Indian Prime Minister Narendra Modi.

JAKARTA (TheInsiderStories) – The resounding election victory of Prime Minister Narendra Modi’s BJP Party with another large parliamentary majority will provide continuity of macroeconomic policy over the next five years, Rajiv Biswas, Asia Pacific Chief Economist at IHS Markit commenting on the election.

“The large parliamentary majority secured by the BJP has avoided the key risk of a weak and fragmented coalition government governing the nation, which could have undermined momentum for further economic reforms,” he said.

PM Modi and the BJP have achieved steady and robust macroeconomic growth over the past five years, so the election results signal a strong vote of confidence from the electorate in the BJP’s economic track record in governing the nation.

India has faced its fair share of economic challenges during PM Modi’s first term of office, including bad debt problems of the public sector banks as well as turbulence during the demonetization episode.

However, overall the BJP has provided a steady hand at the helm of government, delivering five consecutive years of economic stability, with strong growth and moderate inflation. Foreign direct investment inflows into India have surged under the Modi government, providing an important positive boost to the Indian external account position as well as helping to create a more dynamic industrial economy.

However key economic challenges in the PM Modi’s second term of office will be to continue to drive reforms in the public sector banks and reduce the burden of non-performing loans on their balance sheets, as well as to drive the transformation of India’s industrial sector through PM Modi’s ‘Make in India’ strategy.

Despite significant achievements in infrastructure development during PM Modi’s first term, rapid infrastructure development in key sectors such as transport and power infrastructure remain important priorities, as well as reducing the regulatory burden of government red tape.

The BJP still does not have a majority in India’s upper house of parliament, the Rajya Sabha, and this will pose hurdles to the BJP’s legislative reform agenda.

Despite these challenges, the economic outlook looks positive for the second term of the Modi-led BJP government, with GDP growth forecast to average around 7 percent per year over the 2019-2023 period.

IHS Markit estimates India to become the world’s fifth largest economy in 2019, reaching a total GDP size exceeding US$3 trillion, and overtaking its former colonial ruler, the United Kingdom. By 2025, Indian GDP is also forecast to surpass Japan, which will make India the second-largest economy in the Asia-Pacific region.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com