The Story Continues, but with a New Chapter

The much-anticipated general election has concluded, and the results have led to a unique situation where both sides see themselves as winners. The BJP-led NDA, which is set to form the government, highlights that the entire opposition, led by the Indian National Congress (INC), failed to secure even the number of seats that BJP alone garnered. On the other hand, the INC takes pride in almost doubling its seat count despite contesting fewer seats and notes that the BJP did not secure power independently and fell short of a majority.

From a market perspective, this election outcome raises questions about whether the new government’s policies will lean towards populist measures. The return of a coalition government, after two consecutive terms of single-party dominance, intensifies this debate, especially given the vote share distribution. However, I believe the government is unlikely to lose focus or adopt the populist measures that some are predicting. Historical trends show that populism before elections does not guarantee re-election, as seen in 2004 and 2014, when incumbents were not re-elected despite implementing populist measures.

Instead, favourable electoral outcomes for incumbents have been associated with moderate to high growth and moderate inflation. There may also have been concerns that a coalition government will force the BJP to compromise on its reform agenda to accommodate its allies. However, I disagree. Prime Minister Narendra Modi retaining his ‘A’ team also means that there is more likely to be policy continuity and has not yielded to any pressure from allies. Besides, after the alliance parties nominated him as the PM candidate, Modi in his speech emphasised continuing the path of becoming a developed economy, indicating that growth will remain a top priority.

The track records of the main coalition partners also suggest alignment with the BJP’s development policies. For instance, Chandrababu Naidu, leader of the regional Telugu Desam Party—one of the key coalition partners—has a history of aggressively pushing for investment from IT companies and transforming Hyderabad during his tenure as the chief minister of Andhra Pradesh. Therefore, it seems unlikely that coalition partners will push for a significant shift towards populist measures.

Looking ahead, I believe investment-led growth will continue to dominate the Indian economy, reminiscent of the 2003-07 period. Currently, the investment-to-GDP ratio stands at 34 per cent, up from 28 per cent in FY21, and it is expected to increase further. During the 2003-07 cycle, the investment-toGDP ratio rose from 27 per cent in FY 2003 to 39 per cent in FY 2008, nearing its peak. This time also we can expect a similar trajectory by FY 2027.

What does this mean for readers and investors? How should you position your portfolio to navigate the policy landscape? Our cover story delves into these questions, exploring what to expect from the current government and what are the sectors or industries that are going to benefit from the policy continuity. One sector that has been performing exceptionally well is the pharmaceutical and healthcare sector. Our special report in this issue takes an in-depth look at the factors driving this outperformance and assesses its sustainability. Additionally, the report highlights prominent players in the sector, examining their financial and market performance. This comprehensive analysis will provide readers with valuable insights to make informed investment decisions in this burgeoning sector.

As the government starts a new inning, it’s time to reenergise and identify new investment opportunities. Our team is at it and will continue to share their findings with our subscribers. Make sure you catch the action in every issue and make informed investment decisions.

Happy investing!

RAJESH V PADODE
Managing Director & Editor