A weaker Modi may not be too bad for India

Modifying Modi. Sentiment is a fickle thing. A few months ago, business leers talked up a thumping win for Narendra Modi in India's national election. After five of seven rounds of polling which began on April 19, some uncertainty is creeping in about what will emerge when votes are counted on June 4. Stock market volatility is at a 23-month high and foreign investors are selling. re may not be too much to fear, though, if prime minister's ruling Bharatiya Janata Party returns to power with a reduced backing.

BJP launched its campaign with a promise to better its 2019 tally of 303 seats in 545-member lower house of parliament. Once polling started, reports of low voter turnout me BJP's target of a rare 400-seat super-majority seem a stretch. Focus returned to wher voters would punish government of world's fifth largest economy for stubbornly high inflation and its struggle to create sufficient high-quality jobs.

One of three political configurations will emerge. In first, which show betting market predicts and stocks are largely pricing in, BJP scores a simple majority for a third successive term. In or scenarios, coalition governments emerge led eir by BJP or opposition Indian National Congress. Benchmark stock indices would likely fall if Modi is forced to ally, or correct sharply if he's out altoger.

nature of Modi's return matters because investors associate his dece in power with stability and a strong hand; y fear rampant corruption and slow policy-making as trappings of coalition rule. se issues dogged a Congress-led ministration between 2009 and 2014. Political alliances always demand policy compromises too.

While re is minimal risk of landmark financial reforms including a nationwide tax and bankruptcy code being reversed by any major party, new growth-fuelling initiatives on land, labour and crop procurement may fall off agenda if BJP loses its majority.

re are implications for public purse too. Any seat count well below halfway mark could force Modi to raise spending to dress financial distress among constituents his allies represent, including farmers and rural households whose incomes are squeezed. In that scenario, investors would remain jittery at least until July when new government outlines its budget. government may need companies to chip in more on investment if it is to both maintain GDP growth, at 8.4% in October to December quarter, and honour a pledge to trim borrowing.

A slightly diminished BJP may not be all b, however. Greater participation of or parties in governance could have a unifying effect with states in sourn and eastern India where Modi’s party is less popular. If BJP's muscular and Hindu nationalist rhetoric reduces, those who worry about religious minorities and press freedom may be more willing to invest in country for long term. Modi is likely to return but if he does emerge weaker from election, it won’t necessarily spell a weaker India.