NDA election result suggests political stability with potential FDI adjustments, says Surjit Bhalla

Surjit Bhalla, eminent economist, author and columnist who served as executive director for India at the International Monetary Fund (IMF), shared his insights on the potential political implications of the National Democratic Alliance securing around 300 seats (NDA). Bhalla said that while key economic policies are likely to remain unchanged, adjustments to foreign direct investment (FDI) policies could be expected.

It also analyzed the surprising election results in Uttar Pradesh, West Bengal and Rajasthan, which defied exit predictions, highlighting the importance of these developments for both democracy and political coherence.

Below is the verbatim report of the interview:

Q: Do you expect a significant change in policy direction if the number actually stabilizes around 300 instead of 350-360? Your thoughts?
A: If this is the result, it appears to converge towards 300 to 320 or 290 to 320 for the National Democratic Alliance (NDA). I do not expect changes in the existing policy, but in some of them, which I spoke about, for example, about the attitude of the policy towards foreign direct investments, etc. So these policies should and probably will change. So this is a fantastic check and balance to what we see working here. My prediction, as written in the book, that we would vote for was for a much broader mandate for the NDA and the BJP. It is therefore the return of democracy in action. So any time you have a close race, if you run in it, the policy you get will be less extreme and more balanced. None of the existing economic policies are likely to change. Some political policies could change.

Q: What do you think about what we are seeing unfolding in Uttar Pradesh (UP), West Bengal? This is contrary to what the polls predicted, and it is also contrary to what your own expectations were.

A: So UP, West Bengal and you missed Rajasthan, so those are three states that are completely going against the exit poll results. So one of the talking points after the election was over is that first there was massive convergence in the exit polls, and normally when you have massive convergence in the exit polls, exit the polls, you are not wrong. So this is a case where the whole class failed. And the only other time I remember, and at that time I was on the right side of the coin, was the 2015 Bihar elections, when the whole class was saying that Lallu Prasad Yadav was going to lose, and he returned with a resounding victory. . So these checks and balances are fantastic, both for democracy and for politics, because there will now be greater consistency in policy on the economic side. In other words, I don’t think the budget deficit is at risk, nor the government’s response. In my opinion, the government is not going to spend more. I think what Mr. Modi has shown is a strict adherence to the fiscal deficit, in fact much more than what I advocated and appreciated. So I think this one is pretty stable, and not where I would expect any shifts, if you will, toward more expansionary fiscal policy.

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