According to exit polls, experts believe that a potential third term for the BJP-led NDA government would have a positive impact on economic stability and reforms. This outcome is expected to provide comfort to the markets as well. Madhavi Arora, Lead Economist at Emkay Global Financial Services, stated that if the final outcome aligns with the exit polls, it would calm investor nerves and ensure political and policy continuity, which is beneficial for risk assets in the short term and macro stability in the medium term. The foreign exchange and rates markets are likely to react positively, with the RBI expected to manage the surplus effectively.
Arora also mentioned that a strong macroeconomic foundation for both public and private sectors sets the stage for higher growth, and she anticipates continued reform-driven targeted expenditures. The Union Budget for 2024-25 in July is expected to outline the next phase of policy reforms, with Central ministries already working on a 100-day agenda for the new government. After the election event, all eyes will be on the budget in July to maintain consolidation while enhancing budget internals.
The economy is showing signs of improvement, with fourth quarter GDP growth surpassing expectations at 7.8%. For the fiscal year 2023-24, GDP growth was recorded at 8.2%, the highest since FY17. However, growth is projected to slow to 6.5%-7% in the current fiscal year. Additionally, the Centre’s fiscal deficit for FY24 improved to 5.6% compared to the revised estimate of 5.8%, with further improvement expected in FY25.
Exit polls suggest that the BJP will maintain its majority in the Lok Sabha, with the NDA expected to secure over 365 seats and make gains in key states. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated that the exit poll results indicating a clear victory for the NDA have alleviated election-related concerns that were impacting the markets in May. The better-than-expected 8.2% GDP growth further boosts investor confidence.
Official election results will be announced on June 4.
