India's Investment Climate Under the New Government
In one of the most important global events of 2014 and beyond, Indian citizens elected a new government in May. With an organised and energetic Obama-style campaign built on inspiration and change, and a pledge of an economic and development revolution, Mr. Narendra Modi of the opposition Bharatiya Janata Party won the election by a margin not registered in three decades. India’s financial markets are fired up, global media have taken notice and investors around the world are looking to fully understand the implications and predict the future of India’s change in government. We review the significance of Mr. Modi’s victory and present our prognosis of India’s investment climate over the term of this new government.
The new government possesses the political flexibility and the execution capability required to rejuvenate the Indian economic machine. With an absolute parliamentary majority, the administration will be able to escape the straitjacket of coalition politics that has mired recent administrations. During Mr. Modi’s twelve years as Chief Minister of the state of Gujarat, the state demonstrated above-average performance on numerous indicators of growth, governance, and socio-economic progress. Mr. Modi is deemed a pro-business game-changer who is able to position India back towards a trajectory of positive growth and development.
India under this new government is a very attractive investment destination. We recommend that investors calibrate their investment plans accordingly, and in particular consider allocating capital to the infrastructure, technology and energy sectors in India as these look mostly likely to be restructured in the government’s initial policy wave.