. Experts believe that the incumbent BJP government will be re-elected in 2024, although possibly with a reduced majority.
Although India’s performance in emerging markets has lagged behind this year, the country is still trading at a premium on a 12-month forward price-to-earnings basis. More than 50 foreign institutional investors have expressed their positive outlook on India, resulting in a recovery of equity flows. This optimism is driven by better economic, political, and geopolitical outlooks, as well as strong domestic flows.
Overall, the political tectonic shift in Maharashtra has given a significant boost to PM Modi’s power hunt. As the BJP gains momentum in the state, it is positioning itself for a stronger performance in the upcoming general elections. However, challenges remain, especially in key southern states where the party currently lacks power. Foreign investors, on the other hand, are already betting on the BJP’s return to power, driven by their optimism about India’s economic and political trajectory.
