Why Modi won’t be hobbled by running a coalition govt

Most analysts expect that the Narendra Modi-led coalition government, reliant on “secular” partners like Nitish Kumar of the Janata Dal (United) and Chandrababu Naidu’s Telugu Desam Party, will be shackled on core “Hindutva” issues such as a national rollout of the uniform civil code.The Economist last week condescendingly praised Indian democracy for not giving the Bharatiya Janata Party (BJP) a majority mandate. It said Modi would now be forced to be inclusive and India had been saved from lapsing into further “authoritarianism”.The Economist, which has a record of getting things badly wrong (such as endorsing the US-led illegal invasion of Iraq in 2003 in the absence of a United Nations Security Council resolution), is likely to get the dynamics of Modi’s third term wrong too. medium110940306Contrary to conventional wisdom that he will be hobbled by running a minority government, Modi will in fact abandon some of the timidity that marked his first two terms (giving in on farm laws and backtracking on labour and land reforms). Instead, he will practise hard-nosed politics that gives no quarter and asks for no quarter. The iron fist will come without a velvet glove.Modi knows that he and home minister Amit Shah made serious mistakes in the selection of candidates in Uttar Pradesh and Maharashtra which cost the BJP collectively more than 45 seats in the two states — the difference between 240 seats the BJP won and the 285 seats it could have won had it listened more closely to ground reports.Modi has also finally realised that being accommodative to the Opposition doesn’t pay. He will take a tougher line in Parliament against a voluble and charged-up Opposition. He knows the next five years are crucial for India.Unlike the first two terms, time is short to carry out a phalanx of pending reforms. Modi will have little patience with disruptions in Parliament.Watch: BJP retains top posts in NDA 3.0 govt medium nocaptionhttps://youtu.be/IwQ62IFzxkg?si=G5du57lT-yXtVTgMThat is why Modi has retained the Big Four in their old ministries — home, defence, finance and external affairs.Other key ministers have been similarly retained: Nitin Gadkari, Ashwini Vaishnaw, Piyush Goyal, Bhupender Yadav, Hardeep Singh Puri and Dharmendra Pradhan.Reforms will be put on steroids. In Naidu, Modi has a strong ally with a technology background. Periodic tantrums from Nitish will be quietly dealt with. Both chief ministers need central funds for their states, Andhra Pradesh and Bihar.Strategic errorThe Congress-led Opposition, meanwhile, made a serious tactical mistake even before Modi was sworn in as prime minister.In a bizarre 22-minute press conference on June 6, Congress leader Rahul Gandhi accused Modi, Shah and Nirmala Sitharaman of what in effect was insider trading in the stock exchange.This was Rahul’s extraordinary charge: “For the first time, we noted that during elections, the prime minister and the Union home minister commented on the stock market. The PM said that the stock market is rising at a great speed. The home minister said that on June 4 the stock market will be on the rise and you all should invest. A similar thing was said by the finance minister…Amit Shah said buy shares before June 4. On May 19, PM Modi said the stock market will break records on June 4.”Rahul wasn’t done. He added: “Why did the PM and home minister give specific investment advice to the five crore families investing in the stock market? Is it their job to give investment advice? Why were both the interviews given to the same media owned by the same business group which is also under Sebi investigation for manipulating stocks? What is the connection between the BJP, fake exit pollsters and the dubious foreign investors who invested one day before the exit polls were announced and made a huge profit at the cost of five crore investors?“We are convinced that this is a scam. Somebody has made thousands of crore rupees at the cost of Indian retail investors and the PM and home minister have given an indication to buy stocks. So we demand today a joint parliamentary committee to investigate this.”Watch: 'JPC should probe June 4 market crash' medium nocaptionhttps://youtu.be/WbtnQLsUNQA?si=tskwXWt--eRWQ2ikEven a stock market novice knows that publicly listed shares move up and down based on a mix of economic and political factors. India has 150mn demat accounts. The total value of shares traded every day in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) is more than ₹1.5 lakh crore.When exit polls on June 1 projected the National Democratic Alliance (NDA) winning the 2024 Lok Sabha election by a landslide, the stock market was delighted. Markets crave stability and continuity.When stock exchanges opened for trading on June 3, shares shot up by more than 8%. Indian retail investors believed reforms would continue under a Modi-led NDA government.Their delight was shortlived.When the actual results trickled in on June 4, showing the BJP falling well short of a simple majority of 272 seats in the Lok Sabha, the stock market crashed.Anchors on television channels at prime time announced that “Modi magic” was over.Some predicted that Modi would tender his resignation the next day. The Congress-led Opposition INDIA bloc, they believed, would be invited by President Droupadi Murmu to form the next government.One exit pollster who had predicted up to 401 seats for the NDA shed tears on camera for getting it so badly wrong. He was consoled but there was jubiliation among the anchor and panellists of the channel at this shock “defeat” for “invincible” Modi.Watch: 'Rahul Gandhi misleading investors' medium nocaptionhttps://youtu.be/triVSC48Ir8?si=G3X3AgGBymriCFCNMeanwhile, shareholder wealth fell by ₹31 lakh crore. For perspective, consider: the total value of stocks listed in India is more than ₹450 lakh crore. The fall of ₹31 lakh crore represented just over 6% of the total market value. This loss was made up within three working days when the market recovered, realising that a Modi-led coalition would form the next government.Rahul at his press conference alleged that the ₹31 lakh crore loss in share value — which was largely notional — constituted a “scam” because Modi and others had “misled” investors into buying stocks following upbeat exit polls on June 1.It is the job of a responsible Opposition in a democracy to criticise the government and hold it to account. But if the criticism is seen as based on a false — and in this case infantile — narrative, it will backfire.To reduce the sublime to the ridiculous, a lawyer, Vishal Tiwari, has filed a plea in the Supreme Court to investigate the market loss.Tech-enabled regulationIndia’s stock market is actually well regulated. The Securities and Exchange Board of India (Sebi) was one of the first global market regulators to mandate a T+1 settlement. This means all trades are settled within 24 hours.On a trial basis, Sebi has become the first international stock market regulator to pilot a T+0 settlement. Trades are settled directly into client accounts in real time following a transaction. This has drawn envy and admiration from the New York Stock Exchange (NYSE), still struggling with T+1 and T+2 settlements.Despite the market capitalisation of shares listed on Indian stock exchanges rising to more than $5trn, the fifth highest in the world, payment defaults are rare. Trading, payments and deliveries are seamless.For Rahul to open his third stint in the Opposition with a poorly advised press conference alleging a mythical ₹31 lakh crore stock market scam following the exit polls displays exceptional political naivete. His mettle will be fully tested when he encounters the Modi government’s iron fist in the 18th Lok Sabha.Read more from the author here.